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, 2006

                            Commission File #0-30503
                          PANGEA PETROLEUM CORPORATION
                 (Name the small business issuer in its charter)

                                    COLORADO
         (State or other jurisdiction of incorporation or organization)

                                   76-0635938
                        (IRS Employer Identification No)

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

                                 (713) 706-6350
                           (Issuer's telephone number)

              (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

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

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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|

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

Revenues for year ended December 31, 2006: $38,497. The aggregate market value
of the voting common stock held by non-affiliates of the registrant as of March
20, 2007 was $1,637,368. The number of shares of common stock outstanding as of
March 20, 2007 was 290,780,986.


                                       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


                                     PART II

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

Item 6.     Management's Discussion and Analysis or Plan of Operations

Item 7.     Consolidated Financial Statements

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

Item 8A.    Controls and Procedures

Item 8B.    Other Information

                                    PART III

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

Item 10.    Executive Compensation

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

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

Item 13.    Exhibits

Item 14.    Principal Accountant Fees and Services


                                   SIGNATURES


                                       2
<PAGE>

                            FORWARD LOOKING STATEMENT

We are including the following cautionary statement in this Form 10-KSB to make
applicable and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf of, the Company. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, expectations, future events or
performance and underlying assumptions and other statements which are other than
statements of historical facts. 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. We undertake no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that may arise
after the date hereof. Our expectations, beliefs and projections are expressed
in good faith and are believed to have a reasonable basis, including without
limitations, management's examination of historical operating trends, data
contained in our records and other data available from third parties, but there
can be no assurance that management's expectations, beliefs or projections will
result or be achieved or accomplished. In addition to other factors and matters
discussed elsewhere herein, the following are important factors that could cause
actual results to differ materially from those discussed in the forward-looking
statements: our dependence on limited cash resources, dependence on certain key
personnel within the Company, and the ability to raise additional capital; our
ability to secure leases for our oil and gas projects; our ability to obtain
acceptable forms and amounts of financing; the demand for, and price level of,
our products and services; competitive factors; the ability to mitigate
concentration of business in a small number of customers; the evolving industry
and technology standards; the ability to protect proprietary technology; the
dependence on key personnel; and the effect of business interruption due to
political unrest; oil and gas prices; and our ability to efficiently manage our
operations. In addition, our 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
greater resources. Greater competition for profitable operations can increase
prices and make it more difficult to acquire assets at reasonable multiples of
cash flow. We believe that we 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 operations. Operations are
also significantly affected by factors, which are outside our control, 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 is a Colorado corporation that was organized on
March 11, 1997. Our principle executive office is located at 9801 Westheimer,
Suite 302, Houston, Texas 77042. Our company website can be viewed at
www.pangeapetroleum.com. We are a publicly traded company listed on the OTC
Electronic Bulletin Board under the symbol "PAPO". We currently have 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. We diversify our risk by
carefully identifying prospects that fit within strict parameters and by taking
a minority working interest in each project. We 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.

Our 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. We seek to hold a minority
non-operating interest in the projects and, thus, also closely examine the
project operator to determine that they have the experience and operating
philosophy that is consistent with Pangea quality expectations. The well
drilling cost and upfront cost to buy in to the prospect are estimated.

                                       3
<PAGE>

We then utilizes a risk based economic evaluation that compares "high", "most
likely", and "low" production and price scenarios to rank projects for
investment. Our 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.

We attempt 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, we have a strategy that will enhance production and cash
flow and optimize the use of our investment capital.

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

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

|X|   primarily Gulf Coast Basin locations,
|X|   an established production history and infrastructure,
|X|   multiple productive sands and reservoirs,
|X|   low current production levels with significant identified proven and
      potential reserve opportunities and,
|X|   the opportunity to obtain a minority interest.

RISK FACTORS

Going Concern Risk

We have had and could have in the future 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, we have suffered recurring
losses from operations and have been dependent on existing stockholders and new
investors to provide the cash resources to sustain its operations. During the
years ended December 31, 2006 and 2005, we reported net income and losses and
negative cash flows from operations as follows:

                                                         2006          2005
                                                     ------------   -----------
Loss from operations                                 ($  962,566)   ($  508,366)
Net Loss from continuing operations                  ($1,010,931)   ($  542,737)
Net cash provided by (used in) operating activities   $ (113,169)    $      562

Our continuing negative operating results have produced a working capital
deficit of $540,449 at December 31, 2006. This is an increase compared to a
working capital deficit of $487,381 at December 31, 2005, and reflects the
additional loss of 11% from 2006 operations. The above factors represent a
substantial improvement over year 2005 performance; however the net loss from
continuing operations continues to raise doubt about our ability to fully
establish the Company.

                                       4
<PAGE>

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 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.

JOINT OPERATIONS; 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 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.

                                       5
<PAGE>

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
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 December 31, 2006, we had two full-time employees. We also retain
independent geological and engineering consultants and administrative assistance
as needed and expect 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, 2007 for $763 per month.
We will continue to lease this space on a month to month basis for $932 a month
until management can locate another space that meets our needs.

ITEM 3.  LEGAL PROCEEDINGS

None

                                       6
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information as to the high and low bid
quotations quoted on the OTC Bulletin Board for the fiscal years ended December
31, 2005 and December 31, 2006. 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.

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

                          2005

First Quarter                        .034     .006
Second Quarter                       .021     .008
Third Quarter                        .014     .008
Fourth Quarter                       .054     .008

                          2006

First Quarter                        .036     .007
Second Quarter                       .054     .018
Third Quarter                        .039     .015
Fourth Quarter                       .023     .011

The closing price of our common stock as of March 20, 2007 was $.011 per share.
As of March 20, 2007 there were approximately 612 certificate shareholders of
record and 290,780,986 common shares outstanding.

OUR TRANSFER AGENT IS:
Olde Monmouth Stock Transfer Co., Inc.
200 Memorial Parkway
Atlantic Highlands, New Jersey 07716

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS FOR FISCAL
YEAR ENDED DECEMBER 31, 2006

<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))
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                             <C>                          <C>                          <C>
                                (a)                          (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans
approved by security holders            25,000,000                      $0.11                      6,281,190
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders                 0                            0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTAL                                   25,000,000                      $0.11                      6,281,190
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

                                       7
<PAGE>

On July 20, 2005, our shareholders approved the 2005 Equity Compensation Plan.
The purpose of the Plan is to further the interests of the Corporation and the
stockholders by providing incentives in the form of stock to key employees,
consultants and Directors who contribute materially to our success and
profitability. The grants recognize and reward outstanding individual
performances and contributions and will give such a person a proprietary
interest in us, thus enhancing their personal interest in our continued success
and progress. The Plan also compensates consultants for their work for the
Corporation. The Plan will be administered by the Board of Directors. The Board
of Directors has exclusive power to select the participants in the Plan, to
establish the terms of the stock granted to each participant, and to make all
determinations necessary or advisable under the Plan. The maximum number of
shares of common stock that may be granted or optioned and sold under the Plan
is 25,000,000.

DIVIDENDS

We have never declared dividends. 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.

RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM UNREGISTERED
SECURITIES

None

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

GENERAL

We are 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. We have 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, management 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

We participated in drilling five wells in 2006. Three of those wells are
producing and one well encountered reserves, was tested and due to mechanical
difficulties, was found to be sub-commercial reserves. The well was abandoned as
a dry hole. One additional well was a dry hole and was abandoned following
drilling. This resulted in a 60% success rate, which is above the Company's
target success rate of 50% and just below the 66% rate we achieved in 2005.
Production in 2006 was down 40% to 5.1 million cubic feet of gas equivalent,
versus 8.6 million cubic feet in 2005. The successful drilling in 2006 was
partially offset by a larger than anticipated production declines in two of the
producing areas; however, the addition of Fort Bend County properties in the
fourth quarter returns the production rate to 2005 levels.

Pangea acquired in the first quarter 2006 an approximate 1.5% working interest
in Fort Bend County, Texas. This is a 421 acre project currently producing
approximately 7,500 barrels of oil per month from fifteen wells, in five leases,
in the Miocene and Frio sands. We began receiving revenue from the project
during the fourth quarter 2006. The project also drilled a new well and placed
it on production during the fourth quarter. In 2006, the project was assessed a
$31,430 impairment to adjust the acquisition value to the current evaluation of
proved developed reserves. . We are currently evaluating the project to
determine if there is a favorable alternative for acquiring an additional 1-2%
working interest in the field.

