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


                             FORM 10-KSB/A (Mark One)
                                Amendment No. 1


[X]     ANNUAL  REPORT  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF  1934

                   For the fiscal year ended December 31, 2005

[ ]     TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT  OF  1934

            For the transition period from __________  to ___________


                        Commission file number 000-28813

                            NEW CENTURY ENERGY CORP.
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                   COLORADO                              93-1192725
        (State or other jurisdiction of      (IRS Employer Identification No.)
         incorporation or organization)

                 5851 San Felipe, Suite 775, Houston Texas 77057
                 -------------------------------------------------
                    (Address of principal executive offices)

                                 (713) 266-4344
                         -------------------------------
                         (Registrant's telephone number)

Securities registered under Section 12(b) of the Exchange Act:

                                      NONE

Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, $.001 PAR VALUE PER SHARE

Indicate  by check mark whether the registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act).

                                 Yes [ ] No [X].

<PAGE>

Check  whether  the registrant (1) has filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has  been  subject  to  such  filing  requirements  for  the  past  90  days.

                                 Yes [X] No [ ]

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.  [ ]

The issuer's revenues for the most recent fiscal year ended December 31, 2005
were $7,017,065.

The  aggregate  market value of the issuer's voting and non-voting common equity
held by non-affiliates computed by reference to the average bid and ask price of
such  common  equity  as  of  December  31,  2005, was approximately $3,951,615.

     As of March 31, 2006, the issuer had 55,810,612 shares of common stock,
$0.001 par value per share outstanding ("Common Stock"),

     Documents Incorporated by Reference:

                                      NONE

Transitional Small Business Disclosure Format:

                                 Yes [ ] No [X]


     This  amended  Report  on  Form  10-KSB is being filed by the Registrant to
include  added  disclosure under the section entitled "Controls and Procedures,"
of  the date the Registrant became aware of the deficiencies in its controls and
procedures,  the  problems  which  were identified, the reasons the Registrant's
management  believed  such  problems were material, and the steps the Registrant
took  to  remedy the problems. The Registrant is also filing this amended Report
on  Form 10-KSB, to correct the Registrant's previous disclosure of the terms of
the Amended Term Note (as defined below), under the heading "September 19, 2005,
Closing  with  Laurus." All of the other sections of this amended Report on Form
10-KSB  remain the same as originally filed by the Registrant on April 17, 2006,
and  investors  should  review  the Registrant's most recent filings for updated
information  on  the  operations  and  financial  condition  of  the Registrant,
including but not limited to the Registrant's legal proceedings, the description
of  Mr.  DeStefano's  employment  agreement,  the  Registrant's total authorized
shares  of  common stock disclosed throughout this report, which have since been
increased  to 200,000,000 shares of common stock, $0.001 par value per share and
the  "Risk  Factors"  disclosure  provided  below.


<PAGE>

                            NEW CENTURY ENERGY CORP.
                                   FORM 10-KSB
                          YEAR ENDED DECEMBER 31, 2005
                                      INDEX

                                     Part I

    Item 1.             Description of Business                            4

    Item 2.             Description of Property                           24

    Item 3.             Legal Proceedings                                 33

    Item 4.             Submission of Matters to a Vote of
                        Security Holders                                  35


                                     Part II

    Item 5.             Market for Common Equity and Related
                        Stockholder Matters                               35

    Item 6.             Management's Discussion and Analysis or
                        Plan of Operation                                 37

    Item 7.             Financial Statements                              62

    Item 8.             Changes in and Disagreements with
                        Accountants on Accounting and Financial
                        Disclosure                                        96

    Item 8A.            Controls and Procedures                           97

    Item 8B.            Other Information                                100


                                    Part III

    Item 9.             Directors, Executive Officers, Promoters
                        and Control Persons; Compliance with
                        Section 16(a) of the Exchange Act                100

    Item 10.            Executive Compensation                           102

    Item 11.            Security Ownership of Certain Beneficial
                        Owners and Management and Related Stockholder
                        Matters                                          103

    Item 12.            Certain Relationships and Related
                        Transactions                                     104

    Item 13.            Exhibits and Reports on Form 8-K

                        (a)   Exhibits                                   104
                        (b)   Reports on Form 8-K                        107

    Item 14.            Principal Accountant Fees and Services           108

<PAGE>

                                    PART I

ITEM  1.  DESCRIPTION  OF  BUSINESS

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain  statements  in  this  amended Annual Report on Form 10-KSB/A (this
"Form  10  KSB"),  including statements under "Item 1. Description of Business,"
and  "Item 6. Management's Discussion and Analysis", constitute "forward looking
statements"  within the meaning of Section 27A of the Securities Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995 (collectively,
the  "Reform  Act").  Certain,  but not necessarily all, of such forward-looking
statements  can  be identified by the use of forward-looking terminology such as
"believes",  "expects",  "may",  "should",  or  "anticipates",  or  the negative
thereof or other variations thereon or comparable terminology, or by discussions
of  strategy  that  involve  risks  and  uncertainties.  Such  forward-looking
statements  involve  known  and  unknown  risks, uncertainties and other factors
which  may  cause the actual results, performance or achievements of New Century
Energy  Corp.  ("New  Century",  the  "Company",  "we",  "us"  or  "our")  to be
materially  different  from  any  future  results,  performance  or achievements
expressed or implied by such forward-looking statements. References in this Form
10-KSB,  unless  another  date  is  stated,  are  to  December  31,  2005.

     Information regarding certain technical oil and gas exploration terms which
are used throughout this Form 10-KSB can be found on in the "Glossary of Oil and
Gas  Terms,"  incorporated  by  reference into this Form 10-KSB as exhibit 99.1.

     New  Century  Energy  Corp.  is  a  Colorado  corporation,  organized under
Colorado  Business  Corporation  Law  ("CBCL")  engaged  in  the  acquisition,
development,  operation and exploration of oil and natural gas properties in the
Gulf  Coast  region  of  the  United  States,  primarily in Texas. Our corporate
headquarters are located at 5851 San Felipe Suite 775, Houston, Texas 77057, and
our  phone  number  is  713-266-4344.

AVAILABLE  INFORMATION:

     The  Company files Annual Reports on Form 10-KSB, Quarterly Reports on Form
10QSB, current Reports on Form 8-K, registration statements and other items with
the Securities and Exchange Commission (SEC). You may read and copy any reports,
statements,  or  other information we file at the SEC's public reference room at
100  F.  Street,  N.E.,  Washington  D.C. 20549. You can request copies of these
documents,  upon payment of a duplicating fee by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The Company also provides internet links to its SEC filings, as
soon  as  reasonably  practicable  after filing, on its internet site located at
www.newcenturyenergy.com.  Our  SEC  filings are also available to the public on
the  SEC's  Internet  site  at  http://www.sec.gov.

                                        4
<PAGE>

HISTORY

     New  Century  Energy Corp. (the "Company"), was incorporated in Colorado on
April  18,  1997 as "Perfection Development Corporation." On September 29, 1998,
the  Company entered into an agreement pursuant to which it would acquire all of
the  outstanding  capital  stock  of  Vertica  Software,  Inc.,  a  California
corporation  ("Vertica  California").  On  December 31, 1998, Vertica California
merged  with  and into the Company. The Company was the surviving corporation in
the  merger  and  the separate corporate existence of Vertica California ceased.
Concurrently  with  the  merger,  the  Company  changed its name from Perfection
Development  Corporation  to  Vertica  Software,  Inc.  ("Vertica").

     On February 1, 2002, the Company's charter was automatically revoked by the
Colorado  Secretary  of  State for failure to file a periodic report. Because of
the  Colorado  statute  at that time, once a charter was revoked it could not be
renewed  and  the Company was forced to file new a new Articles of Incorporation
with  the  Colorado  Secretary  of  State, which it did on December 22, 2003, as
Vertica Software, Inc. The Company filed a Statement of Merger with the Colorado
Secretary  of  State  to  merge  its  former  Colorado  filings  as  Perfection
Development  Corporation/Vertica Software, Inc., with its current filings as New
Century  Energy  Corp.

     On  January  28,  2004,  the  Company  filed  Articles  of Amendment to the
Company's  Articles  of  Incorporation  to  authorize  5,000  shares of Series A
Convertible  Preferred  Stock.  On  June 30, 2004, the Company filed Articles of
Amendment  to  the  Company's  Articles  of  Incorporation to amend the Series A
Convertible  Preferred Stock ("Series A") designation and to authorize 2,000,000
shares  of  Series  B  Convertible  Preferred  Stock ("Series B"). Each share of
Series A Preferred Stock is able to vote an amount equal to 300 shares of Common
Stock.  All  shares  of  preferred  stock  rank  prior to all other stock of the
Company,  as  to  payments  of  dividends  and  to  distributions of assets upon
liquidation,  dissolution or winding up of the Corporation, whether voluntary or
involuntary.  Each  share  of Series B Preferred Stock is able to vote an amount
equal  to  2,958  shares of Common Stock. Each share of Series A Preferred Stock
can  be converted into 300 shares of the Company's Common Stock at the option of
the holder, provided that there are a sufficient number of shares authorized but
unissued and unreserved. Each share of Series B Preferred Stock can be converted
into  98.6  shares  of  the  Company's Common Stock at the option of the holder,
provided  that  there  are a sufficient number of shares authorized but unissued
and  unreserved. As of the date of the filing of this report there are no shares
of  Series  A  Preferred  Stock  outstanding and no shares of Series B Preferred
Stock  outstanding.

     On  September  30,  2004,  the  Company  acquired  100%  of  the issued and
outstanding  common  stock  of  Century  Resources, Inc., a Delaware Corporation
("Century"),  which was originally established for the acquisition, development,
production,  exploration  for,  and the sale of oil and natural gas in Texas, in
exchange  for 37,500,000 newly issued post 1:100 reverse split (described below)
shares  of  the  Company's  Common  Stock,  pursuant to an Agreement and Plan of
Reorganization  whereby  Century became a wholly-owned subsidiary of the Company
(the  "Exchange").  Also  on  September  30,  2004, the Company affected a 1:100
reverse  stock  split.  Unless  otherwise  stated,  all  share  amounts  in this
quarterly  report  on  Form  10-KSB  are  provided in post reverse split shares.

     In  connection with the Exchange, the Company agreed to transfer all rights
to  the  existing  installation  of  hardware  and  software  used  to  develop
intellectual  property,  all  trademarks,  copyrights  and  marketing  materials
developed  for  sales  and  distribution  of  such  products  relating  to
Internet/Intranet  software  products  and services and an Internet web site for
the  hazardous material to the Company's wholly owned subsidiary, ERC Solutions,
Inc.,  a Delaware corporation ("ERC"), and changed its business focus to oil and
gas  exploration and production. On October 26, 2004, in connection with its new
business  focus,  the  Company  filed  Articles  of  Amendment with the Colorado
Secretary  of  State,  to  change  its  name to "New Century Energy Corp." which
became  effective  on  November  1,  2004.

                                        5
<PAGE>

     In  November  2004,  the  Company  filed a Certificate of Correction to the
Company's  previously  filed  Articles  of  Amendment,  to correct the number of
shares  the  Company is authorized to issue. As a result of this correction, the
total  number  of  authorized  shares  of  the  Company is 120,000,000, of which
100,000,000  are  Common  Stock,  par value $0.001 per share, and 20,000,000 are
Preferred  Stock,  par  value  $0.001  per  share  ("Preferred  Stock").

DESCRIPTION  OF  THE  COMPANY'S  BUSINESS  FOCUS

OVERVIEW:

     New Century Energy Corp. is a small independent oil and gas exploration and
production  company,  with  daily  net  production  to  its  working interest of
approximately  5.8  million cubic feet of gas per day (Mcfgpd) and 55 barrels of
oil  per  day (Bopd).  The Company's proved reserves as of December 31, 2005 are
8.06  billion  cubic feet (Bcf) of natural gas and 121,000 barrels of crude oil.
The  Company's  major  areas  of  operations  are  located  in the United States
primarily  in  Matagorda,  Wharton and McMullen counties in Texas.  During 2005,
the  Company's  proved  reserves  increased  by over 700% due to acquisition and
drilling  success  of new natural gas reserves in the Wishbone Field in McMullen
County, Texas, and also from success in an ongoing gas well recompletion program
in  the  Sargent  South  Field  in  Matagorda  County,  Texas.  Proved developed
reserves  comprise  45%  of  the  Company's  total  proved  reserves.

     The  Company's estimates of proved reserves and proved undeveloped reserves
at  December  31,  2005 and 2004, and changes in proved reserves during the last
two  years  are  contained  in  the  Supplemental  Information  on  Oil  and Gas
Exploration  and  Production  Activities  in  the  Company's  2005  Consolidated
Financial Statements of this Form 10-KSB.  Proved reserve estimates were made by
R.A.  Lenser  and Associates, an independent petroleum evaluation and consulting
firm,  and  were  prepared  in  accordance  with  generally  accepted  petroleum
engineering  and  evaluation  principles  in conformity with SEC definitions and
guidelines.

     The  Company  earns  revenues and income and generates operating cash flows
primarily  from  the sale of natural gas and crude oil at market prices of those
products  at  the  time  of  sale.  An  important  element  in understanding the
Company's  future  operating performance are trends and uncertainties in natural
gas  and  crude oil prices that may have a material impact on future cash flows.
The tightening of the natural gas supply and demand fundamentals has resulted in
extremely volatile natural gas prices, which volatility is expected to continue.
The  Energy  Information  Administration  "EIA"  of the U.S. Government projects
"[c]ontinued  steady world oil demand growth, combined with only modest increase
in  world  spare  oil  production  capacity,  and  with  continuing  risks  of
geopolitical  instability,  are  expected  to keep crude oil prices high through
2006.  The  price  of  West  Texas  Intermediate (WTI) crude oil is projected to
average  $64  per  barrel  in  2006  and  $61  in 2007." (EIA "Short-Term Energy
Outlook,"  March  7,  2006  Release  (the  "EIA  Release"),

                                        6
<PAGE>

     Regarding  natural  gas  prices,  the  EIA  Release states, "[t]he expected
average  2006  Henry  Hub  spot price of $8.11 per mcf is about 10 percent lower
than in 2005, but it is expected to move back toward an average of $8.74 in 2007
as  demand  picks  up  and the domestic market tightens again."  The EIA Release
also  states  that,  "[t]otal  natural gas demand in 2006 is projected to remain
near  2005  levels,  then  increase  by  2.4  percent  in  2007."

     With  the  uncertainties  in  product prices, and possible changes in sales
volumes  that  may  increase or decrease as a result of future operations, these
factors  can  impact  cash  flow from operating activities in the short and long
term.  If  there  are  significant changes in crude oil or natural gas prices in
2006 and 2007 beyond those projected by the EIA, this factor may have a material
impact  on  future  revenues,  income  and operating cash flows for the Company.

     The  discussion found below describes our activities and operations in more
detail.

                        BUSINESS STRATEGY FOR 2006 & 2007

     As part of our corporate strategy, we expect to remain focused in the
following operational and project areas:

     1.   remain focused in the Texas Gulf Coast onshore region;

     2.   acquire  properties  and  proven  reserves  where  we  believe
          additional value can be created through a combination of exploitation,
          development,  exploration  drilling  and  expanding  marketing
          opportunities;

     3.   acquire  properties  that  give  us  a  majority  working interest and
          operational control or where we believe we can ultimately obtain it;

     4.   maximize  the  value  of  our  properties by increasing production and
          reserves  while  reducing  cost  through  the  use  of  3D seismic and
          attribute analysis technologies;

     5.   maintain  a  highly  experienced  team  of  operations and exploration
          consultants using state of the art technology; and

     6.   develop  drilling  prospects  and  acquire  acreage positions over new
          drilling  areas,  for  future  drilling  by  the Company or farmout to
          qualified industry partners.

                      2005 FUNDING AND RELATED ACQUISITIONS

PURCHASE  AND  SALE  AGREEMENT

     Effective  on  June 27, 2005, we entered into a Purchase and Sale Agreement
with  Hanson  Resources Company, 4 Star Ventures, L.P., Bastante Mas, Ltd., A.M.
Brown  Family  Limited  Partnership,  Fletcher  Ventures,  LLC,  William Kimble,
Prescio  Oil  &  Gas,  LLC, Kaye Thompson, Sierra Vista Ventures, L.P., Linda C.
Barber,  B.J.  Drehr,  Barbara A. Hanson, Kurt M. Hanson, George E. Jochetz III,
Karen Smith, John J. Surko, Neil E. Hanson, and BSC Minerals, Ltd. (collectively

                                        7
<PAGE>

the  "Sellers").  The  Sellers were sent payment for the sales price on June 30,
2005.  The  effective  date  for ownership of the acquired interests is April 1,
2005.  Through  the  Purchase  and  Sale  Agreement, we acquired certain working
interests,  overriding  royalty  interests,  and  term  royalty interests, which
together entitle us to a 6.2% working interest and a 5.464% net revenue interest
in  production  from  the Lindholm-Hanson Gas Unit and certain other licenses in
the  Wishbone  Field  in  McMullen  County, Texas, located 80 miles south of San
Antonio,  Texas  (the "Assets"). We paid the sellers an aggregate of $11,000,000
in cash (generated through the sale of a Secured Convertible Term Note to Laurus
Master  Fund, Ltd., described in greater detail below) and issued the Sellers an
aggregate  of  1,320,000  restricted shares of our Common Stock as consideration
for  the  sale  of  the  Assets.

SECURITIES  PURCHASE  AGREEMENT

     On  June  30,  2005,  we  entered into a Securities Purchase Agreement with
Laurus Master Fund, Ltd., a Cayman Islands company ("Laurus" and the "Closing"),
whereby  we  sold  a  Secured  Convertible  Term Note in the principal amount of
fifteen  million  dollars ($15,000,000)(the "Note" or "Convertible Note"), which
is  convertible  into an aggregate of 24,193,548 shares of our Common Stock at a
conversion  price  of $0.62 per share; issued Laurus a warrant to purchase up to
7,258,065  shares  of Common Stock at $0.80 per share (the "Warrant"); issued an
option  to  Laurus  to  purchase  up  to  10,222,784  shares of our Common Stock
(representing  20%  of  our  outstanding  Common  Stock on a fully-diluted basis
[prior  to  the  issuance  of  shares  in  connection with the Purchase and Sale
Agreement]), for $0.001 per share (as amended)(the "Option"); and entered into a
Master Security Agreement, Registration Rights Agreement, Stock Pledge Agreement
and  Funds  Escrow Agreement with Laurus and Century Resources, Inc., our wholly
owned  subsidiary, entered into a Subsidiary Guaranty with Laurus. The Note, the
Warrant,  the  Option,  the  Master  Security Agreement, the Registration Rights
Agreement, the Subsidiary Guaranty, the Stock Pledge Agreement, the Funds Escrow
Agreement  and  all  other documents, instruments and agreements entered into in
connection with the Closing, are referred to herein as the "Related Agreements."

     In connection with the Closing, we agreed to pay Laurus Capital Management,
L.L.C.,  the  manager of Laurus, a fee equal to 3.50% of the aggregate principal
amount  of  the  Note,  totaling  $525,000,  and  agreed  to  pay Energy Capital
Solutions,  LP  $599,000,  and  granted  Energy  Capital  Solutions,  LP 900,000
warrants  exercisable  at $0.80 per share, with piggyback registration rights in
connection  with  a  finders  agreement.

SUBSIDIARY GUARANTY AGREEMENT AND COLLATERAL ASSIGNMENT AGREEMENT

     Century  Resources,  Inc.,  our  wholly  owned  subsidiary,  entered into a
Subsidiary  Guaranty  Agreement  at  the  Closing  with Laurus on June 30, 2005,
whereby  it agreed to guaranty the prompt payment of all amounts, when due, owed
to  Laurus  under  the  Note and in connection with the Closing. We also entered
into  a  Collateral  Assignment  Agreement  at the Closing, whereby we agreed to
assign  and  to  grant  a  security  interest to Laurus in all of our rights and
benefits under the Purchase and Sale Agreement. Additionally, at the time of the
Closing,  we  entered  into  a Master Security Agreement with Laurus, whereby we
agreed  to  grant  Laurus  a  continuing security interest in all of our assets,
including  without  limitation,  cash,  cash  equivalents,  accounts receivable,
deposit  accounts,  inventory, equipment, goods, fixtures and other tangible and
intangible  assets,  which  we  now own or at any time in the future may acquire
right,  title  or  interest  to.

                                        8
<PAGE>

SECURED  CONVERTIBLE  NOTE

     In  connection  with  the Securities Purchase Agreement, we issued Laurus a
three  year  Secured  Convertible  Note  in the amount of $15,000,000, which was
subsequently  replaced  by an Amended and Restated Secured Convertible Term Note
(the  "Convertible  Term  Note" or the "Note") which bears interest at the prime
rate (as published by the Wall Street Journal) plus 2% (currently 9.5%, with the
prime  rate  at  7.5%  as  of March 22, 2006, the "Contract Rate") per year, and
which at no time unless adjusted as described below, shall bear interest at less
than  7%  per  year, which unpaid principal and unpaid accrued interest, if any,
shall be due and payable on June 30, 2008 (the "Maturity Date"). The interest on
the  Note  shall be payable monthly, in arrears, commencing on September 1, 2005
(each  monthly  date  being  a  "Determination  Date").  Additionally,  if  the
Registration  Statement  covering  the  shares  which  the  Note and Warrant are
convertible  into has been declared effective and our Common Stock has traded at
least  25% above the "Fixed Conversion Rate," which is currently $0.62 and which
is  subject  to  adjustment  as  described  below,  for  the  five  trading days
immediately  preceding  a  Determination  Date,  then the Contract Rate shall be
reduced  by  1%, and shall be reduced by 1% for each incremental 25% increase in
the  market price of our Common Stock above the then applicable Fixed Conversion
Rate  (for example, if our Common Stock has traded at $0.93 for the five trading
days preceding a Determination Date, which amount is 50% above the current Fixed
Conversion  Rate  ($0.62),  the Contract Rate will be reduced by an aggregate of
two  percentage  points,  one  percentage  point  for each 25% increase that our
Common Stock traded above the Fixed Conversion Rate), but, in no event shall the
Contract  Rate  at  any  time  be  less  than  0%.

     Additionally,  we  agreed  to  make  payments of the principal amount owing
under  the  Note,  as  amended,  to  Laurus  on  July 1, 2006,  and on the first
business  day  of each month thereafter, including the Maturity Date of the Note
("Principal Payment"). Each Principal Payment shall be in the amount of $250,000
together  with  any  accrued  and  unpaid interest on such portion of the unpaid
portion  of the Notes (together with any other amounts to be paid, including the
Contract  Rate,  the  "Monthly Amount") and to pay Laurus an amount equal to the
outstanding  principal amount of the Note and any accrued and unpaid interest on
the  Maturity  Date.

     Laurus  must  convert all or a portion of the Monthly Amount into shares of
our  Common  Stock if: (i) the average closing price of our Common Stock for the
five  trading  days immediately proceeding such payment is greater than or equal
to  110%  of  the Fixed Conversion Price; and (ii) the amount of such conversion
does  not  exceed  twenty-five percent of the aggregate dollar trading volume of
the Common Stock for the period of twenty-two trading days immediately preceding
such  payment  date;  however  if (i) is met and (ii) is not, Laurus may convert
such amount of the Monthly Amount into shares of our Common Stock that meet (i),
above,  assuming  that  such  conversion does not cause Laurus to hold more than
9.99%  of our then issued and outstanding stock, as described and subject to the
conditions  listed  below.  Additionally, no amount of the Monthly Amount may be
converted  into  shares  of  our  Common  Stock  unless  there  is  an effective
Registration Statement covering such shares to be converted or an exemption from
registration  exists  under  Rule  144 for such shares, and there is no event of
default  (as defined below). If (i) above is not met, the Monthly Amount must be
payable in cash and we must pay an amount of cash to Laurus equal to 102% of the
Monthly  Amount.

                                        9
<PAGE>

     We  may  prepay  the  Note  in cash by giving Laurus a notice of repayment,
seven  (7)  days  before  such  intent to prepay, and by paying Laurus an amount
equal  to  125% of the outstanding principal amount of the Note during the first
year  the  Note  is outstanding, 120% of the outstanding principal amount of the
Note during the second year the Note is outstanding, and 115% of the outstanding
principal  amount  of  the  Note  during  the  period of time between the second
anniversary  of  the  Note  until  the  Maturity  Date.

     The Note includes a provision whereby Laurus is not entitled to convert any
amount of shares which would cause Laurus to become the beneficial owner of more
than  9.99%  of  our  outstanding  Common  Stock, which limitation automatically
becomes  null  and  void  upon  the  occurrence  and  continuance of an event of
default,  or  upon  75  days prior notice to us. In the event that we change our
Common  Stock  into  the  same  or  a  different  number  of  securities  by
reclassification  or  otherwise,  Laurus  shall  have  the  right to purchase an
adjusted  number  of  securities  and  kind  of  securities that would have been
issuable  as  the  result  of  such  change with respect to the Common Stock (i)
immediately  prior to or (ii) immediately after, such reclassification, or other
change  at  the  sole  election  of  Laurus.

     Additionally,  the  Fixed  Conversion  Price  of the Note shall be adjusted
automatically  in  the event that we issue any additional shares of Common Stock
as a dividend or any preferred stock; subdivide our outstanding shares of Common
Stock;  or  effect  a  reverse  stock  split,  by multiplying the exercise price
(currently  $0.62)  by  the number of our shares outstanding prior to such event
and  dividing  that  number  by  the number of our shares outstanding after such
event.  Additionally,  if  at  any  time  prior  to  the full conversion or full
repayment  of  the  principal  amount of the Note, we issue any shares, options,
warrants,  or  other  obligations, to anyone other than to Laurus (other than in
connection with a company employee incentive stock plan, or to vendors for goods
sold  and  services rendered (not to exceed 1,000,000 shares and not eligible to
be  sold  by  the holders of such shares until three years from June 30, 2005)),
for  consideration  per  share  less  than the Fixed Conversion Price, the Fixed
Conversion  Price  shall  immediately  reset  to  such  lower  price.

     Events  of  default  under  the Note include our failure to pay amounts due
under  the  Note; breach of any covenants under the Note, if not cured within 15
days; breach of any warranties found in the Note or any other Related Agreement;
the  occurrence  of any default under any agreement, which causes any contingent
obligation  to become due prior to its stated maturity or to become payable; any
change  or  occurrence likely to have a material adverse effect on the business,
assets,  liabilities,  financial  condition,  our  operations  or prospects; our
bankruptcy;  a  judgment  against  us  in excess of $100,000, which has not been
vacated, discharged or stayed, within thirty (30) days of the date of entry; our
insolvency;  a  change  in  control  of  us;  an indictment or other proceedings
against  us  or  any  executive  officer;  if  we  breach  any  provision of the
Securities Purchase Agreement, or any other Related Agreement; if the SEC puts a
stop  trade  order  or  otherwise  suspends  our Common Stock from trading for a
period of five (5) consecutive days or five (5) days during a period of ten (10)
consecutive  days; or our failure to deliver the Common Stock to Laurus pursuant
to  and  in  the  form  required  by  the  Note.

     If  an  event  of  default  were to occur under the Note, Laurus may at its
option,  demand  repayment in full of all obligations and liabilities owed to it
by  us  under  the Note, Securities Purchase Agreement and any Related Agreement
and  may  require us to immediately pay 130% of the principal amount outstanding
under  the  Note,  plus  any  accrued  and  unpaid  interest.

                                       10
<PAGE>

COMMON  STOCK  PURCHASE  WARRANT

     We granted Laurus a seven year Common Stock Purchase Warrant ("Warrant") to
purchase  7,258,065 shares of our Common Stock at an exercise price of $0.80 per
share.  The  Warrant  became  immediately  exercisable when granted. The Warrant
allows  Laurus  to  purchase  the  shares  until  5:00  p.m., June 30, 2012. The
exercise  price of the Warrant shall be adjusted automatically in the event that
we  issue  any  additional shares of Common Stock as a dividend or any preferred
stock;  subdivide  our  outstanding  shares of Common Stock; or effect a reverse
stock  split,  by multiplying the exercise price (currently $0.80) by the number
of  our  shares  outstanding prior to such event and dividing that number by the
number  of  our  shares  outstanding  after  such event. The Warrant states that
Laurus may not exercise the Warrant, if such exercise would cause Laurus to hold
more  than 9.99% of our outstanding Common Stock, subject to the same limitation
as  in  the  Note,  as  described  above.

     We  also granted Energy Capital Solutions, LP, 900,000 warrants immediately
exercisable  at  $0.80  per  share,  under  a  separate  warrant agreement, with
piggyback  registration  rights  pursuant  to a finder's agreement in connection
with  the  Closing.  The Warrant allows Energy Capital Solutions, LP to purchase
the  shares until 5:00 p.m. CST, June 30, 2008. The exercise price of the Energy
Capital Solutions, LP warrants shall be adjusted automatically in the event that
we  issue  any  additional shares of Common Stock as a dividend or any preferred
stock;  subdivide  the  outstanding  shares of Common Stock; or effect a reverse
stock  split,  by multiplying the exercise price (currently $0.80) by the number
of shares outstanding prior to such event and dividing that number by the number
of  shares  outstanding  after  such  event.

OPTION  AGREEMENT

     At  the  Closing, and in connection with the Securities Purchase Agreement,
we  granted  Laurus  an  option  which  vested  immediately  to  purchase  up to
10,222,784  shares  of  our  Common  Stock  at  an  aggregate  exercise price of
approximately  $10,222.78  (with  a  per share exercise price of $0.001). Laurus
agreed  under  the  Option  not to sell any shares of Common Stock issuable upon
exercise  of the Option until: (a) payment in full of all of our obligations and
liabilities  to  Laurus  under  the  Securities  Purchase Agreement, and (b) the
exercise of the Warrant by Laurus; provided; however that Laurus may sell all or
any  portion  of the Common Stock issuable upon the Option following an event of
default (as defined in the Note, and described under the section titled "Secured
Convertible  Note,"  above),  or  with  75  days notice to us of their intent to
convert  and hold more than 9.99% of our outstanding Common Stock. On the day of
the  Closing,  June  30,  2005,  Laurus  exercised  a  portion of the Option and
received  3,675,000  shares  of  our  Common  Stock  for an aggregate of $3,675,
leaving  an  option  to  purchase  6,547,784  shares  of  our  Common  Stock for
$6,547.78.

     Under  the  Option, if we effect a reorganization, consolidation, merger or
dissolution,  Laurus  has  the  right  to  receive  the amount of stock or other
property  (including  cash) which Laurus would have been entitled, if Laurus had
exercised  the  Option  in  full  immediately  prior  to  the  reorganization,
consolidation,  merger  or  dissolution,  and  the  Option  shall continue to be
binding  upon  such  issuer and/or the person acquiring substantially all of our
properties  and/or  assets. Additionally, under the Option, in the event that we
issue  additional  shares of Common Stock as a dividend or other distribution on
Common  Stock  or  preferred  stock,  subdivide our outstanding shares of Common
Stock,  or  combine our outstanding shares of Common Stock into a smaller number
of  shares  of  Common  Stock, the number of shares that Laurus shall receive in

                                       11
<PAGE>

connection  with  the  exercise of the Option shall be increased or decreased by
multiplying the number of shares of Common Stock that would be issuable prior to
such  event by the amount of our issued and outstanding Common Stock outstanding
after  such  event and dividing that number by the issued and outstanding shares
of  Common  Stock issued and outstanding immediately prior to such event. Laurus
is  not  able to exercise the Option, if such exercise shall cause it to hold in
excess  of 9.99% of our issued and outstanding Common Stock, subject to the same
limitation  as  in  the  Note  and  Warrant,  as  described  above.

REGISTRATION  RIGHTS  AGREEMENT

     We  gave  Laurus  registration  rights  to the shares issuable to Laurus in
connection  with the Note, Warrant and Option, pursuant to a Registration Rights
Agreement.  The  Registration  Rights  Agreement  provided  for  us  to  file  a
Registration  Statement  with  the  Securities and Exchange Commission within 30
days  of  the Closing; however, we were able to obtain a one week extension from
Laurus,  and  as  a result, the filing of our Registration Statement past the 30
day deadline did not cause an event of default to occur. Additionally, under the
Registration  Rights  Agreement,  we  agreed  to give our best efforts to obtain
effectiveness  of  our Registration Statement within 120 days of the Closing. If
we do not obtain effectiveness of this Registration Statement within 120 days of
the Closing; such Registration Statement ceases to be effective for more than 30
days  or  more  than 20 consecutive days during the 365 day period following the
effectiveness  of  the Registration Statement; or our Common Stock is not listed
or  quoted,  or  is  suspended from trading for a period of three days, which we
have  been  unable  to  cure  within 30 days of notice thereof, we agreed to pay
Laurus,  as  liquidated damages, an amount equal to 1.5% per day that such event
listed  above exceeds the time period given. As a result of the First Amendment,
Second  Amendment  and  Third Amendment agreements with Laurus, described below,
the  date by which we now have to file a Registration Statement covering all the
securities  issuable  to Laurus is 10 days from the date we filed this report on
Form  10-KSB,  and  the date we have to obtain effectiveness of our Registration
Statement  by  under  the Registration Rights Agreement was extended to  July 1,
2006.

FIRST  AMENDMENT  TO  THE  NOTE,  WARRANT  AND  OPTION

     On July 25, 2005, we entered into the "First Amendment to the Note, Warrant
and  Option,"  with  Laurus  (the  "First Amendment"), which First Amendment was
consented  and  agreed  to  by  Century with an effective date of June 30, 2005,
whereby  we modified the terms of the Note, Warrant and Option (as described and
defined  below) to adjust the limitation on the amount of our outstanding shares
which  Laurus  is  able  to  hold  at  any  one time from 4.99% of our issued an
outstanding  stock  (under  the  original  provisions  of  the Note, Warrant and
Option)  to  9.99%  of  our issued and outstanding stock, to change the exercise
price  of  the  Option  from  an aggregate of $1.00 for 10,222,784 shares of our
common  stock  (under  the  Options  original terms) to $0.001 per share, and to
clarify  that  Laurus is not able to sell any shares held in connection with the
Option  until both (a) payment in full of all of the obligations and liabilities
of  us  to Laurus under the Securities Purchase Agreement and the Note have been
paid  in  full and (b) the exercise of the Warrant by Laurus (unless an event of
default occurs and continues to occur as described in greater detail above). The
discussions  of  the  Note, Warrant and Option found throughout this Form 10-QSB
take  into  account the changes to the Note, Warrant and Option, which were made
in  connection  with  the  First  Amendment.

                                       12
<PAGE>

PURCHASE  AND  SALE  AGREEMENT  DATED  SEPTEMBER  2,  2005

     Effective  September 2, 2005, we entered into a Purchase and Sale Agreement
with  Pat Baker, D/B/A Baker Exploration Company; The Sebastian Revocable Trust;
George  R.  Smith  Revocable Trust; and George Smith Family Limited Partnership,
D/B/A  GSTX  Limited Partnership, collectively the "September Sellers." Pursuant
to  this Purchase and Sale Agreement, we agreed to purchase certain interests in
leases  that  have  been  pooled into the Lindholm-Hanson Gas Unit together with
interests  in  certain  contiguous  leases,  for an aggregate of $8,750,000. The
interests  to  be  purchased  total a 7.25 percent working interest and a 5.4375
percent  net  revenue  interest  in  the  leases.

     We  closed  the purchase on September 19, 2005, with funds obtained through
the  sale  of a Secured Term Note to Laurus (as described below under "September
19,  2005  Closing  with  Laurus,"  the  "Purchase  and  Sale  Closing").

     The  effective date of the sale of the September Sellers' interests is July
1,  2005.  At  the  Purchase and Sale Closing, the September Sellers paid us the
aggregate  amount  of  the  proceeds  actually received by September Sellers and
attributable  to production during the period between the Effective Date and the
Purchase and Sale Closing (the "Adjustment Period") of (i) the proceeds from the
sale of oil, gas and hydrocarbons net of gathering processing and transportation
costs,  and  all  production,  severance,  sales or excise and similar taxes not
reimbursed  to  September Sellers by the purchaser of production, and (ii) other
proceeds  earned  with  respect  to  the  purchased leases during the Adjustment
Period. Additionally, the September Sellers paid us an amount equal to all costs
attributable  to  the  ownership and operation of the purchased leases which are
paid  by  the  September Sellers and incurred at or after the Effective Date and
agreed  to  pay  us  all  ad valorem taxes prorated to the September Sellers and
assumed  by  us.

     Additionally,  under  the  Purchase and Sale Agreement, we agreed to assume
all  duties  and obligations of the September Sellers, express and implied, with
respect  to  the  purchased  interests, including those arising under any lease,
contract,  agreement,  document,  permit,  applicable  law,  statute  or  rule,
regulation,  or  order  of  any governmental authority and defend, indemnify and
hold  the  September  Sellers  harmless  from and pay or reimburse the September
Sellers  for any and all claims in connection with the duties and obligations of
the  September Sellers in connection with the ownership of the interests, before
or  after  the  Effective Date, except (a) to the extent any such claim has been
asserted  against  the September Sellers prior to the Effective Date, (b) as set
forth  in the Purchase and Sale Agreement, or (c) any claim is expressly assumed
by  the  September  Sellers.

     We also agreed to defend, indemnify and hold the September Sellers harmless
from  and  pay  or  reimburse  the  September Sellers for any and all claims for
damage  to the environment, environmental cleanup, remediation or compliance, or
for  any  other  relief,  arising directly or indirectly from or incident to the
use,  occupation, operation, maintenance or abandonment of any of the interests,
or  condition  of  the  interests,  whether  latent or patent, including without
limitation,  contamination  of the property or premises with Naturally Occurring
Radioactive  Materials  (NORM),  whether  such claim was caused by the September
Sellers' negligence or strict liability, whether in law or equity; excluding the
September  Sellers,  the September Sellers' agents, employees or contracts gross
negligence  or  willful  misconduct.

                                       13
<PAGE>

The Purchase and Sale Agreement called for certain assets to be excluded from
the sale of the leases including:

     A)   All  minute  books,  tax  returns,  partnership  documents  of  the
          September  Sellers  and  their  business  records  not  related to the
          purchased interests;

     B)   All  records  that  were  (i)  proprietary  in nature, (ii) covered by
          the  attorney-client  privilege  or  work  product doctrine, (iii) not
          readily severable from the September Sellers' general records, or (iv)
          required by applicable law to be retained by the September Sellers;

     C)   All  rights  and  claims  arising,  occurring,  or  exiting  in  the
          September  Sellers  prior  to  the  Effective  Date including, but not
          limited  to,  any  and  all  contract  rights,  claims  penalties,
          receivables,  revenues,  recoupment  rights,  rights or reimbursement,
          audit  rights,  recovery rights (excepting gas imbalances), accounting
          adjustments,  mispayments,  erroneous  payments or other claims of any
          nature relating solely to any time period prior to the Effective Date;
          and

     D)   Any  claims,  rights  and  interests  to  the September Sellers or any
          of the September Sellers' affiliates in and to any refunds of taxes or
          fees  of any nature whatsoever which relate solely to and arise out of
          the period prior to the Effective Date.

     We  obtained  the  $8,750,000  in  funding required for the purchase of the
interests  covered  by  the  Purchase  and  Sale Agreement through the sale of a
Secured  Term  Note  to  Laurus,  as  described  below under "September 19, 2005
Closing  with  Laurus."

SEPTEMBER  19,  2005,  CLOSING  WITH  LAURUS


     On September 19, 2005, we entered into a Securities Purchase Agreement with
Laurus  (the  "September  2005 SPA"), pursuant to which we sold Laurus a Secured
Term  Note in the amount of $9,500,000 (the "Term Note"). We also entered into a
Reaffirmation  and  Ratification  Agreement  with  Laurus in connection with the
September  19,  2005  Securities  Purchase Agreement and Term Note. The interest
rate of the Term Note is twenty percent (20%) per year, based on a 360 day year,
payable  monthly  in arrears, with the first interest payment due on November 1,
2005.  The Term Note was amended by our entry into the Amended and Restated Term
Note  (the "Amended Term Note") as described below on March 30, 2006, to provide
for the interest and principal on the Amended Term Note, to be payable to Laurus
by  way  of a production payment equal to 80% of the gross proceeds generated by
our  7.5%  interest in the Lindholm-Hanson Gas Unit, which we purchased pursuant
to  the  September  2005  Purchase  and  Sale  Agreement,  described  above.
Additionally,  the  due date of the Amended Term Note was changed from March 19,
2006  until  January  2,  2007,  pursuant  to  the  amendment.


     Events  of  default  under  the  Term  Note  include our failure to pay any
interest  or  principal under the Term Note when due; our breach of any covenant
in the Term Note, if not cured within fifteen days after the occurrence thereof;
our  breach  of  any representation or warranty made in connection with the Term
Note  or the September 19, 2005 Securities Purchase Agreement; our default under
any  other agreement relating to any indebtedness or contingent obligation of us
beyond  any  grace period; any change or the occurrence of any event which could
reasonably  be  expected  to  have  a  material  adverse effect on our business,
assets,  liabilities, condition (financial or otherwise), properties, operations

                                       14
<PAGE>

or  prospects;  if  we  enter  bankruptcy;  if  a judgment is attached or levied
against  us  in  excess of $100,000 in the aggregate; if we admit in writing our
inability to pay our debts as they become due or cease operations of our present
business;  a  change  in  control  of  the company; the indictment or threatened
indictment  of  us  or any of our executive officers under any criminal statute,
commencement or threatened commencement of criminal or civil proceedings against
the  company or any executive, pursuant to which statute or proceeding penalties
or remedies sought or available include forfeiture of any of our property; or if
an  event of default as defined under any of the June 30, 2005 Closing documents
(as  described  above  under "Secured Convertible Note," occurs.) If an event of
default  under  the  Term  Note occurs, Laurus can require us to pay 130% of the
total  amount  of  the  Term  Note  and  any  accrued  and  unpaid  interest.

