UNITED STATES SECURITES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                              For Fiscal Year Ended
                                December 31, 2004

                            Commission File #0-30503
                          PANGEA PETROLEUM CORPORATION
             (Exact name of registrant as specified in its charter)

                                    COLORADO
         (State or other jurisdiction of incorporation or organization)

                                   76-0635938
                      (IRS Employer Identification Number)

                9801 Westheimer, Suite 302, Houston, Texas 77042
               (Address of principal executive offices)(Zip Code)

                                 (713) 706-6350
                (Registrant's telephone no., including area code)

   (Former name, former address and former fiscal year, if changed since last
                                     report)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $0.001
Par Value

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will be contained,
to the best of the  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. (X)

Revenues for year ended December 31, 2004:  $81,646.  Aggregate  market value of
the voting common stock held by non-affiliates of the registrant as of March 23,
2005  was  $1,375,051.  Number  of  shares  of  the  registrant's  common  stock
outstanding as of March 23, 2005 was 180,919,846.


                                     Page 1
<PAGE>

                                TABLE OF CONTENTS


                                     PART I

Item 1.     Description of Business

Item 2.     Description of Properties

Item 3.     Legal Proceedings

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

Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters
            and Small Business Issuer Purchase of Equity Securities

                                     PART II

Item 6.     Management's Discussion and Analysis of Financial Conditions and
            Results of Operations

Item 7.     Financial Statements

Item 8.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure

Item 8A.    Controls and Procedures

Item 8B.    Reports on Form 8-K

                                    PART III

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

Item 10.    Executive Compensation

Item 11.    Security Ownership of Certain Beneficial Owners and Management

Item 12.    Certain Relationships and Related Transactions

Item 13.    Exhibits

Item 14.    Principal Accountant Fees and Services


                                   SIGNATURES


                                     Page 2
<PAGE>

                            FORWARD LOOKING STATEMENT

The statements  contained herein and other information  contained in this report
may be  based,  in part,  on  management's  estimates,  projections,  plans  and
judgments.  These  forward-looking  statements  are subject to certain risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical   results  or  those   anticipated.   In  this   report,   the  words
"anticipates",  "believes",  "expects",  "intends", "future", "plans", "targets"
and  similar  expressions  identify  forward-looking  statements.   Readers  are
cautioned  not  to  place  undue  reliance  on  the  forward-looking  statements
contained herein.  The Company undertakes no obligation to publicly revise these
forward-looking  statements to reflect  events or  circumstances  that may arise
after the date  hereof.  Additionally,  these  statements  are based on  certain
assumptions  that may prove to be  erroneous  and are  subject to certain  risks
including,  but not  limited  to,  the  Company's  dependence  on  limited  cash
resources,  its dependence on certain key personnel within the Company,  and its
ability to raise additional capital. The Company's ability to generate long-term
value for the common stockholder is dependent upon the acquisition of profitable
energy  prospects.  There are many  companies  participating  in the oil and gas
industry, many with resources greater than the Company.  Greater competition for
profitable  operations can increase prices and make it more difficult to acquire
assets at reasonable  multiples of cash flow. The Company  believes that it will
be able to  compete  in this  environment  and  will be able to find  attractive
investments;  however,  it is not possible to predict  competition or the effect
this will have on the Company's  operations.  The Company's  operations are also
significantly affected by factors, which are outside the control of the Company,
including  the prices of oil and natural  gas,  environmental  and  governmental
regulations.  Accordingly,  actual results may differ, possibly materially, from
the predictions contained herein

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL INFORMATION ABOUT PANGEA

Pangea Petroleum  Corporation  ("Pangea" or "Company"),  a Colorado corporation,
was organized on March 11, 1997.  Our principle  executive  office is located at
9801 Westheimer,  Suite 302, Houston,  Texas 77042. Pangea's company website can
be viewed at www.pangeapetroleum.com. Pangea is a publicly traded company listed
on the OTC Electronic  Bulletin Board under the symbol "PAPO".  Pangea currently
has no subsidiaries.

BUSINESS STRATEGY

Pangea is an independent  energy company  focused on exploration and development
of oil and  natural  gas  reserves,  whose  core  business  is  directed  to the
development of oil and gas prospects in proven onshore production areas.  Pangea
is  pursuing  a  development  program  designed  to  achieve   profitability  by
distributing risk across multiple oil and gas projects.  Pangea  diversifies its
risk by carefully identifying prospects that fit within strict parameters and by
taking  a  minority  working  interest  in each  project.  The  Company  devotes
essentially all of it resources to development of revenue  producing  activities
by keeping its overhead at a minimum  level  through the  retention of carefully
selected consultants, contractors and service companies.

Pangea projects are focused on low risk development type drilling.  Each project
is screened  looking at depth,  seismic data available,  surrounding  production
from similar  wells,  and  proximity to  infrastructure.  Pangea seeks to hold a
minority non-operating interest in the projects and, thus, also closely examines
the project  operator to determine  that they have the  experience and operating
philosophy that is consistent with Pangea quality expectations. Finally the well
drilling cost and upfront cost to buy in to the prospect are estimated.


                                     Page 3
<PAGE>

Pangea then utilizes a risked based economic evaluation that compares high, most
likely,  and low production and price scenarios to rank projects for investment.
The Company's  overall  Business  Plan employs the same  technique for price and
production,  and in addition, uses high, most likely and low scenarios to factor
in a projection for the number of potential dry holes that may be encountered in
the drilling program each year.

The most likely case is  designed  to have a 50% chance of being  achieved.  The
high and low cases then define the  boundaries of an 80% range,  such that there
is a 10% chance of achieving the high case and a 90% chance of achieving the low
case.

Pangea  attempts to design a drilling  program that will be attractive,  even in
the low case  assumption  range,  by  choosing  generally  lower risk wells from
prospects  at  shallower  depths.  This  philosophy  allows  Pangea to avoid the
unnecessarily  complex  down-hole  environments  which are often  encountered in
deeper wells, and which often invite very expensive and unreliable results.

To date Pangea has chosen to focus its acquisition, exploration, and development
activities  primarily in the Gulf Coast region.  This region is characterized by
long-lived gas reserves with predictable and relatively low production depletion
rates, multiple geologic targets that decrease drilling risk, strong natural gas
prices,  lower  service  costs  than in more  competitive  or remote  basins,  a
favorable  regulatory  environment that encourages active drilling efforts,  and
virtually no federal land or land access  impediments.  Management believes that
by  continuing  to  identify  projects  that fit the  company's  investment  and
production criteria, Pangea has a strategy that will enhance production and cash
flow and optimize the use of the Company's investment capital.

Pangea is managed by a small experienced team focused on finding and structuring
attractive  oil and gas  investment  opportunities.  Pangea's  goal is to create
long-term  value for our  investors  by building a  significant  onshore oil and
natural gas reserve base.

 In summary,  Pangea seeks to acquire and exploit  properties with the following
characteristics:

      o     primarily Gulf Coast Basin locations

      o     an established production history and infrastructure

      o     multiple productive sands and reservoirs

      o     low current production levels with significant identified proven and
            potential reserve opportunities

      o     the opportunity to obtain a minority interest.


RISK FACTORS

GOING CONCERN RISK

We have had and could have losses, deficits and deficiencies in liquidity, which
could impair our ability to continue as a going concern.

In Note #2 to our consolidated  financial  statements,  our independent auditors
have indicated that certain factors raise substantial doubt about our ability to
continue as a going  concern.  Since its  inception,  the  Company has  suffered
recurring losses from operations and has been dependent on existing stockholders
and new  investors  to provide the cash  resources  to sustain  its  operations.
During the years ended  December  31, 2004 and 2003,  the Company  reported  net
losses and negative cash flows from operations as follows:


                                     Page 4
<PAGE>

                                                           2004         2003
                                                      ------------   ---------
Net Income (loss)                                         $927,924   ($669,654)
Net Loss from continuing operations                      ($547,217)  ($669,654)
Cash flow gain (loss) from continuing operations           $29,724    ($51,773)

The  Company's  continuing  negative  operating  results have produced a working
capital  deficit  of  $392,054  at  December  31,  2004.  This is a  substantial
reduction  compared to a working  capital  deficit of $1,875,835 at December 31,
2003,  and reflects  the  recognition  of the deferred  gain on the sale of Mass
Energy. The above factors represent a substantial  improvement over prior year's
performance,  however the net loss from continuing operations continues to raise
doubt about the Company's ability to fully establish itself as a going concern.

IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING

Pangea must obtain  financing to fund the expansion of operations.  Such outside
financing  must be provided  from the sale of equity or third  party  financing.
Further,  the sale of equity  securities will dilute our existing  stockholders'
interests,  and  borrowings  from third parties could result in our assets being
pledged as  collateral.  While the Company is  currently  able to fund all basic
operating costs, it is possible our operations could be restricted if loan terms
increase our debt service requirements. There is no assurance that we can obtain
financing on favorable terms.

INDUSTRY

The petroleum  industry is a global industry that is fundamental to all economic
activity.  It is  composed  of the  down  stream  sector  (refining,  marketing,
products and derivatives) and the upstream sector that is focused on finding and
producing crude oil and natural gas. Oil and natural gas are commodities,  which
are  found  throughout  the world and they  have  been  produced  in  increasing
quantities  since  the  mid  19th  century.  The  exploration,   production  and
transportation  of these  materials  in the  modern  era  generate  an  enormous
appetite for capital because quantities  sufficient to fuel the world's economic
machine are rapidly  becoming  more  difficult to find and expensive to produce.
Consequently,  a few global corporations and state energy companies dominate the
industry.  These companies tend to concentrate  their  investments on very large
prospects and to quickly abandon less productive, older reserves.

The production technology in the petroleum industry has improved tremendously in
recent years,  however commercial  quantities of oil and gas are frequently left
in place when  fields are  abandoned.  This fact is  particularly  true in older
reservoirs  that were  abandoned  before  modern  technologies  were  available.
Additionally,  the economic level of interest  varies with company size. A small
company such as Pangea can successfully  exploit a field that is not of interest
to a major oil and gas company.

Mature  energy  provinces  such as the  United  States  have  many  fields  with
production and  collection  infrastructure  in place that can be purchased.  The
infrastructure  represents  a  significant  savings in  investment  required for
production  to  continue.  These  fields offer  investment  potential  for those
companies willing to commit capital and appropriate technology.  Technology that
is readily  available  from  consultants,  service  companies,  and other groups
established to support the petroleum production sector.

These factors allow small  companies like Pangea to effectively  and efficiently
target the niche  comprised  by fields with  established  reserves  that require
capital and/or technology in order to develop, enhance or restore production.


                                     Page 5
<PAGE>


JOINT OPERATIONS WITH OTHERS; NON-OPERATOR STATUS

Pangea owns less than 100% of the working  interest in our oil and gas holdings.
Operations  are conducted  jointly with other  working  interest  owners.  Joint
operating  arrangements  are  customary  in the  oil and  gas  industry  and are
governed by a joint operating  agreement whereby a single working interest owner
is  designated  the operator.  On  properties  where we own less than 50% of the
working  interest,  drilling and operating  decisions may not be entirely within
our control.  If we disagree with the decision of a majority of working interest
owners,  we may be  required,  among  other  things,  to postpone  the  proposed
activity or decline to participate.  If we decline to  participate,  we might be
required to  relinquish  our  interest or may be subject to certain  non-consent
penalties,  as provided in the applicable  operating  agreement.  Such penalties
typically  allow  participating  working  interest  owners to  recover  from the
proceeds  of  production,  if any,  an  amount  equal to  100%-  400% of the new
investment.  Under most operating  agreements,  the operator is given direct and
full  control  over all  operations  on the property and is obligated to conduct
operations in a workman-like manner;  however the operator is usually not liable
to the working interest owners for losses sustained or for liabilities incurred,
except those resulting from its own gross negligence or willful misconduct. Each
working  interest  owner is  generally  liable  for its  share  of the  costs of
developing and operating jointly owned  properties.  The operator is required to
pay the  expenses of  developing  and  operating  the  property and will invoice
working  interest  owners  for  their  proportionate  share  of such  costs.  In
instances  where we are a  non-operating  working  interest owner, we may have a
limited ability to exercise  control over operations and the associated costs of
such operations.  The success of our investment in such non-operated  activities
may,  therefore,  be  dependent  upon a number of facts that are  outside of our
direct control.

MARKETING

The revenue  generated by our operations is highly  dependent upon the price of,
and demand for, crude oil and natural gas.  Historically,  the markets for crude
oil and natural gas have been volatile and are likely to continue to be volatile
in the future.  The prices received by the Company for its crude oil and natural
gas production and the level of such production are subject to fluctuations  and
depend on  numerous  factors  beyond  our  control  including  seasonality,  the
condition of the United States economy (particularly the manufacturing  sector),
foreign  imports,  political  conditions  in  other  oil-producing  and  natural
gas-producing  countries, the actions of the Organization of Petroleum Exporting
Countries and domestic  regulation,  legislation and policies.  Decreases in the
prices of crude oil and natural gas could have an adverse effect on the carrying
value of any proved reserves or revenue from operations in the future.

