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, 2003

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

                                    COLORADO
         (State or other jurisdiction of incorporation or organization)

                                   76-0635938
                      (IRS Employer Identification Number)

                5850 San Felipe, Suite 500, Houston, Texas 77057
               (Address of principal executive offices)(Zip Code)

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

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

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

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

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will be contained,
to the best of the  registrant's  knowledge,  in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. (X)

Revenues for year ended December 31, 2003:  $33,187.  Aggregate  market value of
the voting common stock held by  non-affiliates of the registrant as of March 5,
2004 was  $1,595,820.24  Number  of  shares  of the  registrant's  common  stock
outstanding as of March 5, 2004 was 138,895,962.


                                     Page 1
<PAGE>

                                TABLE OF CONTENTS

                                     PART I

Item 1.     Description of Business

Item 2.     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 and Related Stockholder
            Matters

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

Item 7.     Financial Statements and F-1

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

Item 8A.    Controls and Procedures

                                    PART III

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

Item 10.    Executive Compensation

Item 11.    Security Ownership of Certain Beneficial Owners  And Management

Item 12.    Certain Relationships and Related Transactions

Item 13.    Exhibits and Reports on Form 8-K

Item 14.    Principal Accountant Fees and Services

SIGNATURES


                                     Page 2
<PAGE>

                                                                PART I
ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL INFORMATION ABOUT PANGEA

Pangea Petroleum  Corporation  ("Pangea" or "Company"),  a Colorado corporation,
was  organized  on March 11, 1997.  Pangea is located at 5850 San Felipe,  Suite
500,  Houston,   Texas  77057.   Pangea's  company  website  can  be  viewed  at
www.pangeapetroleum.com.  Pangea is a publicly  traded company listed on the OTC
Electronic  Bulletin  Board under the symbol  "PAPO".  Pangea  currently  has no
subsidiaries. Pangea had acquired a subsidiary, Mass Energy, in October of 2000;
however, this subsidiary was unprofitable and was sold in September of 2002.

BUSINESS STRATEGY

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

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

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

The most likely case is designed to have a 65-70% chance of being achieved.  The
high and low cases then define the  boundaries of an 80% range,  such that there
is a 10% chance of achieving the high case and a 90% chance of achieving the low
case.

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

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


                                     Page 3
<PAGE>

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

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

      o     primarily Gulf Coast Basin locations

      o     an established production history and infrastructure

      o     multiple productive sands and reservoirs

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

      o     the opportunity to obtain a minority interest.

RISK FACTORS

GOING CONCERN RISK

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

In Note #2 to our consolidated  financial  statements,  our independent auditors
have indicated that certain factors raise substantial doubt about our ability to
continue as a going  concern.  Since its  inception,  the  Company has  suffered
recurring losses from operations and has been dependent on existing stockholders
and new  investors  to provide the cash  resources  to sustain  its  operations.
During the years ended  December  31, 2003 and 2002,  the Company  reported  net
losses and negative cash flows from operations as follows:

                                                        2003             2002
                                                     ----------       ----------
Net loss                                             $  669,654       $1,275,753

Negative cash flows from operations                  $   51,773       $  223,963

The  Company's  continuing  negative  operating  results have produced a working
capital  deficit of  $1,875,835  at  December  31,  2003.  These  factors  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:

      -     The  Company's  ability  to  continue  to obtain  sources of outside
            financing to support near term  operations  and to allow the Company
            to continue to make  strategic  investments  in new oil and gas well
            prospects.

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

      -     The Company's  ability to increase  profitability and sustain a cash
            flow level that will ensure support for continuing operations.


                                     Page 4
<PAGE>

IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING

Pangea must obtain  financing to fund the  expansion of  operations  and to meet
obligations as they become due. 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.  It is possible
our  operations  could be  restricted  if loan terms  increase  our debt service
requirements.  There is no assurance  that we can obtain  financing on favorable
terms.

INDUSTRY

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

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

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

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

JOINT OPERATIONS WITH OTHERS; NON-OPERATOR STATUS

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


                                     Page 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.

RECENT FINANCING

In 2003,  Pangea received  $90,800 from private  placements and $30,000 in loans
from Officers of the company.

EMPLOYEES

As of March 5,  2004,  Pangea has 2  full-time  employees,  including  executive
officers, non- executive officers,  secretarial and clerical personnel and field
personnel.   Pangea  also  retains   independent   geological  and   engineering
consultants  and  administrative  assistance  on a limited  basis and expects to
continue to do so in the future.


                                     Page 6
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

Pangea's principal executive offices are located at 5850 San Felipe,  Suite 500,
Houston,  Texas 77057 in  approximately  140 square feet of office space that is
leased on a one-year  contract  basis  expiring  March 31,  2005 for $687.52 per
month.  We believe  that our  offices  are  adequate  for our present and future
needs.

ITEM 3. LEGAL PROCEEDINGS

Pangea's former affiliate,  Mass Energy,  Inc., incurred substantial debt in the
drilling of a well. One of the Mass Energy creditors, Halliburton, Inc. has sued
Pangea  Petroleum  Corporation  under an alter ego claim on June 11, 2002, Cause
Number 2002-19465,  Halliburton Energy Services,  Inc. vs. Mass Energy, Inc. and
Pangea  Petroleum  Corp. in the District  Court of Harris County,  Texas,  129th
Judicial  District.  This claim is currently in the discovery phase. The Company
believes it will prevail in the case. Additionally,  in 2001, Pangea purchased a
ten percent  working  interest  in a well in Duval  County,  Texas.  The well is
producing  but Pangea has not  received  monies  under their  working  interest.
Pangea filed suit against the  operator of well along with the  individual  from
whom they purchased the working interest.  Pangea Petroleum Corporation vs. Clay
Exploration, Inc. and Joseph W. Shunta, Cause Number 2002-18505, in the District
Court, Harris County, Texas, 157th Judicial District. Pangea has agreed to go to
arbitration in the case and is currently in the discovery phase.  Arbitration is
currently scheduled for April 2004.

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

None

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 2002 and 2003.  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
                                   ------           ------            -----
                                   2002
First Quarter                                        .105             .032
Second Quarter                                       .06              .0081
Third Quarter                                        .06              .0081
Fourth Quarter                                       .025             .005

                                   2003
First Quarter                                       .013              .005
Second Quarter                                      .009              .002
Third Quarter                                       .027              .008
Fourth Quarter                                      .022              .012

The bid price of our common stock was $0.013 per share on March 22, 2004 and had
approximately 247 certificate shareholders of record as of March 22, 2004.


                                     Page 7
<PAGE>

SECURITIES  AUTHORIZED FOR ISSUANCE UNDER EQUITY  COMPENSATION  PLANS FOR FISCAL
YEAR ENDED DECEMBER 31, 2003

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                Number of Securities to be   Weighted-average price of    Number of Securities
                                issued upon exercise of      outstanding options          remaining available for
                                outstanding options,         warrants and rights          future issuance under
                                warrants and rights                                       equity compensation
                                                                                          plans(excluding securities
                                                                                          reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
                                (a)                          (b)                          (c)
----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                             <C>                        <C>
Equity compensation plans
approved by security holders            10,000,000                      $0.11                      6,549,997
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders             5,000,000                                                     0
----------------------------------------------------------------------------------------------------------------------
TOTAL                                   15,000,000                      $0.11                      6,549,997
----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

OUR TRANSFER AGENT IS:

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

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.

                                     PART II

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following is a discussion of our financial condition, results of operations,
liquidity and capital  resources.  This discussion should be read in conjunction
with our  Consolidated  Financial  Statements  and the  notes  thereto  included
elsewhere in this Form 10-KSB.

FORWARD-LOOKING INFORMATION-GENERAL

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


                                     Page 8
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

OIL AND GAS PRODUCING ACTIVITIES

The Company  follows the  "successful  efforts" method of accounting for its oil
and gas properties.  Under this method of accounting,  all property  acquisition
costs (cost to acquire  mineral  interests in oil and gas  properties) and costs
(to drill and equip) of exploratory and development  wells are capitalized  when
incurred,  pending  determination of whether the well has found proved reserves.
If an exploratory  well has not found proved reserves in commercial  quantities,
the  costs  associated  with the well  are  charged  to  expense.  The  costs of
development   wells  are  capitalized   whether   productive  or  nonproductive.
Geological  and  geophysical  costs  and the  costs of  carrying  and  retaining
undeveloped  properties are expensed as incurred.  Management estimates that the
salvage value of lease and well equipment will  approximately  offset the future
liability for plugging and  abandonment  of the related wells.  Accordingly,  no
accrual for such costs has been recorded.

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


                                     Page 9
<PAGE>

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. 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.

