**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**








**[
                X ]**
            **ANNUAL
                REPORT UNDER SECTION 13 0R 15(****d****)
                OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      fiscal year ended  **December
      31, 2004**





**[  
                ]**
            **TRANSITION
                REPORT UNDER SECTION 13 0R 15(****d****)
                OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      transition period from____________ to____________





Commission
      file number  **000-27753**








**BREK
                ENERGY CORPORATION**(Name
                of Small Business Issuer in its
                charter)








Incorporated
                in the State of Nevada
              (State
                or other jurisdiction of incorporation or organization)
            **98-0206979**
              (I.R.S.
                Employer Identification No.)Third
                Floor, 346 Kensington High Street, London, UK
              (Address
                of principal executive offices)
            W14
                8NS
              (Zip
                Code)





Issuer’s
      telephone number: **011-44-20-7371-6668**








Securities
      registered pursuant to Section 12(b) of the Act:


**Title
                of each class**
            **Name
                of each exchange on which registered**None
            N/A








Securities
      registered pursuant to Section 12(g) of the Act:








**shares
                of common stock****-
                $0.001 par value**(Title
                of Class)





Indicate
      by check mark whether the issuer (1) filed all reports required to be filed
      by
      Section 13 or 15(d) of the Exchange Act during the last 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**





Indicate
      by check mark if disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. **[ 
      ]**




***Page
          - 1***





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


**[ 
      ] Yes [ X ] No**





State
      issuer’s revenues for its most recent fiscal year.   $
      363,053





State
      the
      aggregate market value of the voting and non-voting common equity held by **non-affiliates** computed
      by reference to the price at which the common equity was sold, or the average
      bid and asked price of such common equity, as of a specified date within the
      past 60 days: **$29,649,598
      as of November 10, 2005 ($0.66 close)**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date.





**Class**
            **Outstanding
                at November 10, 2005**shares
                of common stock - $0.001 par value
            59,498,090





Documents
      incorporated by reference: Exhibit 3.1 (Amended and Restated Articles of
      Incorporation) filed on May 14, 2002 as an Exhibit to Brek’s Form 10-K/A (Annual
      Report); Exhibit 3.2 (By-laws) filed on October 21, 1999 as an Exhibit to Brek’s
      Form 10 (Registration Statement); Exhibit 4.1 (1999 Employee Stock Option /
      Warrant Plan) filed on September 11, 2000 as an Exhibit to Brek’s Form S-8
      (Registration Statement); Exhibit 4.2 (Rights Agreement) filed on March 6,
      2002
      as an Exhibit to Brek’s Form 8-K (Current Report); Exhibit 4.3 (2001 Employee
      Stock Option / Warrant Plan) filed on July 10, 2002 as an Exhibit to Brek’s Form
      S-8 (Registration Statement); Exhibit 10.1 (Stock Purchase Agreement) filed
      on
      March 29, 2000 as an Exhibit to Brek’s Form 10-KSB (Annual Report); Exhibit 10.2
      (Stock Purchase Agreement) filed on September 18, 2002 as an attached Exhibit
      to
      Brek’s Form 10-K/A (Annual Report); Exhibit 10.3 (Purchase Agreement) filed on
      July 31, 2002 as an Exhibit to Brek’s Form 8-K (Current Report); Exhibit 10.4
      (Share Purchase Agreement) filed on November 21 ,
      2005 as
      an Exhibit to Brek’s Form 10-KSB (Annual Report); and Exhibit 10.5 (License
      Agreements) filed on November 21 ,
      2005 as
      an Exhibit to Brek’s Form 10-KSB (Annual Report).





Transitional
      Small Business Disclosure Format (Check one): **Yes [  ] No [ x ]**





***Page
          - 2***


**PART
      I**





**Item
      1.**  **Description
      of Business.**





**(a)**
            **Business
                Development**





Brek
      Energy Corporation is a Nevada corporation in the oil and gas business. Brek
      was
      in the business of developing electronic payment processing systems from its
      inception until July 2001 when it acquired shares in Gasco Energy, Inc., an
      oil
      and gas exploration company. In July 2002, Brek exchanged its shares in Gasco
      for a leasehold interest in 25% of Gasco’s undeveloped properties in Utah,
      Wyoming and California, which it owns and operates through subsidiaries, and
      sold its electronic payment processing subsidiary. Since then, Brek has focused
      on the development of its natural gas and oil properties. On
      March
      12, 2002, Brek acquired shares in Vallenar Energy Corp., an oil and gas
      exploration company. On
      June
      28, 2002, Brek increased its shareholding in Vallenar to 51.53%. See
      “Business of Brek” and “Management’s Discussion and Analysis or Plan of
      Operations” below for more information.





Brek
      has
      an authorized capital of 300,000,000 shares of common stock with a par value
      of
      $0.001 of which 59,498,090 shares are issued and outstanding.





Neither
      Brek nor any of its subsidiaries has been involved in any bankruptcy,
      receivership or similar proceedings. There have been no material
      reclassifications, mergers, consolidations or purchases or sales of a
      significant amount of assets not in the ordinary course of Brek’s
      business.





**(b)**
            **Business
                of Brek**





Brek
      is a
      natural gas and petroleum exploitation, development, and production company
      engaged in the acquisition, operation and development of unconventional
      hydrocarbon prospects, primarily in the Rocky Mountain region. Brek, through
      its
      subsidiaries, conducts its principal business, which is (1) the acquisition
      of
      leasehold interests in petroleum and natural gas rights, either directly or
      indirectly, and (2) the exploitation and development of properties subject
      to
      these leases. Brek is currently focusing on drilling efforts in the Riverbend
      Project located in the Unita Basin of northeastern Utah, targeting the Wasatch,
      Mesaverde and Blackhawk formations. See “Item 2. Description of Property” below
      for more information.





Brek
      is
      the majority owner of Vallenar Energy Corp., an oil and gas company with a
      strategy of structuring and developing an economically viable enhanced oil
      recovery project in Texas. See “Item 2. Description of Property” below for more
      information.





Brek
      is
      in the early stages of development and has insufficient operating history on
      which to base an evaluation of its business and prospects. Any evaluation must
      be made in light of the risks frequently encountered by companies in their
      early
      stages of development, particularly for companies in high risk sectors such
      as
      natural gas and oil.





**Products
      and Services**





The
      discovery of natural gas or oil and the ability to produce either one in
      commercial quantities is very speculative. Even assuming that Brek obtains
      the
      necessary financing for drilling, if Brek or its operator does not discover
      and
      produce commercial quantities of natural gas or oil, it will not have any
      products or services to offer and its business could fail. The principal uses
      for natural gas and oil are heating, manufacturing, power, and
      transportation.





Natural
      gas is gathered through connections between Brek’s natural gas wells and the
      pipeline transmission system. Natural gas sales are by contract, and Brek,
      through its operator, will enter into a contract with the natural gas company
      that purchases most of the natural gas produced in the area. Natural gas
      purchasers pay well operators 100% of the sale proceeds of natural gas on or
      about the 25th of each month for the previous month’s sales. The operator is
      responsible for all distributions to the working interest and royalty owners.
      There is no standard price for natural gas and prices will fluctuate with the
      seasons and the general market conditions. See Exhibit 10.7 - Natural Gas
      Purchase Agreement for more details.





Brek
      primarily produces natural gas, and also produces condensate (oil). During
      the
      fiscal year ended December 31, 2004, Brek produced 58,907.61 Mcf of natural
      gas
      and 834.08 Bbl of oil. Brek sells its product to purchasers in the geographic
      area of the properties. Natural gas, after processing, is distributed through
      pipelines. Brek recognizes revenue from the sale of natural gas when it reaches
      the customer’s point of purchase in the gas transmission system. The amount Brek
      recognizes for each well will be based on the percentage of Brek’s net revenue
      interest in the well, and the remainder will be allocated to other persons
      holding a net revenue interest.




***Page
          - 3***





**Market**





Brek
      currently derives its revenue principally from the sale of natural gas. As
      a
      result, Brek’s revenues are determined, to a large degree, by prevailing natural
      gas prices. Brek currently sells the majority of its natural gas on the open
      market at prevailing market prices. The market price for natural gas is dictated
      by supply and demand, and Brek cannot accurately predict or control the price
      it
      receives for its natural gas. See Exhibit 10.7 - Natural Gas Purchase Agreement
      for more details.





The
      market for natural gas and oil production is regulated by both the state and
      federal governments. The overall market is mature and, with the exception of
      natural gas, all producers in a producing region will receive the same price.





The
      availability of a ready market for any natural gas or oil produced by Brek
      depends on numerous factors beyond the control of management, including but
      not
      limited to, the extent of domestic production and imports of oil, the proximity
      and capacity of natural gas pipelines, the availability of skilled labor,
      materials and equipment, the effect of state and federal regulation of natural
      gas and oil production, and federal regulation of natural gas sold in interstate
      commerce. Natural gas and oil produced by Brek or its operator in Utah is sold
      to various purchasers who service the areas where Brek’s wells are located.
      During the fiscal year ended December 31, 2004, Brek’s wells are not subject to
      any agreements that would prevent Brek from either selling its production on
      the
      spot market or committing such gas to a long-term contract; however, there
      can
      be no assurance that Brek will continue to have ready access to suitable markets
      for its future natural gas and oil production.





The
      marketability of Brek’s natural gas has not posed a problem for Brek. Natural
      gas can be easily sold wherever it is produced in the States that Brek operates
      subject to the transportation cost. However, the natural gas produced by Brek
      can be difficult to sell since transportation requires a pipeline. In the areas
      that Brek is presently pursuing new drilling activity for natural gas, other
      companies have been delayed up to a year because of the unavailability of a
      pipeline. No assurance can be given that natural gas wells drilled by Brek
      or
      its operator will be placed on line within a year after the well is drilled
      and
      completed.





**Distribution
      Methods of Products and Services**





Natural
      gas will be delivered to the purchaser via gathering lines into the main gas
      transmission line or pipeline. See Exhibit 10.7 - Natural Gas Purchase Agreement
      for more details.





Management
      anticipates that Brek’s products will be sold to any number of purchasers in the
      area of its properties, however, no assurance can be given that Brek will be
      able to make such sales or that if it does, it will be able to receive a price
      that is sufficient to make its operations profitable.





**Competition**





Brek’s
      natural gas and oil exploration activities take place in a highly competitive
      and speculative business atmosphere. In seeking suitable natural gas and oil
      properties for acquisition, Brek competes with a number of other companies
      operating in its areas of interest, including large oil and gas companies and
      other independent operators with greater financial resources. Management does
      not believe that Brek’s competitive position in the natural gas and oil industry
      will be significant .





Competition
      in the natural gas and oil exploration industry also exists in the form of
      competition to acquire the most promising acreage blocks and obtaining the
      most
      favorable prices for transporting the product. Brek is relatively small compared
      to other natural gas and oil exploration companies and may have difficulty
      acquiring additional acreage or projects, and may have difficulty arranging
      for
      the transportation of product, if Brek is successful in its exploration
      efforts.





The
      natural gas industry is very competitive, particularly with respect to the
      acquisition of drilling rigs and natural gas exploration services from
      independent contractors. Brek
      anticipates a tight market for obtaining drilling rigs and services, and the
      manpower to run them. The current high level of drilling activity in Brek’s
      areas of exploration may have a significant adverse impact on the timing and
      profitability of Brek’s operations. In addition, Gasco Energy, Inc., the
      operator on the properties, will be required to obtain drilling permits for
      its
      wells, and there is no assurance that such permits will be available in a timely
      manner or at all.




***Page
          - 4***





The
      price
      of natural gas is affected by continuous shifts in supply and demand and is
      controlled by domestic and world markets. Natural gas is becoming the preferred
      source of energy over other fossil fuels because it is an environmentally
      friendlier source of energy. The demand for natural gas is increasing and
      whether or not their will be an adequate supply is very uncertain. Numerous
      well-established companies are focusing significant resources on exploration.
      These companies may be able to compete more effectively than Brek. Due to these
      factors, Brek expects competition to intensify in the natural gas industry
      in
      general and for the acquisition of drilling rigs and natural gas exploration
      services from independent contractors.





**Government
      Controls and Regulations**





Brek,
      or
      a venture in which it participates, will be required to obtain local government
      and other permits for drilling oil or gas wells.





Brek
      and
      its operators are subject to stringent federal, state, and local laws and
      regulations governing the discharge of materials into the environment or
      otherwise relating to environmental protection. These laws and regulations
      may
      require the acquisition of permits before drilling commences, limit or prohibit
      operations on environmentally sensitive lands such as wetlands or wilderness
      areas, result in capital expenditures to limit or prevent emissions or
      discharges, and place restrictions on the management of wastes. Failure to
      comply with these laws and regulations may result in the assessment of
      administrative, civil and criminal penalties, the imposition of remedial
      obligations, and the issuance of injunctive relief. Any changes in environmental
      laws and regulations that result in more stringent and costly waste handling,
      disposal or cleanup requirements could have a material adverse effect on our
      operations. While management believes that Brek and its operators are in
      substantial compliance with current environmental laws and regulations and
      that
      continued compliance with existing requirements would not materially affect
      Brek, there is no assurance that this trend will continue in the
      future.





The
      Comprehensive Environmental Response, Compensation and Liability Act, as
      amended, also known as “ **CERCLA** ”
or
      “ **Superfund** ”,
      and
      comparable state laws impose liability without regard to fault or the legality
      of the original conduct, on certain classes of persons who are considered to
      be
      responsible for the release of a hazardous substance into the environment.
      Under
      CERCLA, these “ **responsible
      persons** ”
may
      be
      subject to joint and several liability for the costs of cleaning up the
      hazardous substances that have been released into the environment, for damages
      to natural resources, and for the costs of certain health studies, and it is
      not
      uncommon for neighboring landowners and other third parties to file claims
      for
      personal injury and property damage allegedly caused by the release of hazardous
      substances into the environment.





Brek
      also
      may incur liability under the Resource Conservation and Recovery Act, also
      known
      as “ **RCRA** ”,
      which
      imposes requirements relating to the management and disposal of solid and
      hazardous wastes. While there exists an exclusion from the definition of
      hazardous wastes for “drilling fluids, produced waters, and other wastes
      associated with the exploration, development, or production of crude oil,
      natural gas or geothermal energy”, in the course of Brek’s operations, Brek may
      generate ordinary industrial wastes, including paint wastes, waste solvents,
      and
      waste compressor oils that may be regulated as hazardous waste.





Brek
      currently owns or leases, and has in the past owned or leased, through its
      operators, properties that for a number of years have been used for the
      exploration and production of natural gas and oil. Although Brek and its
      operators have utilized operating and disposal practices that were standard
      in
      the industry at the time, hydrocarbons or other wastes may have been disposed
      of
      or released on or under the properties owned or leased by Brek or on or under
      other locations where such wastes have been taken for disposal. In addition,
      some of these properties may have been operated by third parties whose disposal
      or release of hydrocarbons or other wastes was not under Brek’s control. These
      properties and the wastes disposed thereon may be subject to CERCLA, RCRA,
      and
      analogous State laws. Under such laws, Brek could be required to remove or
      remediate previously disposed wastes or property contamination or to perform
      remedial operations to prevent future contamination.





The
      Federal Water Pollution Control Act of 1972, as amended, also known as the
      “ **Clean
      Water Act** ”
and
      analogous State laws impose restrictions and strict controls regarding the
      discharge of pollutants, including produced waters and other oil and natural
      gas
      wastes, into state or federal waters. The discharge of pollutants into regulated
      waters is prohibited, except in accord with the terms of a permit issued by
      EPA
      or the state. The Clean Water Act provides civil and criminal penalties for
      any
      discharge of oil in harmful quantities and imposes liabilities for the costs
      of
      removing an oil spill.





The
      Clean
      Air Act, as amended (the “ **CAA** ”),
      restricts the emission of air pollutants from many sources, including natural
      gas and oil operations. New facilities may be required to obtain permits before
      work can begin, and existing facilities may be required to incur capital costs
      in order to remain in compliance. In addition, more stringent regulations
      governing emissions of toxic air pollutants are being developed by the EPA,
      and
      may increase the costs of compliance for some facilities.




***Page
          - 5***





Under
      the
      National Environmental Policy Act (the “ **NEPA** ”),
      a
      federal agency, in conjunction with a permit holder, may be required to prepare
      an environmental assessment or a detailed environmental impact statement, also
      known as an “ **EIS** ”
before
      issuing a permit that may significantly affect the quality of the environment.
      Brek or its operators are currently in negotiations with the U.S. Bureau of
      Land
      Management or “ **BLM** ”
      regarding the preparation of an EIS in connection with certain proposed
      exploration and production operations in the Uinta Basin of Utah. Brek expects
      that the EIS will take approximately 18 to 24 months to complete. Until the
      EIS
      is completed and issued by the BLM, Brek will be limited in the number of
      natural gas and oil wells that it or its operator can drill in the areas
      undergoing EIS review. While Brek does not expect that the EIS process will
      result in a significant curtailment in future natural gas and oil production
      from this particular area, Brek can provide no assurance regarding the outcome
      of the EIS process.





Brek
      and
      its subsidiaries are in compliance with the foregoing legislation and will
      continue to comply with the legislation in the future. Management believes
      that
      compliance with the foregoing legislation will not adversely affect Brek’s
      business operations in the future or its competitive position.