                                       8
<PAGE>

We participated in drilling a prospect in White County, Illinois, on an
approximately 880 acre tract. The primary target was the Warsaw sand at 4200'
with a secondary objective to test a geologic feature in the Trenton Black River
at approximately 8500'. The Trenton was found along with the underlying St.
Peter; however, both were wet in this location. They will be evaluated for a
future up structure location. The primary Warsaw objective was excellent as well
as the Salem immediately above. The well was placed on production in July 2006
after construction of facilities and installation of pumping equipment. The well
has produced 15-20 BOPD from the Warsaw and Salem sands since going on line.
Pangea has a 2.25% working interest and 1.82% net interest in the project.
Additional drilling locations on the prospect are being evaluated.

In the third quarter of 2004 a 9200' test of the Lower Wilcox was drilled in
Liberty County, Texas. The Lower Wilcox was present but not commercial, however,
two 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. In November 2006, a workover was done in the second
Yegua sand resulting in less production than expected at 135 MCFD. In 2006, the
reserves were downgraded causing a $31,100 impairment value to be placed on the
well. The well was placed on production at approximately 160 MCF in November,
2006. Pangea has a 5% working interest (3.75% net revenue interest) in the well.

In the fourth quarter 2005, we participated in drilling a 5,000' test of the
Frio well Colorado County, Texas. This project was developed based on 3D seismic
data. The well encountered three Frio sands and a Miocene sand. The first Frio
sand was placed on production in February 2006 at 200 MCFD. We have a 3.0%
drilling interest and a 2.25% working interest in the prospect. The prospect
area has several potential additional locations in the Frio and Miocene that are
being evaluated for drilling.

In February 2006, we purchased a 7% working interest (5.25% net interest) in a
re-entry workover in Brazoria County, Texas. The well was drilled in 2002 and
experienced mechanical difficulty in the first of four zones in the Miocene
sands. The logs indicate three additional sands which will be sequentially
completed for the project. A workover rig moved in at the end of March 2006. The
workover in the first zone was successful. Following facilities construction and
pipeline connection the well was placed on production at a 250 MCFD restricted
rate. This prospect will likely have two to three additional well locations. To
date, we have not received revenue from this project, as the operator has had
mechanical difficulties with the surface sales equipment. It is expected that
these issues will be resolved in the second quarter 2007. In 2006, a $21,000
impairment value was placed on the well pending results of operations.

Colorado County, Texas was a redrill of a 10000' Wilcox well drilled in 2005
that was idled due to mechanical problems. The well was drilled at the end of
June and casing was set at 9740' in July. This project was developed based on 3D
seismic data and analysis of existing Wilcox formations in the area. Pangea has
a 1.5% working interest and a 1.125% net interest in the prospect. The initial
well encountered several attractive Wilcox and Yegua sands. The redrill was
placed on production in August at the rate of 200 MCFD and 10 BOPD. The well
operator made a unilateral decision to perform a fracture treatment on the
interval, with the hope of increasing the production rate. The rate did increase
briefly to 750 MCFD, however, the fracture treatment also allowed the water rate
to increase from 1 BWPD to 250 BWPD. The water completely overwhelmed the
hydrocarbon production and resulted in another mechanical well failure. Both
wells are judged to be unrepairable and as of the end of 2006 the leases are
expiring due to lack of production. The original well and the redrill were
abandoned in 2006 resulting in a write off of $29,845. It is our opinion that
several Wilcox and Yegua intervals are present in this prospect. We are working
with the original project developer to reacquire the leases and work with a more
competent operator to do and effective job of drilling and completing producing
wells on the prospect. It is unknown if we will eventually participate, and if
we do, it is unknown what working interest we will take in the new development

Pangea participated in September 2006 in one well in Wharton County, Texas that
was drilled to a total depth of 5253' to test several Frio amplitude anomalies
identified in 3D seismic survey data. The prospect is in an area with extensive
Frio production and discovered several potential intervals that were tested and
judged to be non-commercial. The well was plugged and abandoned in November 2006
resulting in a write off of $17,835. Pangea had a 3% drilling interest and a
2.25% working interest in the prospect.

                                       9
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of its financial condition and results of operations
as of December 31, 2006 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 us 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, we evaluate our estimates. We base
the 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.

We believe 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

We follow the "successful efforts" method of accounting for our 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 $7,943 has been recorded for plugging and abandonment.

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 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.

OIL AND GAS REVENUES

Oil and gas revenues are recorded under the sales method. We recognize oil and
gas revenues as production occurs. As a result, we accrued revenue relating to
production for which we have not received payment.


COMPARISON OF YEAR ENDED DECEMBER 31, 2006 TO YEAR ENDED DECEMBER 31, 2005.

Revenues were $38,497 in 2006 compared to revenue of $57,360 in 2005 reflecting
a decrease of 33% or $18,863 in revenue in 2006. This decrease in revenue
reflects a drop in production during the year that was partially offset by
slightly higher contract oil and gas prices in 2006 versus 2005. During the
fiscal year 2006 $172,506 was used for capital and exploratory expenditures
compared to $101,046 in 2005 (using the successful effort method of accounting).

The $468,194 increase in the net loss from continuing operations to $1,010,931
for the year ended December 31, 2006 from $542,737 for the year ended December
31, 2005 is due to a few factors. Impairment of oil and gas properties increased
$67,959 in 2006. This was due to the plug and abandonment costs recorded in 2006
for the drilled and abandoned wells of $73,105, while no costs were recorded in
2005. There was an increase in Selling, General and Administrative expenses
including stock based compensation, which increased by $249,934 to $737,101 in
2006 compared to $487,167 in 2005. There was also an increase in lease operating
expenses of $4,658 and DD&A increased by $43,357 in 2006.

                                       10
<PAGE>

During the year ended December 31, 2006, we reported a net loss of $1,010,931
compared to a net loss of $542,737 for the year ended December 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES

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

Our capital and exploratory expenditures of $172,506 for the fiscal year 2006
were used to invest in five wells. Three of the wells were generating revenue at
year end. We have not been able to generate positive cash flow from operations.
We utilized cash from financing activities and from monies received from
settlement income to fund these investments. The net cash from financing
activities increased in 2006 to $282,988 from $100,404 in 2005. We intend to
continue investing in additional oil and gas projects but will need additional
financing from private placements, debt financing or equity investment in order
to participate fully and at the levels we intend. There can be no assurance that
any of the plans developed by Pangea will produce cash flows sufficient to
ensure its long-term viability.

Our long-term viability as a going concern is dependent on certain key factors,
as follows:

-     Our ability to continue to obtain sources of outside financing that will
      supplement current income and allow us to continue to make strategic
      investments in new oil and gas well prospects.

-     Our ability to coordinate attractive development prospects, with timely
      funding that will allow us to continue to increase oil and gas reserves
      and production.

-     Our 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

On January 30, 2006, we received $35,000 and on February 21, 2006 we received
$150,000 from two investors for the sale of our restricted common stock .

 2007 OUTLOOK

We have identified additional prospects scheduled for drilling in 2007 in
Henderson County, Texas, and Colorado County, Texas. In addition, we are
monitoring additional activity in Henderson County, Wharton County, Fort Bend
County and De Witt County, Texas and anticipate several prospects to be ready
for drilling in Illinois and New York in 2007. We are also in the process of
evaluating several additional prospects for inclusion in the 2007 program.

Pangea's 2.5% working interest in Stueben County, New York, which covers
approximately 50,000 acres, has completed shooting twenty-two square miles of
3-D seismic. The data is being processed and drilling prospects are being
examined. Thus far there are two well defined drilling prospects in the Trenton
Black River and two leads identified in the Oriskany and Onandaga Reef sands.
Plans are being made to initiate drilling in the third quarter of 2007.

Pangea has taken an interest in a Geneva Reef project covering approximately
3600 acres in Clay, Effingham, Shelby, Fayette, and Cumberland Counties in
Illinois. Analysis of 2D seismic in the area indicates that there are at least
six geologic features that have the potential to offset successful Geneva Reef
production in the area. The next step is to run 3D seismic in the areas of
interest and confirm the existence of the reef structure. It is anticipated that
at least half of the 2D prospects will have a drillable reef and that the
identified reefs will have approximately three wells each. Initial total reef
production has been between 500 and 1000 BOPD on the successful 3D finds. Pangea
has a 3.0% working interest and a 2.4% net interest in the project. Bids for the
seismic work were awarded in the fourth quarter 2006, and it is expected that
the seismic work will proceed when the weather clears during the 2nd quarter
2007.