GENERAL

Pangea Petroleum  Corporation  ("Pangea" or "Company"),  a Colorado corporation,
was  organized  on March 11, 1997.  Pangea is located at 5850 San Felipe,  Suite
500,  Houston,   Texas  77057.   Pangea's  company  website  can  be  viewed  at
www.pangeapetroleum.com.  Pangea is a publicly  traded company listed on the OTC
Electronic Bulletin Board under the symbol "PAPO". The Company is an independent
energy  company  focused on exploration  and  development of oil and natural gas
reserves,  whose core  business is directed  to the  development  of oil and gas
prospects in proven onshore  production areas.  Pangea is pursuing a development
program designed to achieve  profitability by distributing  risk across multiple
oil and gas  projects.  Pangea  diversifies  its risk by  carefully  identifying
prospects  that fit within strict  parameters  and by taking a minority  working
interest in each project. The Company devotes essentially all of it resources to
development of revenue producing activities by keeping its overhead at a minimum
level through the retention of carefully selected  consultants,  contractors and
service  companies.  Pangea  is  working  to create  shareholder  value by using
capital and proven  technology  to exploit  energy  prospects  that are of minor
interest to larger companies due to their size and location. The Company invests
in projects at different levels of participation, generally as a minority owner,
such that daily operating  responsibility  is in the hands of experienced,  high
quality  partners  and  contractors.  Producing  properties  may  be  resold  as
appropriate to establish and maintain optimum asset value.  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 year ended  December 31, 2003 and 2002, the
Company reported net losses of $669,654 and $1,275,753 respectively.

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

      -     The  Company's  ability  to  continue  to obtain  sources of outside
            financing to support near term  operations  and to allow the Company
            to continue to make  strategic  investments  in new oil and gas well
            prospects.

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

      -     The Company's  ability to increase  profitability and sustain a cash
            flow level that will ensure support for continuing operations.


                                    Page 10
<PAGE>

RESULTS OF OPERATIONS

Pangea  participated  in  drilling  4 wells in  2003.  Two of  those  wells  are
producing and two are suspended  awaiting  further work. At one of the suspended
wells, oil reserves were found but the well is not currently producing due to an
apparent  mechanical problem.  The other suspended well is being evaluated,  but
may be uneconomical for further  development.  The income from the two producing
wells, in Liberty and Panola  counties,  has made a substantial  contribution to
the Pangea  cash flow in the second half of 2003.  The two wells still  awaiting
further work are:

LEE COUNTY, WHICH is a Lower Wilcox prospect identified in a 2D seismic analysis
that shows a closure between two existing Lower Wilcox  producing  fields in the
area, was drilled and tested in August 2003. Pangea has a 17.5% working interest
(13.125% net interest). The well encountered 40' of overall sand with 16'-18' of
oil sand on top and water in the bottom 22'. The well was tested in early August
and showed signs of oil at a low rate of production.  The well was  subsequently
stimulated with an acid treatment which greatly  increased the water  production
rate,  making the well  uneconomical  to produce.  Pangea and its partners  have
reviewed the reservoir data and determined  that there may be locations that are
up structure from the first well,  further from the underlying  water. We are in
the  process  of  obtaining  new  seismic  data,  which will  clarify  whether a
follow-up  well can be  drilled.  Following  that  determination,  we will  also
further  examine the  potential  for the first well, if the new data supports an
adequate amount of potential reserves to justify remedial work.

AUSTIN  COUNTY,  WHICH is a 2600'  Frio zone  test that was based in 3D  seismic
analysis,  was drilled in July 2003.  The Company has a 15.3%  working  interest
(11.48% net  interest).  Unfortunately,  the target  production  zone  contained
residual gas and water,  and produced only water on the test.  The well has been
shut in and is being evaluated for potential shallower productive intervals.  No
timetable has been set for decisions on future work at this time.

COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002.

Revenues were $33,187 in 2003 compared to no revenue in 2002. To produce greater
revenue,  investments  in oil and gas were  increased to $188,264 in 2003 (using
the successful effort method of accounting).

The  substantial  reduction  in the net loss from  $669,654  for the year  ended
December 31, 2003 compared to $1,275,753 for the year ended December 31, 2002 is
due to the discontinued operation and sale of its wholly-owned subsidiary,  Mass
Energy,  Inc., a Settlement Agreement negotiated with certain parties related to
the Company and the decreased selling,  general and administrative expenses. The
decreases  in these areas  reflect the  progress the Company has made since 2002
when it developed a plan and took actions to improve its financial  position and
to deal with its liquidity problems. Most of the expenses in 2002 are related to
the  disposition  of a  non-performing  subsidiary and settlement of outstanding
issues.  In 2003,  the focus  changed to  strategic  investments  in oil and gas
properties and continued to focus on minimizing  expenses that is also reflected
in the reduction of expenses from $1,065,598 in 2002 to $702,841 in 2003. Pangea
maintains a low overhead by minimizing  personnel  and office space.  Nearly all
work is contracted on an as needed basis.  In addition,  the two officers of the
Company that are permanent  employees have agreed to accept restricted shares of
Pangea Common stock in lieu of cash compensation.  This move aligns the goals of
the  Company  and the  officers  and allows the Company to direct any extra cash
into investment opportunities.


                                    Page 11
<PAGE>

The Company invested in several wells that generated  revenue in 2003 of $33,187
compared to no revenue in 2002.  This  increased  lease  operating  expenses and
production tax expenses.  However,  selling, general and administrative expenses
decreased  from $311,822 for the year ended  December 31, 2002 to $72,554 in for
the year ended December 31, 2003 as a result of a minimizing  overhead including
compensation  consultants  with  equity  and  conserving  cash  for oil and cash
investments.  Stock based compensation increased to $575,494 in 2003 compared to
$263,974 in 2002 as the company  compensation  employees  with stock rather than
cash. In 2002, the company had several expenses related to their plan to improve
their financial  position,  which included the  disposition of a  non-performing
subsidiary and settlement of outstanding issues.  Several expenses were incurred
as this plan was put into effect that were not incurred in 2003.  These included
impairment of oil and gas properties  ($197,039 in 2002), penalty for failure to
timely register shares ($192,833 in 2002) and loss on sale of marketable  equity
securities  ($55,887 in 2002).  None of these  expenses were incurred in 2003 as
the company's focus changed from resolving their liquidity  issues to active oil
and gas investment.

Loss on sale of marketable  equity  securities  was $55,887 in 2002 was due to a
decline in the value of securities that were received in a settlement  agreement
with certain related parties. There was no similar activity in 2003.

Interest  expense  remained  fairly constant in 2003 as compared to 2002 because
debt levels remained reasonably consistent.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  operating  activities used cash in the amount of $188,264 for the
fiscal  year  2003 to  invest in four  wells.  Two of the  wells are  generating
revenue but currently,  the Company has not been able to generate  positive cash
flow from  operations.  The Company  utilized cash from financing  activities to
fund these investments. The net cash from financing activities increased in 2003
to $227,300 from $49,100 in 2002. The Company  intends to continue  investing in
additional  oil and gas projects but will need  additional  private  placements,
debt  financing or equity  investment in order to  participate  fully and at the
levels the  Company  intends.  There can be no  assurance  that any of the plans
developed  by the  Company  will  produce  cash flows  sufficient  to ensure its
long-term viability.

OFF BALANCE SHEET ARRANGEMENT

During the year ended  December 31, 2003,  the Company had no off balance  sheet
arrangements.

2004 OUTLOOK

The Company has identified two specific  prospects for drilling in early 2004 in
Anderson  and  Liberty  counties  and is in the  process of  evaluating  several
additional prospects for 2004 drilling. Anderson County is a 4600' test of a new
fault block that was identified in the Woodbine formation.  Geologic and seismic
analysis  revealed an untested area off the  southwest  flank of the Jarvis dome
that was untested. The Jarvis dome structures have had several recent successful
well  completions in the last several years in three  different  Woodbine sands.
Pangea has a 5.0% working  interest  (4.25% net interest) in the well.  The well
was  drilled at the end of  February  2004.  Unfortunately  it  encountered  the
Woodbine  sands as  predicted,  but they did not contain oil or gas reserves and
the well was abandoned.

Liberty County is a 9000' test of the Lower Wilcox, based on 3D seismic data and
multiple  surrounding  wells.  The fault trap  identified  has a down  structure
producing well that would not have produced the bulk of the reserves potentially
available.  In  addition,  several  wells in the  surrounding  area  support the
presence of a large fault block that is substantially  untested. The well should
encounter  several zones that are currently  producing in adjacent fault blocks,
which will be  secondary  objectives.  It is  anticipated  that the well will be
drilled around the end of the second quarter.

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


                                    Page 12
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

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

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

None

                                    PART III

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

The  directors and officers of the Company,  as of March 5, 2004,  are set forth
below.  The  directors  hold  office for their  respective  term and until their
successors are duly elected and qualified. The officers serve at the will of the
Board of Directors.