COMPETITION

We operate in a highly  competitive  environment.  Competition  is  particularly
intense with respect to the acquisition of desirable  undeveloped  crude oil and
natural gas properties.  The principal competitive factors in the acquisition of
such undeveloped crude oil and natural gas properties include the staff and data
necessary  to  identify,  investigate  and  purchase  such  properties,  and the
financial resources necessary to acquire and develop such properties. We compete
with major and  independent  crude oil and natural gas companies for  properties
and the  equipment  and labor  required to develop and operate such  properties.
Many of these  competitors  have  financial  and other  resources  substantially
greater than ours, which may adversely  affect the company's  ability to compete
on certain projects.

TITLE TO PROPERTIES

As is  customary  in the  crude oil and  natural  gas  industry,  we make only a
cursory review of title to  undeveloped  crude oil and natural gas leases at the
time they are acquired by us. However,  before drilling commences,  we require a
thorough  title search to be  conducted,  and any material  defects in title are
remedied prior to the time actual drilling of a well begins. To the extent title


                                     Page 6
<PAGE>

opinions or other  investigations  reflect  title  defects,  we, rather than the
seller of the undeveloped  property,  are typically  obligated to cure any title
defect at our expense. If we were unable to remedy or cure any title defect of a
nature such that it would not be prudent to commence drilling  operations on the
property,  we could suffer a loss of the lease cost for the property. We believe
that we have good title to our oil and gas leases.

EMPLOYEES

As of March 23,  2005,  Pangea had 2 full-time  employees,  including  executive
officers, non- executive officers,  secretarial and clerical personnel and field
personnel.   Pangea  also  retains   independent   geological  and   engineering
consultants  and  administrative  assistance  on a limited  basis and expects to
continue to do so in the future.

ITEM 2.  DESCRIPTION OF PROPERTY

Pangea's principal executive offices are located at 9801 Westheimer,  Suite 302,
Houston,  Texas 77042 in  approximately  140 square feet of office space that is
leased on a one-year  contract  basis  expiring  March 31,  2005 for $687.52 per
month.  The Company has renewed the lease for another  year at a rate of $712.52
per month.  The new lease expires on March 31, 2006.  The Company  believes that
this office space is adequate for the Company's present and future needs.

ITEM 3.  LEGAL PROCEEDINGS

On May 7, 2004,  the Company was awarded  $158,000.00 in its  arbitration  claim
against  Clay  Exploration,  Inc.  and  Joseph W.  Shunta  pertaining  to a well
interest in Duval County, Texas.  Counterclaims asserted by Clay Exploration and
Shunta  were  dismissed  by the  Arbitrator,  with  the  exception  that  Pangea
conceded,  and Clay  Exploration was awarded,  certain expenses in the amount of
$5,566.54 pertaining to a separate well in Jim Wells County, Texas. On September
8, 2004,  Pangea  entered  into a  settlement  agreement  with Clay  Exploration
whereby Clay agreed to pay Pangea $80,000 and release Pangea from any claims, in
exchange  for a full  release  from  Pangea.  The  amount was paid in the fourth
quarter 2004. Pangea has entered into two Forbearance  Agreements with Joseph W.
Shunta.  The first agreement was executed in December 2004 and provided  covered
from January 2005 to June 2005. The second signed Forbearance Agreement is dated
March 23,  2005 and extends the payment  period to  December  2005.  Mr.  Shunta
agreed to withdraw an appeal of the judgment confirming the award,  allowing the
judgment  to become  final,  and agreed to pay $2,000 per month for the 12 month
period,  while he  arranges  to pay the balance of the  judgment.  In  exchange,
Pangea agreed to refrain from executing on property liens filed by Pangea on Mr.
Shunta's real estate holdings during the Forbearance period. In addition, Pangea
has agreed to release liens so that Mr. Shunta could sell two of the  properties
that  had  negative  cash  flow  and no net  asset  value,  in  exchange  for an
additional $2,000 payment.

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

None

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of  December  31,  2004,  Pangea  had  175,694,413  shares  of  common  stock
outstanding and had  approximately 544 certificate  stockholders of record.  The
following  table  sets  forth  certain  information  as to the  high and low bid
quotations quoted on the OTC Bulletin Board for 2003 and 2004.  Information with
respect to  over-the-counter  bid quotations  represents prices between dealers,
does  not  include  retail  mark-ups,  mark-downs  or  commissions,  and may not
necessarily represent actual transactions.


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<PAGE>

                            Period    High       Low
                            -------   ----       ----
                             2003

First Quarter                        .013       .005
Second Quarter                       .009       .002
Third Quarter                        .027       .008
Fourth Quarter                       .022       .012

                             2004

First Quarter                        .0195      .011
Second Quarter                       .018       .007
Third Quarter                        .013       .0042
Fourth Quarter                       .0091      .005

The bid price of our common stock was $0.016 per share on March 23, 2005.  There
are approximately 544 certificate shareholders of record as of March 23, 2005.

SECURITIES  AUTHORIZED FOR ISSUANCE UNDER EQUITY  COMPENSATION  PLANS FOR FISCAL
YEAR ENDED DECEMBER 31, 2004

<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                Number of Securities to be   Weighted-average price of    Number of Securities
                                issued upon exercise of      outstanding options          remaining available for
                                outstanding options,         warrants and rights          future issuance under
                                warrants and rights                                       equity compensation
                                                                                          plans(excluding securities
                                                                                          reflected in column (a))
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                        (a)                           (b)                             (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                     <C>                             <C>                            <C>
Equity compensation plans
approved by security holders            10,000,000                      $0.11                          0
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders                 0                            0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTAL                                   10,000,000                      $0.11                          0
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

For information  relating to the equity compensation plan,  reference is made to
footnote 11 to our Financial Statements, Stock Holders Equity.

OUR TRANSFER AGENT IS:

Olde Monmouth Stock Transfer Co., Inc.
200 Memorial Parkway
Atlantic Highlands, New Jersey 07716


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<PAGE>

DIVIDENDS

There have been no dividends declared in the past two years. We presently intend
to retain future  earnings to support our growth.  Any payment of cash dividends
in the future will be dependent upon: the amount of funds legally available, our
earnings; financial condition; capital requirements; and other factors which our
Board of Directors deems relevant.

                                     PART II

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS

GENERAL
Pangea is an independent  energy company  focused on exploration and development
of oil and natural gas reserves in the onshore United  States,  primarily on the
Gulf Coast.  The company has crafted a business model  specifically  designed to
exploit the unique  opportunities  currently available to small companies in the
domestic  oil  and  gas  industry.  Pangea's  basic  philosophy  is that it will
maximize potential success by focusing on shallow, less expensive prospects with
quality data.  Through the  development  of strong  relationships  with industry
partners,   Pangea  has  been  able  to   assemble  a  large  pool  of  prospect
opportunities,  which  have  been  rigorously  evaluated  to  identify  the best
possible drilling candidates. Finally, Pangea believes that, while not all wells
will be  successful,  there is a  relationship  between the number of  potential
prospects drilled and the rate of success enjoyed,  such that the more wells the
Company  drills,  the more chances we have for success.  For this reason  Pangea
takes a minority  position in each well, so that within the available funds, the
number of wells drilled can be increased.

RESULTS OF OPERATIONS

Pangea  participated  in  drilling  six  wells in 2004.  Two of those  wells are
producing and four wells encountered  sub-commercial reserves and were abandoned
as dry holes resulting in a 33.3% success rate, which is below the Company's 50%
success rate  achieved in 2003.  Production  in 2004 was up 208% to 12.6 million
cubic feet of gas  equivalent,  versus  6.0  million  cubic  feet in 2003.  This
resulted  from  the  successful  drilling  in  2003  and the  additions  for the
successful  wells  that  were  added in 2004.  Pangea  was  also  successful  in
replacing 160% of reserves produced in 2004.  However,  overall reserves in 2004
declined to 76.7 million  cubic feet of gas  equivalent as of December 31, 2004,
from 83.5 million cubic feet at December 31, 2003 due to  adjustments  primarily
due to mechanical problems in the Company's Anderson County, Texas well. Results
from the six wells drilled in 2004, are discussed below:

In the third  quarter a 9200' test of the Lower  Wilcox  was  drilled in LIBERTY
COUNTY,  TEXAS.  The Lower Wilcox was present but not commercial,  however,  two
very  attractive  zones were  logged in the Yegua  sands,  which are  productive
throughout the area. The first zone was completed and placed on production  late
November 2004 at the rate of 225 MCFD.  The second zone remains  behind pipe for
completion in the future.  Pangea has a 5% working  interest  (3.75% net revenue
interest) in the well.

SAN  PATRICIO  COUNTY,  TEXAS is a project  that  consists of two wells that are
based on 3D seismic  data in the  Miocene  sands.  These wells are in a prolific
Miocene  production trend and tap into potentially  unproduced  channel sands in
the area.  The first well was drilled in December and  encountered  a productive
sand.  The well was completed and as of December 31, 2004 was awaiting  pipeline
connection. In January 2005 the well was placed on production at the rate of 130
MCFD.  Pangea has a 4.25%  working  interest  and a 3.275% net  interest in both
wells.  The second well was awaiting  the  drilling  rig at the end of 2004.  In
January 2005, the well was drilled and the results are discussed below.

During 2004 the Company participated in the drilling of four additional wells in
Anderson  County,  Colorado  County,  and Austin  County,  Texas and  Kingfisher
County,  Oklahoma. All four wells encountered the forecast objectives,  however,
in all cases the predominant  formation fluid,  based on log  interpretation and


                                     Page 9
<PAGE>

core analysis,  was water with only small amounts of oil and gas. All four wells
were  abandoned  as  non-commercial,  and no funds were  expended in attempts to
complete these prospects.

Pangea  has two  suspended  wells that were  drilled in 2003 and have  undergone
further review. The suspended well in Lee County, Texas, where oil reserves were
found,  was  retested  and  produced a small  quantity of oil and an  increasing
amount of water. There is no justifiable  remedial action available and the well
will be abandoned in 2005. The other suspended well in Austin County, Texas, has
mechanical and lease issues that will preclude  consideration  for further work.
That well will also be abandoned in 2005.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's  discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance  with  generally  accepted  accounting  principles in the
United  States.  The  preparation  of these  financial  statements  requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities,  revenue and expenses, and related disclosure of contingent
assets  and  liabilities.  On  an  ongoing  basis,  the  Company  evaluates  its
estimates.  The Company  bases its  estimates on  historical  experience  and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances.  These  estimates  and  assumptions  provide a basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different  assumptions or conditions,  and these differences may
be material.

The Company believes the following critical  accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements.

OIL AND GAS PRODUCING ACTIVITIES

The Company  follows the  "successful  efforts" method of accounting for its oil
and gas properties.  Under this method of accounting,  all property  acquisition
costs (cost to acquire  mineral  interests in oil and gas  properties) and costs
(to drill and equip) of exploratory and development  wells are capitalized  when
incurred,  pending  determination of whether the well has found proved reserves.
If an exploratory  well has not found proved reserves in commercial  quantities,
the  costs  associated  with the well  are  charged  to  expense.  The  costs of
development   wells  are  capitalized   whether   productive  or  nonproductive.
Geological  and  geophysical  costs  and the  costs of  carrying  and  retaining
undeveloped properties are expensed as incurred. Management estimates the future
liability for plugging and abandonment of the related wells. Accordingly,  a net
cost of $8,413 has been recorded as of the end of 2004.

Unproved  oil  and  gas  properties  that  are   individually   significant  are
periodically  assessed for impairment of value,  and a loss is recognized at the
time  of  impairment  by  providing  an  impairment  allowance.  Other  unproved
properties  are  amortized  based  on  the  Company's  average  holding  period.
Capitalized  costs  of  producing  oil  and  gas  properties  after  considering
estimated  dismantlement and abandonment costs and estimated salvage values, are
depreciated  and  depleted  by the  unit-of-production  method.  On the  sale or
retirement  of a  complete  unit of a proved  property,  the  cost  and  related
accumulated  depreciation,  depletion,  and amortization are eliminated from the
property  accounts,  and  the  resultant  gain or  loss  is  recognized.  On the
retirement or sale of a partial unit of proved property,  the cost is charged to
accumulated  depreciation,  depletion, and amortization with a resulting gain or
loss recognized in the statement of operations.

On the sale of an  entire  interest  in an  unproved  property  for cash or cash
equivalent,  gain or loss on the sale is recognized,  taking into  consideration
the  amount  of any  recorded  impairment  if the  property  had  been  assessed


                                    Page 10
<PAGE>

individually.  If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

OIL AND GAS REVENUES

Oil and gas revenues are recorded under the sales method. The Company recognizes
oil and gas revenues as  production  occurs.  As a result,  the Company  accrues
revenue relating to production for which the Company has not received payment.

Since its inception,  the Company has suffered  recurring losses from operations
and has been dependent on existing stockholders and new investors to provide the
cash resources to sustain its operations.

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003.

Revenues were $81,646 in 2004 compared to revenue of $33,187 in 2003  reflecting
an  increase  of 246% or $48,459 in revenue  in 2004.  Revenues  increased  as a
direct  result of an increase in production  during the year,  from 6025 mcf gas
equivalent  in 2003 to 12564 mcf gas  equivalent  in 2004,  coupled  with higher
average  prices for both oil and gas in 2004.  $178,157 was used for capital and
exploratory  expenditures  in 2004  compared  to  $188,264  in 2003  (using  the
successful effort method of accounting).