     In  connection  with  the  sale  of  the Term Note, we agreed to pay Laurus
Capital  Management,  L.L.C.,  the manager of Laurus, a closing payment equal to
four  percent  (4.00%)  of  the  principal  amount  of  the  Note,  or $380,000.

     In  connection  with  the  September  19,  2005  closing,  we  and  Century
Resources,  Inc.,  entered  into a Reaffirmation and Ratification Agreement with
Laurus,  whereby  we  agreed  to  ratify  and  confirm the terms of the original
Closing  documents  and  Related  Documents,  the  September  19,  2005  closing
documents;  the  events  of  default  under  the June and September 2005 closing
documents;  the  grants  of  security interests to Laurus in connection with the
June  and  September 2005 closings; and we agreed to release Laurus, and Laurus'
employees,  agents,  representatives,  consultants,  attorney's,  fiduciaries,
officers,  directors,  partners,  predecessors, successors and assigns, from any
and  all  actions  and  cause  of  actions, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and every
character,  known  or  unknown,  direct and/or indirect, at law or in equity, or
whatsoever  kind or nature, for or because of any matter or things done, omitted
or  suffered  to be done by any of the above, prior to and including the date of
execution  of  the  Reaffirmation  and  Ratification  Agreement,  the  June 2005
agreements  and  the  September  2005  agreements.

     In  connection  with the Term Note, we entered into three Mortgage, Deed of
Trust,  Security  Agreement,  Financing  Statement and Assignment of Productions
with Laurus (the "Mortgage"), whereby we agreed to grant Eugene Grin, as trustee
for  Laurus  ("Trustee")  a  security  interest on the items described below, to
secure  the  June  2005 Note (as described above under "Convertible Term Note");
the  Term  Note;  payment  and  performance  of  any  and all present and future
obligations; and sums advances as expenses or costs included on behalf of us any
and  all  additional  debts,  obligations  and  liabilities  of  every  kind and
character  existing  in  connection  with  the  Term Note or the June 2005 Note.

     We  provided a security interest to the Trustee in connection with the sale
of  the  Term  Note  to  Laurus  on  the  following  items:

     o    our  oil  and  gas  leases;  certain  properties  described  in  the
          Mortgage;
     o    all  rights,  titles,  interests  and  estates  now owned or hereafter
          acquired  by  us in any and all properties now or thereafter pooled or
          unitized  with  any  interests  and  all  presently existing or future
          operating  agreements  and  unitization,  communitization  and pooling
          agreements and the units operated thereby;

                                       15
<PAGE>

     o    all  presently  existing  and  future  agreements entered into between
          us  and  any  third  party  which  provide  for the acquisition of the
          properties or interests specifically described in the Mortgage;
     o    all oil and gas; all accounts and contract rights;
     o    all  personal  property  and  fixtures  affixed  or  situated upon any
          property covered by the Mortgage;
     o    all  drilling  reports,  logs,  orders,  agreements  or  contracts,
          seismic data, memoranda and other information in our possession;
     o    our  rights  and  security  interests  held  by  us  to  secure  the
          obligation of the first purchaser to pay the purchase price of the oil
          and gas;
     o    all  surface  leases,  rights-of-way,  franchises,  easements,
          servitudes, licenses, privileges; and any tenements and appurtenances;
          and
     o    all and any rights of nature.

     Upon  the  occurrence  of an event of default under the Securities Purchase
Agreement  entered  into  in  June  2005  or any other agreement entered into in
connection  with  such  Securities  Purchase Agreement (as described above under
"Convertible  Term  Note"),  the  Securities  Purchase Agreement entered into in
connection with the Term Note (described above under "September 19, 2005 Closing
with  Laurus");  or  the  Mortgage  itself,  Laurus  may  direct the Trustee to:

     (a)  exercise  all  of  the  rights,  remedies,  powers  and  privileges of
          Laurus with respect to the Mortgage;
     (b)  execute  and  deliver  to  any  person  designated  by  Laurus,
          appropriate  powers  of  attorney to act for an on behalf of Laurus in
          connection with the Mortgage;
     (c)  exercise  any  and  all  other  rights  or  remedies granted to Laurus
          pursuant  to  the  provisions  of  the  June  2005  Note  or  Related
          agreements, or the September 19, 2005 Securities Purchase Agreement or
          Term Note;
     (d)  perform or attempt to perform any covenant under the Mortgage;
     (e)  Laurus,  may  at  its  option,  without  notice,  demand, presentment,
          notice  of  intent  to  accelerate  or  of  acceleration, or notice of
          protest,  declare the entire unpaid balance of the amount indebtedness
          owed  to  Laurus or any part thereof, immediately due and payable, and
          the  liens  granted  pursuant to the Mortgage shall then be subject to
          foreclosure; and
     (f)  upon  the  occurrence  of  an  event  of  default, the Mortgage may be
          foreclosed  as  to  the  items  covered  in  the  Mortgage or any part
          thereof, in any manner permitted by law.

NOVEMBER 2005 PURCHASE AND SALE AGREEMENT

     On  November  1,  2005,  we  entered  into  a  Purchase  and Sale Agreement
("November  2005  Purchase  and  Sale  Agreement") with Mr. Gerald W. Green, the
"Seller."  Pursuant  to the November 2005 Purchase and Sale Agreement, we agreed
to  purchase  certain  interests  in and to certain oil and gas leases which are
located  within  and  adjacent  to  the Lindholm-Hanson Gas Unit in the Wishbone
Field  in  McMullen  County, Texas, located 80 miles south of San Antonio, Texas
(the  "Unit"),  for  $1,890,000,  which  we intend to fund from our current cash
flows and operations. The interests purchased total a 1.75% working interest and
a  1.3125%  net  revenue  interest in the leases (the "November 2005 Interest").

                                       16
<PAGE>

     The  effective  date of the sale of the Seller's November 2005 Interest was
October  1,  2005  (the  "November  2005 Purchase and Sale Effective Date"). The
closing  date  for  the  purchase  was  November  22, 2005, but was subsequently
extended to January 3, 2006, through an Amendment to Purchase and Sale Agreement
dated  November 2, 2005 (the "November 2005 Purchase and Sale Amendment" and the
"November  2005 Purchase and Sale Closing"). The November 2005 Purchase and Sale
Amendment  also  provided  that  we  would  equally share the net revenue of the
November  2005  Interest with the Seller for the month of October 2005; provided
that  we  would wire Seller a deposit in the amount of 10% of the purchase price
of  the  November  2005  Interest, which deposit is refundable to us only in the
event that Seller does not have clear title to the November 2005 Interest at the
time  of  closing; that we will be responsible for all Approval for Expenditures
("AFE")  on  the  new proposed Lindholm-Hanson #9 well, which is planned to spud
within  thirty  days  of the November 2005 Purchase and Sale Amendment; that any
monies  paid  by Seller in connection with the #9 well prior to October 1, 2005,
will  be repaid to Seller by us; that we will be responsible for all AFE charges
from  the date of the November 2005 Purchase and Sale Amendment for the workover
on  the  #4  well;  and that Seller shall be refunded for all unused and prepaid
expenses  with  U.S.  Enercorp,  Ltd.  for  drilling  the  #11 and Fee #1 wells.

     Additionally,  under  the  November  2005  Purchase  and Sale Agreement, we
agreed  to assume all duties and obligations of the Seller, express and implied,
with  respect  to  the purchased November 2005 Interest, including those arising
under  any lease, contract, agreement, document, permit, applicable law, statute
or  rule,  regulation,  or  order  of  any  governmental  authority  and defend,
indemnify  and hold Seller harmless from and pay or reimburse Seller for any and
all claims in connection with the duties and obligations of Seller in connection
with  the  ownership of the November 2005 Interest, before or after the November
2005  Purchase  and Sale Effective Date, except (a) to the extent any such claim
has  been  asserted  against Seller prior to the November 2005 Purchase and Sale
Effective  Date,  (b)  as  set  forth  in  the  November  2005 Purchase and Sale
Agreement,  or  (c)  any  claim  that  is  expressly  assumed  by  Seller.

     We  also  agreed to defend, indemnify and hold Seller harmless from and pay
or  reimburse  Seller  for  any  and  all  claims for damage to the environment,
environmental  cleanup,  remediation  or  compliance,  or  for any other relief,
arising  directly  or  indirectly  from  or  incident  to  the  use, occupation,
operation,  maintenance  or abandonment of any of the November 2005 Interest, or
condition  of  the  November  2005 Interest, whether latent or patent, including
without  limitation,  contamination  of  the property or premises with Naturally
Occurring  Radioactive  Materials  ("NORM"),  whether  such  claim was caused by
Seller's  negligence  or  strict  liability, whether in law or equity, excluding
Seller,  Seller's  agents,  employees  or  contracts gross negligence or willful
misconduct.

     The  November 2005 Purchase and Sale Agreement called for certain assets to
be  excluded  from  the  sale  of  the  leases  including:

     A)   All  minute  books,  tax  returns,  partnership  documents  of  Seller
          and their business records not related to the purchased interests;

     B)   All  records  that  were  (i)  proprietary  in nature, (ii) covered by
          the  attorney-client  privilege  or  work  product doctrine, (iii) not
          readily  severable  from Seller's general records, or (iv) required by
          applicable law to be retained by Seller;

                                       17
<PAGE>

     C)   All  rights  and  claims  arising,  occurring,  or  existing in Seller
          prior to the November 2005 Purchase and Sale Effective Date including,
          but  not  limited  to,  any and all contract rights, claims penalties,
          receivables,  revenues,  recoupment  rights,  rights of reimbursement,
          audit  rights,  recovery rights (excepting gas imbalances), accounting
          adjustments,  mispayments,  erroneous  payments or other claims of any
          nature  relating  solely to any time period prior to the November 2005
          Purchase and Sale Effective Date; and

     D)   Any  claims,  rights  and  interests  of  Seller  or  any  of Seller's
          affiliates  in  and  to  any  refunds  of  taxes or fees of any nature
          whatsoever which relate solely to and arise out of the period prior to
          the November 2005 Purchase and Sale Effective Date.

     All  production  of  oil,  gas  and  other  minerals from the November 2005
Interest  prior  to  the  November 2005 Purchase and Sale Effective Date and all
proceeds  from  the  sale of such production remained the property of the Seller
under  the  November  2005 Purchase and Sale Agreement. All such production upon
and  after  the  November 2005 Purchase and Sale Effective Date and all proceeds
from the sale thereof (other than the one-half the net revenue interest from the
November  2005 Interest granted to Seller pursuant to the November 2005 Purchase
and  Sale  Amendment)  will  be  our  property.  We  assumed  all  rights and/or
liabilities  of  Seller  arising  from any gas imbalances affecting the November
2005  Interest  as  of  the  November  2005 Purchase and Sale Effective Date and
thereafter.

     On  January  3,  2006,  we  closed  the  November  2005  Purchase  and Sale
Agreement.  At the closing and in accordance with the provisions of the November
2005  Purchase and Sale Agreement, the November 2005 Seller paid us the proceeds
actually  received by November 2005 Seller and attributable to production during
the  period  between  the November 2005 Purchase and Sale Effective Date and the
closing.  At  the  time  of  closing,  we  reimbursed  the  November 2005 Seller
approximately  $154,750  for  drilling  and  development costs assumed by us and
attributable  to  the ownership and operation of the purchased leases which were
paid by November 2005 Seller and incurred at or after the November 2005 Purchase
and  Sale  Effective  Date.

SECOND  AMENDMENT  AGREEMENT  WITH  LAURUS

     On  December  14,  2005,  we entered into a Second Amendment Agreement (the
"Second  Amendment"),  with  Laurus  which  amended  certain  provisions  to the
Registration  Rights  Agreement  entered  into between us and Laurus on June 30,
2005; the June 30, 2005 Securities Purchase Agreement between us and Laurus (the
"June  2005  SPA");  and  the  September  19, 2005 Securities Purchase Agreement
between  us  and  Laurus  (the  "September  2005  SPA").

     The  Second  Amendment  amended  the  date  which we are required to obtain
effectiveness of our Form SB-2 Registration Statement by, from December 12, 2005
(as  was  the  previous  date  for  us  to obtain effectiveness of our Form SB-2
Registration  Statement  under  our  First Amendment with Laurus entered into on
November  4,  2005,  as  described  above  to  January 31, 2006 without being in
default  of  the  Registration  Rights  Agreement).

     Additionally,  the Second Amendment also revised both the June 2005 SPA and
the  September 2005 SPA (the "SPA's") to exclude the timely filing of certain of
the  reports  we  are required to file with the Commission from the covenants we
agreed  to  under  the  SPA's.

                                       18
<PAGE>

The  reports  which  Laurus  agreed  under  the  Second  Amendment are no longer
required to be filed on a timely basis include:

     (i)  The  Company's  Quarterly  Report  on  Form  10-QSB  for  the  quarter
          ended September 30, 2005 (the "Quarterly Report");

     (ii) The  Company's  required  Report  on  Form 8-K regarding the Company's
          default of the June 2005 SPA and the September 2005 SPA, in each case,
          based  upon  the  Company's  failure  to  file  the  Quarterly  Report
          referenced  in  the  proceeding  clause (i), and the default occurring
          prior  to December 14, 2005 under the Registration Rights Agreement as
          a  result  of  the  Company's  failure  to obtain effectiveness of its
          Registration  Statement  by  the then applicable Effectiveness Date as
          defined  in  the  Registration Rights Agreement, which would have been
          required  to  be  filed  by  us  but  for  our  entry  into the Second
          Amendment; and

     (iii) The  Company's  amended  Reports  on  Form  8-K  relating  to  its
          September  2005  and November 2005 acquisitions in the Lindholm-Hanson
          Gas Unit, which were required to be filed by the Company in connection
          with  the  filing  of  its  audited financial statements and pro forma
          information regarding such acquisitions.

DECEMBER  2005  AGREEMENTS  WITH  LAURUS

     On  December  30, 2005, we entered into a Third Amendment Agreement ("Third
Amendment"),  an  Amended  and Restated Secured Convertible Term Note ("Restated
Note,"  described in greater detail below) and an Option (the "December Option,"
described  in  greater  detail  below),  with  Laurus.

THIRD  AMENDMENT  AGREEMENT

     The  Third  Amendment  amended  the  Registration Rights Agreement to add a
definition  of  the  December  Option; changed the date which we are required to
obtain  effectiveness  of  our  Registration Statement, which we are required to
file under the Registration Rights Agreement to register the Securities, to July
1,  2006;  and  added a provision whereby we are required to file a Registration
Statement  covering  the  shares  exercisable  in  connection  with the December
Option,  no  later than ten (10) business days after the date which we file this
Form  10-KSB  for  the year ended December 31, 2005 or April 25, 2006, whichever
date  is  earlier.

DECEMBER  OPTION

     In  connection  with  the  Third  Amendment,  we agreed to issue Laurus the
December  Option,  which  provides  Laurus the right to purchase up to 5,061,392
shares  of  our common stock at $0.001 per share, representing ten percent (10%)
of  our fully diluted issued and outstanding shares of Common Stock prior to the
date  of  the  June  2005  SPA (June 30, 2005). Laurus agreed under the December
Option  not  to exercise any rights under the December Option until: (a) payment
in full of all of the obligations and liabilities of the Company to Laurus under
the  June 2005 SPA and Restated Note have been paid in full and (b) the exercise
of  the  Warrant  by  Laurus,  provided  however that Laurus may sell all or any
portion of the Common Stock issuable upon the December Option following an event
of  default  (as  defined  in  the  Amended Note), or upon 75 days notice to us.

                                       19
<PAGE>

     Under  the  December  Option,  if  the  Company  effects  a reorganization,
consolidation, merger or dissolution, Laurus has the right to receive the amount
of  stock  or  other  property  (including  cash)  which  Laurus would have been
entitled,  if Laurus had exercised the December Option in full immediately prior
to  the  reorganization,  consolidation, merger or dissolution, and the December
Option shall continue to be binding upon such issuer and/or the person acquiring
substantially  all of the properties and/or assets of the Company. Additionally,
under  the December Option, in the event the Company issues additional shares of
common  stock  as  a dividend or other distribution on common stock or preferred
stock,  subdivides  its  outstanding  shares  of  common  stock, or combines its
outstanding  shares  of  common  stock into a smaller number of shares of common
stock,  the  number  of  shares that Laurus shall receive in connection with the
exercise  of  the December Option shall be increased or decreased by multiplying
the number of shares of common stock that would be issuable after such event and
dividing that number by the issued and outstanding shares of common stock issued
and  outstanding  immediately  prior  to  such  event.

     Laurus  is  not  able  to exercise any part of the December Option, if such
exercise  shall  cause it to hold in excess of 9.99% of the Company's issued and
outstanding  common  stock,  provided  however  that  Laurus may sell all or any
portion of the common stock issuable upon the December Option following an event
of  default  (as  defined  in  the  Amended Note), or upon 75 days notice to us.

     As  a  result  of  the December Option, Laurus has the right to convert the
Restated Note, and exercise the Warrant, June Option and December Option into an
aggregate  of  approximately  46,735,789  shares  of  the Company's common stock
(assuming  the  full  conversion  of  the Amended Note, Warrant, June Option and
December  Option  and  without  taking into account any conversion for interest)
which  would  constitute  approximately  45.6% of the Company's then outstanding
common  stock  (assuming  the  issuance  of no additional shares of common stock
other  than in connection with the conversion of the Restated Note, and exercise
of  the  Warrant,  June  Option  and  December  Option);  however,  Laurus  has
contractually  agreed  not  to  hold more than 9.99% of the Company's issued and
outstanding  common  stock,  unless  an  event of default occurs or upon 75 days
prior  notice  to  the  Company.

RESTATED  NOTE

     The  Restated Note, which replaced and superseded the Convertible Note, but
which  had  an  effective  date  of  June  30,  2005,  the  date of the original
Convertible  Note,  added  a  section  to  the  original Convertible Note, which
provided  that  the events of default set forth in the Restated Note are subject
to  the  express  waiver  of certain events of default by Laurus in favor of the
Company  as provided in the Amendment and the Second Amendment entered into with
Laurus  on  November  3,  2005 and December 14, 2005. The Restated Note provided
that such events of default expressly waived pursuant to the First Amendment and
the Second Amendment shall remain waived in accordance with the express terms of
the  First Amendment and the Second and shall not be deemed to constitute events
of  default  for  purposes  of  the  Restated Note, the June 2005 SPA or related
agreements,  the  September  2005  SPA  and/or  related  agreements.

     Additionally,  under  the Restated Note, Laurus agreed to amend the date on
which  we were required to begin making payments of principal under the original
Convertible  Note from January 1, 2006, until July 1, 2006, in consideration for
us entering into the Restated Note, the December Option and the Third Amendment.

                                       20
<PAGE>

     The  payments  of  principal under the Restated Note are due monthly at the
rate  of  $250,000  per  month,  until  June  30, 2008, the maturity date of the
Restated  Note  (the  "Maturity  Date").  On  the  Maturity Date, the $9,000,000
remaining  outstanding under the Restated Note (assuming Laurus does not convert
any principal amount of the Restated Note into shares of our common stock), plus
any  accrued  and  unpaid  interest  is  due  and  payable.

                            OTHER INDUSTRY AGREEMENTS
                            -------------------------

     The  Company  has  executed agreements with other oil and gas companies and
other  industry  investors  who are interested in participating in the Company's
exploration  and  production  activities.

VIKING  AGREEMENT:

     In  October 2003, the Company executed a Right of First Refusal-Exploration
Agreement  ("Exploration  Agreement")  with Viking International Petroleum, LLC.
("Viking"). Viking holds a license to 118 square miles of 3D data in Wharton and
Jackson counties, Texas. Under the Exploration Agreement, Viking will present to
the  Company  drillable,  seismically defined prospects, which the Company shall
lease  and  either  drill  for  its own account or promote to industry partners.
Initially,  the  Viking  agreement  included  5 prospects, but it has since been
expanded to include approximately 25 prospects.

     The  Company  has acquired its first two oil and gas leases relating to the
Exploration  Agreement.  Both  leases  are paid up leases. The first prospect is
identified  as  Prospect  P-105  and the lease dated October 29, 2004, covers 90
acres  in  the  I&G.N.R.R. Co. Survey No.2, Block No.2 Abstract 188 , in Jackson
County,  Texas. The lease term is two years and expires on October 29, 2006. The
second  prospect  is identified as Prospect P-7 and the lease dated December 10,
2004,  covers  174.66 acres in the I&G.N.R.R. Co. Survey, Section 9 Abstract No.
178  in  Jackson  County,  Texas.  The  lease  term  is two years and expires on
December 10, 2006.

     The  Company  expects to acquire additional acreage in 2006 relating to the
Exploration  Agreement and expects to commence drilling operations on certain of
the leases and prospects in 2006, of which there can be no assurance.

     To  minimize  leasing  costs  relating  to  the ongoing oil and gas leasing
program  in  Wharton  and  Jackson  County,  Texas,  relating to the Exploration
Agreement,  on  October 27, 2004, an agreement was signed with Lone Star Natural
Resources,  LLC.  ("Lone  Star").  Under  the  Loan  Star  agreement,  Lone Star
committed  to  provide  all land, leasing and title services to put together the
necessary  acreage  for  certain  undrilled  3D prospects in Wharton and Jackson
County,  Texas.  Lone  Star  will  be compensated for services in the form of an
overriding  royalty  on  each  oil  and  gas  lease  acquired.  The  Company  is
responsible  for  funding any lease bonus to be paid for each lease. The Company
believes  that  this  arrangement  will  help  the  Company limit land and title
research  expenses  relating  to  acquiring leases on the various tracts. Offers
have already been made to mineral owners on various tracts, and the first leases

                                       21
<PAGE>

have  been  acquired  in  Jackson  County on two separate prospects. The Company
expects to lease additional prospectus drilling throughout 2006 and 2007.

GEOPHYSICAL INTERPRETATION AGREEMENT:

     In  July  2005,  the  Company  executed  a  Geophysical  Interpretation  &
Exploration Agreement ("Seismic Agreement") with Viking International Petroleum,
L.L.C.  ("Viking").  Under  the Seismic Agreement, Viking committed to reprocess
the  Company's  3-D  seismic  data  base  in  Matagorda  County, Texas using its
proprietary  technology  for  the  purpose  of  reprocessing  the  seismic data,
identifying  new  well  locations  and to provide structural interpretations and
mapping  as  requested  by  the  Company.  In  return  for  the reprocessing and
interpretation  work,  the  Seismic  Agreement  provides  for  Viking to earn an
overriding royalty as its sole compensation. On any drilling prospects developed
using the Company's seismic data, Viking may have the right, but not obligation,
to participate to the extent of a ten percent (10%) working interest in drilling
and  completion  of  new  well(s).

BROOKSHIRE  DOME  FIELD  AREA:

     The Company has concluded its oil and gas leasing program in Waller County,
Texas in the area of the Brookshire Dome Field. The Company has acquired a total
of 26 leases in Waller County where ongoing exploration and development drilling
is  planned. The Company commenced drilling activities on the first well on June
15,  2005 and the well was temporarily plugged and abandoned at a depth of 5,200
feet  on  June  27, 2005, as no hydrocarbons were encountered in this well bore.
The  Company has decided to not pursue further drilling on this prospect area at
this  time  and  does  not  anticipate  renewing  or extending any of the leases
comprising the 25 acre lease hold in this area.

     Seventeen  of the original 26 leases taken over this prospect have expired.
These  leases  are  subject  to  the  provisions  of  an  agreement with Aquatic
Cellulose  International  Corp.,  which  is  publicly  traded ("Aquatic" and the
"Aquatic  Agreement").  The  Aquatic  Agreement  was subsequently amended by the
First  Amendment  of Purchase and Sale & Exploration Agreement on March 7, 2005,
which  had an effective date of January 1, 2005 (the "Amendment"). The Amendment
gives  Aquatic  an  exclusive, non-transferable right, but not the obligation to
participate with the Company in the first two drilling prospects developed under
the  Exploration  Agreement with Viking in Wharton and Jackson County, Texas, by
acquiring up to a 75% interest in these two prospects. Additionally, pursuant to
the Amendment, Aquatic, participated as a 50% working interest owner in drilling
of  the initial test well, the Weido #1 well, on the 25 acre Isaac Holiday tract
in  the  William  Cooper  Survey in the Brookshire Dome field area, described in
more  detail  above. Additionally, under the original Aquatic Agreement, Aquatic
was  granted  the  option  to  extend  its participation for successive one year
periods.  The Amendment removed this provision and the Aquatic Agreement expired
on  December  31, 2005, without further obligation on the part of the Company or
Aquatic,  except  for  those obligations arising from any work-in in progress or
yet  to  be fulfilled terms of the said agreement, namely Article I, Section A),
wherein  it  details  the  option  for  Aquatic  Cellulose International Corp to
acquire  up  to  a seventy-five (75%) working interest in up to two new drilling
prospects  developed by the Company under the Exploration Agreement with Viking,
described  above.  Additionally,  the  Amendment  changed  the  original Aquatic
Agreement  to  allow  the  Company  to receive shares in Aquatic, instead of the
Company's  Chief  Executive  Officer, as was provided under the original Aquatic

                                       22
<PAGE>

Agreement,  and  to  reduce  the  Company's shares in Aquatic from 15% under the
original  Aquatic Agreement to 7.5% under the Amendment, upon its reorganization
and re-capitalization.

     Additionally,  under the Aquatic Agreement, Aquatic purchased a 20% working
interest  and  16% net revenue interest in the Hamill Lease in the Sargent South
Field,  described  below,  effective  March  1,  2004.

                                  RECENT EVENTS
                           --------------------------

     On  or  about  March  20,  2006,  we  entered into a Settlement and Release
Agreement  with  our  former  officer  and employee, Hans Nehme ("Nehme" and the
"Nehme Settlement").  Pursuant to the Nehme Settlement, Nehme agreed to file all
necessary  pleadings  to  dismiss  his previously filed lawsuit against us, with
prejudice  and we agreed to pay Nehme $25,483.09 and to issue him 100,000 shares
of our restricted common stock.  Additionally, pursuant to the Nehme Settlement,
we,  Nehme,  our  agents, representatives, and assigns agreed to release, acquit
and  forever  discharge  each  other,  together  and  our employees, affiliates,
representatives,  assigns,  and  in  Nehme's  release  of  us, our directors and
officers  and  parent and subsidiary organizations, from and against any and all
claims,  demands,  obligations,  liabilities and causes of action, of any nature
whatsoever, at law or equity, asserted or unasserted, known or unknown, fixed or
contingent,  liquidated  or  unliquidated,  including but not limited to Nehme's
previously disclosed lawsuit against us.  The Nehme Settlement, however, did not
include  the  release  by  Nehme  of  any  claim  against  any  third parties in
connection  with  his  ownership of rights or interests in intellectual property
that  was previously possessed or owned by Vertica Software, Inc., which was our
former  name  up  to  the  date  of  the  Exchange,  described  above.

AMENDED AND RESTATED SECURED TERM NOTE

     On  or  about March 30, 2006, with an effective date of September 19, 2005,
we  entered  into  the Amended and Restated Secured Term Note (the "Amended Term
Note")  with Laurus. Pursuant to the Amended Term Note, the maturity date of the
September  2005  Secured  Term  Note  ("Term  Note") with Laurus was extended to
January  2,  2007.  Additionally,  a  section was added to the Amended Term Note
which  provided  for  the  Amended Term Note to be repaid by way of a production
payment  on  certain of our oil and gas property (described below). The interest
rate  of  the Term Note, which rate was not changed by the Amended Term Note, is
twenty  percent  (20%)  per  year,  based  on a 360 day year, payable monthly in
arrears.

     The  Amended  Term  Note  provides  for  the payment of amortizing payments
("Amortizing  Payments")  of  principal  and interest due under the Amended Term
Note  equal  to eighty percent (80%) of the gross proceeds paid to us in respect
of  oil,  gas and/or other hydrocarbon production arising from our 7.25% working
interest  in  the  Wishbone  Field  in  the Lindholm-Hanson Gas Unit, located in
McMullen  County,  Texas,  purchased  by  us  pursuant  to the Purchase and Sale
Agreement dated September 2, 2005 (the "September Interests" and the "Production
Payments").  Pursuant  to  the  Amended  Term Note, each such Amortizing Payment
shall be made by us to Laurus not later than five (5) days following the date on
which we receive the Production Payment, commencing with all Production Payments
received  by  us  after  March  1, 2006, with respect to the production month of
January  2006 and each month thereafter.  Our payment of the Amortizing Payments

                                       23
<PAGE>

to Laurus will be in lieu of the monthly payments of interest accruing under the
Term  Note,  which  we  had  previously  been  making  since  November  1, 2005.

     Notwithstanding  anything  contained  in  the  Amended  Term  Note  to  the
contrary,  if during the 2006 calendar year the Company drills one or more wells
in  the  Wishbone Field, then so long as no Event of Default shall have occurred
and  be continuing the Company shall be permitted to deduct from each Amortizing
Payment  in  respect  of the principal amount then required to be made an amount
sufficient  to cover not more than the Company's then owing 7.25% pro-rata share
of  the  drilling  and  completion costs associated with such drilling, provided
that  in  no event shall any such drilling and completion costs be deducted from
the interest payments then due and owing by the Company to Laurus.

ITEM  2.  DESCRIPTION  OF  PROPERTY

                                  OFFICE SPACE

     The  Company entered into an amended lease with Essex Tanglewood Investors,
L.P.,  a Texas limited partnership, in connection with its office space lease at
5851  San  Felipe,  Houston,  Texas, on August 17, 2005 (the "Lease"). The Lease
term  is until September 30, 2010. The monthly rent under the Lease is $1,952.17
per  month from September 1, 2005 until March 31, 2006, $2,958.65 per month from
April  1,  2006  to  June 30, 2006 and $3,042.28 a month from July 1, 2007 until
September  30,  2010.  The  Lease  may  not terminated by us prior to its stated
expiration.  We  increased  the  square footage we rent during 2005 and 2006, in
connection  with  increases  of  the  number  of  personnel  on  our  staff.

                             OIL AND GAS PROPERTIES

1.)      OPERATED PROPERTIES:

     The  Company  operates  primarily  in  Texas and operates under the name of
Century  Resources, Inc., a wholly owned subsidiary of the Company. Our Railroad
Commission of Texas Operator number is 141835. Of the properties we operate, our
working  interest  ownership ranges from 80% in the Sargent South Field, to 100%
in  the  San  Miguel  Creek  and  Tenna  Fields.

SARGENT  SOUTH  FIELD-  MATAGORDA  COUNTY.  TEXAS

     The  Company  acquired  100%  of  the working interest in the Sargent South
Field  from  Calpine  Natural  Gas (NYSE) and its partner ("Calpine") in January
2004.  The  Sargent  South  Field is located in Matagorda County, Texas, east of
Matagorda  Bay.  The  leasehold  is  approximately  3,645  acres.

     At  the time of this acquisition there were two producing wells, the Hamill
#2  and Hamill #19. In March 2004, the Company recompleted a shut-in well on the
lease,  Hamill  #10  and  established  production in the 3,345' sand. One of the
original  producing  wells  acquired from Calpine, the Hamill #19 ceased flowing
gas  after  producing 615 MMCF of gas from the original completion at 3,917', in
May 2004. This Hamill #19 well was recompleted by the Company in July 2004, in a
sand  at 4,324 feet and this sand produced 107 MMCF of gas until it was depleted
in October 2004. The Hamill #19 is currently being worked over with a completion
attempt  to be tried at the 6,700 sand level. Work on the Hamill #19 is expected

                                       24
<PAGE>

to  be  completed  and  production  testing to commence in the second quarter of
2006.  If  this  completion  attempt  is  unsuccessful we may attempt a possible
deepening outside of the casing.

     At  present, there are five (5) producing wells on the Hamill Lease; Hamill
#2, Hamill #10, Hamill #11, Hamill #14 and Hamill #17., with daily production in
excess  of approximately 2,500 MCF of gas per day, (MCFGPD) however, the Company
can  give no assurances that the wells will continue to produce at this rate, if
at  all.

     A  license to a 10 square mile 3-D seismic survey ("3-D") was also acquired
from  Calpine  and  this  3-D has been reprocessed, and the final interpretation
work  will  be  completed  in the second quarter of 2006. New drilling locations
have  been identified on this lease for drilling in 2006. The 3-D interpretation
process will be an ongoing process, over 2006 and 2007 with results from any new
wells  drilled  being  integrated  into  and  used  to  update  our  ongoing
interpretation  project.

     During  January 2005, work over operations were commenced on the Hamill #17
well  which had been shut-in since 2001, by the previous owner and operator. The
wellhead  and  surface equipment were replaced and remedial operations commenced
to drill out and remove various cement and cast iron bridge plugs set inside the
well  casing  by previous operators. The well bore was cleaned out to a depth of
4,500  feet,  and  tests  were  run in the well to evaluate potential productive
sands  in  this  well.  In  March 2005, the Hamill #17 well was recompleted in a
stray  sand at 4,230 feet; and is currently producing gas at the rate of 250 MCF
per day on a 8/64" choke with a flowing tubing pressure of 700 pounds per square
inch  ("psi").  Additional  probable  and proven behind pipe gas sands have been
identified  in the Hamill #17 well for future recompletion attempts, if/when the
current completion at 4,230 feet depletes.

     During  June  2005,  work over operations commenced on the Hamill #14 well,
which  had  been  shut-in  since  2001.  The wellhead and surface equipment were
repaired  and  remedial operations commenced to drill out and remove a number of
cement  and  cast  iron  bridge  plugs  set  inside  the well casing by previous
operators. The well bore was cleaned out to a depth of 5,905 feet and tests were
run  in  the  well  to evaluate potential productive sands in this well. In July
2005,  the Hamill #14 was recompleted in a sand at 4,209 feet at the rate of 250
MCF  of gas per day on a 8/64" choke with flowing tubing pressure of 1000 pounds
per  square inch. Additional probable and proven behind pipe gas sands have been
identified  in  the  Hamill  #14 well for future recompletion attempts, when the
current  completion  at 4,209 feet depletes. This well is currently producing at
the  rate  of 275 MCF per day on a 8/64" choke with a flowing tubing pressure of
700 pounds per square inch ("psi").

     During  July  2005,  work  over operations commenced on the Hamill #10 well
after  the  well  ceased producing gas earlier in the month. Remedial operations
commenced  to drill out and remove a number of cement and cast iron bridge plugs
set  inside the well casing by previous operators. The well bore was cleaned out
to  a  depth  of  3,515 feet but encountered collapsed casing at this depth. The
bottom  section  of the well bore was plugged off and tests were run in the well
to evaluate potential productive sands in this well above 3,515 feet. In October
2005,  the  Hamill #10 was recompleted in a stray sand at 3,270 feet at the rate
of  approximately 340 MCF of gas per day on a 8/6 inch choke with flowing tubing
pressure  of  1350 pounds per square inch. Additional probable and proven behind
pipe  gas  sands  have  been  identified  in  the  Hamill  #10  well  for future

                                       25
<PAGE>

recompletions attempts, when the current completion at 3,270 feet depletes. This
well is currently producing at the rate of 450 MCF per day on a 7/64" choke with
a flowing tubing pressure of 1350 pounds per square inch ("psi").

     During  August  2005  work over operations commenced on the Hamill #2 well.
This  well  was  a marginal producer and we removed a number of cast iron bridge
plugs set inside the well casing by previous operators. The well was cleaned out
to  a  depth of 6,170 feet. In October of 2005, the Hamill #2 was recompleted in
the  5,940  foot  sand  at  the  rate  of 950 MCF per day. The well is currently
producing at the rate of 1300 MCF per day on a 7/64" choke with a flowing tubing
pressure of 1900 pounds per square inch ("psi").

     During  November  of  2005 work over operations commenced on the Hamill #11
well.  This  well  was  a marginal producer and we removed a number of cast iron
bridge  plugs  set  inside  the  well casing by previous operators. The well was
cleaned  out  to  a depth of 6,000 feet. In February of 2006, the Hamill #11 was
recompleted  in  the  2760 foot sand at the rate of 275 MCF per day. The well is
currently  producing  at  the  rate  of  200 MCF per day on a 7/64" choke with a
flowing tubing pressure of 700 pounds per square inch ("psi").

SAN MIGUEL CREEK FIELD- MCMULLEN COUNTY. TEXAS

     The San Miguel Creek Field is located in north central McMullen County near
its  border  with  Atascosa  County,  approximately  75  miles  due south of San
Antonio,  Texas.  The  Company currently owns and operates the 200 acres Herrera
Lease  and  the  40-acre  Wheeler  #2 lease in this field (240 acres total). The
Company now controls 100% of the working interest in the wells. A new 3D seismic
survey  was  recently completed in this field, to help identify further drilling
locations in the Wilcox formation at 6,000 feet and possibly deep seated targets
down  to 14,000 feet on our acreage. During 2006, the Company plans to acquire a
portion  of  this  new  3-D seismic survey to help delineate additional drilling
prospects  on  our  acreage,  of  which  there  can  be  no  assurance.

TENNA (HILLJE SAND) FIELD- WHARTON COUNTY, TEXAS

     The Company acquired 100% of the working interest in three (3) wells in the
Tenna  field  in  July 2003. The field is located on county road 1300 in western
Wharton  County,  Texas, approximately 60 miles southwest of Houston, Texas. The
Hillje  Sand  was  discovered  in 1991 and has been an oil and gas producer at a
shallow  depth  of 4,100 feet. A newer 3-D seismic survey has been shot over the
field and the surrounding area and we are in discussions to acquire a portion of
the survey to reprocess and interpret, of which there can be no assurance. There
are mapped attic oil locations on our leases and we anticipate drilling new well
location(s)  in  2006,  of  which  there  can  be  no  assurance.

2.)     NON-OPERATED  PROPERTIES:  WISHBONE  FIELD  - LINDHOLM HANSON GAS UNIT-
McMULLEN  COUNTY,  TEXAS:

     As  of  January  3,  2006,  the  Company owns a 15.20% non-operated working
interest  with  a 12.214% net revenue interest in the Wishbone Field in McMullen
County,  Texas,  which  is  operated by U.S. Enercorp, LTD, headquartered in San
Antonio,  Texas. The Company acquired its interest in the Wishbone Field through
three  (3)  separate  transactions.  In  June of 2005 it acquired a 6.2% working
interest  and  5.464%  net  revenue interest. In September of 2005 it acquired a
7.25%  working  interest  and 5.4375 net revenue interest. In January of 2006 it

                                       26
<PAGE>

acquired  a  1.75%  working interest and 1.3125% net revenue interest. The total
combined  interest  now  owned  by  the Company is a 15.20% working interest and
12.214%  net  revenue  interest.

     The  field  was  discovered  in  2004  after the successful drilling of the
Linholm-Hanson  Gas  Unit  #1 Well, operated by U.S. Enercorp LTD of San Antonio
Texas.  The  field  produces  from  Upper  Wilcox  sands  at an average depth of
approximately  12,800 feet. All of the producing wells in the Linholm-Hanson Gas
Unit  have  been fracture stimulated using approximately 400,000 pounds of 20/40
proppant.  Initial  producing  rates  after stimulation in a number of wells has
exceeded  15,000  Mcfgpd  per  well.  As  of  January 1, 2006 there are ten (10)
producing  wells  in  the  640 acre unitized Linholm-Hanson Gas Unit. Cumulative
production  in  the  field  has  been approximately 15 billion cubic feet of gas
(Bcf).  Well log analysis indicates probable and possible oil and gas production
at  shallow  depths  in  the  Wishbone Field. Potential future production may be
achieved  in the Slick sand, the 9,100 foot sand, the Hostetter sand and the Tom
Lyne  sands, ranging in depth from 7,000 feet to 11,000 feet, of which there can
be  no  assurance.

     Since  the  Company acquired its working interest in the Wishbone field, we
have  participated  in  drilling  an  additional three (3) new wells with in the
unitized  Wishbone  field.  LH  Gas Unit #10 was drilled in July of 2005. LH Gas
Unit  #11  was  drilled  in  September  of  2005.  LH Gas Unit #9 was drilled in
December  of 2005. The Company also participated in drilling of the Lindholm Fee
#1  in  September  of  2005,  this well is not a part of the Lindholm-Hanson Gas
unitized  gas  field and our working interest is smaller in this well at 12.10%.

     The  following  chart represents the net revenue interest to the Company in
L-H  Gas  Unit  and  Lindholm  Fee #1 for the year ended December 31, 2005. This
includes  all  revenues from the First Acquisition from July 1, 2005 to December
31, 2005 and from the Second Acquisition from September 20, 2005 to December 31,
2005.