**Effect
      of Existing or Probable Governmental Regulations on Brek’s
      Business**





Brek’s
      business is subject to various levels of government controls and regulations,
      which are supplemented and revised from time to time, including various laws
      and
      regulations of the United States, the State of Utah, the State of Wyoming,
      the
      State of California, the State of Texas, and the municipalities in which it
      operates that govern the exploration, development and production of natural
      gas
      and oil. Brek will have to abide and follow the procedures established by the
      entities in those jurisdictions. For instance, the Texas Railroad Commission
      determines all procedures and regulations that concern oil and natural gas
      exploration and production activities in the State of Texas. Brek is unable
      to
      predict what additional legislation or revisions may be proposed that might
      affect its business or when any such proposals, if enacted, might become
      effective. Such changes, however, could require increased capital and operating
      expenditures and could prevent or delay certain operations by Brek or one of
      its
      subsidiaries.





**Dependence
      on One or a Few Major Customers**





Brek
      does
      not independently market its production: it depends entirely upon the operators
      of its wells to market and sell all of its production. As Brek does not yet
      rely
      upon the revenue from its production, an operator’s refusal to market and sell
      the production on Brek’s behalf would not have a material adverse affect on its
      business, except to the extent that Brek does not have storage facilities and
      would be obligated to take delivery of its production. Brek’s management does
      not believe that any of its operators is likely to refuse to market and sell
      its
      production.





**Patents/Trade
      Marks/Licences/Franchises/Concessions/Royalty Agreements or Labour
      Contracts**





Neither
      Brek nor its subsidiaries currently own any patents or trade marks. Also, they
      are not party to any license or franchise agreements, concessions, royalty
      agreements or labor contracts arising from any patents or trade
      marks.





Brek’s
      web site is copyrighted upon loading. www.brekenergy.com is a
      registered domain name of Brek. Brek and its subsidiaries will seek further
      trademark protection for any associated domain names.





**Estimate
      of Research and Development Costs**





Brek
      did
      not perform any research activities in the past two fiscal years ended 2004
      and
      2003. Brek spent $1,661,077 and $306,485 on exploration and development
      activities during the two fiscal years ended 2004 and 2003 respectively. Also,
      Brek did not spend any funds on geological and economical evaluations of its
      properties during the same time period.





**Number
      of Total Employees and Number of Full Time Employees**





As
      of
      December 31, 2004 Brek had no employees.





**RISK
      FACTORS**





Brek
      is
      in the early stages of development and an investment in Brek’s business involves
      a high degree of risk. You should consider each of the following risk factors
      and the other information in this Annual Report, including Brek’s financial
      statements and the related notes, in evaluating Brek’s business and prospects.
      The risks and uncertainties described below are not the only ones that impact
      on
      Brek’s business. Additional risks and uncertainties not presently known to Brek
      or that Brek currently considers immaterial may also impair its business
      operations. If any of the following risks actually occur, Brek’s business and
      financial results could be harmed. In that case, the trading price of Brek’s
      shares of common stock could decline.




***Page
          - 6***




**Risks
      associated with Brek’s business and properties:**





**1.**  **Brek** **is
      in the early stages of development and may not be able to continue as a going
      concern and may not be able to raise additional financing.**




Brek
        has
        a working capital deficiency. This factor raises substantial doubt about
        Brek’s
        ability to continue as a going concern. These consolidated financial statements
        have been prepared on a going concern basis, which implies that Brek will
        continue to realize its assets and discharge its liabilities in the normal
        course of business. Brek has never paid any dividends. Brek is unlikely to
        pay
        dividends in the immediate or foreseeable future. There is no guarantee that
        Brek will be able to raise any equity financing. Brek has a working capital
        deficit of $789,409 and has accumulated losses of $61,335,708 since inception.
        These factors raise substantial doubt regarding Brek’s ability to continue as a
        going concern.
 
 These
        factors may make it more difficult for Brek to raise additional equity or
        debt
        financing needed to run its business and is not viewed favorably by analysts
        or
        investors. Brek urges potential investors to review this report before making
        a
        decision to invest in Brek.





**2.**  **Brek
      has a limited history.**




Brek
      has
      a limited operating history upon which an evaluation of its future success
      or
      failure can be made. You should be aware of the difficulties normally
      encountered by new natural gas exploration companies similarly situated to
      Brek
      and the high rate of failure of such enterprises. Many of these risks and
      uncertainties are described in more detail elsewhere in this “Risk Factors”
section. Brek’s likelihood of success must be considered in light of the
      problems, expenses, difficulties, complications and delays encountered in
      connection with the exploration of the properties that Brek plans to undertake.
      These potential problems include, but are not limited to, unanticipated problems
      relating to exploration, and additional costs and expenses that may exceed
      current estimates. You should consider the likelihood of Brek’s future success
      to be highly speculative in view of its limited operating history, as well
      as
      the complications frequently encountered by other companies in the early stages
      of development. If Brek realizes problems, additional costs, difficulties,
      complications or delays in connection with its exploration activities, it will
      have a material adverse effect on its business operations, results of operations
      and financial condition, and as a result, its business could suspended or
      fail.




Brek
        has
        limited financial resources to support it. Brek’s accumulated net losses since
        inception on September 16, 1998 are $61,335,708. For the 12 months ended
        December 31, 2004, operating expenses increased by $64,760. Based upon current
        plans, Brek expects to incur approximately $17,000 per month in operating
        losses
        over the 18 months, primarily due to expenses associated with the proposed
        natural gas and oil exploration programs on its properties. See “Management
        Discussion and Analysis” on page 25 for more details.
 
 Brek
        cannot guaranty that it will be successful in generating revenues in the
        future
        or that it will be able to raise any working capital for operating funds.
        Failure to generate sufficient revenues or raise any financing may cause
        Brek to
        suspend or cease operations.





Brek’s
      ability to maintain profitability and positive cash flow is dependent upon
      its
      ability to continue to generate revenues from its planned business operations
      and to control operating costs. Without the generation of any revenues or any
      capital being raised in an equity or debt financing, Brek will run out of
      operating funds within three months.





**3.**  **Brek
      has limited control over activities on properties that Brek does not operate
      and
      depends on Gasco Energy, Inc. to manage, drill and operate the wells, which
      could negatively impact on the exploration and development of Brek’s properties
      and on Brek’s business operations.**





Substantially
      all of Brek’s business operations are conducted through joint operating
      agreements under which Brek owns partial interests in natural gas and oil
      properties. If Brek does not operate the properties in which it owns an
      interest, Brek does not have control over normal operating procedures,
      expenditures or future development of underlying properties. The failure of
      an
      operator of Brek’s wells to adequately perform operations, or an operator’s
      breach of the applicable agreements, could reduce Brek’s production and revenues
      and have a negative impact on Brek’s business operations. The success and timing
      of Brek’s drilling and development activities on properties operated by others
      therefore depends upon a number of factors outside of Brek’s control, including
      the operator’s timing and amount of capital expenditures, expertise and
      financial resources, inclusion of other participants in drilling wells, and
      use
      of technology. Because Brek does not have a majority interest in most wells
      that
      Brek does not operate, Brek may not be in a position to remove the operator
      in
      the event of poor performance .




***Page
          - 7***





**4.**  **Brek’s
      partners and third party operators could suffer financial hardship, which could
      negatively impact on the exploration and development of Brek’s
      properties.**





Liquidity
      and cash flow problems encountered by Brek’s partners or the co-owners of Brek’s
      properties may prevent or delay the drilling of a well or the development of
      a
      project. Brek’s partners and working interest co-owners may be unwilling or
      unable to pay their share of the costs of projects as they become due. In the
      case of a farm-out partner, Brek would have to find a new farm-out partner
      or
      obtain alternative funding in order to complete the exploration and development
      of the prospects subject to the farm-out agreement. In the case of a working
      interest owner, Brek could be required to pay the working interest owner’s share
      of the project costs. Brek cannot assure you that it would be able to obtain
      the
      capital necessary to fund either of these contingencies or that Brek would
      be
      able to find a new farm-out partner.





**5.**  **Brek’s
      estimated reserves are based on many assumptions, which may be inaccurate,
      and
      any material inaccuracies in the estimated reserve or underlying assumptions
      will materially affect the quantities and present value of Brek’s reserves and
      negatively impact Brek’s business operations.**





Estimating
      accumulations of gas and oil is complex and is not exact because of the numerous
      uncertainties inherent in the process. The process relies on interpretations
      of
      available geological, geophysical, engineering and production data. The extent,
      quality and reliability of this technical data can vary. The process also
      requires certain economic assumptions, some of which are mandated by the SEC,
      such as gas and oil prices, drilling and operating expenses, capital
      expenditures, taxes and availability of funds.





Actual
      future production, gas and oil prices, revenues, taxes, development
      expenditures, operating expenses and quantities of recoverable gas and oil
      reserves most likely will vary from Brek’s estimates. Any significant variance
      could materially affect the quantities and present value of its reserves. In
      addition, Brek may adjust estimates of proved reserves to reflect production
      history, results of exploration and development, and prevailing gas and oil
      prices. If the estimated reserves are materially inaccurate, this will
      negatively impact Brek and its business operations.





**6.**  **As
      a result of Brek’s reserves and production being concentrated in a small number
      of properties, any production problems or significant decrease in reserve
      estimates related to any property could negatively impact Brek’s business
      operations.**





Brek’s
      current reserves and production primarily come from producing properties in
      Utah
      and Wyoming. If mechanical problems, depletion or other events reduced a
      substantial portion of the production, Brek’s cash flows would be adversely
      affected. If the actual reserves associated with Brek’s fields are less than its
      estimated reserves, Brek’s business operations and financial condition could be
      negatively impacted.





**7.**  **The
      exploration and development of Brek’s oil & gas properties require
      substantial capital, which Brek may not be able to obtain, which in turn could
      lead to a loss of Brek’s interest in certain oil & gas properties and a
      decline in Brek’s natural gas and oil reserves.**





Brek’s
      current operating funds are less than necessary to complete Brek’s proposed oil
& gas exploration programs, and therefore Brek will need to obtain
      additional financing in order to complete each of the proposed oil & gas
      exploration programs. As of September 30, 2005, Brek had cash in the amount
      of
      $19,293. Brek currently has limited operations and minimal income. Brek’s
      natural gas and oil exploration programs call for significant expenses in
      connection with the exploration of the respective natural gas and oil
      properties. While Brek does not need to participate in every well that the
      operator decides to drill, if Brek does not participate in the well and pay
      its
      portion of the costs of drilling, Brek will lose some interest in that well.
      If
      Brek decides to participate in every well that is drilled, it will need to
      raise
      approximately $1 million for each well that it decides to participate in to
      maintain its interest in the natural gas and oil properties.





Brek
      has
      relied in the past primarily on the sale of equity capital to fund working
      capital and the acquisition of its prospects and related leases. Failure to
      generate operating cash flow or to obtain additional financing could result
      in
      substantial dilution of its property interests, or delay or cause indefinite
      postponement of further exploration and development of its prospects with the
      possible loss of its oil & gas properties.




Brek
      will
      require significant additional capital to fund its future activities and to
      service current and any future indebtedness. In particular, Brek face
      uncertainties relating to its ability to generate sufficient cash flows from
      operations to fund the level of capital expenditures required for its natural
      gas and oil exploration and production activities and its obligations under
      various agreements with third parties relating to exploration and development
      of
      certain prospects. Brek’s failure to find the financial resources necessary to
      fund its planned activities and service its debt and other obligations could
      adversely affect Brek’s ability to continue as a going concern.




***Page
          - 8***





Brek
      can
      provide no assurance that it will be able to find the required capital.
      Obtaining additional and acceptable financing would be subject to a number
      of
      factors, including the market prices for natural gas and oil, investor
      acceptance of Brek’s natural gas and oil properties, and investor sentiment.
      These factors may make the timing, amount, terms or conditions of the financing
      unavailable and unacceptable to Brek. The most likely source of future capital
      presently available to Brek is through the sale of equity capital. However,
      any
      sale of share capital will result in dilution to existing shareholders. The
      only
      other anticipated alternatives for the financing of Brek’s proposed natural gas
      and oil exploration programs exploration would be private loans or the offering
      by Brek of an interest in its natural gas and oil properties to be earned by
      another party or parties carrying out further exploration thereof, which is
      not
      presently contemplated.





**8.**  **Brek’s
      and its operator’s ability to market and transport the natural gas and oil that
      is discovered on Brek’s properties is essential to Brek’s business operations,
      but is subject to certain requirements.**





Several
      factors beyond Brek’s control may adversely affect its ability to market the
      natural gas and oil that it discovers. These factors include the proximity,
      capacity and availability of natural gas and oil pipelines and processing
      equipment, market fluctuations of prices, taxes, royalties, land tenure,
      allowable production, and environmental protection. The extent of these factors
      cannot be accurately predicted, but any one or a combination of these factors
      may result in Brek’s inability to sell its natural gas and oil at prices that
      would result in an adequate return on Brek’s invested capital.





Currently,
      all of Brek’s natural gas that is being produced is being transported and
      delivered via pipelines that are owned and controlled by the operator of the
      property or by a third party. The pipeline owners have set gas quality
      requirements for the transportation of gas on their pipeline. These requirements
      could and most likely, would be imposed on all companies delivering gas into
      their main pipeline. If pipeline owners should require companies to meet more
      strict quality requirements, there is no assurance that Brek could meet the
      new
      requirements in the short term future or secure a substitute facility in order
      to deliver the gas that is produced. It is possible that Brek would need to
      make
      significant capital expenditures to meet the new gas quality requirements and/or
      to transport the gas itself. During this process and/or adding new
      transportation facilities, Brek’s business operations would be negatively
      impacted in both time and capital expenditures.





**9.**  **As
      a result of substantially all of Brek’s producing properties are located in the
      Rocky Mountains, Brek is vulnerable to certain risks associated with primarily
      operating in one geographical area.**





All
      of
      Brek’s production is currently located in, and all of its future production is
      anticipated to be located in, the Rocky Mountain Region of the United States.
      The natural gas prices that Brek and other companies in the Rocky Mountain
      region have received and are currently receiving are at a discount to natural
      gas prices in other parts of the United States. Factors that can cause price
      volatility for natural gas and crude oil within this region are:





•
the
      availability of gathering systems with sufficient capacity to handle local
      production;


•
      seasonal fluctuations in local demand for production;


•
local
      and national gas storage capacity;


•
      interstate pipeline capacity; and


•
the
      availability and cost of gas transportation facilities from the Rocky Mountain
      region.





**10.**  **Brek’s
      business operations could negatively be impacted if there is a shortage of
      supplies, equipment and personnel for the exploration and development on Brek’s
      properties.**





Brek’s
      ability to conduct operations in a timely and cost effective manner depends
      on
      the availability of supplies, equipment and personnel. The natural gas and
      oil
      industry is cyclical and experiences periodic shortages of drilling rigs,
      supplies and experienced personnel. Shortages can delay operations and
      materially increase operating and capital costs, which could negatively impact
      on Brek’s business operations and financial position.





**11.**  **Seasonal
      weather conditions and lease stipulations adversely affect Brek’s ability to
      conduct drilling activities in some of the areas where its properties are
      located.**





Natural
      gas and oil operations in the Rocky Mountains are adversely affected by seasonal
      weather conditions and lease stipulations designed to protect various wildlife.
      In certain areas, including the Uinta Basin, drilling and other natural gas
      and
      oil activities can only be conducted during the spring and summer months. This
      limits Brek’s or its operator’s ability to operate in those areas and can
      intensify competition during those months for drilling rigs, oil field
      equipment, services, supplies and qualified personnel, which may lead to
      periodic shortages. These constraints and the resulting shortages or high costs
      could delay Brek’s or its operator’s operations and materially increase Brek’s
      operating and capital costs.




***Page
          - 9***





**12.**  **Brek
      may suffer losses or incur liability for events that Brek or the operator of
      a
      property have chosen not to insure against.**





Although
      management believes the operator of any property in which Brek may acquire
      interests will acquire and maintain appropriate insurance coverage in accordance
      with standard industry practice, Brek may suffer losses from uninsurable hazards
      or from hazards, which Brek or the operator have chosen not to insure against
      because of high premium costs or other reasons. Brek may become subject to
      liability for pollution, fire, explosion, blowouts, cratering and oil spills
      against which Brek cannot insure or against which Brek may elect not to insure.
      Such events could result in substantial damage to natural gas and oil wells,
      producing facilities and other property and personal injury. The payment of
      any
      such liabilities may have a material adverse effect on Brek’s financial position
      and business operations.





**13.**  **Brek
      may incur losses or a reduction in its reserves** **** **as
      a result of title deficiencies in the oil & gas properties Brek invests in,
      which could negatively impact Brek’s business operations.**





If
      an
      examination of the title history of a property that Brek has purchased reveals
      a
      natural gas or petroleum lease that has been purchased in error from a person
      who is not the owner of the mineral interest desired, Brek’s interest would be
      worthless. In such an instance, the amount paid for such natural gas or
      petroleum lease would be lost and Brek’s estimated or proven reserves would be
      decreased and Brek’s business would be negatively impacted.





It
      is
      Brek’s practice, in acquiring natural gas and petroleum leases, or undivided
      interests in natural gas and petroleum leases, not to undergo the expense of
      retaining lawyers to examine the title to the mineral interest to be placed
      under lease or already placed under lease. Rather, Brek will rely upon the
      judgment of natural gas and petroleum lease brokers or landmen who perform
      the
      fieldwork in examining records in the appropriate governmental office before
      attempting to acquire a lease in a specific mineral interest.





Prior
      to
      the drilling of a natural gas or petroleum well, however, it is the normal
      practice in the natural gas and petroleum industry for the person or company
      acting as the operator of the well to obtain a preliminary title review of
      the
      spacing unit within which the proposed natural gas or petroleum well is to
      be
      drilled to ensure there are no obvious deficiencies in title to the well.
      Frequently, as a result of such examinations, certain curative work must be
      done
      to correct deficiencies in the marketability of the title, and such curative
      work entails expense. The work might include obtaining affidavits of heirship
      or
      causing an estate to be administered.