The $122,437  reduction in the net loss from  continuing  operations to $547,217
for the year ended  December 31, 2004 from $669,654 for the year ended  December
31,  2003 is due to a few  factors.  Excluding  dry hole  costs,  the loss  from
continuing  operations improved by $318,179, to $351,475 in 2004 versus $669,654
in 2003.  The reduction  occurred  primarily as a result of a reduction in stock
based  compensation  resulting from a  restructuring  of executive  contracts in
mid-2004 (a $237,537  decrease in stock based  compensation  to $237,357 in 2004
from  $474,894 in 2003),  and the  successful  collection  of $80,000 as partial
payment of the Company's  arbitration  claim against Clay Exploration and Joseph
W.  Shunta.  These  factors  were  partially  offset by an  increase in selling,
general and  administrative  costs of $54,979 to  $228,133  in 2004  compared to
$173,154  in 2003.  This  increase  was related to costs  incurred  for the 2003
Shareholders  Meeting  (which  were  billed  in 2004)  and an  increase  in well
expenses from  producing  interests,  an increase in office lease expense and an
increase  in  legal  and  professional  expenses.  The  increase  in  legal  and
professional  expenses was related to arbitration  which resulted in the Company
being awarded $158,000 in its arbitration claim against Clay  Exploration,  Inc.
and  Joseph  W.  Shunta.  As a  result  of this  award,  Pangea  entered  into a
settlement  agreement with Clay Exploration whereby Clay Exploration paid Pangea
$80,000  which is  reflected  on the  financials  under  Settlement  Income.  In
addition,  the Company has collected $4,000 due from the other party,  Joseph W.
Shunta in the first  quarter of 2005.  Additionally,  impairment  of oil and gas
properties  increased  by $195,742 in 2004 from $0 in 2003.  This was due to the
dry hole costs  recorded in 2004 for the drilled and abandoned  wells,  while no
dry hole costs were  recorded in 2003.  The two officers of the Company that are
permanent  employees agreed to accept a fixed 100,000 restricted shares of stock
as  their  total  monthly  compensation  with a  cancellation  of  the  variable
component that was paid in restricted  shares calculated on monthly stock value.
This move provides the Company with the ability to decrease  employment expenses
and allows as much cash as possible to be invested into energy opportunities.

During the year ended  December 31, 2004,  the Company  reported a net profit of
$927,924  compared to a net loss of  $669,654  for the year ended  December  31,
2003. The net profit for the year ended December 31, 2004 was due to recognition
of a deferred  gain on the sale of a  discontinued  exploration  and  production
subsidiary, a non-recurring event. From October 5, 2000 through October 7, 2002,
the Company had a subsidiary,  Mass Energy, Inc. On October 7, 2002, the Company
sold 100 percent of the common stock of Mass Energy, Inc. to Thomas Banks, Ltd.,
an unrelated  Cayman Islands  corporation.  The  transaction  resulted in Thomas
Banks, Ltd's assumption of Mass Energy,  Inc.'s liabilities totaling $1,475,141.


                                    Page 11
<PAGE>

The Company  deferred  recognition of any gain from the  transaction  until such
time that legal counsel could  determine  that legal actions  related to imputed
liability, or alter-ego claims, against Pangea Petroleum,  Inc., as former owner
of Mass Energy,  Inc. would be unlikely to result in the Company's liability for
the claims.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  capital and  exploratory  expenditures of $178,157 for the fiscal
year 2004 were used to  invest  in six  wells.  Two of the wells are  generating
revenue. Currently, the Company has not been able to generate positive cash flow
from operations.  The Company  utilized cash from financing  activities and from
monies received from settlement income to fund these  investments.  The net cash
from financing  activities  decreased in 2004 to $201,000 from $227,300 in 2003.
The Company intends to continue investing in additional oil and gas projects but
will need additional financing  activities,  including private placements,  debt
financing or equity  investment in order to participate  fully and at the levels
the Company  intends.  There can be no assurance that any of the plans developed
by the  Company  will  produce  cash flows  sufficient  to ensure its  long-term
viability.

During the year ended  December  31, 2004,  the Company  reported an overall net
profit of $927,924  compared to a loss of $669,654  for the year ended  December
31,  2003.  The net  profit  for the year  ended  December  31,  2004 was due to
recognition  of a deferred gain on the sale of a  discontinued  exploration  and
production subsidiary, a non-recurring event. During the year ended December 31,
2004, the company  recorded a net loss from  continuing  operations of $547,217,
compared  to a net loss of $669,654 in the year ending  December  31,  2003,  an
improvement of $122,437 in 2004.

The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:

-        The  Company's  ability  to  continue  to  obtain  sources  of  outside
         financing that will supplement  current income and allow the Company to
         continue  to  make  strategic  investments  in new  oil  and  gas  well
         prospects.

-        The Company's ability to coordinate attractive  development  prospects,
         with timely funding that will allow the Company to continue to increase
         oil and gas reserves and production.

The Company's  ability to increase  profitability  and sustain a cash flow level
that will ensure  support for  continuing  operations as well as make timely new
well investments.

RECENT FINANCING

In 2004, Pangea received  $186,000 from private  placements and $15,000 in loans
from officers of the company.


2005 OUTLOOK

The Company has drilled one prospect in 2005 and has identified  four additional
prospects  for drilling  participation,  as noted  below.  Pangea is also in the
process of evaluating several additional prospects for 2005 drilling.

The SAN PATRICIO  COUNTY,  TEXAS project that consists of two wells one of which
was drilled in  December  2004 and placed on  production  in January  2005.  The
second  well was drilled to the Miocene in  February  2005 and  encountered  the
expected intervals with an analysis that they contained sub-commercial reserves.
The well was  abandoned  without  attempting  a  completion.  Pangea has a 4.25%


                                    Page 12
<PAGE>

working interest and a 3.275% net interest in the prospect.  The results will be
analyzed to  determine  if  additional  prospective  locations  on the  acquired
acreage justify drilling attempts. No further work is scheduled at this time.

Pangea  entered  into an  agreement,  in  January  2005,  with Titan Oil and Gas
Corporation to purchase an interest in a LAVACA COUNTY, TEXAS well. This well is
a 3500' Frio  prospect  that has been  successfully  drilled and logged in early
January.  Pangea has a 2.0%  working  interest  and a 1.5% net  interest  in the
prospect. The well was completed in February 2005 and had an extended production
test at pipeline  conditions  and  produced at the rate of 260 mcf per day.  The
well  will  be  placed  on  production  a soon  as the  pipeline  connection  in
completed.

HENDERSON  COUNTY,  TEXAS is an 11,500'  test in the Rodessa and Pettit,  with a
secondary  objective in the Upper Travis Peak.  The first well has the potential
to prove up an additional well in the fault trap and, if successful will lead to
drilling in four additional analogous fault blocks on the leased acreage. Pangea
expects to have a 2% working interest and 1.54% net interest in the first well.

COLORADO  COUNTY,  TEXAS is a 10,000' test of the Wilcox.  This project has been
developed based on 3D seismic data and analysis of existing Wilcox  formation in
the area.  Pangea has a 2.0%  working  interest  and a 1.5% net  interest in the
prospect.  The operator of the well has indicated that budgetary constraints and
rig availability make the most likely drilling time frame in July 2005.

DE WITT  COUNTY,  TEXAS is a 4800'  test of  several  stacked  Yegua  objectives
identified  by 3D seismic  data.  The prospect is on trend with  existing  Yegua
production,  and there is considerable  shallow Frio and Miocene production that
appears  in the  area.  Two  recent 3D wells to the  south  back up the  seismic
analysis on the prospect, and if successful, the lease could provide a follow-up
location. Pangea has committed to a 6.67% working interest and a 5% net interest
in the prospect. It is expected that rig availability will allow this well to be
drilled in mid 2005.

Pangea is actively  reviewing  additional  prospects  in Texas,  Louisiana,  and
Oklahoma to add new wells to the prospect  list.  The Company is continuing  its
strategy of evaluating  primarily  shallow,  onshore oil and gas projects,  that
avoid  investing in "wildcat" or  exploratory  wells,  and focus on investing in
development well prospects that are supported by seismic data, proven production
from  the   surrounding   area  and  good   information   from  adjacent  wells.
Additionally,  Pangea will  continue to diversify  its risk by taking a minority
working interest in the prospects, such that the Company is not dependent on any
one project,  or highly impacted by an unsuccessful  well. The ability to invest
further will be heavily dependent on securing  additional capital from investors
or debt. There is no assurance that additional  equity or debt financing will be
available on terms acceptable to Management.

OFF BALANCE SHEET ARRANGEMENT

During the year ended  December 31, 2004,  the Company had no off balance  sheet
arrangements.

FORWARD-LOOKING INFORMATION-GENERAL

The statements  contained herein and other information  contained in this report
may be  based,  in part,  on  management's  estimates,  projections,  plans  and
judgments.  These  forward-looking  statements  are subject to certain risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical   results  or  those   anticipated.   In  this   report,   the  words
"anticipates",  "believes",  "expects",  "intends", "future", "plans", "targets"
and  similar  expressions  identify  forward-looking  statements.   Readers  are
cautioned  not  to  place  undue  reliance  on  the  forward-looking  statements
contained herein.  The Company undertakes no obligation to publicly revise these
forward-looking  statements to reflect  events or  circumstances  that may arise
after the date  hereof.  Additionally,  these  statements  are based on  certain
assumptions  that may prove to be  erroneous  and are  subject to certain  risks
including,  but not  limited  to,  the  Company's  dependence  on  limited  cash


                                    Page 13
<PAGE>

resources,  its dependence on certain key personnel within the Company,  and its
ability to raise additional capital. The Company's ability to generate long-term
value for the common stockholder is dependent upon the acquisition of profitable
energy  prospects.  There are many  companies  participating  in the oil and gas
industry, many with resources greater than the Company.  Greater competition for
profitable  operations can increase prices and make it more difficult to acquire
assets at reasonable  multiples of cash flow. The Company  believes that it will
be able to  compete  in this  environment  and  will be able to find  attractive
investments;  however,  it is not possible to predict  competition or the effect
this will have on the Company's  operations.  The Company's  operations are also
significantly affected by factors, which are outside the control of the Company,
including  the prices of oil and natural  gas,  environmental  and  governmental
regulations.  Accordingly,  actual results may differ, possibly materially, from
the predictions contained herein

ITEM 7.  FINANCIAL STATEMENTS

The financial statements of the company are set forth beginning on page F-1.

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

None

ITEM 8A. CONTROLS AND PROCEDURES

Charles B. Pollock,  our Chief Executive  Officer,  and Scott Duncan,  our Chief
Financial Officer, have evaluated our controls and procedures as of December 31,
2004.  Each has  concluded  that our  disclosure  controls  and  procedures  are
appropriate and effective.

During the quarter ended December 31, 2004, there were no significant changes in
our internal controls or in other factors that could significantly  affect these
controls  subsequent to the date of their  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

ITEM 8B.  REPORTS ON FORM 8K

None

                                    PART III

ITEM 9.  DIRECTORS  AND  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The directors and officers of the Company,  as of March 23, 2005,  are set forth
below.  The  directors  hold  office for their  respective  term and until their
successors are duly elected and qualified. The officers serve at the will of the
Board of Directors.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below are the names, ages, and positions of the executive officers and
directors of the Company


                                    Page 14
<PAGE>

Name                       Age            Office
------------------         ---            --------

Charles B.  Pollock        65             Chief Executive Officer
                                          and Chairman of
                                          the Board of Directors

Mark F.  Weller            54             President and Director

Scott Duncan               38             Chief Financial Officer

Edward R.  Skaggs          39             Director

CHARLES B. POLLOCK was appointed the Chief Executive Officer and Chairman of the
Board in June 1999.  From  January  1994 to  September  1995,  Mr.  Pollock  was
President of Praxair Indonesia,  an industrial gas company. From October 1995 to
August  1996,  he was General  Manager of  Praxair,  Inc.  His  responsibilities
included strategic  marketing and competition  analysis.  From September 1996 to
May 1999, Mr.  Pollock was  self-employed  as a consultant and managed  projects
including  the  acquisition  and sale of  businesses,  competitive  analysis and
strategic marketing. Mr. Pollock received his Bachelor of Science degree in 1962
from North  Carolina State  University,  his Master of Science degree in Ceramic
Engineering from North Carolina State University in 1968 and his PhD in Material
Engineering from North Carolina State University in 1972.

MARK F. WELLER was appointed  President  and Director in March 2002.  Mr. Weller
was with Texaco,  Inc. for over 30 years until his departure in early 2002.  His
last position with Texaco was as general manager for new project development for
West Africa.  His  background  includes all phases of oil and gas operations and
development, both onshore and offshore on the U.S. gulf and west coasts, as well
as international  project development  assignments.  He holds a BS in mechanical
engineering from the University of California, Davis.