                     Revenue      Production     Lease Operating        Net
                                     Taxes          Expenses          Revenue
                    ---------      ---------       ----------      -----------
LH-Gas Unit #1     $  151,235     $ (11,353)       $  (8,626)       $  131,256
LH-Gas Unit #2        405,814       (30,463)         (17,894)          357,457
LH-Gas Unit #3        280,778       (21,077)         (13,717)          245,984
LH-Gas Unit #4        302,618       (22,717)         (12,161)          267,740
LH-Gas Unit #5        824,168       (61,868)         (30,089)          732,211
LH-Gas Unit #7          8,877          (666)          (2,402)            5,809
LH-Gas Unit #8        233,988       (17,565)         (12,474)          203,949
LH-Gas Unit #9        113,846        (8,546)          (2,146)          103,154
LH-Gas Unit #10       928,657       (69,707)         (19,277)          839,673
LH-Gas Unit #11     1,342,855      (100,804)         (22,814)        1,219,237
Lindholm Fee #1        22,498        (1,689)         (28,884)           (8,075)
                    ---------      ---------       ----------      -----------
Total              $4,615,334     $(346,455)       $(170,484)       $4,098,395
                    =========      =========       ==========      ===========

                                       27
<PAGE>

Current well status in the Lindholm-Hanson Gas Unit and Lindholm Fee #1 at March
1, 2006:

                                              Daily 8/8THS        Net Revenue
Well Number                    Status       Production (Mcf)     Interest(Mcf)
-------------                 ---------     ----------------     --------------
LH-Gas Unit #1                Producing             709                 87
LH-Gas Unit #2                Producing           2,409                294
LH-Gas Unit #3                Producing           1,838                224
LH-Gas Unit #4-C              Producing           2,600                318
LH-Gas Unit #4-T              Producing           1,201                147
LH-Gas Unit #5                Producing           3,575                437
LH-Gas Unit #7                 Shut-in                0                  0
LH-Gas Unit #8                 Shut-in                0                  0
LH-Gas Unit #9                Producing           4,034                493
LH-Gas Unit #10               Producing           3,109                380
LH-Gas Unit #11               Producing           7,134                871
Lindholm Fee #1               Producing             150                 13
                                                -------              -----
Daily totals in MCF of Gas                       26,759              3,264
                                                =======              =====

PRADO FIELD LEASES, JIM HOGG COUNTY, TEXAS.

     In  June  2004,  the  Company acquired leases in the Prado Field comprising
1,280  acres in Jim Hogg County, Texas. The former owner was JMI Energy Inc., of
Houston,  Texas  ("JMI").  As  of  January 1, 2006 there were currently four (4)
active  wells  on  this lease and twenty (20) inactive well bores. In July 2004,
under  the  terms  of  the  Aquatic  Agreement,  Aquatic exercised its option to
participate  for  a 50% working interest in this acquisition by purchasing a 50%
working  interest  from  the  Company.

DEVELOPMENTS IN THE PRADO FIELD DURING 2005

     On  April  26,  2005,  the  Company  and Aquatic entered into a Development
Agreement  relating  to  the  Prado Field interests with Strong Petroleum Group,
Inc. (a Texas corporation hereinafter "Strong") to invest and participate in the
re-development  of  the  Company's Prado field interests (the "Prado Assets" and
the "Development Agreement"). The Development Agreement had an effective date of
April  1,  2005.  The Development Agreement called for Strong to invest at least
$2.0  million  in  an initial work program in 2005 and to pay a signing bonus to
the  Company  and  Aquatic  Cellulose  International  ("Aquatic"). Additionally,
Strong  was  to pay all of the initial work program expenditures while providing
the Company and Aquatic a 12.5% carried working interest. The scope of the "Work
Program"  was  at  a  minimum to include the following activities: Strong was to
conduct a comprehensive study in the Prado Field and perform workovers as needed
or  in  lieu  of  working  over  wells,  Strong had the option to substitute the
drilling  of  new  wells(s),  or the workover of other wells in adjacent acreage
later  acquired  from  the  Kenedy  Memorial Foundation of Corpus Christi, Texas
and/or  re-enter  wells  that  were  shut-in  or  plugged  and  abandoned. These
alternative operations were to be pursued as necessary in combination with other
workovers until the Work Program required expenditure of $2,000,000 was met, and
Strong was to drill, test and complete, if commercially viable, a minimum of two
(2)  new  wells  to  a  true  vertical  depth  ("TVD") not to exceed 5,500 feet.

     Under  the original Development Agreement, Strong was entitled to receive a
Partial  Assignment  of  the  interests we originally purchased from JMI Energy,
Inc., if Strong completed the Work Program before December 31, 2005, expended no
less  than  two million dollars ($2,000,000) in accordance with the terms of the
Work  Program,  did not breach the Development Agreement, and had no outstanding
debt  which would or could support a lien on the Prado Field interests. However,
none  of  the  required  tasks  were  completed  in accordance with the original
required schedule.  While, we were not legally required to provide an additional

                                       28
<PAGE>

extension  to  Strong, we did sign an extension in December 2005, which provided
an  extension for Strong to accomplish the required Work Program until March 31,
2006.  On March 22, 2006 the Company sent notice to Strong that it was unwilling
to  provide  any  further  unconditional  extensions.

     On  April  6,  2006  a  new  Extension  Agreement  was executed between the
Company,  Aquatic  and  Strong  with  an effective date of March 31, 2006, which
extended  the  deadline  for  Strong's  required  accomplishment  of all of Work
Program  which  was revised by the Extension Agreement until 5:00 p.m. September
21,  2006  (the  "Extended  Deadline").  The  "Revised Work Program" changed the
original  Work  Program,  to  require  Strong  to  drill,  test and complete, if
commercially  viable,  a  minimum  of two (2) new wells to a true vertical depth
("TVD")  not to exceed 4,000 feet; to require Strong to perform casing integrity
operations  on certain wells described in the Development Agreement, and to plug
and  abandon wells that are not commercial to workover; and to require Strong to
complete  a  minimum  of  five  workovers  on  various  wells  described  in the
Development  Agreement.

     Under  the  Extension  Agreement, the Development Agreement was modified as
follows  with  respect  to  our  interests  and  rights:

A.   We  shall,  during  and  after  the  Revised  Work  Program,  assuming such
     Revised  Work  Program  is  completed,  retain  a twenty-five percent (25%)
     working  interest  (as  opposed  to  the  12.5% working interest previously
     provided under the Development Agreement) in the Prado Assets. Accordingly,
     the Partial Assignment, instead of being 87.5%, shall be 75% of the working
     interest  and  effective April 1, 2006, we shall be entitled to twenty-five
     percent (25%) of all net production proceeds;

B.   We  shall  have  the  option  with  Aquatic,  or  if Aquatic elects not to,
     then  by  our  self,  to  acquire up to an additional fifteen percent (15%)
     working  interest  in  the Prado Assets for $20,000 per percentage point of
     working  interest acquired, which if exercised in full, would make sure the
     owner of a 40% working interest in the Prado interests;

C.   Strong  and  we  agreed  that  if  we and Aquatic, or if Aquatic elects not
     to, then just us, shall have an option to acquire up to fifty-percent (50%)
     of  any  interest  in  certain  additional  acreage  leased from the Kenedy
     Foundation  by  Strong  in  return  for paying Strong one-half of any lease
     bonus  actually  paid  by Strong for such acreage. This right shall survive
     the  termination  and/or  completion  of the Extension Agreement and/or the
     Development Agreement; and

D.   In  the  event  that  Strong  shall  elect  to drill one or more of the two
     wells  it  is obligation to drill on any newly acquired acreage and we have
     exercised  our  right to acquire fifty-percent (50%) of such newly acquired
     acreage,  then we, with respect to our fifty-percent (50%) working interest
     and  if  and to the extent that we elect to participate, shall be obligated
     to  pay  only  for twenty-five percent (25%) of the drilling and completion
     expenses associated with the well(s).

     Strong  acknowledged  that its failure to perform each and every one of the
task associated with the Revised Work Program on or before the Extended Deadline
shall result in Strong not being able to earn any assignment in the Prado Assets
and  as  such,  Strong  will  be required to redeliver to the Company all of the

                                       29
<PAGE>

property  and  documents associated with the Prado Assets in accordance with the
original  terms  of  the  Development  Agreement.

     If Strong is not entitled to the assignment, Strong's rights will terminate
with  respect  to  any and all producing wells associated with the Prado Assets,
effective  September  21,  2006,  and  Strong  shall execute a release of rights
indicating  that  it  does  not  own  or claim any interest in the Prado Assets.
Additionally, all right title and interest in any and all equipment installed on
the  Prado  Assets  shall  become  our  property  and  our  partner  Aquatic.

          OIL AND GAS ACREAGE, PRODUCTIVE WELLS, AND DRILLING ACTIVITY
                      DISCLOSURE OF OIL AND GAS OPERATIONS:

COMPARISON OF AVERAGE SALES PRICES OF OIL AND GAS SOLD BY THE COMPANY FOR THE
LAST THREE FISCAL YEARS OPERATED AND NON-OPERATED PROPERTIES:

                              2003     2004       2005
                           ---------  -------   --------
AVERAGE SALE PRICE OF OIL
(Per bbl.)                   $28.74    $39.78    $53.63

AVERAGE SALE PRICE OF GAS
(PER MCF)                    $ 4.04    $ 5.08    $ 7.10

ANNUAL 8/8THS GROSS OIL PRODUCTION FROM COMPANY OPERATED PROPERTIES FOR THE LAST
THREE FISCAL YEARS:

                              2003      2004     2005
                            Barrels   Barrels   Barrels
                           ---------  -------   --------
SAN MIGUEL CREEK FIELD      15,589    14,756     12,704

TENNA FIELD                 13,362     9,066      11,710
                           ---------  -------   --------
    ANNUAL TOTALS           28,951    26,121      24,414
                           =========  =======   ========

ANNUAL 8/8THS GAS PRODUCTION FROM COMPANY OPERATED PROPERTIES FOR THE LAST THREE
                                          --------
FISCAL YEARS:

                              2003      2004      2005
                           ---------  -------   --------
SARGENT SOUTH FIELD(MCF)    41,389    236,671    255,758


ANNUAL 8/8THS GAS PRODUCTION FROM NON-OPERATED PROPERTIES FOR THE LAST THREE
                                  ------------
FISCAL YEARS:

                              2003       2004       2005
                           ---------  ---------  ----------
WISHBONE FIELD-
LINDHOLM HANSON
GAS UNIT(MCF)                    0    5,137,646  11,255,571

                                       30
<PAGE>

     The  above table relates to the Company's interest in the Wishbone Field in
McMullen  County,  Texas  as of December 31, 2005. As of the date of filing this
Report,  the  Company  has  a  15.2%  working interest and a 12.214% net revenue
interest.

OIL AND GAS ACREAGE

     In  the data below, "gross" represents the total acres or wells in which we
own  a working interest and "net" represents the gross acres or wells multiplied
by the Company's working interest percentage. The following table sets forth New
Century's  acreage  position  at  December  31,  2005:

<TABLE>
<CAPTION>
                            Developed                    Undeveloped
                    --------------------------     ------------------------
                     GROSS            NET           GROSS             NET
<S>                   <C>             <C>            <C>              <C>
Jackson County, Tx        0            0             265              265

Jim Hogg County, Tx   1,280          640               0                0

Matagorda County, Tx  3,645        2,916               0                0

McMullen County, Tx     960          335               0                0

Waller County, Tx         0            0              25               13

Wharton County, Tx      100          100               0                0
                       =====        =====           =====           =====
Total                 5,985        3,991             290              278
</TABLE>

     The  Company's  net undeveloped acreage which is subject to expiration over
the  next  three  years  is  approximately  100  %  in  2006  and  0  % in 2007.

PRODUCTIVE WELLS

     The following table sets forth our gross and net productive oil and natural
gas wells at December 31, 2005:

<TABLE>
<CAPTION>
                      Producing  Oil  Wells       Producing  Gas  Wells
                       Gross          Net          Gross        Net
                    ------------- ------------  ----------- -----------
<S>                    <C>             <C>          <C>         <C>
Jim Hogg County, Tx     2               1            0           0

Matagorda County, Tx    0               0            5           4

McMullen County, Tx     7               7           10          1.52

Waller County, Tx       0               0            0           0

Wharton County, Tx      2               2            0           0
                     =======         =======      ========    =======
     TOTAL             11              10           15          5.52
</TABLE>

                                       31
<PAGE>

DRILLING  ACTIVITY:

     The following table sets forth the results of our drilling activities over
the last year.:

<TABLE>
<CAPTION>
                                        Oil  Wells          Gas  Wells
                                       Gross     Net       Gross    Net
                                      -------  -------    -------  ------
<S>                                     <C>      <C>        <C>      <C>
Exploratory Wells-Productive(1)(2):      0        0          4     .608

Exploratory Wells-Non-productive(1)(3):  1       .5          1     .0419

Development Wells:                       0       .0          0     .0
                                      -------  -------    -------  ------
</TABLE>

(1)  An  exploratory  well  is  a  well  drilled  either  in search of a new, as
     yet  undiscovered oil or gas reservoir or to greatly extend the know limits
     of  a previously discovered reservoir. A development well is a well drilled
     with  the  presently  proved  productive  area  of  an  oil  or natural gas
     reservoir,  as  indicated  by reasonable interpretations of available data,
     with the objective of completing in that reservoir.
(2)  A  productive  well  is  an  exploratory  or  development  well found to be
     capable  of producing either oil or natural gas in sufficient quantities to
     justify completion as an oil or natural gas well.
(3)  A  non-productive  well  is  an  exploratory  or  development  well that is
     not a producing well.

SIGNIFICANT  OIL  AND  GAS  PURCHASERS  AND  PRODUCT  MARKETING

     Oil and gas sales are made on a day-to-day basis under short-term contracts
at  the  current area market price. For the year ended December 31, 2005, we had
three  purchasers that each accounted for 10% or more of our oil and natural gas
revenues on Company operated properties: Flint Hills Resources purchased 100% of
our  crude oil production on a month to month competitive contract basis and two
separate  purchasers  accounted  for  79%  and  20%  of sales of our natural gas
production,  respectively.

     Our  ability  to  market oil and natural gas depends on many factors beyond
our  control, including the extent of domestic production and imports of oil and
gas, the proximity of our gas production to pipelines, the available capacity in
such  pipelines, the demand for oil and natural gas, the effects of weather, and
the  effects  of  state and federal regulation. Our production is primarily from
developed  fields  close  to  major  pipelines  or  refineries  and  established
infrastructure.  As  a result, we have not experienced any difficulty to date in
finding  a  market  for  all  of  our  production  as it becomes available or in
transporting  our  production  to  those markets; however, there is no assurance
that  we will always be able to market all of our production or obtain favorable
prices.

OIL  MARKETING.

     The  quality  of  our crude oil varies by area as well as the corresponding
price  received.  In  the  San Miguel Creek Field in McMullen County, Texas, the
Tenna Field, Wharton County, Texas; and Prado Field, Jim Hogg County, Texas, our
oil  production is primarily light sweet crude, which typically sells at or near
NYMEX  West  Texas  Intermediate  ("WTI")  prices,  or  often  at  a  premium.

                                       32
<PAGE>

NATURAL  GAS  MARKETING

OPERATED  PROPERTIES:

     Virtually all of our natural gas production is close to existing pipelines.
We  sell all of our natural gas produced from the Sargent South Field to Harvest
Pipeline  on  a  month  to month contract with prices fluctuating month-to-month
based  on a discount to the published Houston Ship Channel Inside FERC, first of
month  index  price.

NON-OPERATED  PROPERTIES:

     All  of  the natural gas production sold from the non-operated gas wells in
the Wishbone Field are sold to Cross Tex CCNG Marketing LTD. ("Cross Tex") under
a  two  year contract effective February 1, 2004. The price payable by Cross Tex
is  equal to the first of the month "Index" price published in Inside F.E.R.C.'s
Gas  Market  Report for the Houston Ship Channel as listed in the table entitled
Market  center  spot-gas  prices,  less  sixteen  cents per MMBtu ($0.16/MMBtu).

ITEM 3.  LEGAL PROCEEDINGS

     On  November  5, 2004, our former transfer agent, Corporate Stock Transfer,
Inc. ("Corporate"), filed a lawsuit for $4,535.25 against us in Denver, Colorado
relating  to  the  payment  of  fees  associated  with  stock  transactions  and
termination  fees.  On  December  13,  2004,  we  filed  a  counterclaim against
Corporate  in  the 11th District Court of Texas, alleging breach of contract and
breach  of  fiduciary duty. On or about December 28, 2005, we finalized and made
final  payment  on  a  Settlement  Agreement  and Mutual Release with Corporate,
whereby,  we  and Corporate agreed to release, acquit and forever discharge each
other,  each  others  current  and former agents, officers, directors, servants,
attorneys,  representatives,  successors, employees and assigns from any and all
rights,  obligations, claims, demands and causes of action, whether in contract,
tort,  under  state  and/or  federal  law,  or  state and/ or federal securities
regulations, whether asserted or unasserted, whether known or unknown, suspected
or  unsuspected,  arising  from  or relating to the disputes which we had or the
lawsuits described above. In connection with the Settlement Agreement and Mutual
Release,  we  agreed  to  pay  Corporate  $2,750  and Corporate and we agreed to
dismiss  our  lawsuits  against  each  other with prejudice, which lawsuits have
since  been  dismissed.

     In  February 2005, we received correspondence from four individuals who are
our  former  employees,  which  alleged  that  we  owed  those  former employees
approximately  $298,000  in  accrued  and unpaid wages, payroll taxes and unpaid
loans  and interest. We denied the individual's claims, but choose to enter into
a  Settlement,  Release  and  Indemnification  Agreement  with three of the four
individuals  in  July 2005. In consideration for us issuing those individuals an
aggregate  of  58,000  restricted  shares  of  our  Common  Stock,  those  three
individuals  agreed to acquit, release and forever discharge us, our principals,
directors,  officers,  shareholders,  employees,  agents,  representatives,
successors,  insurers  and  attorneys  from  any  all claims, remedies, demands,
debts,  liens, causes of action or liabilities. We filed suit against the fourth
individual,  our  former  officer  and Director, Hans Nehme, in October 2005, in
Harris  County,  Texas,  alleging  that Mr. Nehme agreed to settle the claims by
exchange  of  written  correspondence on May 10, 2005, and later agreed upon the
form  of a final settlement, but failed to sign with the other three plaintiffs.
In  the  lawsuit,  we  sought a declaratory judgment that Mr. Nehme breached his
agreement to sign the release, and that the claims he continues to try to assert
have  been  released  by  the  release agreement Mr. Nehme agreed to enter into.

                                       33
<PAGE>

     Mr.  Nehme filed suit against us on October 21, 2005, claiming $15,000 owed
in  connection  with monies loaned to us, $113,733.42 in connection with accrued
wages,  $1,458  in 401(k) payments that Mr. Nehme claims he is due, and the loss
of the value of the shares of our stock which he owns as a result of our reverse
stock  split effected in September 2004, as described under the section entitled
"Description  of  Business"  On  November  11,  2005, Mr. Nehme filed an amended
complaint,  which  removed his previous claim regarding the loss of the value of
the  shares  of  his stock which he owns as a result of our reverse stock split.
On  or  about March 20, 2006, we entered into a Settlement and Release Agreement
with  Mr. Nehme (the "Nehme Settlement").  Pursuant to the Nehme Settlement, Mr.
Nehme  agreed to all necessary pleadings to dismiss his previously filed lawsuit
against  us,  with  prejudice  and  we agreed to pay Mr. Nehme $25,483.09 and to
issue him 100,000 shares of our restricted common stock.  Additionally, pursuant
to the Nehme Settlement, we, Mr. Nehme, our agents, representatives, and assigns
agreed  to  release,  acquit  and forever discharge each other, together and our
employees,  affiliates,  representatives, assigns, and in Mr. Nehme's release of
us, our directors and officers and parent and subsidiary organizations, from and
against  any  and  all  claims,  demands, obligations, liabilities and causes of
action,  of  any  nature  whatsoever,  at law or equity, asserted or unasserted,
known or unknown, fixed or contingent, liquidated or unliquidated, including but
not  limited  to Mr. Nehme's previously disclosed lawsuit against us.  The Nehme
Settlement,  however,  did not include the release by Nehme of any claim against
any  third  parties  in  connection with his ownership of rights or interests in
intellectual  property  that  was  previously  possessed  or  owned  by  Vertica
Software,  Inc.,  which  was  our  former  name  up to the date of the Exchange,
described  above.

     On  or  about  December  23, 2005, we finalized a Settlement Agreement with
William  F.  Mason, our former Chief Executive Officer and Director ("Mason" and
the  "Mason  Settlement"). In connection with the Mason Settlement, we and Mason
agreed  to rescind the Agreement between us and ERC Solutions, Inc. ("ERC"), our
wholly  owned  subsidiary,  which  was  entered  into  in  March 2005, and which
provided  for  ERC  to  indemnify us against certain liabilities, and to rescind
certain  provisions  of  the  Reorganization  (as  defined  below)  and  related
agreements  entered  into  between us and Mason; we and Mason agreed to release,
acquit,  and  forever  discharge  each  other  from  any  and all claims, debts,
demands, actions, cause of actions, suits, contracts, agreements and liabilities
whatsoever,  in law or equity (other than the terms of the Mason Settlement) and
other  than  those  claims  or liabilities which arise or relate to any business
operated  by Mason for the period from October 1, 2004 forward; and Mason agreed
to make himself available and help the Company in connection with any subsequent
claims  or  lawsuits  made  against  the  Company  which  date back prior to the
September  30,  2004  Plan  of  Reorganization  ("Reorganization")  entered into
between  the  Company  and  Century Resources, Inc. In connection with the Mason
Settlement, Mason agreed to convert his 5,000 shares of Series A Preferred Stock
into  1,100,000  shares  of  our  common  stock,  which  shares  were previously
convertible into 1,500,000 shares of our Common Stock, as each share of Series A
Preferred  Stock  was  able  to  convert  into  300  shares of our Common Stock.
Additionally,  the  Mason  Settlement  amended  the  Agreement  and  Plan  of
Distribution  ("Distribution  Agreement")  entered  into  in connection with the
Reorganization, to remove the requirement that the shares of common stock of ERC
be  registered  and  distributed  to  our shareholders of record as of the prior
distribution  date.  As  a  result  of  this  amendment,  it  is unlikely that a
Registration  Statement  will  be filed to register and distribute the shares of
ERC.  Mason  has since been issued the 1,100,000 shares of common stock pursuant
to  the  Mason  Settlement.

                                       34
<PAGE>

     In  February  2006,  the Board of Directors approved the dissolution of ERC
Solutions,  Inc.,  one  of  our  former  wholly owned subsidiaries. The State of
Delaware authorized the dissolution on February 9, 2006.

     Other than the above, the Company is not a party to, and its properties are
not  the  subject of, any material pending legal proceeding nor to the knowledge
of the Company, are any such legal proceedings threatened against the Company.

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

     None.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     "Bid"  and  "asked"  offers  for  the common stock are listed on the NASDAQ
OTC-Bulletin  Board  published  by the National Quotation Bureau, Inc. Below are
the  high and low bid prices for the Company's Common Stock for the past two (2)
fiscal  years.  On  November  2,  2004  in  connection with the Exchange and the
Company's change in business focus, the Company changed its name to "New Century
Energy  Corp."  and  the  Company's  securities  began  trading under the symbol
"NCEY." Previous to the Company's name change and the Exchange, described above,
the  Company's  securities  traded  under  the  symbol  "VERI."

     The  following  table  sets  forth  the  high  and  low  bid prices for the
Company's  common  stock  for  the  periods  indicated as reported by the NASDAQ
OTC-Bulletin  Board.  The quotations reflect inter-dealer prices, without retail
mark-up,  mark-down  or  commission  and  may not represent actual transactions.

                                         BID PRICES(1)
             QUARTER ENDED          HIGH             LOW
             -------------          ----             ---

             December 31, 2005      $0.50           $0.15
             September 30, 2005     $0.57           $0.325
             June 30, 2005          $1.70           $0.53
             March 31, 2005         $1.75           $0.70

             December 31, 2004      1.25            $0.55
             September 30, 2004(1)  1.30            $0.06
             June 30, 2004          1.90            $0.70
             March 31, 2004         3.40            $1.10

(1)  The  Company  affected  a  1  for  100  reverse  stock  split  effective
     September  30,  2004,  and  the bid prices for the quarters ended March 31,
     2003 to September 30, 2004 retroactively reflect this split.

     There  were 476 holders of record of the common stock as of March 31, 2006.
The  Company  has  never  paid  a cash dividend on its common stock and does not
anticipate the payment of a cash dividend in the foreseeable future. The Company
intends  to  reinvest in its business operations any funds that could be used to
pay a cash dividend. The Company's common stock is considered a "penny stock" as

                                       35
<PAGE>

defined  in  the  Commission's  rules  promulgated  under  the  Exchange Act. In
general,  a security which is not quoted on NASDAQ or has a market price of less
than  $5.00  per share where the issuer does not have in excess of $2,000,000 in
net tangible assets (none of which conditions the Company meets) is considered a
penny  stock.  The  Commission's  rules regarding penny stocks impose additional
sales  practice  requirements  on  broker-dealers  who  sell  such securities to
persons  other  than  established  customers and accredited investors (generally
persons  with  net  worth  in excess of $1,000,000 or an annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by the
rules,  the  broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction prior
to  the  sale.  Thus  the Rules affect the ability of broker-dealers to sell the
Company's  shares  should  they wish to do so because of the adverse effect that
the  Rules have upon liquidity of penny stocks. Unless the transaction is exempt
under  the  Rules,  under  the  Securities  Enforcement Remedies and Penny Stock
Reform  Act  of  1990,  broker-dealers  effecting customer transactions in penny
stocks  are  required  to  provide  their  customers  with (i) a risk disclosure
document;  (ii)  disclosure  of  current  bid  and  ask quotations if any; (iii)
disclosure  of  the compensation of the broker-dealer and its sales personnel in
the transaction; and (iv) monthly account statements showing the market value of
each  penny stock held in the customer's account. As a result of the penny stock
rules  the  market  liquidity  for  the  Company's  securities  may  be severely
adversely  affected  by  limiting  the  ability  of  broker-dealers  to sell the
Company's  securities  and the ability of purchasers of the securities to resell
them.

RECENT SALES OF UNREGISTERED SECURITIES

     On  December  19, 2005, we issued 1,100,000 shares of our restricted common
stock  to William F. Mason, in connection with his conversion of 5,000 shares of
our  Series  A  Convertible Preferred Stock pursuant to the Settlement Agreement
entered  into  between  us  and Mason on December 19, 2005 (described in greater
detail  above). We claim an exemption from registration afforded by Section 4(2)
of  the  Act since the foregoing issuance did not involve a public offering, the
recipient  took the shares for investment and not resale and we took appropriate
measures  to  restrict  transfer. No underwriters or agents were involved in the
foregoing  issuance  and  we  paid  no  underwriting  discounts  or commissions.

     On  December  30, 2005, we granted Laurus the December Option, which allows
Laurus  to  purchase  up  to 5,061,392 shares of our common stock at an exercise
price  of  $0.001 per share. We claim an exemption from registration afforded by
Regulation  S  of  the  Act  ("Regulation  S") for the above issuances since the
issuances  were  made  to  a  non-U.S. person (as defined under Rule 902 section
(k)(2)(i) of Regulation S), pursuant to an offshore transaction, and no directed
selling  efforts  were  made  in  the  United  States  by us, a distributor, any
respective  affiliates,  or any person acting on behalf of any of the foregoing.

     In  March  2006,  we  issued  our  former officer and employee, Hans Nehme,
100,000  restricted shares of our restricted common stock in connection with our
entry into a Settlement and Release Agreement with Mr. Nehme, as described above
under  Item  1.01,  Description  of Business, "Recent Events," and Item 3, Legal
Proceedings.  We  claim  an exemption from registration afforded by Section 4(2)
of  the  Act since the foregoing issuance did not involve a public offering, the
recipient  took the shares for investment and not resale and we took appropriate
measures  to  restrict  transfer. No underwriters or agents were involved in the
foregoing  issuance  and  we  paid  no  underwriting  discounts  or commissions.

                                       36
<PAGE>

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

     This  report  contains  forward  looking  statements  within the meaning of
Section  27a  of  the  Securities  Act of 1933 and Section 21e of the Securities
Exchange  Act  of  1934. These forward looking statements are subject to certain
risks  and  uncertainties  that  could cause actual results to differ materially
from  historical results or anticipated results, including those set forth under
"Risk  Factors"  in  this  Management's  Discussion  and  Analysis  of Financial
Condition and Results of Operations" and elsewhere in this report. The following
discussion  and  analysis should be read in conjunction with "Selected Financial
Data"  and  the  Company's  financial  statements  and  notes  thereto  included
elsewhere  in  this  report.

                               PLAN OF OPERATIONS
OVERVIEW

     During  2005,  we enjoyed the benefit of strong oil and gas price increases
as  the  year  progressed.   We  also grew our operations externally through two
successful  acquisitions  of mineral interests in a producing gas property known
as  the  Lindholm-Hanson Gas Unit & Wells ("L-H Gas Unit"), located south of San
Antonio,  Texas.  A  third  acquisition of working interest in the same property
was  also completed early in January 2006.  Our consolidated balance sheet as of
December  31,  2005, reflects approximately $29 million in total assets; and our
total oil and gas proved reserves as of January 1, 2006 are 1,464,667 equivalent
barrels, of which 1,110,166 equivalent barrels were contributed by the first two
L-H  Gas  Unit  acquisitions.

     We achieve production and proved reserve growth primarily through producing
property acquisitions, followed by low-risk development generally funded by cash
flow  from  operating activities.  In a trend that began in 2004 and accelerated
during  2005,  prices  for  natural  gas,  natural gas liquids and oil increased
significantly.  The higher prices have led to increased activity in the industry
and,  consequently,  rising  costs.  Drilling  rig counts are at levels not seen
since  the  last  boom  in the early 1980s and labor to run the rigs is in short
supply.  This  was  further  aggravated by the damage in the Gulf of Mexico as a
result  of  the  August  and  September  hurricanes.  These cost trends have put
pressure  not only on our operating costs, but also our capital costs.  With the
increased  activity,  there  is also increased demand for oil and gas properties
which  has  resulted  in  higher  acquisition  prices.

     Like  all  oil  and  gas  exploration and production companies, we face the
challenge  of  natural  production  decline.  An  oil  and  gas  exploration and
production company depletes part of its asset base with each unit of oil and gas
it  produces.  Despite  this  natural  decline,  we  have  been able to grow our
production  through acquisitions and development of existing fields, adding more
reserves  than we produce.  Future growth will depend on our ability to continue
to  add  reserves  in  excess  of  production.

     We  were  able  to  finance  our  acquisition  growth  by securing two debt
instruments during 2005: a Convertible Note for $15.0 million and a Secured Term
Note for $9.5 million.  The Convertible Note contained freestanding and embedded
derivatives  which  resulted  in  the  recording  of over $7 million in non-cash
income  due  to  the  net  decrease  in  the  fair  value  of  these  derivative
liabilities.  This  net decrease in fair value was primarily driven by a fall in
the  price  of  our common stock during the second half of 2005.  Therefore, our
results  of operations in the future could be favorably or adversely affected by

                                       37
<PAGE>

the  change  in  our  stock  price,  so  long  as  the  Convertible Note remains
outstanding.  The  non-cash  gain on the derivatives was substantially offset by
$11.2  million  of  charges  related  to  the  Convertible Note, namely interest
expense,  amortization  of  discount and an early debt extinguishment related to
the  third  amendment  to  the  Convertible  Note.

     We  were  also  successful in reaching settlements on certain legal matters
during  2005 and early 2006, arising from the reverse merger in 2004, which will
provide  for  increased  focus  on  oil  and  gas  operations  in  2006.

     Our  goal  for  2006  is  to increase reserves by 100% to 150%.  To achieve
future  production  and  reserve growth, we will continue to pursue acquisitions
that meet our criteria, and to complete development projects in our inventory of
potential  drilling  locations.  Our  2006  development  drilling  budget  is
$4,700,000.  While  an  acquisition  budget  has not been formalized, we plan to
actively  review  additional  acquisition  opportunities during 2006.  We cannot
ensure  that  we  will  be  able  to  find  properties that meet our acquisition
criteria,  that  we  can purchase such properties on acceptable terms, or secure
the  necessary  funding  to  close  additional  acquisitions.

OPERATED  PROPERTIES:

     As  of  December  31,  2005, we estimated that our daily deliverability was
approximately  2,000  Mcf  of  gas  per  day, and 70 Bpd of crude oil on Company
operated properties. Due to a subsequent work-over in Sargent South, as of March
1,  2006, our daily gas deliverability increased to 2,600 MCF of gas per day. We
plan to continue our recompletion and drilling program on our owned and operated
properties  and  undeveloped  acreage  throughout  2006  and  beyond.

     During  2005,  we  continued interpretation of our 3-D seismic data base in
Matagorda  County,  Texas.  We received results of our first reprocessed seismic
data  in  the  first  quarter  of  2005  and  completed  the  first phase of our
structural  and  stratigraphic  interpretation in the fourth quarter of 2005. We
believe  that  the  reprocessed  3-D seismic data allows us to better locate and
optimize  the  structural  placement  of  our  new  drilling  locations.

     While  it  is extremely difficult to accurately forecast future production,
we  believe  that our recompletion and drilling program in Matagorda County will
provide long-term production growth potential and will be an important source of
our  reserve  growth  for  the  foreseeable  future.

NON-OPERATED  PROPERTIES:

     On  June  30,  2005,  we closed the acquisition of the various non-operated
working,  term royalty and overriding royalty interests in the Wishbone Field in
McMullen  County,  Texas, with an effective date for ownership of April 1, 2005.
On  September  19,  2005,  we  closed  the  acquisition  of  additional  various
non-operated  working interests in the Wishbone Field in McMullen County, Texas,
with  an  effective  date  for ownership of July 1, 2005. On January 3, 2006, we
closed  the  acquisition of an additional working interest in the Wishbone Field
in  McMullen  County,  Texas  with an effective date for ownership of October 1,
2005.   The purchase of the June 2005, September 2005 and January 2006 interests
are  described  in  greater  detail  above  under  "Description  of  Business."

                                       38
<PAGE>

     As  of  December  31,  2005, we estimate that daily gas deliverability from
Wishbone Field was approximately 40 MMCF of gas per day to the 8/8 ths interest,
with  net production to the Company's working interest (13.45%) of approximately
5.38  MMCF  of  gas  per  day.

     We  believe  this  was  a  significant  acquisition  for  us  as  we  added
considerable  natural gas reserves, which we believe will increase our cash flow
significantly.  As of January 1, 2006, our third party engineers have attributed
over  6.661  billion cubic feet of net proved gas reserves in the Wishbone Field
to  us,  with  approximately  $46  million  of  undiscounted  future  net income
attributed  to  our  interests  in  the  Wishbone  Field. The acquisition of the
Wishbone interest helped to increase our proved gas reserves by over 700% from a
total of 1.0 billion cubic feet of gas to a total of over 8.0 billion cubic feet
of  gas.

     We  currently  have  development  plans  in  the  Wishbone  Field  to drill
additional  new  well  locations  to  exploit  proven, probable and possible gas
reserves. In July 2005, drilling operations commenced on the Lindholm-Hanson Gas
Unit  #10  well,  which  reached  total  depth  on  July  21, 2005 and commenced
production  on August 15, 2005. In August 2005, drilling operations commenced on
the  Lindholm-Hanson  Gas Unit #11 well, which commenced production on September
17,  2005.  In September 2005, drilling operations commenced on the Lindholm Fee
#1  well,  which  commenced  production  on  October 10, 2005. In November 2005,
drilling  operations  commenced  on  the  Lindholm-Hanson  Gas  Unit  #9 , which
commenced  production  on  December  17, 2005. In addition to these recent wells
there  is the possibility of two additional new locations to be drilled in 2006.

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting principles in the United States requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of  assets,
liabilities,  revenues,  expenses,  contingent  assets  and  liabilities and the
related  disclosures  in the accompanying financial statements. Changes in these
estimates  and  assumptions  could  materially  affect  our  financial position,
results of operations or cash flows. Management considers an accounting estimate
to be critical if: (a) it requires assumptions to be made that were uncertain at
the  time  the  estimate  was made, and (b) changes in the estimate or different
estimates  that  could  have  been  selected could have a material impact on our
consolidated results of operations or financial condition. All other significant
accounting  policies  that  we  employ  are  presented  in  the  notes  to  the
consolidated financial statements. The following discussion presents information
about  the  nature of our most critical accounting estimates, our assumptions or
approach  used  and  the  effects  of  hypothetical  changes  in  the  material
assumptions  used  to  develop  each  estimate.

Oil  and  Gas  Properties.  -

     We follow the successful efforts method of accounting for our investment in
oil  and  natural gas properties. Under the successful efforts method, the costs
of  successful  exploratory  wells and leases containing productive reserves are
capitalized.  Costs  incurred  to drill and equip developmental wells, including
unsuccessful  development wells, are capitalized. Other costs such as geological
and  geophysical  costs and the drilling costs of unsuccessful exploratory wells
are expensed.

                                       39
<PAGE>

All capitalized costs are accumulated and recorded separately for each field and
allocated  to  leasehold costs and well costs. Leasehold costs are depleted on a
units-of-production basis based on the estimated remaining equivalent proved oil
and gas reserves of each field. Well costs are depleted on a units-of-production
basis  based  on the estimated remaining equivalent proved developed oil and gas
reserves  of  each  field.

Proved  Reserve  Estimates.  -

     Our  estimate  of proved reserves is based on the quantities of oil and gas
which geological and engineering data demonstrate, with reasonable certainty, to
be recoverable in future years from known reservoirs under existing economic and
operating  conditions. The accuracy of any reserve estimate is a function of the
quality  of  available  data,  engineering  and  geological  interpretation, and
judgment.  For  example,  we  must  estimate  the  amount  and  timing of future
operating costs, severance taxes, development costs, and work-over costs, all of
which  may in fact vary considerably from actual results. In addition, as prices
and  cost  levels  change  from  year  to  year,  the economics of producing the
reserves  may  change  and  therefore  the  estimate of proved reserves also may
change.  Any  significant  variance in these assumptions could materially affect
the  estimated  quantity  and  value  of  our  reserves.  Despite  the  inherent
imprecision in these engineering estimates, our reserves are used throughout our
financial  statements.  When  converting  proved  gas  reserves to barrel of oil
equivalent,  we  use  a conversion factor of 6,000:1, or 6,000 cubic feet of gas
equaling 1 barrel of oil.

Long-Lived  Assets  -

     We  review  long-lived  assets for impairment whenever events or changes in
circumstances  indicate  that  the  carrying amount of any such asset may not be
recoverable. We record impairment losses on long-lived assets, including oil and
gas properties, used in operations when the estimated cash flows to be generated
by  those assets are less than the carrying amount of those items. Our cash flow
estimates  are  based  upon,  among other things, historical results adjusted to
reflect  our best estimate of future market rates, utilization levels, operating
performance,  and  with  respect  to  our oil and gas properties, future oil and
natural  gas sales prices, an estimate of the ultimate amount of recoverable oil
and  natural gas reserves that will be produced from a field, the timing of this
future  production,  future  costs  to produce the oil and natural gas and other
factors.  Our  estimate  of  fair  value  represents  our best estimate based on
industry  trends  and  reference  to  market  transactions  and  is  subject  to
variability.  The  oil  and  gas  industry  is cyclical and our estimates of the
period  over  which  future  cash  flows  will  be  generated,  as  well  as the
predictability  of these cash flows, can have significant impact on the carrying
value  of  these  assets and, in periods of prolonged down cycles, may result in
impairment charges.

Asset  Retirement  Obligations  -

     We  have  certain obligations to remove tangible equipment and restore land
at  the  end  of  oil and gas production operations. Our removal and restoration
obligations  are  primarily  associated  with  plugging and abandoning wells. We
adopted Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting
for Asset Retirement Obligations effective January 1, 2003, as discussed in Note
2  to  our Consolidated Financial Statements. SFAS No. 143 significantly changed
the method of accruing for costs an entity is legally obligated to incur related
to  the  retirement  of  fixed assets ("asset retirement obligations" or "ARO").
Primarily, SFAS No. 143 requires us to estimate asset retirement costs for all

                                       40
<PAGE>

of  our  assets,  adjust  those  costs for inflation to the forecast abandonment
date,  discount  that  amount using a credit-adjusted-risk-free rate back to the
date  we  acquired the asset or obligation to retire the asset and record an ARO
liability  in that amount with a corresponding addition to our asset value. When
new  obligations are incurred, i.e. new well drilled or acquired, we add a layer
to  the  ARO liability. We then accrete the liability layers quarterly using the
applicable  period-end effective credit-adjusted-risk-free rates for each layer.
Should  either  the  estimated  life  or  the  estimated  abandonment costs of a
property  change upon our quarterly review, a new calculation is performed using
the  same methodology of taking the abandonment cost and inflating it forward to
its  abandonment  date  and  then  discounting  it back to the present using our
credit-adjusted-risk-free  rate.  The  carrying  value  of  the asset retirement
obligation  is  adjusted  to  the  newly  calculated value, with a corresponding
offsetting adjustment to the asset retirement cost; therefore, abandonment costs
will  almost always approximate the estimate. When well obligations are relieved
by  sale  of  the  property  or  plugging  and  abandoning the well, the related
liability  and  asset  costs  are  removed  from  our  balance  sheet.