DIRECTORS AND EXECUTIVE OFFICERS

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

            Name                     Age    Office
            -------                 -----   --------
            Charles B.  Pollock       64    Chief Executive Officer
                                            and Chairman of
                                            The Board of Directors

            Mark F. Weller            53    President and Director

            Scott Duncan              37    Chief Financial Officer

            Edward R.  Skaggs         37    Director

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


                                    Page 13
<PAGE>

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

SCOTT DUNCAN was appointed Chief Financial  Officer in February 2003. Mr. Duncan
is currently the Cost Accounting  Manager for Farouk Systems,  a rapidly growing
manufacturer of hair care and spa products. From September 2001 through February
2004,   Mr.  Duncan   handled   financial  and  cost   accounting   for  Goodman
Manufacturing, a large air conditioner manufacturing company. From December 1998
to August  2001,  Mr.  Duncan was a  Programmer  Analyst  with RHI  Refractories
America.  Mr.  Duncan has a total of 8 years of experience in financial and cost
accounting  for  manufacturing  companies  along  with a  total  of 6  years  of
experience  with  computer  programming.  He is actively  involved  with various
organizations  offering  accounting,  programming  and consulting  services.  He
received a BBA in accounting from Southwest  Texas State  University in 1989 and
his CPA license in 1992.

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

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

ITEM 401(E)

The Company currently does not have an audit committee.

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, 2003.

The Company has adopted a code of ethics for its Principal  Executive and Senior
Financial Officers, which is attached hereto as Exhibit 14.


                                    Page 14
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

    SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                   Annual Compensation               Long Term Compensation
                             -------------------------------  ----------------------------------
                                                                             Awards                  Payouts
                                                              -----------------------------------  ------------
Name and               Year  Salary     Bonus   Other Annual  Restricted     Securities     LTIP    All Other
Principal Position             ($)       ($)    Compensation     Stock       Underlying   Payouts  Compensation
                                                     ($)        award(s)       Options      ($)
                                                                (shares)        SARs
                                                                               (#)
------------------     ----  ------     -----   ------------  ----------     ----------   -------   -----------
<S>                    <C>     <C>       <C>       <C>      <C>               <C>            <C>       <C>
Charles B. Pollock     2001    -0-       -0-        3,000    1,000,000(4)      300,000       -0-       -0-
CEO and                2002    -0-(1)    -0-            0      600,000(4)            0       -0-       -0-
Chairman of the        2003    -0-(2)    -0-(3)         0    1,200,000(4)            0       -0-       -0-
Directors
------------------     ----  ------     -----   ------------  ----------     ----------   -------   -----------
Mark F.  Weller        2001    N/A       N/A          N/A          N/A             N/A      N/A
President and          2002    -0-(5)    -0-(3)         0      800,000(4)            0       -0-       -0-
Director               2003    -0-(6)    -0-(3)         0    1,100,000(4)            0       -0-       -0-
------------------     ----  ------     -----   ------------  ----------     ----------   -------   -----------
</TABLE>

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

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

                               Individual Grants

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

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


                                    Page 15
<PAGE>

EMPLOYMENT AGREEMENTS

We have entered into employment  agreement with Mr. Charles Pollock and Mr. Mark
Weller. The following sets forth the terms of the employment agreement:  Charles
B. Pollock-On January 1, 2003, we entered into an employment  agreement with Mr.
Pollock that ends on December  31, 2004,  to act as our Chairman of the Board of
Directors and Chief Executive Officer. Pursuant to the employment agreement, Mr.
Pollock is paid a salary of $10,000  per month and has an option to convert  any
or all salary with accrued interest to Pangea  Petroleum  restricted stock under
Rule 144 at a conversion  rate thirty percent off the average closing bid during
the month  prior to the month  being  compensated.  In  addition,  he shall also
receive  100,000  restricted  shares a month as part of his base  salary  and an
annual  bonus in the  minimum  amount of  200,000  shares of  restricted  stock.
Currently, Mr. Pollock has chosen to defer his salary.

Mark F.  Weller-On  March 1, 2003, we entered into an employment  agreement with
Mr. Weller that ends on December 31, 2004, to act as our President and Director.
Pursuant to the employment agreement,  Mr. Weller is paid a salary of $9,000 per
month and has an option to convert  any or all salary with  accrued  interest to
Pangea  Petroleum  restricted  stock under Rule 144 at a conversion  rate thirty
percent  off the  average  closing bid during the month prior to the month being
compensated.  In addition,  he shall also receive  100,000  restricted  shares a
month as part of his base salary and an annual  bonus in the  minimum  amount of
200,000 shares of restricted  stock.  Currently,  Mr. Weller has chosen to defer
his salary through the end of 2004.

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

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based upon information received from the persons concerned, each person known to
us to be the  beneficial  owner of more than  five  percent  of the  outstanding
shares of our Common Stock,  each director,  each of our executive  officers and
all of our directors and executive officers as a group, owned beneficially as of
March 5, 2004,  the number and  percentage of  outstanding  shares of our Common
Stock indicated in the following table:

Name and Address of
Beneficial Owner                  Number of Shares(1)     Percentage
-------------------               -------------------     ----------

Charles B.  Pollock                    28,635,328(2)          21%
5850 San Felipe, Suite 500
Houston, TX 77057

Mark F.  Weller
5850 San Felipe, Suite 500             20,788,954             15%
Houston, TX 77057

Edward Skaggs
5850 San Felipe, Suite 500                270,000             **
Houston, TX 77057

Scott Duncan
5850 San Felipe, Suite 500                545,000             **
Houston, TX 77057

All directors and executive officers as a group
(as a group)                                                 36%

**    Less than one percent.
(1)   Shares are held directly with sole voting and investment power.
(2)   24,456,943 shares indirectly held through spouse and 3,578,385 shares held
      directly


                                    Page 16
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On October 7, 2002,  the Company  sold their  interest in Mass  Energy,  Inc. in
exchange  for the  liabilities  of the  Company;  however,  Pangea  retained two
promissory notes owed by Randall Massey and Sandstone Ventures,  Inc. Both notes
receivables  were incurred prior to the Company's  acquisition of Mass Energy in
October of 2000. At December 31, 2003, the Company had notes receivable due from
Randy  Massey in the amount of $150,000  plus  accrued  interest.  Approximately
$150,000 of the  balance is  evidenced  by a  promissory  note.  Under the note,
interest  accrues on the unpaid  principal  at 6.25% per annum.  Mr.  Massey has
never made any payments of principal or interest on these notes receivable.  The
notes are fully reserved at December 31, 2003.

Additionally,  the Company had a notes  receivable due from Sandstone  Ventures,
Inc.,  an affiliate  of Randy  Massey in the amount of $40,000.  Under the note,
interest accrues on the unpaid principal at 7.0% per annum.

At December 31, 2003, the Company had notes payable to related parties  totaling
$372,684.  These  include a demand  note  payable in the amount of  $233,500  to
Charles  B.  Pollock,  a demand  note  payable  in the amount of $89,184 to Mary
Pollock,  daughter  of Charles B.  Pollock  and to Mark  Weller in the amount of
$50,000.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

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

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

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

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

(b)   Reports on Form 8-K.

      None.


                                    Page 17
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Ham, Langston & Brezina, L.L.P. billed us in the aggregate amount of $24,577 and
$27,816  for  professional  services  rendered  for  their  audit of our  annual
financial  statements and their reviews of the financial  statements included in
our Forms  10-QSB for the year ended  December  31, 2003 and  December 31, 2002,
respectively.

AUDIT-RELATED FEES

Ham,  Langston & Brezina,  L.L.P. did not bill us for, nor perform  professional
services  rendered  for  assurance  and related  services  that were  reasonably
related  to the  performance  of  audit or  review  of the  Company's  financial
statements for the fiscal years ended December 31, 2003 and December 31, 2002.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

For the fiscal  years  ended  December  31, 2003 and  December  31,  2002,  Ham,
Langston & Brezina,  L.L.P.  did not bill us for,  nor  perform,  any  financial
information  systems  design  or  implementation.  For the  fiscal  years  ended
December 31, 2003 and December  31,  2002,  we were not billed for  professional
services  from any  other  accounting  firm for  information  systems  design or
implementation.

TAX FEES

Ham, Langston & Brezina,  L.L.P. billed us in the aggregate amount of $1,758 and
$1,500 for  professional  services  rendered  for tax related  services  for the
fiscal years ended December 31, 2003 and December 31, 2002, respectively.

ALL OTHER FEES

We were not billed for any other professional services for the fiscal year ended
December 31, 2003.

AUDITOR INDEPENDENCE

Our Board of  Directors  considers  that the work done for us in the year  ended
December  31,  2003 by Ham,  Langston  &  Brezina,  L.L.P.  is  compatible  with
maintaining Ham, Langston & Brezina, L.L.P.'s independence.

AUDITOR'S TIME ON TASK

All of the work expended by Ham, Langston & Brezina,  L.L.P. on our December 31,
2003 audit was attributed to work performed by Ham, Langston & Brezina, L.L.P.'s
full-time, permanent employees.


                                    Page 18
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  undersigned  has duly caused this Form 10-KSB to be signed on
its  behalf  by the  undersigned,  there  unto duly  authorized,  in the City of
Houston, Texas, on March 23, 2004.

PANGEA PETROLEUM CORPORATION


By: /s/ Charles B. Pollock                                  Date: March 23, 2004
    -------------------------------
    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.