                                       11
<PAGE>

Henderson County, Texas is an 11500' test in the Rodessa and Pettit with a
secondary objective in the Upper Travis Peak. The first well has the potential
for 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
has a 2% working interest and 1.54% net interest in the first well. The well has
had difficulty obtaining the necessary leases for the surface drilling location
and has been delayed since the 4th quarter of 2006. It is currently expected
that the drilling site leases will be resolved and that a rig will be available
to drill the well bore the end of the 2nd quarter 2007.

Colorado County, Texas is a 4750' test of Frio amplitude anomalies identified in
3D seismic survey data. The prospect is in an area with extensive Frio
production and offsets the company's recent Frio well placed on production
earlier this year. The well also has the potential for Miocene. The primary
objective covers an estimated 400 acres and, if successful, will lead to five to
six additional drilling locations. Pangea has a 2.0% working interest and a 1.5%
net interest in the prospect, which is expected to be drilled in the 2nd quarter
of 2007.

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. We have 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 the fourth quarter 2007.

We are actively reviewing additional prospects in Texas, Louisiana, Illinois and
New York to add new wells to the prospect list. We are continuing our strategy
of evaluating primarily shallow, onshore oil and gas projects that avoid
investing in "wildcat" or exploratory wells. Focus remains 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, we will continue to diversify our risk by taking a minority
working interest in the prospects such that we are 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 financing. 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, 2006, we had no off balance sheet
arrangements.

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

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

                          PANGEA PETROLEUM CORPORATION






                        CONSOLIDATED FINANCIAL STATEMENTS
          WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
                 For the years ended December 31, 2006 and 2005






                                      F-1
<PAGE>


                          PANGEA PETROLEUM CORPORATION
                                TABLE OF CONTENTS

                                   ----------

                                                                       Page
                                                                       ----

Reports of Independent Registered Public Accounting Firms              F-3 & F-4

Consolidated Financial Statements:

  Consolidated Balance Sheet as of December 31, 2006                   F-5

  Consolidated Statements of Operations for the years
    ended December 31, 2006 and 2005                                   F-6

  Consolidated Statements of Stockholders' Deficit for
    the years ended December 31, 2006 and 2005                         F-7

  Consolidated Statements of Cash Flows for the years
    ended December 31, 2006 and 2005                                   F-8

Notes to Consolidated Financial Statements                             F-9


                                      F-2
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
  Pangea Petroleum Corporation
  Houston, Texas

We have audited the accompanying consolidated balance sheet of Pangea Petroleum
Corporation as of December 31, 2006, and the related consolidated statements of
operations, stockholders' deficit and cash flows for the year then ended. These
consolidated financial statements are the responsibility of Pangea Petroleum
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with 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
consolidated 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
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pangea Petroleum Corporation as
of December 31, 2006, and the results of its operations and its cash flows for
the year ended December 31, 2006 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has experienced significant
losses. Those conditions, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
these matters are also described in Note 2. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Malone & Bailey, PC
Houston, Texas
www.malone-bailey.com

March 22, 2007


                                      F-3
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Pangea Petroleum Corporation

We have audited the accompanying consolidated statements of operations,
stockholders' deficit and cash flows of Pangea Petroleum Corporation for the
year ended December 31, 2005. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit 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
consolidated 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 consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results operations and cash flows of
Pangea Petroleum Corporation for the year ended December 31, 2005, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses and negative
cash flows from operations 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.

                                             /a/ Ham, Langston & Brezina, L.L.P.



Houston, Texas
March 15, 2006


                                      F-4
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2006

<TABLE>
<CAPTION>
<S>                                                                              <C>
     ASSETS
     ------

Current assets:
  Cash                                                                           $     53,690
  Payroll taxes refundable                                                              7,131
                                                                                 ------------

    Total current assets                                                               60,821

Property and equipment:
  Oil and gas properties (successful efforts method), net of accumulated
   depletion of $112,000                                                              209,903
                                                                                 ------------

      Total assets                                                               $    270,724
                                                                                 ============


LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

Current liabilities
  Accounts payable                                                               $      9,864
  Accrued interest payable to related parties                                          63,365
  Notes payable to related parties                                                    528,041
                                                                                 ------------

     Total current liabilities                                                        601,270

Asset retirement obligations                                                            7,943
                                                                                 ------------

    Total liabilities                                                                 609,213
                                                                                 ------------


Commitments and contingencies                                                              --

Stockholders' deficit:
  Preferred stock: $.001 par value; 10,000,000 shares authorized,
    none issued and outstanding                                                            --
  Common stock: $.001 par value; 500,000,000 shares authorized;
    281,258,566 shares issued and outstanding                                         281,259
  Additional paid-in capital                                                       18,173,717
  Deferred compensation                                                                (4,247)
  Accumulated deficit                                                             (18,789,218)
                                                                                 ------------

    Total stockholders' deficit                                                      (338,489)
                                                                                 ------------

      Total liabilities and stockholders' deficit                                $    270,724
                                                                                 ============
</TABLE>


                     See summary for significant accounting
            policies and notes to consolidated financial statements.


                                      F-5
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     Years ended December 31, 2006 and 2005

                                                      2006             2005
                                                 -------------    -------------

Revenue from operations                          $      38,497    $      57,360

Costs and expenses:
  Lease operating expenses                              18,217           13,559
  Production tax                                         3,636            7,312
  Selling, general and administrative,
    including stock based compensation                 737,101          487,167
  Impairment of oil and gas properties                  90,938           22,979
  Plug and abandonment costs                            73,105               --
  Depletion and depreciation                            78,066           34,709
                                                 -------------    -------------

      Total costs and expenses                       1,001,063          565,726
                                                 -------------    -------------

         Loss from operations                         (962,566)        (508,366)

Other income and (expenses)
  Interest expense                                     (63,365)         (42,371)
  Settlement income                                     15,000            8,000
                                                 -------------    -------------

            Net loss                             $  (1,010,931)   $    (542,737)
                                                 =============    =============


Weighted average common shares outstanding         269,385,275      193,782,389
                                                 =============    =============

Basic and diluted net loss per common share      $       (0.00)   $       (0.00)
                                                 =============    =============


                     See summary for significant accounting
            policies and notes to consolidated financial statements.


                                      F-6
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                     Years ended December 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                           Additional    Unissued                                       Total
                                    Common Stock            Paid-In       Common       Accumulated      Deferred     Stockholders'
                               Shares         Amount        Capital        Stock         Deficit      Compensation     Deficit
                           ------------   ------------   ------------   ------------   ------------   ------------   ------------
<S>                         <C>           <C>            <C>            <C>            <C>            <C>            <C>
Balance at
December 31, 2004           175,694,413   $    175,694   $ 16,614,739   $    192,833   $(17,235,550)  $     (2,000)  $   (254,284)

Common stock issued
 for cash                    15,785,000         15,785         81,215             --             --             --         97,000

Common stock issued
  to compensate
  employees and
  consultants                28,134,664         28,135        348,550             --             --          2,000        378,685

Common stock issued
  upon exercise
  of warrants                 1,562,809          1,563          1,841             --             --             --          3,404

Common stock iss
  for professional fees       1,500,000          1,500         18,000             --             --             --         19,500

Reversal of unissued
  common stock upon
  expiration of
  agreement                          --             --        192,833       (192,833)            --             --             --

Net loss                             --             --             --             --       (542,737)            --       (542,737)
                           ------------   ------------   ------------   ------------   ------------   ------------   ------------

Balance at
December 31, 2005           222,676,886        222,677     17,257,178             --    (17,778,287)            --       (298,432)

Common stock issued
  for cash                   13,700,000         13,700        171,300             --             --             --        185,000

Common stock issued
  for exercise
  of cashless
  warrants                    2,296,434          2,296         (2,296)            --             --             --             --

Common stock issued
  to compensate employees
  and consultants            34,239,244         34,239        585,882             --             --         (4,247)       615,874

Common stock issued
  for Asset Purchase
  Agreement                  20,000,000         20,000        150,000             --             --             --        170,000

Cancellation of shares
  Under Securities
  Purchase Agreement
  Dated December 31, 2001   (11,653,998)       (11,654)        11,654             --             --             --             --


Net loss                             --             --             --             --     (1,010,931)            --     (1,010,931)
                           ------------   ------------   ------------   ------------   ------------   ------------   ------------


Balance at
December 31, 2006           281,258,566   $    281,259   $ 18,173,717             --   $(18,789,218)  $     (4,247)  $   (338,489)
                                          ============   ============   ============   ============   ============   ============
</TABLE>


                     See summary for significant accounting
            policies and notes to consolidated financial statements.