**14.**  **Brek
      may not be able manage growth of its business operations effectively, which
      could result in a negative impact on Brek’s business operations and financial
      condition.**





If
      Brek
      is unable to manage growth effectively, its business, financial condition,
      and
      results of operations condition will be negatively affected. Because of Brek’s
      small size, growth in accordance with its plan of operations, if achieved,
      will
      place a significant strain on its financial, technical, operational and
      management resources. As Brek expands its activities and increases the number
      of
      projects it is evaluating or in which it participates, there will be additional
      demands on Brek’s financial, technical and management resources. Brek’s systems,
      procedures or controls may not be adequate to support its business operations
      and Brek’s management may not be able to achieve the execution necessary to
      successfully implement Brek’s plan of operations. The failure to continue to
      upgrade its technical, administrative, operating and financial control systems
      or the occurrence of unexpected expansion difficulties, including the
      recruitment and retention of experienced managers, geoscientists and engineers,
      could have a negative impact on Brek’s business, financial condition, and
      results of operations and its ability to timely execute its plan of
      operations.





**Risks
      associated with Brek’s industry:**





**15.**  **Due
      to the speculative nature of natural gas exploration, there is substantial
      risk
      that Brek will be unable to locate commercial quantities of natural gas, which
      in turn will negatively impact Brek’s business operations.**





The
      search for commercial quantities of natural gas as a business is extremely
      risky. The properties may not contain commercially exploitable quantities of
      natural gas. The exploration expenditures to be made by Brek may not result
      in
      the discovery of commercial quantities of natural gas. Problems such as unusual
      or unexpected formations and other conditions are involved in natural gas
      exploration and often result in unsuccessful exploration efforts. Brek may
      not
      be able to discover and produce commercial quantities of natural gas from its
      properties. If Brek does not discover and produce commercial quantities of
      natural gas, it will not have any products or services to offer and its business
      could fail.




***Page
          - 10***





**16.**  **The
      natural gas and oil markets are volatile markets that have a direct impact
      on
      Brek’s revenues and profits and the market conditions will effect whether Brek
      will be able to continue its operations.**





Brek’s
      revenues, operating results, cash flow and future rate of growth are very
      dependent upon prevailing prices for natural gas and oil. Historically, natural
      gas and oil prices and markets have been volatile and not predictable, and
      they
      are likely to continue to be volatile in the future. Prices for natural gas
      and
      oil are subject to wide fluctuations in response to relatively minor changes
      in
      the supply of and demand for natural gas and oil, market uncertainty and a
      variety of additional factors that are beyond our control,
      including:





•
      political conditions in both natural gas and oil producing and exporting
      countries


•
the
      supply and price of both domestic and foreign natural gas and oil


•
the
      worldwide and regional demand for energy


•
the
      effect of domestic and foreign government regulation of production and
      transportation


•
the
      price and availability of alternative energy sources


•
weather
      conditions


•
acts
      of
      war, terrorism and vandalism


•
market
      manipulation





Lower
      natural gas and oil prices may not only decrease Brek’s revenues on a per unit
      basis but also may reduce the amount of natural gas and oil that Brek can
      produce economically. A substantial or extended decline in natural gas and
      oil
      prices may materially and adversely affect Brek’s business operations, financial
      condition, and ability to finance planned capital expenditures.





**17.**  **Competition
      in the** **natural
      gas and oil industry is intense and Brek may not be able to compete effectively
      with its competitors.**





Brek’s
      ability to acquire additional natural gas and oil properties and develop new
      and
      existing properties in the future will depend on its ability to conduct
      operations, to evaluate and select suitable properties, to attract qualified
      personnel, and to consummate transactions in this intensely competitive
      environment. Brek
      competes with other natural gas and oil companies and other independent
      operators possessing greater financial resources and technical facilities than
      Brek in connection with the acquisition of natural gas and oil properties and
      in
      connection with the recruitment and retention of qualified personnel. There
      is
      significant competition for the limited number of natural gas and oil
      opportunities and, as a result, Brek may be unable to acquire an interest in
      attractive natural gas and oil exploration properties on terms it considers
      acceptable on a continuing basis. Brek
      also
      competes for the equipment and labor required to operate and to develop natural
      gas and oil properties. Management believes that Brek’s competitive position in
      the natural gas and oil industry is significant at this time.





Also,
      larger competitors may be able to absorb the burden of any changes in federal,
      state and local laws and regulations more easily than Brek can, which would
      adversely affect Brek’s competitive position. Also, these competitors may be
      able to pay more for natural gas and oil properties and may be able to define,
      evaluate, bid for and acquire a greater number of properties than Brek can.
      In
      addition, some of Brek’s competitors have been operating in the natural gas and
      oil industry for a much longer time than Brek and have demonstrated the ability
      to operate through industry cycles.





**18.**  **Brek
      is subject to complex laws and regulations, including environmental regulations,
      which could negatively impact the business operations and financial condition
      of
      Brek.**





Development,
      production and sale of natural gas and oil in the United States are subject
      to
      extensive laws and regulations, including environmental laws and regulations.
      Brek may be required to make large expenditures to comply with environmental
      and
      other governmental regulations. Matters subject to regulation
      include:





•
      location and density of wells


•
the
      handling of drilling fluids and obtaining discharge permits for drilling
      operations


•
      emissions into the environment


•
      accounting for and payment of royalties on production from state, federal and
      Indian lands


•
bonds
      for ownership, development and production of natural gas and oil
      properties


•
      transportation of natural gas and oil


•
storage
      and disposition of hazardous waste


•
      operation of wells and reports concerning operations


•
      taxation




***Page
          - 11***





Under
      the
      various complex laws and regulations, Brek could be liable for personal
      injuries, property damage, oil spills, discharge of hazardous materials,
      remediation and clean-up costs and other environmental damages. Failure to
      comply with these laws and regulations also may result in the suspension or
      termination of Brek’s operations and subject Brek to administrative, civil and
      criminal penalties. Moreover, these laws and regulations could change in ways
      that substantially increase Brek’s costs. Accordingly, any of these liabilities,
      penalties, suspensions, terminations or regulatory changes could negatively
      impact Brek’s business operations and financial condition.





**19.**  **The
      natural gas and oil industry involves numerous uncertainties and operating
      risks
      that could negatively impact Brek’s business operations and financial
      condition.**





Brek’s
      development, exploitation and exploration activities may be unsuccessful for
      many reasons, including weather, cost overruns, equipment shortages and
      mechanical difficulties. Moreover, the successful drilling of a natural gas
      well
      or an oil well does not ensure a profit on investment. A variety of factors,
      both geological and market-related, can cause a well to become uneconomical
      or
      only marginally economical. In addition to their cost, unsuccessful wells can
      impede Brek’s efforts to replace reserves.





The
      natural gas and oil business involves a variety of operating risks,
      including:


•
      fires


•
      explosions


•
blow-outs
      and surface cratering


•
      uncontrollable flows of oil, natural gas, and formation water


•
natural
      disasters, such as adverse weather conditions


•
pipe,
      cement, or pipeline failures


•
casing
      collapses


•
embedded
      oil field drilling and service tools


•
abnormally
      pressured formations


•
      environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures,
      and discharge of toxic gases





If
      Brek
      or its operators experience any of these problems, it could affect well bores,
      gathering systems and processing facilities, which could adversely affect Brek’s
      or the operator’s ability to conduct operations. Brek could also incur
      substantial losses as a result of:


•
injury
      or
      loss of life


•
severe
      damage to and destruction of property, natural resources, and
      equipment


•
pollution
      and other environmental damage


•
clean-up
      responsibilities


•
regulatory
      investigation and penalties


•
suspension
      of business operations


•
repairs
      to
      resume business operations





Brek
      does
      not carry business interruption insurance at levels that would provide enough
      funds for it to continue operating without access to other funds. For some
      risks, Brek may not obtain insurance if management believes the cost of
      available insurance is excessive relative to the risks presented. In addition,
      pollution and environmental risks generally are not fully insurable. If a
      significant accident or other event occurs and is not fully covered by
      insurance, it could negatively impact Brek’s business operations enough to force
      Brek to cease business operations.





**Risks
      associated with Brek and its subsidiaries:**





**20.**  **Brek’s
      stock price is volatile and may fluctuate, which will have a direct impact
      on
      your investment in Brek.**





The
      stock
      markets in general, and the stock prices of natural gas and oil companies in
      particular, have experienced extreme volatility that often has been unrelated
      to
      the operating performance of any specific public company. Brek’s stock price may
      be impacted by factors that are unrelated or disproportionate to its operating
      performance and the
      trading price of Brek’s shares of common stock may not be an accurate reflection
      of their value . The
      market price of Brek’s common stock may fluctuate significantly in response to a
      number of factors, some of which are beyond Brek’s control, such as interest
      rates, increased competition, general economic, political and market conditions, recessions,
      or changes in government regulations, including environmental
      regulations ,
      and
      some of which are within Brek’s control, such as actual
      or
      anticipated variations in Brek’s operating
      results, announcements of new projects and properties, new customers,
      acquisition of potential natural gas and oil entities and prospects, Brek’s
      ability or inability to generate new revenues ,
      and
      results of exploration and development. These
      market fluctuations may adversely affect the market price of Brek’s shares of
      common stock.




***Page
          - 12***





**21.**  **A
      small number of Brek’s stockholders own a substantial amount of Brek’s shares of
      common stock, and if such stockholders were to sell those shares in the public
      market within a short period of time, the price of Brek’s shares of common stock
      could drop significantly.**





Because
      a small
      number of Brek’s stockholders own a substantial amount of Brek’s shares of
      common stock, those shareholders will be able to significantly decide who will
      be directors and any other stockholders may not be able to elect any directors.
      Also, sales of a large number of shares of Brek’s shares of common stock or even
      the availability of a substantial number of shares of common stock for sale
      could have the effect of reducing the price per share of Brek’s common stock,
      especially if the shares of common stock continue to be thinly
      traded.




As
        of
        November 10, 2005, 59,498,090 shares of common stock were issued and
        outstanding, of which 15,100,008 shares were freely tradeable and 35,973,912 shares were, to the
        best
        of Brek’s knowledge, subject to Rule 144. The remaining 8,424,170 shares of
        common stock were restricted from trading. As of November 10, 2005, 18,784,460
        share purchase warrants exercisable into one share of common stock each were
        outstanding; and 1,580,000 stock options, exercisable into one share of common
        stock each, were outstanding. An additional 3,320,000 stock options could
        be
        granted under Brek’s 2001 Stock Option Plan. At November 10, 2005, if all the
        share purchase warrants and all the granted options were exercised, the number
        of issued and outstanding shares of common stock would increase by 20,364,460
        to
        79,862,550.





**22.**  **A
      change of control of Brek can be delayed, impeded or effected by the directors
      and management, who collectively own 24.5% of the outstanding shares or by
      the
      implementation of Brek’s rights agreement by the board of directors.**




Brek’s
        directors and management own an aggregate of 14,574,456 shares of common
        stock
        and as a result have the ability to influence the vote for a change of voting
        control of Brek or the vote to approve or reject any offer for the purchase
        and
        sale of Brek’s assets.





Also,
      upon the happening of certain events, the board of directors could vote to
      implement Brek’s rights agreement, which would delay, impede or effect a change
      in control of Brek or could impede a merger, consolidation, takeover or other
      business combination involving Brek or discourage a potential acquirer from
      making a tender offer or otherwise attempting to obtain control of
      Brek **.** See
“Dividends” on page 19 and Exhibit 4.2 - Rights Agreement for more
      details





**23.**  **Brek
      is unable to implement its rights agreement at this time and as a result may
      be
      unable to delay, impede, or effect a change of control of Brek.**




As
        of
        November 10, 2005, Brek
        has
        59,498,090 shares of common stock issued and outstanding and is authorized
        to
        issue up to 300 million shares of common stock. If the rights agreement were
        implemented today, Brek could be required to issue an additional 297,490,450
        shares of common stock on a non-diluted basis, assuming all rights under
        the
        rights agreement were exercised. As a result, Brek would not have enough
        shares
        in treasury to issue rights to all shareholders. This does not include any
        shares that may be issued upon exercise of warrants or stock options.
        Effectively, Brek’s board of directors will not be able to implement the rights
        agreement until the number of authorized shares of common stock is increased
        to
        satisfy share issuances for the exercise of all warrants and stock options
        and
        for the implementation of the rights agreement. As a result, Brek will not
        be
        able to discourage a potential acquirer from making a tender offer or otherwise
        attempting to obtain control of Brek by implementing the rights
        agreement **.** See
“Dividends” on page 20 and Exhibit 4.2 - Rights Agreement for more
        details





**24.**  **Brek
      may not be able to attract and retain qualified personnel necessary for the
      implementation of its plan of operations and exploration
      programs.**





Brek’s
      current management is inexperienced in operating a natural gas and oil business.
      Brek may need to hire or retain qualified management, employees or consultants
      with expertise in natural gas and oil exploration and development. Brek’s
      success depends on its ability to attract, retain and motivate qualified
      personnel. Key personnel represent a significant asset, and the competition
      for
      these personnel is intense in the natural gas and oil industry. Brek does not
      maintain key person life insurance on any of its personnel. The loss of one
      or
      more of its key employees or its inability to attract, retain and motivate
      qualified personnel could negatively impact Brek’s ability to implement its plan
      of operations and to complete its natural gas and oil programs.




***Page
          - 13***





**25.**  **Brek’s
      officers and directors have conflicts of interest in that they are officers
      and
      directors of other companies that will prevent them from devoting full-time
      to
      Brek’s business operations, which may negatively impact on Brek’s business
      operations.**





Brek’s
      officers and directors have conflicts of interest in that they are officers
      and
      directors of other companies. Management’s other activities will prevent them
      from devoting full-time to Brek’s business operations. This will impede Brek’s
      growth and business operations and may reduce its financial results because
      of
      the slow down in operations.





**26.**  **Brek
      has not and does not expect to pay dividends in the foreseeable
      future.**





Brek
      has
      never paid cash dividends on its shares of common stock and has no plans to
      do
      so in the foreseeable future. Brek intends to retain earnings, if any, to
      develop and expand its business operations.





**27.**  **“Penny
      Stock” rules may make buying or selling Brek’s shares of common stock difficult,
      and severely limit their market and liquidity.**





Trading
      in Brek’s shares of common stock is subject to certain regulations adopted by
      the SEC commonly known as the “penny stock” rules. Currently, Brek’s shares of
      common stock qualify as penny stocks and are covered by Section 15(g) of the
      Securities Exchange Act of 1934, which imposes additional sales practice
      requirements on broker/dealers who sell the shares of common stock in the
      aftermarket. The “penny stock” rules govern how broker-dealers can deal with
      their clients and “penny stocks”. For sales of Brek’s shares of common stock,
      the broker/dealer must make a special suitability determination and receive
      from
      you a written agreement prior to making a sale to you.





These
      additional burdens imposed upon broker-dealers by the “penny stock” rules may
      discourage broker-dealers from effecting transactions in Brek’s shares of common
      stock, which could severely limit their market price and liquidity of its shares
      of common stock. This could prevent you from reselling your shares and may
      cause
      the price of the shares to decline. See “Penny Stock rules” on page 25 for more
      details.





**Item
      2.**  **Description
      of Property.**





**Corporate
      Headquarters**





Brek
      operates out of the president’s own office located at Third Floor, 346
      Kensington High Street, London, United Kingdom, W14 8NS. Brek’s telephone number
      is 011-44-207-371-6668. The office space was provided to Brek by Richard N.
      Jeffs, the president of Brek, on a rent-free basis. There is no written
      agreement in existence for this rental arrangement. However, Brek does provide
      the president with a budget of $20,000 per month to cover his office and related
      costs.





**Property**





**A.**
            **Petroleum
                and Natural Gas Properties**





Riverbend
      Project, Utah





The
      Riverbend Project comprises approximately 129,514 gross acres in the Uinta
      Basin
      of northeastern Utah, of which Brek holds leasehold interests in approximately
      17,881 net acres as of December 31, 2004. Brek’s interest is concentrated on
      three tight-sand formations in the Uinta basin: the Wasatch, Mesaverde and
      Blackhawk formations.





During
      the year ended December 31, 2004, Brek participated in the drilling and
      completion of three wells in the Riverbend area, farmed out the drilling of
      two
      wells, and did not participate in the drilling of one proposed well. So far
      in
      2005, Brek has farmed out the drilling of three wells, and did not participate
      in the drilling of twenty proposed wells. Brek has received notice from the
      operator that it proposes to drill two wells in Utah and must decide whether
      to
      participate in them by December 8, 2005. See Management’s Discussion and
      Analysis on page 25.





On
      April
      8, 2004, Brek exercised its rights under the July 16, 2002 purchase agreement
      with Gasco Energy, Inc. to acquire 3,266 net acres located in the Uinta Basin
      in
      Utah for approximately $800,000. This purchase included six wells producing
      nominal amounts of natural gas that the former owner had drilled to earn the
      acreage. See Exhibit 10.3 - Purchase Agreement for more details.




***Page
          - 14***





In
      July
      2004, Gasco Energy, Inc. expanded its gas gathering system in the Riverbend
      area
      to carry the gas produced in this area to a major pipeline. Gasco gathers the
      majority of Brek’s natural gas produced in the Riverbend area, markets it and
      sells it.





During
      January 2005, Brek exercised its rights under the July 16, 2002 purchase
      agreement with Gasco Energy, Inc. to acquire approximately 4,000 net acres
      in
      the Riverbend Area for a purchase price of approximately $833,000. See Exhibit
      10.3 - Purchase Agreement for more details.