By: /s/ Charles B. Pollock
   --------------------------------
Date:  March 23, 2004
Charles B. Pollock, Chairman of the Board, and Chief Executive Officer


By: /s/ Scott Duncan
   --------------------------------
Date:  March 23, 2004
Scott Duncan, Chief Financial Officer


By: /s/ Mark Weller
   --------------------------------
Date:  March 23, 2004
Mark Weller, President and Director


By: /s/ Edward R. Skaggs
   --------------------------------
Date:  March 23, 2004
Edward R. Skaggs, Director


                                    Page 19
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                                   ----------

                        CONSOLIDATED FINANCIAL STATEMENTS
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                      F-1
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                                TABLE OF CONTENTS
                                   ----------

                                                                       PAGE

Report of Independent Accountants                                       F-3

Consolidated Financial Statements:

  Consolidated Balance Sheet as of December 31, 2003                    F-4

  Consolidated Statements of Operations for the years
    ended December 31, 2003 and 2002                                    F-5

  Consolidated Statements of Stockholders' Deficit for
    the years ended December 31, 2003 and 2002                          F-6

  Consolidated Statements of Cash Flows for the years
    ended December 31, 2003 and 2002                                    F-8

Notes to Consolidated Financial Statements                              F-9

                                      F-2
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
Pangea Petroleum Corporation

We have audited the accompanying consolidated balance sheet of Pangea Petroleum
Corporation and subsidiaries as of December 31, 2003 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the two years in the period then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pangea
Petroleum Corporation and subsidiaries as of December 31, 2003, and the results
of their operations and their cash flows for each of the two years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses, negative cash
flows from operations and has a net capital deficiency at December 31, 2003 that
raise substantial doubt about its ability to continue as a going concern.
Management's plans with regard to this matter are also discussed in Note 2.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Houston, Texas
February 15, 2004


                                      F-3
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                   ----------


     ASSETS

Current assets:
  Cash                                                             $      1,890
  Accounts receivables                                                   12,460
                                                                   ------------
      Total current assets                                               14,350
                                                                   ------------
Property and equipment:
  Oil and gas properties (successful efforts method)                    198,264
  Other property and equipment                                           16,689
  Less accumulated depletion, depreciation and amortization             (21,514)
                                                                   ------------
  Net property and equipment                                            193,439
                                                                   ------------
      Total assets                                                 $    207,789
                                                                   ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                                 $     26,661
  Accrued liabilities                                                    65,699
  Notes payable to related parties                                      322,684
  Deferred gain on sale of Mass Energy, Inc.                          1,475,141
                                                                   ------------
      Total current liabilities                                       1,890,185

Obligation for dismantlement and disposal activities                     10,000

Notes payable to related parties, net of current portion                 60,000
                                                                   ------------
      Total liabilities                                               1,960,185
                                                                   ------------
Commitments and contingencies

Stockholders' deficit:
  Preferred stock: $.001 par value; 10,000,000 shares authorized              -
  Common stock: $.001 par value; 200,000,000 shares authorized;
    117,665,959 shares issued and outstanding                           117,666
  Additional paid-in capital                                         16,116,224
  Unissued common stock: 1,440,500 shares                               192,833
  Accumulated deficit                                               (18,163,474)
                                                                   ------------
                                                                     (1,736,751)
  Less subscriptions receivable                                         (15,645)
                                                                   ------------
      Total stockholders' deficit                                    (1,752,396)
        Total liabilities and stockholders' deficit                $    207,789
                                                                   ============

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

                                      F-4
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                   ----------

<TABLE>
<CAPTION>
                                                          2003            2002
                                                      ------------    ------------
<S>                                                   <C>                 <C>
Revenue from operations                               $     33,187        $      -
                                                      ------------    ------------

Costs and expenses:
  Lease operating expenses                                   7,756               -
  Production tax                                             2,367               -
  Selling, general and administrative                       72,554         311,822
  Stock based compensation                                 575,494         263,974
  Impairment of oil and gas properties                           -         197,039
  Depletion, depreciation, and amortization                  6,125               -
  Loss on sale of marketable equity securities                   -          55,887
  Penalty for failure to timely register shares                  -         192,833
  Interest expense                                          38,545          44,043
                                                      ------------    ------------

    Total costs and expenses                               702,841       1,065,598
                                                      ------------    ------------

      Loss from continuing operations                     (669,654)     (1,065,598)

Loss from operation of discontinued exploration and
  production subsidiary                                          -        (210,155)
                                                      ------------    ------------

        Net loss                                      $   (669,654)   $ (1,275,753)
                                                      ============    ============


Basic and diluted net loss per common share:
  Continuing operations                               $      (0.01)   $      (0.02)
  Discontinued operations                                    (0.00)          (0.00)
                                                      ------------    ------------

        Net loss                                      $      (0.01)   $      (0.02)
                                                      ============    ============

Weighted average common shares                          90,591,355      57,612,359
                                                      ============    ============
</TABLE>



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


                                      F-5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        ADDITIONAL      UNISSUED                        STOCK
                                                COMMON STOCK              PAID-IN        COMMON       ACCUMULATED    SUBSCRIPTIONS
                                            SHARES         AMOUNT         CAPITAL         STOCK         DEFICIT        RECEIVABLE
                                          ----------    ------------    -----------    ------------   ------------    ------------
<S>                                       <C>                 <C>         <C>           <C>            <C>                 <C>
Balance at December 31, 2001              52,186,900          52,187      14,717,956              -    (16,218,067)        (16,000)

Common stock issued for cash               1,205,000           1,205          43,895              -              -         (22,500)

Common stock issued to compensate
  employees                               10,966,654          10,967         253,007              -              -               -

Capital contribution by stockholders
  under the Settlement Agreement (See
  Note 4)                                          -               -         576,008              -              -               -

Common stock to be issued under the
  Securities Purchase Agreement (See
  Note 12) because the Company did
  not meet registration requirements
  re- quired under the Agreement
  (1,440,500 shares)                               -               -               -        192,833              -               -

Surrender of common stock                    (25,000)            (25)             25              -              -               -

Net loss                                           -               -               -              -     (1,275,753)              -
                                          ----------    ------------    -----------    ------------   ------------    ------------

Balance at December 31, 2002              64,333,554    $     64,334    $ 15,590,891   $    192,833   $(17,493,820)   $    (38,500)
                                          ==========    ============    ===========    ============   ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                               TOTAL
                                              TREASURY      STOCKHOLDERS'
                                                STOCK         (DEFICIT)
                                             ------------    ------------
<S>                                          <C>            <C>
Balance at December 31, 2001                            -      (1,463,924)

Common stock issued for cash                            -          22,600

Common stock issued to compensate
  employees                                             -         263,974

Capital contribution by stockholders
  under the Settlement Agreement (See
  Note 4)                                        (223,640)        352,368

Common stock to be issued under the
  Securities Purchase Agreement (See
  Note 12) because the Company did
  not meet registration requirements
  re- quired under the Agreement
  (1,440,500 shares)                                    -         192,833

Surrender of common stock                               -               -

Net loss                                                -      (1,275,753)
                                             ------------    ------------

Balance at December 31, 2002                 $   (223,640)   $ (1,907,902)
                                             ============    ============
</TABLE>


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


                                      F-6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        ADDITIONAL       UNISSUED                        STOCK
                                               COMMON STOCK              PAID-IN          COMMON      ACCUMULATED     SUBSCRIPTIONS
                                          SHARES          AMOUNT         CAPITAL          STOCK         DEFICIT        RECEIVABLE
                                       ------------    ------------    ------------    ------------   ------------    ------------
<S>                                      <C>           <C>             <C>             <C>            <C>             <C>
Balance at December 31, 2002             64,333,554    $     64,334    $ 15,590,891    $    192,833   $(17,493,820)   $    (38,500)

Common stock issued for cash             12,058,063          12,058         134,242               -              -               -

Common stock issued to compensate
  employees and consultants and
  to satisfy $55,388 of compensation
  accrued at December 31, 2002           43,043,593          43,044         564,911               -              -               -

Common stock issued for legal
  services                                  671,104             671           6,018               -              -               -

Common stock issued to convert
  $39,000 of related party debt
  and $2,361 of accrued interest
  to equity                               3,150,645           3,150          38,211               -              -               -

Cancellation of treasury stock           (5,591,000)         (5,591)       (218,049)              -              -               -

Stock subscription receivable paid
  or treated as compensation                      -               -               -               -              -          22,855

Net loss                                          -               -               -               -       (669,654)              -
                                       ------------    ------------    ------------    ------------   ------------    ------------
Balance at December 31, 2003            117,665,959    $    117,666    $ 16,116,224    $    192,833   $(18,163,474)   $    (15,645)
                                       ============    ============    ============    ============   ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                          TOTAL
                                         TREASURY      STOCKHOLDERS'
                                          STOCK         (DEFICIT)
                                       ------------    ------------
<S>                                    <C>             <C>
Balance at December 31, 2002           $   (223,640)   $ (1,907,902)

Common stock issued for cash                      -         146,300

Common stock issued to compensate
  employees and consultants and
  to satisfy $55,388 of compensation
  accrued at December 31, 2002                    -         607,955

Common stock issued for legal
  services                                        -           6,689