                                      F-7
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                  2006           2005
                                                              ------------   ------------
<S>                                                           <C>            <C>
Cash flows from operating activities:
  Net loss                                                    $ (1,010,931)  $   (542,737)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:

    Depletion and depreciation expense                              78,066         34,709
    Impairment of oil and gas properties                            90,938         22,979
    Dry hole expense                                                54,119             --
    Plug and abandonment costs                                      73,105             --
    Common stock issued as compensation for services               615,874        378,685
    Warrants issued for compensation for services                       --         19,500
    Changes in assets and liabilities:
      Accounts receivable                                            2,136          8,741
      Prepaid expenses                                               6,500         (6,500)
      Payroll taxes refundable                                       2,748             --
      Accounts payable and accrued liabilities                     (25,724)        85,656
      Dismantlement obligation                                          --           (470)
                                                              ------------   ------------

          Net cash provided by operating activities               (113,169)           562
                                                              ------------   ------------

Cash flows from investing activities:
  Capital and exploratory expenditures                            (172,506)      (101,046)
  Proceeds from sale of interest in well                                --          2,000
                                                              ------------   ------------

          Net cash used in investing activities                   (172,506)       (99,046)
                                                              ------------   ------------

Cash flows from financing activities:
  Proceeds from the sale of common stock                           185,000        100,404
  Proceeds from notes payable                                       97,988             --
                                                              ------------   ------------


          Net cash provided by financing activities                282,988        100,404
                                                              ------------   ------------

Net change in cash and cash equivalents                             (2,687)         1,920

Cash and cash equivalents at beginning of year                      56,377         54,457
                                                              ------------   ------------

Cash and cash equivalents at end of year                      $     53,690   $     56,377
                                                              ============   ============

Supplemental Disclosures:
Cash paid for interest                                        $         --   $         --
Cash paid for income taxes                                              --             --
Noncash investing and financing activities:
   Oil and gas property acquired with common stock issuance   $    170,000             --
   Cashless exercise of warrants                                     2,296             --
   Cancellation of shares                                           11,654             --
</TABLE>


                     See summary for significant accounting
            policies and notes to 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 consolidated 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 consolidated
      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
      valuation of deferred tax assets and the realizability of accounts
      receivable.

      Fair Value of Financial Instruments

      The Company includes fair value information in the notes to consolidated
      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.

      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.

      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 $7,943 at
      December 31, 2006.

      In 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
      Obligations" which was adopted by Pangea when Pangea first acquired oil
      and gas properties. SFAS 143 requires entities to record the fair value of
      a liability for asset retirement obligations ("ARO") in the period in
      which it is incurred and a corresponding increase in the carrying amount
      of the related long-lived asset. The present value of the estimated asset
      retirement cost is capitalized as part of the carrying amount of the
      long-lived asset and is depreciated over the useful life of the asset.
      Pangea accrues an abandonment liability associated with its oil and gas
      wells when those assets are placed in service. The ARO is recorded at its
      estimated fair value and accretion is recognized over time as the
      discounted liability is accreted to its expected settlement value. Fair
      value is determined by using the expected future cash outflows discounted
      at Pangea's risk-free interest rate. No market risk premium has been
      included in Pangea's calculation of the ARO balance. Pangea's ARO
      liability at December 31, 2006 is $7,943.

      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. Pangea recorded
      $90,938 and $22,979 of impairment expense in the years ended December 31,
      2006 and 2005, respectively. Other unproved properties are amortized based
      on the Company's average holding period.


                                      F-9
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Significant Accounting Policies, continued

      Oil and Gas Producing Activities (continued)

      Capitalized costs of producing oil and gas properties after considering
      estimated dismantlement and abandonment costs and estimated salvage value,
      are depreciated and depleted by the unit-of-production method. On the sale
      or retirement of a complete unit of 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.

      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 resulting
      in an impairment expense of $90,938 and $22,979 in 2006 and 2005,
      respectively.

      Asset Retirement Obligation

      Estimated costs related to the abandonment of wells are based on the depth
      of the well and the completion type and are based on past cost of similar
      wells. Asset retirement obligations at December 31, 2006 was $7,943.

      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, 2006 and 2005, 100% of the
      Company's revenues were 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.


                                      F-10
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Significant Accounting Policies, continued

      Stock Based Compensation

      Financial Accounting Standard No. 123, "Accounting for Stock-Based
      Compensation" established financial accounting and reporting standards for
      stock-based employee compensation plans. It defines a fair value based
      method of accounting for an employee stock option or similar equity
      instrument. In January 2006, the Company implemented SFAS No. 123R, and
      accordingly, the Company accounts for compensation cost for stock option
      plans in accordance with SFAS No. 123R.

      During 2005, the Company applied APB No. 25 in accounting for its stock
      option plans and, accordingly, no compensation cost has been recognized in
      the Company's consolidated financial statements for stock options under
      any of the stock plans which on the date of grant the exercise price per
      share was equal to or exceeded the fair value per share. There were no
      stock options granted in 2005.

      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.

      Earnings Per Share

      The Company 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 reflects the potential dilution of
      securities that could share in the earnings of an entity. Common stock
      equivalents were anti-dilutive for the years ended December 31, 2006 and
      2005.

      Recently Issued Accounting Pronouncements

      The Company does not expect the adoption of recently issued accounting
      pronouncements to have a significant impact on the Company's results of
      operations, financial position or cash flow.

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, 2006 and 2005, the Company reported losses of
      $1,010,931 and $542,737, respectively. Continuing negative operating
      results produced a working capital deficit of $540,449 as of December 31,
      2006. These conditions raise substantial doubt as to Pangea's ability to
      continue as a going concern.

      The Company developed a multi-step plan and during 2006 took actions to
      improve its financial position and deal with its liquidity problems. 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 offerings.


                                      F-11
<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.

      The consolidated financial statements do not include any adjustments that
      might be necessary if the Company is unable to continue as a going
      concern.

3.    Oil and Gas Properties

      Oil and gas properties consist of the following at December 31, 2006:

        Oil and gas properties                                        $ 321,903

        Less accumulated depletion                                     (112,000)
                                                                      ---------

        Net oil and gas properties                                    $ 209,903
                                                                      =========

      Included in oil and gas properties is $7,943 recorded to reflect the cost
      of disposal activities associated with oil and gas properties 2006. 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, 2006 and 2005, the Company recorded
      dry hole, abandonment and impairment charges of $218,162 and $22,978,
      respectively. At December 31, 2006, the Company has working interests in
      nine wells. Three of the wells, with capitalized costs totaling $165,858,
      have not been completed and, accordingly, a determination has not yet been
      made if those wells are economically viable.

4.    Property and Equipment

      Property and equipment consists of the following at December 31, 2006:

        Office equipment           10 years                           $  15,594
        Furniture and fixtures     10 years                               2,580
                                                                      ---------

                                                                         18,174

        Less accumulated depreciation                                   (18,174)
                                                                      ---------

        Net property and equipment                                    $       0
                                                                      =========

5.    Notes Payable to Related Parties

      Notes payable to related parties consist of the following at December 31,
      2006:

      Notes payable to Mary Pollock, daughter of the chief
        executive officer. This note bears interest at rates of
        12% per year and is due in a one time payment of
        principal and interest on December 31, 2007. These notes
        are not collateralized.                                       $ 118,299

      Notes payable to Charles Pollock, the Chief Executive Officer
        and a significant stockholder of the Company. This note
        bears interest of 12% per year, and due in one time
        payment of principal and interest on December 31, 2007.
        These notes are not collateralized.                             323,315


                                      F-12
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.    Notes Payable to Related Parties, continued

      Notes payable to Mark Weller, the Chief Operating Officer
        and a significant stockholder of the Company. This note
        bears interest of 12% per year, and due in one time
        payments of principal and interest on December 31, 2007.
        These notes are not collateralized.                              86,427
                                                                      ---------

                                                                      $ 528,041

      Accrued interest payable to related parties of $63,365 at December 31,
      2006 represents interest accrued on the above notes payable to related
      parties.