Derivatives  -

     We  follow  the  provisions  of  SFAS  No.  133  "Accounting for Derivative
Instruments  and  Hedging  Activities"  ("SFAS  No.  133")  along  with  related
interpretations  EITF No. 00-19 "Accounting for Derivative Financial Instruments
Indexed  to,  and Potentially Settled in, a Company's Own Stock" ("EITF-19") and
EITF  No.  05-2  "The  Meaning  of 'Conventional Convertible Debt Instrument' in
Issue  No.  00-19"  ("EITF  05-2").  SFAS  No.  133  requires  every  derivative
instrument  (including  certain  derivative  instruments  embedded  in  other
contracts)  to  be recorded in the Balance Sheet as either an asset or liability
measured  at  its  fair  value,  with  changes  in  the  derivative's fair value
recognized  currently  in earnings unless specific hedge accounting criteria are
met.

     We value these derivative securities under the fair value method at the end
of  each  reporting period (quarter), and their value is marked to market at the
end  of each reporting period with the gain or loss recognition recorded against
earnings. We continue to revalue these instruments each quarter to reflect their
current  value  in  light  of the current market price of our common stock. As a
result,  our financial statements may fluctuate from quarter to quarter based on
the  change  in  fair  value  of  the derivatives and therefore our consolidated
financial position and results of operations may vary significantly from quarter
to quarter, based on factors other than the Company's revenues and expenses.

     We  utilize  the  Black-Scholes  option-pricing model to determine the fair
value  of  our  freestanding  derivative  instruments.  Key  assumptions  of the
Black-Scholes  option-pricing  model  include  applicable  volatility  rates,
risk-free  interest  rates  and the instruments expected remaining life. We also
determined  a  fair  value  for  our various embedded derivatives within our $15
million convertible note by using a layered discounted probability-weighted cash
flow  model.  The  assumptions  used  in  both  modeling  techniques  required
significant  management  judgment  and  estimates of future fluctuation in stock
price  as  well as changes in future interest rates. The reader should reference
Note  5  in the "Notes to Consolidated Financial Statements" for further details
in  regards  to  our  derivative  liabilities.

     We have developed the following chart which shows the positive and negative
effects  on  our net loss if there was a change in the value of our common stock
at  December  31,  2005, which was $0.17 per share. With the possibility of only
the share price changing in the valuation of the derivative liabilities, the

                                       41
<PAGE>

following  chart  shows  the net effect on our net loss from a change of plus or
minus  a  10%  or  50%  of  the value of our common shares on December 31, 2005.

<TABLE>
<CAPTION>
                                         +10%          +50%          -10%        -50%
                                       -------       --------      --------    ---------
<S>                                      <C>            <C>          <C>           <C>
Possible company stock price             $.187          $.225         $.153        $.85
Increase (decrease) in fair value
 of the derivative liabilities*       $294,461     $1,483,673     $(293,027)  ($1,455,540)
                                       =======      =========      ========    =========
</TABLE>

Extinguishment  of  Debt  -

     We  follow  the  provisions  of  SFAS No. 140 "Accounting for Transfers and
Servicing  of  Financial  Assets  and Extinguishments of Liabilities" ("SFAS No.
140")  along  with  related  interpretations from Emerging Issues Task Force No.
96-19 ("EITF No. 96-19"). The Task Force reached a consensus that an exchange of
debt instruments with substantially different terms is a debt extinguishment and
should  be  accounted  for  in accordance with paragraph 16 of SFAS No. 140. The
Task Force also observed that a debtor could achieve the same economic effect by
making  a  substantial  modification  of  terms  of an existing debt instrument.
Accordingly,  the Task Force reached a consensus that a substantial modification
of  terms  should  be accounted for like, and reported in the same manner as, an
extinguishment of debt.

     From the debtor's perspective, an exchange of debt instruments between or a
modification  of  a debt instrument by a debtor and a creditor in a non-troubled
debt  situation  is  deemed to have been accomplished with debt instruments that
are  substantially  different  in  the present value of the cash flows under the
terms  of  the  new  debt  instrument  is at least 10 percent different from the
present  value  of  the  remaining  cash  flows  under the terms of the original
instrument.  With  the  Third Amendment to the Convertible Note and the December
Option,  the  Company  feels  that  a  substantial  modification in terms of the
Convertible Note has occurred. Upon further analysis, the Company has determined
that  a  greater  than  10% difference in the net present value of the remaining
cash  flows  of  both the original Convertible Note and the New Convertible Note
has  occurred.  Therefore, the Company has extinguished the original Convertible
Note,  along with the related unamortized discounts and deferred loan costs, and
recorded  the  New  Convertible Note at its fair value on December 30, 2005. The
extinguishment  required the Company to record an extinguishment debt expense of
$8,309,759.

Income  Taxes  -

     The  amount  of  income taxes recorded by us requires the interpretation of
complex  rules  and  regulations  of various taxing jurisdictions throughout the
world.  We  have  recognized  deferred  tax  assets  and  liabilities  for  all
significant  temporary  differences,  operating  losses  and  tax  credit
carryforwards.  We routinely assess the realizability of our deferred tax assets
and  reduce  such  assets by a valuation allowance if it is more likely than not
that  some  portion  or  all of the deferred tax assets will not be realized. We
routinely  assess  potential  tax  contingencies  and,  if  required,  establish
accruals  for  such  contingencies.  The  accruals  for  deferred tax assets and
liabilities  are subject to a significant amount of judgment by us and we review
and  adjust routinely our estimates based on changes in facts and circumstances.
Although  we  believe  our  tax accruals are adequate, material changes in these
accruals  may  occur in the future, based on the progress of ongoing tax audits,
changes  in  legislation  and  resolution  of  pending  tax  matters.

                                       42
<PAGE>

Stock-Based  Compensation.-

     On  December  16,  2004,  the  FASB  issued  SFAS  No.  123(R),"Share-Based
Payment",  which  is  a  revision  of  SFAS No. 123, "Accounting for Stock-Based
Compensation."  SFAS  No.  123(R) supersedes Accounting Principles Board ("APB")
Opinion  No. 25, "Accounting for Stock Issued to Employees", and amends SFAS No.
95,  "Statement  of  Cash  Flows." Generally, the approach in SFAS No. 123(R) is
similar  to  the  approach  described  in SFAS No. 123; however, SFAS No. 123(R)
requires  all  share-based  payments  to employees, including grants of employee
stock options, be recognized in the income statement based on their fair values.
Pro forma disclosure will no longer be an alternative.

SFAS  No. 123(R) permits public companies to adopt its requirements using one of
two  methods:

     1.   A  "modified  prospective"  method  in  which  compensation  cost  is
          recognized  beginning  with  the  effective  date  (a)  based  on  the
          requirements  of  SFAS No. 123(R) for all share-based payments granted
          after the effective date and (b) based on the requirements of SFAS No.
          123 for all awards granted to employees prior to the effective date of
          SFAS No. 123(R) that remain unvested on the effective date.

     2.   A  "modified  retrospective"  method  which  includes the requirements
          of  the  modified prospective method described above, but also permits
          entities  to  restate based on the amounts previously recognized under
          SFAS  No.  123  for  purposes  of pro forma disclosures either (a) all
          prior  periods  presented  or (b) prior interim periods of the year of
          adoption.

We  have  elected  the  modified  prospective  transition  method.

     In  March  2005,  the  SEC issued Staff Accounting Bulletin ("SAB") No. 107
which  expressed the views of the SEC regarding the interaction between SFAS No.
123(R)  and  certain  SEC  rules  and regulations. SAB No. 107 provides guidance
related  to  the  valuation  of  share-based  payment  arrangements  for  public
companies,  including assumptions such as expected volatility and expected term.
In  April  2005, the SEC approved a rule that delayed the effective date of SFAS
No.  123(R) for public companies. As a result, SFAS No. 123(R) will be effective
for  us  on  January  1,  2006.

Accounting  pronouncements

     In  March  2005,  the  Financial  Accounting  Standards  Board  issued FASB
Interpretation  No.  47,  "Accounting  for  Conditional  Asset  Retirement
Obligations".  Under  the  provisions  of FIN No. 47, the term conditional asset
retirement  obligation as used in SFAS No. 143, "Accounting for Asset Retirement
Obligations",  refers  to  a  legal  obligation  to  perform an asset retirement
activity  in  which  the timing and/or method of settlement are conditional on a
future  event  that may or may not be within the control of the entity while the
obligation  to  perform  the  asset  retirement  activity  is  unconditional.
Accordingly,  an  entity is required to recognize a liability for the fair value
of  a conditional asset retirement obligation if the fair value of the liability
can  be  reasonably estimated. The fair value of a liability for the conditional
asset retirement obligation is required to be recognized when incurred-generally
upon  acquisition,  construction,  or  development  and/or  through  the  normal
operation  of  the  asset.  We  have adopted FIN No. 47 as of December 31, 2005.

                                       43
<PAGE>

     Adoption  of  this  pronouncement  did not have a significant effect on our
2005  consolidated financial statements, and we do not expect this pronouncement
to  have  a  significant  effect  on  our  future reported financial position or
earnings.

     In July 2005, the Financial Accounting Standards Board issued SFAS No. 154,
"Accounting  for  Changes  and Error Corrections" - A Replacement of APB Opinion
No.  20  and  FASB  Statement  No.  3.  Under  the provisions of SFAS No. 154, a
voluntary  change  in accounting principle requires retrospective application to
prior  period  financial  statements,  unless  it  is impracticable to determine
either  the  period-specific  effects  or the cumulative effect of the change. A
change  in  depreciation,  amortization,  or  depletion  method  for long-lived,
non-financial  assets  must  be accounted for as a change in accounting estimate
affected  by a change in accounting principle. The guidance contained in Opinion
No.  20  for reporting the correction of an error in previously issued financial
statements  and  a  change  in  accounting  estimate  was  not  changed.  We are
implementing  this  new  standard  as  of  January 1, 2006. This standard is not
expected  to  have  a  significant  effect on our reported financial position or
earnings.

RESULTS OF OPERATIONS:

Comparison of the Results of Operations for the Years Ended December 31, 2005
and 2004

Revenues -

Our revenues are summarized as follows for the year ended December 31:

                                                      2005              2004
                                                 ----------          ----------
Oil sales                                        $1,108,613          $  761,581
Gas sales                                         5,810,271             952,862
                                                 ----------          ----------
Oil and gas sales                                 6,918,884           1,714,443
Gain on sale of oil and gas interest                 98,181             101,138
Gain on sale to participate in future
  Property acquisitions                                                 290,000
                                                 ----------          ----------
          Total revenues                         $7,017,065          $2,105,581
                                                 ==========          ==========

     Our  oil  and  gas  sales  are principally to two gas customers and one oil
customer  in  the  State  of Texas. Oil and gas sales increased by approximately
$5.2  million, or 304% for the year ended December 31, 2005, compared to oil and
gas  sales  for  the  prior year, principally due to $4,615,334 of increased gas
sales from our acquisitions of the Lindolm-Hanson Gas Unit (the "L-H Gas Unit");
increases of $400,205 in our oil production in our Herrera and Tenna fields; and
$242,074 of increased gas production in our Sargent South field, during the year
ended  December  31, 2005, compared to the year ended December 31, 2004. For the
year  ended  December  31,  2005,  average  oil prices per barrel were $53.63 as
compared  to average oil prices per barrel of $39.78 for the year ended December
31, 2004; and average gas prices increased from $5.08 per MCF for the year ended
December 31, 2004, to $7.10 per MCF for the year ended December 31, 2005.

                                       44
<PAGE>

Expenses-

Our expenses comprised the following for the year ended December 31:

                                                      2005              2004
                                                 ----------          ----------
Operating expenses                               $1,168,124          $  634,445
Depreciation, depletion and amortization          2,177,485             335,586
General and administrative                        2,296,879           4,158,022
                                                 ----------          ----------
            Total expenses                       $5,642,488          $5,128,053
                                                 ==========          ==========

     Operating  expenses  (lease  operating,  production  taxes  and exploration
costs)  increased  by  $533,679,  or  84%  for the year ended December 31, 2005,
compared  to  the  year  ended  December  31,  2004, which increases were mainly
attributed  to  additional  production  taxes  of  $346,456 and additional lease
operating costs of $170,435 arising from the L-H Gas Unit Acquisitions.

     Depreciation,  depletion  and  amortization increased by $1,841,899 for the
year  ended December 31, 2005, compared to the year ended December 31, 2004, due
to  the  $22,315,018  increase  in  our  depletable  asset  base  in oil and gas
properties as a result of our two acquisitions of interests in the L-H Gas Unit.

     General  and  administrative  expenses decreased by $1,861,143, or 45%, for
the  year ended December 31, 2005, compared to the year ended December 31, 2004,
which  decrease was primarily associated with greater consulting expenses during
the year ended December 31, 2004, due to common stock issued for services.

Other Income (Expense)-

Other income (expense) consisted of the following for the year ended December
31:

                                                      2005             2004
                                                 ----------         ----------
Net decrease in fair value of derivative
    liabilities                                 $ 7,117,882        $         -
Loss on early extinguishment of debt             (8,309,759)                 -
Interest and amortization of discount
    on debt expense                              (3,872,265)          (250,590)
Vertica-related items                               312,895           (718,488)
All other, net                                      (22,154)                 -
                                                 ----------         ----------
          Other income (expense), net           $(4,773,401)        $  (969,078)
                                                 ==========         ==========

     The  convertible  note  financing  for the first acquisition of the L-H Gas
Unit during the year ended December 31, 2005, comprised freestanding derivatives
of  warrants and options issued to the lender, and embedded derivatives relating
to  a  conversion feature, a contract rate adjustment and an optional redemption
provision  which  were  bundled  together  into  a  single  compound  embedded
derivative. These derivative liabilities are marked-to-market each quarter, with
the  change  in  fair value recorded in our income statement. For the year ended
December  31,  2005,  the  net decrease in fair value, or increase in income, by
derivative  was  as  follows:

Single compound embedded derivative within Convertible Note       $  675,637
Laurus Stock Option                                                3,571,005
Laurus Warrant                                                     2,871,240
                                                                   ---------
          Net decrease in fair value of derivative liabilities    $7,117,882
                                                                   =========

                                       45
<PAGE>

     The  Black-Scholes  Method  is  utilized  in  determining fair value of the
Laurus  Stock  Option and Laurus Warrant. As a result of a decrease in the price
of  our  common  stock  during  the second half of 2005, the fair value of these
derivative  liabilities decreased sharply over the six month period beginning on
the  date they were issued and ending on December 31, 2005. A layered discounted
probability-weighted  expected cash flow method is used for determining the fair
value  of  the  single  compound  embedded derivative. The effect of the smaller
initial  assigned  fair market value to the single compound embedded derivative,
together  with  our  stock  price  representing  only  one  component  of  the
methodology,  resulted  in  the  effect  on  income  not  being  as great as the
freestanding  derivatives.  So long as the Convertible Note remains outstanding,
the  quarterly  mark-to-market adjustments to these derivative liabilities could
produce wide fluctuations in our financial position and results of operations.

     On  December  30,  2005,  we  executed a Third Amendment to the Convertible
Note, whereby additional options were granted to the lender as consideration for
a deferral of scheduled principal payments and registration "effectiveness" with
the  SEC.  This  amendment  triggered an early extinguishment of the Convertible
Note  for  financial  reporting  purposes, and resulted in a loss of $8,309,759,
representing  the fair value of the additional options granted and the change in
fair  value of the single compound embedded derivative and the extinguishment of
the  related  unamortized  discounts  to the note and related deferred financing
costs.

     Interest and amortization of discount on debt expense of $3,872,265 for the
year  ended  December  31,  2005,  primarily related to the Convertible Note and
includes the following:

                                                                      2005
                                                                   ----------
Interest expense on notional balance                               $1,215,556
Accretion of note discount                                          2,034,910
Amortization of deferred loan costs                                   558,627
                                                                   ----------
Subtotal                                                            3,809,093
Other interest expense                                                 63,172
                                                                   ----------
Total interest expense                                             $3,872,265
                                                                   ==========

     The  interest expense on notional balance during 2005 represents the stated
interest on the Convertible Note, the Secured Term Note and a production payment
loan from the prior year which was paid off in 2005.

     The  accretion  of  note  discount  in  2005 refers to the accretion of the
unamortized  discount  originally established for the derivative liabilities and
financing  cost  paid  to  the  lender at the inception of the Convertible Note,
which is amortized over its life, 36 months.

     Amortization  of  deferred  loan  costs  comprises  financing  fees paid to
non-lenders in connection with the Convertible Note and Secured Term Note, which
are capitalized as deferred financing costs, and amortized over their respective
lives, or three years and six months.

                                       46
<PAGE>

     In  connection  with  the  reverse  merger  with Vertica Software, Inc., in
September  2004,  we  assumed pre-merger liabilities of Vertica in the amount of
$717,540,  which  liabilities were recorded in our results of operations for the
year  ended  December  31,  2004. During 2005, we actively pursued resolution of
these  assumed  liabilities  through settlement and the passage of the statutory
aging  limits, whereby such amounts owed were reduced to $175,558 as of December
31,  2005.  The  change  in  the  Vertica  liabilities in the amount of $541,982
relates  to $509,028 of other income, $7,434 cash payment for various prior year
taxes  and  $25,520  in common stock for legal settlement of outstanding claims.
Additionally,  we  incurred Vertica-related expenses subsequent to the merger in
the  amount  of $196,133, which related to a settlement with outside consultants
and legal and other consulting fees.

Income taxes-

     No  federal income taxes have been paid since inception of the Company, due
to  our net operating loss carryforwards. Due to the uncertainty surrounding the
realization  of the benefits of our tax attributes, including net operating loss
carryforwards,  no  provision  or  benefit  for  federal  income  taxes has been
recorded in our consolidated statements of operations.

Net Loss -

     The  Company  had  a net loss of $3,398,824 for the year ended December 31,
2005,  as  compared  to a net loss of $3,991,550 for the year ended December 31,
2004.  It  should  be noted that approximately $7.1 million of gain from the net
decrease in fair value of derivative liabilities was recorded in 2005 due to the
mark-to-market  accounting  of  our  derivative liabilities. We also recorded an
extinguishment  of debt expense in 2005 of approximately $8.3 million due to the
Third Amendment to the Convertible Note and the December Option which we believe
triggered  an  extinguishment of the original Convertible Note. The Company also
issued stock for services in the amount of $1,602,500 in 2005.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents -

     We  believe  our  cash  and  cash  equivalents  balance of $3,311,665 as of
December  31,  2005,  is  sufficient to meet our working capital requirements in
2006.  On  January  3, 2006, we paid $1,855,749 to the seller in connection with
the  third  acquisition  of  the  L-H  Gas  Unit.  The  remaining  cash and cash
equivalents  balance of $1,455,916 after consideration of the third acquisition,
is  anticipated  to  be supplemented by positive cash flows from operations with
favorable  demand  and  pricing  of  our  oil and gas products. Furthermore, the
six-month  deferral  of  principal payments under the Convertible Note, together
with  the  deferral  of the Secured Term Note until January 2, 2007, will have a
favorable  effect  on  our  projected  2006  cash  flows. We also plan to pursue
attractive  financing  opportunities  to  enable  us  to  pursue our oil and gas
exploration  and  production  program,  including  external  growth  through
acquisition.

Total Assets -

     We  had total assets of $28,649,490 as of December 31, 2005, which included
$6,247,902  of  current  assets,  mainly  comprised  of  $3,311,665  of cash and
$2,387,004 of accounts receivable; $72,490 of land; $62,650 of equipment, net of
$4,115 of accumulated depreciation; $22,177,965 of oil and gas properties net of
accumulated depreciation of $2,934,821; and deferred loan costs of $88,483.

                                       47
<PAGE>

Working capital -

     At  December  31,  2005,  we  had  a working capital deficit of $1,130,315.
Additionally, as of December 31, 2005, we had current liabilities of $7,378,217,
which  included $2,606,607 of notes payable relating to the Convertible Note and
the Secured Term Note and $3,358,747 in derivative liabilities which are subject
to  wide  fluctuations from quarter-to-quarter. Our current assets of $6,247,902
at  December  31,  2005, are substantially liquid as they comprise cash and cash
equivalents  of  $3,311,665  and  accounts  receivable of $2,387,004. We believe
these current assets are sufficient, together with our anticipated positive cash
flow from operations in 2006, to enable us to meet our financial obligations.

Liabilities -

     Total  liabilities  as  of December 31, 2005 were $26,306,843, and included
current  liabilities  of  $7,378,217;  notes  payable in connection with amounts
loaned  to us by Laurus, less current portion and loan costs of $18,623,553; and
asset retirement obligation of $305,073.

Off-balance sheet financing -

     We have not entered into any off-balance sheet financing arrangements.

Change in prices -

     Oil  and  natural gas prices are subject to seasonal and other fluctuations
that are beyond our ability to control or predict.

Inflation -

     Although  certain  of  our  costs and expenses are affected by the level of
inflation,  inflation  has  not  had  a  significant  effect  on  our results of
operations since inception.

Cash flows-

Sources and Uses of Cash                                2005         2004
                                                    ----------    ----------
Net cash provided by /(used in)
  Operating activities                             $  2,044,147   $  642,205
  Investing activities                              (21,762,897)  (1,106,477)
  Financing activities                               22,577,634      840,476
                                                    ----------    ----------
Increase/(decrease) in cash and cash equivalents   $  2,858,884   $  376,204
                                                    ===========    =========

Year ended December 31,                                 2005          2004
                                                     ----------    ---------
Cash and cash equivalents                          $  3,311,665   $  452,781
                                                    ===========    =========

Operating activities -

2005

     Cash  flows  from  operating  activities  of  $2,044,147 for the year ended
December  31,  2005,  were  adversely  impacted by a net loss for the year ended

                                       48
<PAGE>

December  31,  2005,  of  $3,398,824  and  benefited  by non-cash charges to our
results of operations for depletion, depreciation and amortization of $2,177,485
and  stock  for services of $1,602,500. The Company also benefited from positive
cash  flows  in  regards  to  the  Convertible Note-related non-cash adjustments
netting  to $3,785,414 (change in fair value of derivative liabilities, the loss
on  early  extinguishment  of  debt  and  accretion of discount and loan cost on
debt),  and  changes  in  working  capital components netting to $1,497,589, and
other non-cash credits netting to $624,839 for the year ended December 31, 2005.

     For  so  long  as  the Convertible Note is outstanding, our cash flows from
operations  will  be  subject to wide fluctuations as a result of mark-to-market
accounting of the derivative liabilities.

2004

     Cash  flows  from  operating  activities  of  $642,205  for  the year ended
December  31, 2004 were driven by non-cash charges, namely stock for services of
$3,885,000, assumed Vertica liabilities in connection with the reverse merger of
$717,540, and depletion, depreciation and amortization-$335,586; which more than
offset  the  net  loss  for  the  year  of $3,991,550, and other items including
working  capital  components  netting  to  $304,371.  The  assumption of Vertica
liabilities  is  a  one-time  event; however, the issuance of stock for services
occurred in both 2004 and 2005, as well as in 2006.

Investing Activities -

2005

     Cash  flows  used in investing activities of $21,762,897 for the year ended
December  31,  2005,  were  primarily  attributed  to  the  first  and  second
acquisitions  of  the  L-H Gas Unit, which totaled $18,840,592. Additionally, we
made  capital  expenditures for oil and gas properties of $2,639,997 during 2005
in  accordance  with  our  exploration  and  production program. Other investing
activities  netted  to a cash outflow of $282,308 during the year ended December
31, 2005.

     In early January 2006, we completed a third acquisition of the L-H Gas Unit
for  approximately  $1,700,000  million in cash, excluding an initial deposit of
$189,000  paid in 2005. We will be pursuing other oil and gas properties in 2006
and beyond that meet our acquisition criteria. Additionally, we will continue to
make  capital  expenditures  in  the  exploration and production area to further
exploit our oil and gas properties.

2004

     Cash  flows  used  in investing activities of $1,106,477 for the year ended
December  31,  2004,  comprised  our oil and gas program capital expenditures of
$1,672,981,  partially offset by proceeds received on the sale of one of our oil
and gas properties of $569,983, and a minor capital expenditure of $3,479.

     These  expenditures are expected to reoccur in the future based our planned
oil and gas development program.

                                       49
<PAGE>

Financing activities -

2005

     Cash  flows  from  financing  activities  of $22,577,634 for the year ended
December  31,  2005,  were  generated  from proceeds totaling $24,500,000 on the
Convertible  Note  and Secured Term Note in connection with the first and second
acquisitions  of  the  L-H Gas Unit. These proceeds were reduced by the deferred
financing  costs  paid  at  closing  of  $1,805,156,  and retirement of existing
long-term  debt of $776,158. Additionally, our sale of unregistered common stock
netted $655,273 of proceeds during the year.

     The  Convertible Note contained freestanding and embedded derivatives which
resulted  in  the  recording  of  derivative  liabilities  with  quarterly
mark-to-market  adjustments  through  earnings,  which creates volatility in our
financial  position  and  results  of operations. Additionally, these derivative
liabilities  have  produced  a higher effective interest rate when compared with
the  stated  interest  rate  in  the  agreement.

     The Secured Term Note used to finance the second acquisition was originally
due  in March 2006, and we successfully refinanced the debt on a long-term basis
in  March  2006,  whereby  the  maturity  date  of such Secured Term Note is now
January  2,  2007. The amendment calls for interest and principal of the Secured
Term  Note  to be paid monthly through 80% of the income received by the Company
from  our  5.4375% net revenue interest in the Second Acquisition. Such payments
shall  commence  with  gas sales received after March 1, 2006 for the production
month  of  January  2006.  The Company expects to pay approximately $1.1 million
under this amendment during 2006.

2004

     Cash  flows  from  financing  activities  of  $840,476  for  the year ended
December  31,  2004,  were  principally  generated from acquisition financing of
$1,304,500  and  proceeds  from  the sale of common stock of $467,630; which was
partially  offset  by  payments on long-term debt of $734,953 and other net cash
outflows of $196,701.

OUTLOOK-

     Our objective in 2006 is to continue our profitability, whereby we generate
positive cash flows from operations to meet our working capital requirements and
service  our  debt,  namely  the  principal  and  interest  payments  under  the
Convertible  Note  and  the  Amended  Secured  Term  Note.

     Our  strategy  with  respect to our capital program is to maintain a steady
level  of  activity.  We have plans to continue our redevelopment of our Sargent
South  Field,  as  well  as  continued  discussions with possible joint interest
partners  regarding  acquisitions  of underdeveloped reserves.  The L-H Gas Unit
will  continue  its development plan with an additional drilling program for two
new  wells.  We  also  continue  to  reevaluate our Herrera and Tenna fields for
possible  improvement  in  production through added development and exploration.

     Our growth and continued operations could be impaired by limitations on our
access  to  the capital markets. In the event that we do not generate the amount
of  revenues  from  our  oil  and  gas properties which we anticipate, and/or we
decide  to  purchase additional oil and gas properties and are required to raise
additional  financing, we may be forced to scale back our operations which would
have  a  material  adverse  impact upon our ability to pursue our business plan.
There  can  be no assurance that capital from outside sources will be available,
or  if  such financing is available, it may involve issuing securities senior to
our  Common  Stock  or  equity  financings  which are dilutive to holders of our
Common  Stock. In addition, in the event we do not raise additional capital from
conventional sources, it is likely that our growth will be restricted and we may
need  to  scale  back  or  curtail  implementing  our  business  plan.

                                       50
<PAGE>

     We  believe  we can repay our $15,000,000 Secured Convertible Term Note and
$9,500,000 Secured Term Note with Laurus, and interest thereon, with our current
cash  flows  in  connection  with  the  sale of oil and gas, and that even after
repaying the amounts owed to Laurus, we will be able to continue our planned oil
and  gas operations until approximately the end of 2006, assuming that our level
of oil and gas production remains constant or expands and that the prices of oil
and  gas  remain  constant  or  increases.  However,  we  may choose to purchase
additional  properties  in  the future, expand our oil and gas operations and/or
may  find substantially less oil and gas on our properties than we expect, which
could  force  us  to raise additional financing and/or scale back or curtail our
business  operations.

                        RISKS RELATING TO OUR OPERATIONS

WE  WILL  NEED  ADDITIONAL  FINANCING  TO  CONTINUE OUR BUSINESS PLAN AND DRILL,
RECOMPLETE  AND  STUDY  ADDITIONAL  WELLS,  WHICH FINANCING, IF WE ARE UNABLE TO
RAISE  MAY  FORCE  US  TO  SCALE  BACK  OR  ABANDON  OUR  BUSINESS  PLAN.

     We  raised approximately $1,122,903 from the sale of our Common Stock under
an  exemption provided by Regulation S of the Securities Act of 1933 in 2004 and
2005; and raised $15,000,000 from the sale of a Secured Convertible Term Note to
Laurus  Master  Fund,  Ltd.;  $3,675  from  Laurus' exercise of a portion of the
Option;  and  $9,500,000 from the sale of a separate Secured Term Note to Laurus
in  2005.  However,  approximately  $23,951,097  of the aggregate of $24,503,675
which  was raised from Laurus, was immediately used to purchase interests in the
Wishbone  field,  pay closing costs and fees in connection with the funding, and
to  repay  amounts  previously owed  (as described in greater detail below under
"Description  of  Business").  As  a  result,  as  of  December 31, 2005, we had
approximately  $3,311,665  of  cash  on  hand.

     We  believe  this  cash  on  hand as of December 31, 2005, and the revenues
which we expect to generate from the sale of oil and gas this year will allow us
to  pay our outstanding liabilities and continue our business operations through
2006.  However,  as  described  below,  the  price  of  oil and gas is extremely
volatile,  we  cannot be sure that we will find any additional quantities of oil
and/or gas, nor can we give any assurances that if found that the oil and/or gas
will  be  commercial  quantities,  that  we  will be able to extract it from the
ground,  that  we  will  not  face  liability  in connection with our extraction
efforts, and/or that we will be able to generate the revenues we expect from the
sale  of our oil and gas. Additionally, we may choose to spend additional monies
on  the  purchases  of  oil  and  gas properties in the future. Depending on the
decisions of our management, the volatility of the prices of oil and/or gas, our
exploration  activities,  and/or potential liability, and the amount of money we
receive  from  the  sale of oil and gas, we may need to raise additional capital
substantially  faster than the one year, which we currently estimate such monies
and  production  of  oil  and  gas  will  last.  As  such,  we may need to raise
additional  capital  much sooner than the two year estimate which our management
currently  feels  is  reasonable.  We  do  not  currently  have  any  additional
commitments  or  identified  sources of additional capital from third parties or
from  our officers, directors or majority shareholders. We can give no assurance
that additional financing will be available on favorable terms, if at all. If we
are not able to raise the capital necessary to continue our business operations,
we  may  be  forced  to  abandon or curtail our business plan and/or suspend our
exploration  activities.

                                       51
<PAGE>

WE  OWE  LAURUS MASTER FUND, LTD., A SUBSTANTIAL AMOUNT OF MONEY WHICH WE DO NOT
HAVE.

     In  connection  with the Securities Purchase Agreement, Laurus Master Fund,
Ltd.  ("Laurus"),  purchased  a $15,000,000 Secured Convertible Term Note, later
amended  and  replaced by the Restated Note, described above (the "Note"), which
bears  interest  at  the  rate of 9.5% per year (as of March 22, 2006), which is
subject  to  adjustment  as described below under "Description of Business," and
which  is  due  and payable on June 30, 2008, and which $250,000 of principal is
payable  on  the first day of each month beginning on July 1, 2006 and ending on
June  30,  2008,  at which time the remaining principal amount, of approximately
$9,000,000  is  due  and  payable.  Additionally, on September 19, 2005, we sold
Laurus  a  separate  Secured  Term  Note  (the  "Term  Note")  in  the amount of
$9,500,000. The Term Note bears interest at the rate of twenty percent (20%) per
year,  based  on a 360 day year and is payable monthly in arrears through 80% of
the  production payments on our 7.5% working interest on the Lindholm-Hanson Gas
Unit  property  purchased  in  September 2005. The Term Note is currently due on
January  2,  2007.  While, we do have sufficient cash on hand to pay the July 1,
2006  payment  of  $250,000 of principal on the Note, and have made our required
payments of interest on the Term Note to date, there can be no assurance that we
will  continue  to have sufficient funds to pay any principal or interest on the
Note  and  Term  Note when due.  Additionally, we do not have funds available to
repay the full $15,000,000 remaining on the Note and/or the $9,500,000 remaining
on  the  Term Note as of the filing of this Report. If we do not have sufficient
funds  to  pay the total remaining amount of the Note (after taking into account
payments  of  principal,  which  we  may  not  have sufficient funds to pay, and
conversions)  when  due,  and/or  the interest on or the principal amount of the
Term  Note  when due, if not sufficiently repaid through the production payments
described  above,  we  will  be  in  default  and  Laurus  may  take  control of
substantially  all  of  our  assets  (as  described  in more detail under "Risks
Relating  to  the  Company's Securities"). As a result, we will need to raise or
otherwise  generate  approximately  $15,000,000 to repay the Note (not including
any adjustments for payment of principal or conversion into shares of our Common
Stock) by June 30, 2008 and $9,500,000 to repay the Term Note (not including any
interest  which is accruing) by January 2, 2007. If we fail to raise this money,
we  could  be  forced  to  abandon  or  curtail  our  business  operations.

WE RELY HEAVILY ON EDWARD R. DESTEFANO, OUR SOLE OFFICER AND DIRECTOR, AND IF HE
WERE TO LEAVE, WE COULD FACE SUBSTANTIAL COSTS IN SECURING A SIMILARLY QUALIFIED
OFFICER  AND  DIRECTOR.

     Our  success  depends  upon the personal efforts and abilities of Edward R.
DeStefano,  our  sole Director and our President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Secretary. Our ability to operate and implement
our  exploration activities is heavily dependent on the continued service of Mr.
DeStefano  and  our  ability  to  attract  qualified contractors on an as-needed
basis.  We  face  continued  competition  for  such  contractors.  We do have an
employment contract with Mr. DeStefano which is effective for three years ending
on  August  30, 2008; however, we do not currently have any key man insurance on
Mr.  DeStefano.  Mr.  DeStefano  is  our  driving  force  and is responsible for
maintaining  our relationships and operations. We cannot be certain that we will
be  able  to  retain Mr. DeStefano and/or attract and retain such contractors in
the  future  and/or that he will not terminate his employment agreement with us.
The  loss  of Mr. DeStefano and/or our inability to attract and retain qualified
contractors  on  an  as-needed basis could have a material adverse effect on our
business  and  operations.

                                       52
<PAGE>

EDWARD  R.  DESTEFANO  OWNS APPROXIMATELY 67.2% OF OUR OUTSTANDING COMMON STOCK,
AND  HAS SIGNIFICANT INFLUENCE OVER CORPORATE DECISIONS, AND AS A RESULT, IF YOU
INVEST  IN  US,  YOUR  ABILITY  TO  AFFECT  CORPORATE DECISIONS WILL BE LIMITED.

     Edward  R.  DeStefano,  our sole director and sole executive officer, holds
37,500,000  shares  of our Common Stock, representing approximately 67.2% of the
outstanding  shares  of  our  Common  Stock prior to our Form SB-2 offering (and
which  will  represent  approximately  37.9%  of  our  outstanding  Common Stock
assuming  the  sale  of all 43,060,789 of the shares issuable upon conversion of
Laurus'  Note  and  the exercise of Laurus' Warrant, Option and December Option,
provided  that  Laurus  may  not  convert  the  Note, or exercise the Warrant or
Options  if such conversion or exercise would cause it to own more than 9.99% of
our outstanding Common Stock. This restriction, however, does not prevent Laurus
from  converting  and/or  exercising some of its holdings, selling those shares,
and  then  converting  the  rest  of its holdings, while still staying below the
9.99%  limit.  Accordingly,  Mr.  DeStefano  will  have significant influence in
determining  the  outcome  of  all  corporate  transactions  or  other  matters,
including  mergers,  consolidations  and the sale of all or substantially all of
our  assets,  and  also  the  power to prevent or cause a change in control even
after  such  conversion  and  exercise  by  Laurus, as Mr. DeStefano will likely
continue  to  be  our  largest  shareholder.  The interests of Mr. DeStefano may
differ from the interests of the other stockholders and thus result in corporate
decisions  that  are  adverse  to  other  shareholders.  Additionally, potential
investors  you  should  take  into  account  the  fact  that  any vote of shares
purchased  will  have  limited  effect  on  the  outcome of corporate decisions.

BECAUSE  OF  THE  SPECULATIVE  NATURE  OF  OIL  AND  GAS  EXPLORATION,  THERE IS
SUBSTANTIAL  RISK THAT NO ADDITIONAL COMMERCIALLY EXPLOITABLE OIL OR GAS WILL BE
FOUND  AND  THAT  OUR  BUSINESS  WILL  FAIL.

     The  search  for  commercial  quantities  of oil as a business is extremely
risky.  We  cannot  provide  investors  with  any  assurance that our properties
contain  commercially  exploitable quantities of oil and/or gas. The exploration
expenditures  to  be  made  by  us may not result in the discovery of commercial
quantities  of  oil  and/or  gas  and  problems  such  as  unusual or unexpected
formations  and  other  conditions involved in oil and gas exploration and often
result  in  unsuccessful  exploration  efforts.  If  we  are  unable  to  find
commercially  exploitable  quantities  of  oil  and gas, and/or we are unable to
commercially extract such quantities, we may be forced to abandon or curtail our
business  plan,  and  as  a  result,  any investment in us may become worthless.

BECAUSE  OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A
RISK  THAT  WE  MAY  INCUR  LIABILITY  OR  DAMAGES  AS  WE  CONDUCT OUR BUSINESS
OPERATIONS,  WHICH  COULD  FORCE  US  TO EXPEND A SUBSTANTIAL AMOUNT OF MONEY IN
CONNECTION  WITH  LITIGATION  AND/OR  A  SETTLEMENT.

     The  oil  and  natural gas business involves a variety of operating hazards
and  risks  such  as  well  blowouts, caterings, pipe failures, casing collapse,
explosions,  uncontrollable  flows  of  oil,  natural gas or well fluids, fires,
formations  with  abnormal  pressures,  pipeline  ruptures or spills, pollution,
releases  of  toxic gas and other environmental hazards and risks. These hazards
and  risks  could  result  in substantial losses to us from, among other things,
injury  or  loss  of  life, severe damage to or destruction of property, natural

                                       53
<PAGE>

resources  and  equipment,  pollution  or  other  environmental  damage, cleanup
responsibilities,  regulatory  investigation  and  penalties  and  suspension of
operations.  In  addition,  we may be liable for environmental damages caused by
previous owners of property purchased and leased by us. As a result, substantial
liabilities  to  third  parties  or  governmental  entities may be incurred, the
payment  of which could reduce or eliminate the funds available for exploration,
development or acquisitions or result in the loss of our properties and/or force
us to expend substantial monies in connection with litigation or settlements. In
accordance  with  customary  industry  practices,  we maintain insurance against
some,  but not all, of such risks and losses. As such, there can be no assurance
that  any  insurance  obtained  by  us  will  be adequate to cover any losses or
liabilities. We cannot predict the availability of insurance or the availability
of  insurance  at  premium levels that justify our purchase. The occurrence of a
significant event not fully insured or indemnified against, could materially and
adversely  affect  our  financial  condition  and  operations.  We  may elect to
self-insure  if  management  believes  that  the  cost  of  insurance,  although
available,  is excessive relative to the risks presented. In addition, pollution
and  environmental risks generally are not fully insurable. The occurrence of an
event not fully covered by insurance could have a material adverse effect on our
financial  condition  and  results  of  operations,  which  could  lead  to  any
investment  us  becoming  worthless.

WE  REQUIRE  SUBSTANTIAL  ADDITIONAL  FINANCING  TO CONTINUE OUR EXPLORATION AND
DRILLING  ACTIVITIES,  WHICH FINANCING IS OFTEN HEAVILY DEPENDENT ON THE CURRENT
MARKET  PRICE  FOR  OIL  AND  GAS,  WHICH  WE  ARE  UNABLE  TO  PREDICT.

     Our growth and continued operations could be impaired by limitations on our
access  to  capital markets. If the market for oil and/or gas were to weaken for
an  extended period of time, our ability to raise capital would be substantially
reduced.  There  can  be  no assurance that capital from outside sources will be
available,  or  that  if  such  financing is available, that it will not involve
issuing securities senior to the Common Stock or equity financings which will be
dilutive to holders of Common Stock. Such issuances, if made, would likely cause
a  decrease  in  the  value  of  our  Common  Stock.

THE  MARKET  FOR  OIL AND GAS IS INTENSELY COMPETITIVE, AND AS SUCH, COMPETITIVE
PRESSURES  COULD  FORCE  US  TO  ABANDON  OR  CURTAIL  OUR  BUSINESS  PLAN.