Common stock issued to convert
  $39,000 of related party debt
  and $2,361 of accrued interest
  to equity                                       -          41,361

Cancellation of treasury stock              223,640               -

Stock subscription receivable paid
  or treated as compensation                      -          22,855

Net loss                                          -        (669,654)
                                       ------------    ------------
Balance at December 31, 2003                $     -    $ (1,752,396)
                                       ============    ============
</TABLE>


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


                                      F-7
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
                                   ----------

<TABLE>
<CAPTION>
                                                                    2003            2002
                                                                 -----------    -----------

<S>                                                              <C>            <C>
Cash flows from operating activities:
  Net loss                                                       $  (669,654)   $(1,275,753)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Loss from operation of discontinued business
      segment                                                              -        210,155
    Depletion, depreciation and amortization expense                   6,125              -
    Impairment of oil and gas properties                             197,039
    Loss on sale of marketable equity securities                           -         55,887
    Common stock issued as compensation for services                 575,422        263,974
    Common stock issuable for failure to register shares                   -        192,833
    Common stock issued for accrued interest                           2,361              -
    Common stock issued for accrued compensation                      55,388              -
    Changes in operating assets and liabilities, net of
      effects of dispositions:
      Accounts receivable                                              9,676          6,453
      Prepaid expenses and other assets                                4,720         (4,720)
      Accounts payable and accrued liabilities                       (23,148)       118,801
                                                                 -----------    -----------

        Net cash used in continuing operations                       (51,733)      (235,331)
        Net cash provided by discontinued operations                       -         11,368
                                                                 -----------    -----------

          Net cash used in operating activities                      (51,733)      (223,963)
                                                                 -----------    -----------

Cash flows from investing activities:
  Proceeds from settlement agreement                                       -         75,000
  Proceeds from sale of marketable equity securities                       -         97,113
  Capital and exploratory expenditures                              (188,264)             -
                                                                 -----------    -----------

        Net cash provided by (used in) continuing operations        (188,264)       172,113
        Net cash provided by (used in) discontinued operations             -              -
                                                                 -----------    -----------

          Net cash provided by (used in) investing activities       (188,264)       172,113
                                                                 -----------    -----------

Cash flows from financing activities:
  Proceeds from the sale of common stock                             146,300         22,600
  Proceeds from notes payable to related parties                      81,000         26,500
                                                                 -----------    -----------

        Net cash provided by continuing operations                   227,300         49,100
        Net cash provided by discontinued operations                       -              -
                                                                 -----------    -----------

          Net cash provided by financing activities                  227,300         49,100
                                                                 -----------    -----------

Net decrease in cash and cash equivalents                            (12,737)        (2,750)

Cash and cash equivalents at beginning of year                        14,627         17,377
                                                                 -----------    -----------

Cash and cash equivalents at end of year                         $     1,890    $    14,627
                                                                 ===========    ===========
</TABLE>


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


                                      F-8
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

      ORGANIZATION

      Pangea  Petroleum  Corporation  (the "Company") is a Colorado  corporation
      engaged  in oil and gas  exploration  and  development.  The  Company  was
      originally  incorporated in 1997 as Zip Top, Inc. and subsequently adopted
      a name change to Pangea  Petroleum  Corporation.  On April 26,  2000,  the
      Company was  recapitalized  when the Company  acquired  the  non-operating
      public  shell,  Segway  II  Corporation.  Segway  II  Corporation  had  no
      significant  assets  or  liabilities  at  the  date  of  acquisition  and,
      accordingly,  the transaction was accounted for as a recapitalization.  In
      October 2000 the Company acquired a wholly owned subsidiary,  Mass Energy,
      Inc., that was disposed of in December 2002 (See Note 3).

      PRINCIPLES OF CONSOLIDATION

      The  consolidated   financial  statements  presented  herein  include  the
      accounts of the  Company and its wholly  owned  subsidiary,  Mass  Energy,
      Inc., through the date of the sale. All significant inter-company accounts
      and transactions have been eliminated.

      ACCOUNTING ESTIMATES

      The  preparation  of financial  statements in conformity  with  accounting
      principles  generally  accepted in the United  States of America  requires
      management  to make  estimates  and  assumptions  that affect the reported
      amounts of assets and liabilities at the date of the financial  statements
      and the  reported  amounts of revenue and  expenses  during the  reporting
      period. Actual results could differ from those estimates.  These estimates
      mainly involve the useful lives of property and equipment,  the impairment
      of unproved oil and gas  properties,  the  recognition  of a deferred gain
      that arose upon sale of Mass Energy,  Inc.,  the valuation of deferred tax
      assets and the realization of accounts receivable.

      OIL AND GAS PRODUCING ACTIVITIES

      The Company follows the "successful  efforts" method of accounting for its
      oil and gas  properties.  Under this method of  accounting,  all  property
      acquisition  costs  (cost  to  acquire  mineral  interests  in oil and gas
      properties)  and costs (to drill and equip) of exploratory and development
      wells are capitalized when incurred,  pending determination of whether the
      well has  found  proved  reserves.  If an  exploratory  well has not found
      proved reserves in commercial  quantities,  the costs  associated with the
      well  are  charged  to  expense.   The  costs  of  development  wells  are
      capitalized   whether   productive  or   nonproductive.   Geological   and
      geophysical  costs and the costs of  carrying  and  retaining  undeveloped
      properties are expensed as incurred. Management estimates that the salvage
      value of lease and well  equipment  will  approximately  offset the future
      liability for plugging and abandonment of the related wells.  Accordingly,
      no accrual for such costs has been recorded.

      Unproved oil and gas  properties  that are  individually  significant  are
      periodically assessed for impairment of value, and a loss is recognized at
      the  time of  impairment  by  providing  an  impairment  allowance.  Other
      unproved  properties are amortized based on the Company's  average holding
      period.  Capitalized  costs  of  producing  oil and gas  properties  after
      considering  estimated  dismantlement  and abandonment  costs and estimate
      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.


                                      F-9
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   ----------

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

      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.

      CASH AND CASH EQUIVALENTS

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

      FAIR VALUE OF FINANCIAL INSTRUMENTS

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

      CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

      Financial  instruments  which  subject  the Company to  concentrations  of
      credit risk include cash and cash equivalents and accounts receivable. The
      Company  maintains  its cash and cash  equivalents  with  major  financial
      institutions  selected  based upon  management's  assessment of the banks'
      financial  stability.  Balances  periodically  exceed the $100,000 federal
      depository  insurance limit. The Company has not experienced any losses on
      deposits.  During the years ended December 31, 2003 and 2002,  100% of the
      Company's revenues was received from two customers.

      OIL AND GAS REVENUES

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

      EARNINGS PER SHARE

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


                                      F-10

<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

      STOCK BASED COMPENSATION

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

      INCOME TAXES

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

      NEW ACCOUNTING PRONOUNCEMENTS

      In June  2002,  the  FASB  issued  SFAS No.  146,  "Accounting  for  Costs
      Associated with Exit or Disposal  Activities,"  which addresses  financial
      accounting  and  reporting  for costs  associated  with  exit or  disposal
      activities  and supersedes  Emerging  Issues Task Force ("EITF") Issue No.
      94-3, "Liability Recognition for Certain Employee Termination Benefits and
      Other Costs to Exit an Activity  (including  Certain  Costs  Incurred in a
      Restructuring)."  SFAS No.  146  requires  companies  to  recognize  costs
      associated with exit or disposal  activities when they are incurred rather
      than at the date of a commitment to an exit or disposal plan. In addition,
      SFAS No. 146  establishes  that fair value is the  objective  for  initial
      measurement  of the  liability.  SFAS  No.  146 is  effective  for exit or
      disposal activities  initiated after December 31, 2002, but early adoption
      is permitted.  The Company  adopted SFAS No. 146 on January 1, 2003 and at
      December 31, 2003 has  recognized a liability  for disposal  activities of
      $10,000.

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

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


                                      F-11
<PAGE>
                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

      NEW ACCOUNTING PRONOUNCEMENTS, CONTINUED

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

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

      RECLASSIFICATIONS

      Certain amounts  presented in the 2002 consolidated  financial  statements
      have  been  reclassified  to  conform  to  the  2003   presentation.   The
      reclassifications  relate  primarily  to the  presentation  of  costs  and
      expenses in the statement of operations.

2.    GOING CONCERN CONSIDERATIONS

      Since its  inception,  the  Company  has  suffered  recurring  losses from
      operations  and  has  been  dependent  on  existing  stockholders  and new
      investors to provide the cash resources to sustain its operations.  During
      the years ended  December  31, 2003 and 2002,  the  Company  reported  net
      losses of $669,654 and $1,275,753,  respectively,  and negative cash flows
      from operations of $51,773 and $223,963 respectively.