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, 2006, the
      Company had net operating loss ("NOL") carryforward for income tax
      purposes of approximately $7,506,994 which expire in various tax years
      through 2026. Additionally, because United States tax law limits 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, 2006 are as follows:

        Net operating losses                                        $ 2,627,448

        Less valuation allowance                                     (2,627,448)
                                                                    -----------

        Net deferred tax asset                                      $        --
                                                                    ===========

7.    Commitments and Contingencies

      Operating Lease

      The Company leased office space under a one year operating lease that
      expired in March 31, 2007 for monthly rent of $763. The lease will not be
      renewed due to rising costs and the Company is currently leasing the space
      on a month to month basis at $895 until other space is found. Rent expense
      incurred under operating leases during the years ended December 31, 2006
      and 2005 was $9,315 and $11,250, respectively.

      Employment Agreement

      The Company entered into an employment agreement with its Chairman/Chief
      Executive Officer and its President. The employment agreements provide for
      salaries of $10,000 each per month. The employees may convert any or all
      salaries with accrued interest to common stock of the Company based on 30%
      off the average closing bid price during the month prior to the month
      being compensated. All common stock due under the agreements was issued as
      of December 31, 2006. The conversion was analyzed for derivative
      accounting consideration under SFAS 133 and EITF 00-19. Since the
      employees converted the full amount to common stock, it was determined
      that derivative accounting was not applicable.

      Additionally, the employment agreements provide for the issuance of
      100,000 shares of restricted stock per month as part of the base salary
      compensation. These shares were issued during 2006.

      Legal Proceedings

      On May 7, 2004, the Company was awarded $158,000 in its arbitration claim
      against Clay Exploration, Inc. and Joseph W. Shunta pertaining to a well
      interest in Duval 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 3rd quarter 2004. Pangea
      has entered into two Forbearance Agreements with Joseph W. Shunta. The
      first agreement was executed in December 2004 and provided a payment
      period from January 2005 to June 2005.


                                      F-13
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.    Commitments and Contingencies, continued

      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. He also agreed to pay $2,000 per month for the 12 month
      period while he arranges to pay the balance of the judgment. In exchange,
      the Company agreed to refrain from executing property liens filed by the
      Company on Mr. Shunta's real estate holdings during the Forbearance
      period. In addition, the Company 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. Mr. Shunta
      paid $8,000 and $15,000 in 2005 and 2006, respectively; and Pangea has
      determined that no further recovery is possible. These amounts are
      reflected in other income as settlement amounts. The Company has ceased
      further legal recovery efforts and released the liens on the remaining
      Shunta properties.

      As of the date hereof, the Company is not a party to any further legal
      proceedings, and none are known to be contemplated against the Company.

8.    Stockholders' Equity

      In July 2005 the stockholders of the Company voted to approve an increase
      in the authorized shares from 210,000,000 to 510,000,000, which includes
      500,000,000 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 serias preferred stock, with a par value of $.001 and
      other characteristics determined by the Company's board of directors. As
      of December 31, 2006, there was no preferred stock issued or outstanding.

      Common Stock

      During the years ended December 31, 2006 and 2005, the Company issued
      shares for cash under private placements of securities and as compensation
      to employees and consultants.

      During 2006, Pangea:

            o     Sold 13,700,000 shares of common stock and 9,000,000 warrants
                  for $185,000 of cash. The warrants have an exercise price
                  ranging from $.01 - $.015 per share and expire 6 years from
                  the date of grant. The proceeds were allocated $111,059 to the
                  common stock and $73,941 to the warrants based on their
                  relative fair values.

            o     Issued 2,296,434 shares of common stock for the cashless
                  exercise of 3,426,100 warrants

            o     34,239,244 shares of common stock valued at $620,121 to
                  employees and consultants for services. $4,247 of this amount
                  was deferred in connection with a 12 month service agreement
                  with a third party.

            o     20,000,000 shares of common stock valued at $170,000 were
                  issued for the purchase of working interests in two oil and
                  gas properties.

            o     11,653,998 shares of common stock were cancelled under the
                  termination provisions of a 2001 securities purchase
                  agreement.

      During 2005:

            o     Subscription Agreement with Charles Taylor was signed on
                  January 12, 2005 for 2,285,000 shares and a warrant for
                  1,371,000 shares for $16,000.

            o     An Agreement with Platinum Partners was signed on September 2,
                  2005 issuing 8,300,000 shares under a re-priced warrant
                  agreement, which involved the issuance of 3,700,000 shares for
                  exercise of the warrants for cash for $72,000.


            o     Subscription Agreement with Charles Taylor was signed on
                  January 30, 2006 for 3,700,000 shares and a warrant for
                  2,000,000 shares for $35,000.

            o     Subscription Agreement with White Star was signed on February
                  21, 2006 for 10,000,000 shares and a warrant for 7,000,000
                  shares for $150,000.


                                      F-14
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.    Stockholders' Equity, continued

      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.

      A summary of the Company's stock option activity and related information
      for the years ended December 31, 2006 and 2005 follows:

                                       Number of                     Weighted
                                        Shares                        Average
                                        Under         Exercise       Exercise
                                        Option         Price           Price
                                       -------     -------------     --------
      Balance outstanding at
        January 1, 2005                350,000     $0.200-$1.000     $   0.56

      Balance outstanding at
        December 31, 2005              350,000     $0.200-$1.000     $   0.56

      Balance outstanding at
        December 31, 2006              350,000     $0.200-$1.000         0.56
                                       =======

            All outstanding stock options are exercisable at December 31, 2006.
            A summary of outstanding stock options at December 31, 2006 follows:

                                                                    Remaining
        Number of Common                                            Contracted
        Stock Equivalents     Expiration Date      Life (Years)   Exercise Price
        -----------------     ---------------      ------------   --------------

              50,000          May 2010                 5.4           $  0.500
             100,000          May 2010                 5.4              1.000
             100,000          August 2010              5.7              0.200
             100,000          January 2011             6.1              0.500
             -------

             350,000
             =======

      Effective June 1, 2005, the Company adopted the 2005 Equity Compensation
      Plan (the "Plan") under which stock in lieu of cash compensation awards
      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 25,000,000 shares of stock for issuance under the Plan and until
      2013.

      Stock Warrants

      In January 2006, the Company granted a warrant to Charles Taylor to
      purchase 2,000,000 shares of the Company's common stock exercisable at
      $0.01 per share, at which time the trading price was averaging $0.01 per
      share. The warrant vests on and is exercisable on January 30, 2007 and
      expires on January 30, 2012. In January 2006, the Company granted a
      warrant to White Star to purchase 7,000,000 shares of the Company's common
      stock exercisable at $0.015 per share, at which time the trading price was
      averaging $0.01 per share. The warrant vests on and is exercisable on
      February 17, 2007 and expires on February 17, 2012. The warrants fair
      value was $249,036 determined by using the Black Scholes option pricing
      model. The weighted average fair value of the warrants granted during
      fiscal03 per share. Variables used in the Black-Scholes option-pricing
      model include (1) risk-free interest rate, (2) expected warrant life is
      the actual remaining life of the warrants as of the year end, (3) expected
      volatility was 255%-261%, and (4) zero expected dividends.


                                      F-15
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.    Stockholders' Equity (continued)

      In April 2006, Charles Taylor exercised 828,635 shares at an exercise
      price ranging from $0.007 to $.015 per share out of a total granted
      1,285,550 in prior years. In April 2006, Patricia Taylor exercised 928,678
      shares at an exercise price ranging from $0.007 to $0.016 per share out of
      a total granted 1,540,550 in prior years. In April 2006, Duane Street
      Group exercised 539,131 shares at an exercise price ranging from $0.012 to
      $0.019 per share out of a total granted 800,000 in prior years. All
      exercises were on a cashless basis.

      In February 2006, a warrant granted to Generation Capital December 31,
      2001 for 3,428,000 shares expired.