     The  market for oil and gas exploration services is highly competitive, and
we only expect competition to intensify in the future. Numerous well-established
companies  are  focusing  significant resources on exploration and are currently
competing  with  us  for  oil  and  gas  opportunities.  Additionally, there are
numerous  companies  focusing their resources on creating fuels and/or materials
which serve the same purpose as oil and gas, but are manufactured from renewable
resources.  As  a  result,  there  can  be  no assurance that we will be able to
compete successfully or that competitive pressures will not adversely affect our
business,  results  of operations and financial condition. If we are not able to
successfully  compete  in the marketplace, we could be forced to curtail or even
abandon  our  current  business  plan, which could cause any investment in us to
become  worthless.

                                       54
<PAGE>

WE  MAY  NOT  BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD LEAD TO OUR
INABILITY  TO  IMPLEMENT  OUR  BUSINESS  PLAN.

     Our  growth  is  expected  to place a significant strain on our managerial,
operational  and  financial  resources, especially considering that we currently
only  have  one  Executive  Officer  and  Director.  Further,  as  we enter into
additional  contracts, we will be required to manage multiple relationships with
various consultants, businesses and other third parties. These requirements will
be  exacerbated  in  the  event  of  our further growth or in the event that the
number  of  our drilling and/or extraction operations increases. There can be no
assurance  that  our  systems,  procedures  and/or  controls will be adequate to
support  our operations or that our management will be able to achieve the rapid
execution  necessary  to  successfully  implement  our  business plan. If we are
unable to manage our growth effectively, our business, results of operations and
financial condition will be adversely affected, which could lead us being forced
to  abandon  or  curtail  our  business  plan  and  operations.

THE  PRICE  OF OIL AND NATURAL GAS HAS HISTORICALLY BEEN VOLATILE AND IF IT WERE
TO  DECREASE  SUBSTANTIALLY,  OUR  PROJECTIONS,  BUDGETS,  AND REVENUES WOULD BE
ADVERSELY  EFFECTED,  AND WE WOULD LIKELY BE FORCED TO MAKE MAJOR CHANGES IN OUR
OPERATIONS.

     Our  future  financial  condition,  results  of operations and the carrying
value of our oil and natural gas properties depends primarily upon the prices we
receive  for  our  oil  and  natural  gas production. Oil and natural gas prices
historically  have  been volatile and likely will continue to be volatile in the
future,  especially  given current world geopolitical conditions. Our cash flows
from  operations  are highly dependent on the prices that we receive for oil and
natural  gas.  This  price  volatility also affects the amount of our cash flows
available  for  capital  expenditures  and  our ability to borrow money or raise
additional  capital.  In  the  short-term  our  production  on  a  barrel of oil
equivalent  (BOE)  is  weighted  towards  natural  gas and over the long term we
believe  that  natural  gas  prices are likely to affect us more than oil prices
because  as  of December 31, 2005 (on a BOE using 6 MCF equals 1 barrel of oil),
more  than approximately 92% of our current proved reserves were gas. The prices
for  oil and natural gas are subject to a variety of additional factors that are
beyond  our  control.  These  factors  include:

     o    the level of consumer demand for oil and natural gas;

     o    the domestic and foreign supply of oil and natural gas;

     o    the  ability  of  the  members  of  the  Organization  of  Petroleum
          Exporting  Countries  ("OPEC")  to agree to and maintain oil price and
          production controls;

     o    the price of foreign oil and natural gas;

     o    domestic governmental regulations and taxes;

     o    the price and availability of alternative fuel sources;

     o    weather conditions;

     o    market  uncertainty  due  to  political  conditions in oil and natural
          gas producing regions, including the Middle East; and

                                       55
<PAGE>

     o    worldwide economic conditions.

     These  factors  as  well  as the volatility of the energy markets generally
make  it  extremely  difficult  to  predict  future  oil  and  natural gas price
movements  with  any certainty. Declines in oil and natural gas prices would not
only reduce our revenue, but could reduce the amount of oil and natural gas that
we  can  produce  economically  and,  as a result, could have a material adverse
effect  upon our financial condition, results of operations, oil and natural gas
reserves  and  the carrying values of our oil and natural gas properties. If the
oil  and  natural gas industry experiences significant price declines, we may be
unable to make planned expenditures, among other things. If this were to happen,
we  may  be  forced  to  abandon or curtail our business operations, which would
cause the value of an investment in us to decline in value, or become worthless.

OUR ESTIMATES OF RESERVES COULD HAVE FLAWS, OR MAY NOT ULTIMATELY TURN OUT TO BE
100%  CORRECT  OR  COMMERCIALLY EXTRACTABLE AND AS A RESULT, OUR FUTURE REVENUES
AND  PROJECTIONS  COULD  BE  INCORRECT.

     Estimates  of  reserves  and  of  future net revenues prepared by different
petroleum  engineers  may  vary  substantially  depending,  in  part,  on  the
assumptions  made  and  may  be  subject  to adjustment either up or down in the
future.  Our  actual  amounts  of  production,  revenue,  taxes,  development
expenditures,  operating  expenses,  and  quantities  of recoverable oil and gas
reserves  may  vary  substantially  from  the  engineers' estimates. Oil and gas
reserve  estimates  are  necessarily  inexact  and involve matters of subjective
engineering  judgment. In addition, any estimates of our future net revenues and
the  present  value  thereof  are  based  on  assumptions  derived  in part from
historical  price and cost information, which may not reflect current and future
values,  and  on  other  assumptions  made  by  us  that only represent our best
estimates.  If these estimates of quantities, prices and costs prove inaccurate,
we  may  be  unsuccessful  in  expanding  our oil and gas reserves base with our
acquisitions. Additionally, if declines in and instability of oil and gas prices
occur, then write downs in the capitalized costs associated with our oil and gas
assets  may  be required. Because of the nature of the estimates of our reserves
and  estimates  in  general, we can give no assurance that additional or further
reductions to our estimated proved oil and gas reserves and estimated future net
revenues  will  not be required in the future, an/or that our estimated reserves
will  be  present  and/or commercially extractable. If our reserve estimates are
incorrect,  the value of our Common Stock could decrease and we may be forced to
write  down  the  capitalized  costs  of  our  oil  and  gas  properties.

OUR OPERATIONS ARE HEAVILY DEPENDENT ON CURRENT ENVIRONMENTAL REGULATIONS, WHICH
WE  ARE  UNABLE  TO  PREDICT,  AND WHICH MAY CHANGE IN THE FUTURE, CAUSING US TO
EXPEND  SUBSTANTIAL  ADDITIONAL  CAPITAL.

     Public  interest  in  the  protection  of  the  environment  has  increased
dramatically  in  recent years. Our oil and natural gas production and saltwater
disposal  operations  and  our  processing,  handling  and disposal of hazardous
materials,  such  as  hydrocarbons and naturally occurring radioactive materials
are subject to stringent regulation. We could incur significant costs, including
cleanup costs resulting from a release of hazardous material, third-party claims
for  property  damage  and personal injuries fines and sanctions, as a result of
any  violations  or liabilities under environmental or other laws. Changes in or
more  stringent  enforcement  of  environmental  laws  could  force us to expend
additional  operating  costs  and  capital  expenditures  to stay in compliance.

                                       56
<PAGE>

     Various federal, state and local laws regulating the discharge of materials
into  the  environment,  or  otherwise  relating  to  the  protection  of  the
environment, directly impact oil and gas exploration, development and production
operations,  and  consequently  may  impact  our  operations  and  costs.  These
regulations  include,  among  others,  (i)  regulations  by  the  Environmental
Protection  Agency  and  various  state  agencies  regarding approved methods of
disposal  for certain hazardous and non-hazardous wastes; (ii) the Comprehensive
Environmental  Response,  Compensation,  and  Liability  Act,  Federal  Resource
Conservation  and  Recovery  Act  and  analogous  state  laws which regulate the
removal  or remediation of previously disposed wastes (including wastes disposed
of  or released by prior owners or operators), property contamination (including
groundwater  contamination),  and remedial plugging operations to prevent future
contamination;  (iii)  the  Clean  Air  Act  and  comparable  state  and  local
requirements  which  may  result  in the gradual imposition of certain pollution
control requirements with respect to air emissions from our operations; (iv) the
Oil  Pollution  Act of 1990 which contains numerous requirements relating to the
prevention  of  and response to oil spills into waters of the United States; (v)
the  Resource  Conservation  and  Recovery  Act  which  is the principal federal
statute  governing  the treatment, storage and disposal of hazardous wastes; and
(vi)  state  regulations and statutes governing the handling, treatment, storage
and  disposal  of  naturally  occurring  radioactive  material.

     Management  believes  that we are in substantial compliance with applicable
environmental  laws  and regulations. To date, we have not expended any material
amounts  to  comply  with  such  regulations,  and management does not currently
anticipate  that  future compliance will have a materially adverse effect on our
consolidated  financial  position, results of operations or cash flows. However,
if  we are deemed to not be in compliance with applicable environmental laws, we
could  be  forced to expend substantial amounts to be in compliance, which would
have  a  materially  adverse  effect on our financial condition. If this were to
happen,  any  investment  in  us  could  be  lost.

OUR  FINANCIAL  STATEMENTS, INCLUDING OUR QUARTERLY LIABILITIES AND STATEMENT OF
OPERATIONS  ARE  SUBJECT  TO  QUARTER  BY  QUARTER  CHANGES  IN  OUR  DERIVATIVE
ACCOUNTING  OF  THE  LAURUS  NOTE, WARRANT, OPTION, AND SINGLE COMPOUND EMBEDDED
DERIVATIVES.

     The value of the liabilities relating to the Laurus' Note, Warrant, Option,
December  Option  and  single  compound  embedded  derivatives  in our quarterly
financial statements, as well as the net fair value of the Laurus Note, Warrant,
Option,  December  Option  and  single  compound  embedded  derivatives  in  our
Statement  of Operations, are subject to the changes in the trading value of our
securities.  As  a  result,  our  quarterly  financial statements and results of
operations  may  fluctuate  quarter  to  quarter  based  on factors, such as the
trading  value  of  our  common  stock  on  the  OTCBB  and the amount of shares
converted by Laurus in connection with the Note and exercised in connection with
the  Warrant,  Option  and  December  Option.  Consequently, our liabilities and
statement of operations may vary quarter to quarter, based on factors other than
the  Company's  revenues  and  expenses.

                                       57
<PAGE>

                   RISKS RELATING TO THE COMPANY'S SECURITIES

A  DEFAULT  BY US UNDER THE SECURED CONVERTIBLE TERM NOTE, COMMON STOCK PURCHASE
WARRANT, OPTION, OR THE SECURED TERM NOTE WOULD ENABLE LAURUS MASTER FUND, LTD.,
TO  TAKE  CONTROL  OF  SUBSTANTIALLY  ALL  OF  OUR  ASSETS.

     The  Convertible  Secured  Term Note, Common Stock Purchase Warrant, Option
and December Option, as well as the Secured Term Note are secured by Laurus by a
continuing security interest in all of our assets, including without limitation,
cash,  cash  equivalents,  accounts  receivable,  deposit  accounts,  inventory,
equipment,  goods,  fixtures  and other tangible and intangible assets, which we
own  or  at any time in the future may acquire right, title or interest to. As a
result, if we default under any provision of the Note, Warrant, Option, December
Option  or  Term Note, or fail to pay any amounts due to Laurus, Laurus may take
control  of substantially all of our assets. If this were to happen, we could be
left  with  no revenue producing assets, and the value of our Common Stock could
become  worthless.

     Additionally,  under  the  Stock  Pledge  Agreement  between Laurus and us,
entered  into  in  connection  with  the  June  30,  2005,  Securities  Purchase
Agreement,  we  pledged  all  of  the  outstanding  stock  of  our  wholly owned
subsidiary,  Century  Resources,  Inc.  ("Century"),  as  collateral  for  the
Securities  Purchase  Agreement  and  Note. As a result, if we default under any
provision of the Note, Warrant, Option, Term Note or any other agreement entered
into in connection with the Closing, Laurus may take control of Century. If this
were  to  happen, it could force us to abandon or curtail our business plan, and
could  result  in  our  securities  becoming  worthless.

WE  MAY  BE  REQUIRED  TO  PAY  PENALTIES  TO LAURUS MASTER FUND, LTD. UNDER THE
REGISTRATION  RIGHTS  AGREEMENT,  WHICH  COULD  FORCE US TO EXPEND A SUBSTANTIAL
AMOUNT  OF  THE  MONEY  WE  HAVE  PREVIOUSLY  RAISED.

     We  granted  Laurus  Master  Fund,  Ltd., registration rights to the shares
issuable  to Laurus in connection with the Note, Warrant and Option, pursuant to
a  Registration  Rights Agreement, and such shares are being registered pursuant
to an SB-2 Registration Statement. We originally agreed to give our best efforts
to  obtain effectiveness of this Registration Statement by October 28, 2005 (120
days  from  the date of the closing of the Securities Purchase Agreement), which
date  was  extended  to  December  12,  2005, pursuant to an Amendment Agreement
entered into with Laurus on November 4, 2005, to January 31, 2006, pursuant to a
Second Amendment Agreement entered into with Laurus on December 14, 2005, and to
July 1, 2006, pursuant to the Third Amendment Agreement entered into on December
30,  2005.  If we do not obtain effectiveness of our SB-2 Registration Statement
by  the  amended date, or such Registration Statement ceases to be effective for
more  than  30  days  or more than 20 consecutive days during the 365 day period
following  the  effectiveness of the Registration Statement, or our Common Stock
is not listed or quoted, or is suspended from trading for a period of three days
from the OTC Bulletin Board, which we have been unable to cure within 30 days of
notice  thereof,  we  will  be  forced  to pay Laurus, as liquidated damages, an
amount  equal  to  the amount outstanding under the original principal amount of
the  Note  times  one-thirtieth  (1/30) times 1.5% (which as of the date of this
filing  would  be equal to approximately $7,500), per day that such event listed
above  exceeds  the  time  period  given.  As  a  result,  if  we fail to obtain
effectiveness  of our SB-2 Registration Statement by July 1, 2006, or our Common
Stock  ceases  to  trade  on  the  OTC  Bulletin Board, we will be forced to pay
substantial  penalties  to  Laurus,  which would cause us to spend a substantial
amount  of  the  money  raised  in connection with the sale of the Note and Term
Note,  and  could  force  us  to  abandon  or  scale  back  our  current planned
operations.

                                       58
<PAGE>

THE  NOTE, WARRANT, OPTION AND DECEMBER OPTION CONTAIN PROVISIONS WHEREBY LAURUS
MASTER  FUND,  LTD.  MAY HOLD MORE THAN 9.99% OF OUR COMMON STOCK, PROVIDED THEY
PROVIDE  US  SEVENTY-FIVE  (75)  DAYS  NOTICE  OR  AN  EVENT  OF DEFAULT OCCURS.

     Although  Laurus  may  not  convert  its  Note and/or exercise its Warrant,
Option  and/or  December Option if such conversion or exercise would cause it to
own  more  than 9.99% of our outstanding Common Stock, the Note, Warrant. Option
and December Option also contain provisions which provide for the 9.99% limit to
be  waived provided that Laurus provides us with 75 days notice of its intent to
hold  more than 9.99% of our Common Stock or if there is an event of default (as
defined under the Note, Warrant, Option and/or December Option). As a result, if
we  receive 75 days notice from Laurus and/or an event of default occurs and our
Registration  Statement  coving Laurus' securities is declared effective, Laurus
may fully exercise the Warrant, Option and December Option and fully convert the
Note,  and  become the beneficial owner of up to approximately 43.6% of our then
outstanding  Common Stock, not including the conversion of interest on the Note.
If that were to happen, Laurus would have significant control over us, including
the  election  of  Directors and ability to cause or prevent a change in control
and/or  our  business  operations.  If  Laurus  were  to  take  control  over
approximately 43.6% of our outstanding Common Stock, it could force us to change
our  business focus, sell all or substantially all of our assets, or abandon our
business  plan. Any such event, if it were to occur would likely cause the value
of  our  Common  Stock  to  decline, and could lead to our Common Stock becoming
worthless.

WE  HAVE  THE ABILITY TO ISSUE ONLY A LIMITED NUMBER OF SHARES AS WE HAVE AGREED
PURSUANT  TO  THE  CONVERTIBLE  TERM  NOTE,  WARRANT AND OPTIONS WITH LAURUS, TO
RESERVE  A  SUFFICIENT  NUMBER  OF  SHARES OF OUR AUTHORIZED BUT UNISSUED COMMON
STOCK  TO  ALLOW  LAURUS TO FULLY CONVERT THE CONVERTIBLE TERM NOTE AND EXERCISE
THE WARRANT AND OPTIONS.

     Pursuant  to our Convertible Term Note, Warrant and Options with Laurus, we
agreed  to  maintain a sufficient number of authorized but unissued shares, such
that  Laurus  would be able to fully convert the Term Note, Warrant and Options.
As  of  the  filing  of  this  report,  and not including any accrued and unpaid
interest  on  the  Convertible  Term Note, Laurus has the ability to convert the
Convertible  Term Note and exercise the Warrant and Options into an aggregate of
approximately  43,060,789  shares of our common stock. We have 55,810,612 shares
of common stock issued and outstanding as of the filing of this report, and have
100,000,000  shares  of  common  stock  authorized  pursuant  to our Articles of
Incorporation.  Additionally,  we have granted 900,000 warrants to ECS, which if
exercised  will  further  decrease  the  amount  of  unreserved  shares  we have
authorized  under  our  Articles  of Incorporation. As such, we are only able to
issue  a  maximum  of  228,599 shares of our common stock in connection with the
issuance  of  stock  for services, to settle claims and/or for other corporation
purposes  and  still  have enough shares of authorized but unissued common stock
reserved for issuance to Laurus and ECS. If we issue more than 228,599 shares of
our  common  stock prior to increasing our authorized shares of common stock, we
may  be found to be in default of the Convertible Term Note, Warrant and Options
and  may face penalties associated with such potential default. Our inability to
issue  shares  of  common  stock  to  certain  consultants,  employees and/or in
consideration  for  the  repayment  of debt or for services rendered may make it
more  costly for us to settle such debts and/or obtain and pay such consultants.
While  we  currently  have  plans  to  seek shareholder approval to increase our
authorized  shares  subsequent to the filing of this report, if we are unable to
increase  our  authorized  shares, we may be forced to pay cash instead of stock
for  certain  services rendered, which could decrease our current assets and may
force us to curtail some portion of our current business plans. Additionally, if
we  are  not able to keep a sufficient amount of shares reserved for issuance to
Laurus  in  connection  with  the  conversion  of  the Convertible Term Note and
exercise of the Warrant and Options, we may be liable to Laurus for a default of
such agreements and may face substantial penalties.

IF  AN EVENT OF DEFAULT OCCURS UNDER THE NOTE, WE COULD BE FORCED TO IMMEDIATELY
PAY  THE  AMOUNTS  DUE  UNDER  THE  NOTE.

     The Secured Convertible Term Note includes provisions whereby Laurus Master
Fund,  Ltd., may make the amounts outstanding under the Note immediately due and
payable  if  an  event of default occurs under the Note, which events of default
include:

     o    our failure to pay amounts due under the Note;

     o    breach  of  any  covenants  under  the  Note,  if  not cured within 15
          days;

     o    breach of any warranties found in the Note;

     o    the  occurrence  of  any  default  under  any  agreement, which causes
          any  contingent  obligation to become due prior to its stated maturity
          or to become payable;

     o    any  change  or  occurrence  likely  to have a material adverse effect
          on  the  business,  assets,  liabilities,  financial  condition,  our
          operations or prospects;

                                       59
<PAGE>

     o    an  indictment  or  other  proceedings  against  us  or  any executive
          officer; or

     o    a  breach  by  us  of  any  provision  of  the  Securities  Purchase
          Agreement, or any other Related Agreement.

If  any event of default were to occur under the Note and Laurus was to make the
entire Note immediately due and payable, and we did not have sufficient funds on
hand  to  pay such amounts, we could be forced to sell some or all of our assets
at  less than fair market value, and/or abandon or curtail our business plan and
operations.

THE ISSUANCE AND SALE OF COMMON STOCK IN CONNECTION WITH THE SECURED CONVERTIBLE
TERM NOTE, COMMON STOCK PURCHASE WARRANT AND OPTION MAY DEPRESS THE MARKET PRICE
OF  OUR  COMMON  STOCK.

     As  of  March 31, 2006, we had 55,810,612 shares of Common Stock issued and
outstanding.  We will register 59,982,563 shares of Common Stock pursuant to our
Form  SB-2 Registration Statement, which we are required to file within ten (10)
business days of the date we file this Form 10-KSB, which registered shares will
consist  of  36,290,322  shares  representing  150%  of the shares which Laurus'
Secured  Convertible  Term  Note  is  convertible into at the current conversion
price  of $0.62 per share; 10,222,784 shares underlying Laurus' Option, which is
exercisable  at a cost of $0.001 per share (of which a portion of our Option was
exercised  to  purchase  3,675,000  shares  of our Common Stock for an aggregate
consideration  of  $3,675);  5,061,392 shares underlying the December Option, as
described  above,  which is exercisable at a cost of $0.001 per share; 7,258,065
shares  underlying  Laurus'  Common  Stock  Purchase  Warrant and 900,000 shares
underlying Energy Capital Solutions, LP's warrants to purchase 900,000 shares of
our  Common  Stock,  which  are both exercisable at $0.80 per share; and 250,000
shares of our Common Stock which are held by Core Concepts, LLC. Although Laurus
may  not  convert  its  Note and/or exercise its Warrant, Option and/or December
Option  if  such conversion or exercise would cause it to own more than 9.99% of
our  outstanding  Common  Stock (unless Laurus gives us 75 days notice and/or an
event  of  default  occurs),  this  restriction  does  not  prevent  Laurus from
converting  and/or  exercising  some  of its holdings, selling those shares, and
then  converting  the  rest of its holdings, while still staying below the 9.99%
limit. As a result, as sequential conversions and sales take place, the price of
our  Common  Stock may decline to the detriment of our then shareholders. All of
the  shares  issuable  upon conversion of the Note, Warrant, Option and December
Option,  may  be  sold  without  restriction  once our Registration Statement is
declared  effective and the sale of these shares may adversely affect the market
price  of  our  Common  Stock.

THE ISSUANCE OF COMMON STOCK UNDERLYING THE SECURED CONVERTIBLE NOTE, OPTION AND
COMMON  STOCK  PURCHASE  WARRANT  WILL CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION.

     The  issuance  of  Common  Stock upon conversion of the Secured Convertible
Note  ("Note"), Common Stock Purchase Warrant ("Warrant") and Option will result
in  immediate  and  substantial  dilution to the interests of other stockholders
since  Laurus Master Fund, Ltd., may ultimately receive and sell the full amount
issuable on conversion and/or exercise of the Note, Warrant and Option. Although
Laurus  may  not  convert  its Note and/or exercise its Warrant and/or Option if
such  conversion  or  exercise  would  cause  it  to  own more than 9.99% of our
outstanding  Common Stock (unless Laurus gives us 75 days notice and/or an event
of  default  occurs),  this  restriction does not prevent Laurus from converting
and/or  exercising  some  of  its  holdings,  selling  those  shares,  and  then
converting  the rest of its holdings, while still staying below the 9.99% limit.

                                       60
<PAGE>

In this way, Laurus could sell more than this limit while never actually holding
more  shares  than  this  limit prohibits. If Laurus chooses to do this, it will
cause substantial dilution to our Common Stock, and could cause the value of our
Common  Stock  to  decline  precipitously.

                       RISKS RELATING TO OUR COMMON STOCK

WE  HAVE NOT PAID ANY CASH DIVIDENDS IN THE PAST AND HAVE NO PLANS TO ISSUE CASH
DIVIDENDS IN THE FUTURE, WHICH COULD CAUSE THE VALUE OF OUR COMMON STOCK TO HAVE
A  LOWER  VALUE  THAN  OTHER  SIMILAR  COMPANIES  WHICH  DO  PAY CASH DIVIDENDS.

     We  have not paid any cash dividends on our Common Stock to date and do not
anticipate  any  cash dividends being paid to holders of our Common Stock in the
foreseeable  future.  While  our  dividend policy will be based on the operating
results  and  capital needs of the business, it is anticipated that any earnings
will  be  retained to finance our future expansion. As we have no plans to issue
cash  dividends in the future, our Common Stock could be less desirable to other
investors and as a result, the value of our Common Stock may decline, or fail to
reach the valuations of other similarly situated companies who have historically
paid  cash  dividends  in  the  past.

THE  MARKET  FOR  OUR  COMMON  STOCK  MAY  BE  VOLATILE.

     The  market  for  our  Common  Stock  has historically been volatile and we
anticipate  that such market will continue to be subject to wide fluctuations in
response  to  several  factors,  including,  but  not  limited  to:

     (1)  actual or anticipated variations in our results of operations;
     (2)  our ability or inability to generate new revenues;
     (3)  increased competition; and
     (4)  conditions  and  trends  in  the  oil and gas exploration industry and
          the market for oil and gas.

     Our Common Stock is traded on the over-the-counter Bulletin Board under the
symbol  "NCEY."  In  recent  years,  the stock market in general has experienced
extreme  price fluctuations that have oftentimes been unrelated to the operating
performance of the affected companies. Similarly, the market price of our Common
Stock  may  fluctuate  significantly  based  upon  factors  unrelated  or
disproportionate  to  our  operating  performance. These market fluctuations, as
well  as  general economic, political and market conditions, such as recessions,
interest  rates  or international currency fluctuations may adversely affect the
market price of our Common Stock.

IF  WE  CONTINUE  TO  BE LATE IN FILING OUR QUARTERLY OR ANNUAL REPORTS WITH THE
SEC,  WE  MAY  BE  DE-LISTED  FROM  THE  OVER-THE-COUNTER  BULLETIN  BOARD.

     Pursuant to new Over-The-Counter Bulletin Board ("OTCBB") rules relating to
the timely filing of periodic reports with the SEC, any OTCBB issuer which fails
to  file  a  periodic report (Form 10-QSB's or 10-KSB's) by the due date of such
report  (not withstanding any extension granted to the issuer by the filing of a
Form  12b-25),  three  (3)  times  during  any  twenty-four (24) month period is

                                       61
<PAGE>

automatically  de-listed  from  the  OTCBB.  Such  removed  issuer  would not be
re-eligible  to  be  listed  on the OTCBB for a period of one-year, during which
time  any  subsequent late filing would reset the one-year period of de-listing.
If  we  are  late  three  times  in  any  twenty-four  (24) month period and are
de-listed  from  the  OTCBB,  our  securities may become worthless and we may be
forced  to  curtail  or  abandon  our  business  plan.

OUR  COMMON  STOCK  IS  SUBJECT TO THE "PENNY STOCK" RULES OF THE SECURITIES AND
EXCHANGE  COMMISSION  WHICH LIMITS THE TRADING MARKET IN OUR COMMON STOCK, MAKES
TRANSACTIONS  IN  OUR  COMMON  STOCK  CUMBERSOME  AND MAY REDUCE THE VALUE OF AN
INVESTMENT  IN  OUR  COMMON  STOCK.

     Our  Common  Stock  is considered a "penny stock" as defined in Rule 3a51-1
promulgated by Commission under the Securities Exchange Act of 1934. In general,
a  security  which  is  not  quoted on NASDAQ or has a market price of less than
$5.00  per  share  where the issuer does not have in excess of $2,000,000 in net
tangible  assets  is  considered  a  penny  stock.  The  Commission's Rule 15g-9
regarding  penny  stocks  impose  additional  sales  practice  requirements  on
broker-dealers  who  sell  such  securities  to  persons  other than established
customers  and  accredited investors (generally persons with net worth in excess
of  $1,000,000  or  an annual income exceeding $200,000 or $300,000 jointly with
their  spouse).  For  transactions  covered by the rules, the broker-dealer must
make  a  special  suitability  determination  for  the purchaser and receive the
purchaser's  written  agreement  to the transaction prior to the sale. Thus, the
rules  affect the ability of broker-dealers to sell our Common Stock should they
wish  to  do so because of the adverse effect that the rules have upon liquidity
of  penny  stocks.  Unless  the transaction is exempt under the rules, under the
Securities  Enforcement  Remedies  and  Penny  Stock  Reform  Act  of  1990,
broker-dealers  effecting  customer transactions in penny stocks are required to
provide  their customers with (i) a risk disclosure document; (ii) disclosure of
current  bid  and ask quotations if any; (iii) disclosure of the compensation of
the  broker-dealer  and its sales personnel in the transaction; and (iv) monthly
account  statements  showing  the  market  value of each penny stock held in the
customer's  account.  As a result of the penny stock rules, the market liquidity
for  our  Common  Stock  may  be  adversely  affected by limiting the ability of
broker-dealers  to sell our Common Stock and the ability of purchasers to resell
our  Common  Stock.  Additionally,  various  state  securities  laws  impose
restrictions  on  transferring  "penny stocks" and as a result, investors in the
Common  Stock  may  have  their ability to sell their shares of the Common Stock
impaired.

ITEM  7.  FINANCIAL  STATEMENTS

     The  Financial Statements required by Item 310 of Regulation S-B are stated
in  U.S.  dollars  and  are  prepared in accordance with U.S. Generally Accepted
Accounting  Principles.

                                       62
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
New Century Energy Corp.

We have audited the accompanying consolidated balance sheet of New Century
Energy Corp. (the Company) as of December 31, 2005, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
year 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 audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New
Century Energy Corp. as of December 31, 2005, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles in the United States of America.


HELIN, DONOVAN, TRUBEE & WILKINSON, LLP

/s/ Helin, Donovan, Trubee & Wilkinson, LLP

March 16, 2006
Houston, Texas

                                       63
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
New Century Energy Corp.
Houston, Texas

We have audited the consolidated statements of operations, stockholders' equity
(deficit) and cash flows of New Century Energy Corp. for the year ended December
31, 2004.  These financial statements are the responsibility of New Century's
management.  Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
New Century Energy Corp.  for year ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 2, the consolidated financial statements have been
restated.

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

February 22, 2005
(November 11, 2005 as to the effects of the restatement discussed in Note 2)

                                       64
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

<TABLE>
<CAPTION>
                            NEW CENTURY ENERGY CORP.
                        (formerly Vertica Software, Inc.)
                           CONSOLIDATED BALANCE SHEET
                               December 31, 2005

ASSETS
<S>                                                                      <C>
Current Assets
  Cash                                                                $ 3,311,665
  Accounts receivable                                                   2,387,004
  Inventory                                                                47,790
  Drilling and completion advances                                        262,343
  Prepaid expenses and other                                              239,100
                                                                       ----------
  Total Current Assets                                                  6,247,902
                                                                       ----------
Land                                                                       72,490
Equipment, net of $4,115 accumulated depreciation                          62,650
  Oil and gas properties, net of accumulated depletion,
  depreciation, and amortization of $2,934,821, using
  successful efforts method of accounting                              22,177,965
Deferred loan costs                                                        88,483
                                                                       ----------
TOTAL ASSETS                                                          $28,649,490
                                                                       ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Accounts payable                                                    $   690,488
  Accrued liabilities                                                     546,817
  Liabilities related to purchase of Vertica shell                        175,558
  Current portion of notes payable                                      2,606,607
  Derivative liability for Laurus Warrant                                 797,059
  Derivative liability for Laurus Stock Option                          1,112,447
  Single Compound Embedded Derivatives within Convertible Note            589,327
  Derivative liability for Laurus December Option                         859,914
                                                                       ----------
  Total Current Liabilities                                             7,378,217
                                                                       ----------
Notes payable, less current portion (net of unamortized
  discount and loan costs of $3,269,840)                               18,623,553
Asset retirement obligation                                               305,073
                                                                       ----------
Total liabilities                                                      26,306,843
                                                                       ----------
Contingencies                                                                   -

Stockholders' Equity
  Preferred stock, $.001 par, 20,000,000 shares authorized,
    Series A convertible preferred shares, 0 shares
    issued and outstanding                                                      -
    Series B convertible preferred shares, 2,000,000 shares
    designated, none issued                                                     -
  Common stock, $.001 par value, 100,000,000 shares
    authorized, 55,710,612 shares issued and outstanding                   55,711
  Additional paid in capital                                            9,873,043
  Retained deficit                                                     (7,586,107)
                                                                       ----------
  Total Stockholders' Equity                                            2,342,647
                                                                       ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $28,649,490
                                                                       ==========
</TABLE>
       The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       65
<PAGE>

<TABLE>
<CAPTION>
                              NEW CENTURY ENERGY CORP.
                        (formerly  Vertica  Software,  Inc.)
                         CONSOLIDATED  STATEMENTS  OF  OPERATIONS
                     Years  ended  December  31,  2005  AND  2004

                                                             2005          2004
                                                          ---------     --------
                                                                       (Restated)
<S>                                                          <C>           <C>
Revenues
  Oil and gas sales                                     $ 6,918,884   $ 1,714,443
  Gain on sale of oil and gas interest                       98,181       101,138
  Gain on option to participate in future
    property                                                      -       290,000
                                                          ---------      --------
  Total Revenues                                          7,017,065     2,105,581
                                                          ---------      --------
Expenses
  Lease operating                                           640,455       516,253
  Production taxes                                          393,090       107,698
  Exploration costs                                         134,579        10,494
  Depreciation, depletion
    and amortization                                      2,177,485       335,586
  General & administrative                                2,296,879     4,158,022
                                                          ---------     ---------
  Total expenses                                          5,642,488     5,128,053
                                                          ---------     ---------
Operating income (loss)                                   1,374,577    (3,022,472)
                                                          ---------     ---------
Other income (expense)

  Net decrease in fair value of derivative
    liabilities                                           7,117,882             -
  Loss on early extinguishment of debt                   (8,309,759)            -
  Interest and amortization of discount on debt expense  (3,872,265)     (250,590)
  Purchase and write down of Vertica liabilities            509,028      (717,540)
  Other Vertica expenses                                   (196,133)         (948)
  Other income                                               64,708             -
  Other expenses                                           (104,492)            -
  Gain on sale of equipment                                  17,630             -
                                                          ---------      --------
  Total other income (expense)                           (4,773,401)     (969,078)
                                                          ---------      --------
Loss before income taxes                                 (3,398,824)   (3,991,550)
  Income tax expense (benefit)                                    0             0
                                                          ---------       -------
  NET LOSS                                              $(3,398,824)  $(3,991,550)
                                                         ==========    ==========

Loss per share                                                $(.07)        $(.11)
                                                               ====          ====

Weighted average common shares
  used in computing basic loss per share                 50,961,205    37,694,704
                                                         ==========    ==========

Diluted loss per share                                        $(.13)        $(.11)
                                                               ====          ====

Weighted average common shares
  used in computing diluted loss per share               54,275,225    37,694,704
                                                         ==========    ==========
</TABLE>

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

                                       66
<PAGE>

<TABLE>
<CAPTION>
                                                   NEW CENTURY ENERGY CORP.
                                               (formerly Vertica Software, Inc.)
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                            Years Ended December 31, 2005 and 2004

                                       Series A                                       Additional      Retained
                                     Preferred Stock           Common Stock             Paid In       Earnings
                                  Shares       Amount        Shares      Amount         Capital       (Deficit)        Totals
                                 --------    ----------    ----------  ----------    ------------   -----------     -----------
<S>                                <C>          <C>           <C>         <C>             <C>           <C>             <C>
Balances,
December 31, 2003 (restated)            -     $       -    37,500,000     $37,500    $   (25,950)   $   (194,638)   $ (183,088)

Conversion of debt                  5,000             5             -           -              -               -             5
Reverse merger                          -             -       484,559         485           (490)              -            (5)
Stock for services                      -             -     5,550,000       5,550      3,879,450               -     3,885,000
Stock for cash                          -             -     1,099,107       1,099        466,531               -       467,630
Stock for debt                          -             -       856,000         856        427,144               -       428,000
Imputed interest                        -             -             -           -          7,076               -         7,076
Net loss                                -             -             -           -              -      (3,991,550)   (3,991,550)
                                 --------    ----------    ----------  ----------    -----------    ------------     ---------

Balances,
December 31, 2004 (restated)        5,000             5    45,489,666      45,490      4,753,761      (4,186,188)      613,068

Stock for cash                          -             -     1,721,946       1,722        653,551               -       655,273
Stock for services                      -             -     2,300,000       2,300      1,600,200               -     1,602,500
Stock for debt                          -             -        46,000          46         29,954               -        30,000
Stock for property                      -             -     1,320,000       1,320        830,280               -       831,600
ECS Warrant issued                      -             -             -           -        326,577               -       326,577
Options exercised                       -             -     3,675,000       3,675      1,653,258               -     1,656,933
Stock for legal
  settlement                            -             -        58,000          58         25,462               -        25,520
Stock for conversion
  of preferred stock               (5,000)          (5)     1,100,000       1,100              -          (1,095)            -
Net loss                                -            -              -           -              -      (3,398,824)   (3,398,824)
                                 --------    ----------    ----------  ----------    -----------    ------------     ---------
Balances,
December 31, 2005                       -    $       -     55,710,612     $55,711    $ 9,873,043    $ (7,586,107)   $2,342,647
                                 ========    ==========    ==========  ==========    ===========    ============    ==========
</TABLE>

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

                                       67
<PAGE>

<TABLE>
<CAPTION>
                            NEW CENTURY ENERGY CORP.
                        (formerly Vertica Software, Inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      Years Ended December 31, 2005 and 2004

                                                             2005          2004
                                                          ----------     --------
                                                                        (Restated)
<S>                                                          <C>            <C>
Cash flows from operating activities
  Net loss                                               $(3,398,824) $(3,991,550)
  Adjustments to reconcile net loss
    to net cash provided by operating activities:
    Depreciation, depletion and amortization               2,177,485      335,586
    Liabilities incurred (subsequent write off)
     on purchase of Vertica shell                           (509,028)     717,540
    Gain on sale of oil and gas properties                   (98,181)    (101,138)
    Gain on sale of equipment                                (17,630)           -
    Gain on option to participate in future
     property acquisitions                                         -     (290,000)
    Imputed interest                                               -        7,076
    Stock for services                                     1,602,500    3,885,000
    Loss on early extinguishment of debt                   8,309,759
    Net decrease in fair value of derivatives             (7,117,882)           -
    Accretion of discount and loan
     cost on debt to interest expense                      2,593,537            -

  Changes in:
    Accounts receivable                                   (2,293,664)      26,258
    Inventory                                                 17,913      (65,703)
    Prepaid expenses and other                              (174,716)     (64,384)
    Accounts payable                                         427,113      120,540
    Accrued liabilities                                      514,508       42,439
    Asset retirement obligation                               11,257       20,541
                                                          ----------    ---------
  Net cash provided by operating activities                2,044,147      642,205
                                                          ----------    ---------

Cash flows from investing activities
  Drilling advances                                         (262,343)           -
  First Acquisition of Lindholm Hanson Gas Unit
   and Wells, net of cash acquired                       (10,394,361)           -
  Second Acquisition of Lindholm Hanson Gas Unit
   and Wells, net of cash acquired                        (8,446,231)           -
  Capital expenditures on oil and gas properties          (2,639,997)  (1,672,981)
  Proceeds from sale of oil and gas property
   and equipment                                             115,811      569,983
  Purchase of land                                           (72,490)           -
  Purchase of equipment                                      (63,286)      (3,479)
                                                          ----------    ---------
  Net cash used in investing activities                  (21,762,897)  (1,106,477)
                                                          ----------    ---------
Cash flows from financing activities
  Proceeds from acquisition financing                     24,500,000    1,304,500
  Proceeds from the sale of common stock                     655,273      467,630
  Proceeds from the exercise of Laurus options                 3,675            -
  Payments to reduce long-term debt                         (776,158)    (734,953)
  Payments for deferred loan costs                        (1,805,156)           -
  Investor payments received for drilling                          -      (27,578)
  Repayments to sole shareholder                                   -     (169,123)
                                                          ----------    ---------
Net cash provided by financing activities                 22,577,634      840,476
                                                          ----------    ---------
Net increase in cash                                       2,858,884      376,204

Cash at beginning of the year                                452,781       76,577
                                                          ----------    ---------

Cash at end of the year                                  $ 3,311,665    $ 452,781
                                                          ==========     ========

Supplemental disclosures of cash flow information:

Interest paid                                           $ (1,100,220)   $(250,590)
Income taxes paid                                                  -            -
</TABLE>

Supplemental disclosures of noncash investing and financing activities
(See Notes 11 and 12)

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

                                       68
<PAGE>

                            NEW CENTURY ENERGY CORP.
                        (formerly Vertica Software, Inc.)
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1  -  ORGANIZATION AND BUSINESS

New  Century  Energy Corp. ("New Century" or the "Company"), was incorporated in
Colorado on April 18, 1997 as "Perfection Development Corporation." On September
29,  1998,  the  Company  entered  into  an agreement pursuant to which it would
acquire  all  of  the  outstanding  capital  stock  of Vertica Software, Inc., a
California  corporation  ("Vertica  California").  On December 31, 1998, Vertica
California  merged  with  and  into  the  Company. The Company was the surviving
corporation  in  the  merger  and  the  separate  corporate existence of Vertica
California  ceased.  Concurrently  with the merger, the Company changed its name
from  Perfection  Development Corporation to Vertica Software, Inc. ("Vertica").