      Continuing  negative  operating results produced a working capital deficit
      of $1,875,835 as of December 31, 2003. The negative operating results were
      largely caused by the Company's former subsidiary,  Mass Energy, Inc. Mass
      Energy,  Inc.  became  severely  delinquent on certain  accounts  payable.
      Various  vendors have initiated legal actions against the Company and Mass
      Energy, Inc. to force payment of past due accounts,  but Mass Energy, Inc.
      lacks the cash  resources to make such  payments.  One suit has been filed
      against Pangea Petroleum  Corporation  alleging that it is responsible for
      the debt of its former subsidiary,  Mass Energy,  Inc. The result of legal
      actions against the Company cannot be predicted, but this legal action and
      the Company's recurring negative financial results raise substantial doubt
      about the Company's ability to continue as a going concern.


                                      F-12
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

2.    GOING CONCERN CONSIDERATIONS, CONTINUED

      In 2002,  the  Company  developed  a plan and took  actions to improve its
      financial position and deal with its liquidity problems. In the first step
      of  the  plan,  the  Company   negotiated  a  settlement   agreement  (the
      "Settlement Agreement") between the Company and certain parties related to
      the  Company.  Under the terms of the  Settlement  Agreement  the  Company
      received a cash payment of $75,000 and  marketable  equity  securities  of
      $153,000  and  fully  satisfied  $296,010  of  liabilities  and  claims in
      exchange for various assets with a carrying value of $171,642.  Due to the
      related party nature of the Settlement  Agreement,  the Company recognized
      no gain,  but  recognized  an increase to  additional  paid-in  capital of
      $352,368.  (See Note 4) In the second  step of the plan the  Company  sold
      Mass Energy,  Inc. in a transaction that management  believes will improve
      both the Company's overall financial position and its chances of acquiring
      economically  viable oil and gas  properties  or engaging in  transactions
      necessary for the future viability of the Company.  The final steps of the
      plan  are  still  being  developed,  but may  include  additional  private
      placements of the Company's common stock,  additional oil and gas property
      acquisitions and/or exploration  efforts,  and efforts to raise additional
      debt financing or equity  investments.  There can be no assurance that any
      of the plans  developed by the Company will produce cash flows  sufficient
      to ensure its long-term viability as a going concern.

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

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

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

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


3.    ACQUISITION AND SUBSEQUENT DISPOSITION OF MASS ENERGY, INC.

      On October 5, 2000,  the Company  acquired  Mass Energy,  Inc., a Houston,
      Texas based oil and gas exploration  company,  in a transaction  accounted
      for  as a  purchase.  The  purchase  price  was  2,000,000  shares  of the
      Company's  restricted  common  stock  issued  in  exchange  for all of the
      outstanding  common stock of Mass Energy,  Inc.  The  $4,521,856  purchase
      price was allocated to the assets acquired and  liabilities  assumed based
      on their estimated fair values at the date of acquisition.

      Almost immediately,  the Mass Energy, Inc.  acquisition  produced negative
      financial  results.  A series  of  costly  dry-hole  projects  caused  the
      financial  position of Mass Energy,  Inc., and accordingly,  the Company's
      consolidated financial position, to deteriorate.  Over the next two years,
      trade payables and other liabilities increased dramatically.  Mass Energy,
      Inc.'s  unpaid  liabilities  resulted in legal  actions by a number of its
      vendors and certain of the legal actions seek relief from Pangea Petroleum
      Corporation (See Note 10).

      Accordingly,  on October 7, 2002, the Company initiated a transaction (the
      "Transaction") under which it sold 100 percent of the common stock of Mass
      Energy,   Inc.  to  Thomas  Banks,   Ltd.,  an  unrelated  Cayman  Islands
      corporation,  in exchange  for $500 and the  assignment  of certain  fully
      reserved notes receivable on the books of Mass Energy, Inc. At the date of
      the sale, all of Mass Energy,  Inc.'s assets had been written off or fully
      reserved based on impairment  analysis performed by the Company.  The $500
      in cash from Thomas Banks,  Ltd. has not been collected and has been fully
      reserved.

      The Transaction resulted in Thomas Banks, Ltd's assumption of Mass Energy,
      Inc.'s  liabilities   totaling   $1,475,141.   The  Company  has  deferred
      recognition of any gain from the Transaction  because legal counsel cannot
      currently  determine if legal actions against Mass Energy, Inc and related
      imputed liability or alter-ego claims against Pangea  Petroleum,  Inc., as
      the sole stockholder- of Mass Energy,  Inc. could eventually result in the
      Company's liability for the claims.


                                      F-13
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

3.    ACQUISITION AND SUBSEQUENT DISPOSITION OF MASS ENERGY, INC., CONTINUED

      Based on the  Transaction,  the  operations of Mass Energy,  Inc have been
      separated from continuing  operations and presented as loss from operation
      of  discontinued  business  segment  in  the  accompanying   statement  of
      operations:

      The following is a summary of the operating  results of Mass Energy,  Inc.
      for the period from January 1, 2002 to October 7, 2002.

       Revenues:
          Sales and operating revenues                               $   31,895
          Interest income                                                    --
                                                                     ----------
              Total revenue                                              31,895
                                                                     ----------
       Costs and expenses:
          Exploration-dry hole and abandonment expense                       --
          Cost of sales                                                      --
          Selling, general and administrative                             9,142
          Loss on write-down of assets to estimated net
              realizable value                                          232,908
          Interest expense                                                   --
                                                                     ----------

              Total costs and expenses                                  242,050
                                                                     ----------

                Net loss                                             $ (210,155)
                                                                     ==========

4.    SETTLEMENT AGREEMENT

      On May 30, 2002,  the Company  entered into a  settlement  agreement  (the
      "Settlement  Agreement")  with  various  related  parties  to settle  debt
      obligations  and  position  the  Company  in a more  favorable  cash  flow
      position.  Under the Settlement Agreement, the Company gave up 100% of the
      outstanding  common stock of a wholly owned  subsidiary,  Pangea Services,
      Inc. in exchange  for: (i) the  settlement  of certain  accounts and notes
      payable  totaling  approximately  $300,000;  (ii) the return of  5,991,000
      shares of its  common  stock to  treasury;  (iii) the  receipt  of 900,000
      shares of Consolidated  Medical Management,  Inc.; and (iv) the receipt of
      $75,000 in cash.  The primary  assets of Pangea  Services,  Inc. that were
      given up in the settlement  were: (i) 475,000 Class A membership  units of
      Worldlink USA, LLC, (an investment previously written off by the Company);
      (ii)  a  $125,000  investment  in  Paradigm  Advanced  Technologies,  Inc.
      including  200,000  warrants  to  purchase  shares  of  Paradigm  Advanced
      Technologies,  Inc. at a price of $1.00 per share;  and (iii) certain real
      estate held for investment of $46,642.  The Company  recognized no gain or
      loss on the transaction but recognized a capital contribution of $352,368.

5.     NOTES RECEIVABLE FROM RELATED PARTIES

       Notes  receivable  from  related  parties at December 31, 2003 consist of
       demand notes  receivable  from the former owner of Mass Energy,  Inc. and
       from a company that he owns.  These notes bear  interest at rates ranging
       from 6.25% to 7% per year and are  uncollateralized.  The notes are fully
       reserved  at  December  31,  2003.  Following  is an  analysis  of  notes
       receivable from related parties at December 31, 2003:

         Contractual balance                                         $  190,000
         Accrued interest                                                54,839
                                                                     ----------
                                                                        244,839
         Less allowance for doubtful notes                             (244,839)
                                                                     ----------
                                                                     $       --
                                                                     ==========

      The Company is pursuing collection of the note receivable; however, due to
      the  uncertainty  of the  outcome of those  efforts,  the balance has been
      fully reserved.


                                      F-14
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

6.    PROPERTY AND EQUIPMENT

      Property and equipment consists of the following at December 31, 2003:

         Oil and gas properties                                      $  198,264
         Office equipment                                                15,245
         Furniture and fixtures                                           1,444
                                                                     ----------

                                                                        214,953
       Less accumulated depreciation, depletion and amortization        (21,514)
                                                                     ----------

       Net property and equipment                                    $  193,439
                                                                     ==========

      Included in oil and gas properties is $10,000 recorded to reflect the cost
      of disposal  activities  associated  with oil and gas properties  added in
      2003. A long-term  liability  for the same amount has been  recognized  to
      reflect the Company's obligation for future disposal and dismantlement.

      During the year ended  December 31, 2002,  the Company  recorded dry hole,
      abandonment and impairment charges of $197,039.  At December 31, 2003, the
      Company has working  interests  in five  wells.  Three of the wells,  with
      capitalized  costs  totaling   $89,114,   have  not  been  completed  and,
      accordingly,  a  determination  has not yet been  made if those  wells are
      economically viable.