Greater
      Green River Basin Project, Wyoming





As
      of
      December 31, 2004, Brek had a leasehold interest in approximately 125,572 gross
      acres and 21,307 net acres in this area. Brek holds a non-operated interest
      in
      one shut in well in this area and a non-operated interest in one producing
      well
      in this area. Brek may consider other proposals for this area such as the
      farm-out or unitization of some of its acreage if necessary to extend
      leases.





Crocker
      Canyon Prospect, California





Brek
      has
      a leasehold interest in approximately 3,868 gross acres and 880 net acres in
      Kern and San Luis Obispo Counties of Southern California. Brek has farmed out
      the drilling of one well to preserve acreage but has no other drilling or
      development plans for this acreage during 2005. Brek plans to continue paying
      leasehold rentals and other minimum geological expenses to preserve acreage
      on
      these prospects.





The
      farmout agreement, effective May 1, 2005, is between Brek and Gasco as Farmor,
      and Venoco, Inc. as Farmee. Venoco, can earn an undivided working interest
      in
      the farmout lands by drilling a test well on the property. Venoco was required
      to spud the test well by November 1, 2005, but has elected to extend the spud
      date by six months as permitted by the farmout agreement.





Rocksprings
      Prospect, Edwards County, Texas





In
      March
      2002, Brek acquired 2,512,500 shares of common stock of Vallenar Energy Corp.
      which, together with the 733,333 shares of common stock issuable upon conversion
      of preferred stock of Vallenar Energy Corp. held by Brek, represents
      approximately 25% of Vallenar Energy Corp.’s equity. On June 28, 2002, Brek
      acquired an additional 2 million shares of common stock of Vallenar Energy
      Corp.
      from third parties for $10,000 and subscribed for an additional 800,000 shares
      of common stock of Vallenar Energy Corp. at $0.50 per share ($400,000). At
      December 31, 2002, Brek held a 51.53% equity interest in Vallenar Energy Corp.
      For as long as at least one-half of the preferred stock is outstanding, it
      is
      entitled as a class to at least 29.69% of the total voting power of Vallenar
      Energy Corp. Brek is entitled to designate one director who must sit on the
      executive committee of the board or additional voting rights accrue to the
      preferred stock. All decisions of this executive committee must be unanimous.
      Brek has been playing an active role in the management of Vallenar Energy Corp.
      since 2002.





Vallenar
      Energy Corp. holds leases covering approximately 51,194 gross and 8,865 net
      acres in the Rocksprings Prospect, which is located in central Edwards County,
      Texas, and is a part of the Geronimo Creek Prospect. The Geronimo Creek Prospect
      is a shallow, heavy oil play within the Cretaceous aged Glen Rose limestone
      and
      Travis Peak sandstone. It is a north-south oriented, faulted anticline having
      approximately 75 feet of closure covering approximately 29,500 acres. During
      2002, Vallenar drilled one well, the results were inconclusive, and no further
      work has been performed.





**B.**
            **Reserve
                Estimates**





The
      following table summarizes Brek’s estimated reserve data as of December 31,
      2004, as estimated by Netherland, Sewell & Associates, Inc., independent
      petroleum engineers. The present value of future net cash flows is based on
      prices at December 31, 2004, of $5.11 per Mcf of natural gas and $42.25 per
      bbl
      of oil. All of Brek’s proved reserves are located within the state of Utah.





Net
                Reserves
            Future
                Net Reserves (US$)Category
            Oil
              (Barrels)
            Gas
              (MCF)
            Total
            Present
                Worth at 10%Proved
                Developed
              Producing
            7,330
            613,588
            2,197,200
            1,323,400Non-Producing
            2,677
            370,854
            1,462,700
            737,200Proved
                Undeveloped
            41,488
            5,868,868
            14,818,800
            3,651,900Total
                Proved
            51,495
            6,853,310
            18,478,700
            5,712,500




***Page
          - 15***





Actual
      future prices and costs may be materially higher or lower than the prices and
      costs as of the date of any estimate. No estimates of proved reserves comparable
      to those included herein have been included in reports to any federal agency
      other than the Securities and Exchange Commission.





**C.**
            **Volumes,
                Prices and Operating
                Expenses**





The
      following table presents information regarding the production volumes, average
      sales prices received and average production costs associated with Brek’s sales
      of natural gas for the periods indicated.





For
                the Years Ended December 312004
            
            
            2003
            
            
            2002Natural
                gas production (Mcf)
            
            58,908
            
            
            5,628
            
            
            n/aAverage
                sales price per Mcf
            $
            5.54
            
            $
            3.95
            
            
            n/aOil
                production (Bbl)
            
            834
            
            
            25.14
            
            
            n/aAverage
                sales price per Bbl
            $
            43.66
            
            $
            32.78
            
            
            n/aExpenses
                per Mcfe:Lease
                Operating
            
            nil
            
            
            nil
            
            
            n/aGeneral
                and administrative
            $
            5.97
            
            $
            51.01
            
            
            n/aDepletion
                and impairment
            
            nil
            
            
            nil
            
            
            n/a






**D.**
            **Development,
                Exploration and Acquisition Capital
                Expenditures**





During
      the year ended December 31, 2004, Brek spent $2,461,077 **** in
      development and exploration activities, which included the acquisition of
      acreage in the Riverbend Area for approximately $800,000. During the year ended
      December 31, 2003, Brek spent $306,485 in development and exploration
      activities, including property acquisition costs. During the year ended December
      31, 2002, Brek spent $2,032,860 in development and exploration activities,
      including property acquisition costs, net of impairment charges of $16,634,187.
      As of December 31, 2004, Brek held a 25% working interest in 258,954 gross
      acres
      and 40,068 net acres located in Utah, Wyoming and California. Brek also owns
      a
      51.53% interest in 51,194 gross acres and 8,865 net acres located in Edwards
      County, Texas. As of December 31, 2004, Brek held an interest in 10 gross (1.61
      net to Brek’s interest) producing gas wells and 1 gross (0.14 net) shut-in gas
      well located on these properties.





The
      following table presents information regarding Brek’s net costs incurred in the
      purchase of proved and unproved properties and in exploration and development
      activities:





For
                the Years Ended December 312004
            
            2003
            
            2002Property
                Acquisition Costs:Unproved
            $
            2,832,860
            
            $
            2,032,860
            
            $
            18,137,141Proved
            
            nil
            
            
            nil
            
            
            nilExploration
                and Development Costs:
            $
            1,967,562
            
            $
            306,485
            
            $
            529,906Impairment
                Charges:
            
            nil
            
            
            nil
            
            
            ($16,634,187
            )Total
            $
            4,800,422
            
            $
            2,339,345
            
            $
            2,032,860





**E.**
            **Productive
                Wells and Acreage**





The
      following summarizes Brek’s productive and shut-in gas wells as of December 31,
      2004. Productive wells are producing wells and wells capable of production.
      Shut-in wells are wells that are capable of production but are currently not
      producing. Gross wells are the total number of wells in which Brek has an
      interest. Net wells are the sum of Brek’s fractional interests owned in the
      gross wells.





**Productive
                Gas Wells****Gross**
            **Net**Producing
                gas wells
            10.0
            1.61Shut-in
                gas wells
            1.0
            0.14






***Page
          - 16***





On
      April
      8, 2004, Brek exercised its rights, as per the July 16, 2002 purchase agreement
      with Gasco Energy, Inc., to acquire working interests in six producing wells,
      3,266 net acres and gathering system assets located in the Uinta Basin in Utah
      for approximately $800,000. See Exhibit 10.3 - Purchase Agreement for more
      details.





**F.**
            **Undeveloped
                Acreage**





The
      following table sets forth the undeveloped and developed leasehold acreage,
      by
      area, held by Brek as of December 31, 2004. Undeveloped acres are acres on
      which
      wells have not been drilled or completed to a point that would permit the
      production of commercial quantities of oil and gas, regardless of whether or
      not
      such acreage contains proved reserves. Developed acres are acres, which are
      spaced or assignable to productive wells. Gross acres are the total number
      of
      acres in which Brek has a working interest. Net acres are the sum of Brek’s
      fractional interests owned in the gross acres. The table does not include
      acreage that Brek has a contractual right to acquire or to earn through drilling
      projects, or any other acreage for which Brek has not yet received leasehold
      assignments. In certain leases, Brek’s ownership is not the same for all depths;
      therefore, the net acres in these leases are calculated using the greatest
      ownership interest at any depth. Generally this greater interest represents
      Brek’s ownership in the primary objective formation.





Undeveloped
                Acres
            
            Developed
                AcresGross
            
            Net
            
            Gross
            
            NetUtah
            129,514
            
            17,881
            
            360
            
            51Wyoming
            125,572
            
            21,307
            
            80
            
            9California
            3,868
            
            880
            
            -
            
            -Texas
            51,194
            
            8,865
            
            -
            
            -Total
                Acres
            310,148
            
            48,933
            
            440
            
            60





**G.**
            **Drilling
                Activity**





The
      following table sets forth Brek’s drilling activity during the years ended
      December 31, 2004, 2003 and 2002. In the table, “gross” refers to the total
      wells in which Brek has a working interest, and “net” refers to gross wells
      multiplied by Brek’s working interest. A productive well is an exploratory or a
      development well that is not a dry well.








2004
            
            2003
            
            2002Gross
            
            Net
            
            Gross
            
            Net
            
            Gross
            
            NetExploratory
                WellsProductive
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            3.0
            
            0.3Dry
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            0.0Inconclusive
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            1.0
            
            1.0Total
                Wells
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            4.0
            
            1.3Development
                WellsProductive
            3.0
            
            0.4
            
            0.0
            
            0.0
            
            0.0
            
            0.0Dry
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            0.0
            
            0.0Total
                Wells
            3.0
            
            0.4
            
            0.0
            
            0.0
            
            0.0
            
            0.0





**H.**
            **Present
                Activity**





Brek
      will
      continue to review drilling proposals that it receives from the operators,
      and
      will participate, if its financial resources permit.





**I.**
            **Delivery
                Commitments**





Brek
      Energy is not obligated to provide a fixed and determinable quantity of oil
      or
      gas in the near future under existing contracts or agreements








***Page
          - 17***





**Item
      3.**  **Legal
      Proceedings.**





Brek
      is
      not a party to any pending legal proceedings and, to the best of Brek’s
      knowledge, none of Brek’s property or
      assets are the subject of any pending legal proceedings ,
      except
      for the following:





Temporary
      Order - British Columbia Securities Commission





On
      November 14, 2002, Brek became aware that itself, Vallenar Energy Corp., Richard
      Jeffs, and Vallenar Energy Corp’s president and CEO, Jeff Paquin, had been named
      in a Temporary Order and Notice of Hearing regarding certain alleged violations
      of the British Columbia Securities Act (the “BCSA”). This Temporary Order and
      Notice of Hearing (the “Temporary Order”) alleged that Messrs. Jeffs and Paquin,
      together with others, engaged in acts in furtherance of trades of shares of
      Brek
      (and other issuers) and advised persons to purchase shares of Brek (and other
      issuers) without being registered under the British Columbia Securities Act.
      The
      Temporary Order required Messrs. Jeffs and Paquin to resign from their positions
      as officers of Brek and Vallenar Energy Corp., and prohibited them and Brek
      and
      Vallenar Energy Corp. from trading in any securities and from engaging in
      investor relations activities in British Columbia. Management believed that
      neither it nor Vallenar Energy Corp. violated the BCSA or engaged in any
      activity that would require them to be registered under the BCSA.





As
      a
      result of the Temporary Order, Richard N. Jeffs resigned as both the CEO and
      president of Brek on November 20, 2002. On December 5, 2002, the British
      Columbia Securities Commission released a decision not to extend the Temporary
      Order against Brek, Mr. Jeffs, Vallenar Energy Corp. and Mr. Paquin, among
      others, as a result of there being insufficient evidence of any
      wrongdoing.





On
      April
      1, 2003, the British Columbia Securities Commission withdrew the notice of
      hearing and has not, to the best of management’s knowledge, issued any further
      notices or orders against Brek or its officers or directors. As of December
      31,
      2004, Brek and Vallenar Energy Corp., to the best of management’s knowledge,
      were no longer under investigation by the British Columbia Securities
      Commission.





Bermuda
      lawsuit - Transworld Payment Solutions N.V. et al. vs. Brek Energy Corporation
      et al.





On
      February 25, 2003, Transworld Payment Solutions N.V. and First Curacao
      International Bank N.V., the debtor and the guarantor respectively of a note
      receivable, commenced legal action against Brek and others in the Supreme Court
      of Bermuda claiming that Brek and its former subsidiary, First Ecom Systems
      Limited, had promised to develop and supply them with certain software pursuant
      to three license agreements dated October 19, 2001. The plaintiffs were seeking
      rescission of all agreements between the parties or, alternatively, damages
      for
      misrepresentation and breach of agreements. The plaintiffs commenced the lawsuit
      approximately one week before they had to make their first instalment payment
      pursuant to a share purchase agreement dated October 19, 2001. At that time,
      the
      plaintiffs were obligated to make an instalment payment in the amount of
      $1,901,107. The plaintiffs have not made any instalment payments as required
      pursuant to the terms and conditions of the share purchase agreement. See
      Exhibit 10.4 - Share Purchase Agreement and Exhibit 10.5 - License Agreements
      for more details.





Brek
      and
      the other defendants filed a defence and counterclaim on May 8, 2003 with the
      Supreme Court of Bermuda. In their counterclaim, the defendants were seeking
      specific performance of the share purchase agreement or, alternatively, damages
      for breach of contract. Although the directors believed that the plaintiffs’
claims were without merit as there was no condition to develop software for
      the
      plaintiffs, due to lack of financial resources Brek did not pursue its
      counterclaim. No party has taken any further action since Brek filed its defence
      and counterclaim.





Texas
      lawsuit - Burlington Resources Oil & Gas Company, LP vs. Brek Petroleum
      Inc.





On
      June
      9, 2003, Burlington Resources Oil & Gas Company, LP (“Burlington”) filed a
      Petition in the District Court in Midland County, Texas of the 142 nd Judicial
      District claiming that Brek Petroleum Inc. failed to pay for costs incurred
      by
      Burlington in drilling oil and gas wells located in Midland County, Texas.
      Burlington claimed damages in the amount of $658,831. On July 16, 2003, Brek
      Petroleum Inc. filed its Original Answer to the Petition.





On
      March
      1, 2004, the parties reached a settlement and entered into a Settlement
      Agreement and Release whereby Brek Petroleum Inc. agreed to pay Burlington
      a
      total of $691,874 in 12 equal monthly payments. The total of the settlement
      comprised the original amount claimed for damages, Burlington’s legal fees of
      $3,278, and court-imposed interest. As of December 31, 2004, Brek Petroleum
      Inc.
      had delivered eight of the monthly payments to Burlington. On July 14, 2005,
      Brek Petroleum Inc. delivered the twelfth and final monthly payment to
      Burlington.




***Page
          - 18***




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





No
      matter
      was submitted to a vote of security holders, through the solicitation of proxies
      or otherwise, during the fourth quarter of the fiscal year covered by this
      report.





**PART
      II**





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





**(a)**  **Market
      Information**





Brek’s
      common stock traded on the Nasdaq National Market System under the symbol “FECC”
from June 6, 2000 until February 19, 2002 when the symbol was changed to “BREK”.
      Prior to that, BREK traded on the NASD OTC Bulletin Board under the symbol
      “FECC” since March 8, 1999. On December 3, 2002, Brek was removed from the
      Nasdaq National Market System for failing to maintain minimum listing
      requirements.





Brek’s
      common stock has also traded on the Berlin over-the-counter stock exchange
      since
      January 27, 2000 and has been listed on the Bermuda Stock Exchange since
      December 23, 1999.





Subsequent
      to December 3, 2002, Brek’s shares of common stock were quoted on the NASD OTC
      Bulletin Board under the symbol “BREK”. On May 23, 2003, Brek’s shares of common
      stock ceased to be quoted on the NASD OTC Bulletin Board and Brek’s shares of
      common stock were quoted on the gray market under the same symbol,
“BREK”.





The
      table
      below gives the high and low bid information for each fiscal quarter for the
      last two fiscal years and for the interim period ended November 9, 2005. The
      bid
      information was obtained from Pink Sheets LLC and reflects inter-dealer prices,
      without retail mark-up, mark-down or commission, and may not represent actual
      transactions.




High
                & Low BidsPeriod
                ended
            High
            Low
            Source9
                November 2005
            $0.70
            $0.64
            Pink
                Sheets LLC30
                September 2005
            $0.68
            $0.34
            Pink
                Sheets LLC30
                June 2005
            $0.44
            $0.29
            Pink
                Sheets LLC31
                March 2005
            $0.47
            $0.33
            Pink
                Sheets LLC31
                December 2004
            $0.42
            $0.30
            Pink
                Sheets LLC30
                September 2004
            $0.30
            $0.21
            Pink
                Sheets LLC30
                June 2004
            $0.32
            $0.18
            Pink
                Sheets LLC31
                March 2004
            $0.25
            $0.05
            Pink
                Sheets LLC31
                December 2003
            $0.07
            $0.03
            Pink
                Sheets LLC30
                September 2003
            $0.05
            $0.03
            Pink
                Sheets LLC30
                June 2003
            $0.23
            $0.10
            Pink
                Sheets LLC31
                March 2003
            $0.24
            $0.17
            Pink
                Sheets LLC





**(b)**  **Holders
      of Record**





Currently,
      there are approximately 245 holders of record of Brek’s shares of common stock.
      As of December 31, 2004, there were approximately 219 holders of records of
      Brek’s shares of common stock.





**(c)**  **Dividends**





Brek
      has
      never declared or paid dividends on its shares of common stock. Brek intends
      to
      follow a policy of retaining earnings, if any, to finance the growth of the
      business and does not anticipate paying any cash dividends in the foreseeable
      future. The declaration and payment of future dividends on the shares of common
      stock will be the sole discretion of the board of directors and will depend
      on
      Brek’s profitability and financial condition, capital requirements, statutory
      and contractual restrictions, future prospects and other factors deemed relevant
      by the board of directors.