On  September  30, 2004, the Company acquired 100% of the issued and outstanding
common  stock of Century Resources, Inc., a Delaware Corporation ("Century"), in
exchange  for  37,500,000  newly  issued  shares  of the Company's Common Stock,
pursuant  to  an  Agreement  and Plan of Reorganization whereby Century became a
wholly-owned  subsidiary  of  the  Company  (the  "Exchange").

In  connection  with  the Exchange, the Company agreed to transfer all rights to
the existing installation of hardware and software used to  develop intellectual
property, all trademarks, copyrights and marketing materials developed for sales
and  distribution  of  such  products  relating  to  Internet/Intranet  software
products and services and an Internet web site for the hazardous material to the
Company's  wholly owned subsidiary, ERC Solutions, Inc. ("ERC"), and changed its
business  focus  to oil and gas exploration and production. On October 26, 2004,
in  connection  with  its  new  business  focus,  the  Company filed Articles of
Amendment  with  the  Colorado  Secretary  of  State,  to change its name to New
Century  Energy  Corp.

Since  the  date  of  the  Exchange,  the  Company  has  focused  on oil and gas
exploration and production. The Company's major business focus for the year 2005
was  to  make  two  acquisitions of mineral interests in the Lindholm Hanson Gas
Unit and Wells ("L-H Gas Unit"). The primary reason for the two acquisitions was
to  add  to  our "Proved" developed and undeveloped reserves as well as generate
significant future cash flows for the Company.

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Basis  of  Presentation

The consolidated financial statements include the accounts of New Century Energy
Corp., its wholly owned subsidiaries, and its proportionate share of the assets,
liabilities,  revenues  and expenses.  All significant intercompany accounts and
transactions  have  been  eliminated  in  consolidation.

2004  Restatement

In December 2005, the Company restated its consolidated balance sheet, statement
of  operations,  statement of stockholders' equity, statement of cash flows, and
summary  of  accounting  policies  in  connection  with its audited consolidated
financial statements as of December 31, 2004 and 2003.  The restatements include
adjustments  to  (a)  record  the  asset  retirement  obligation effective as of
January  1,  2003  and  the  depreciation  and  depletion and accretion expenses
related thereto; and (b) correct an error in the calculation of depreciation and
depletion  of certain oil and gas properties in 2004.  Additionally, the Company
added  a  note  to the consolidated financial statements regarding the Company's
benefit  plans.  The  Company  also  revised notes to the consolidated financial
statements to clarify the nature of its operations and organization, and updated
its  subsequent  events.  The  Supplemental  Oil  and  Gas  Information note was
updated  with  additional language regarding the Company's (a) capitalized costs
incurred  in property acquisition, exploration, and development activities as of
December 31, 2004, and (b) costs incurred for property acquisition, exploration,
and  development  activities.

                                       69
<PAGE>

Use  of  estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that   affect   the  reported  amounts  of  assets,
liabilities,  revenues  and  expenses,  as  well  as certain financial statement
disclosures.  While  management believes that the estimates and assumptions used
in  the  preparation  of  the consolidated financial statements are appropriate,
actual  results  could  differ  from  these  estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year
presentation.

Cash  and  Cash  Equivalents

For purposes of the statements of cash flows, cash equivalents are considered to
be  all highly liquid investments having an original maturity of three months or
less.

Concentration  of  credit  risk

We  maintain our cash primarily with major U.S. domestic banks. The amounts held
in  these  banks  exceed the federal insured limit of $100,000 from time to time
and  exceeded  that  balance  at  December 31, 2005 by $3,518,641.  The terms of
these  deposits  are  on  demand  to minimize risk.  We have not incurred losses
related  to  these  deposits.

Revenue  recognition  and  accounts  receivable

Oil  and gas revenues are recognized when production is sold to a purchaser at a
fixed  or  determinable  price,  when  delivery  has  occurred  and  title  has
transferred,  and  if  collectibility  of the revenue is probable. Cash received
relating  to  future  revenues  is  deferred  and  recognized  when  all revenue
recognition criteria are met.

The Company periodically reviews its accounts receivable for collectibility, and
has  determined that no allowance for doubtful accounts is warranted at December
31,  2005.

Inventory

The  Company  carries  small  inventories of crude oil in its pipelines from the
well  to the purchaser of its product.  Crude oil inventories are carried at the
lower  of current market value or cost. Inventory costs include expenditures and
other  charges  (including  depreciation)  directly  and  indirectly incurred in
bringing  the inventory to its existing condition and location. Selling expenses
and  general  and  administrative  expenses  are  reported  as  period costs and
excluded  from  inventory cost. Inventories of materials and supplies are valued
at  cost  or  less.

Oil  and  gas  properties

We  follow  the  successful  efforts  method  of  accounting for our oil and gas
activities,  capitalizing  costs  of  successful exploratory wells and expensing
costs  of unsuccessful exploratory wells. Exploratory geological and geophysical
costs  are  expensed as incurred. All developmental costs are capitalized. As of
December  31,  2005,  we have no capitalized costs for exploratory wells pending
determination  of  proved  reserves.  We  generally  pursue  acquisition  and
development  of  proved  reserves  as  opposed  to  exploration  activities.  A
significant  portion  of  the  property  costs  reflected  in  the  accompanying
consolidated balance sheet are from acquisitions of proved properties from other
oil and gas companies.

Depreciation,  depletion  and  amortization  of  proved  producing properties is
computed  on the unit-of-production method based on estimated proved oil and gas
reserves.  Other  property  and  equipment is generally depreciated using either
the  unit-of-production  method  for assets associated with specific reserves or
the  straight-line  method  over estimated useful lives which range from 3 to 40
years.  Repairs and maintenance are expensed, while renewals and betterments are
generally  capitalized.

                                       70
<PAGE>

If conditions indicate that long-term assets may be impaired, the carrying value
of  the  property is compared to management's future estimated pre-tax cash flow
from  properties  generally  aggregated on a field-level basis. If impairment is
necessary,  the  asset  carrying  value is written down to fair value. Cash flow
estimates  are  based  on existing proved reserve and production information and
pricing  assumptions  that  management  believes  are  reasonable. Impairment of
individually  significant  unproved  properties  is  assessed  on  a
property-by-property  basis,  and  impairment  of  other  unproved properties is
assessed  and  amortized  on an aggregate basis. The Company has not capitalized
any  interest  in  2005 relating to expenditures for significant exploration and
development projects.

Long-lived  assets

Long  lived  assets  to  be  held and used or disposed of other than by sale are
reviewed  for  impairment  whenever  events or changes in circumstances indicate
that  the  carrying  amount  may  not be recoverable.  When required, impairment
losses  on  assets  to  be  held  and used or disposed of other than by sale are
recognized  based  on  the  fair  value  of  the asset.  Long-lived assets to be
disposed  of  by sale are reported at the lower of their carrying amount or fair
value  less  cost  to  sell.

Other  assets

Other  assets  primarily  include  deferred  loan  costs  that  are amortized to
interest  expense  over  the  term  of  the  related  debt.

Derivative  instruments

New Century accounts for all derivative financial instruments in accordance with
SFAS  No.  133,  "Accounting for Derivative Instruments and Hedging Activities."
Derivative financial instruments are recorded as liabilities in the consolidated
balance  sheet  and  are  measured  at fair value. When available, quoted market
prices  are used in determining fair value. However, if quoted market prices are
not  available,  New  Century  estimates  fair  value using either quoted market
prices  of financial instruments with similar characteristics or other valuation
techniques.  These derivative liabilities are marked-to-market each quarter with
the change in fair value recorded in the income statement.

New  Century  utilizes  the  Black-Scholes option-pricing model to determine the
fair  value  of  its freestanding derivative instruments. Key assumptions of the
Black-Scholes  option-pricing  model  include  applicable  volatility  rates,
risk-free  interest  rates  and the instruments expected remaining life. We also
determined  a  fair  value  for  our various embedded derivatives within our $15
million convertible note by using a layered discounted probability-weighted cash
flow  model.  The  assumptions  used  in  both  modeling  techniques  required
significant  management  judgment  and  estimates of future fluctuation in stock
price  as  well as changes in future interest rates. The reader should reference
Note 5 for further details in regards to our derivative liabilities.

Extinguishment  of  Debt  -

We follow the provisions of SFAS No. 140 "Accounting for Transfers and Servicing
of  Financial  Assets and Extinguishments of Liabilities" ("SFAS No. 140") along
with  related  interpretations  from Emerging Issues Task Force No. 96-19 ("EITF
No.  96-19").  The  Task  Force  reached  a  consensus  that an exchange of debt
instruments  with  substantially  different  terms  is a debt extinguishment and
should  be  accounted  for in accordance with paragraph 16 of SFAS No. 140.  The
Task Force also observed that a debtor could achieve the same economic effect by
making  a  substantial  modification  of  terms  of an existing debt instrument.
Accordingly,  the Task Force reached a consensus that a substantial modification
of  terms  should  be accounted for like, and reported in the same manner as, an
extinguishment  of  debt.

From  the  debtor's  perspective,  an  exchange of debt instruments between or a
modification  of  a debt instrument by a debtor and a creditor in a non-troubled
debt  situation  is  deemed to have been accomplished with debt instruments that
are substantially different if the net present value of the cash flows under the
terms  of  the  new  debt  instrument  is at least 10 percent different from the
present  value  of  the  remaining  cash  flows  under the terms of the original
instrument.  With  the  Third Amendment to the Convertible Note and the December
Option,  the  Company  feels  that  a  substantial  modification in terms of the
Convertible  Note  has  occurred.  Upon  further  analysis,  the  Company  has
determined  that  a  greater than 10% difference in the net present value of the
remaining  cash  flows  of  both  the  original  Convertible  Note  and  the New
Convertible  Note  has  occurred.  Therefore,  the  Company has extinguished the
original  Convertible  Note,  along  with  the related unamortized discounts and
deferred loan costs,  and recorded the New Convertible Note at its fair value on
December  30,  2005.  The  extinguishment  required  the  Company  to  record an
extinguishment  debt  expense  of  $8,309,759.

                                       71
<PAGE>

Asset  retirement  obligation

For  asset retirement obligations, we follow SFAS No. 143, "Accounting for Asset
Retirement  Obligations"  ("SFAS  No. 143"). SFAS No. 143 requires that an asset
retirement  obligation  associated  with  the  retirement  of  a  tangible
long-lived asset be recognized  as  a  liability  in  the  period in which it is
incurred  or  becomes  determinable, with an associated increase in the carrying
amount  of  the  related  long-lived  asset. The cost of the tangible long-lived
asset,  including the asset retirement cost, is depreciated over the useful life
of  the  asset.

Asset  retirement  obligations  primarily relate to the potential abandonment of
oil  and  gas  producing  facilities.  The  fair  value  of the asset retirement
obligation  is  recognized in the period in which the liability is incurred if a
reasonable  estimate  of  fair  value  can be made. Asset retirement obligations
include  costs  to  dismantle  and  relocate  wells  and  related  structures,
and  restoration  costs  of  land,  including  those leased. Depreciation of the
capitalized  asset  retirement  cost  and  accretion  of  the  asset  retirement
obligation  are  recorded  over  time. The depreciation on the capitalized asset
will  generally be determined on a unit-of-production basis, while the accretion
of  the  liability  will  be  recognized  over the life of the producing assets.

Contingencies

We account for loss contingencies in accordance with SFAS No. 5, "Accounting for
Contingencies."  Accordingly,  when  management  determines  that it is probable
that  an asset has been impaired or a liability has been incurred, we accrue our
best  estimate  of  the loss if it can be reasonably estimated.  Our legal costs
related  to  litigation  are  expensed  as  incurred.

Stock-based  compensation

We  may,  from  time  to time, issue common stock, stock options or common stock
warrants  to  acquire services or goods from non-employees.  Common stock, stock
options  and  common  stock  warrants  issued to persons other than employees or
directors are recorded on the basis of their fair value, as required by SFAS No.
123  -  "Accounting  for  Stock Based Compensation", which is measured as of the
date  required  by EITF Issue 96-18, "Accounting for Equity Instruments That Are
Issued  to  Other  Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services."  The stock options or common stock warrants are valued using
the  Black-Scholes  model  on  the  basis  of the market price of the underlying
common  stock on the "valuation date," which for options and warrants related to
contracts that have substantial disincentives to non-performance, is the date of
the  contract, and for all other contracts is the vesting period.  Where expense
must  be recognized prior to a valuation date, the expense is computed under the
Black-Scholes  model  on  the basis of the market price of the underlying common
stock  at  the  end  of  the  period.

Income  taxes

The  Company  accounts  for  income  taxes  in  accordance  with  SFAS  No. 109,
"Accounting  for  Income  Taxes".  This  Statement  prescribes  the  use  of the
liability  method  whereby deferred tax asset and liability account balances are
determined  based  on  differences  between financial reporting and tax bases 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. In
assessing  the  realization of deferred tax assets, management considers whether
it  is  likely  that  some  portion  or  all  of the deferred tax assets will be
realized.  The ultimate realization of deferred tax assets is dependent upon the
Company  attaining future taxable income during periods in which those temporary
differences  become deductible. The effect of changes in tax rates is recognized
in  the  period  of  enactment.

Loss  per  share

In  accordance with SFAS No. 128, "Earnings Per Share," we report basic loss per
common  share, which excludes the effect of potentially dilutive securities, and
diluted  loss  per  common  share,  which includes the effect of all potentially
dilutive  securities  unless  their  impact  is  antidilutive.

                                       72
<PAGE>

Fair  Value  of  Financial  Instruments

Our  financial  instruments  consist  of  accounts receivable, accounts payable,
notes  payable  and  derivative  liabilities.  The  fair  values of our accounts
receivable,  accounts  payable, notes payable and derivative liabilities, in our
opinion,  reflect  their respective carrying amounts.  We believe the fair value
of the Convertible Note, as amended, reflects the amount as presented in  Note 7
to the consolidated financial statements as of December 31, 2005.

Recent  accounting  pronouncements

In  December  2004,  the  FASB  issued  SFAS  No.  123 (Revised 2004 - "SFAS No.
123(R)"), "Share-Based Payment", which requires that compensation related to all
stock-based  awards,  including  stock  options,  be recognized in the financial
statements.  This  pronouncement  replaces  SFAS  No.  123,  "Accounting  for
Stock-Based  Compensation,"  and  supersedes APB Opinion No. 25, "Accounting for
Stock  Issued  to  Employees."  We are adopting SFAS No. 123(R) as of January 1,
2006  and,  for  stock  awards  on  and  after  that  date, we will be using the
Black-Scholes  model  to value these stock awards which will then be recorded in
our  consolidated  financial  statements.  We  have  previously  recorded  stock
compensation  pursuant  to  the intrinsic value method under APB Opinion No. 25,
whereby  no  compensation was recognized for most stock option awards. We expect
that  stock  option  grants  will  not  be  a  significant  part  of  employee
compensation, and, therefore, SFAS No. 123(R) will not have a significant impact
on  our  consolidated  financial statements. We do not expect SFAS No. 123(R) to
significantly  change  recorded  compensation  expense  related  to  grants  of
performance  and  unrestricted  shares.  We  are  using the modified prospective
application  method  of adopting SFAS No. 123R, whereby the estimated fair value
of  unvested stock awards granted prior to January 1, 2006 will be recognized as
compensation  expense in periods subsequent to December 31, 2005. As of December
31, 2005, the Company has no employee stock options outstanding.

In  March  2005,  the  Financial  Accounting  Standards  Board  issued  FASB
Interpretation  No.  47  ("FIN  No.  47"),  "Accounting  for  Conditional  Asset
Retirement  Obligations  -  An Interpretation of FASB Statement No. 143."  Under
the  provisions  of FIN No. 47, the term conditional asset retirement obligation
as  used  in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers
to  a  legal  obligation  to  perform  an asset retirement activity in which the
timing  and  /or method of settlement are conditional on a future event that may
or  may  not be within the control of the entity while the obligation to perform
the  asset  retirement  activity  is  unconditional.  Accordingly,  an entity is
required  to  recognize  a  liability  for the fair value of a conditional asset
retirement  obligation  if  the  fair  value  of the liability can be reasonably
estimated.  The  fair  value of a liability for the conditional asset retirement
obligation  is  required  to  be  recognized  when  incurred  -  generally  upon
acquisition,  construction,  or development and /or through the normal operation
of  the asset.  We have adopted FIN No. 47 as of December 31, 2005.  Adoption of
this  pronouncement  did  not have a significant effect on our 2005 consolidated
financial  statements,  and  we  do  not  expect  this  pronouncement  to have a
significant  effect  on  our  future  reported  financial position or results of
operations.

In  July  2005,  the  Financial  Accounting Standards Board issued SFAS No. 154,
"Accounting  for  Changes and Error Corrections-A Replacement of APB Opinion No.
20 and FASB Statement No. 3."  Under the provisions of SFAS No. 154, a voluntary
change  in  accounting  principles  requires  retrospective application to prior
period  financial statements, unless it is impracticable to determine either the
period-specific  effects  or  the  cumulative  effect  of  change.  A  change in
depreciation,  amortization,  or  depletion method for long-lived, non-financial
assets  must  be  accounted for as a change in accounting estimate effected by a
change  in  accounting  principle.  The guidance contained in Opinion NO. 20 for
reporting  the  correction of an error in previously issued financial statements
and  a  change in accounting estimate was not changed.  We are implementing this
new  standard  as  of  January 1, 2006.  This standard is not expected to have a
significant  effect on our reported financial position or results of operations.

Effective  July  1,  2005,  the  Company  adopted  SFAS  No.  153, "Exchanges of
Nonmonetary Assets," an amendment of Accounting Principles Board ("APB") Opinion
No. 29 ("SFAS 153").  SFAS 153 amended prior guidance to eliminate the exception
for  nonmonetary  exchanges  of similar productive assets and replaced it with a
general  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial  substance.  A  nonmonetary  exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of  the  exchange.  The  provisions  of  SFAS  153  were  required to be applied
prospectively.  SFAS  153  did  not  have  a  material  impact  on the Company's
consolidated  financial  statements.

                                       73
<PAGE>

NOTE  3  -  FIRST  ACQUISITION  OF MINERAL INTERESTS IN THE LINDHOLM  HANSON GAS
UNIT  AND  WELLS

We  acquired  certain  working  interests,  overriding  royalty  interests,  and
term  royalty  interests, which together entitled New Century to a 6.2%  working
interest  and  a  5.464%  net  revenue  interest in production from the L-H  Gas
Unit.  New  Century  paid  the  sellers  $10,753,255  in  cash  and  also issued
1,320,000  shares  of common stock  towards  the  purchase  price of the L-H Gas
Unit. The fair market common share  price was $.63 a share for this transaction.
The  common  shares  issued for the  purchase were valued at $831,600. Also, the
effective  date  of  the  agreement  regarding  the  L-H  Gas Unit's revenue and
expenses  was  agreed  upon  by both New Century  and  the  sellers  as April 1,
2005.  These revenues and expenses, which netted to $683,662, were accounted for
as  an  adjustment  to  the  purchase  price.

The  following  table  summarizes  the  initial  estimated  fair  values  of the
assets  acquired  and liabilities assumed, which may be adjusted within one year
of  the  purchase  date  for  changes  in  estimates  of  their  fair  value.

<TABLE>
<CAPTION>
Assets acquired:
<S>                                                  <C>                <C>
     Cash                                                         $    246,745
     Accounts receivable                                               470,585
     L-H Gas Unit
        Leasehold costs                           $10,438,692
        Equipment                                     787,269
                                                   -----------      11,225,961
                                                                   -----------
Total assets acquired                                               11,943,291
Liabilities assumed
    Accounts payable                                                   107,299
    Accrued liabilities                                                  4,392
                                                                   -----------
Net assets acquired                                               $ 11,831,600
                                                                   ===========

A summary of the acquisition consideration at December 31, 2005 is as follows:

Purchase price                                                    $ 11,831,600
    Common stock issued (1,320,000 shares at $.63 per share)          (831,600)
     Cash received from the net of revenues and
       expenses from April 1 to June 30, 2005                         (683,662)
     Other closing costs                                                78,023
                                                                   -----------
Total acquisition consideration                                   $ 10,394,361
                                                                   ===========
</TABLE>

NOTE  4  -SECOND  ACQUISITION  OF  MINERAL  INTERESTS IN THE LINDHOLM HANSON GAS
UNIT  AND  WELLS

Acquisition  -

On  September  19,  2005, New Century entered into a Purchase and Sale Agreement
with  certain  "Sellers"  whereby New Century agreed to purchase certain mineral
interests  that  have  been pooled together in the L-H Gas Unit for an aggregate
purchase  price  of  $8,750,000.  The  interests  purchased total a 7.25 percent
working  interest  and  a 5.4375 percent net revenue interest in the leases. The
effective  date  of  the  agreement  regarding  the  L-H Gas Unit's revenues and
expenses  was  agreed  upon by both New Century and the Sellers as July 1, 2005.
These  revenues and expenses, which netted to $300,941, were accounted for as an
adjustment to the purchase price.

                                       74
<PAGE>

The  following  table summarizes the initial estimated fair values of the assets
acquired  and  liabilities assumed, which may be adjusted within one year of the
purchase date for changes in estimates of their fair value.

<TABLE>
<CAPTION>
Assets acquired:
<S>                                                  <C>                <C>
     Accounts receivable                                          $    902,083
     L-H Gas Unit
        Leasehold costs                           $ 7,669,451
        Equipment                                     779,608
                                                   -----------       8,449,059
                                                                   -----------
Total assets acquired                                                9,351,142

Liabilities assumed
    Accounts payable                                                   341,453
    Accrued liabilities                                                259,689
                                                                   -----------
Net assets acquired                                               $  8,750,000
                                                                   ===========

This acquisition was financed by the Secured Term Note (See Note 6)

A summary of the acquisition consideration at December 31, 2005 is as follows:

Purchase price                                                      $8,750,000
Cash received from the net of revenues and
  expenses from July 1 to September 19, 2005                          (300,941)
Remaining payable for acquisition                                       (2,828)
                                                                   -----------
Total acquisition consideration                                     $8,446,231
                                                                   ===========
</TABLE>

NOTE  5  -  FINANCING  FOR  THE  FIRST  ACQUISITIONS

Secured  convertible  note  -

On  June 30, 2005, New Century entered into a Securities Purchase Agreement with
Laurus  Master  Fund,  Ltd.,  a  Cayman  Islands company ("Laurus"), whereby New
Century  sold  a  Secured  Convertible Term Note (the "Convertible Note") in the
principal  amount  of  $15,000,000  which  is  convertible  into an aggregate of
24,193,548  shares  of New Century's common stock at a conversion price of $0.62
per  share ("Fixed Conversion Price"), in connection with the acquisition of the
L-H  Gas  Unit.

The  Convertible  Note  bears  interest  at  the prime rate (as published in the
Wall  Street  Journal)  plus  2% (the "Contract Rate"). As of June 30, 2005, the
Contract  Rate  was  8%.  The  interest on the Convertible Note shall be payable
monthly,  in arrears, commencing on September 1, 2005 (each monthly date being a
"Determination  Date").  Monthly principal payments of $250,000 were to commence
January  1,  2006  along  with  any  accrued  and  unpaid  interest. On June 30,
2008  (the  "Maturity Date"), New Century will pay Laurus an amount equal to the
outstanding  principal  amount  of  the  Convertible  Note, plus any accrued and
unpaid  interest.

The  Contract Rate shall be calculated on the last business day of each calendar
month  hereafter (other than for increases or decreases in the prime rate) until
the  Maturity Date and shall be subject to adjustment as follows: (i)New Century
shall  have  registered the shares of the common stock underlying the conversion
of  the  Convertible  Note,  the Laurus Stock Option and the Laurus Warrant on a
registration  statement  declared  effective  by  the  Securities  and  Exchange
Commission  ("SEC")  and (ii)the market price of the common stock as reported by
Bloomberg,  L.P.  on  the  principal  market  for  the  five  (5)  trading  days
immediately  preceding  a  Determination  Date  exceeds  the  applicable  Fixed
Conversion  Price by at least 25%, the Contract Rate for the succeeding calendar
month  shall  automatically  be  reduced  by  100  basis points, or 1%, for each
incremental  25%  increase  in  the  market  price of the common stock above the
applicable  Fixed  Conversion  Price. In no event shall the Contract Rate at any
time be less than zero percent.

The  monthly  amount  of  the  Convertible  Note  payment may be made in cash or
common  stock.  When  the  monthly amount is paid in cash, New Century shall pay
Laurus  an  amount in cash equal to 102% of the cash portion of the payment. The
monthly  amount may be converted into shares of common stock. The shares will be
issued  to  Laurus and the number shall be determined by dividing the portion of
the  monthly  amount  converted  into  shares of common stock, by the applicable
Fixed  Conversion Price of $0.62. The following criteria must be met in order to

                                       75
<PAGE>

convert  common  stock  for  payment  of the monthly amount. The average closing
price  of the common stock as reported by Bloomberg L.P. on the principal market
for  the five trading days immediately preceding such amortization date shall be
greater  than  or  equal  to  110%  of the Fixed Conversion Price, or $0.682. In
addition,  shares  shall  not  be  converted  which  would exceed the difference
between (i)4.99% of the outstanding shares of common stock and (ii)the number of
shares  of  common stock beneficially owned by Laurus. Finally, shares shall not
be converted if the value of the shares exceeds twenty-five percent (25%) of the
gross trading volume of the stock for the previous twenty-two (22) trading days.

The  Company  has  a  redemption  option  in regard to the Convertible Note and,
if  exercised,  will pay 125% of the principal amount outstanding at the time of
such  prepayment up to the first anniversary date.  If New Century exercises the
redemption  option  after  the  first  anniversary  date  but  before the second
anniversary  date, the Company will pay 120% of the principal amount outstanding
at  the time of such prepayment.  If New Century exercises the redemption option
after the second anniversary date but before the Maturity date, the Company will
pay  115%  of  the  principal amount outstanding at the time of such prepayment.

The  Convertible  Note  has  a Registration Rights Agreement ("RRA") whereby New
Century  was to have its registration statement declared effective by the SEC no
later than 120 days after the Closing (June 30, 2005). Further, New Century must
maintain  the  registration  statement  in  an effective status and not have the
trading  of its common stock suspended beyond a specified period. New Century is
subject  to  a  liquidated  damages  provision under the RRA, whereby it will be
liable  to  pay  1.5%  of  the  product  of the original principal amount of the
Convertible  Note  per  month  until  the  event  is cured. As of this date, New
Century's  registration  statement  on  Form  SB-2  has  not  yet  been declared
effective  by  the SEC and withdrew its filing on December 30, 2005. The Company
plans  to  refile  the  Form SB-2 upon the filing of this report. On November 4,
2005,  New  Century  and Laurus executed an Amended Agreement, whereby the grace
period  for  the  registration statement being declared effective by the SEC was
extended  to  December  12,  2005.  On December 14, 2005, New Century and Laurus
executed  a  Second  Amended  Agreement effective December 12, 2005, whereby the
grace  period for the registration statement being declared effective by the SEC
was  extended to January 31, 2006. On December 30, 2005, we entered into a Third
Amended  Agreement, which further deferred the grace period for the registration
statement  to be declared effective to July 1, 2006. As of December 31, 2005, no
amount  has  been  assessed  or  accrued for liquidated damages in New Century's
accompanying consolidated balance sheet.

The  fixed  conversion  price  and number of shares to be issued upon conversion
shall  be  subject  to  adjustment  upon  the occurrence of the following events
during  the  period that this conversion right remains outstanding: common stock
reclassification; stock splits, combinations and dividends; and share issuances.
Share  issuances would include options, warrants or other issuances of shares to
third  parties  or  employees  for an offer price less than the fixed conversion
price.  The  occurrence  of  one  of  these  events  would  result  in the fixed
conversion  price  or  number of shares convertible to Laurus to be adjusted, or
reset, to the lower offer price at the time of share issuance.

In  connection  with  the  Laurus  financing,  New Century executed a Subsidiary
Guaranty  Agreement,  Collateral  Assignment   Agreement   and  Master  Security
Agreement,  whereby  Century  Resources  Inc.  is a guarantor on the Convertible
Note,  and Laurus has a continuing security interest in all of the assets of New
Century.

Events  of  default  under the Convertible Note include, among other provisions,
cross-default, bankruptcy, material adverse event, breach of Covenant, change in
control,  stock  trading  stop-order, and failure to deliver the common stock to
Laurus  free  of  restrictions  and  other  conditions, whereby upon occurrence,
Laurus  may  demand  immediate  repayment  of  the  Convertible Note and accrued
interest.  Following  the  occurrence  and during the continuance of an Event of
Default,  Laurus, at its option, may demand repayment in full of all obligations
and  liabilities  owing by New Century. The default payment shall be 130% of the
outstanding  principal amount of the Convertible Note. Additionally, New Century
must  pay  additional  interest on the Convertible Note equal to 2% per month on
all  outstanding  amounts  until  the  events  of  default  are cured or waived.
Subsequent  to  June  30,  2005, the Company was in technical default of certain
covenants  within  the  Securities  Purchase Agreement, including lack of timely
filing of certain reports required to be filed with the SEC pursuant to

                                       76
<PAGE>

the  Exchange  Act  and  effectiveness  of its associated registration statement
within  120  days  of  Closing. The Company obtained a waiver for these defaults
through  the  Amended  Agreement  dated  November 4, 2005 and the Second Amended
Agreement  dated  December  14,  2005.  As  such, no amount has been accrued for
liquidated  damages,  default  payment  or  default  interest  in  New Century's
accompanying  consolidated  balance  sheet  as  of  December  31,  2005.

The  Convertible  Note  is  a hybrid instrument which contains both freestanding
derivative  financial  instruments and more than one embedded derivative feature
which  would  individually warrant separate accounting as derivative instruments
under  SFAS  No.  133. The freestanding derivative financial instruments include
the  Laurus Warrant and the Laurus Stock Option, which were valued individually,
and  totaled  $3,668,299  and $6,338,126, respectively, at inception on June 30,
2005.  The  various embedded derivative features have been bundled together as a
single,  compound  embedded  derivative instrument that has been bifurcated from
the  debt  host  contract,  and  is referred to as the "Single Compound Embedded
Derivatives  Within  Convertible  Note". The single compound embedded derivative
features include the conversion feature within the Convertible Note, the premium
for  cash payment, the early redemption option and the Contract Rate adjustment.
The  value  of  the single compound embedded derivative liability was bifurcated
from  the  debt  host  contract  and  recorded  as a derivative liability, which
resulted in a reduction of the initial carrying amount (as unamortized discount)
of  the  Convertible  Note  of  $1,716,420  at  inception  on June 30, 2005. The
unamortized  discount  is  amortized  to  interest  expense  using the effective
interest method over the life of the Convertible Note, or 36 months.

Additionally,  the  ECS  Warrant  also  resulted  in  a reduction of the initial
carrying  amount  (as  unamortized  discount)  of  the Convertible Note.  It was
valued  at  $326,577  was allocated  to additional paid-in capital, as it is not
subject  to  the  RRA.

New  Century  also  incurred  closing costs of $1,204,596 in connection with the
closing  of the Securities Purchase Agreement. Net fees and costs to non-lenders
in  the  amount of $629,596 were capitalized as deferred loan costs at inception
on June 30, 2005, and shall be recognized over the life of the Convertible Note,
or  36  months,  by using the effective interest method. The remaining financing
costs  of  $575,000  paid to Laurus were recorded to unamortized discount on the
Convertible  Note and are amortized to interest expense over 36 months under the
effective interest method.

Derivative  Liability  with  Single  Compound  Embedded  Derivatives  within
Convertible  Note-

Using  a  layered  discounted  probability-weighted  expected  cash  flow
methodology,  the  fair value of the Single Compound Embedded Derivatives within
Convertible  Note  was  computed  at  $1,716,420  as of June 30, 2005. The model
replicated  the  economics  of the Convertible Note and applied different events
based  on  various  conditions  likely to occur over the life of the Convertible
Note.  Multiple  scenarios were used in the model and the underlying assumptions
below  were  applied.  The  value  of  this  single compound embedded derivative
instrument  was  bifurcated  from  the  debt  host  contract  and  recorded as a
derivative  liability  which  resulted  in  a  reduction of the initial carrying
amount (as unamortized discount) to the notional amount of the Convertible Note.

                                       77
<PAGE>

Probability-Weighted  Expected  Cash  Flow  Methodology - at inception (June 30,
2005):

Assumptions                              Single  Compound  Embedded
                                     Derivatives  within  Convertible  Note
------------                  --------------------------------------------------
Risk  -  free  interest  rate                                         3.67%

Prime  rate                                                           6.00%
  Increasing  .25%  each  quarter  of  first  year

Timely  registration                                                 95.00%
  Increasing  by  1%  monthly  up  to  99%

Default  status                                                       5.00%
  Increasing  by  0.1%  monthly

Alternative  financing  available  and  exercised                     0.00%
  Increasing  2.5%  monthly  up  to  25%

Trading  volume,  gross  monthly  dollars                             2.00%
  Monthly  increase

Annual  growth  rate  of  stock  price                               31.80%

Future  projected  volatility                                       100.00%

Common  stock  purchase  warrants-

On  June  30,  2005,  in  connection with the Securities Purchase Agreement, New
Century  granted  Laurus  a  seven  year  Common Stock Purchase Warrant ("Laurus
Warrant")  to  purchase  7,258,065  shares  of  New Century's common stock at an
exercise  price  of  $.80  per share. The holder may exercise the Laurus Warrant
immediately.  The  Laurus Warrant allows the holder to purchase the shares until
5:00  PM  CST,  June  30,  2012.

                                       78
<PAGE>

The  Laurus Warrant is a freestanding derivative financial instrument. Using the
Black-Scholes  Method,  the  fair  value  of  the  derivative  was  computed  at
$3,668,299  at inception on June 30, 2005 and recorded as a derivative liability
which  resulted  in  a  reduction of the initial carrying amount (as unamortized
discount) of the Convertible Note. This derivative liability is marked-to-market
each  quarter  with  the  change in fair value recorded in the income statement.
Unamortized  discount  is  amortized  to  interest  expense  using the effective
interest  method  over  the  life  of the Convertible Note, or 36 months. If the
Laurus  Warrant  is  exercised  during  this  36  month  period,  the derivative
liability will be released and recorded as additional paid in capital.

On  June  30,  2005,  New  Century  also granted Energy Capital Solutions, L.P.,
a  three-year  common stock Purchase Warrant ("ECS Warrant") to purchase 900,000
shares  of  New  Century's  common stock at an exercise price of $.80 per share,
with  piggyback  registration  rights  pursuant  to   a  finder's  agreement  in
connection  with  the  closing  of the Securities Purchase Agreement between New
Century  and  Laurus.  The  ECS Warrant allows Energy Capital Solutions, L.P. to
purchase  the  shares  until  5:00 PM CST, June 30, 2008. The ECS Warrant is not
subject  to the RRA and is expected to be settled in the Company's common stock.

The ECS Warrant using the Black-Scholes Method, had an initial fair value in the
amount  of $326,577 at June 30, 2005. The value of the ECS Warrant was allocated
to  additional  paid-in  capital  and  resulted  in  a  reduction of the initial
carrying  amount  (as  unamortized  discount)  of  the Convertible Note. The ECS
Warrant  discount  is amortized to interest expense using the effective interest
method over the life of the Convertible Note, or 36 months.

Since  the  ECS Warrant is not subject to the RRA, the ECS Warrant was allocated
to  additional  paid-in capital whereas the Laurus Stock Option, Laurus Warrant,
December  Option  and  the  Single,  Compound  Embedded  Derivatives  within the
Convertible Note have all been allocated to derivative liabilities.

Stock  option  agreement-

On  June  30,  2005,  in  connection with the Securities Purchase Agreement, New
Century  granted  an  option  to  Laurus  ("Laurus  Stock  Option") which vested
immediately,  to purchase any time or from time to time, up to 10,222,784 shares
of  New  Century's  common stock at an initial exercise price of an aggregate of
$1.00.  The  Laurus  Stock  Option  has  an indefinite life per the terms of the
Option.  Each  exercise of this Option by Laurus was limited to Laurus initially
owning  an  aggregate  maximum  of  4.99% of the outstanding common stock of New
Century.  Laurus  agreed  under  the  agreement not to sell any shares of common
stock exercisable upon exercise of the options until: (a) payment in full of all
of the obligations and liabilities of New Century to Laurus under the Securities
Purchase  Agreement  and  Convertible  Note  have  been paid in full and (b) the
exercise  of  the  Laurus Warrant; provided, however that Laurus may sell all or
any  portion  of the common stock issuable upon the exercise of the Laurus Stock
Option  following an event of default. On July 25, 2005, New Century amended the
Laurus Stock Option to adjust the limitation on the amount of outstanding shares
which  Laurus  could  hold at any one time from 4.99% to 9.99% and to change the
exercise  price  of  the  Laurus  Stock  Option  from  an aggregate of $1.00 for
10,222,784  shares  of  New  Century's  common  stock  to $.001 per share of New
Century's  common stock. The amendment also clarified that Laurus is not able to
sell  any  shares held in connection with the Laurus Stock Option until both (a)
payment  in  full  of  all  of the obligations and liabilities of New Century to
Laurus under the Securities Purchase Agreement and the Convertible Note has been
paid in full; and (b) the exercise of the Laurus Warrant by Laurus.

                                       79
<PAGE>

The  Laurus  Stock  Option  is  a  freestanding  derivative instrument and using
the Black-Scholes Method, it had an initial fair value of $6,338,126 at June 30,
2005. This derivative liability is marked-to-market each quarter with the change
in  fair  value  recorded  in  the  income  statement.  The  Laurus Stock Option
unamortized  discount  is  amortized  to  interest  expense  using the effective
interest  method  over the life of the Convertible Note, or 36 months. If any of
the Laurus Stock Option is exercised during this 36 month period, the derivative
liability  will  be  released  by the fair value of the options at that date and
recorded  as  additional  paid-in  capital.

The  following  assumptions were used in the preparation of the above valuations
at  inception  (June  30,  2005):

Black-Scholes Methodology:
                                       Laurus
                            ECS        Stock        Laurus
Assumptions               Warrant      Option       Warrant
-----------               -------      ------       -------
Dividend yield             0.00%        0.00%         0.00%
Risk-free interest rate    3.67%        4.28%         3.80%
Volatility               100.00%      100.00%       100.00%
Expected Term            3 years      20 years      7 years

The  Laurus  Stock  Option  has  an  indefinite term per the Securities Purchase
Agreement;  however, a 20-year expected term has been assumed in the calculation
of its valuation, which we believe reasonably approximates the fair value of the
Laurus  Stock  Option.

The  components  of  Notes  payable at inception and at December 31, 2005 are as
follows:

Convertible  Note  at  Inception  (June  30,  2005)  -

As  a  result  of  these  contract  provisions,  the Convertible Note balance at
Inception  (June  30,  2005)  was  adjusted  as  follows:

Notional balance of Convertible Note at June 30, 2005                $15,000,000
Adjustments:
     Discount relating to ECS Warrant                                  (326,577)
     Discount for derivative liability-Convertible Note
       with Compound Embedded Derivatives                            (1,716,420)
     Discount for derivative liability-Laurus Stock Option           (6,338,126)
     Discount for derivative liability-Laurus Warrant                (3,668,299)
     Discount for deferred loan costs paid to Laurus
          on Convertible Note                                          (575,000)
                                                                     ----------
Subtotal of adjustments                                             (12,624,422)
                                                                     ----------
Convertible Note balance, as adjusted, at June 30, 2005               2,375,578
    Less current portion of Convertible Note                         (1,500,000)
                                                                     ----------
Convertible Note balance, net of current portion
    and unamortized discount at June 30, 2005                      $    875,578
                                                                     ==========

                                       80
<PAGE>

Convertible  Note  at  December  31,  2005  -

The  Convertible  Note  balance on the consolidated balance sheet as of December
31,  2005  is  comprised  of  the  following:

Notional balance of Convertible Note at December 31, 2005           $15,000,000
Adjustments:
     Discount for derivative liability-Convertible Note
       with Compound Embedded Derivatives                              (589,327)
     Discount for current market yield of Convertible Note           (2,506,863)
                                                                     ----------
Subtotal of adjustments                                              (3,096,190)
                                                                     ----------
Convertible Note balance, as adjusted, at December 31, 2005          11,903,810
    Less current portion of Convertible Note                         (1,500,000)
                                                                     ----------
Convertible Note balance, net of current portion
    and unamortized discount at December 31, 2005                  $ 10,403,810
                                                                     ==========

Secured  Term  Note  at  Inception  (September 19,  2005 - see Note 6)  -

Notional balance of the Secured Term Note at September 19, 2005    $  9,500,000
Adjustment -
     Discount for deferred loan costs paid to Laurus
          on Secured Term Note                                         (395,000)
                                                                     ----------
Secured Term Note balance, as adjusted, at September 19, 2005         9,105,000
    Less current portion of Secured Term Note                        (9,105,000)
                                                                     ----------
Secured Term Note balance, net of current portion
    and unamortized discount at September 19, 2005                 $          -
                                                                     ==========

Secured  Term  Note  at  December 31, 2005  (See terms of amendment in Note 6)-

Notional balance of the Secured Term Note at December 31, 2005     $  9,500,000
Adjustments -
     Discount for deferred loan costs paid to Laurus
          on Secured Term Note                                         (173,650)
                                                                     ----------
Secured Term Note balance, as adjusted, at December 31, 2005          9,326,350
    Less current portion of Secured Term Note                        (1,106,607)
                                                                     ----------
Secured Term Note balance, net of current portion
    and unamortized discount at December 31, 2005                  $  8,219,743
                                                                     ==========

At  December  31,  2005, the current and long-term portions of the Notes payable
balances  in  the  accompanying  consolidated  balance  sheet  consist  of  the
following:

Notes payable on Convertible Note, current portion                 $  1,500,000
Notes payable on Secured Term Note, current portion                   1,106,607
                                                                     ----------
Notes payable, current portion at December 31, 2005                $  2,606,607
                                                                     ==========

Notes payable on Convertible Note, net of current portion
    and unamortized discount                                       $ 10,403,810
Notes payable on Secured Term Note, net of current portion
    and unamortized discount                                          8,219,743
                                                                     ----------
Notes payable, less current portion at December 31, 2005           $ 18,623,553
                                                                     ==========

                                       81
<PAGE>

Change  in  unamortized  discount  and  loan  costs  of  Note  payable  -

For  the year ended December 31, 2005, the discount on Notes payable changed for
amortization  of discounts for derivative liabilities related to the Convertible
Note  and  ECS  Warrant,  for  amortization  of  loan  costs  paid  to Laurus in
connection  with  both  the  Convertible  Note and the Secured Term Note and for
extinguishment  of  debt relating to the December Option.  The total discount in
2005  on  Notes  payable  changed from $13,019,422 to $3,269,840 at December 31,
2005.