SCOTT DUNCAN was appointed Chief Financial  Officer in February 2003. Mr. Duncan
is currently the cost  accounting  manager for Farouk  Systems,  a manufacturing
company.  From September 2001 to February 2004, Mr. Duncan handled financial and
cost accounting for Goodman Manufacturing. From December 1998 to April 2001, Mr.
Duncan was a Programmer  Analyst  with RHI  Refractories  America.  From 1991 to
December  1998, Mr. Duncan was the MIS Manager,  Controller and Cost  Accountant
for Garlock.  Mr.  Duncan has a total of 8 years of  experience in financial and
cost  accounting for  manufacturing  companies  along with a total of 6 years of
experience  with  computer  programming.  He is actively  involved  with various
organizations  offering  accounting,  programming  and consulting  services.  He
received a BBA in accounting from Southwest  Texas State  University in 1989 and
his CPA license in 1992.

EDWARD R.  SKAGGS was  appointed  to the Board of  Directors  of the  Company on
December 18, 2000. Mr. Skaggs has worked for an  investigative  consulting firm,
Skaggs  &  Associates  since  June of  1991.  Mr.  Skaggs  has  over 10 years of
experience  in  investigations  and  security.  In  addition,  he has  extensive
experience in retail  management  specifically  dealing in personnel  issues and
security  matters.  He received a Bachelor of Arts degree in  Political  Science
from Texas Tech University in 1992.

All  officers  and  directors  listed above will remain in office until the next
annual meeting of our  stockholders,  and until their  successors have been duly
elected and qualified.  There are no agreements  with respect to the election of
Directors.  We have not  compensated  our  Directors for service on our Board of
Directors,  any  committee  thereof,  or  reimbursed  for expenses  incurred for
attendance  at meetings of our Board of  Directors  and/or any  committee of our
Board of Directors.  Officers are  appointed  annually by our Board of Directors
and each  Executive  Officer serves at the discretion of our Board of Directors.
We do not have any standing committees. Our Board of Directors may in the future
determine to pay Directors' fees and reimburse Directors for expenses related to
their activities.


                                    Page 15
<PAGE>


ITEM 401(e)

The Company currently does not have an audit committee.

ITEM 401(g)

There have been no material  changes to the procedures by which security holders
may recommend nominees to the board of directors.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act") requires the Company's  officers,  directors and persons who own more than
10% of the  Company's  Common Stock to file reports of ownership  and changes in
ownership with the SEC and the National Association of Securities Dealers,  Inc.
Officers, directors and greater than 10% stockholders are required by regulation
to furnish  the Company  with copies of all forms they file  pursuant to Section
16(a) of the Exchange Act.

Based solely on the reports we have received and on written representations from
certain reporting persons,  we believe that the directors,  executive  officers,
and our  greater  than ten percent  beneficial  owners  have  complied  with all
applicable filing requirements for the fiscal year ended December 31, 2004.

The Company has adopted a code of ethics for its Principal  Executive and Senior
Financial Officers.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                  Annual Compensation             Long Term Compensation
                             -------------------------- ---------------------------------------------
                                                                     Awards                Payouts
                                                        -------------------------------- ------------
Name and             Year   Salary  Bonus  Other Annual  Restricted  Securities    LTIP    All Other
Principal Position            ($)    ($)   Compensation     Stock    Underlying  Payouts Compensation
                                               ($)        award(s)    Options/     ($)
                                                          (shares)      (#)
------------------- ----    ------- ------ ------------ ------------ ----------  ------- ------------
<S>                 <C>      <C>     <C>        <C>     <C>              <C>       <C>        <C>
Charles B. Pollock
CEO and             2002     -0-(1)  -0-        0         600,000(4)     0         -0-        -0-
Chairman of the     2003     -0-(2)  -0-(3)     0       1,200,000(4)     0         -0-        -0-
Board of Directors  2004     -0-(7)  -0-        0       1,200,000(4)     0         -0-        -0-
------------------- ----    ------- ------ ------------ ------------ ----------  ------- ------------
Mark F.  Weller
President and       2002     -0-(5)  -0-(3)     0         800,000(4)     0         -0-        -0-
Director            2003     -0-(6)  -0-(3)     0       1,100,000(4)     0         -0-        -0-
                    2004     -0-(8)  -0-        0       1,200,000(4)     0         -0-        -0-
------------------- ----    ------- ------ ------------ ------------ ----------  ------- ------------
Scott Duncan
CFO                 2003     -0-     -0-        0         465,000(4)     0         -0-        -0-
                    2004     -0-     -0-        0         480,000(4)     0         -0-        -0-
</TABLE>

(1)   6,279,041 shares of common stock were issued in lieu of cash salary
(2)   14,041,356 shares of common stock were issued in lieu of cash salary
(3)   Bonus of 200,000 restricted shares of common stock
(4)   Restricted shares pursuant to employment contract
(5)   3,602,230 shares of common stock were issued in lieu of cash salary
(6)   11,666,724 shares of common stock were issued in lieu of cash salary
(7)   11,300,064 shares of common stock were issued in lieu of cash salary
(8)   10,170,056 shares of common stock were issued in lieu of cash salary


                                    Page 16
<PAGE>

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                  Individual Grants
------------------------------------------------------------ ------------------
Name        Number of  Percent of   Exercise  Expiration Grant Date Present
           Securities     Total     of Base      Date         Value ($)
           Underlying   Options /    Price
            Options/      SARs       ($/sh)
              SARs     Granted to
             Granted    Employees
               (#)      in Fiscal
                           Year
---------- ----------- ----------- ---------- ---------- ---------------
Charles B.
Pollock         0           0          0        N/A           N/A
---------- ----------- ----------- ---------- ---------- ---------------
Mark F.
Weller          0           0          0        N/A           N/A
---------- ----------- ----------- ---------- ---------- ---------------
Scott
Duncan          0           0          0        N/A           N/A
---------- ----------- ----------- ---------- ---------- ---------------

-------------- ------------ ---------------- ---------------- ----------
Name           Shares        Value Realized  Number of        Value of
               Acquired on   ($)             Securities       Unexercised In-
               Exercise (#)                  Underlying       The-Money
                                             Unexercised      Options/SARs
                                             Options / SARs   At Fiscal Year-
                                             At Fiscal Year-  End ($)
                                             End (#)          Exercisable /
                                             Exercisable /    Unexercisable
                                             Unexercisable
-------------- ------------ ---------------- ---------------- -----------
Charles B.
Pollock            -0-              -0-           -0-             -0-
-------------- ------------ ---------------- ---------------- -----------
Mark F.
Weller             -0-              -0-            -0-            -0-
-------------- ------------ ---------------- ---------------- -----------
Scott Duncan       -0-              -0-            -0-            -0-
-------------- ------------ ---------------- ---------------- -----------


EMPLOYMENT AGREEMENTS

We have entered into employment  agreement with Mr. Charles Pollock and Mr. Mark
Weller. The following sets forth the terms of the employment agreement:

Charles B. Pollock-On  October 1, 2004, we entered into an employment  agreement
with Mr.  Pollock that ends on December 31, 2005,  to act as our Chairman of the
Board of  Directors  and Chief  Executive  Officer.  Pursuant to the  employment
agreement,  Mr. Pollock  receives  100,000 shares per month as  consideration of
services.


                                    Page 17
<PAGE>

Mark F. Weller-On October 1, 2004, we entered into an employment  agreement with
Mr. Weller that ends on December 31, 2005, to act as our President and Director.
Pursuant to the employment  agreement,  Mr. Weller  receives  100,000 shares per
month as consideration of services.

Mr.  Scott  Duncan was  retained on May 12, 2003 as Chief  Financial  Officer to
provide  advice and services on financial  matters  pertaining  to the Company's
business  including but not limited to SEC reports.  The terms of his employment
are based on payment in the form of the  Company's  common  stock at the rate of
40,000 restricted Rule 144 shares per month.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth certain  information  as of March 23, 2005 with
respect to the beneficial  ownership of shares of the Company's  common stock by
(i)  each  person  known  to us  who  owns  beneficially  more  than  5% of  the
outstanding  shares of the Company's  common stock,  (ii) each of our Directors,
(iii) each of our Executive  Officers and (iv) all of our Executive Officers and
Directors as a group.  Unless  otherwise  indicated,  each  stockholder has sole
voting and  investment  power with respect to the shares shown.  As of March 23,
2005,  there were  180,919,846  shares of the Company's  common stock issued and
outstanding.

<TABLE>
<CAPTION>
----------------------- ---------------------------------- -------------------------- ---------------------
                        Name and address of beneficial     Number of Shares of        Percentage of Common
Title of class          owner                              Common Stock               Stock (1)
----------------------- ---------------------------------- -------------------------- ---------------------
<S>                     <C>                                      <C>                           <C>
Common Stock            Charles B. Pollock                       61,212,664(2)                 33.8%
                        Chairman and CEO
                        9801 Westheimer, Suite 302
                        Houston, Texas  77042
----------------------- ---------------------------------- -------------------------- ---------------------
Common Stock            Mark F. Weller                            32,459,010                   17.9%
                        President and Director
                        9801 Westheimer, Suite 302
                        Houston, Texas  77042
----------------------- ---------------------------------- -------------------------- ---------------------
Common Stock            Scott Duncan                               1,145,000                     **
                        CFO
                        9801 Westheimer, Suite 302
                        Houston, Texas  77042
----------------------- ---------------------------------- -------------------------- ---------------------
Common Stock            Edward Skaggs                               350,000                      **
                        Director
                        9801 Westheimer, Suite 302
                        Houston, Texas  77042
----------------------- ---------------------------------- -------------------------- ---------------------
Common Stock            All Officers and Directors as a                                        51.7%
                        group (total of 4)
----------------------- ---------------------------------- -------------------------- ---------------------
</TABLE>

(1) Under Rule 13d-3 promulgated under the Exchange Act, a beneficial owner of a
security includes any person who, directly or indirectly,  through any contract,
arrangement, understanding, relationship, or otherwise has or shares: (i) voting
power,  which includes the power to vote, or to direct the voting of shares; and
(ii)  investment  power,  which  includes  the power to  dispose  or direct  the
disposition of shares.  Certain shares may be deemed to be beneficially owned by
more than one person (if,  for example,  persons  share the power to vote or the
power  to  dispose  of  the  shares).  In  addition,  shares  are  deemed  to be
beneficially owned by a person if the person has the right to acquire the shares
(for example, upon exercise of an option) within 60 days of the date as of which
the  information  is provided.  In  computing  the  percentage  ownership of any
person,  the  amount  of  shares  is  deemed  to  include  the  amount of shares
beneficially  owned by such  person  (and only such  person)  by reason of these
acquisition  rights.  As a result,  the percentage of outstanding  shares of any


                                    Page 18
<PAGE>

person as shown in this table does not  necessarily  reflect the person's actual
ownership  or voting  power with respect to the number of shares of common stock
actually  outstanding  on March  23,  2005.  As of March  23,  2005  there  were
180,919,846 shares of our common stock issued and outstanding.

(2) 24,056,943  shares  indirectly  through  spouse and 37,155,721  shares  held
directly

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At December 31, 2004, the Company had notes payable to related parties  totaling
$430,053.07.  These  include a note  payable  in the  amount of  $273,039.92  to
Charles B. Pollock due December 31, 2005, a demand note payable in the amount of
$89,184.45 to Mary Pollock, daughter of Charles B. Pollock and to Mark Weller in
the amount of  $52,828.7  due on  December  31, 2005 and $15,000 due on June 28,
2006.

ITEM 13.  EXHIBITS

(a) The following documents are filed as part of this report

     Exhibit 31.1 --    Certification  of  Chief  Executive  Officer  of  Pangea
                        Petroleum  Corporation  required  by Rule 13a - 14(1) or
                        Rule 15d - 14(a) of the Securities Exchange Act of 1934,
                        as adopted pursuant to Section 302 of the Sarbanes-Oxley
                        Act of 2002.

     Exhibit 31.2 --    Certification  of  Chief  Financial  Officer  of  Pangea
                        Petroleum  Corporation  required  by Rule 13a - 14(1) or
                        Rule 15d - 14(a) of the Securities Exchange Act of 1934,
                        as adopted pursuant to Section 302 of the Sarbanes-Oxley
                        Act of 2002.

     Exhibit 32.1 --    Certification  of  Chief  Executive  Officer  of  Pangea
                        Petroleum  Corporation  pursuant  to Section  906 of the
                        Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C.
                        63.

     Exhibit 32.2 --    Certification  of  Chief  Financial  Officer  of  Pangea
                        Petroleum  Corporation  pursuant  to Section  906 of the
                        Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C.
                        63.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Ham, Langston & Brezina, L.L.P. billed us in the aggregate amount of $29,349 and
$24,577  for  professional  services  rendered  for  their  audit of our  annual
financial  statements and their reviews of the financial  statements included in
our Forms  10-KSB for the year ended  December  31, 2004 and  December 31, 2003,
respectively.

AUDIT-RELATED FEES

Ham,  Langston & Brezina,  L.L.P. did not bill us for, nor perform  professional
services  rendered  for  assurance  and related  services  that were  reasonably
related  to the  performance  of  audit or  review  of the  Company's  financial
statements for the fiscal years ended December 31, 2004 and December 31, 2003.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

For the fiscal  years  ended  December  31, 2004 and  December  31,  2003,  Ham,
Langston & Brezina,  L.L.P.  did not bill us for,  nor  perform,  any  financial
information  systems  design  or  implementation.  For the  fiscal  years  ended


                                    Page 19
<PAGE>

December 31, 2004 and December  31,  2003,  we were not billed for  professional
services  from any  other  accounting  firm for  information  systems  design or
implementation.