On
      December 5, 2001, the Board of Directors of Brek adopted a shareholder rights
      plan (the “Rights Plan”). The purpose of the Rights Plan is to deter, and
      protect Brek’s shareholders from, certain coercive and otherwise unfair takeover
      tactics and enable the Board of Directors to represent effectively the interests
      of shareholders in the event of a takeover attempt. The Rights Plan does not
      deter negotiated mergers or business combinations that the Board of Directors
      determines to be in the best interests of Brek and its shareholders. In
      connection with the adoption of the Rights Plan, Brek entered into a rights
      agreement with U.S. Bank, N.A. dated as of March 1, 2002.




***Page
          - 19***





On
      March
      20, 2002, the Board of Directors declared a dividend of one common share
      purchase right (a “Right”) for each outstanding share of common stock, par value
      $0.001 per share, of Brek. The dividend was payable on March 20, 2002 to the
      stockholders of record on that date. Upon the happening of certain events,
      the
      board of directors could vote to implement Brek’s rights agreement, which would
      delay, impede or effect a change in control of Brek or could impede a merger,
      consolidation, takeover or other business combination involving Brek or
      discourage a potential acquirer from making a tender offer or otherwise
      attempting to obtain control of Brek **.** Once the
      Rights become exercisable, each Right entitles the registered holder to purchase
      from Brek five shares of common stock at a price of $0.01 per share, subject
      to
      adjustment. The description and terms of the Rights are set forth in the rights
      agreement. See Exhibit 4.2 - Rights Agreement for more details.





**(d)**  **Recent
      Sales of Unregistered Securities**





There
      have been no sales of unregistered securities within the last three years that
      would be required to be disclosed pursuant to Item 701 of Regulation S-B, except
      for the following:





March
      2002 - $0.50 Offering





On
      or
      about April 9, 2002, Brek issued 2,845,000 shares of common stock at $0.50
      per
      share producing aggregate proceeds of $1,397,500, which was net of related
      share
      issue cost of $25,000, received by Brek. The sales were to 14 investors, of
      which 12 were non-US persons outside the United States and two were accredited
      investors in the United States. Of these investors, one was a director and
      executive officer of Brek, one was a director of Brek, and one was an executive
      officer of Brek. The issuances and sales were exempt under Section 4(2) under
      the Securities Act of 1933, and Regulations S and D thereunder. All expenditures
      of proceeds were for normal overhead and other general corporate
      purposes.





July
      31, 2002 - Purchase Agreement with Gasco Energy, Inc.





On
      July
      31, 2002, Brek issued an aggregate 4,125,000 common shares in exchange for
      an
      undivided interest in oil and gas properties at a deemed value of $2,862,750.
      Brek issued 1,237,500 shares of common stock to Richard N. Jeffs, 1,237,500
      shares of common stock to Wet Coast Management Corp., a company controlled
      by
      Mr. Jeffs, 825,000 shares of common stock to Nicolas Mathys, and 825,000 shares
      of common stock to Ralph Fuoss in exchange for an undivided interest in Gasco
      Energy, Inc’s undeveloped mineral leases. Brek relied upon Section 4(2) of the
      Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant to
      that
      Act by the Securities and Exchange Commission. Management is satisfied that
      the
      requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with. The
      offering was not a public offering and was not accompanied by any general
      advertisement or any general solicitation. No offer was made or accepted in
      the
      United States and the share certificates representing the shares were legended
      with the applicable trading restrictions. See Exhibit 10.3 - Purchase Agreement
      for more details.





August
      23, 2002 - Penalty Payment





On
      August
      23, 2002, Brek issued 80,000 common shares, at a deemed value of $56,800, to
      certain subscribers of the March 28, 2002 private placement as a 10% penalty
      for
      failing to make its S-3 Registration Statement effective within 120 days, as
      required under the terms of their private placement agreements. Brek issued
      68,000 shares of common stock to Warwick Ventures Ltd. and 12,000 shares of
      common stock to Ultratech Capital Management.





September
      10, 2002 - Severance





On
      September 10, 2002, Brek issued 100,000 common shares at a price of $0.70 to
      Gregory Pek, Brek’s former Chief Executive Officer, as part of his severance
      package. See Item 10 - “Executive Compensation” below for more
      information.





September
      24, 2002 - Settlement of accrued bonuses





On
      September 24, 2002, Brek issued 50,000 shares of common stock at $0.68 per
      share
      to each of two directors and an officer of Brek in settlement of $102,000 in
      accrued bonuses payable. Brek issued 50,000 shares of common stock to Ian
      Robinson, 50,000 shares of common stock to Ravi Daswani, and 50,000 shares
      of
      common stock to Kenneth Telford. See Item 10 - “Executive Compensation” below
      for more information.





***Page
          - 20***








October
      3, 2002 - Exercise of stock options





On
      September 19, 2002, 50,000 employee stock options, issued under the 2001 stock
      option warrant plan, were exercised at $0.40 per share for cash proceeds of
      $20,000. Upon receipt of the exercise price in full, Brek issued 50,000 shares
      of common stock to Steve Corbin on October 3, 2002.





2002
      -
      Stock Options Granted





Under
      the
      2001 Stock Option/Warrant Plan, Brek granted the following share purchase
      options to employees, directors and consultants of Brek during the fiscal year
      ended December 31, 2002:


Date
                of Grant
            Number
                of Options
            Exercise
                PriceJuly
                15, 2002
            420,000
            $0.55





On
      July
      15, 2002, Brek granted options to employees and directors to purchase up to
      370,000 shares of Brek’s common stock at a price of $0.55 per share. The options
      vested immediately and expire on July 15, 2007.





On
      July
      15, 2002, Brek also granted options to officers to purchase up to 50,000 shares
      of Brek’s common stock at a price of $0.55 per share. The options vested at 25%
      every 6 months and expire 3 months after termination of employment. These
      options expired during the first quarter of 2003.





April
      14, 2003 - $0.18 Offering





O n
      March
      20, 2003, the board of directors authorized the issuance of up to 277,776 shares
      of common stock at an offering price of $0.18 per share. The offering price
      was
      arbitrarily set by Brek and had no relationship to its assets, book value,
      revenues or other established criteria of value. All the restricted shares
      issued in this offering were issued for investment purposes in a “private
      transaction”.





On
      April
      14, 2003, Brek raised $49,999 in cash from this offering and issued an aggregate
      277,776 restricted shares to four non-US investors outside the United States,
      one of which was an executive officer of Brek.








Brek
      relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of
      Regulation S promulgated pursuant to that Act by the Securities and Exchange
      Commission. Management is satisfied that the requirements of the exemption
      from
      the registration and prospectus delivery requirements of the Securities Act
      of
      1933 have been fully complied with. The offering was not a public offering
      and
      was not accompanied by any general advertisement or any general solicitation.
      Brek received from each subscriber a completed and signed subscription agreement
      containing certain representations and warranties, including, among others,
      that
      (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for
      the
      shares for their own investment account and not on behalf of a U.S. person,
      and
      (c) there was no prearrangement for the sale of the shares with any buyer.
      No
      offer was made or accepted in the United States and the share certificates
      representing the shares have been legended with the applicable trading
      restrictions.





April
      14, 2003 - $0.18 Shares for Debt Offering





O n
      March
      20, 2003, the board of directors approved a debt offering at a settlement price
      of $0.18 per share. The settlement price was arbitrarily set by Brek and had
      no
      relationship to its assets, book value, revenues or other established criteria
      of value. All the restricted shares of common stock issued in this debt
      settlement were issued for investment purposes in a “private
      transaction”.





On
      April
      14, 2003, Brek settled $337,647 of debt by issuing an aggregate 1,875,817 shares
      of common stock at a settlement price of $0.18 per share of common stock to
      15
      non-US creditors outside the United States, five of which were directors and/or
      executive officers of Brek.




For
      this
      shares for debt offering, Brek relied upon Section 4(2) of the Securities Act
      of
      1933 and Rule 903 of Regulation S promulgated pursuant to that Act by the
      Securities and Exchange Commission. Management is satisfied that the
      requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with. The
      offering was not a public offering and was not accompanied by any general
      advertisement or any general solicitation. Brek received from each creditor
      a
      completed and signed subscription agreement containing certain representations
      and warranties, including, among others, that (a) the creditor was not a U.S.
      person, (b) the creditor subscribed for the shares for their own investment
      account and not on behalf of a U.S. person, and (c) there was no prearrangement
      for the sale of the shares with any buyer. No offer was made or accepted in
      the
      United States and the share certificates representing the shares have been
      legended with the applicable trading restrictions.





***Page
          - 21***





January
      15, 2004 -
      $0.05 Offering





On
      January 15, 2004, the board of directors authorized the issuance of up to
      11,000,000 units at an offering price of $0.05 per unit. Each unit consisted
      of
      one restricted share of common stock and one restricted warrant. Each restricted
      warrant is convertible into one restricted share of common stock. The restricted
      warrant is exercisable for 12 months at an exercise price of $0.35 per warrant.
      The value of the units was arbitrarily set by Brek and had no relationship
      to
      its assets, book value, revenues or other established criteria of value. All
      the
      restricted units issued in this offering were issued for investment purposes
      in
      a “private transaction”.




In
      March
      2004, Brek raised $437,500 in cash from this offering and issued an aggregate
      8,750,000 restricted units to the six non-US subscribers outside the United
      States and an additional 875,000 restricted units as a finder’s fee to one
      non-US finder outside the United States, who was an executive officer of Brek.





Also,
      in
      March 2004 and in May 2004 and as part of this same offering, Brek issued an
      aggregate 1,375,000 restricted units as settlement of $68,750 of debt owed
      to
      five creditors of Brek, who had previously provided services to Brek. Of the
      five creditors, two were non-US persons outside the United States and three
      were
      accredited investors in the United States. Of these creditors, one was an
      executive officer and one was a director of Brek.





Brek
      relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of
      Regulation S promulgated pursuant to that Act by the Securities and Exchange
      Commission for the private placement in March 2004 and two of the debt
      settlements. Management is satisfied that the requirements of the exemption
      from
      the registration and prospectus delivery requirements of the Securities Act
      of
      1933 have been fully complied with. The offering was not a public offering
      and
      was not accompanied by any general advertisement or any general solicitation.
      Brek received from each subscriber a completed and signed subscription agreement
      containing certain representations and warranties, including, among others,
      that
      (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for
      the
      shares for their own investment account and not on behalf of a U.S. person,
      and
      (c) there was no prearrangement for the sale of the shares with any buyer.
      No
      offer was made or accepted in the United States and the share certificates
      representing the shares have been legended with the applicable trading
      restrictions.





Finally,
      Brek relied upon Section 4(2) of the Securities Act of 1933 and Rule 506
      Regulation D promulgated pursuant to that Act by the Securities and Exchange
      Commission for the other three debt settlements. Management is satisfied that
      the requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with.
      Specifically, the offer was made to only accredited investors, as that term
      is
      defined under applicable federal and state securities laws. The share
      certificates representing the shares have been legended with the applicable
      trading restrictions.





January
      29, 2004 - $0.20 Offering





On
      January 29, 2004, the board of directors authorized the issuance of up to
      7,500,000 units at an offering price of $0.20 per unit. Each unit consisted
      of
      one restricted share of common stock and one restricted warrant. Each restricted
      warrant is convertible into one restricted share of common stock. The restricted
      warrant is exercisable for three years at an exercise price of $0.30 per
      warrant. The value of the units was arbitrarily set by Brek and had no
      relationship to its assets, book value, revenues or other established criteria
      of value. All the restricted units issued in this offering were issued for
      investment purposes in a “private transaction”.





On
      May
      24, 2004, Brek raised $700,000 in cash from this offering and issued an
      aggregate 3,500,000 restricted units to 10 accredited subscribers in the United
      States and an additional 350,000 restricted units as a finder’s fee to one
      non-US finder outside the United States, who was an executive officer of Brek.





On
      May
      28, 2004, Brek raised an additional $50,000 in cash from this offering and
      issued an additional 250,000 restricted units to one non-US subscriber outside
      the United States and an additional 25,000 restricted units as a finder’s fee to
      one non-US finder outside the United States, who was an executive officer of
      Brek.





On
      November 30, 2004, Brek raised an additional $110,000 in cash from this offering
      and issued an additional 550,000 restricted units to two non-US subscribers
      outside the United States and one accredited subscriber in the United States,
      and an additional 55,000 restricted units as a finder’s fee to one non-US finder
      outside the United States, who was an executive officer of Brek.




***Page
          - 22***





For
      the
      accredited subscribers in the United States, management is satisfied that the
      requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with, which
      exemption is specified by the provisions of Section 4(2) of that Act and Rule
      506 Regulation D promulgated pursuant to that Act by the Securities and Exchange
      Commission. Specifically, the offer was made to only accredited investors,
      as
      that term is defined under applicable federal and state securities laws. The
      share certificates representing the shares have been legended with the
      applicable trading restrictions.





For
      the
      non-US subscribers outside the United States, Brek relied upon Section 4(2)
      of
      the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant
      to
      that Act by the Securities and Exchange Commission. Management is satisfied
      that
      the requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with. The
      offering was not a public offering and was not accompanied by any general
      advertisement or any general solicitation. Brek received from each subscriber
      a
      completed and signed subscription agreement containing certain representations
      and warranties, including, among others, that (a) the subscriber was not a
      U.S.
      person, (b) the subscriber subscribed for the shares for their own investment
      account and not on behalf of a U.S. person, and (c) there was no prearrangement
      for the sale of the shares with any buyer. No offer was made or accepted in
      the
      United States and the share certificates representing the shares have been
      legended with the applicable trading restrictions.





May
      3,
      2004 - $0.15 Offering





On
      May 3,
      2004, the board of directors authorized the issuance of up to 5,000,000 units
      at
      an offering price of $0.15 per unit. Each unit consisted of one restricted
      share
      of common stock and one restricted warrant. Each restricted warrant is
      convertible into one restricted share of common stock. The restricted warrant
      is
      exercisable for three years at an exercise price of $0.25 per warrant. The
      value
      of the units was arbitrarily set by Brek and had no relationship to its assets,
      book value, revenues or other established criteria of value. All the restricted
      units issued in this offering were issued for investment purposes in a “private
      transaction”.





On
      May 6,
      2004, Brek raised $700,000 in cash from this offering and issued an aggregate
      4,666,667 restricted units to two non-US subscribers outside the United States,
      one of which was an executive officer of Brek, and an additional 66,667
      restricted units as a finder’s fee to one non-US finder outside the United
      States, who was an executive officer of Brek.





Brek
      relied upon Section 4(2) of the Securities Act of 1933 and Rule 903 of
      Regulation S promulgated pursuant to that Act by the Securities and Exchange
      Commission. Management is satisfied that the requirements of the exemption
      from
      the registration and prospectus delivery requirements of the Securities Act
      of
      1933 have been fully complied with. The offering was not a public offering
      and
      was not accompanied by any general advertisement or any general solicitation.
      Brek received from each subscriber a completed and signed subscription agreement
      containing certain representations and warranties, including, among others,
      that
      (a) the subscriber was not a U.S. person, (b) the subscriber subscribed for
      the
      shares for their own investment account and not on behalf of a U.S. person,
      and
      (c) there was no prearrangement for the sale of the shares with any buyer.
      No
      offer was made or accepted in the United States and the share certificates
      representing the shares have been legended with the applicable trading
      restrictions.





October
      1, 2004 - $0.20 Offering





On
      October 14, 2004, Brek raised $279,392 in cash from this offering and issued
      1,396,956 restricted units to First Griffin Group LLC at an offering price
      of
      $0.20 per unit. Each unit consisted of one restricted share of common stock
      and
      one restricted warrant. Each restricted warrant is convertible into one
      restricted share of common stock. The restricted warrant is exercisable for
      two
      years at an exercise price of $0.35 per warrant. The value of the units for
      the
      offering was arbitrarily set by Brek and had no relationship to its assets,
      book
      value, revenues or other established criteria of value. All the restricted
      units
      issued in this offering were issued for investment purposes in a “private
      transaction”. For this offering, Brek relied upon Section 4(2) of the Securities
      Act of 1933. Management is satisfied that the requirements of the exemption
      from
      the registration and prospectus delivery requirements of the Securities Act
      of
      1933 have been fully complied with. The offering was not a public offering
      and
      was not accompanied by any general advertisement or any general solicitation.
      The share certificates representing the shares have been legended with the
      applicable trading restrictions.





October
      27, 2004 - $0.20 Offering





On
      October 27, 2004, the board of directors authorized the issuance of up to
      6,000,000 units at an offering price of $0.20 per unit. Each unit consisted
      of
      one restricted share of common stock and one restricted warrant. Each restricted
      warrant is convertible into one restricted share of common stock. The restricted
      warrant is exercisable for two years at an exercise price of $0.35 per warrant.
      The value of the units was arbitrarily set by Brek and had no relationship
      to
      its assets, book value, revenues or other established criteria of value. All
      the
      restricted units issued in this offering were issued for investment purposes
      in
      a “private transaction”.




***Page
          - 23***





On
      November 30, 2004, Brek raised $765,000 in cash from this offering and issued
      an
      aggregate 3,825,000 restricted units to three accredited subscribers in the
      United States, one of which was a director of Brek, and an additional 382,500
      restricted units as a finder’s fee to one non-US finder outside the United
      States, who was an executive officer of Brek.





On
      December 21, 2004, Brek raised an additional $100,000 in cash from this offering
      and issued an additional 500,000 restricted units to one accredited subscriber
      in the United States and an additional 50,000 restricted units as a finder’s fee
      to one non-US finder outside the United States, who was an executive officer
      of
      Brek..