Accretion of unamortized discounts to Convertible Note
  and Secured Term Note for derivative liabilities                  $(2,361,065)
A change in the underlying terms of the Laurus
  Stock Option Agreement                                                 (1,416)
Discounts relating to extinguishment of debt                        (10,483,291)
Discount relating to fair value of
  single compound embedded derivative of Convertible Note               589,327
Discount relating to fair value of market yield
  on Convertible Note                                                 2,506,863
                                                                      ---------
Total change in discount on Notes Payable during 2005               $(9,749,582)
                                                                      =========

Future payments under outstanding notes payable at their notional amounts as of
December 31, 2005 are as follows:

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31:
-----------------------
<S>                            <C>
2006                     $  2,606,607
2007                       11,393,393
2008                       10,500,000
2009 and Thereafter                 -
                          -----------
Total                    $ 24,500,000
                          ===========
</TABLE>

The  following  assumptions were used in the preparation of the above valuations
at  December  31,  2005:

<TABLE>
<CAPTION>

Black-Scholes Methodology:
                                       Laurus                    Laurus
                                       Stock        Laurus      December
Assumptions                            Option       Warrant      Option*
------------                           ------       -------     --------
<S>                                     <C>           <C>          <C>
Dividend yield                          0.00%         0.00%        0.00%
Risk-free interest rate                 4.61%         4.36%        4.61%
Volatility                            100.00%       100.00%      100.00%
Expected Term                         20 years    6.50 years     20 years
</TABLE>
*  See  Note  -  7

Probability-Weighted  Expected  Cash  Flow  Methodology  -

Assumptions                        Single  Compound  Embedded
                             Derivatives  within  Convertible  Note

Risk  -  free  interest  rate                                         4.37%

Prime  rate                                                           7.25%
  Increasing  .25%  each  quarter  of  first  year

Timely  registration                                                 95.00%
  Increasing  by  1%  monthly  up  to  99%

Default  status                                                       5.00%
  Increasing  by  0.1%  monthly

Alternative  financing  available  and  exercised                     0.00%
  Increasing  2.5%  monthly  up  to  25%

Trading  volume,  gross  monthly  dollars                             4.00%
  Monthly  increase

Annual  growth  rate  of  stock  price                               31.90%

Future  projected  volatility                                       100.00%

                                       82
<PAGE>

Change  in  fair  value  of  derivatives  instruments-

For the year ended December 31, 2005, the fair value of the Company's derivative
liabilities  decreased  as  follows:

    Single  Compound  Embedded
      Derivatives  within Convertible Note                          $    675,637
    Laurus  Stock Option                                               3,571,005
    Laurus  Warrant                                                    2,871,240
                                                                      ----------
    Decrease  in  fair  value  of  derivative
       liabilities  (marked-to market)                              $  7,117,882
                                                                      ==========

The  net  decrease  in  derivative  liabilities (marked-to-market) of $7,117,882
for  the  year  ended December 31, 2005, has been recorded under Other income in
the  accompanying  consolidated  statements  of  operations.

The  values  of  these  derivative liabilities are subject to the changes in the
trading  value  of  the  Company's  common  stock.  As  a  result, our financial
statements  may  fluctuate from quarter  to  quarter  based on factors,  such as
the  trading  value of New Century's common stock and the amount of shares which
may  be  converted  by  Laurus in connection with the Laurus Convertible Note or
exercised  in  connection  with  the  Laurus  Warrants and Laurus Stock Options.
Consequently,  our consolidated financial position and results of operations may
vary  significantly  from  quarter  to  quarter, based on factors other than New
Century's  revenues  and  expenses.

NOTE  6  -  FINANCING  FOR  THE  SECOND  ACQUISITION

On  September 19, 2005, New Century sold to Laurus Master Funds, LTD. ("Laurus")
a Secured Term Note (the "Term Note") in the amount of $9,500,000. The Term Note
bears  interest at the rate of twenty percent (20%) per year, based on a 360 day
year  and  is  payable  monthly  in  arrears.  The first interest payment is due
November  1,  2005. The principal amount of the Term Note was originally due six
(6)  months from the date of issuance, or March 19, 2006. New Century may prepay
the  Term  Note  together with accrued interest to Laurus at any time before the
due  date  of  March  19,  2006,  but must give written notice 7 days before the
redemption date.

In  connection  with  the  closing  of  the Term Note, New Century agreed to pay
Laurus  Capital  Management,  L.L.C.,  a  closing  payment equal to four percent
(4.00%)  of  the principal amount of the Term Note, or $380,000; and $200,000 to
Energy  Capital  Solutions,  L.L.C.,  as  a  finder's fee on the closing of  the
Term  Note.  The finders' fee has been capitalized as Deferred loan costs in the
accompanying  consolidated  balance  sheet and is amortized over the related six
month  term  under  the effective interest method. The remaining financing costs
paid  to  Laurus have been recorded as unamortized discount on the Term Note and
amortized  to  interest  expense  over  six  months under the effective interest
method.

On  March  30,  2006,  the  Company signed an "Amended and Restated Secured Term
Note"  ("Amended  Term  Note").  The Amended Term Note will continue to bear the
same  interest  rate of twenty percent (20%) per year as the original Term Note;
however, the Amended Term Note will be due in full on January 2, 2007 instead of
March  19, 2006.  A monthly interest and principal payment will be made based on
eighty  percent  (80%)  of  the gross proceeds paid to the Company in respect to
oil, gas and /or other hydrocarbon production arising from the Company's 5.4375%
net revenue interest in the L-H Gas Unit (Second Acquisition).  The Company will
make  a  monthly  payment to Laurus within 5 days of receiving payment from U.S.
Enercorp,  the  operator of the unit.  Each payment made by the Company shall be
applied  first  to  accrued and unpaid interest due on the Amended Term Note and
then  to  the  outstanding  principal  amount.

                                       83
<PAGE>

NOTE  7  - THIRD AMENDMENT AGREEMENT TO THE CONVERTIBLE NOTE, DECEMBER OPTION
AND EXTINGUISHMENT OF DEBT

Third Amendment Agreement -

On  December  30,  2005,  New  Century  entered into a Third Amendment Agreement
("Third  Amendment")  with  Laurus. The Third Amendment amended the Registration
Rights  Agreement  to provide for the December Option; further deferred the date
which  we are required to obtain effectiveness of our Registration Statement, to
July  1,  2006,  from  January  31,  2006;  and added a provision whereby we are
required  to  file  a  Registration Statement covering the shares exercisable in
connection  with the December Option, no later than ten (10) business days after
the  date which we file our Form 10-KSB for the year ended December 31, 2005, or
April 25, 2006, whichever is earlier.

The  Third  Amendment of the Convertible as described above was accounted for as
an extinguishment of debt in accordance with EITF 96-19 "Debtor's Accounting for
a  Modification  or  Exchange  of  Debt  Instruments."  The Company determined a
substantial  difference  in  the  net present value of the cash flows (including
changes  in  the  fair  value of our single compound embedded derivatives of the
Convertible  Note)  under  the  terms  of  the  Third Amendment was more than 10
percent  different  from the present value of the remaining cash flows under the
terms  of  the original Convertible Note. Due to the substantial difference, the
Company  determined  an  extinguishment  of  debt  had  occurred  with the Third
Amendment. As such, it was necessary to reflect the Convertible Note at its fair
market value.

Accordingly,  the  change  in  the  fair  value  from  pre-modification  to
post-modification  of  the Convertible Note for the compound embedded derivative
aggregating  $451,456,  and  the  fair  value  of  the December Option issued in
connection with the Third Amendment, amounting to $859,914, were included in the
Company's  determination  of the debt extinguishment loss recorded in the fourth
quarter  of  fiscal  year  2005.  The  $8,309,759  aggregate  loss  from  these
transactions,  accounted  for as an extinguishment of debt, is included in Other
expenses  for  the  year  ended December 31, 2005. In addition to the fair value
change  from  pre-modification  to post-modification of the Convertible Note for
the compound embedded derivative offset by the fair value of the December Option
(both  noted above), the approximately $8.3 million aggregate loss also includes
$10,483,291  and  $514,200  for the unamortized discounts and deferred financing
costs  related  to  the  Convertible  Note,  offset  by the establishment of the
discounts  to  the  new  note  of  $589,327  for  the fair value of the compound
embedded derivative and $2,506,863 for the current market yield.

The following table shows the basis for the debt extinguishment:

<TABLE>
<CAPTION>
Extinguishment of Convertible Note at December 30, 2005:
<S>                                                                        <C>
Convertible Note                                                    $ (15,000,000)
Unamortized discount of Laurus Warrant                                  3,019,907
Unamortized discount of Laurus Stock Option                             5,325,279
Unamortized discount of Single Compound Embedded
    Derivatives of Convertible Note                                     1,397,910
Unamortized discount of ECS Warrant                                       270,054
Unamortized discount of Laurus closing costs                              470,141
Unamortized discount of Non-Laurus closing costs                          514,200
                                                                     ------------
Subtotal                                                               10,997,491
                                                                     ------------
Extinguishment of Convertible Note                                  $  (4,002,509)
                                                                     ============

Record New Convertible Note at December 30, 2005:
Convertible Note                                                    $  15,000,000
Unamortized discount of Single Compound Embedded
    Derivatives of Convertible Note                                      (589,327)
Unamortized discount for market yield based on 20% rate                (2,506,863)
                                                                     ------------
Subtotal                                                               (3,096,190)
                                                                     ------------
Fair value of the new Convertible Note                              $  11,903,810
                                                                     ============

Other items relating to the extinguishment:
Extinguishment loss on the December Option                          $     859,914
Change in fair value from pre-modification
    to post-modification of the Convertible
     Note for the compound embedded derivative                           (451,456)
                                                                     ------------
Other items relating to the extinguishment                                408,458

Extinguishment of Convertible Note                                     (4,002,509)

Fair value of the new Convertible Note                                 11,903,810
                                                                     ------------

Loss on early extinguishment of debt                                $   8,309,759
                                                                     ============
</TABLE>

                                       84
<PAGE>

Laurus  December  Option  -

The  Company  has  agreed  to issue Laurus the December Option ("Laurus December
Option")  as  consideration  for  the Third Amendment, which provides Laurus the
right to purchase up to 5,061,392 shares of our common stock at $.001 per share.
Laurus  agreed under the Laurus December Option not to exercise any rights under
the  Laurus December Option until: (a) payment in full of all of the obligations
and liabilities of the Company to Laurus under the June 2005 Securities Purchase
Agreement  and  Restated  Convertible  Note  have  been paid in full and (b) the
exercise of the Laurus Warrant, provided however that Laurus may sell all or any
portion  of  the common stock issuable upon the Laurus December Option following
an  event  of  default  (as defined in the Amended Convertible Note), or upon 75
days  notice  to  us.

The  December  Option  is  a  freestanding  derivative instrument and, using the
Black-Scholes  Method,  it had an initial fair value of $859,914 at December 30,
2005. This derivative liability is marked-to-market each quarter with the change
in fair value recorded in the income statement. The value of the December Option
granted  to  Laurus  as  part  of  the  modification  was  associated  with  the
extinguishment  of the Convertible Note and included in the determination of the
debt extinguishment loss recognized.

Fair  value  of  derivative  liabilities  at  year  ended  December  31,  2005:

  Derivative liability for Laurus Warrant                        $  797,059
  Derivative liability for Laurus Stock Option                    1,112,447
  Single Compound Embedded Derivatives within Convertible Note      589,327
  Derivative liability for Laurus December Option                   859,914
                                                                  ---------
Total                                                            $3,358,747
                                                                  =========

NOTE  8  -  OTHER  INCOME  (EXPENSE)

The  Company  had  a net decrease in fair value of its derivative liabilities of
$7,117,882  which  was  included  in  "Other  income"  (See  Note  5).

Interest expense consists of the following for the years ended 2005 and 2004:

                                                        2005           2004
                                                     ----------    ----------
Interest expense on notional balance                 $1,215,556    $  250,590
Accretion of note discount                            2,034,910             -
Amortization of deferred loan costs                     558,627             -
                                                     ----------    ----------
Subtotal                                              3,809,093       250,590
Other interest expense                                   63,172             -
                                                     ----------    ----------
Total interest expense                               $3,872,265    $  250,590
                                                     ==========    ==========

As of December 31, 2005, $509,028 has been released into "Other income" from the
liability  of $717,540 initially recorded, in connection with the reverse merger
with  Vertica.  The  release  of  $509,028  into  "Other income" is comprised of
creditor  settlements,  expiration  of  accounts  payable  regarding a four year
statute  of  limitations,  and  the  settlement  agreement  with  prior  Vertica
employees  regarding  disputed  back  wages  (See  Note  12).


NOTE  9  -  INCOME  TAXES

The  Company  has  net  operating  loss  for  financial  accounting  purposes of
approximately  ($3,400,000)  for  the year ended December 31, 2005.  The Company
has  a  potential  deferred tax asset of approximately $1,850,000 as a result of
the  tax  net  operating loss carry forward for December 31, 2005.    Due to the
uncertainty  surrounding  the realization of the benefits of its tax attributes,
including  net operating loss carry forwards, in future tax returns, The Company
has  provided  a  100%  valuation  allowance  on  its  deferred tax assets.  The
valuation  allowance  increased  by  approximately  $221,000  for the year ended
December  31,  2005.

                                       85
<PAGE>

The  following table sets forth a reconciliation of the statutory federal income
tax  for  the  year  ended  December  31,  2005  and  2004.

<TABLE>
<CAPTION>
                                                          2005            2004
                                                      ------------    -----------
<S>                                                       <C>             <C>
Loss before income taxes                               $(3,398,824)   $(3,991,550)
                                                       ===========    ===========
Income tax expense(benefit)
   computed at statutory rates                         $(1,155,600)   $(1,357,127)
Net decrease in fair value of derivative
   liabilities, net of amortization
   of discounts                                         (1,728,229)             -
Loss on early extinguishment of debt                     2,825,318              -
Permanent differences                                     (163,503)       322,647
Increase in valuation allowance                            220,729      1,031,079
Other                                                        1,285          3,401
                                                      ------------    -----------
Tax provision for income taxes                         $         0    $         0
                                                       ===========    ===========
</TABLE>

No  federal income taxes have been paid since the inception of the Company.  The
Company  has a net operating loss carry forward for financial reporting purposes
of  approximately  $5,440,000  at  December  31, 2005, which will expire in 2024
through  2025  if not utilized.  Section 382 of the Internal Revenue Code limits
net  operating  loss  and  tax credit carry forwards when an ownership change of
more  than  fifty percent of the value of the stock in a loss corporation occurs
within  a  three-year  period.

The  tax  effects  of the temporary differences between income for financial and
income  tax  reporting  purposes  are  recognized  as  a deferred tax assets and
liabilities.  Significant  components  of deferred tax assets and liabilities as
of  December  31,  2005  are  set  out  below:

<TABLE>
<CAPTION>
                                                                        2005
                                                                   ------------
<S>                                                                    <C>
Deferred tax assets:
  Net operating loss carry forwards                                 $ 1,849,534
  Stock issued for services                                             487,900
  Asset retirement obligation                                           103,725
  Valuation allowance                                                (1,251,868)
Deferred tax liabilities:
  Book over tax depreciation, depletion
    and capitalization methods on oil
    and gas properties                                               (1,189,291)
                                                                    ------------
Net deferred tax asset                                              $         0
                                                                    ============
</TABLE>

NOTE  10  -  ASSET  RETIREMENT  OBLIGATION

A summary of the changes in the asset retirement obligation during 2005 and 2004
is as follows:
<TABLE>
<CAPTION>
                                                          2005            2004
                                                        --------        --------
<S>                                                        <C>             <C>
Carrying amount of obligation at beginning of year     $ 293,816       $ 181,473
Obligations incurred                                       7,508         113,291
Abandonment expenditures                                       -         (21,489)
Accretion expense                                         22,200          20,541
Revision in estimated liabilities                        (18,451)              -
                                                        --------        --------
Carrying amount of obligation at end of year           $ 305,073       $ 293,816
                                                        ========        ========
</TABLE>

                                       86
<PAGE>

NOTE  11  -  COMMITMENTS  AND  CONTINGENCIES

Leases

The Company has entered into a lease for its corporate office in Houston, Texas,
under  a  third party non-cancelable operating lease through September 30, 2009.
Future  minimum  lease  commitments  are  as  follows  as  of December 31, 2005:

Years  ending  December  31
---------------------------------------------------
2006                                      $  23,400
2007                                         23,800
2008                                         24,100
2009                                         18,100
                                           --------
Total                                     $  89,400
                                           ========

Rent  expense  for  2005  and  2004  was  $20,089  and  $15,442,  respectively.

Litigation

In December 2005, we finalized a Settlement Agreement with William F. Mason, our
former  Chief  Executive  Officer  and  Director  ("Mason"  and  the  "Mason
Settlement").  In  connection with the Mason Settlement, Mason agreed to convert
his 5,000 shares of Series A Preferred Stock into 1,100,000 shares of our common
stock,  which  shares  were  previously convertible into 1,500,000 shares of our
Common Stock.

In  February 2005, we received correspondence from four individuals who were our
former  employees,  which  alleged  that  we  owed  those  former  employees
approximately  $298,000  in  accrued  and unpaid wages, payroll taxes and unpaid
loans  and  interest.  We entered into a Settlement, Release and Indemnification
Agreement with three of the four individuals, which settled their claims in July
2005  and we issued an aggregate of 58,000 restricted shares of our Common Stock
in  connection with such settlement. In March 2006, we entered into a Settlement
Agreement  with  the  fourth  individual, Mr. Hans Nehme, our former officer and
Director, whereby we agreed to pay Mr. Nehme approximately $25,000 and issue him
100,000 restricted shares of our common stock in settlement of his claims.

In December 2005, we entered into a Settlement Agreement and Mutual Release with
Corporate  Stock  Transfer,  who  had previously filed a lawsuit against us, and
agreed  to  pay  Corporate  Stock  Transfer  $2,750.

Other  than the above, the Company is not a party to, and its properties are not
the  subject  of,  any material pending legal proceeding nor to the knowledge of
the  Company,  are  any  such  legal proceedings threatened against the Company.

Employment  agreements

The  Company's  Chief  Executive  Officer and President (the "Officer") signed a
three year employment agreement with us on September 10, 2005, with an effective
date  of  September  1,  2005  which  runs  through August 30, 2008.  Under this
agreement,  the  Officer  receives  a  different  annual  salary for each period
covered  by  the  employment  agreement,  including  the  following:

For  the  year  ended:
2005                                                           $  66,667*
2006                                                             225,000*
2007                                                             250,000*
2008                                                             187,500*
                                                                ---------
Total                                                          $ 729,167*
                                                                =========

*  Solely  for  the  periods  covered  by  the employment agreement and does not
include  amounts  the  Officer  was  paid prior to the entry into the employment
agreement,  or  which  he  may  be  paid  after the expiration of the employment
agreement.  Additionally,  these  amounts do not include any bonuses the Officer
may  be  paid.

In addition, the Officer may also be granted bonus payments of cash or shares of
the  Company's common stock from time to time at the discretion of the Company's
Board of Directors.  The Officer may participate in any incentive, discretionary
bonus and stock option plans approved by the Board of Directors.  As of December
31,  2005,  the  Officer  is  the  sole  member  of  the  Board  of  Directors.

The  agreement  also  provides  that,  in  the  event the Officer terminates his
employment  for  good  reason,  as  defined  in  the  agreement,  the Officer is
terminated  without  cause,  or  a  change in control of the Company occurs, the
Officer is entitled to a lump-sum payment of 150% of the full yearly salary then
in  effect.

                                       87
<PAGE>

NOTE  12  -  OTHER  STOCKHOLDERS'  EQUITY  TRANSACTIONS

Common  stock  -

New  Century  issued an aggregate of 1,721,946 shares of restricted common stock
to  231  investors,  in  connection  with Offshore Subscription Agreements, in a
transaction  not registered under the Securities Act of 1933. New Century raised
$655,273  after  offering costs of $72,808. The shares were issued at an average
price  of  $0.42  per  share.

During  2005,  New  Century  issued  2,300,000  shares of common stock valued at
$1,602,500  for services.  Of this amount, 2,050,000 shares were issued to three
individuals  for  legal  and  business development consulting services at a fair
value  of  $1,435,000,  with  a per share value of $.70 per share. The remaining
250,000  shares  were  issued  to  Core  Concepts, LLC ("Core Concepts") for the
services  provided in settling claims relating to creditors of Vertica Software,
Inc.  The  250,000 shares of restricted common stock issued to Core Concepts had
a  fair  market  value  of  $167,500, with a per share price of $0.67 per share.

In  April  2005,  New  Century entered into an agreement with two individuals to
convert  $30,000  of  debt  owed  in exchange for 46,000 shares of New Century's
restricted  common  stock.

On  June  30,  2005,  New Century entered into a Purchase and Sale Agreement for
the L-H Gas Unit whereby 1,320,000 shares of restricted common stock were issued
to  17 individuals and entities as part of the purchase price.  The common stock
was  valued  at  $.63  per  share  with  a  total  fair  value  of  $831,600.

The  ECS Warrant had an initial fair value in the amount of $326,577 at June 30,
2005.  The value of the ECS Warrant was allocated to additional paid-in capital.

On  July  28,  2005, Laurus Master Funds, LTD. exercised a portion of the Laurus
Stock  Option  for 3,675,000 shares at $.001 per share for cash consideration of
$3,675.  The  fair  value  of this transaction was $1,653,258 which was released
from  the derivative liability into additional paid in capital. In July of 2005,
a  settlement  agreement  was  signed  with  three  former  employees of Vertica
Software  relating  to  a  dispute  over  alleged unpaid wages from 2001. In the
settlement  agreement,  New  Century agreed to issue 58,000 shares of restricted
common  stock in exchange for the three employees to acquit, release and forever
discharge  any  claims  for  their  alleged  past  wages.  As  a  result of this
settlement,  $198,790  was  released  from  the  liability initially recorded in
connection  with  the  reverse  merger with Vertica. The common stock issued was
valued  at  a  fair  market  value  of  $.44 a share, or a total of $25,520. The
remaining  $173,270  was  released  into "Other income" during the quarter ended
June 30, 2005.

Preferred  stock  -

Each  share  of  Series A Preferred Stock is able to vote an amount equal to 300
shares  of  Common  Stock. All shares of preferred stock rank prior to all other
stock of the Company, as to payments of dividends and to distributions of assets
upon  liquidation,  dissolution  or  winding  up  of  the  Corporation,  whether
voluntary or involuntary. Each share of Series B Preferred Stock is able to vote
an  amount  equal  to  2,958  shares  of  Common  Stock.  Each share of Series A
Preferred  Stock  can be converted into 300 shares of the Company's Common Stock
at  the  option  of  the  holder, provided that there are a sufficient number of
shares  authorized but unissued and unreserved. Each share of Series B Preferred
Stock  can  be  converted  into 98.6 shares of the Company's Common Stock at the
option  of  the  holder,  provided  that there are a sufficient number of shares
authorized  but  unissued  and  unreserved.

The  5,000  shares  of  Series  A convertible preferred stock outstanding became
convertible  at  the option of either the holder or New Century on March 5, 2005
into  1,500,000  shares  of  common  stock.  On  December  19, 2005 an agreement
between New Century and the holder was signed giving the holder 1,100,000 shares
of  common  stock  at $.001 par value per share in exchange solely for the 5,000
shares  of  Series  A  convertible  preferred stock.  New Century and the holder

                                       88
<PAGE>

agreed  that  the  holder  shall  have  no further rights in connection with any
Series A convertible preferred stock.  At December 31, 2005, there are no shares
of  either  Series  A  Preferred  Stock or Series B Preferred Stock outstanding.

Equity  instruments  issued  to  non-employees

From  time  to  time,  in  order  to  preserve  cash  and  to fund our operating
activities,  common stock or other equity instruments may be issued for cash for
in  exchange  for  goods  or  services.  Equity  instruments issued for goods or
services are recorded at the fair value of the goods or services received or the
fair  value  of  the  equity  instruments  issued,  whichever  is  more reliably
measurable.  During  the  year  ended  December  31,  2005,  2,300,000 shares of
restricted  common  stock  were  issued  to  non-employees  for  services.

Summary  non-employee  stock  option  and  warrant  information

<TABLE>
<CAPTION>

Activity in 2005                                  Options              Warrants
                                                -----------           -----------
<S>                                                 <C>                   <C>
Outstanding, beginning of year                            0                     0
Granted                                          15,284,176             8,158,065
Exercised                                        (3,675,000)                    0
Expired or cancelled                                      0                     0
                                                -----------           -----------
Outstanding, end of year                         11,609,176             8,158,065
                                                ===========           ===========
Exercisable, end of year                         11,609,176             8,158,065
                                                ===========           ===========
Available for grant, end of year                          0                     0
                                                ===========           ===========
</TABLE>

The  weighted  average option and warrant exercise price information for 2005 is
as  follows:

<TABLE>
<CAPTION>

Activity in 2005                                  Options              Warrants
                                                 ---------             ---------
<S>                                                 <C>                   <C>
Outstanding, beginning of year                  $    -                   $   -
Granted during the year                         $0.001                   $0.80
Exercised during the year                       $0.001                   $   -
Expired or cancelled during the year            $    -                   $   -
Outstanding at end of year                      $0.001                   $0.80
Exercisable at end of year                      $0.001                   $0.80
</TABLE>

Significant  option  and  warrant  groups  outstanding at December 31, 2005, and
related  weighted  average  exercise  price and remaining life information is as
follows:

<TABLE>
<CAPTION>
Grant date         Options      Warrants          Exercisable        Weighted  Remaining
                 Outstanding   Outstanding     Options   Warrants     Exercise     Life
                                                                       Price      (Years)
-----------------------------------------------------------------------------------------
<S>                   <C>         <C>           <C>        <C>          <C>         <C>
June 30, 2005      6,547,784                 6,547,784                $0.001   indefinite
June 30, 2005                  7,258,065             -  7,258,065     $0.800         6.50
June 30, 2005                    900,000             -    900,000     $0.800         2.50
December 30, 2005  5,061,392                 5,061,392                $0.001   indefinite
                  ----------   ---------     ---------  ---------
Totals            11,609,176   8,158,065    11,609,176  8,158,065
                  ==========   =========     =========  =========
</TABLE>

At  December  31,  2005,  approximately 44.0 million shares of common stock were
reserved  for  issuance under the Convertible Note, the Laurus Stock Option, the
Laurus  Warrant,  the ECS Warrant and the Laurus December Option.  Additionally,
5.2 million, 70,000 and 30,000 shares of common stock were reserved for issuance
under  the  2004  Plan,  2002  ESPP  and 2000 ESPP (described in Note 14 below),
respectively.  The  number  of  shares reserved for future issuances at December
31,  2005  exceeds  the  number  of  authorized  shares available by 4.9 million
shares.  New Century anticipates taking action during the second quarter of 2006
to  increase  its  authorized  shares.

                                       89
<PAGE>

NOTE  13  -LOSS  PER  SHARE

Basic  loss  per  share  is  computed  by  dividing  net  loss  attributable  to
common  stock  by  the  weighted  average  number  of  common shares outstanding
during  each  period.  Diluted  loss  per  share  is  computed by adjusting  the
average  number  of  common  shares outstanding for the dilutive effect, if any,
of common stock equivalents. The Company uses the treasury stock method,  unless
otherwise  indicated,  to  determine  the  dilutive  effect  of  securities  on
loss  per  share.

Although  the  Company  has a net loss for the year ended December 31, 2005, the
basic and diluted loss per share are not the same, as the unexercised portion of
the  Laurus  Stock  Option for 6,547,784 common shares is dilutive and therefore
included  in  the  diluted calculation.  The  diluted effect  of the unexercised
portion  of  the  Laurus  Stock  Option is  accounted  for  under  the  treasury
stock method, whereby it is assumed to be converted into 3,314,020 common shares
by  applying the ratio of the average 2005 market price for the Company's common
shares of $0.70, less the exercise price of $.001 to the weighted average number
of  shares  of  3,318,740.  The  adjustment to the numerator for the unexercised
portion  of  the  Laurus  Stock  Option for the related net decrease in the fair
value of the Derivative Liability for Laurus Stock Option of $3,571,005 is added
back  to  the  net  loss.

The  effect  of  the  Convertible  Note  in  the  diluted  loss  per  share
calculation  is  accounted  for  under  the  "if  converted" method, whereby the
Convertible  Note  is assumed to be converted to shares (weighted for the number
of  days outstanding in the period) at a conversion price of $0.62; and interest
expense  (see  Note  5) related to the Convertible Note is added back to the net
loss.

The weighted average number of shares for the Convertible Note of 12,262,483 has
been excluded from the diluted calculation because it would have an antidilutive
effect  on  the  loss  per  share.  The  adjustments  to  the numerator totaling
$10,222,187  include the net decrease in the fair value of the compound embedded
derivative $675,637, the interest expense "add back" for the Convertible Note of
$2,588,065  and  the loss on the early extinguishment of debt of the Convertible
Note  of  $8,309,759.  No tax  effect  on  interest expense has been applied, as
the  Company  has  available  net  operating  loss  carry  forwards  to  offset
taxable  income.

Additionally,  the  weighted  average  number  of  shares  of the ECS Warrant of
456,164  and  the  Laurus  Warrant of 3,678,745 have also been excluded from the
diluted  calculation  because the warrants strike price of $.80 per common share
exceeds  the average market price for 2005 of the Company's common stock of $.70
per  share.

The  weighted average number of shares for the 3,675,000 common shares exercised
under  the  Laurus Stock Option of 291,986 and for the December Option of 27,737
were  also  excluded  from  the  diluted  calculation  as  the  effect  would be
antidilutive  because  there  are  no  associated  amounts  to "add back" to the
numerator.

Further,  the  preferred shares were also excluded from the denominator for 2005
as they were converted into common stock in December 2005, and no dividends were
paid  on  such  shares.

Additionally,  due  to  the  net  loss for the year ended December 31, 2004, the
basic  and  diluted  loss  per share are the same.  Any additional shares in the
denominator  would  have an antidilutive effect on the loss per share price.  As
such,  the  1.5  million  preferred shares outstanding at December 31, 2004 were
excluded  from the denominator for diluted earnings per share for the year ended
December  31,  2004.

                                       90
<PAGE>

The  following  table  sets  forth the computation of basic and diluted loss per
common  share  for  2005  and  2004:

<TABLE>
<CAPTION>
For the years ended December 31,                  2005                    2004
<S>                                               <C>                      <C>
Numerator  for  basic loss per
  common share-Net loss, as reported         $ (3,398,824)           $(3,991,550)

  Effect  of  dilutive  securities             (3,571,005)                     -
                                                ---------               --------
Numerator  for  diluted loss per
  common share                                $(6,969,829)           $(3,991,550)
                                                =========              =========
Denominator  for  basic  loss
  per  common  share-weighted  average
  common shares                                50,961,205             37,694,704
                                               ----------             ----------
  Effect  of  dilutive  securities              3,314,020                      -
                                               ----------             ----------
Denominator  for  diluted  earnings  per
  common  share-adjusted  weighted
  shares and assumed conversions               54,275,225             37,694,704
                                              ===========             ==========

Basic loss per common share                        $ (.07)                $ (.11)
                                                    =====                  =====

Diluted loss per common share                      $ (.13)                $ (.11)
                                                    =====                  =====
</TABLE>

NOTE 14 - EMPLOYEE BENEFIT PLANS

401(k)  Plan

As  a  result  of  the  Vertica  reverse merger, the Company assumed an employee
benefit  plan  under Section 401(k) of the Internal Revenue Code("401(k) plan").
The  401(k)  plan  is  available  to all full-time employees. Employees may make
contributions up to a specified percentage of their compensation. The Company is
not  obligated  to  make  contributions  under the 401(k) plan.  At December 31,
2005,  the  total  plan  assets  were  $23,390.  The  Company  did  not make any
contributions  to  the  401(k)  Plan  in  2005  and  2004.

2004  Directors, Officers and Consultants Stock Option, Common Stock Warrant and
Stock  Award  Plan  ("2004  Plan")

On December 8, 2004, the Company registered 9,700,000 shares of its common stock
for  its  2004 Plan. The aggregate number of shares that may be optioned subject
to  conversion  or  issued  under  the  2004 plan is 13,000,000 shares of common
stock,  warrants, options, preferred stock, or any combination thereof ("Company
Securities"). The Company's Board of Directors administers the 2004 Plan and has
sole discretionary authority to describe, authorize and designate the directors,
employees and consultants who will be granted securities under the 2004 Plan. As
of  December  31, 2005, there were no options or warrants granted or outstanding
under the 2004 Plan.

2004 Plan activity                                   2005                2004
                                                   ---------         ----------
Beginning of year                                  7,450,000         13,000,000
Issued stock for services                         (2,300,000)        (5,550,000)
                                                   ---------         ----------
Remaining shares available to issue
  at end of year                                   5,150,000          7,450,000
                                                   =========         ==========

2002 Employee Stock Purchase Plan

Also in connection with the Vertica reverse merger, the Company assumed the 2002
Employee  Stock Purchase Plan ("2002 ESPP"), whereby the Company may issue up to
an  aggregate  of 70,000 shares of common stock to employees at 85% of the lower
of  fair  market  value of the common stock on the date of grant, except for 10%
shareholders  who  may  exercise options at no less than 110% of the fair market
value  of the shares on the date of grant. No shares of stock were granted under
the 2002 ESPP in 2005 and 2004 and there were no options to purchase shares of
the common stock at December 31, 2005.

2000 Employee Stock Purchase Plan

The  Vertica  reverse  merger  also provided for the Company's assumption of the
2000 Employee Stock Purchase Plan ("2000 ESPP") whereby the Company may issue up
to  an  aggregate  of  30,000  shares of common stock to employees at 85% of the
lower  of the fair market value of the common stock on the date of grant, except
for  10%  shareholders who may exercise options at no less than 110% of the fair
market value of the shares on the date of grant. No shares of stock were granted
under  the 2000 ESPP in 2005 and 2004 and there were no options to purchase
shares of common stock at December 31, 2005.

                                       91
<PAGE>

NOTE  15  -  DRILLING  AND  COMPLETION  ADVANCES

As  of  December 31, 2005, the Company made prepayments to a production operator
for  2006  drilling  and  completions  costs  in  the  amount  of  $262,343.

NOTE 16 - CONCENTRATIONS

Major  Purchaser

During  the  year  ended  December  31,  2005, New Century had one purchaser who
individually  accounted  for 100% of crude oil sales and two separate purchasers
who  individually  accounted  for  79% and 20% of sales of natural gas products.

Predominance  of  Gas  Sales

In  2005  and  2004,  sales  of  natural gas products accounted for 84% and 57%,
respectively,  and  crude  oil sales accounted for 16% and 43%, respectively, of
sales  of  natural  gas  products.

NOTE  17  -  SUBSEQUENT  EVENTS

Settlement  with  Former  Director  -

In  March 2006, we signed a Settlement and Release Agreement with Hans Nehme our
former Officer and Director.  We paid him $25,483 in cash and issued in his name
100,000  shares  of  restricted  common  stock.  Mr. Nehme agreed to dismiss his
pending litigation in regards to his claims against the Company.  As a result of
this  Settlement,  $86,359 has been released from the liabilities to our results
of  operations  relating  to  the  purchase of the Vertica Shell on December 31,
2005.

Third  Acquisition  of  L-H  Gas  Unit  -

On  November  1,  2005,  the  Company entered into a Purchase and Sale Agreement
("Agreement") with Mr. Gerald W. Green, the "Seller." Pursuant to the Agreement,
we  agreed  to  purchase  certain interests in and to certain oil and gas leases
which  are  located  within  and adjacent to the Lindholm-Hanson Gas Unit in the
Wishbone Field in McMullen County, Texas, located 80 miles south of San Antonio,
Texas  (the "Unit"), for $1,890,000, which we funded from our current cash flows
and  operations.  The  interests  purchased total a 1.75% working interest and a
1.3125% net revenue interest in the leases (the "Interest"). On January 3, 2006,
we  closed  the  purchase  of the Interest, and our total ownership of interests
within the Lindholm-Hanson Gas Unit increased to a 15.20% working interest and a
12.2140%  net  revenue  interest  and our total ownership of the Lindholm fee #1
well,  which  is  outside  of the Unit includes a 12.10% working interest and an
8.9820% net revenue interest.

The effective date of the sale of the Seller's Interest was October 1, 2005 (the
"Effective  Date").  The  original  scheduled  closing date for the purchase was
November  22, 2005, but was subsequently extended to January 3, 2006, through an
Amendment to Purchase and Sale Agreement dated November 2, 2005 (the "Amendment"
and  the  "Closing").  The Third Acquisition closed on January 3, 2006, with the
following consideration given for the purchase of Mr. Green's interest:

Purchase  price                                                     $  1,890,000
Closing  costs                                                            16,132
L-H Gas Unit revenue for 2   months                                    (281,089)
L-H  Gas Unit expenses for 2   months                                     94,831
                                                                     ----------
Consideration  for Third Acquisition                                $  1,719,874
                                                                    ===========

Dissolution  of  ERC  Solutions,  Inc.  -

In  February  2006,  the  Board  of  Directors  approved  the dissolution of ERC
Solutions,  Inc.,  one  of its wholly owned subsidiaries.  The State of Delaware
authorized  the  dissolution  on  February  9,  2006.

Amended  and  Restated  Secure  Term  Note  -

On March 30, 2006, the Company signed an "Amended and Restated Secure Term Note"
in  regards  to  the  Laurus  financing  for $9,500,000.  Refer to Note 6 for an
expanded  explanation.

                                       92
<PAGE>

Prado  Development  Agreement  with  Strong  Petroleum  Group,  Inc.("Strong") -

On  April 6, 2006, the Company and Aquatic Cellulose International ("New Century
Group")  signed  a  new  extension  agreement  with Strong Petroleum Group, Inc.
("Strong").  The  new  extension  agreement  calls  for  Strong  to complete the
re-development  of  the  Company's Prado field interests (the "Prado Assets" and
the  "Development  Agreement")  by  September  21,  2006.  In  exchange  for the
extension  of  time,  the  New  Century  Group  will  increase its 12.5% working
interest  to  25% in the Prado Assets.  Beginning April 1, 2006, the New Century
Group  shall  also  be  entitled  to one-quarter of all net production proceeds.
Additionally,  there  will  be  no  assertion  of  liquidated damages by the New
Century  Group  for  Strong's failure to complete the re-development by December
31,  2005.

Laurus  Financing  Commitment

On  April 13, 2006, the Company entered into a term sheet with Laurus regarding
the  sale  of  a  $40,000,000  secured  term  note with a forty-two month term.
Pursuant to the term sheet, the Company and Laurus  will  form a joint  venture
company,  which  will purchase  certain  oil and gas properties through a to-be
formed wholly owned subsidiary of the Company.  Pursuant  to  the  term  sheet,
Laurus  will receive an option to purchase a 49% interest in the joint venture.
Laurus  will receive  80%  of the net production revenue generated by the joint
venture, and the Company will  receive  20%  of  such revenues, until such time
as the secured term note  is repaid by the Company or the maturity of the note,
at which time the  proceeds  from  the   joint   venture  will  be  distributed
to  the  then shareholders.  It is  anticipated  that approximately $33,000,000
of the amount received from the secured term  note  will  be  used by the joint
venture to purchase oil and gas interests, $1,400,000 will be paid to Laurus as
a closing fee,  $125,000  will be paid to Laurus in legal and closing fees, and
$5,475,000  will  be  used  by  the  Company  for  future  drilling  costs. The
transaction  will close upon the completion  of  due diligence by Laurus, which
is expected by May 2006. The $40,000,000 secured term note will  bear  interest
at the Wall Street Prime Rate, plus 2%, subject  to  a  8%  floor,  per  annum.
The Company paid  Laurus  a  $25,000 non-refundable  deposit in connection with
Laurus' due diligence and the review and approval of  the  term  sheet  by  the
Laurus' investment committee.