TAX FEES

Ham, Langston & Brezina,  L.L.P. billed us in the aggregate amount of $1,500 and
$1,758 for  professional  services  rendered  for tax related  services  for the
fiscal years ended December 31, 2004 and December 31, 2003, respectively.

ALL OTHER FEES

We were not billed for any other professional services for the fiscal year ended
December 31, 2004.

AUDITOR INDEPENDENCE

Our Board of  Directors  considers  that the work done for us in the year  ended
December  31,  2004 by Ham,  Langston  &  Brezina,  L.L.P.  is  compatible  with
maintaining Ham, Langston & Brezina, L.L.P.'s independence.

AUDITOR'S TIME ON TASK

All of the work expended by Ham, Langston & Brezina,  L.L.P. on our December 31,
2004 audit was attributed to work performed by Ham, Langston & Brezina, L.L.P.'s
full-time, permanent employees.



                                    Page 20
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  undersigned  has duly caused this Form 10-KSB to be signed on
its  behalf  by the  undersigned,  there  unto duly  authorized,  in the City of
Houston, Texas, on March 31, 2005.

PANGEA PETROLEUM CORPORATION

         By: /s/ Charles B. Pollock                         Date: March 31, 2005
             -------------------------------------
             Charles B.  Pollock,
             Chairman of the Board and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1933, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the date indicated.

Date: March 31, 2005


By: /s/ Charles B. Pollock
---------------------------------
Charles B. Pollock, Chairman of the Board, and Chief Executive Officer


Date:  March 31, 2005
By: /s/ Scott Duncan
----------------------------------
Scott Duncan, Chief Financial Officer



Date: March 31, 2005
By: /s/ Mark Weller
----------------------------------
Mark Weller, President and Director



Date:  March 31, 2005
By: /s/ Edward R. Skaggs
----------------------------------
Edward R. Skaggs, Director


                                    Page 21

<PAGE>



                          PANGEA PETROLEUM CORPORATION

                                   ----------

                        CONSOLIDATED FINANCIAL STATEMENTS
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003




                                      F-1
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                                TABLE OF CONTENTS

                                   ----------

                                                                           PAGE

Report of Independent Registered Public Accounting Firm                    F-3

Consolidated Financial Statements:

  Consolidated Balance Sheet as of December 31, 2004                       F-4

  Consolidated Statements of Operations for the years
    ended December 31, 2004 and 2003                                       F-5

  Consolidated Statements of Stockholders' Deficit for
    the years ended December 31, 2004 and 2003                             F-6

  Consolidated Statements of Cash Flows for the years
    ended December 31, 2004 and 2003                                       F-8

Notes to Consolidated Financial Statements                                 F-9



                                      F-2
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Pangea Petroleum Corporation


We have audited the accompanying  consolidated balance sheet of Pangea Petroleum
Corporation   and   subsidiaries  as  of  December  31,  2004  and  the  related
consolidated statements of operations,  stockholders' deficit and cash flows for
each of the two years in the period then  ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform 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 consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Pangea
Petroleum  Corporation and subsidiaries as of December 31, 2004, and the results
of their operations and their cash flows for each of the two years in the period
then ended, in conformity with accounting  principles  generally accepted in the
United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses,  negative cash
flows from operations and has a net capital deficiency at December 31, 2004 that
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans with  regard to this  matter are also  discussed  in Note 2.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.


Houston, Texas
March 22, 2005


                                      F-3
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004

     ASSETS

Current assets:
  Cash                                                             $     54,457
  Accounts receivable                                                    10,877
  Payroll taxes refundable                                                9,879
                                                                   ------------
      Total current assets                                               75,213
                                                                   ------------

Property and equipment:
  Oil and gas properties (successful efforts method)                    179,204
  Other property and equipment                                           18,174
  Less accumulated depletion, depreciation and amortization             (41,845)
                                                                   ------------
  Net property and equipment                                            155,533
                                                                   ------------

      Total assets                                                 $    230,746
                                                                   ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                                 $      2,138
  Accrued interest payable to related parties                            44,426
  Notes payable to related parties                                      415,053
                                                                   ------------

      Total current liabilities                                         461,617

Obligation for dismantlement and disposal activities                      8,413

Notes payable to related parties, net of current portion                 15,000
                                                                   ------------

      Total liabilities                                                 485,030
                                                                   ------------

Commitments and contingencies

Stockholders' deficit:
  Preferred stock: $.001 par value; 10,000,000 shares authorized
  Common stock: $.001 par value; 200,000,000 shares authorized;
    175,694,413 shares issued and outstanding                           175,694
  Additional paid-in capital                                         16,614,739
  Unissued common stock: 1,399,998 shares                               192,833
  Deferred compensation                                                  (2,000)
  Accumulated deficit                                               (17,235,550)
                                                                   ------------

      Total stockholders' deficit                                      (254,284)
                                                                   ------------

        Total liabilities and stockholders' deficit                $    230,746
                                                                   ============


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


                                      F-4
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                            2004             2003
                                                       -------------    -------------
<S>                                                    <C>              <C>
Revenue from operations                                $      81,646    $      33,187
                                                       -------------    -------------

Costs and expenses:
  Lease operating expenses                                     5,002            7,756
  Production tax                                               5,844            2,367
  Selling, general and administrative                        228,133          173,154
  Stock based compensation                                   237,357          474,894
  Impairment of oil and gas properties                       195,742               --
  Depletion, depreciation, and amortization                   20,331            6,125
                                                       -------------    -------------

      Total costs and expenses                               692,409          664,296
                                                       -------------    -------------

         Loss from operations                               (610,763)        (631,109)
                                                       -------------    -------------

Other income and (expenses)
  Interest expense                                           (41,225)         (38,545)
  Settlement income                                           80,000               --
  Other income                                                24,771               --
                                                                        -------------

      Other income and expenses, net                          63,546          (38,545)
                                                       -------------    -------------

         Loss from continuing operations                    (547,217)        (669,654)

Recognition of deferred gain on sale of discontinued
  exploration and production subsidiary                    1,475,141               --
                                                       -------------    -------------

            Net income (loss)                          $     927,924    $    (669,654)
                                                       =============    =============

Basic and diluted net loss per common share:
  Continuing operations                                $       (0.00)   $       (0.01)
  Discontinued operations                                       0.01            (0.00)
                                                       -------------    -------------

        Net (income) loss                              $        0.01    $       (0.01)
                                                       =============    =============

Weighted average common shares                           151,886,501       90,591,355
                                                       =============    =============
</TABLE>


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


                                      F-5
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                   ADDITIONAL     UNISSUED                      STOCK
                                             COMMON STOCK           PAID-IN        COMMON     ACCUMULATED   SUBSCRIPTIONS  TREASURY
                                        SHARES        AMOUNT        CAPITAL        STOCK        DEFICIT      RECEIVABLE     STOCK
                                     -----------    ---------    ------------    ---------   ------------    ---------    ---------
<S>                                   <C>           <C>          <C>             <C>         <C>             <C>          <C>
Balance at December 31, 2002          64,333,554    $  64,334    $ 15,590,891    $ 192,833   $(17,493,820)   $ (38,500)   $(223,640
Common stock issued for cash          12,058,063       12,058         134,242           --             --           --           --
Common stock issued to compensate
  employees and consultants and
  to satisfy $55,388 of compensation
  accrued at December 31, 2002        43,043,593       43,044         564,911           --             --           --           --
Common stock issued for legal
  services                               671,104          671           6,018           --             --           --           --
Common stock issued to convert
  $39,000 of related party debt
  and $2,361 of accrued interest
  to equity                            3,150,645        3,150          38,211           --             --           --           --
Cancellation of treasury stock        (5,591,000)      (5,591)       (218,049)          --             --           --      223,640
Stock subscription receivable paid
  or treated as compensation                  --           --              --           --             --       22,855           --
Net loss                                      --           --              --           --       (669,654)          --           --
                                     -----------    ---------    ------------    ---------   ------------    ---------    ---------
Balance at December 31, 2003         117,665,959    $ 117,666    $ 16,116,224    $ 192,833   $(18,163,474)   $ (15,645)   $      --
                                     ===========    =========    ============    =========   ============    =========    =========
</TABLE>

<TABLE>
<CAPTION>
                                         TOTAL
                                     STOCKHOLDERS'
                                       (DEFICIT)
                                     -----------
<S>                                  <C>
Balance at December 31, 2002         $(1,907,902)
Common stock issued for cash             146,300
Common stock issued to compensate
  employees and consultants and
  to satisfy $55,388 of compensation
  accrued at December 31, 2002           607,955
Common stock issued for legal
  services                                 6,689
Common stock issued to convert
  $39,000 of related party debt
  and $2,361 of accrued interest
  to equity                               41,361
Cancellation of treasury stock                --
Stock subscription receivable paid
  or treated as compensation              22,855
Net loss                                (669,654)
                                     -----------
Balance at December 31, 2003         $(1,752,396)
                                     ===========
</TABLE>


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


                                      F-6
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                   ADDITIONAL     UNISSUED                      STOCK
                                             COMMON STOCK           PAID-IN        COMMON     ACCUMULATED   SUBSCRIPTIONS  TREASURY
                                        SHARES        AMOUNT        CAPITAL        STOCK        DEFICIT      RECEIVABLE     STOCK
                                     -----------    ---------    ------------    ---------   ------------    ---------    ---------
<S>                                   <C>           <C>          <C>             <C>         <C>             <C>          <C>
Balance at December 31, 2003         117,665,959    $ 117,666    $ 16,116,224    $ 192,833   $(18,163,474)   $ (15,645)   $      --
Common stock issued for cash          24,571,667       24,572         161,428           --             --           --           --
Common stock issued to compensate
  employees and consultants           30,893,235       30,893         265,483           --             --           --       (2,000)
Common stock issued for legal
  services                               563,552          563           3,967           --             --           --           --
Common stock issued for profes-
  sional fees                          2,000,000        2,000          34,000           --             --           --           --
Stock warrants issued for profes-
  sional services                             --           --          27,900           --             --           --           --
Stock warrants issued to originate
  debt                                        --           --           5,737           --             --           --           --
Write off of stock subscription
  receivable                                  --           --              --           --             --       15,645           --
Net income                                    --           --              --           --        927,924           --           --
                                     -----------    ---------    ------------    ---------   ------------    ---------    ---------
Balance at September 30, 2004        175,694,413    $ 175,694    $ 16,614,739    $ 192,833   $(17,235,550)   $      --    $  (2,000)
                                     ===========    =========    ============    =========   ============    =========    =========
</TABLE>

<TABLE>
<CAPTION>
                                         TOTAL
                                     STOCKHOLDERS'
                                       (DEFICIT)
                                     -----------
<S>                                  <C>
Balance at December 31, 2003         $(1,752,396)
Common stock issued for cash             186,000
Common stock issued to compensate
  employees and consultants              294,376
Common stock issued for legal
  services                                 4,530
Common stock issued for profes-
  sional fees                             36,000
Stock warrants issued for profes-
  sional services                         27,900
Stock warrants issued to originate
  debt                                     5,737
Write off of stock subscription
  receivable                              15,645
Net income                               927,924
                                     -----------
Balance at September 30, 2004        $  (254,284)
                                     ===========
</TABLE>

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


                                      F-7
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                 2004            2003
                                                             -----------    -----------
<S>                                                          <C>            <C>
Cash flows from operating activities:
  Net loss                                                   $   927,924    $  (669,654)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Recognition of deferred gain from sale of discontinued
      business segment                                        (1,475,141)            --
    Depletion, depreciation and amortization expense              20,331          6,125
    Impairment of oil and gas properties                         195,742             --
    Direct write-off of subscription receivable                   15,645             --
    Common stock issued as compensation for services             334,906        637,499
    Warrants issued for compensation for services                 27,900             --
    Common stock issued for accrued interest                          --          2,361
    Changes in operating assets and liabilities, net of
     effects of dispositions:
      Accounts receivable                                          1,583         (9,676)
      Other assets                                                (9,879)         4,720
      Accounts payable and accrued liabilities                    (7,690)       (23,148)
       Dismantlement obligation                                   (1,597)            --
                                                             -----------    -----------

          Net cash used in operating activities                   29,724        (51,773)
                                                             -----------    -----------

Cash flows from investing activities:
  Capital and exploratory expenditures                          (178,157)      (188,264)
                                                             -----------    -----------

          Net cash used in investing activities                 (178,157)      (188,264)
                                                             -----------    -----------

Cash flows from financing activities:
  Proceeds from the sale of common stock                         186,000        146,300
  Proceeds from notes payable to related parties
    with warrants                                                 15,000         81,000
                                                             -----------    -----------

          Net cash provided by financing activities              201,000        227,300
                                                             -----------    -----------

Net increase (decrease) in cash and cash equivalents              52,567        (12,737)

Cash and cash equivalents at beginning of year                     1,890         14,627
                                                             -----------    -----------

Cash and cash equivalents at end of year                     $    54,457    $     1,890
                                                             ===========    ===========
</TABLE>


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


                                      F-8
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

       ORGANIZATION

       Pangea Petroleum  Corporation  (the "Company") is a Colorado  corporation
       engaged in oil and gas  exploration  and  development.  The  Company  was
       originally incorporated in 1997 as Zip Top, Inc. and subsequently adopted
       a name change to Pangea  Petroleum  Corporation.  On April 26, 2000,  the
       Company was  recapitalized  when the Company  acquired the  non-operating
       public  shell,  Segway  II  Corporation.  Segway  II  Corporation  had no
       significant  assets  or  liabilities  at the  date  of  acquisition  and,
       accordingly, the transaction was accounted for as a recapitalization.