      A summary of the Company's stock warrant activity and related information
      for the years ended December 31, 2006 and 2005 follows:

                                    Number of                          Weighted
                                      Shares                           Average
                                      Under           Exercise         Exercise
                                     Warrant           Price            Price
                                   -----------     -------------       --------
      Warrants outstanding at
        December 31, 2004           42,747,918     $0.008-$3.750        0.015

             Issued                  1,371,100     $0.010               0.015
             Exercised             (10,707,533)    $0.006-$0.012        0.015
              Expired              (10,821,998)    $0.010-$0.500        0.016
                                   -----------

      Warrants outstanding at
        December 31, 2005           22,589,487     $0.008-$3.75         0.015
                                   -----------

        Issued                       9,000,000     $0.010-$0.015        0.014
        Exercised                   (3,626,100)    $0.007-$0.019        0.015
        Expired                     (3,428,000)    $3.75                0.016
                                   -----------

      Warrants outstanding at
        December 31, 2006           24,535,387     $0.008-$0.02         0.016
                                   ===========

      All stock warrants are exercisable at December 31, 2006. A summary of
      outstanding stock warrants at December 31, 2006 follows:

                                                    Remaining
        Number of Common                            Contracted
        Stock Equivalents     Expiration Date      Life (Years)   Exercise Price
        -----------------     ---------------      ------------   --------------
             600,000          December 2008            2.0            0.020
           1,740,387          February 2009            2.2            0.010
           2,250,000          March 2009               2.3            0.008
           1,200,000          April 2009               2.3            0.010
           2,520,000          July 2009                2.5            0.010
             800,000          September 2009           2.7            0.015
             800,000          October 2009             2.8            0.010
           3,600,000          December 2009            3.0            0.010
             600,000          January 2010             3.1            0.010
             300,000          February 2010            3.2            0.120
           1,125,000          June 2010                3.5            0.008
           2,000,000          January 2012             5.0            0.01
           7,000,000          February 2012            5.1            0.015
           ---------

          24,535,387
          ==========


                                      F-16
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.    Related Party Transactions

      During the years ended December 31, 2006 and 2005, the Company engaged in
      transactions with Sage Office Services, a company controlled by one of
      Pangea's shareholders, as follows:

      The Company entered into a consulting agreement to provide record-keeping
      and other administrative services. During the years ended December 31,
      2006 and 2005 the Company paid consideration under this record-keeping and
      administrative services agreement totaling $164,400 and $54,000,
      respectively. The Company paid for these services by issuing 11,200,000
      and 7,000,000 shares of the Company's common stock.

      In addition to record-keeping services described above, the Company has
      related party notes payable at December 31, 2006 (See Note 5).

10.   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 31% and 78% of the Company's oil
      and gas sales revenues for the years ended December 31, 2006 and 2005,
      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, 2006. 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. Oil Gas Quantity of Oil and Gas Reserves (Bbls) (Mcf)

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

      Discoveries and Purchase of Property                      --        8,770
      Production                                               (57)      (8,279)
      Revision of previous estimates                          (620)     (29,092)
      Sales of Property                                         --       (7,792)
                                                           -------      -------

      Total proved reserves at December 31, 2005                75       35,743

      Discoveries and Purchase Property                      1,410          181
      Production                                              (147)      (2,682)
      Revision of previous estimates                          (276)     (28,296)
      Sales of Property                                         --           --
                                                           -------      -------

      Total proved reserves at December 31, 2006             1,062        4,946
                                                           =======      =======

      Proved developed reserves:

        December 31, 2006                                    1,062        4,946
                                                           =======      =======



                                      F-17
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   Supplemental Oil and Gas Information - Unaudited (continued)


      Capitalized Costs of Oil and Gas Producing Activities

      The following table sets forth the aggregate amounts of capitalized costs
      relating to the Company's oil and gas producing activities and the related
      accumulated depletion as of December 31, 2006:

                                                                        2006
                                                                      ---------
        Unproved properties and prospect generation costs
          not being depleted                                          $ 165,858
        Dismantlement costs                                               7,943
        Proved properties being depleted                                148,102
        Less accumulated depletion                                     (112,000)
                                                                      ---------

          Net capitalized costs                                       $ 209,903
                                                                      =========


      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, 2006 and 2005:

                                                         2006           2005
                                                      ----------     ----------

        Exploration costs                             $       --     $       --
        Development costs                                172,506        101,046
                                                      ----------     ----------

                                                      $  172,506     $  101,046
                                                      ==========     ==========

      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, 2006 and 2005:

                                                         2006           2005
                                                      ----------     ----------

        Future cash inflows                           $   53,000     $  288,000
        Future production and development costs           (2,000)       (56,000)
        Future dismantlement costs                        (7,943)        (7,483)
                                                      ----------     ----------

        Future net cash inflows before income taxes       43,057        224,157
        Future income taxes                                   --             --
                                                      ----------     ----------

        Future net cash flows                             43,057        224,157
        10% discount factor                              (11,000)       (56,000)
                                                      ----------     ----------

          Standardized measure of discounted
            future net cash inflow                    $   32,057     $  168,157
                                                      ==========     ==========


      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).

      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.


                                      F-18
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   Supplemental Oil and Gas Information - Unaudited (continued)

      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.

11.   Subsequent Events

      The following shares of our restricted common stock and common shares
      registered on Form S8 have been issued for services:

<TABLE>
<CAPTION>
      ------------- -------------------------- ----------------------- ------------------------ -------------------
       Date Issued           Name              # of Restricted Common    # of Common Shares      Fair Market Value
                                                       Shares           Registered on Form S8
      ------------- -------------------------- ----------------------- ------------------------ -------------------
        <S>          <C>                              <C>                     <C>                     <C>
        01/01/07     Mark Weller, President           1,290,099                                       $17,545
        01/08/07     Charles Pollock, CEO             1,290,099                                       $17,545
        01/08/07     Scott Duncan, CFO                 120,000                                        $1,632
         01/0807     Edward Skaggs, Director           100,000                                        $1,360
        02/02/07     Mary Pollock, Consultant                                 2,000,000               $26,000
        03/07/07     Mark Weller                      2,361,111                                       $25,972
        03/07/07     Charles Pollock                  2,361,111                                       $25,972
</TABLE>


                                      F-19
<PAGE>

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

On July 10, 2006, our Board of Directors received formal notice that our
independent auditors, Ham, Langston & Brezina, L.L.P. ("HLB"), had made the
decision to resign as our independent accountants effective July 10, 2006. On
July 17, 2006, the Board of Directors voted unanimously to accept the
resignation.

HLB audited the financial statements of the Company for the five years ended
December 31, 2005. The report of HLB on such financial statements, dated March
15, 2006, did not contain an adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles.

For the past two fiscal years and subsequent interim periods though the date of
resignation, there have been no disagreements with the former accountants on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Ham, Langston & Brezina, L.L.P., would have caused them to make
reference thereto in there report on the financial statements.

During the two most recent fiscal years and the interim period to the date of
their resignation, there have been no reportable events, as that term is defined
in Item 304(a)(1)(v) of Regulation S-B.

                                       12
<PAGE>

During the Company's two most recent fiscal years, and since then, HLB has not
advised the Company that any of the following exist or are applicable:

      (1)   That the internal controls necessary for the Company to develop
            reliable financial statements do not exist, that information has
            come to their attention that has led them to no longer be able to
            rely on management's representations, or that has made them
            unwilling to be associated with the financial statements prepared by
            management.

      (2)   That the Company needs to expand significantly the scope of its
            audit, or that information has come to their attention that if
            further investigated may materially impact the fairness or
            reliability of a previously issued audit report or the underlying
            financial statements or any other financial presentation, or cause
            them to be unwilling to rely on management's representations or be
            associated with the Company's financial statements for the foregoing
            reasons or any other reason, or

      (3)   That they have advised the Company that information has come to
            their attention that they have concluded materially impacts the
            fairness or reliability of either a previously issued audit report
            or the underlying financial statements for the foregoing reasons or
            any other reason.

New Independent Accountants

On July 17, 2006, Malone and Bailey, PC ("MB"), Certified Public Accountants of
Houston, Texas, were appointed by the Company to audit our financial statements
for the quarter ended June 30, 2006. During our two most recent fiscal years and
the subsequent interim periods preceding their appointment as independent
accountants, neither the Company nor anyone on its behalf consulted MB regarding
either the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered of the Company's consolidated financial statements, nor has MB provided
to the Company a written report or oral advice regarding such principles or
audit opinion. MB has performed the audit for our fiscal year ended December 31,
2006. The report appears in the financial statements.

ITEM 8A. CONTROLS AND PROCEDURES

Charles B. Pollock, our Chief Executive Officer, and Scott Duncan, our Chief
Financial Officer, have concluded that our disclosure controls and procedures
were not effective to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms, because of several adjustments required by
our auditors predominantly in the areas of impairment and equity. Specifically,
our independent auditors identified deficiencies in our internal controls and
disclosure controls related to the valuation of impairments for our oil and gas
properties and expense recognition related to issuances of our common stock.
Appropriate adjustments and footnote disclosures have been recorded and
disclosed in our Annual Report on Form 10-KSB. We are in the process of
improving our internal controls in an effort to remediate these deficiencies
through the following efforts: 1) implementing better controls and procedures
over impairment valuation and stock expense recognition and 2) improving
supervision and training of our accounting staff. We are continuing our efforts
to improve and strengthen our control processes and procedures to fully remedy
these deficiencies. Our management and directors will continue to work with our
auditors and other outside advisors to ensure that our controls and procedures
are adequate and effective.