7.     ACCRUED LIABILITIES

       Accrued liabilities consist of the
         following at December 31, 2003:

         Consulting expense payable to stockholders                  $    2,000
         Payroll taxes payable                                           12,392
         Accrued interest payable                                        51,307
                                                                     ----------
                                                                     $   65,699
                                                                     ==========

8.    NOTES PAYABLE TO RELATED PARTIES

      Notes payable to related  parties consist of the following at December 31,
      2003:

      Notes payable to a stockholder of the Company,
         bearing interest at the prime rate (4% at
         December 31, 2003) with interest due
         quarterly and principal due in
         October 2004. This note is uncollateralized.                $   89,184

      Notes payable to two stockholders/officers of
         the Company, bearing interest at 12% per year,
         and due in one time payments of principal and
         interest at various dates between July 2004 and
         December 2005. These notes are uncollateralized.               283,500

      Other note payable                                                 10,000
                                                                     ----------
                                                                        382,684
       Less current portion                                            (322,684)
                                                                     ----------

       Long-term portion of notes payable to related parties         $   60,000
                                                                     ==========

       Included in accrued  liabilities at December 31, 2003 is
       accrued interest owed to these notes payable to related
       parties of $51,307.

       Future annual maturities of the notes payable to related
       parties as of December 31, 2003 are as follows:


                                      F-15
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

8.     NOTES PAYABLE TO RELATED PARTIES, CONTINUED

         YEAR ENDED
         DECEMBER 31,

            2004                                                     $  322,684
            2005                                                         60,000
                                                                     ----------
                                                                     $  382,684
                                                                     ==========

9.    INCOME TAXES

      The Company has incurred  losses since its inception and,  therefore,  has
      not been subject to federal  income  taxes.  As of December 31, 2003,  the
      Company  had net  operating  loss  ("NOL")  carryforwards  for  income tax
      purposes of  approximately  $12,380,000  which expire in various tax years
      through 2023.  Under the provisions of Section 382 of the Internal Revenue
      Code, the net operating loss carryforwards  resulting from the acquisition
      of Mass  Energy,  Inc.  and the  ownership  change in the Company  when it
      recapitalized in 2000 will severely limit the Company's ability to utilize
      its NOL  carryforward  to reduce  future  taxable  income and  related tax
      liabilities.  Additionally,  because United States tax laws limit the time
      during  which NOL  carryforwards  may be applied  against  future  taxable
      income,  the  Company  will,  in all  likelihood,  be  unable to take full
      advantage of its NOL for federal  income tax  purposes  should the Company
      generate taxable income.

      The composition of deferred tax assets and the related tax effects at
      December 31, 2003 are as follows:

         Net operating losses                                        $4,209,200
         Other                                                           17,411

           Total deferred tax assets                                  4,226,611

         Less valuation allowance                                    (4,226,611)

         Net deferred tax asset                                      $       --

       The  difference  between  the  income  tax  benefit  in the  accompanying
       statement  of  operations  and the amount  that would  result if the U.S.
       Federal  statutory rate of 34% were applied to pre-tax loss for the years
       ended December 31, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
                                                    2003                       2002
                                          ---------------------      ---------------------
                                             AMOUNT       %             AMOUNT           %

        <S>                               <C>           <C>         <C>               <C>
        Benefit for income tax at federal
          statutory rate                  $  (227,682)   (34.0%)     $  (433,756)   (34.0%)
        Non-deductible expenses               195,643     29.2%          155,314     12.2%
        Increase in valuation allowance        32,039      4.8%          278,442     21.8%
                                          -----------   ------       -----------   ------
                                          $        --       --%      $        --       --%
                                           ==========   ======       ===========   ======
</TABLE>

10.   COMMITMENTS AND CONTINGENCIES

      OPERATING LEASE

      The Company  leases office space under an operating  lease that expires in
      2004. The Company  expects to replace its office space lease in the normal
      course of business.  Rent expense  incurred under operating  leases during
      the  years  ended  December  31,  2003 and 2002 was  $4,738  and  $15,364,
      respectively.


                                      F-16
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

10.   COMMITMENTS AND CONTINGENCIES, CONTINUED

      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 and $9,000 per month, respectively,  which the Company
      may defer and pay,  plus  accrued  interest  at the prime rate plus 1%, on
      amounts  deferred.  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.  Additionally,  the  employment  agreements  provide  for the
      issuance of 100,000  shares of  restricted  stock per month as part of the
      base salary compensation.

      LEGAL PROCEEDINGS

      During the year ended  December 31, 2002,  various  vendors that  provided
      services and supplies to Mass Energy, Inc. initiated legal actions against
      Mass Energy,  Inc.  and related  alter-ego  claims  against the Company to
      force payment of past due amounts,  but Mass Energy,  Inc.  lacks the cash
      resources to make such payments. In addition,  one alter ego suit has been
      filed against the Company.  These legal actions  pertain to  approximately
      $209,000 of accounts  payable and  accrued  liabilities  and all  balances
      claimed by the vendors were  included in the sale of Mass Energy,  Inc. to
      Thomas  Banks,  Ltd.  (See Note 3). Based on the legal claims  against the
      Company,  the gain the Company would have  otherwise  realized on the sale
      was deferred until the outcome of legal actions is known. Accordingly, all
      claims  against the Company and Mass Energy,  Inc.  are fully  reserved as
      part of the  $1,475,141  deferred  gain  presented in the balance sheet at
      December 31, 2003.

      The  Company may also be  periodically  subject to legal  proceedings  and
      claims that arise in the ordinary  course of its business.  In the opinion
      of  management,  such legal  proceedings  and claims  will not  materially
      affect the financial position,  results of operations or cash flows of the
      Company.

11.   STOCKHOLDERS' EQUITY

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

      PREFERRED STOCK

      The Company's  articles of  incorporation  authorize the issuance of up to
      5,000,000 shares of serial preferred stock,  with a par value of $.001 and
      other characteristics  determined by the Company's board of directors.  As
      of December  31, 2003 and 2002,  there was no  preferred  stock  issued or
      outstanding.

      COMMON STOCK

      During the years  ended  December  31, 2003 and 2002,  the Company  issued
      shares for cash under private placements of securities and as compensation
      to  employees  and   consultants.   These   issuances  are  shown  on  the
      accompanying statement of stockholders' deficit.

      Included  in stock  issuances  for the year ended  December  31, 2001 were
      certain  shares  issued  under  a  Securities   Purchase   Agreement  (the
      "Securities  Purchase  Agreement")  whereby the Company issued  12,650,000
      shares of  restricted  common  stock to an  escrow  agent  (the  "Escrowed
      Shares")  for  the  benefit  of  four  investor  groups  in  exchange  for
      $1,300,000  in  cash.  The  terms  of the  Securities  Purchase  Agreement
      required the Company to file a Registration  Statement with the Securities
      and  Exchange  Commission  to register  the  Escrowed  Shares and included
      provisions  for the  issuance  of four series of  warrants  with  exercise
      prices to be set based on a combination  of certain  future events and the
      performance  of the Company's  common stock.  As of December 31, 2002, the
      Company  had not  registered  shares in  accordance  with the terms of the
      Securities  Purchase  Agreement  and,  accordingly,  at December 31, 2002,
      1,440,500  additional  shares  are  issuable  to the  investors  under the
      agreement. During the year ended December 31, 2002, the Company recognized
      a  $192,833  expense  for  failure  to timely  register  shares  under the
      Securities  Purchase  Agreement.  Following  is an  analysis of shares and
      warrants issuable under the Securities Purchase Agreement.


                                     F-17
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

10.   STOCKHOLDERS' EQUITY, CONTINUED

      COMMON STOCK

                                               MAXIMUM
                                  PURCHASE    NUMBER OF       MAXIMUM NUMBER
       PURCHASER                   PRICE       SHARES          OF WARRANTS
       ---------                ----------    ---------    --------------------

Generation Capital Associates   $  600,000    1,600,000    3,450,000 A Warrants
                                                           3,450,000 B Warrants

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

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

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

Escrow Agent Fee                        --           --       75,000 A Warrants
                                                              75,000 B Warrants
                                ----------   ----------   ----------
  Total                         $1,300,000    3,350,000   14,049,998 Warrants
                                ==========   ==========   ==========

      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 issuance of such options
      are approved by the Board of  Directors.  The exercise  price of an option
      granted is determined by the fair market value of the stock on the date of
      grant.

      The Company has elected to follow Accounting  Principles Board Opinion No.
      25,  "Accounting  for Stock  Issued  to  Employees"  (APB 25) and  related
      Interpretations  in accounting for its employee stock options because,  as
      discussed below, the alternative fair value accounting  provided for under
      FASB  Statement  No.  123,  "Accounting  for  Stock-Based   Compensation",
      requires use of option valuation models that were not developed for use in
      valuing employee stock options. Under APB 25, if the exercise price of the
      Company's  employee  stock  options is greater than or equal to the market
      price  of the  underlying  stock  on the date of  grant,  no  compensation
      expense is  recognized.  No  compensation  expense  related to options was
      recognized in 2003 or 2002.