       ACCOUNTING 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 at the date of the financial statements
       and the  reported  amounts of revenue and expenses  during the  reporting
       period. Actual results could differ from those estimates. These estimates
       mainly involve the useful lives of property and equipment, the impairment
       of unproved oil and gas  properties,  the  recognition of a deferred gain
       that arose upon sale of Mass Energy,  Inc., the valuation of deferred tax
       assets and the realization of accounts receivable.

       OIL AND GAS PRODUCING ACTIVITIES

       The Company follows the "successful efforts" method of accounting for its
       oil and gas  properties.  Under this method of  accounting,  all property
       acquisition  costs  (cost to  acquire  mineral  interests  in oil and gas
       properties) and costs (to drill and equip) of exploratory and development
       wells are capitalized when incurred, pending determination of whether the
       well has found  proved  reserves.  If an  exploratory  well has not found
       proved reserves in commercial  quantities,  the costs associated with the
       well  are  charged  to  expense.  The  costs  of  development  wells  are
       capitalized   whether   productive  or   nonproductive.   Geological  and
       geophysical  costs and the costs of carrying  and  retaining  undeveloped
       properties are expensed as incurred. Management has performed an analysis
       and developed an estimate for plugging and abandoning wells of $8,413 and
       10,000 at December 31, 2004 and 2003, respectively.

       Unproved oil and gas properties  that are  individually  significant  are
       periodically assessed for impairment of value, and, if necessary,  a loss
       is  recognized  by  providing an  impairment  allowance.  Other  unproved
       properties are amortized  based on the Company's  average holding period.
       Capitalized  costs of producing oil and gas properties after  considering
       estimated  dismantlement  and  abandonment  costs and  estimated  salvage
       values, are depreciated and depleted by the unit-of-production method. On
       the sale or retirement of a complete unit of a proved property,  the cost
       and related  accumulated  depreciation,  depletion,  and amortization are
       eliminated from the property accounts,  and the resultant gain or loss is
       recognized.  On the  retirement  or sale  of a  partial  unit  of  proved
       property, the cost is charged to accumulated depreciation, depletion, and
       amortization with a resulting gain or loss recognized in the statement of
       operations.

       On the sale of an entire  interest  in an unproved  property  for cash or
       cash  equivalent,  gain or loss on the sale is  recognized,  taking  into
       consideration  the amount of any recorded  impairment if the property had
       been assessed individually. If a partial interest in an unproved property
       is sold, the amount received is treated as a reduction of the cost of the
       interest retained.

       OTHER PROPERTY AND EQUIPMENT

       Property and equipment is stated at cost.  Depreciation is computed using
       the straight-line  method over the estimated useful lives of 3 to 5 years
       for  office  furniture  and  equipment  and   transportation   and  other
       equipment.  Additions or  improvements  that increase the value or extend
       the life of an asset are capitalized. Expenditures for normal maintenance
       and repairs are  expensed as  incurred.  Disposals  are removed  from the
       accounts at cost less accumulated  depreciation and any gain or loss from
       disposition is reflected in operations.


                                      F-9
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

       IMPAIRMENT OF LONG-LIVED ASSETS

       In the event facts and  circumstances  indicate the  carrying  value of a
       long-lived asset, including associated  intangibles,  may be impaired, an
       evaluation  of  recoverability  is performed by comparing  the  estimated
       future  undiscounted  cash flows associated with the asset to the asset's
       carrying  amount  to  determine  if  a  write-down  to  market  value  or
       discounted  cash flow is  required.  Based  upon a recent  evaluation  by
       management,  an impairment  write-down of the Company's long-lived assets
       was recorded to write such assets down to their  estimated net realizable
       value.

       CASH AND CASH EQUIVALENTS

       For  purposes  of  reporting  cash  flows,  the  Company   considers  all
       short-term  investments with an original maturity of three months or less
       when purchased to be cash equivalents.

       FAIR VALUE OF FINANCIAL INSTRUMENTS

       The Company  includes  fair value  information  in the notes to financial
       statements when the fair value of its financial  instruments is different
       from the book value.  When the book value  approximates  fair  value,  no
       additional disclosure is made.

       CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

       Financial  instruments  which  subject the Company to  concentrations  of
       credit risk include cash and cash  equivalents  and accounts  receivable.
       The Company  maintains its cash and cash equivalents with major financial
       institutions  selected based upon  management's  assessment of the banks'
       financial  stability.  Balances  periodically exceed the $100,000 federal
       depository insurance limit. The Company has not experienced any losses on
       deposits.  During the years ended December 31, 2004 and 2003, 100% of the
       Company's revenues was received from two customers.

       OIL AND GAS REVENUES

       Oil and gas  revenues are recorded  under the sales  method.  The Company
       recognizes oil and gas revenues as production  occurs.  As a result,  the
       Company accrues revenue  relating to production for which the Company has
       not received payment.

       EARNINGS PER SHARE

       The Company has adopted SFAS No. 128, which  provides for  calculation of
       "Basic"  and  "Diluted"  earnings  per share.  Basic  earnings  per share
       includes no dilution and is computed by dividing net income  available to
       common shareholders by the weighted average common shares outstanding for
       the period.  Diluted earnings per share reflect the potential dilution of
       securities that could share in the earnings of an entity similar to fully
       diluted earnings per share.

       STOCK BASED COMPENSATION

       SFAS No.  123,  "Accounting  for  Stock-Based  Compensation"  established
       financial  accounting and reporting  standards for  stock-based  employee
       compensation  plans.  It defined a fair value based method of  accounting
       for an employee stock option or similar equity  instrument and encouraged
       all entities to adopt that method of accounting for all of their employee
       stock  compensation plans and include the cost in the income statement as
       compensation  expense.  However,  it also allows an entity to continue to
       measure compensation cost for those plans using the intrinsic value based
       method of accounting  prescribed by Accounting  Principles  Board ("APB")
       Opinion No. 25,  "Accounting for Stock Issued to Employees".  The Company
       accounts for compensation  cost for stock option plans in accordance with
       APB Opinion No. 25.


                                      F-10
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

       INCOME TAXES

       The Company uses the  liability  method in  accounting  for income taxes.
       Under this method,  deferred tax assets and  liabilities  are  determined
       based on differences  between financial reporting and income tax carrying
       amounts of assets and  liabilities and are measured using the enacted tax
       rates and laws that will be in effect when the  differences  are expected
       to reverse.  A valuation  allowance,  if necessary,  is provided  against
       deferred  tax  assets,  based upon  management's  assessment  as to their
       realization.

       NEW ACCOUNTING PRONOUNCEMENTS

       In June  2002,  the FASB  issued  SFAS No.  146,  "Accounting  for  Costs
       Associated with Exit or Disposal  Activities," which addresses  financial
       accounting  and  reporting  for costs  associated  with exit or  disposal
       activities and supersedes  Emerging  Issues Task Force ("EITF") Issue No.
       94-3,  "Liability  Recognition for Certain Employee  Termination Benefits
       and Other Costs to Exit an Activity  (including Certain Costs Incurred in
       a  Restructuring)."  SFAS No. 146 requires  companies to recognize  costs
       associated with exit or disposal activities when they are incurred rather
       than  at the  date  of a  commitment  to an exit  or  disposal  plan.  In
       addition,  SFAS No. 146 establishes  that fair value is the objective for
       initial measurement of the liability.  SFAS No. 146 is effective for exit
       or disposal  activities  initiated  after  December 31,  2002,  but early
       adoption is  permitted.  The Company  adopted  SFAS No. 146 on January 1,
       2003 and at December  31, 2004 has  recognized  a liability  for disposal
       activities of $8,413.

       In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for Stock
       Based  Compensation",  which  amends SFAS No. 123 to provide  alternative
       methods of transaction for an entity that voluntarily changes to the fair
       value method of accounting for stock based employee compensation. It also
       amends the  disclosure  provisions  of SFAS No. 123 to require  prominent
       disclosure  about the  effects  on  reported  net  income of an  entity's
       accounting   policy  decisions  with  respect  to  stock  based  employee
       compensation.  Finally,  SFAS No. 148 amends APB Opinion No. 28, "Interim
       Financial  Reporting",  to require disclosure of those effects in interim
       financial  statements.  SFAS No. 148 is effective  for fiscal years ended
       after  December 15, 2002,  but early  adoption is permitted.  The Company
       continues to measure  stock based  compensation  in  accordance  with APB
       Opinion No. 25, but began reporting the additional quarterly  disclosures
       required by SFAS No. 148 in the quarter ending March 31, 2003.

       In  January  2003,  the FASB  issued  FASB  Interpretation  (FIN)  No. 46
       "Consolidation  of  Variable  Interest  Entities."  FIN No. 46 requires a
       company to consolidate a variable  interest entity ("VIE") if the company
       has variable  interests that give it a majority of the expected losses or
       a majority of the expected  residual returns of the entity.  Prior to FIN
       No. 46, VIEs were commonly  referred to as SPEs.  FIN No. 46 is effective
       immediately for VIEs created after January 31, 2003. This  interpretation
       did not have a material  effect on the Company's  financial  condition or
       results of operations.

       In April 2003,  the FASB issued SFAS No. 149,  Amendment to Statement No.
       133 on Derivative  Instruments  and Hedging  Activities.  This  statement
       amends and clarifies  financial  accounting  and reporting for derivative
       instruments,  including certain derivative  instruments embedded in other
       contracts  (collectively  referred  to as  derivatives)  and for  hedging
       activities  under SFAS No.  133.  The  changes  in SFAS No.  149  improve
       financial   reporting  by  requiring  that   contracts  with   comparable
       characteristics be accounted for similarly.  Those changes will result in
       more  consistent  reporting of contracts as either  derivatives or hybrid
       instruments.  SFAS No. 149 is  effective  for  contracts  entered into or
       modified after June 30, 2003, except in certain instances detailed in the
       statement,  and hedging  relationships  designated  after June 30,  2003.
       Except as  otherwise  stated in SFAS No. 149,  all  provisions  should be
       applied  prospectively.  The  adoption of this  statement  did not have a
       material  effect on the  Company's  financial  condition  or  results  of
       operations.


                                      F-11
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

       NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED

       In May 2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
       Financial  Instruments  with  Characteristics  of  both  Liabilities  and
       Equity."  SFAS No. 150,  which is effective at the beginning of the first
       interim  period  beginning  after June 15, 2003,  must be  implemented by
       reporting the cumulative  effect of a change in accounting  principle for
       financial  instruments  created before the issuance date of the statement
       and still  existing at the  beginning of the interim  period of adoption.
       The statement requires that a financial instrument which falls within the
       scope of the statement to be classified and measured as a liability.  The
       following  financial   instruments  are  required  to  be  classified  as
       liabilities:   (1)  shares  that  are  mandatorily  redeemable,   (2)  an
       obligation  to  repurchase  the issuer's  equity shares or one indexed to
       such an  obligation  and  that  requires  or may  require  settlement  by
       transferring assets and (3) the embodiment of an unconditional obligation
       that the issuer  may or may not  settle by  issuing a variable  number of
       equity shares if, at inception,  the monetary  value of the obligation is
       based on certain measurements  defined in the statement.  The adoption of
       this statement did not have a material effect on the Company's  financial
       condition or results of operations.

       RECLASSIFICATIONS

       Certain amounts presented in the 2003 consolidated  financial  statements
       have  been  reclassified  to  conform  to  the  2004  presentation.   The
       reclassifications  relate  primarily  to the  presentation  of costs  and
       expenses in the statement of operations.

2.     GOING CONCERN CONSIDERATIONS

       Since its  inception,  the Company  has  suffered  recurring  losses from
       operations  and has  been  dependent  on  existing  stockholders  and new
       investors to provide the cash resources to sustain its operations. During
       the years ended December 31, 2004 and 2003, the Company  reported  losses
       from continuing operations of $547,217 and $669,654, respectively.

       Continuing  negative operating results produced a working capital deficit
       of $392,054 as of December 31, 2004.  In 2001 Mass  Energy,  Inc.  became
       severely  delinquent  on certain  accounts  payable and  various  vendors
       initiated  legal  actions  against the Company and Mass  Energy,  Inc. to
       force payment of past due accounts. However, Mass Energy, Inc. lacked the
       cash resources to make such  payments.  One suit was filed against Pangea
       Petroleum  Corporation  alleging that it was  responsible for the debt of
       the former  subsidiary;  however,  the lawsuit  against Pangea  Petroleum
       Corporation was withdrawn in 2004 without  liability to the Company.  The
       Company's  recurring  negative  financial results raise substantial doubt
       about the Company's ability to continue as a going concern.