During the quarter ended December 31, 2006, there were no changes in our
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting.

ITEM 8B.  OTHER INFORMATION

None


                                       13
<PAGE>

                                    PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name, age, and position of each executive
officer and director of the Company as of December 31, 2006

Name                            Age            Office
------------------             -----           --------
Charles B.  Pollock             67             Chief Executive Officer
                                               and Chairman of
                                               the Board of Directors

Mark F.  Weller                 56             President and Director

Scott Duncan                    40             Chief Financial Officer

Edward R.  Skaggs               41             Director

Charles B. Pollock was appointed our 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 our President and Director in March 2002. Mr.
Weller was employed by Texaco, Inc. for over thirty 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
Bachelor of Science in mechanical engineering from the University of California,
Davis.

Scott Duncan was appointed our Chief Financial Officer in February 2003. In
addition, Mr. Duncan has been employed as the cost accounting manager for Farouk
Systems since February 2004. 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 ten 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 our Board of Directors in December 2000. Mr.
Skaggs has worked for an investigative consulting firm, Skaggs & Associates
since 1991. Mr. Skaggs has over ten 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.

                                       14
<PAGE>

BOARD OF DIRECTORS

The members of the Board of Directors of the Company serve until the next annual
meeting of stockholders, or until their successors have been elected. The
officers serve at the discretion of the Board of Directors.

We do not an audit committee or any other committees. In the future, we may
designate committees as necessary to conduct business. We currently pay one
director, Edward Skaggs, 100,000 shares of our restricted common stock on a
quarterly basis which we value at $375 per month. We believe this structure is
adequate based on the size of our company. In the future, Directors may be paid
their expenses, if any, of attendance at such meeting of the Board of Directors,
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation.

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, 2006.

CODE OF ETHICS

We adopted a Code of Ethics for our Principal Executive and Senior Financial
Officers on February 6, 2005. A copy of the Code of Ethics was with our Form
10-KSB for the fiscal year ended December 31, 2005.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth cash compensation as paid by our Company to
executive officers as of the fiscal year ended December 31, 2006.

<TABLE>
<CAPTION>
                          Summary Compensation Table
-------------   ----   ------  -----  --------     ------  --------------   ------------   ------------   -----
  Name and      Year   Salary  Bonus   Stock       Option    Non-Equity     Nonqualified    All other     Total
  Principal             ($)     ($)    Awards      Awards  Incentive Plan      Deferred    compensation    ($)
  Position                              ($)         ($)    Compensation     Compensation       ($)
                                                               ($)            Earnings
                                                                                ($)
     (a)        (b)      (c)    (d)     (e)         (f)        (g)              (h)            (i)         (j)
-------------   ----   ------  -----  --------     ------  --------------   ------------   ------------   -----
<S>             <C>    <C>     <C>    <C>          <C>     <C>              <C>            <C>            <C>
Charles B
Pollock,        2005       --     --  $ 73,090(1)      --              --             --             --      --
Chief
Executive       2006       --     --  $211,408(2)      --              --             --             --      --
Officer
-------------   ----   ------  -----  --------     ------  --------------   ------------   ------------   -----
Mark F
Weller,         2005       --     --  $ 73,090(1)      --              --             --             --      --
President
                2006       --     --  $211,408(2)      --              --             --             --      --
-------------   ----   ------  -----  --------     ------  --------------   ------------   ------------   -----
Scott Duncan,
Chief           2005       --     --  $  3,880         --              --             --             --      --
Financial
Officer         2006       --     --  $  8,676         --              --             --             --      --
-------------   ----   ------  -----  --------     ------  --------------   ------------   ------------   -----
</TABLE>

(1)   8,677,332 shares o f restricted common stock were issued in lieu of cash
      salary(.)
(2)   10,829,622 shares of restricted common stock were issued in lieu of cash
      salary.

                                       15
<PAGE>

                  Outstanding Equity Awards at Fiscal Year End

The following table sets forth outstanding equity awards as paid by our Company
as of the fiscal year ended December 31, 2006.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                         OPTION AWARDS                                             STOCK AWARDS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Equity
                                                                                                                         Incentive
                                                                                                             Equity      Plan
                                                                                                            Incentive    Awards:
                                                                                                               Plan      Market
                                                                                                             Awards:     or
                                                                                                  Market    Number      Payout
                                                                                   Number          Value       of        Value
                                               Equity                                of             of      Unearned     Unearned
                                               Incentive                           Shares          Shares    Shares,     Shares,
                                               Plan                                  or             or        Units      Units
                                 Number of     Awards:                              Units          Units       or        or
                                Securities     Number of                             of             of       Other       Other
                 Number of      Underlying     Securities                           Stock          Stock     Rights      Rights
                 Securities     Unexercised    Underlying                            that           that     that        that
                 Underlying       Options      Unexercised                           have          have       have       have
                 Unexercised        (#)        Unearned      Option      Option       not           not       not        not
                 Options (#)   Unexercisable    Options     Exercise   Expiration   Vested         Vested    Vested       Vested
      Name       Exercisable                     (#)         Price ($)    Date        (#)          ($)         ($)         ($)
       (a)           (b)            (c)          (d)           (e)        (e)         (g)          (h)         (i)         (j)
------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>              <C>          <C>           <C>     <C>             <C>           <C>          <C>
Charles Pollock    300,000          --           --            .02     12/31/08        --             --           --            --

                   750,000                                    .008      3/14/09

                   600,000                                     .01      4/21/09

                   600,000                                     .01      7/30/09

                  1,800,000                                    .01     12/22/09

------------------------------------------------------------------------------------------------------------------------------------
Mark Weller        300,000          --           --            .02     12/17/08        --             --           --            --

                  1,500,000                                   .008      3/10/09

                   600,000                                     .01      4/21/09

                  1,200,000                                    .01      7/18/09

                  1,800,000                                    .01     12/22/09

                  1,125,000                                    .01      6/28/10

------------------------------------------------------------------------------------------------------------------------------------
Scott Duncan             --         --           --             --           --        --             --           --            --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       16
<PAGE>

                              Director Compensation

The following table sets forth director compensation paid during the fiscal year
ended December 31, 2006.

<TABLE>
<CAPTION>
---------------- ------------- ------------- ------------- --------------- -------------- -------------- -------------
     Name        Fees Earned   Stock Awards     Option       Non-Equity    Nonqualified     All Other       Total
                  or Paid in       ($)          Awards       Incentive       Deferred     Compensation       ($)
                     Cash                        ($)            Plan       Compensation        ($)
                     ($)                                    Compensation     Earnings
                                                                ($)             ($)
     (a)                (b)             (c)             (d)              (e)              (f)              (g)              (h)
----------------   -------------   -------------   -------------   ---------------   --------------   --------------   -------------
<S>                          <C>             <C>             <C>              <C>              <C>              <C>              <C>
Charles Pollock               --              --              --                --               --               --              --
----------------   -------------   -------------   -------------   ---------------   --------------   --------------   -------------
Mark Weller                   --              --              --                --               --               --              --
----------------   -------------   -------------   -------------   ---------------   --------------   --------------   -------------
Edward Skaggs                 --   $7230 (1)                  --                --               --               --              --
----------------   -------------   -------------   -------------   ---------------   --------------   --------------   -------------
</TABLE>

(1)   400,000 shares of our restricted common stock.

EMPLOYMENT AGREEMENTS

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

Charles B. Pollock-On July 1, 2005, we entered into an employment agreement with
Mr. Pollock to act as our Chief Executive Officer that expires on December 31,
2007 and provides for a salary of $10,000 per month. Mr. Pollock may convert any
or all salaries with accrued interest to common stock of the Company based on
30% off the average closing bid price during the month prior to the month being
compensated. Additionally, the employment agreement provides for the issuance of
100,000 shares of restricted stock per month as part of the base salary
compensation.

Mark F. Weller-On July 1, 2005, we entered into an employment agreement with Mr.
Weller to act as our President that expires on December 31, 2007 and provides
for a salary of $10,000 per month. Mr. Weller may convert any or all salaries
with accrued interest to common stock of the Company based on 30% off the
average closing bid price during the month prior to the month being compensated.
Additionally, the employment agreement provides for the issuance of 100,000
shares of restricted stock per month as part of the base salary compensation.