NOTE 18 - SUPPLEMENTAL OIL AND GAS INFORMATION  (Unaudited)

Capitalized Costs

Capitalized costs incurred in property acquisition, exploration, and development
activities:

                                                              December 31, 2005
                                                              -----------------
  Proved properties                                                $ 22,596,213
  Unproved properties                                                    56,854
  Wells and related equipment and facilities                          2,459,719
                                                                     ----------
                                                                   $ 25,112,786
  Less accumulated depreciation, depletion,
    amortization and impairment                                      (2,934,821)
                                                                     ----------
  Net capitalized costs                                            $ 22,177,965
                                                                     ==========

Costs  incurred  for  property  acquisition,  exploration,  and  development
activities.

Year ended December 31,                              2005              2004
Acquisition of properties                        -----------         ----------
-Proved                                         $ 19,675,020        $ 1,083,381
-Unproved                                                  -             43,010
Exploration costs                                    134,579             10,494
Development costs                                  2,650,666            288,019
                                                  ----------         ----------
Total costs incurred for property
  acquisition, exploration, and
  development activities                        $ 22,460,265        $ 1,424,904
                                                  ==========         ==========

Results of Operations for oil and gas producing activities:

Year ended December 31,                              2005              2004
                                                 ----------          ----------
Oil and gas sales                              $  6,918,884         $ 1,714,443
Gain on sale of oil and gas interest                 98,181             101,138
Gain on sale to participate in future
  property                                                -             290,000
Production costs                                 (1,033,545)           (623,951)
Exploration expenses                               (134,579)            (10,494)
Depreciation, depletion and amortization         (2,177,485)           (335,586)
                                                -----------          ----------
                                                  3,671,456           1,135,550
Income tax expense, 34% rate                     (1,248,295)           (386,087)
                                                -----------          ----------
Results of operations for oil and
   gas producing activities (excluding
   corporate overhead and financing costs)     $  2,423,161         $   749,463
                                                ===========          ==========

                                       93
<PAGE>

Reserve Information

The  following  estimates  of  proved  developed  reserve quantities and related
standardized  measure of discounted net cash flow are estimates only, and do not
purport  to  reflect  realizable  values  or fair market values of New Century's
reserves.  New  Century  emphasizes  that  reserve  estimates   are   inherently
imprecise.  Accordingly,  these  estimates  are  expected  to  change  as future
information  becomes  available.  All  of  New Century's reserves are located in
Texas  and  Louisiana,  which  are  considered  a  single  geographic  area.

Proved  reserves  are  estimated reserves of crude oil (including condensate and
natural  gas  liquids)  and  natural  gas  that  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  those expected to be recovered through existing wells,
equipment,  and  operating  methods.

The  standardized  measure  of  discounted  future net cash flows is computed by
applying  year-end  prices  of  oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production  of  proved  oil and gas reserves, less estimated future expenditures
(based  on year-end costs) to be incurred in developing and producing the proved
reserves, less estimated future income tax expenses (based on year-end statutory
tax  rates)  to  be  incurred  on  pretax  net  cash flows less tax basis of the
properties and available credits, and assuming continuation of existing economic
conditions. The estimated future net cash flows are then discounted using a rate
of  10  percent a year to reflect the estimated timing of the future cash flows.

                                                   2005               2004
                                               Oil       Gas      Oil      Gas
                                             (MBbls)   (MMcf)   (MBbls)   (MMcf)
                                             -------   ------   ------    ------
Proved developed and undeveloped reserves
     Beginning  of  year                       113      1116       118      107
     Revisions  of  previous  estimates         23       182        21      (33)
     Purchases  of  minerals  in  place          -      5447         0     1284
     Production                                (15)     (643)      (26)    (242)
     Extensions and discoveries                         1960         -        -
                                              ----     -----      ----     ----
     End  of  the  year                        121      8062       113     1116
                                              ====     =====      ====     ====
Proved developed reserves
     Beginning of year                          99      1030       118      495
                                              ====     =====      ====     ====
     End of year                               121      4517        99     1030
                                              ====     =====      ====     ====

Standardized Measure of Discounted Future
  Net Cash Flows at December 31, 2005 and 2004 in 000's
                                                              2005        2004
                                                             ------     -------
    Future cash inflows                                    $ 75,281    $ 10,310
    Future production costs                                 (13,467)     (3,234)
    Future development costs                                 (3,146)     (1,016)
    Future income tax expenses, at 34%                       (9,985)     (2,060)
                                                             ------      ------
          Future gross cash flows                            48,683       4,000

    Less:  10% annual discount for
          estimated  timing  of  cash  flows                (11,634)     (1,577)
                                                             ------      ------
  Standardized measures of discounted future net cash flows
    relating to proved oil and gas reserves                $ 37,049    $  2,423
                                                             ======      ======

                                       94
<PAGE>

The  following  reconciles  the change in the standardized measure of discounted
future  net  cash  flow  during  2005 and 2004.
                                                             2005        2004
                                                           -------      -------
Beginning of year                                          $ 2,423      $ 3,429
  Sales of oil and gas produced, net of production costs    (5,825)      (1,714)
  Net changes in sales price, net of production costs        3,660          208
  Extensions and discoveries, net of development costs      10,911            0
  Purchase of reserves in place                             23,290            0
  Accretion of discount                                        154            0
  Net changes in estimated future development costs          1,517            0
  Revisions of previous quantity estimates                   1,606          500
  Changes in future income tax expense                      (4,607)           0
  Changes in production rates and other                      3,920            0
                                                          --------      -------
End of year                                               $ 37,049      $ 2,423
                                                          ========     ========

                                       95
<PAGE>

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

     Effective  April  11,  2005, the client-auditor relationship between us and
Malone  &  Bailey,  PC  ("Malone")  ceased  as  the former principal independent
accountant  was dismissed. On that same day, we engaged Helin, Donovan, Trubee &
Wilkinson  LLP,  Certified  Public  Accountants  ("Helin")  as  our  principal
independent  accountant  for  the  fiscal  year  ending  December  31, 2005. The
decision to change accountants from Malone to Helin was approved by our Board of
Directors  on  April  11, 2005. Malone had succeeded Randolph Scott and Company,
Certified  Public  Accountants  ("Scott"),  who  had  served  as  our  principal
independent  accountant until November 12, 2004, when Malone was engaged. Malone
had  previously audited the financial statements of our wholly owned subsidiary,
Century  Resources,  Inc.,  and had audited our balance sheet as of December 31,
2004,  and  the  related  consolidated  statements  of operations, stockholders'
equity  and cash flows for the fiscal years ended December 31, 2003 and December
31, 2004.

     Scott's report on the financial statements of us for the fiscal years ended
December 31, 2002 and December 31, 2003, and any later interim period, including
the interim period to and including the date the relationship with Scott ceased,
did  not  contain  any  adverse  opinion  or  disclaimer  of opinion and was not
qualified  or  modified  as to uncertainty, audit scope or accounting principles
except  for  concerns about our ability to continue as a going concern. Malone's
report  on our financial statements for the fiscal years ended December 31, 2003
and  December  31,  2004,  and  any  later interim period, including the interim
period up to and including the date the relationship with Malone ceased, did not
contain  any  adverse  opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.

     In  connection  with the audits of our last two fiscal years ended December
31,  2004  and  2003,  and  any  later  interim  period,  there  have  been  no
disagreements  with  Scott  or Malone on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement(s),  if  not  resolved to the satisfaction of Scott or Malone would
have  caused  Scott  or  Malone  to  make reference to the subject matter of the
disagreement(s)  in  connection  with  their report on our financial statements.
There  have  been  no  reportable  events as defined in Item 304(a)(1)(iv)(B) of
Regulation  S-B during our two most recent fiscal years ended December 31, 2004,
and  any later interim period, including the period up to and including the date
the relationship with Scott ceased, and including the period up to and including
the date our relationship with Malone ceased.

     We  have  authorized  Scott and Malone to respond fully to any inquiries of
Helin  relating  to their engagement as our principal independent accountant. We
have  requested  that  Scott  and  Malone review the disclosure of our change in
independent accountants which were filed with the SEC in an Form 8-K on December
1,  2004,  relating  to  the  change from Scott to Malone and on April 14, 2005,
relating to the change from Malone to Helin, and both Scott and Malone have been
given an opportunity to furnish us with a letter addressed to the SEC containing
any  new  information,  clarification  of  our expression of their views, or the
respect  in which they did not agree with the statements made by us herein. Such
letters  were filed as Exhibits to our Form 8-K's filed with the SEC on December
1, 2004 and April 14, 2005.

                                       96
<PAGE>

     We  had  not  previously  consulted  with  Helin  regarding  either (i) the
application  of  accounting  principles  to  a  specified  transaction,  either
completed  or proposed; or (ii) the type of audit opinion that might be rendered
on  our  financial  statements;  or (iii) any matter that was either the subject
matter  of a disagreement (as defined in Item 304(a)(1)(iv)(A) of Regulation S-B
and  the  related instructions) between us and Malone and/or Scott, our previous
principal  independent  accountants,  as there were no such disagreements, or an
other  reportable  event (as defined in Item 304(a)(1)(iv)(B) of Regulation S-B)
during our two most recent fiscal years ended December 31, 2004, neither have we
received  any  written  report  nor any oral advice concluding that there was an
important  factor  to  be  considered  by  us  in  reaching  a decision as to an
accounting, auditing, or financial reporting issue.

     Helin  had  reviewed  the  disclosure in our Form 8-K filed with the SEC on
April 14, 2005, before it was filed with the SEC and was provided an opportunity
to furnish us with a letter addressed to the SEC containing any new information,
clarification  of  our expression of our views, or the respects in which it does
not  agree  with the statements made by us in response to Item 304 of Regulation
S-B.  Helin did not furnish such a letter to the SEC. Similarly, Malone reviewed
our disclosure in our Form 8-K filed with the SEC on December 1, 2004, regarding
the  change in accountants from Scott to Malone, and was provided an opportunity
to furnish us with a letter addressed to the SEC containing any new information,
clarification  of  our expression of our views, or the respects in which it does
not  agree  with the statements made by us in response to Item 304 of Regulation
S-B. Malone did not furnish such a letter to the SEC.

ITEM 8A.  CONTROLS AND PROCEDURES


     (a)  On  November  3,  2005,  Edward  R.  DeStefano,  our  Chief  Executive
     Officer and Chief Financial Officer, concluded that our disclosure controls
     and  procedures  were  not  effective  to provide reasonable assurance that
     information  we are required to disclose in reports that we file and submit
     under  the  Exchange  Act  was recorded, processed, summarized and reported
     within the time periods specified in the Securities and Exchange Commission
     (the  "Commission's")  rules  and  forms,  and  that  such  information was
     accumulated  and  communicated  to  our  management,  including  our  Chief
     Executive  Officer  and  Chief  Financial Officer, as appropriate, to allow
     timely  decisions  regarding  required  disclosure.  The  reasons  for  Mr.
     DeStefano's  conclusion  were  because  he  concluded  that  the  Company's
     unaudited  financial  statements for the three months ended March 31, 2005,
     which  are included in the Company's Form 10-QSB for the three months ended
     March  31,  2005, originally filed with the Commission on May 16, 2005, and
     the  Company's  unaudited financial statements for the three and six months
     ended  June  30,  2005, which are included in the Company's Form 10-QSB for
     the  quarter  ended  June 30, 2005, originally filed with the Commission on
     August  22, 2005 (collectively the "Quarterly Reports"), could no longer be
     relied  upon  and  that  the Company's audited financial statements for the
     year  ended  December  31, 2004, which were included in its Form 10-KSB for
     the  fiscal  year  ended  December  31,  2004,  which  was  filed  with the
     Commission  on  March 31, 2005, could no longer be relied upon (the "Annual
     Report").


                                       97
<PAGE>


     Mr.  DeStefano  became  aware  of  potential  problems  in  our  disclosure
     controls  and  procedures  in  connection  with  the  initial  filing  of a
     Registration Statement on Form SB-2 ("Form SB-2") on August 5, 2005, and in
     the  customary course of the Commission's review of the Form SB-2 and other
     prior  Company  filings,  during which time the Commission issued a comment
     letter  (the  "Comment  Letter") to the Company dated October 19, 2005. The
     Comment  Letter  included comments indicating that the Company's accounting
     for the secured convertible debt ("Convertible Note") was not in accordance
     with  U.S.  generally  accepted  accounting  principles.  Specifically, the
     Convertible  Note  was deemed to not meet the definition of a "conventional
     convertible  note,"  and  therefore,  certain  free  standing  and embedded
     derivatives  included  therein  such as the Convertible Note feature, stock
     warrants  and  stock  options  issued  to  the  lender,  and  certain other
     provisions,  should  have  been accounted for as derivative liabilities and
     not  initially  recorded  as  beneficial  conversion  features  within
     stockholders'  equity.  Additionally, through the course of Mr. DeStefano's
     review  and  the  review  of  certain  other  of the Company's prior period
     filings,  including  the  Annual Report, he became aware of an error in our
     calculation  of  depletion  recorded  under  the  line  item  depreciation,
     depletion  and  amortization  included  in the Annual Report as well as the
     need  to  record  an  asset  retirement  obligation  at  December 31, 2004.



     Additionally,  as  a  result,  Mr.  DeStefano  reviewed  our  disclosure
     controls  and  procedures  in  November  2005,  and  found problems in such
     controls  and  procedures,  including  that  during  the preparation of the
     Company's  March  31, 2005 and June 30, 2005 quarterly reports, the Company
     lacked  experienced  accounting  personnel  who  had  a  level of technical
     proficiency  adequate  to  appropriately  account  for  complex  accounting
     transactions such as the free standing and embedded derivatives included in
     the  Convertible  Note,  and  that  during the preparation of the Company's
     annual  report  for  the  year  ended  December  31,  2004, a number of the
     Company's  financial  calculations,  including  the  calculation  of
     depreciation,  depletion and amortization as disclosed in the Annual Report
     were  not  calculated  and  doubled checked by individuals with a competent
     background in accounting, and which errors in calculation were magnified as
     a  result  of  the  size of such errors in connection with the relative low
     amount  of  our  total assets at the end of that period, which problems Mr.
     DeStefano  believed  constituted  material  weaknesses in such controls and
     procedures.



     As  a  result  of  the  Comment  Letter  and  the  review of our disclosure
     controls  and  procedures,  we  decided to restate certain of our unaudited
     quarterly  financial  statements  and  audited annual financial statements,
     including the Company's unaudited financial statements for the three months
     ended March 31, 2005, were restated in an amended Form 10-QSB for the three
     months  ended  March  31,  2005, filed with the Commission on September 13,
     2005,  and  amended  thereafter  on  December  8,  2005,  and the Company's
     unaudited  financial statements for the three and six months ended June 30,
     2005,  were  restated  in  an amended Form 10-QSB filing for the six months
     ended  June  30, 2005, filed with the Commission on September 13, 2005, and
     amended  thereafter  on  December  20,  2005 and that the Company's audited
     financial statements for the year ended December 31, 2004, were restated in
     an  amended  Form  10-KSB  for  the year ended December 31, 2004, which was
     filed  with  the  Commission  on  December  7,  2005  (the "Restatements").


                                       98
<PAGE>


     We  believe  that  the  Restatements  will  be  a  one  time occurrence and
     that  moving  forward  we  will not have any deficiencies in our disclosure
     controls  and procedures, as we have internal accountants, including adding
     a certified public accountant as our full-time controller during the fourth
     quarter  of  2005  (which  controller  left  us and was replaced by another
     certified  public  accountant during the second quarter of 2006), who works
     with our outside accountants in the preparation and review of our financial
     statements;  we believe that the Convertible Note involved a highly complex
     transaction  involving  an "unconventional" convertible note, and we do not
     anticipate  entering  into  any  additional  complex financing transactions
     involving  derivatives  in  the  future;  we  have retained various outside
     accounting  consultants,  including  specialized  accounting  consultants
     knowledgeable  in  tax  accounting,  oil  and  gas  accounting,  and  most
     importantly  in  connection  with the restatement of the Quarterly Reports,
     consultants  with  specialized  expertise  in  the financial accounting and
     valuation  of derivative securities such as the Convertible Note. Since the
     Restatements,  we  have worked closely with these consultants in connection
     with  the  preparation  of  our  quarterly and annual financial statements,
     including  having  such  consultants  review  and signoff on the accounting
     treatment  of  our derivative securities prior to us filing such statements
     with  the  Commission.



     Furthermore,  we  believe  that  our  prior  restatements  to  our  Annual
     Report  would  not  be  as  significant now as they were for the year ended
     December  31,  2004,  as our total assets were significantly smaller during
     the  year  ended December 31, 2004, and as such the calculation errors made
     in  the  Annual  Report  were  magnified  as a result of the amount of such
     assets,  which  errors  if  present  now  we believe would not be nearly as
     significant  to  our  overall  balance  sheet  accounting.



     As  a  result  of  the  Comment Letter and the Restatements, as well as the
     steps we have taken to remedy the prior problems in our disclosure controls
     and  procedures,  we  believe that our "disclosure controls and procedures"
     (as  defined  in  the  Securities  Exchange Act of 1934 Rules 13a-15(e) and
     15d-15(e))  as  of the end of the period covered by this annual report (the
     "Evaluation  Date"),  were  effective  to provide reasonable assurance that
     information  we  are required to disclose in reports that we file or submit
     under  the  Exchange  Act  is  recorded, processed, summarized and reported
     within the time periods specified in the Securities and Exchange Commission
     rules  and forms, and that such information is accumulated and communicated
     to  our  management,  including  our  Chief  Executive  Officer  and  Chief
     Financial  Officer,  as  appropriate,  to  allow timely decisions regarding
     required  disclosure.



(b)  Changes in internal control over financial reporting. Other than the hiring
     of  certified public accountant as our full-time controller, who works with
     our  outside  accountants  in  the  preparation and review of our financial
     statements, during the fourth quarter of 2005 (which controller left us and
     was  replaced  by  another  certified  public  accountant during the second
     quarter  of  2006), there were no other significant changes in our internal
     control over financial reporting during our most recent fiscal quarter that
     materially  affected,  or  were reasonably likely to materially affect, our
     internal  control  over  financial  reporting.


                                       99
<PAGE>

ITEM 8B. OTHER INFORMATION.

     On  April  13,  2006,  we entered into a term sheet with Laurus Master Fund
("Laurus")  regarding  the  sale  of  a  $40,000,000  secured  term  note with a
forty-two  month  term.    Pursuant to the term sheet, we and Laurus will form a
joint  venture  company,  which  will  purchase  certain  oil and gas properties
through  a  to-be  formed  wholly  owned subsidiary. Pursuant to the term sheet,
Laurus  will  receive an option to purchase a 49% interest in the joint venture.
Laurus  will  receive  80%  of the net production revenue generated by the joint
venture,  and  we  will  receive  20%  of  such revenues, until such time as the
secured  term  note  is repaid by us, or the maturity of the note, at which time
the  proceeds  from  the   joint   venture  will  be  distributed  to  the  then
shareholders.  It  is  anticipated  that approximately $33,000,000 of the amount
received  from  the  secured  term  note  will  be  used by the joint venture to
purchase  oil  and gas interests, $1,400,000 will be paid to Laurus as a closing
fee,  $125,000  will be paid to Laurus in legal and closing fees, and $5,475,000
will be used by us for future drilling costs.  The  transaction  will close upon
the  completion  of  due diligence by Laurus, which is expected by May 2006. The
$40,000,000  secured term note will bear interest at the Wall Street Prime Rate,
plus  2%,  subject  to  a  8%  floor,  per  annum.  We  paid  Laurus  a  $25,000
non-refundable  deposit  in connection with Laurus' due diligence and the review
and approval of the term sheet by the Laurus' investment committee.

                                    PART III

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

DIRECTORS AND OFFICERS

The  Directors  and  Officers  of  the  Company  are  as  follows:

          NAME                    AGE               POSITION
          ----                    ---               --------
   Edward R. DeStefano             52          Chief Executive Officer,
                                               Chief Financial Officer,
                                               Secretary, Treasurer and Director

EDWARD  R.  DESTEFANO,
Chief  Executive  Officer,  Chief  Financial  Officer,  Secretary, Treasurer and
Director

     Edward  R. DeStefano has served as the Chief Executive Officer and Director
of  the  Company  since  November 2, 2004. Mr. DeStefano has served as the Chief
Executive  Officer  of  Century  Resources,  Inc.,  the  Company's  wholly owned
subsidiary  since  the Exchange discussed above, since June 1985. From June 1981
to  June  1985  Mr.  DeStefano  served  as  the Director of Operations of Aracca
Petroleum  Corporation.  From  January  1976  to  June  1981,  Mr. DeStefano was
employed  as  an  exploration associate with Gulf Oil Corporation. Mr. DeStefano
obtained a Bachelors of Science degree from Ithaca College in 1975. He completed
additional course work in Energy Economics at the University of Houston in 1980.
Mr. DeStefano is a member of the Houston Geological Society, North Texas Oil and
Gas Association, Society of Petroleum Engineers, and the American Association of
Petroleum  Geologists.

                                       100
<PAGE>

     All Directors of the Company will hold office until the next annual meeting
of the shareholders, and until their successors have been elected and qualified.
Officers of the Company are elected by the Board of Directors and hold office at
the  pleasure  of  the  Board.

                              EMPLOYMENT AGREEMENT

     Effective  September  1, 2005, we entered into an Employment Agreement with
Edward  R.  DeStefano,  who serves as our Chief Executive Officer and President.
The  Employment  Agreement  has a term of three year effective from September 1,
2005  to  August  31,  2008,  and  is  renewable  upon its expiration. Under the
Executive  Employment Agreement, Mr. DeStefano shall receive a different "Yearly
Salary"  depending  on  the  year  which  Mr.  DeStefano  is  employed  (see Mr.
DeStefano's  Employment Agreement, incorporated by reference as Exhibit 10.29 to
this Report for more details regarding the terms of Mr. DeStefano's employment).

     Under  the  Executive Employment Agreement, we agreed to indemnify and hold
harmless  Mr. DeStefano, his nominees and/or assigns against any and all losses,
claims,  damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses  and disbursements (incurred in any and all actions, suits, proceedings
and  investigations  in  respect  thereof and any and all legal and other costs,
expenses  and  disbursements  in  giving  testimony  or  furnishing documents in
response  to  a subpoena or otherwise), including without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending  any such action, suit, proceeding or investigation that is in any way
related  to his employment with us (whether or not in connection with any action
in  which  he is a party). Such indemnification does not apply to acts performed
by  Mr.  DeStefano,  which are criminal in nature or a violation of law. We also
agreed  that  he  shall  not  have any liability (whether direct or indirect, in
contract  or  tort,  or  otherwise)  to  us,  for,  or  in  connection with, the
engagement  of Mr. DeStefano under the Executive Employment Agreement, except to
the  extent  that  any  such  liability resulted primarily and directly from his
gross  negligence  and  willful  misconduct.

SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a) of the Securities Exchange Act of 1934, as amended, requires
our  directors,  executive officers and persons who own more than 10% of a class
of  our  equity  securities  which are registered under the Exchange Act to file
with  the  Securities  and  Exchange Commission initial reports of ownership and
reports  of  changes  of ownership of such registered securities. Such executive
officers,  directors  and  greater  than  10%  beneficial owners are required by
Commission regulation to furnish us with copies of all Section 16(a) forms filed
by  such  reporting  persons.

     To  our  knowledge,  based solely on a review of the copies of such reports
furnished  to  us and on representations that no other reports were required, we
are  of  the  opinion  that  William  Mason failed to make a Form 4 filing and a
Schedule  13d  filing  in  connection  with his ownership of 5,000 shares of our
Series A Convertible Preferred Stock, which is convertible into 1,500,000 shares
of  our  common  stock during fiscal 2004. Based on stockholder filings with the
SEC,  Edward  R.  DeStefano  is  subject  to  Section 16(a) filing requirements.

                                       101
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

                             EXECUTIVE COMPENSATION

                                                   Other(1)
                                                   Annual
Name & Principal                                   Compen-    Options
   Position            Year        Salary ($)      sation     SARs      Bonus($)
-------------------   ------     -----------     ---------  ---------  ---------
Edward R. DeStefano     2005(2)      207,957        $3,000                14,587
CEO, President CFO,     2004          76,340
Treasurer and
Secretary (3)(4)

William F. Mason(3)     2004          - 0 -
CEO and President       2003          - 0 -
                        2002          - 0 -

*  Does  not  include  perquisites  and  other personal benefits in amounts less
than  10%  of  the  total  annual salary and other  compensation. Other than the
individuals listed above, we have no other executive employees who have received
more  than  $100,000 in compensation, including bonuses and options, during each
of  the  last  three  (3)  fiscal  years.

(1)  No  Executive Officer received any LTIP payouts, restricted stock awards or
bonuses  during  the  years  ended  2002,  2003, 2004, and no salaries are being
accrued.

(2)  Mr.  DeStefano earned $207,957 for the fiscal year ended December 31, 2005,
which  includes  $141,290 earned by Mr. DeStefano from January 1, 2005 to August
31,  2005  and  $66,667  which  he was paid pursuant to his Executive Employment
Agreement  (see  footnote 4 below). Additionally, Mr. DeStefano received $14,587
in  bonus for his performance in regards to completing the "Development Plan for
the  Prado  Field"  with  Strong Petroleum and for his efforts in completing the
Lindolm-Hanson  Gas  Unit  acquisitions  described  above  under "Description of
Business."  Additionally,  since  September  1,  2005,  in  connection  with Mr.
DeStefano's  Employment Agreement, he has been receiving $750 per month as a car
allowance,  which  amount  represents the $3,000 of other annual compensation in
the table above.

(3)  William  F.  Mason served as our Chief Executive Officer and President from
October  19,  2001  to  November  2,  2004,  at  which  time he resigned and Mr.
DeStefano  was  appointed  Chief  Executive  Officer, President, Chief Financial
Officer,  Treasurer  and  Secretary.

(4)  Mr. DeStefano is employed under a three year Executive Employment Agreement
with  us  which  expires  on August 31, 2008, and is described in greater detail
under  "Directors,  Executive  Officers,  Promoters and Control Persons," above.

                                     102
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     The  following  table provides the names and addresses of each person known
to  own  directly or beneficially more than a 5% of the outstanding Common Stock
(as determined in accordance with Rule 13d-3 under the Exchange Act) as of March
31, 2006, and by the officers and directors, individually and as a group. Except
as  otherwise  indicated,  all  shares  are  owned  directly.

<TABLE>
<CAPTION>
   Name  and  Address  of
     Beneficial  Owner              Shares        Percent(1)
-------------------------------   -----------   --------------
<S>                                   <C>           <C>
Edward R.  DeStefano               37,500,000        67.2%
5851 San Felipe, Suite 775
Houston, Texas, 77057

Laurus Master Fund, Ltd.(2)         3,675,000(3)      6.6%
P.O. Box 309 GT
Ugland House
George Town
South Church Street
Grand Cayman,
Cayman Islands
-----------------------------------------------------------------
All of the officers and            37,500,000        67.2%
directors as a group
   (1 person)
<FN>
(1)  Using  55,810,612  shares  of  common  stock  issued  and outstanding as of
     March 31, 2006.

(2)  The  beneficial  owner  of  Laurus  Master  Fund,  Ltd.  is  Laurus Capital
     Management,  LLC,  a Delaware limited liability company, who manages Laurus
     Master Fund, Ltd. Eugene Grin and David Grin are the sole members of Laurus
     Capital Management, LLC.

(3)  Laurus  currently  holds  3,675,000  shares  of  our  Common  Stock and has
     contractually  agreed  not  to  hold  more  than  9.99%  of  our issued and
     outstanding  Common  Stock,  unless  an  event  of  default  occurs or upon
     providing 75 days prior notice to us. If an event of default occurs or upon
     75  days  prior  notice  to  us.  Laurus  is  able  to hold an aggregate of
     46,735,789 shares of our Common Stock assuming full conversion of the Note,
     and  exercise  of  the  Warrant,  Option  and December Option, which amount
     represents  an  aggregate of 43,060,789 shares, including 24,193,548 shares
     representing the full conversion of the Note, 7,258,065 shares representing
     full  exercise  of the Warrant, 6,547,784 shares representing the remaining
     amount  of  the  Option, and 5,061,392 shares representing full exercise of
     the  December  Option  (defined and described in greater detail above under
     "Description  of  Business"),  and  not  including  the registration of any
     shares  of  our Common Stock for conversion of interest on the Note, or any
     changes  in the Fixed Conversion Price, plus the 3,675,000 shares of common
     stock  which Laurus already holds. Assuming full conversion of the Note and
     exercise  of  the  Warrant,  Option  and  December  Option upon an event of
     default  or  upon  75 days prior notice to us, Laurus could hold 46,735,789
     shares  of  our  common stock, which would represent approximately 47.3% of
     our  then  outstanding Common Stock (assuming the issuance of no additional
     shares  of Common Stock other than in connection with the conversion of the
     Note, Warrant and Option).
</TABLE>

CHANGES IN CONTROL

     The Company does not anticipate any changes in control of the Company.

                                     103
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On  March  7,  2005,  we entered into an amended agreement with Aquatic (as
described  and defined above under "Description of Property") under the original
Aquatic  Agreement,  our  Chief  Executive  Officer, Edward R. DeStefano, was to
receive  15%  of  Aquatic's  outstanding common stock. Under the Amendment, that
percentage  was  changed to 7.5%, and Mr. DeStefano transferred his right to the
7.5%  of  Aquatic's  common  stock  to  us,  which will be issued upon Aquatic's
reorganization  and  re-capitalization.

     Throughout  2005, $10,000 was repaid to our Chief Executive Officer, Edward
R.  DeStefano,  in  consideration  of  monies  he  loaned  us  interest  free.

     Effective  September  1,  2005,  we  entered  into  an Executive Employment
Agreement  with  our Chief Executive Officer and President, Edward R. DeStefano,
whereby Mr. DeStefano agreed to serve as our Chief Executive and President for a
period  of  three  years,  until  August 31, 2008 under the Executive Employment
Agreement  (described  in  greater  detail  above  under  "Directors,  Executive
Officers,  Promoters  and  Control  Persons").

     In  2005,  we  granted  our  Chief  Executive  Officer, Edward R. DeStefano
$14,587.18  in  bonus consideration for his performance in regards to completing
the  "Development  Plan  for  the Prado Field" with Strong Petroleum and for his
efforts  in  completing  the  Lindholm-Hanson  Gas  Unit  acquisitions.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS

Exhibit No.           Description of Exhibit
----------            ----------------------
10.1(1)           Securities  Purchase  Agreement

10.2(2)           Agreement  with  ERC  Solutions,  Inc.

10.3(2)           Subscription  Agreement  with  Kitaro,  Inc.

10.4(2)           Purchase  and  Sale  &  Exploration  Agreement  with  Aquatic

10.5(2)           First  Amendment  of Purchase and Sale & Exploration Agreement
                  with  Aquatic

10.6(3)           Development  Agreement  with  Strong  (with  all  confidential
                  information  removed)

10.7(4)           Settlement Agreement and Mutual Release with Core Concepts,
                  LLC

10.8(5)           Securities Purchase Agreement between Laurus Master Fund, Ltd.
                  and  New  Century  Energy Corp.

10.9(5)           Secured  Convertible  Term  Note

10.10(5)          Common  Stock  Purchase  Warrant;

10.11(5)          Master  Security  Agreement;

10.12(5)          Registration  Rights  Agreement.

10.13(5)          Option  Agreement

                                     104
<PAGE>

10.14(5)          June  2005  Purchase  and  Sale  Agreement

10.15(6)          Finder's  Warrant

10.16(7)          First  Amendment  to  the  Note,  Warrant  and  Option

10.17(8)          September 2005 Purchase and Sale Agreement

10.18(9)          Securities Purchase Agreement

10.19(9)          Secured Term Note

10.20(9)          Reaffirmation and Ratification Agreement

10.21(9)          Funds Escrow Agreement (September 2005)

10.22(9)          Mortgage,  Deed  of  Trust,  Security  Agreement, Financing
                  Statement and Assignment of Production in Wharton County,
                  Texas

10.23(9)          Mortgage, Deed  of  Trust,  Security  Agreement, Financing
                  Statement and Assignment of Production in  McMullen County,
                  Texas

10.24(9)          Mortgage,  Deed  of  Trust,  Security  Agreement, Financing
                  Statement and Assignment of Production in  Matagorda County,
                  Texas

10.25(10)         Purchase  and  Sale  Agreement  dated  November 1, 2005 and
                  exhibits

10.26(10)         Amendment  to Purchase  and  Sale  Agreement  dated
                  November 2, 2005

10.27(10)         Amendment  Agreement  to  June  2005  Securities  Purchase
                  Agreement

10.28(12)         Funds Escrow Agreement (June 2005)

10.29(12)         Edward R. DeStefano Employment Agreement

10.30(11)         Second Amendment Agreement with Laurus

10.31(13)         Third Amendment Agreement

10.32(13)         Amended and Restated Secured Convertible Note

10.33(13)         December Option

10.34(13)         Settlement Agreement With William F. Mason

10.35(16)         Amended and Restated Secured Term Note

16.1(14)          Letter from Malone and Bailey, PC, Certified Public
                  Accountants

31.1*             Certificate of the Chief Executive Officer and Chief Financial
                  Officer pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002

                                     105
<PAGE>

32.1*             Certificate  of the Chief Executive Officer of Chief Financial
                  Officer pursuant  to  Section  906  of  the Sarbanes-Oxley Act
                  of  2002

99.1(15)          Glossary  of  Oil  and  Gas  Terms

(1)  Filed  as  exhibit  10.1  to  our  Form  8-K  filed  January  6,  2005, and
     incorporated herein by reference.

(2)  Filed  as  exhibits  to  our  10-KSB  filed  on  March  31,  2005,  and
     incorporated herein by reference.

(3)  Filed  as  exhibit  10.4  to  our  Form  10-QSB  filed on May 23, 2005, and
     incorporated herein by reference.

(4)  Filed  as  exhibit  10.1  to  our  Report  on  Form  8-K, filed on June 16,
     2005, and incorporated herein by reference.

(5)  Filed  as  exhibits  to  our  Report  on  Form  8-K, filed on July 8, 2005,
     and incorporated herein by reference.

(6)  Filed  as  exhibit  10.15  to  our  Registration  on  Form  SB-2,  filed on
     August 5, 2005.

(7)  Filed  as  exhibit  10.8  to our Report on Form 8-K, filed on July 28,
     2005.

(8)  Filed  as  an  exhibit  to  the Company's Report on Form 8-K filed with the
     Commission on September 7, 2005, and incorporated herein by reference.

(9)  Filed  exhibits  to  the  Company's  Report  on  Form  8-K,  filed with the
     Commission on September 22, 2005, and incorporated herein by reference.

(10) Filed  as  exhibits  to  the  Company's  Report  on Form 8-K filed with the
     Commission on November 7, 2005, and incorporated herein by reference.

(11) Filed as exhibit 10.1 to the Company's Report on Form 8-K filed with the
     Commission on December 19, 2005, and incorporated herein by reference.

(12) Filed  as  exhibits  to  the  Company's  Report  on  Form 10-QSB filed with
     the Commission on December 20, 2005, and incorporated herein by reference.

(13) Filed  as  exhibits  to  the  Company's  Report  on Form 8-K filed with the
     Commission on January 4, 2006, and incorporated herein by reference.

(16) Filed as an exhibit to the Company's Report on Form 8-K filed with the
     Commission on April 4, 2006, and incorporated herein by reference.

*  Filed  herein

                                     106
<PAGE>

     (b)  REPORTS ON FORM 8-K

The Company filed the following reports on Form 8-K during the last quarter of
the fiscal year ended December 31, 2005:

o    The  Company  filed  a  Report  on  Form  8-K on November 7, 2005 to report
     that  on  November  1,  2005, we entered into a Purchase and Sale Agreement
     with  Mr.  Gerald W. Green, whereby we agreed to purchase certain interests
     in  and to certain oil and gas leases which are located within and adjacent
     to  the  Lindholm-Hanson Gas Unit for $1,890,000; that on November 3, 2005,
     we  concluded that the Company's unaudited consolidated balance sheet as of
     June  30,  2005,  which  is  included in the Company's Form 10-QSB for that
     period,  can  no  longer  be  relied upon; and that on November 4, 2005, we
     entered  into  an  Amendment  Agreement  with  Laurus  Master   Fund,  Ltd.
     ("Laurus"), whereby Laurus agreed to extend the date which we were required
     to  have  our  Form SB-2 Registration Statement declared effective, without
     being in default to December 12, 2005.

o    The  Company  filed  a  report  on  Form 8-K on November 21, 2005 to report
     that  it  would  be delayed in filing its Form 10-QSB for the quarter ended
     September  30,  2005,  as  it  was in the process of making revisions to
     prior  quarterly  reports,  which  changes  effected the accounting for its
     September 30, 2005 period as well.

o    The  Company  filed  an  amended  report on Form 8-K on December 5, 2005 to
     amend  a prior Form 8-K filing made to report the Company's 2nd acquisition
     in  the  Lindholm-Hanson  Gas  Unit,  by  including  the  Audited Financial
     Statements  for  such  acquisition;  to  add  a Management's Discussion and
     Analysis  of  Financial  Condition discussion regarding the acquisition; to
     update  the Closing date of the Company's September 2, 2005 acquisition; to
     add  Item 2.01 Completion of Acquisition or Disposition of Assets regarding
     the closing of the Company's September 2, 2005 acquisition; and to disclose
     the source of the funds used by the Company to purchase the interests.

o    The  Company  filed  an  amended  report on Form 8-K on December 6, 2005 to
     amend  a  prior  Form  8-K  filing  made  to report its belief that certain
     financial  statements  should  no longer be relied upon. The amended report
     clarified  the  Company's  position  regarding  the  non-reliance   on  the
     Company's  audited December 31, 2004, unaudited March 31, 2005 and June 30,
     2005 financial statements to state that such restatements will be material;
     disclosed  that  its  Chief  Executive  Officer and Chief Financial Officer
     concluded  that our financial statements for the periods ended December 31,
     2004,  March  31,  2005 and June 30, 2005 can no longer be relied upon; and
     stated  the effect that the knowledge of such required changes will have on
     the  Company's  conclusion  regarding the effectiveness of its Controls and
     Procedures  in the Company's amended 10-KSB for the year ended December 31,
     2004,  amended  10-QSB for the quarter ended March 31, 2005 and the amended
     10-QSB for the quarter ended June 30, 2005.

o    The  Company  filed  a  Form  8-K  on  December  14,  2005  to  report  the
     Company's entry into the Second Amendment Agreement with Laurus.

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o    The  Company  filed  a  Form  8-K  on  January  4,  2006,  to  report  the
     Company's  entry  into  the  Third  Amendment  Agreement  with  Laurus; the
     granting  to  Laurus  of  the December Option; the Company's entry into the
     Restated  Note  with  Laurus  and  the  Company's  entry  into  settlement
     agreements  with  its  former  transfer  agent  as well as its former Chief
     Executive  Officer,  William  F.  Mason; and to report that the Company had
     closed the purchase and sale agreement entered into on November 1, 2005.

o    The  Company  filed  and  amended  Form 8-K on January 18, 2005, to include
     the  Audited  Financial  Statements  for the Company's third acquisition of
     interests in the Lindholm-Hanson Gas Unit.

O    The  Company  filed  an  amended  Form  8-K on January 18, 2005, to include
     the  Audited  Financial  Statements for the Company's second acquisition of
     interests in the Lindholm-Hanson Gas Unit.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

     The  aggregate  fees billed for each of the fiscal years ended December 31,
2005 and 2004 for professional services rendered by the principal accountant for
the  audit  of  the  Company's annual financial statements and the review of the
financial  statements  included  in the registrant's Form 10-QSB or for services
that  are  normally  provided by the accountant in connection with statutory and
regulatory  filings  or engagements for those fiscal years was approximately
$40,900 and $14,945, respectively.

AUDIT RELATED FEES

     The aggregate audit-related fees billed during 2005 totaled $64,750, which
comprised two acquisition audits and related Form  8-K  filings,  review  of  a
registration  statement  on  Form SB-2, and Company responses and amendments to
prior filings as a  result of comment letters received from the  Securities and
Exchange Commission.

TAX FEES

     The  aggregate  fees  billed  in  each  of  the last two fiscal years ended
December  31,  2005  and  December 31, 2004, by the principal accountant for tax
compliance,  tax  advice  ad  tax  planning  was  $6,250 and $-0-, respectively.

ALL OTHER FEES

None.

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                                   SIGNATURES

     In  accordance  with  Section 13 or 15(d) of the Securities Exchange Act of
1934,  the  Registrant  caused  this  report  to  be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

                                           NEW CENTURY ENERGY CORP.

DATED: September 8, 2006

                                       By: /s/ Edward R. DeStefano
                                           ------------------------
                                           Edward R. DeStefano
                                           Chief Executive Officer

     In accordance with the Securities Exchange Act of 1934, this report  has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

NAME     TITLE                         DATE

/s/ Edward R. DeStefano     Chief Executive Officer,        September 8, 2006
----------------------      Chief Financial Officer,
Edward R. DeStefano         Principal Accounting Officer
                            and Director


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