For
      the
      accredited subscribers in the United States, management is satisfied that the
      requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with, which
      exemption is specified by the provisions of Section 4(2) of that Act and Rule
      506 Regulation D promulgated pursuant to that Act by the Securities and Exchange
      Commission. Specifically, the offer was made to only accredited investors,
      as
      that term is defined under applicable federal and state securities laws. The
      share certificates representing the shares have been legended with the
      applicable trading restrictions.





December
      22, 2004 - $0.30 Offering





On
      December 22, 2004, the board of directors authorized the issuance of up to
      3,666,667 units at an offering price of $0.30 per unit. Each unit consisted
      of
      one restricted share of common stock and one restricted warrant. Each restricted
      warrant is convertible into one restricted share of common stock. The restricted
      warrant is exercisable for two years at an exercise price of $0.50 per warrant.
      The value of the units was arbitrarily set by Brek and had no relationship
      to
      its assets, book value, revenues or other established criteria of value. All
      the
      restricted units issued in this offering were issued for investment purposes
      in
      a “private transaction”.





Brek
      raised $1,000,000 in cash from this offering, which
      had
      five closings between January 2005 and July 2005, and issued an aggregate
      3,333,336 restricted units to six accredited subscribers in the United States
      and four non-US subscribers outside the United States and an additional 333,334
      restricted units as a finder’s fee to one non-US finder outside the United
      States, who was an executive officer of Brek.





For
      the
      accredited subscribers in the United States, management is satisfied that the
      requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with, which
      exemption is specified by the provisions of Section 4(2) of that Act and Rule
      506 Regulation D promulgated pursuant to that Act by the Securities and Exchange
      Commission. Specifically, the offer was made to only accredited investors,
      as
      that term is defined under applicable federal and state securities laws. The
      share certificates representing the shares have been legended with the
      applicable trading restrictions.





For
      the
      non-US subscribers outside the United States, Brek relied upon Section 4(2)
      of
      the Securities Act of 1933 and Rule 903 of Regulation S promulgated pursuant
      to
      that Act by the Securities and Exchange Commission. Management is satisfied
      that
      the requirements of the exemption from the registration and prospectus delivery
      requirements of the Securities Act of 1933 have been fully complied with. The
      offering was not a public offering and was not accompanied by any general
      advertisement or any general solicitation. Brek received from each subscriber
      a
      completed and signed subscription agreement containing certain representations
      and warranties, including, among others, that (a) the subscriber was not a
      U.S.
      person, (b) the subscriber subscribed for the shares for their own investment
      account and not on behalf of a U.S. person, and (c) there was no prearrangement
      for the sale of the shares with any buyer. No offer was made or accepted in
      the
      United States and the share certificates representing the shares have been
      legended with the applicable trading restrictions.





**(e)**
            **Penny
                Stock Rules**





Trading
      in Brek’s shares of common stock is subject to the “penny stock” rules. The SEC
      has adopted regulations that generally define a penny stock to be any equity
      security that has a market price of less than $5.00 per share, subject to
      certain exceptions. These rules require that any broker-dealer who recommends
      Brek’s shares of common stock to persons other than prior customers and
      accredited investors, must, prior to the sale, make a special written
      suitability determination for the purchaser and receive the purchaser’s written
      agreement to execute the transaction. Unless an exception is available, the
      regulations require the delivery, prior to any transaction involving a penny
      stock, of a disclosure schedule explaining the penny stock market and the risks
      associated with trading in the penny stock market. In addition, broker-dealers
      must disclose commissions payable to both the broker-dealer and the registered
      representative and current quotations for the securities they offer. The
      additional burdens imposed upon broker-dealers by such requirements may
      discourage broker-dealers from effecting transactions in Brek’s shares of common
      stock, which could severely limit their market price and liquidity of Brek’s
      shares of common stock.




***Page
          - 24***





The
      “penny stock” rules also imposes additional sales practice requirements on
      broker/dealers who sell penny stock. These rules require a one page summary
      of
      certain essential items. The items include the risk of investing in penny stocks
      in both public offerings and secondary marketing; terms important to in
      understanding of the function of the penny stock market, such as “bid” and
“offer” quotes, a dealers “spread” and broker/dealer compensation; the
      broker/dealer compensation, the broker/dealers duties to its customers,
      including the disclosures required by any other penny stock disclosure rules;
      the customers rights and remedies in causes of fraud in penny stock
      transactions; and, the NASD’s toll free telephone number and the central number
      of the North American Administrators Association, for information on the
      disciplinary history of broker/dealers and their associated
      persons.





**Item
      6.**  **Management’s
      Discussion and Analysis or Plan of Operation.**





The
      following is management’s discussion and analysis of certain significant factors
      that will affect or have affected our financial condition and results of
      operations for the fiscal years ended December 31, 2004 and 2003. Certain
      statements under this section may constitute “forward-looking statements”. You
      should read the following in conjunction with the consolidated financial
      statements and related notes appearing elsewhere herein.





**OVERVIEW**





Until
      2002, we focused our operations on the electronic payment processing business.
      During 2001 and 2002, we disposed of our electronic payment processing
      businesses. In July, 2002, we acquired a 25% working interest in the undeveloped
      oil and gas leases owned by Gasco Energy, Inc. in Utah, Wyoming and California,
      and we acquired a 51.53% non-dilutable voting interest in Vallenar Energy Corp.,
      a company engaged in oil and gas exploration in Texas.





Since
      we
      acquired our oil and gas interests, we have focused our attention on our oil
      and
      gas operations, primarily in Utah and Wyoming. We are not the operator on any
      of
      the properties. The main focus of our oil and gas exploration business is in
      the
      United States.





As
      of the
      date of this filing, we have participated in the drilling or re-completion
      of
      eleven wells and have ten producing wells in which we have net revenue interests
      of between 8% and 20%. One well, an earning well drilled by Burlington in 2002,
      generated some revenue for two years but is now shut in. We are still paying
      for
      work on one well that was completed during the summer of 2005. We believe that
      this work will increase the production in the well, with a corresponding
      increase in revenue.





We
      have
      farmed out the drilling of six wells. Under the farmout agreements, we agreed
      to
      forfeit 100% of our interest in five wells and wellbores and 75% of our interest
      in one well and wellbore, and to relinquish 70% of our leasehold interest in
      the
      acreage surrounding four wells and 75% in the acreage surrounding two wells
      in
      exchange for the right to back in to a 7.5% working interest in four wells
      and
      wellbores when the farmee has recovered 100% of its drilling and operating
      costs, an over-riding royalty interest in the revenue from one well convertible
      to a wellbore interest when the farmee has recovered 100% of its drilling and
      operating costs, and 7.5% of the revenue that we would have earned from one
      well
      had we not relinquished our well and wellbore interests in the well.





We
      transferred one-half of our interest in two wells and wellbores and all of
      our
      interest in one well and wellbore, all in Utah, to a small drilling fund for
      which the fund paid us its share of the drilling and completion costs. We used
      the recovered funds to invest in drilling other wells. The well in which we
      transferred all of our interest was an earning well.





We
      did
      not consent to the drilling of twenty wells proposed by Gasco and have yet
      to
      consent to participate in the drilling of two wells (consent is due December
      8,
      2005). As a result of our non-consent, Gasco has drilled (or will drill in
      the
      case of three) the wells bearing 100% of the costs and is entitled to all of
      the
      revenue generated from the sale of oil and gas until they have recovered 300%
      of
      their drilling costs, 150% of the costs of newly acquired equipment in the
      well,
      and 100% of the operating costs and the costs of any newly acquired surface
      equipment beyond the wellhead connections, at which time we are entitled to
      our
      percentage of the revenue. The average cost of these non-consent wells is
      approximately $3.5 million, so we do not expect to see any revenue from them
      for
      some time, if ever. We have not, however, forfeited any leasehold interests
      and
      can participate in future drilling that is proposed for other locations on
      the
      same leases.





***Page
          - 25***


**FINANCIAL
      CONDITION**





We
      had
      net income of $6,494 during the year ended December 31, 2004. As of December
      31,
      2004, we had a cash balance of $230,848, trade accounts receivable of $56,802,
      prepaids of $1,238 and a receivable due from a related company of $116,594,
      when
      these current assets are offset against our current obligations of $1,026,158
      in
      accounts payable and accrued liabilities and $168,733 in amounts due to related
      parties, we were left with a working capital deficit of $789,409 at December
      31,
      2004. The receivable due from a related company was due from a company
      controlled by relatives of two of the officers and was repaid during the second
      quarter of 2005.





We
      do not
      believe that our cash and cash equivalents at December 31, 2004, or the date
      of
      this filing are sufficient to satisfy our working capital needs. In order to
      satisfy our operational and working capital requirements for the next year
      we
      must raise funds through private loans, private placement of our common shares
      or issuance of shares for debt.





Our
      independent auditors have added an explanatory paragraph to their audit opinions
      issued in connection with our consolidated financial statements for the fiscal
      years 2004 and 2003, which states that our ability to continue as a going
      concern depends upon our ability to resolve liquidity problems, principally
      by
      obtaining capital and generating sufficient revenues to become profitable.
      Our
      ability to achieve and maintain profitability and positive cash flow is
      dependent upon our ability to locate profitable oil and gas properties, generate
      revenues from our oil and gas production and control production costs. Based
      upon current plans, we expect our net income to be marginal or to incur
      operating losses in future periods. We cannot assure that we will be able to
      generate revenues in the future. The accompanying financial statements do not
      include any adjustments that might be necessary if we are unable to continue
      as
      a going concern.





**RELATED-PARTY
      TRANSACTIONS**





Included
      in the $168,733 that is due to related parties at December 31, 2004, is $144,406
      in directors’ fees that accrued during 2002 and 2003, and $24,327 that
      directors, officers or companies controlled by directors or officers paid to
      some of our creditors on our behalf. None of the amounts due to related parties
      bear interest or have any fixed terms of repayment. During the year ended
      December 31, 2004, we repaid $36,346 in related party debt by issuing 726,900
      shares of our common stock.




**COMPARISON
      OF THE YEARS ENDED DECEMBER 31, 2004 AND 2003**





**Overall
      Results of Operations**





For
      the
      year ended December 31, 2004, we had net income of $6,494, or $0.01 per share,
      which was an increase of $268,373 from our net loss of $261,879 or $(0.01)
      per
      share for year ended December 31, 2003. The decrease in net loss for the year
      ended December 31, 2004, as compared to the year ended December 31, 2003, was
      primarily due to a decrease in general and administrative expenses from our
      discontinuing our operations in Hong Kong in the first quarter of 2003 and
      an
      increase in revenue from production of our Utah oil and gas wells in 2004.





**Revenue**





Total
      revenue for the year ended December 31, 2004 was $363,053 compared to $22,077
      for the year ended December 31, 2003. Revenues from the Wyoming oil and gas
      properties for the years ended December 31, 2004 and 2003 were $8,801 and
      $22,077. Revenue from the Utah oil and gas properties was $354,252 and $nil
      for
      the years ended December 31, 2004 and 2003. During 2004, we commenced production
      on our Utah properties and our plans are to participate in more drilling on
      our
      Utah properties if we are financially able. We expect revenues to increase
      from
      our Utah properties primarily due to increases in production and the price
      of
      gas.




**Operating
      Expenses**





Total
      operating expenses increased to $351,900 for the year ended December 31, 2004,
      from $287,140 for the year ended December 31, 2003, due primarily to increases
      in administration, office and rent of $79,081 and travel and promotion of
      $102,061 offset by a decrease in management and professional fees of $116,382.
      Our travel and office expenses increased because we increased our investing
      and
      financing activities. Our professional fees decreased because we no longer
      consult Hong Kong professionals, who are considerably costlier than North
      American professionals. We expect our operating expenses to increase as we
      increase our investing and financing activities.





**Interest
      and Other Income**





Interest
      and other income decreased to $nil from $10,498 for the year ended December
      31,
      2004 and 2003 primarily due to the decrease in cash float in our bank accounts.




***Page
          - 26***





**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenue or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to investors, nor do we
      have
      any non-consolidated, special-purpose entities.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2004, we had a cash balance of $230,848 and negative cash flows
      from operations of $452,286 for the year then ended. During the year ended
      December 31, 2004 we funded our operations through revenues from our oil and
      gas
      properties of $363,053 and the private placement of 23,438,623 units for which
      we received cash of $3,141,893. In return for arranging the private placement,
      we issued 1,804,167 units to an officer to pay finder’s fees of $226,250. We
      also repaid $32,405 in debt by issuing 648,100 units and we repaid debt of
      $36,345 to an officer by issuing 726,900 units. Each unit consists of one common
      share and one warrant exercisable for the purchase of one share.





The
      notes
      to our consolidated financial statements as of December 31, 2004, contain
      footnote disclosure regarding our uncertain ability to continue as a going
      concern. We have not generated sufficient revenues to cover our expenses, and
      we
      have an accumulated deficit of $61,335,708. While we believe that we will begin
      to generate more oil and gas revenue during the year, as of December 31, 2004,
      we had $1,194,891 in current liabilities and we cannot assure that we will
      succeed in generating revenue sufficient to meet our ongoing cash needs.





Below
      is
      a discussion of our sources and uses of funds for the year ended December 31,
      2004.





**Net
      Cash Used in Operating Activities**





Net
      cash
      used in operating activities during the year ended December 31, 2004 was
      $452,286, primarily as a result of an increase in trade accounts receivable
      of
      $50,774, an increase in prepaids of $1,238, an increase in amounts due from
      a
      related party of $116,594, a decrease in accounts payable and accrued
      liabilities of $288,954, and a decrease in amounts due to related parties of
      $5,879, offset by net income of $6,494 and an adjustment to minority interest
      of
      $4,659.





**Net
      Cash Provided By Financing Activities**





During
      the year ended December 31, 2004, we generated $3,141,893 in cash from the
      issuance of 23,438,623 units.





**Net
      Cash Used In Investing Activities**





During
      the year ended December 31, 2004, we invested $2,461,077 in our oil and gas
      properties.





**Contingencies
      and Commitments**




We
        had no
        contingencies or long-term commitments at December 31, 2004, except for the
        Transworld litigation and the Burlington settlement payable which are disclosed
        in the commitments and contingencies section of the footnotes to our
        consolidated financial statements, appearing elsewhere
        herein.





As
      is
      customary in the oil and gas industry, we may at times have agreements that
      permit us to earn acreage or wells. If we do not pay our portion of the costs
      as
      required by these agreements, we will not be entitled to the acreage or wells.





**CRITICAL
      ACCOUNTING POLICIES**





**Principles
      of Consolidation**




Our
      consolidated financial statements include the financial statements of our
      subsidiaries. All significant intercompany balances and transactions have been
      eliminated.





**Accounting
      Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.




***Page
          - 27***





Our
      financial statements are based on a number of significant estimates, including
      the estimates of the oil and gas reserve quantities that are the basis for
      the
      calculation of depletion and impairment of oil and gas properties.





**Fair
      Value of Financial Instruments**





The
      carrying values reflected in the consolidated balance sheets for cash and cash
      equivalents, trade accounts receivable, accounts payable and accrued liabilities
      approximate their fair values because of the short term nature of these
      instruments. The fair value of the note receivable of $1 is an estimate based
      on
      the value we expect to realize within the next twelve months. Amounts due to
      related parties approximate their fair value due to the related party nature
      of
      the debt and the amount receivable from a related party approximates its fair
      value because it was repaid in the second quarter of 2005.




**Revenue
      Recognition**





We
      recognize oil and gas revenue as income when the oil or gas is produced and
      sold.





**Oil
      and Gas Properties**





We
      follow
      the full-cost method of accounting whereby all costs related to the acquisition
      of oil and gas leases and acquisition and development of oil and gas properties
      are capitalized into a single cost center (“full-cost pool”). These costs
      include lease acquisition costs, geological and geophysical expenses, overhead
      directly related to exploration and development activities and costs of drilling
      both productive and non-productive wells. Proceeds from property sales are
      generally credited to the full-cost pool without gain or loss recognition unless
      such a sale would significantly alter the relationship between capitalized
      costs
      and the proved reserves attributable to these costs. A significant alteration
      would typically involve a sale of 25% or more of the proved reserves related
      to
      a single full cost pool.





We
      compute the depletion of exploration and development costs and depreciation
      of
      production equipment using the units-of-production method based upon estimated
      proven oil and gas reserves. We withhold the costs of unproved properties from
      the depletion base until they are either developed or abandoned. We review
      the
      properties periodically for impairment. We transfer total well costs to the
      depletable pool even when multiple targeted zones have not been fully evaluated.
      For depletion and depreciation purposes, we convert relative volumes of oil
      and
      gas production and reserves at the energy equivalent rate of six thousand cubic
      feet of natural gas to one barrel of crude oil.