       The  Company  developed a  multi-step  plan and during 2003 and 2004 took
       actions to improve its  financial  position  and deal with its  liquidity
       problems.  As part of that plan,  in 2002,  the Company sold Mass Energy,
       Inc.  in  a  transaction   that  management   believes  has  resulted  in
       improvements  in both the Company's  overall  financial  position and its
       chances  of  acquiring  economically  viable  oil and gas  properties  or
       engaging  in  transactions  necessary  for the  future  viability  of the
       Company.  The final steps of the plan are still being developed,  but may
       include  additional  private  placements of the  Company's  common stock,
       additional oil and gas property  acquisitions and/or exploration efforts,
       and efforts to raise  additional  debt  financing or equity  investments.
       There can be no assurance that any of the plans  developed by the Company
       will produce cash flows sufficient to ensure its long-term viability as a
       going concern.


                                      F-12
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.     GOING CONCERN CONSIDERATIONS, CONTINUED

       The  Company's  long-term  viability  as a going  concern is dependent on
certain key factors, as follows:

            o     The Company's  ability to obtain  adequate  sources of outside
                  financing  to support  near term  operations  and to allow the
                  Company to continue forward with current strategic plans.

            o     The  Company's  ability  to  locate,  prove and  produce  from
                  economically viable oil and gas reserves.

            o     The   Company's   ability  to  ultimately   achieve   adequate
                  profitability and cash flows to sustain continuing operations.


3.     DEFERRED GAIN ON DISPOSITION OF MASS ENERGY, INC.

       On October 7, 2002,  the Company  sold 100 percent of the common stock of
       Mass Energy,  Inc. to Thomas  Banks,  Ltd., an unrelated  Cayman  Islands
       corporation,  in exchange for $500 and the  assignment  of certain  fully
       reserved notes receivable on the books of Mass Energy, Inc. Thomas Banks,
       Ltd. assumed all of Mass Energy,  Inc.'s liabilities totaling $1,475,141.
       At the date of the  sale,  all of Mass  Energy,  Inc.'s  assets  had been
       written off or fully reserved based on impairment  analysis  performed by
       the Company.  The $500 cash portion of the purchase  price was originally
       recorded  as a  receivable;  however  the cash was never  collected  from
       Thomas Banks, Ltd., and the receivable was written off.

       The Company deferred  recognition of any gain because legal counsel could
       not  determine if legal  actions  against  Mass  Energy,  Inc and related
       imputed liability or alter-ego claims against Pangea Petroleum,  Inc., as
       the former sole stockholder of Mass Energy,  Inc. would eventually result
       in the Company's liability for the claims. At December 31, 2004, based on
       the  passage of the  statute  of  limitations  on  various  debts of Mass
       Energy,  Inc.  and the failure of alter-ego  claims  against the Company,
       legal  counsel  advised the Company  that  likelihood  of any  additional
       liability  arising from Mass Energy,  Inc. was remote.  Accordingly,  the
       $1,475,141  gain  from  sale of Mass  Energy,  previously  deferred,  was
       recognized in 2004.

4.     PROPERTY AND EQUIPMENT

       Property and equipment consists of the following at December 31, 2004:

         Oil and gas properties                                     $ 179,204
         Office equipment                                              15,594
         Furniture and fixtures                                         2,580
                                                                    ---------
                                                                      197,378

       Less accumulated depreciation, depletion and amortization      (41,845)
                                                                    ---------
       Net property and equipment                                   $ 155,533
                                                                    =========


       Included in oil and gas properties is $8,413 recorded to reflect the cost
       of disposal  activities  associated  with oil and gas  properties  in the
       future. A long-term  liability for the same amount has been recognized to
       reflect the Company's obligation for future disposal and dismantlement.

       During the years ended December 31, 2004, the Company  recorded dry hole,
       abandonment and impairment  charges of $195,742.  There were no dry hole,
       abandonment  and  impairment  charges in 2003. At December 31, 2004,  the
       Company  has  working  interests  in six wells.  One of the  wells,  with
       capitalized   costs  totaling   $5,369,   has  not  been  completed  and,
       accordingly,  a  determination  has not  yet  been  made if this  well is
       economically viable.


                                      F-13
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.     NOTES PAYABLE TO RELATED PARTIES

       Notes payable to related parties consist of the following at December 31,
       2004:

<TABLE>
<CAPTION>
<S>                                                                                  <C>
       Notes payable to Mary Pollock,  daughter of the chief executive  officer.
       Theses notes bear interest at rates of 4% to 12% per year with
         interest due quarterly  and principal due in October 2005.  These notes
         are uncollateralized.                                                       $  89,184

       Notes  payable to Charles  Pollock,  the Chief  Executive  Officer  and a
         significant  stockholder  of the Company.  These notes bear interest of
         12% per year, and due in one time payments of principal and interest at
         various dates through December 2005. These notes
         are uncollateralized.                                                         273,040

       Notes payable to Mark Weller, the President and a significant
         stockholder of the Company. These notes bear interest of 12%
         per year, and due in one time payments of principal and interest
         at various dates through June 2006. These notes are uncollateralized.          67,829
                                                                                     ---------

                                                                                       430,053

       Less current portion                                                            415,053
                                                                                     ---------

       Long-term portion of notes payable to related parties                         $  15,000
                                                                                     =========


       Accrued  interest  payable to related  parties of $44,426 at December 31,
       2004  represents  interest  accrued on the above notes payable to related
       parties.  Certain of these above  notes were  renegotiated  and  extended
       during 2004 and  accrued  interest of $41,632 was added to the face value
       of the notes and reclassified from accrued interest.

       The  non-current  portion of the notes  payable to  related  parties,  at
       December 31, 2004, all relates to 2006 maturities.

6.     INCOME TAXES

       The Company has incurred losses since its inception and,  therefore,  has
       not been subject to federal  income taxes.  As of December 31, 2004,  the
       Company  had net  operating  loss  ("NOL")  carryforwards  for income tax
       purposes of  approximately  $6,424,000  which expire in various tax years
       through 2024. Under the provisions of Section 382 of the Internal Revenue
       Code, the net operating loss carryforwards resulting from the acquisition
       of Mass  Energy,  Inc.  and the  ownership  change in the Company when it
       recapitalized  in 2000 will  severely  limit  the  Company's  ability  to
       utilize its NOL  carryforward to reduce future taxable income and related
       tax liabilities.  Additionally,  because United States tax laws limit the
       time during which NOL carryforwards may be applied against future taxable
       income,  the  Company  will,  in all  likelihood,  be unable to take full
       advantage of its NOL for federal  income tax purposes  should the Company
       generate taxable income.

       The  composition  of  deferred  tax assets and the related tax effects at
December 31, 2004 are as follows:

         Net operating losses                                                       $2,184,000
         Interest expense not deductible until paid                                     31,000
                                                                                    ----------

           Total deferred tax assets                                                 2,215,000

         Less valuation allowance                                                    2,215,000
                                                                                    ----------

         Net deferred tax asset                                                     $       --
                                                                                    ==========
</TABLE>


                                      F-14
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.     INCOME TAXES, CONTINUED

       The  difference  between  the  income  tax  benefit  in the  accompanying
       statement  of  operations  and the amount  that would  result if the U.S.
       Federal  statutory rate of 34% were applied to pre-tax loss for the years
       ended December 31, 2004 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                         2004                       2003
                                                ---------------------      ---------------------
                                                  AMOUNT         %           AMOUNT         %
<S>                                             <C>            <C>         <C>            <C>
       Provision (benefit) for income tax
         at federal statutory rate              $   315,494     34.0%      $  (227,682)   (34.0%)
       Non-deductible expenses                      130,820     14.1%          195,643     29.2%
       Non-taxable income                          (501,548)   (54.1%)
       Increase in valuation allowance               55,234      6.0%           32,039      4.8%
                                                -----------    -----       -----------    -----

                                                $      --        -- %      $      --        -- %
                                                ===========    =====       ===========    =====
</TABLE>


7.     COMMITMENTS AND CONTINGENCIES

       OPERATING LEASE

       The Company  leases  office space under a one year  operating  lease that
       expires in March 2005 and  inclues  monthly  rent of $688.  Rent  expense
       incurred under operating  leases during the years ended December 31, 2004
       and 2003 was $8,447 and $4,738, respectively.

       EMPLOYMENT AGREEMENT

       The  Company  entered  into  revised   employment   agreements  with  its
       Chairman/Chief  Executive  Officer and its  President on October 7, 2004.
       The employment  agreements  provide for the issuance of 100,000 shares of
       restricted stock per month for their base salary compensation.

       LEGAL PROCEEDINGS

       On October 7, 2002,  the Company  sold 100 percent of the common stock of
       Mass Energy,  Inc. to Thomas  Banks,  Ltd., an unrelated  Cayman  Islands
       corporation,  in exchange for $500 and the  assignment  of certain  fully
       reserved notes receivable on the books of Mass Energy, Inc. Thomas Banks,
       Ltd. assumed all of Mass Energy,  Inc.'s liabilities totaling $1,475,141.
       At the date of the  sale,  all of Mass  Energy,  Inc.'s  assets  had been
       written off or fully reserved based on impairment  analysis  performed by
       the Company.  The $500 cash portion of the purchase  price was originally
       recorded  as a  receivable;  however  the cash was never  collected  from
       Thomas Banks, Ltd., and the receivable was written off.

       The Company deferred  recognition of any gain because legal counsel could
       not  determine if legal  actions  against  Mass  Energy,  Inc and related
       imputed liability or alter-ego claims against Pangea Petroleum,  Inc., as
       the former sole stockholder of Mass Energy,  Inc. would eventually result
       in the Company's liability for the claims. At December 31, 2004, based on
       the  passage of the  statute  of  limitations  on  various  debts of Mass
       Energy,  Inc.  and the failure of alter-ego  claims  against the Company,
       legal  counsel  advised the Company  that  likelihood  of any  additional
       liability  arising from Mass Energy,  Inc. was remote.  Accordingly,  the
       $1,475,141  gain  from  sale of Mass  Energy,  previously  deferred,  was
       recognized in 2004.


                                      F-15
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.     STOCKHOLDERS' EQUITY

       In September  2003 the  stockholders  of the company  voted to approve an
       increase in the authorized shares from 105,000,000 to 210,000,000,  which
       includes 200,000,000 common shares and 10,000,000 preferred shares.

       PREFERRED STOCK

       The Company's  articles of incorporation  authorize the issuance of up to
       10,000,000  shares of serial preferred  stock,  with a par value of $.001
       and other characteristics determined by the Company's board of directors.
       As of December 31, 2004 and 2003,  there was no preferred stock issued or
       outstanding.

       COMMON STOCK

       During the years ended  December  31, 2004 and 2003,  the Company  issued
       shares  for  cash  under  private   placements   of  securities   and  as
       compensation to employees and  consultants.  These issuances are shown on
       the accompanying statement of stockholders' deficit.

       Included in stock  issuances  for the year ended  December  31, 2001 were
       certain  shares  issued  under  a  Securities   Purchase  Agreement  (the
       "Securities  Purchase  Agreement")  whereby the Company issued 12,650,000
       shares of  restricted  common  stock to an escrow  agent  (the  "Escrowed
       Shares")  for the  benefit  of  four  investor  groups  in  exchange  for
       $1,300,000  in cash.  The  terms  of the  Securities  Purchase  Agreement
       required the Company to file a Registration Statement with the Securities
       and Exchange  Commission  to register  the  Escrowed  Shares and included
       provisions  for the  issuance of four series of  warrants  with  exercise
       prices to be set based on a combination  of certain future events and the
       performance of the Company's  common stock.  As of December 31, 2002, the
       Company had not  registered  shares in  accordance  with the terms of the
       Securities  Purchase  Agreement and,  accordingly,  at December 31, 2002,
       1,399,998  additional  shares are  issuable  to the  investors  under the
       agreement.   During  the  year  ended  December  31,  2002,  the  Company
       recognized a $192,833 expense for failure to timely register shares under
       the Securities Purchase  Agreement.  The additional shares issuable under
       the   agreement   are  shown  in  the  balance  sheet  and  statement  of
       stockholders'  equity as unissued common stock.  Following is an analysis
       of shares and warrants issuable under the Securities Purchase Agreement.

<TABLE>
<CAPTION>
                                                       MAXIMUM
                                        PURCHASE      NUMBER OF        MAXIMUM NUMBER
              PURCHASER                   PRICE         SHARES           OF WARRANTS
              ---------                 ----------    ----------       --------------
<S>                                     <C>            <C>           <C>
       Generation Capital Associates    $  600,000     1,600,000     3,450,000 A Warrants
                                                                     3,450,000 B Warrants

       STL Capital Partners, LLC           250,000       666,667     1,333,333 A Warrants
                                                                     1,333,333 B Warrants

       Greenwood Partners, L.P.            200,000       533,333     1,066,666 A Warrants
                                                                     1,066,666 B Warrants

       The Apmont Group, Inc.              250,000       550,000     1,100,000 C Warrants
                                                                     1,100,000 D Warrants

       Escrow Agent Fee                       -             -           75,000 A Warrants
                                                                        75,000 B Warrants
                                        ----------    ----------    ----------

         Total                          $1,300,000     3,350,000    14,049,998 Warrants
                                        ==========    ==========    ==========
</TABLE>


       STOCK OPTIONS

       The Company periodically issues incentive stock options to key employees,
       officers,  and directors to provide additional  incentives to promote the
       success of the  Company's  business and to enhance the ability to attract
       and retain the  services of  qualified  persons.  The Board of  Directors
       approves the issuance of such  options.  The exercise  price of an option
       granted is  determined  by the fair market value of the stock on the date
       of grant.