      Proforma  information  regarding  net  income  and  earnings  per share is
      required by Statement  123, and has been  determined as if the Company had
      accounted  for its employee  stock  options under the fair value method of
      that  Statement.  There  were no  options  granted  during  the year ended
      December 31, 2003. For options  granted during the year ended December 31,
      2002,  the fair value for such options was  estimated at the date of grant
      using a Black-Scholes option-pricing model with the following assumptions:

                                              2003             2002
                                              ----             ----

         Dividend yield                         -                 0%

         Expected volatility                    -                30%

         Risk free interest                     -                 4%

         Expected lives                         -             2 years


                                      F-18
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

11.   STOCKHOLDERS' EQUITY, CONTINUED

      STOCK OPTIONS, CONTINUED

      The  Black-Scholes  option  valuation  model  was  developed  for  use  in
      estimating fair value of traded options that have no vesting  restrictions
      and are fully transferable.  In addition,  option valuation models require
      the input of highly  subjective  assumptions  including the expected stock
      price  volatility.  Because the  Company's  employee  stock  options  have
      characteristics  significantly different from those of traded options, and
      because changes in the subjective input  assumptions can materially affect
      the fair value estimate,  in management's  opinion, the existing models do
      not necessarily provide a reliable single measure of the fair value of its
      employee stock options.

      For  purposes of proforma  disclosures,  the  estimated  fair value of the
      options  is  included  in  expense  over the  option's  vesting  period or
      expected life.


                                            2003           2002
                                       -----------     -----------

Net loss as reported                   $  (669,654)    $(1,275,753)

Adjustment calculated in accordance
  with SFAS 123                                 --          (4,200)

Proforma net loss                      $  (669,654)    $ (1,279,953)

Loss per common share, as reported     $     (0.01)    $     (0.02)

Proforma and diluted net loss per
  common share                         $     (0.01)    $     (0.02)


      A summary of the Company's stock option  activity and related  information
      for the years ended December 31, 2003 and 2002 follows:

                                         NUMBER OF                    WEIGHTED
                                          SHARES                      AVERAGE
                                          UNDER          EXERCISE     EXERCISE
                                          OPTION           PRICE       PRICE
                                       -----------     -----------  -----------

Balance outstanding at
  December 31, 2001                      4,150,000     $0.50-$5.00       $2.55

  Issued                                   350,000     $0.20-$1.00       $0.56
                                       -----------
Balance outstanding at
  December 31, 2002                      4,500,000     $0.20-$5.00       $2.39

  Expired                               (2,720,000)    $0.50-$5.00       $3.35
                                       -----------
Balance outstanding at
  December 31, 2003                      1,780,000     $0.20-$1.00       $0.91
                                       ===========

      All  outstanding  stock options are  exercisable  at December 31, 2003 and
      2002. A summary of outstanding stock options at December 31, 2003 follows:


                                      F-19
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

11.   STOCKHOLDERS' EQUITY, CONTINUED

      STOCK OPTIONS, CONTINUED



NUMBER OF COMMON                               CONTRACTED          REMAINING
STOCK EQUIVALENTS      EXPIRATION DATE        LIFE (YEARS)       EXERCISE PRICE
-----------------      ---------------        -----------        --------------

     350,000           January 2004                0.0                 1.00
     370,000           February 2004               0.1                 1.00
     160,000           March 2004                  0.2                 1.00
     100,000           April 2004                  0.3                 1.00
     125,000           May 2004                    0.3                 1.00
     150,000           June 2004                   0.4                 1.00
      75,000           July 2004                   0.5                 1.00
      50,000           August 2004                 0.6                 1.00
      50,000           September 2004              0.7                 1.00
      50,000           May 2010                    6.4                 0.50
     100,000           May 2010                    6.4                 1.00
     100,000           August 2010                 6.7                 0.20
     100,000           January 2011                7.1                 0.50

   1,780,000

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


      STOCK WARRANTS

      A summary of the Company's stock warrant activity and related  information
      for the years ended December 31, 2003 and 2002 follows:

                                         NUMBER OF                    WEIGHTED
                                           SHARES                     AVERAGE
                                           UNDER        EXERCISE      EXERCISE
                                          WARRANT         PRICE        PRICE
                                       -----------     -----------  -----------
Warrants outstanding at
  December 31, 2001                     26,549,998     $0.01-$1.00        $0.48

  Issued                                   625,000           $0.02        $0.02
  Canceled                             (12,500,000)          $1.00        $1.00
  Exercised                                     --              --           --
                                       -----------
Warrants outstanding at
  December 31, 2002                     14,674,998     $0.01-$0.02        $0.01

  Issued                                       --               --           --
  Canceled                                     --               --           --
  Exercised                                    --               --           --
                                       -----------
Warrants outstanding at
  December 31, 2003                     14,674,998     $0.01-$0.02        $0.01
                                       ===========


                                      F-20
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------


11.   STOCKHOLDERS' EQUITY, CONTINUED

      STOCK OPTIONS, CONTINUED

      All stock  warrants  are  exercisable  at December  31,  2003 and 2002.  A
      summary of outstanding stock warrants at December 31, 2003 follows:


 NUMBER OF COMMON                              CONTRACTED         REMAINING
 STOCK EQUIVALENTS        EXPIRATION DATE     LIFE (YEARS)      EXERCISE PRICE
 -----------------        ---------------     ------------      --------------

   14,049,998             November 2005           2.9              $0.01
      625,000             December 2012           9.9               0.02
   ----------
   14,674,998
   ==========

      The warrants issued in connection with the Securities  Purchase  Agreement
      had original  exercise prices of $0.0375 to $1.00 and a five year exercise
      term. The related warrant agreements include various provisions that could
      reduce  the  exercise  price  and,   although  the  Company  is  currently
      negotiating  to  establish  the final  terms,  the  Company  believes  the
      exercise price may be as low as $0.01 as shown above.

12.   RELATED PARTY TRANSACTIONS

      During the years ended December 31, 2003 and 2002, the Company was engaged
      in various transactions with related parties as follows:

      In May 2002,  the Company  completed the  Settlement  Agreement  involving
      amounts due from related parties. The Settlement Agreement is described in
      Note 4.

      In November 2001, the Company  entered into a consulting  agreement with a
      stockholder to provide  record-keeping and other administrative  services.
      During  the  years  ended  December  31,  2003 and 2002 the  Company  paid
      consideration  under  this  record-keeping  and  administrative   services
      agreement totaling $80,722 and $39,000,  respectively.  Such consideration
      was paid by issuing 8,072,223 and 1,100,000 shares of the Company's common
      stock.

      In addition to the transactions and balances described above, the Company
      has various related party notes payable at December 31, 2003 (See Note 8).

13.   NON-CASH INVESTING AND FINANCING ACTIVITIES

      During the years ended December 31, 2003 and 2002, the Company engaged in
      various non-cash financing and investing activities as follows:

                                                           2003         2002
                                                         ---------    ---------
       Subscription receivable for issuance of
         common stock                                    $      --    $  22,500

      Common stock issued to retire related party
         Debt                                            $  39,000    $     --

      Long-term obligation recorded upon
         recognition of dismantlement costs              $  10,000    $     --


      In addition to the non-cash  transactions shown above, the Company entered
      into the  Settlement  Agreement in 2002,  as described in Note 4, and sold
      Mass Energy,  Inc. for the  assumption of debts  totaling  $1,475,141,  as
      described in Note 3.

      Following is an analysis of cash paid for interest and income taxes:

                                                           2003         2002
                                                         ---------    ---------

      Cash paid for interest                             $      --     $     -

      Cash paid for income taxes                         $      --     $     -


                                      F- 21
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

14.   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 this field accounted for 15% and 19% of the Company's oil
      and gas sales  revenues  for the years ended  December  31, 2003 and 2002,
      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, 2003. 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, 2002                      --           --
Discoveries                                                    532       86,321
Production                                                     (63)      (5,628)
                                                            ------       ------
  Total proved reserves at December 31, 2003                   469       80,693
                                                            ======       ======
Proved developed reserves:

  December 31, 2003                                             --           --

  December 31, 2002                                            469       80,693


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
aggregate  amount of  related  accumulated  depletion,  depreciation  and
amortization as of December 31, 2003:

  Unproved properties and prospect generation costs
    not being amortized                                           $      89,114
  Dismantlement costs                                                    10,000
  Proved properties being amortized                                      99,150
  Less accumulated depletion, depreciation and amortization              (5,837)
                                                                  -------------
    Net capitalized costs                                         $     192,427
                                                                  =============


                                      F-22
<PAGE>

                          PANGEA PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   -----------

14.   SUPPLEMENTAL OIL AND GAS INFORMATION - UNAUDITED, CONTINUED

      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, 2003 and 2002:

                                                           2003          2002
                                                        ----------   ----------
         Exploration costs                              $       --   $       --
         Development costs                                 198,264           --
                                                        ----------   ----------
                                                        $  198,264   $       --
                                                        ==========   ==========

      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, 2003 and 2002:

                                                          2003          2002
                                                       -----------  -----------

      Future cash inflows                              $ 2,036,000           --
      Future development costs                             (44,000)          --
      Future production costs                              (44,000)          --
      Future dismantlement costs                           (10,000)          --
                                                       -----------  -----------
      Future net cash inflows before income taxes        1,938,000           --
      Future income taxes                                       --           --
                                                       -----------  -----------

      Future net cash flows                              1,938,000           --
      10% discount factor                                 (511,000)          --
                                                       -----------  -----------
        Standardized measure of discounted future net
          cash inflow                                  $ 1,427,000  $        --
                                                       ===========  ===========

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

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

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


                                      F-23