Under
      the
      full-cost method of accounting, capitalized oil and gas property costs less
      accumulated depletion and net of deferred income taxes may not exceed an amount
      equal to the present value, discounted at 10%, of estimated future net revenues
      from proved oil and gas reserves plus the cost or estimated fair value, if
      lower, of unproven properties. Should capitalized costs exceed this ceiling,
      impairment is recognized. The present value of estimated future net revenues
      is
      computed by applying current prices of oil and gas to estimated future
      production of proved oil and gas reserves as of period-end, less estimated
      future expenditures to be incurred in developing and producing the proved
      reserves assuming the continuation of existing economic conditions. Our oil
      and
      gas wells began producing during the first quarter of 2003. We recorded no
      depletion during the years ended December 31, 2004 or 2003 because at December
      31, 2002, our oil and gas properties were either written down to a nominal
      value
      or written down to their net present value, based on a December 31, 2004
      reserves study. (Note 4)





**Stock-based
      Compensation**





We
      account for our stock-based compensation using Accounting Principles Board
      Opinion No. 25 (“APB 25”) and related interpretations. Under APB 25,
      compensation expense is recognized for stock options with an exercise price
      that
      is less than the market price on the grant date of the option. For stock options
      with exercise prices at or above the market value of the stock on the grant
      date, we adopted the disclosure-only provisions of Statement of Financial
      Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS
      123”) for the stock options granted to the employees and directors of the
      Company. Accordingly, we have recognized no compensation cost for these options.
      We have recognized compensation expense in the accompanying financial statements
      for stock options that we issued to our outside consultants. If we had
      determined compensation expense for the options granted to our employees and
      directors based on the fair value at the grant date for options, consistent
      with
      the provisions of SFAS 123, our net loss and net loss per share for the years
      ended December 31, 2004 and 2003 would have been increased to the pro forma
      amounts indicated below:





***Page
          - 28***








**For
                the Year Ended**
            
            
            **For
                the Year Ended****December
                31, 2004**
            
            **December
                31, 2003**Net
                Income (loss) attributable to common shareholders:As
                reported
            
            $
            6,494
            
            $
            (261,879
            )Stock-based
                employee compensationdetermined
                under the fair valuebased
                method
            
            
            -
            
            
            (490
            )Pro
                forma
            
            $
            6,494
            
            $
            (262,369
            )Net
                loss per common share:As
                reported
            
            $
            0.01
            
            $
            (0.01
            )Pro
                forma
            
            $
            0.01
            
            $
            (0.01
            )





The
      fair
      value of the common stock options that we granted during the years ended
      December 31, 2004 and 2003, for disclosure purposes was estimated on the grant
      dates using the Black Scholes Pricing Model and the following
      assumptions.





2004
            2003Expected
                dividend yield
            -
            -Expected
                price volatility
            131%
                - 151%
            131%
                - 151%Risk-free
                interest rate
            3%
                to 5.5%
            3%
                to 5.5%Expected
                life of options
            5
                years
            5
                years





We
      account for equity instruments issued to non-employees in accordance with the
      provisions of SFAS 123, and Emerging Issues Task Force No. 96-18 (“EITF 96-18”).
      We account for all transactions in which we receive goods or services as
      consideration for the issuance of equity instruments based on the fair value
      of
      the consideration received or the fair value of the equity instrument, whichever
      is more reliably measurable.





We
      account for the re-pricing and re-issuing of stock options under the variable
      accounting provisions of FIN 44.





**Recent
      Accounting Pronouncements**





The
      Securities and Exchange Commission issued Staff Accounting Bulletin SAB No.
      106
      (“SAB 106”) in September 2004 regarding the application of SFAS 143 for oil and
      gas producing entities that follow the full-cost accounting method. SAB 106
      states that after adoption of SFAS 143, the future cash outflows associated
      with
      settling asset retirement obligations that have been accrued on the balance
      sheet should be excluded from the present value of estimated future net cash
      flows used for the full cost ceiling test calculation. We have calculated our
      ceiling test computation in this manner since the adoption of SFAS 143, and
      therefore the adoption of SAB 106 in the third quarter of 2004, did not have
      a
      material effect on our financial statements.





During
      March 2004, the Emerging Issues Task Force (“EITF”) determined that mineral
      rights as defined in EITF Issue 04-2, “Whether Mineral Rights are Tangible or
      Intangible Assets”, are tangible assets and should not be considered intangible
      assets in SFAS 141, “Business Combinations” (“SFAS 141”) and SFAS 142, “Goodwill
      and Intangible Assets” (”SFAS 142”). The FASB, in agreement with this
      determination, amended SFAS 141 and 142 through the issuance of FASB Staff
      Position (“FSP”) FSP 141-1 and 142-1. In addition, the proposed FSP 142-b
      confirms that SFAS 142 did not change the balance sheet classification or
      disclosures of mineral rights of oil and gas producing entities. We classify
      our
      oil and gas leaseholds as tangible oil and gas properties which is consistent
      with EITF 04-02, FSP 141-1 and 142-1 and therefore such pronouncements did
      not
      have a material effect on our financial condition or results of operations.





**Contractual
      Obligations**




The
        only
        contractual obligation we had at December 31, 2004, was the following Burlington
        settlement payable:
 
 On
        March
        1, 2004, the Company and Burlington Resources Oil & Gas Company, LP
        (“Burlington”) entered into a settlement agreement whereby the Company agreed to
        pay Burlington a total of $691,874, in twelve equal monthly payments, commencing
        August 14, 2004.




***Page
          - 29***





**Internal
      and External Sources of Liquidity**





We
      have
      funded our operations principally through the subscription of common shares
      and
      through shares for debt.





**Inflation**





We
      do not
      believe that inflation will have a material impact on our future
      operations.





**Uncertainties
      Relating to Forward-Looking Statements**





This
      Form
      10-KSB Annual Report contains “forward-looking statements” within the meaning of
      the Private Securities Litigation Reform Act of 1995. You can identify these
      statements by our use of words such as “plan”, “expect”, “aim”, “believe”,
“project”, “anticipate”, “intend”, “estimate”, “will”, “should”, “could” and
      other expressions that indicate future events and trends. All statements that
      address expectations or projections about the future, including statements
      about
      our strategy for participating in drilling programs, increasing revenues, and
      raising capital from external sources are forward-looking
      statements.





All
      forward-looking statements are made as of the date of filing of this Form 10-KSB
      and we disclaim any duty to update these statements.





Certain
      parts of this Form 10-KSB may contain “forward-looking statements” within the
      meaning of the Securities Exchange Act of 1934 based on current managements
      expectations. Our actual results could differ materially from those in our
      forward looking statements due to a number of uncertainties including, but
      not
      limited to, those discussed in this section. Factors that could cause our future
      results to differ from these expectations include general economic conditions,
      particularly as they affect our ability to raise sufficient working capital,
      the
      costs of bringing our oil and gas properties into production, and the market
      for
      our production. As a result, the identification and interpretation of data
      and
      other information and their use in developing and selecting assumptions from
      and
      among reasonable alternatives requires the exercise of judgment. To the extent
      that the assumed events do not occur, our outcome may vary substantially from
      our anticipated or projected results, and accordingly, we express no opinion
      on
      the achievability of those forward-looking statements and give no assurance
      that
      any of the assumptions relating to the forward-looking statements are
      accurate.





We
      may,
      from time to time, make oral forward-looking statements. We strongly advise
      you
      to read the foregoing paragraphs and the risk factors described in this annual
      report and in our other documents filed with the United States Securities and
      Exchange Commission for a description of certain factors that could cause our
      actual results to differ materially from those in the oral forward-looking
      statements. We disclaim any intention or obligation to update or revise any
      oral
      or written forward-looking statements whether as a result of new information,
      future events or otherwise.





**Item
      7.**  **Financial
      Statements**





See
      audited financial statements for the period ended December 31, 2004 and 2003
      attached as Exhibit A to this Form 10-KSB.





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





There
      are
      no changes in and disagreements with Brek’s accountants on accounting and
      financial disclosure. Brek’s principal
      independent accountant since November 24, 2004 to the current date is Hall
      & Company, Certified Public Accountants Inc. ,
      16140
      Sand Canyon Avenue, Suite 100, Irvine California, 92618





Effective
      November 24, 2004, Brek’s board of directors approved a change in Brek’s
      independent auditors. None of the reports of Deloitte Touche Tohmatsu, Chartered
      Accountants on the financial statements of Brek’s for the fiscal years ended
      December 31, 2000 and 2001 contained any adverse opinion or disclaimer of
      opinion, or was qualified or modified as to uncertainty, audit scope or
      accounting principles. Although audited statements prepared by Deloitte Touche
      Tohmatsu, Chartered Accountants contained a going concern qualification, such
      financial statements did not contain any adjustments for uncertainties stated
      therein, nor have there been at any time, disagreements between Brek and
      Deloitte Touche Tohmatsu, Chartered Accountants on any matter of accounting
      principles or practices, financial statement disclosure or auditing scope or
      procedure.





Brek
      retained the accounting firm of Hall & Company, Certified Public Accountants
      Inc. , to
      serve
      as its independent accountants to audit its financial statements beginning
      with
      the year ended December 31, 2002. This engagement became effective November
      24,
      2004. Prior to its engagement as Brek’s independent auditors, Hall &
Company, Certified Public Accountants Inc. , had
      not
      been consulted by Brek either with respect to the application of accounting
      principles to a specific transaction or the type of audit opinion that might
      be
      rendered on Brek’s financial statements or on any other matter that was the
      subject of any prior disagreement between Brek and its previous certifying
      accountants.




***Page
          - 30***





**Item
      8A.**  **Controls
      and Procedures.**





Brek
      maintains disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in Brek’s Securities Exchange Act of 1934
      reports is recorded, processed, summarized and reported within the time periods
      specified in the SEC’s rules and forms, and that such information is accumulated
      and communicated to Brek’s management, including its chief executive officer and
      chief financial officer, as appropriate, to allow timely decisions regarding
      required disclosure. Based on their most recent evaluation, which was completed
      within 90 days of the filing of this Form 10-KSB, Brek’s Chief Executive Officer
      and Chief Financial Officer believe Brek’s disclosure controls and procedures
      (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure
      that information required to be disclosed by Brek in this report is accumulated
      and communicated to Brek’s management, including its principal executive officer
      and principal financial officer, as appropriate, to allow timely decisions
      regarding required disclosure. Based upon the foregoing, Brek’s chief executive
      officer and chief financial officer concluded that Brek’s disclosure controls
      and procedures are effective in connection with the filing of this Annual Report
      on Form 10-KSB for the year ended December 31, 2004.





There
      were no significant changes in Brek’s internal controls or other factors that
      could significantly affect these controls subsequent to the date of their
      evaluation, including any significant deficiencies or material weaknesses of
      internal controls that would require corrective action.





**Item
      8B. Other Information**





During
      the fourth quarter of the fiscal year covered by this Form 10-KSB, Brek reported
      all information that was required to be disclosed in a report on Form 8-K,
      except for the following.





Item
      3.02 - Unregistered Sales of Equity Securities





On
      October 1, 2004, Brek issued 1,396,956 restricted units to First Griffin Group
      LLC. Each unit consisted of one restricted share of common stock and one
      restricted warrant. Each restricted warrant is convertible into one restricted
      share of common stock. The restricted warrant is exercisable for two years
      at an
      exercise price of $0.35 per warrant. See “Item 5(d) - Recent Sale of
      Unregistered Securities” above for more details.





**PART
      III**





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





**(a)**  **Identify
      Directors and Executive Officers**





Each
      director of Brek or its subsidiaries holds office until (i) the next annual
      meeting of the stockholders, (ii) his successor has been elected and qualified,
      or (iii) the director resigns.





Brek’s
      and its subsidiaries’ management teams are listed below.





**Management
              Teams****Brek
                Energy Corporation**
            **Brek
                Petroleum Inc.**
            **Vallenar
                Energy Corp.**
            **Brek
                Petroleum (California), Inc.****Richard
                N. Jeffs**
            Director,
              CEO,
                President, and
              Chief
                Financial Officer
            Director
              and
              President
            Director
              and
              President
            Director,
                President,
              Chief
                Financial Officer, and
              Corporate
                Secretary**Gregory
                Pek**
            Director
            n/a
            n/a
            n/a**Ian
                Robinson**
            Director
            n/a
            n/a
            n/a**Michael
                L. Nazmack**
            Director
            n/a
            n/a
            n/a**Eugene
                Sweeney**
            Director
            n/a
            n/a
            n/a**Shawne
                Malone**
            Director
            n/a
            n/a
            n/a**John
                daCosta**
            Treasurer
            Treasurer
                and
              Corporate
                Secretary
            Treasurer
                and
              Corporate
                Secretary
            n/a**Anne
                McFadden**
            Corporate
                Secretary
            n/a
            n/a
            n/a







***Page
          - 31***




***Richard
      N. Jeffs*** ** - Mr.
      Jeffs (60 years old) has been the president and chief executive officer of
      Brek
      since February 2004 and a director and the chief financial officer of Brek
      since
      January 2005. Mr. Jeffs has also been the sole director and president of Brek
      Petroleum Inc, since February 2004. Finally, Mr. Jeffs has been the sole
      director and officer of Brek Petroleum (California), Inc. since July 2004.
      In
      the past five years, Mr. Jeffs’ has been a self-employed businessman since 1990
      and a director of a private venture capital company since 1999.





*Potential
      conflict of interest* :
      Richard
      N. Jeffs, Brek’s president and chief executive officer, is an officer and
      director of Trilogy Metals Inc., an inactive reporting company, which may impact
      the amount of his time spent on Brek’s business operations. Mr. Jeffs may have
      demands placed on his time, which will detract from the amount of time he is
      able to devote to Brek. Mr. Jeffs devotes at least 40 hours per week of his
      business time and attention to Brek’s activities as required. Although Mr. Jeffs
      has other current business interests he will attend to Brek’s business as his
      first priority. Brek consents to and understands this potential conflict of
      interest.





***Gregory
      Pek*** - Mr.
      Pek (50) has been a director of Brek since March 1999. Mr. Pek was a co-founder
      of Brek and was the president and chief executive officer of Brek from March
      1999 until June 2000. Mr. Pek was the chairman of the board of Brek from June
      2000 until November 2000. Mr. Pek was the president and co-chief executive
      officer of Brek from October 2000 until August 2001. From August 2001 until
      October 2002, Mr. Pek was the chief executive officer of Brek. Finally, from
      November 2003 until January 2005, Mr. Pek was the chief financial officer of
      Brek. Since December 2002, Mr. Pek has been a director and officer of Global
      Financial Network Limited, a private Hong Kong company. From 1994 to 1999,
      Mr.
      Pek was an executive officer of both David Resources Company Limited, a
      petroleum and wine trading company, and Kong Tai International Holdings Company
      Limited, a real property investment company. From September 1998 to February
      1999, Mr. Pek was a director of Singapore Hong Kong Properties Investment
      Limited, another real property investment company. Mr. Pek obtained a Bachelor
      of Commerce from the University of British Columbia in 1978. In 1981, Mr. Pek
      received his chartered accountant designation after articling with Clarkson
      Gordon.





***Ian
      Robinson*** - Mr.
      Robinson (66) has been a director of Brek since April 2001. Since 1995, Mr.
      Robinson has been the owner and managing director of Robinson Management
      Limited, a business consulting firm. In 1962, Mr. Robinson received his CPA
      designation from the Institute of Chartered Accountants of
      Australia.





***Michael
      L. Nazmack*** - Mr.
      Nazmack (55) has been a director of Brek since March 31, 2003. Mr. Nazmack,
      a
      graduate of Penn State University with degrees in Mechanical and Civil and
      Structural Engineering, was granted his Professional Engineer’s Certificate from
      the states of California and Alaska in 1979. From 1977 until 1984 he worked
      for
      Santa Fe International Corporation on a number of oil and gas related projects
      and was the Project Engineer for the North Slope of Alaska’s oil field
      development, responsible for the planning, engineering and construction of
      over
      one billion dollars worth of oil and gas pipelines. From 1986 to 2003, Mr.
      Nazmack was the president of Longstown Development Corporation, a developer
      of
      300 retirement condominium units. From 1993 to 2002, Mr. Nazmack was also the
      vice-president York Condominium Constructors, Inc., which built another 300
      retirement condominium units. For both these projects, Mr. Nazmack designed
      the
      units and the site layout, did the construction surveying, personally handled
      the permitting, sales, and the business, legal, and engineering matters on
      a
      daily basis. From February 1997 to May 2005, Mr. Nazmack was the Chairman of
      the
      board of York Industries, Inc. Mr. Nazmack was responsible for executive
      decisions such as purchasing of new machinery and computers and deciding to
      build a new facility. Once the decision was made Mr. Nazmack was responsible
      for
      the design and managed the construction of the new 60,000 square foot factory
      building, which York Condominium Constructors, Inc. built in 2001.





***Eugene
      Sweeney*** - Mr.
      Sweeney (38) has been a director of Brek since October 2004. Mr. Sweeney has
      been an investment strategist for Griffin Asset Management LLC since September
      2004. Mr. Sweeney was an equity and options trader from September 1999 to
      September 2004, working for Bushwood Trading until November 2001, then Stafford
      Trading until June 2002, and the TD Securities until September
      2004.





***Shawne
      Malone*** - Mr.
      Malone (37) has been a director of Brek since October 2004. In the past five
      years, Mr. Malone’s business experience has consisted of being an options
      specialist for TD Options LLC in New York, a subsidiary of TD Bank, a large
      multinational bank with headquarters in Toronto, Canada, from March 1999 to
      June
      2004.  Mr. Malone has experience trading options on a variety of assets
      from equities to commodities to convertible bonds.  Mr. Malone is
      a co-founder of, and since July 2004, has been the Co-CEO of Griffin Asset
      Management LLC, a money management firm headquartered in Chicago.  Mr.
      Malone graduated from The Pennsylvania State University in 1997 with a BS in
      Finance and International Business.





**(b)**  **Identify
      Significant Employees**





Brek
      has
      no significant employees.




***Page
          - 32***





**(c)**  **Family
      Relationships**





There
      are
      no family relationships among the directors, executive officers or persons
      nominated or chosen by Brek to become directors or executive officers, with
      the
      exception that Anne McFadden is the sister-in-law of Richard N.
      Jeffs.





**(d)**  **Involvement
      in Certain Legal Proceedings**





(1)
            No
                bankruptcy petition has been filed by or against any business of
                which any
                director was a general partner or an executive officer either at
                the time
                of the bankruptcy or within two years prior to that
                time.