                                      F-16
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.     STOCKHOLDERS' EQUITY

       STOCK OPTIONS, CONTINUED

       The Company has elected to follow Accounting Principles Board Opinion No.
       25,  "Accounting  for Stock  Issued to  Employees"  (APB 25) and  related
       Interpretations in accounting for its employee stock options because,  as
       discussed below, the alternative fair value accounting provided for under
       FASB  Statement  No.  123,  "Accounting  for  Stock-Based  Compensation",
       requires use of option  valuation  models that were not developed for use
       in valuing employee stock options. Under APB 25, if the exercise price of
       the  Company's  employee  stock  options is greater  than or equal to the
       market  price  of  the  underlying   stock  on  the  date  of  grant,  no
       compensation  expense is recognized.  No compensation  expense related to
       options was  recognized  in 2004 or 2003 because no options were granted,
       re-priced or vested.

       A summary of the Company's stock option activity and related  information
       for the years ended December 31, 2004 and 2003 follows:

                                      NUMBER OF                       WEIGHTED
                                        SHARES                        AVERAGE
                                        UNDER           EXERCISE      EXERCISE
                                        OPTION           PRICE         PRICE
                                      ----------        --------      --------
       Balance outstanding at
         December 31, 2002             4,500,000      $0.20-$5.00      $2.39

         Expired                      (2,720,000)     $0.50-$5.00      $3.35
                                      ----------

       Balance outstanding at
         December 31, 2003             1,780,000      $0.20-$1.00      $0.91

         Expired                      (1,430,000)     $1.00            $1.00
                                      ----------

       Balance outstanding at
         December 31, 2004               350,000      $0.20 - $1.00    $0.56
                                      ==========


       All  outstanding  stock options are  exercisable at December 31, 2004 and
       2003.  A summary of  outstanding  stock  options  at  December  31,  2004
       follows:

                                                    REMAINING
          NUMBER OF COMMON                          CONTRACTED
          STOCK EQUIVALENTS     EXPIRATION DATE    LIFE (YEARS)   EXERCISE PRICE
          -----------------     ---------------    ------------   --------------
                50,000          May 2010                5.4            0.50
               100,000          May 2010                5.4            1.00
               100,000          August 2010             5.7            0.20
               100,000          January 2011            6.1            0.50
             ---------
               350,000
             =========

       Effective  in March 2002,  the Company  adopted a Stock  Option and Grant
       Plan (the "Plan")  under which  incentive  stock  options,  non-qualified
       stock options,  restricted  stock, and common stock of the Company may be
       granted from time to time to employees  and  consultants  of the Company.
       The Plan  allows  for  grants to other  individuals  contributing  to the
       success  of the  Company  at the  discretion  of the  Company's  board of
       directors. The purpose of the Plan is to provide additional incentives to
       promote the success of the Company and to enhance the  Company's  ability
       to attract and retain the services of qualified individuals.  The Company
       has reserved 5,000,000 shares of stock for issuance under the Plan and up
       to 400,000  additional shares will be reserved and available for issuance
       under the Plan each year beginning in 2003 and continuing until 2012.


                                      F-17
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.     STOCKHOLDERS' EQUITY

       STOCK WARRANTS

       A summary of the Company's stock warrant activity and related information
       for the years ended December 31, 2004 and 2003 follows:

                                        NUMBER OF                      WEIGHTED
                                          SHARES                       AVERAGE
                                          UNDER          EXERCISE      EXERCISE
                                         WARRANT          PRICE         PRICE
                                       ----------        --------      --------
       Warrants outstanding at
         December 31, 2002             14,849,998       $0.01-$0.50     $0.017
         Issued                        16,072,920      $0.008-$0.19      0.011
                                       ----------
       Warrants outstanding at
         December 31, 2003             30,922,918       $0.01-$0.02     $0.014
         Issued                        11,825,000      $0.008-$0.020     0.017
                                       ----------
       Warrants outstanding at
         December 31, 2004             42,747,918       $0.008-$0.50    $0.015
                                      ===========


       All stock  warrants  are  exercisable  at December  31, 2004 and 2003.  A
       summary of outstanding stock warrants at December 31, 2004 follows:

                                                    REMAINING
         NUMBER OF COMMON                           CONTRACTED
         STOCK EQUIVALENTS      EXPIRATION DATE    LIFE (YEARS)   EXERCISE PRICE
         -----------------      ---------------    ------------   --------------
           14,049,998           November 2005           0.9           $0.01
              200,000           June 2005               0.5            0.50
              600,000           December 2008           4.0            0.02
              910,000           January 2009            4.1            0.0085
              257,100           January 2009            4.1            0.01
            2,080,820           February 2009           4.2            0.01
            2,250,000           March 2009              4.3            0.008
            1,200,000           April 2009              4.3            0.01
            1,000,000           April 2009              4.3            0.012
              855,000           May 2009                4.4            0.016
              120,000           June 2009               4.5            0.01
            2,400,000           July 2009               4.5            0.01
              800,000           September 2009          4.7            0.015
              800,000           October 2009            4.8            0.01
              300,000           October 2009            4.8            0.019
            3,600,000           December 2009           5.0            0.01
              600,000           December 2009           5.0            0.015
              600,000           January 2010            5.1            0.01
              500,000           January 2010            5.1            0.12
              300,000           February 2010           5.2            0.12
            8,300,000           February 2010           5.2            0.20
            1,125,000           June 2010               5.5            0.008
          -----------
           42,747,918
          ===========

       The warrants issued in connection with the Securities  Purchase Agreement
       had original exercise prices of $0.0375 to $1.00 and a five-year exercise
       term. The related  warrant  agreements  include  various  provisions that
       could reduce the exercise  price and the exercise  price may be as low as
       $0.01 as shown above.


                                      F-18
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.     RELATED PARTY TRANSACTIONS

       During the years ended December 31, 2004 and 2003, the Company engaged in
       transactions with related parties as follows:

       The Company has entered into a consulting agreement with a stockholder to
       provide  record-keeping  and other  administrative  services.  During the
       years ended  December  31, 2004 and 2003 the Company  paid  consideration
       under this record-keeping and administrative  services agreement totaling
       $47,019 and $80,722, respectively. The Company paid for these services by
       issuing 4,836,448 and 8,072,223 shares of the Company's common stock.

       In addition to record-keeping  services  described above, the Company has
       various related party notes payable at December 31, 2003 (See Note 5).


10.    NON-CASH INVESTING AND FINANCING ACTIVITIES

       During the years ended December 31, 2004 and 2003, the Company engaged in
       various non-cash financing and investing activities as follows:

<TABLE>
<CAPTION>
                                                                   2004           2003
                                                                ---------      ----------

<S>                                                             <C>            <C>
         Common stock issued to retire related party debt       $      --      $   39,000

         Long-term obligation recorded upon recognition
           of dismantlement costs                                      --          10,000
</TABLE>

       Following is an analysis of cash paid for interest and income taxes
       during the years ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                    2004           2003
                                                                -----------    ----------
<S>                                                             <C>            <C>
         Cash paid for interest                                 $      --      $       --

         Cash paid for income taxes                                    --              --
</TABLE>


11.    SUPPLEMENTAL OIL AND GAS INFORMATION - UNAUDITED

       The  following  supplemental   information  regarding  the  oil  and  gas
       activities  of the  Company  is  presented  pursuant  to  the  disclosure
       requirements  promulgated  by  the  Securities  and  Exchange  Commission
       ("SEC")  and  SFAS  No.  69,  Disclosures  About  Oil and  Gas  Producing
       Activities ("Statement 69").

      Production  from one field  accounted for 92% and 90% of the Company's oil
      and gas sales  revenues  for the years ended  December  31, 2004 and 2003,
      respectively.

       ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES

      Set forth below is a summary of the changes in the estimated quantities of
      the Company's crude oil and  condensate,  and gas reserves for the periods
      indicated, as estimated by the Company as of December 31, 2004. All of the
      Company's  reserves are located within the United States.  Proved reserves
      cannot be measured  exactly  because the  estimation of reserves  involves
      numerous judgmental determinations. Accordingly, reserve estimates must be
      continually revised as a result of new information  obtained from drilling
      and production history, new geological and geophysical data and changes in
      economic conditions.

      Proved   reserves  are  estimated   quantities  of  gas,  crude  oil,  and
      condensate,  which  geological  and  engineering  data  demonstrate,  with
      reasonable  certainty,  to be  recoverable  in  future  years  from  known
      reservoirs  under  existing  economic  and  operating  conditions.  Proved
      developed  reserves  are  proved  reserves  that  can  be  expected  to be
      recovered  through  existing  wells with existing  equipment and operating
      methods.


                                      F-19
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    SUPPLEMENTAL OIL AND GAS INFORMATION - UNAUDITED, CONTINUED

<TABLE>
<CAPTION>
                                                                OIL          GAS
       QUANTITY OF OIL AND GAS RESERVES                        (BBLS)        (MCF)
                                                             ---------    ---------
<S>                                                               <C>       <C>
       Total proved reserves at December 31, 2002                   --           --
       Discoveries                                                 532       86,321
       Production                                                  (63)      (5,628)
                                                             ---------    ---------

       Total proved reserves at December 31, 2003                  469       80,693

       Discoveries                                                 146       17,645
       Production                                                 (153)     (13,654)
       Revision of estimates                                       290      (16,274)
                                                             ---------    ---------

       Total proved reserves at December 31, 2004                  752       72,136
                                                             =========    =========

       Proved developed reserves:

         December 31, 2004                                         469       80,693
                                                             =========    =========

         December 31, 2003                                         752       72,136
                                                             =========    =========
</TABLE>

       The following table sets forth the aggregate amounts of capitalized costs
       relating  to the  Company's  oil and  gas  producing  activities  and the
       aggregate  amount of  related  accumulated  depletion,  depreciation  and
       amortization as of December 31, 2004:

<TABLE>
<CAPTION>
                                                                2004         2003
                                                             ---------    ---------
<S>                                                          <C>          <C>
         Unproved properties and prospect generation costs
           not being amortized                               $  17,938    $  89,114
         Dismantlement costs                                     8,413       10,000
         Proved properties being amortized                     160,917       99,150
         Less accumulated depletion, depreciation and
           amortization                                        (33,934)      (5,837)
                                                             ---------    ---------

           Net capitalized costs                             $ 153,334    $ 192,427
                                                             =========    =========
</TABLE>

       COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

       The following  table  reflects the costs incurred in oil and gas property
       acquisition,  exploration  and  development  activities  during the years
       ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                2004         2003
                                                             ---------    ---------
<S>                                                          <C>          <C>
         Exploration costs                                   $      --    $      --
         Development costs                                     187,258      198,264
                                                             ---------    ---------

                                                             $ 187,258    $ 198,264
                                                             =========    =========
</TABLE>


                                      F-20
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    SUPPLEMENTAL OIL AND GAS INFORMATION - UNAUDITED, CONTINUED

       STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

       The  following  table  reflects the  Standardized  Measure of  Discounted
       Future Net Cash Flows  relating to the  Company's  interest in proved oil
       and gas reserves as of December 31, 2004 and 2003:

                                                          2004         2003
                                                       ---------    ---------

         Future cash inflows                           $ 391,000    $ 345,000
         Future production and development costs         (72,000)     (84,000)
         Future dismantlement costs                       (8,400)     (10,000)
                                                       ---------    ---------

         Future net cash inflows before income taxes     310,600      251,000
         Future income taxes                                  --           --
                                                       ---------    ---------

         Future net cash flows                           310,600      251,000
         10% discount factor                             (85,000)     (66,000)
                                                       ---------    ---------

           Standardized measure of discounted future
             net cash inflow                           $ 225,600    $ 185,000
                                                       =========    =========

       Future  net  cash  flows at each  year  end,  as  reported  in the  above
       schedule,  were determined by summing the estimated annual net cash flows
       computed by: (1) multiplying  estimated  quantities of proved reserves to
       be  produced  during  each  year by  current  prices,  and (2)  deducting
       estimated  expenditures  to be  incurred  during each year to develop and
       produce the proved reserves (based on current costs).

       STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS, CONTINUED

       Income taxes were computed by applying year-end statutory rates to pretax
       net cash flows,  reduced by the tax basis of the properties and available
       net operating loss  carryforwards.  The annual future net cash flows were
       discounted,  using a prescribed  10% rate,  and summed to  determine  the
       standardized measure of discounted future net cash flow.

       The Company cautions readers that the  standardized  measure  information
       which places a value on proved  reserves is not indicative of either fair
       market  value or  present  value of  future  cash  flows.  Other  logical
       assumptions  could have been used for this computation which would likely
       have resulted in  significantly  different  amounts.  Such information is
       disclosed  solely in accordance  with  Statement 69 and the  requirements
       promulgated  by the SEC to provide  readers with a common base for use in
       preparing  their own  estimates  of future  cash flows and for  comparing
       reserves  among  companies.  Management  of the Company  does not rely on
       these computations when making investment and operating decisions.



                                      F-21