On June 1, 2006, we entered into a one year consulting agreement with Mr. Scott
Duncan to serve as Chief Financial Officer on financial matters pertaining to
the our business and to provide advice. The terms of his employment are based on
payment in the form of the Company's common stock at the rate of 40,000 shares
of our restricted common stock per month.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 20, 2007 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 20,
2007, there were 290,780,986 shares of the Company's common stock issued and
outstanding.

<TABLE>
<CAPTION>
----------------------------- ----------------------------- -------------------------------- ------------------------

                                                            Amount and Nature of             Percentage of Class (1)
Title of class                Name of Beneficial Owner      Beneficial Ownership
----------------------------- ----------------------------- -------------------------------- ------------------------
<S>                           <C>                           <C>                              <C>
Common Stock                  Charles B. Pollock                    83,251,478 (2)                    28.6%
                              Chairman and CEO
----------------------------- ----------------------------- -------------------------------- ------------------------
Common Stock                  Mark F. Weller                        59,150,458 (3)                    20.3%
                              President and Director
----------------------------- ----------------------------- -------------------------------- ------------------------
Common Stock                  Scott Duncan                             1,580,000                  Less than 1%.
                              CFO
----------------------------- ----------------------------- -------------------------------- ------------------------
Common Stock                  Edward Skaggs                            1,000,000                  Less than 1%.
                              Director
----------------------------- ----------------------------- -------------------------------- ------------------------
Common Stock                  All Officers and Directors              144,981,936                     49.9%
                              as a group (total of 4)
----------------------------- ----------------------------- -------------------------------- ------------------------
</TABLE>


                                       17
<PAGE>

(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 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 20, 2007. As of March 20, 2007 there were
      290,780,986 shares of our common stock issued and outstanding.

(2)   Includes 55,144,535 restricted common shares held directly, 24,056,943
      restricted common shares held indirectly and 4,050,000 warrants which
      include 300,000 warrants at an exercise price of $0.02 that expire
      December 31, 2008; 750,000 warrants with an exercise price of $0.008 that
      expire March 14, 2009; 600,000 warrants with an exercise price of $0.01
      that expire April 21, 2009; 600,000 warrants with an exercise price of
      $0.01 that expire July 30, 2009 and 1,800,000 warrants with an exercise
      price of $0.01 that expire December 22, 2009

(3)   Includes 52,625,458 restricted common shares and 6,525,000warrants that
      include 300,000 warrants with an exercise price of $0.02 that expire
      December 17, 2008; 1,500,000 warrants with an exercise price of $0.008
      that expire March 10, 2009; 600,000 warrants with an exercise price of
      $0.01 that expire April 21, 2009; 1,200,000 warrants with an exercise
      price of $0.01 that expire July 18, 2009; 1,800,000 warrants with an
      exercise price of $0.01 that expire December 22, 2009 and 1,125,000
      warrants with an exercise price of $0.01 that expire June 28, 2010.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE

Except as described below, none of the following persons has any direct or
indirect material interest in any transaction to which we were or are a party
since the beginning of the last fiscal year, or in any proposed transaction to
which we propose to be a party:

(A) any of our directors or executive officers;

(B) any nominee for election as one of our directors;

(C) any person who is known by us to beneficially own, directly or indirectly,
shares carrying more than 5% of the voting rights attached to our common stock;
or

                                       18
<PAGE>

(D) any member of the immediate family (including spouse, parents, children,
siblings and in-laws) of any of the foregoing persons named in paragraph (A),
(B) or (C) above.

We had the following related party notes payable at December 31, 2006 totaling
$528,041 and related accrued interest of $63,365. We replaced these notes
payable including accrued interest through December 31, 2005, effective January
1, 2006 with new notes at 12% due December 31, 2007.

<TABLE>
<S>                                                                         <C>
Notes payable to Mary Pollock Merritt, daughter of the chief executive
  officer. This note bears interest at rates of 12% per year and is due
  in a one time payment of principal and interest on December
  31, 2007.  These notes are not collateralized                             $118,299

Notes payable to Charles Pollock, the Chief Executive Officer and a
  significant stockholder of the Company. This note bears interest of 12%
  per year, and due in one time payment of principal and
  interest on December 31, 2007. These notes are not collateralized          323,315

Notes payable to Mark Weller, the Chief Operating Officer and a
  significant stockholder of the Company. This note bears interest of 12%
  per year, and due in one time payments of principal and
  interest on December 31, 2007. These notes are not collateralized           86,427
                                                                            --------
                                                                            $528,041
                                                                            ========
</TABLE>

We entered into a consulting agreement on January 1, 2005 with Sage Office
Services, L.P., an entity comprised of ownership of Mary Pollock Merritt
(daughter of Charles Pollock our Company's Chief Executive Officer) and the
General Partner Sage Office Management, which is an entity owned by Mary Pollock
Merritt, to provide record-keeping and other administrative services. During the
year ended December 31, 2006 the Company paid consideration under this
record-keeping and administrative consulting agreement totaling $164,400. We
paid for these services under the terms of the consulting agreement by issuing
6,700,000 common shares registered on Form S8 and 4,500,000 restricted common
shares. The stock was issued to Sage Office Services using a 30% off closing bid
price on the date invoiced. Due to recent changes in SEC rules we valued the
stock as of the date of issuance and not the date invoiced.

DIRECTOR INDEPENDENCE

One of our Board of Directors is an independent Director pursuant to the
standards applicable to Regulation S-B. Edward Skaggs is the independent Board
member.

ITEM 13.  EXHIBITS

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

      Exhibit 10.1 --   Employment Agreement with Mark Weller "incorporated by
                        reference to our Form 10KSB filing for the fiscal year
                        ended December 31, 2005."

      Exhibit 10.2 --   Employment Agreement with Charles Pollock "incorporated
                        by reference to our Form 10KSB filing for the fiscal
                        year ended December 31, 2005."

      Exhibit 10.3 --   Consulting Agreement with Scott Duncan

                                       19
<PAGE>

      Exhibit 14.1 --   Code of Ethics "incorporated by reference to our Form
                        10KSB filing for the fiscal year ended December 31,
                        2005."

      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 $15,000 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, 2005.

Malone and Bailey, P.C. billed us in the aggregate amount of $25,000 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, 2006.

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, 2005.

Malone and Bailey, P.C. 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, 2006.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

For the fiscal year ended December 31, 2005, Ham, Langston & Brezina, L.L.P. did
not bill us for, nor perform, any financial information systems design or
implementation. For the fiscal year ended December 31, 2005, we were not billed
for professional services from any other accounting firm for information systems
design or implementation.

For the fiscal year ended December 31, 2006, Malone and Bailey, P.C. did not
bill us for, nor perform, any financial information systems design or
implementation. For the fiscal year ended December 31, 2006, 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 $2,100 for
professional services rendered for tax related services for the fiscal year
ended December 31, 2005.

Malone and Bailey, P.C. billed us in the aggregate amount of $0 for professional
services rendered for tax related services for the fiscal year ended December
31, 2006.

                                       20
<PAGE>

ALL OTHER FEES

We were not billed for any other professional services for the fiscal year ended
December 31, 2005 or December 31, 2006.

AUDITOR INDEPENDENCE

Our Board of Directors considers that the work done for us in the year ended
December 31, 2005 by Ham, Langston & Brezina, L.L.P. is compatible with
maintaining Malone and Bailey's independence.

Our Board of Directors considers that the work done for us in the year ended
December 31, 2006 by Malone and Bailey, P.C. is compatible with maintaining
Malone and Bailey's independence.

AUDITOR'S TIME ON TASK

All of the work expended by Ham, Langston and Brezina, L.L.P. on our December
31, 2005 audit and by Malone and Bailey, P.C. on our December 31, 2006 audit was
attributed to work performed by Ham, Langston and Brezina's and by Malone and
Bailey's full-time, permanent employees.

                                       21
<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 April 5, 2007.


PANGEA PETROLEUM CORPORATION


        By: /s/ Charles B. Pollock                         Date: April 5, 2007
            -------------------------------------
            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: April 5, 2007


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


Date: April 5, 2007


By: /s/ Scott Duncan
----------------------------------
Scott Duncan, Chief Financial Officer and Principal Financial Officer


Date: April 5, 2007


By: /s/ Mark Weller
----------------------------------
Mark Weller, President and Director



Date:  April 5, 2007

By: /s/ Edward R. Skaggs
----------------------------------
Edward R. Skaggs, Director


                                       22