(2)
            No
                director has been convicted in a criminal proceeding and is not subject
                to
                a pending criminal proceeding (excluding traffic violations and other
                minor offences).





(3)
            No
                director has been subject to any order, judgement, or decree, not
                subsequently reversed, suspended or vacated, of any court of competent
                jurisdiction, permanently or temporarily enjoining, barring, suspending
                or
                otherwise limiting his involvement in any type of business, securities
                or
                banking activities.





(4)
            No
                director has been found by a court of competent jurisdiction (in
                a civil
                action), the Securities Exchange Commission or the Commodity Futures
                Trading Commission to have violated a federal or state securities
                or
                commodities law, that has not been reversed, suspended, or
                vacated.





**(e)**  **Compliance
      with Section 16(a) of the Exchange Act.**





All
      reports were filed with the SEC on a timely basis and Brek is not aware of
      any
      failures to file a required report during the period covered by this annual
      report, with the exception of the following. Richard N. Jeffs, Gregory M. Pek,
      Ian Robinson, Michael L. Nazmack, James Pratt and Ravi Daswani all failed to
      file a Form 5 or to provide Brek with a written representation that a Form
      5 was
      not required.





The
      other
      affiliates, in lieu of filing a Form 5, provided Brek with a written
      representation that a Form 5 was not required.





**(f)**  **Audit
      Committee Financial Expert**





Brek
      has
      no financial expert. Management believes the cost related to retaining a
      financial expert at this time is prohibitive. Further, because of Brek’s limited
      operations, management believes the services of a financial expert are not
      warranted.





**(g)**  **Identification
      of Audit Committee**





Brek’s
      Audit Committee currently consists of Gregory Pek, Ian Robinson and Eugene
      Sweeney. The Audit Committee is responsible for (i) reviewing the scope of
      and
      the fees for the annual audit, (ii) reviewing with the independent auditors
      the
      corporate accounting practices and policies, (iii) reviewing with the
      independent auditors their final report, and (iv) being available to the
      independent auditors during the year for consultation purposes. Each of the
      members of the Audit Committee was independent within the meaning of Rule
      4200(a)(15) of the NASD listing standards.





As
      of
      December 31, 2004, Brek did not have a written audit committee charter or
      similar document.





**(h)**  **Code
      of Ethics**





Brek
      has
      adopted a code of ethics that applies to all its executive officers and
      employees, including its CEO and CFO. A copy of Brek’s adopted code of ethics is
      attached to this annual report. See Exhibit 99.1 - Code of Ethics for more
      information. Also, Brek’s code of ethics has been posted on its website at www.brekenergy.com .
      Brek
      undertakes to provide any person with a copy of its code of ethics free of
      charge. Please contact Peter Forward at (604) 648-0511 to request a copy of
      Brek’s code of ethics. Management believes Brek’s code of ethics is reasonably
      designed to deter wrongdoing and promote honest and ethical conduct; provide
      full, fair, accurate, timely and understandable disclosure in public reports;
      comply with applicable laws; ensure prompt internal reporting of code
      violations; and provide accountability for adherence to the code.





***Page
          - 33***


**Item
      10. Executive Compensation.**





Brek
      has
      paid no compensation to its named executive officers during its 2004 fiscal
      year.





**SUMMARY
      COMPENSATION TABLE**





Long-term
                compensation***Annual
                compensation***
            **Awards**
            **Payouts**Name
                and principal position
              (a)
            Year
              (b)
            Salary
              ($)
              (c)
            Bonus
              ($)
              (d)
            Other
                annual compen-sation
              ($)
              (e)
            Restricted
                stock awards
              ($)
              (f)
            Securities
                underlying options/
              SARs
              (#)
              (g)
            LTIP
                Payouts
              ($)
              (h)
            All
                other compen-sation
              ($)
              (i)**Richard
                N. Jeffs**
              CEO
                / President
              Oct
                2002 - Nov 2002
              Feb
                2004 - Present
              CFO
              Jan
                2005 - Present
            2002
              
              2003
              
              2004
            nil
              
              n/a
              
              nil
            nil
              
              n/a
              
              nil
            nil
              
              n/a
              
              nil
            nil
              
              n/a
              
              nil
            nil
              
              n/a
              
              nil
            nil
              
              n/a
              
              nil
            nil[1]
              
              n/a
              
              226,250[2]**Gregory
                M. Pek**
              CEO
                / President
              Mar
                1999 - Oct 2000
              Aug
                2001 - Oct 2002
              Co-CEO
                / President
              Oct
                2000 - Aug 2001
              CFO
              Nov
                2003 - Jan 2005
            2002
              
              2003
              
              2004
            189,286[3]
              
              65,575
              
              nil
            nil
              
              nil
              
              nil
            27,871[4]
              
              nil
              
              nil
            nil
              
              nil
              
              nil
            25,000[5]
              
              nil
              
              nil
            nil
              
              nil
              
              nil
            70,000[6]
              
              50,000[7]
              
              nil**Kenneth
                G. C. Telford**
              CFO
              July
                2000 - Oct 2003
            2002
              
              2003
              
              2004
            297,806[8]
              
              50,909
              
              n/a
            34,000[9]
              
              nil
              
              n/a
            17,209[4]
              
              7,742[4]
              
              n/a
            nil
              
              nil
              
              n/a
            50,000[5]
              
              nil
              
              n/a
            nil
              
              nil
              
              n/a
            nil
              
              50,000[10]
              
              n/a**Ian
                Robinson**
              Chairman
              Jan
                2001 - present
            2002
              
              2003
              
              2004
            40,500[11]
              
              nil[12]
              
              nil
            34,000[13]
              
              nil
              
              nil
            nil
              
              nil
              
              nil
            nil
              
              nil
              
              nil
            25,000[5]
              
              nil
              
              nil
            nil
              
              nil
              
              nil
            nil
              
              13,500[14]
              
              nil


[1] Richard
      N. Jeffs was owed $24,000 for consulting fees at December 31, 2002.


[2
      ] Richard
      N. Jeffs was paid 1,804,167 units valued at $226,250 for finder’s fee. The fair
      market value of Brek’s shares of common stock at the time of the issuances of
      these shares ranged from $0.15 per share to $0.38 per share. See “Item 5.(d)
      Recent Sale of Unregistered Securities” above for more details.


[3] Gregory
      Pek accrued $159,038 in additional salary in the fiscal year ended December
      31,
      2002.


[4] Other
      annual compensation consisted of housing expense, directors fees, and employer
      contributions to the mandatory provident fund in Hong Kong, which is a similar
      program to Social Security in the United States.


[5] On
      July
      15, 2002, Brek granted these stock options to the named executive officer.
      The
      fair market value of Brek’s shares of common stock at the time of the granting
      of these stock options was $0.73 per share.


[6] On
      September 10, 2002, Gregory Pek received 100,000 shares of common stock as
      severance valued at $70,000. The fair market value of Brek’s shares of common
      stock at the time of the issuance of these shares was $0.72 per
      share.


[7] On
      April
      14, 2003, Gregory Pek received 277,778 shares of common stock as settlement
      for
      $50,000 debt at a settlement price of $0.18 per share. The fair market value
      of
      Brek’s shares of common stock at the time of the issuance of these shares was
      $0.21 per share.


[8] Kenneth
      Telford accrued $54,000 in additional salary in the fiscal year ended December
      31, 2002.


[9] Kenneth
      Telford received 50,000 shares of common stock in payment of a bonus accrued
      during 2001 in the amount of $34,000. The fair market value of Brek’s shares of
      common stock at the time of the issuance of these shares was $0.68 per
      share.


[10] On
      April
      14, 2003, Kenneth Telford received 277,778 shares of common stock as settlement
      for $50,000 debt at a settlement price of $0.18 per share. The fair market
      value
      of Brek’s shares of common stock at the time of the issuance of these shares was
      $0.21 per share.


[11] Ian
      Robinson accrued $13,500 in additional salary for the fiscal year ended December
      31, 2002.


[12] Ian
      Robinson accrued $12,000 in additional salary for the fiscal year ended December
      31, 2003.


[13] Ian
      Robinson received 50,000 shares of common stock in payment of salary accrued
      during 2001 in the amount of $34,000. The fair market value of Brek’s shares of
      common stock at the time of the issuance of these shares was $0.68 per
      share.


[14] On
      April
      14, 2003, Ian Robinson received 75,000 shares of common stock as settlement
      for
      $13,500 debt at a settlement price of $0.18 per share. The fair market value
      of
      Brek’s shares of common stock at the time of the issuance of these shares was
      $0.21 per share. The debt represented the accrued directors’ fees set out in
      footnote #11 above.




***Page
          - 34***





**Grant
      of Stock Options**





Brek
      did
      not grant any stock options or stock appreciation rights during the last
      completed fiscal year.





**Existing
      Stock Options**





No
      stock
      options or stock appreciation rights were exercised during the last completed
      fiscal year. Existing stock options in the hands of named executive officers
      and
      senior management as of December 31, 2004, were as follows:





**Name**
            **Shares
                acquired on exercise**
              **(#)**
            **Value
                realized**
              **($)**
            **Number
                of securities underlying unexercised options/SARs at
                FY-end**
              **(#)**
            **Value
                of unexercised**
              **in-the-money**
              **options/SARs
                at FY-end**
              **($)****Exercisable**
            **Unexercisable**
            **Exercisable**
            **Unexercisable**Richard
                N. Jeffs
            0
            Nil
            150,000(1)
            0
            0
            0Gregory
                M. Pek
            0
            Nil
            100,000
            0
            0
            0Ian
                Robinson
            0
            Nil
            100,000
            0
            0
            0Kenneth
                Telford
            0
            Nil
            250,000
            0
            0
            0


**(1)**
            Stock
                options granted to Wet Coast Management Corp., which Richard N. Jeffs
                is
                the sole shareholder.





**Long
      Term Incentive Plan Awards**





Brek
      did
      not award any long term incentive plans during the last completed fiscal
      year.





**Director
      Compensation**





Currently,
      there are no written arrangements between Brek and any of its directors or
      between any of the subsidiaries and any of its directors whereby such directors
      are compensated for any services provided as directors. From time to time,
      certain directors who are not employees may receive grants of options to
      purchase shares of common stock of Brek.





**Termination
      of Employment**





There
      are
      no other employment agreements between Brek or the subsidiaries and any named
      executive officer, and there are no employment agreements or other compensating
      plans or arrangements with regard to any named executive officer that provide
      for specific compensation in the event of resignation, retirement, other
      termination of employment, a change of control of Brek, or from a change in
      a
      named executive officer’s responsibilities following a change in
      control.





**Compensation
      Committee**





Brek’s
      compensation committee was established on January 31, 2005. Each of Ian
      Robinson, Michael L. Nazmack and Eugene Sweeney were appointed as a member
      of
      Brek’s compensation committee and will serve as a member for one year or until
      the member resigns or is removed from the committee by a majority vote of the
      board of directors. Each member is a non-employee member of Brek’s Board of
      Directors. The Compensation Committee reviews and determines Brek’s executive
      compensation objectives and policies, administers Brek’s stock plans and grants
      stock options.





***Page
          - 35***


**Item
      11. Security Ownership of Certain Beneficial Holders and
      Management.**





(a)  **Security
      Ownership of Certain Beneficial Owners (more than 5%)**





**(1)**
              **Title
                of Class**
            **(2)**
              **Name
                and Address of Beneficial Owner**
            **(3)**
              **Amount
                and Nature of**
              **Beneficial
                Owner**
            **(4)**
              **Percent**
              **of
                Class**[1]shares
                of
              common
                stock
            **Richard
                N. Jeffs**
              Third
                Floor
              346
                Kensington High Street
              London,
                UK, W14 8NS
            15,077,336[2]
                [3]
            23.4%[4]


[1] Based
      on
      59,498,090 shares of common stock issued and outstanding as of November 10,
      2005, unless indicated otherwise.


[2] This
      number includes 1,267,389 shares of common stock that are beneficially owned
      indirectly.


[3] This
      number includes 4,762,501 warrants that that can be exercised into one share
      of
      common stock per warrant and 150,000 stock options that can be exercised into
      one share of common stock per stock option.


[4] Based
      on
      64,410,591 shares of common stock on the assumption that all the warrants and
      stock options in footnote #3 above are exercised.




**** **(b)**  **Security
      Ownership of Management**







**(1)**
              **Title
                of Class**
            **(2)**
              **Name
                and Address of Beneficial Owner**
            **(3)**
              **Amount
                and Nature of Beneficial Owner**
            **(4)**
              **Percent**
              **of
                Class**[1]shares
                of
              common
                stock
            **Richard
                N. Jeffs**
              Third
                Floor
              346
                Kensington High Street
              London,
                UK, W14 8NS
            15,077,336[2]
                [3]
            23.4%[4]shares
                of
              common
                stock
            **Gregory
                M. Pek**
              902
                Henley Building 5
              Queens
                Road Central, Hong Kong
            1,890,278[5]
            3.17%[6]shares
                of
              common
                stock
            **Ian
                Robinson**
              902
                Henley Boulevard
              5
                Queen Road
              Central,
                Hong Kong
            870,000[7]
                [8]
            1.46%[9]shares
                of
              common
                stock
            **Michael
                L. Nazmack**
              3280
                Forrest Lane
              York,
                Pennsylvania, 17402
            810,980
            1.36%shares
                of
              common
                stock
            **Eugene
                Sweeney**
              345
                N. Lasalle
              Chicago,
                Illinois, 60610
            1,546,033[10]
                [11]
            2.59%[12]shares
                of
              common
                stock
            **Shawne
                Malone**
              151
                W. Burton Place
              Coach
                House #2
              Chicago,
                Illinois, 60610
            355,592[13]
                [14]
            0.6%[15]shares
                of
              common
                stock
            Directors
                and Executive Officers (as a group)
            20,550,219[16]
            31.39%[17]


[1] Based
      on
      59,498,090 shares of common stock issued and outstanding as of November 10,
      2005, unless indicated otherwise.


[2] This
      number includes 1,267,389 shares of common stock that are beneficially owned
      indirectly.


[3] This
      number includes 4,762,501 warrants that that can be exercised into one share
      of
      common stock per warrant and 150,000 stock options that can be exercised into
      one share of common stock per stock option.


[4] Based
      on
      64,410,591 shares of common stock on the assumption that all the warrants and
      stock options in footnote #3 above are exercised.


[5] This
      number includes 100,000 stock options that can be exercised into one share
      of
      common stock per stock option.


[6] Based
      on
      59,598,090 shares of common stock on the assumption that all stock options
      in
      footnote #5 above are exercised.


[7] This
      number includes 125,000 shares of common stock that are beneficially owned
      indirectly.


[8] This
      number includes 100,000 stock options that can be exercised into one share
      of
      common stock per stock option.


[9] Based
      on
      59,598,090 shares of common stock on the assumption that all stock options
      in
      footnote #8 above are exercised.


[10] This
      number includes 718,742 shares of common stock that are beneficially owned
      indirectly.


[11] This
      number includes 718,742 warrants that that can be exercised into one share
      of
      common stock per warrant.


[12] Based
      on
      60,216,792 shares of common stock on the assumption that all warrants in
      footnote #11 above are exercised.


[13] This
      number includes 69,520 shares of common stock that are beneficially owned
      indirectly.


[14] This
      number includes 144,520 warrants that that can be exercised into one share
      of
      common stock per warrant.


[15] Based
      on
      59,642,610 shares of common stock on the assumption that all warrants in
      footnote #14 above are exercised.


[16] This
      number includes 5,625,763 warrants that that can be exercised into one share
      of
      common stock per warrant and 350,000 stock options that can be exercised into
      one share of common stock per stock option.


[17] Based
      on
      65,473,853 shares of common stock on the assumption that all warrants and stock
      options listed above in footnotes #3, #5, #8, #11 and #14 are
      exercised.




***Page
          - 36***





**(c)**  **Changes
      in Control**





Brek
      is
      not aware of any arrangement that may result in a change in control of
      Brek.





**Item
      12. Certain Relationships and Related Transactions.**





**(a)**  **Transactions
      with Related Parties**





During
      the last two fiscal years, no director, executive officer or security holder
      has
      had any direct or indirect material interest in any transaction or a series
      of
      similar transactions that exceeded $60,000 to which Brek or any of its
      subsidiaries was a party, except for the following:





Brek
      granted an option on May 1, 2004, to Griffin Asset Management, LLC, a drilling
      fund, which gave the drilling fund the right to contribute 50% of the drilling
      and completion costs of any well in which Brek participates in Utah and Wyoming
      in exchange for 50% of Brek’s production and working interest in the well. This
      right increases to 100% if Brek elects not to participate in the well. The
      drilling fund must pay Brek a fee equal to 7.5% of the estimated costs of the
      work when it elects to participate (adjusted when the work is finished to equal
      7.5% of the actual costs), and a 7% royalty (subject to adjustment in certain
      circumstances). The agreement ends on the earlier of April 30, 2012, and the
      date on which the drilling fund acquires an interest 100 wells. The drilling
      fund has not exercised any rights under this agreement. See Exhibit 10.6 -
      Option to Acquire Interests in Oil and Gas Properties for more
      details.





Each
      of
      Eugene Sweeney and Shawne Malone has a beneficial interest in Griffin Asset
      Management, LLC. Both Mr. Sweeney and Mr. Malone are directors of Brek. Mr.
      Sweeney has a 50% beneficial interest in Griffin Asset Management, LLC. Mr.
      Malone is the Co-CEO of and has the other 50% beneficial interest in Griffin
      Asset Management, LLC.





**Item
      13. Exhibits.**





**(a)**  **Index
      to and Description of Exhibits.**





**Exhibit**
              **Description**
              **Status****Exhibit
                  A**
              Audited
                  Financial Statements for the period ended December 31, 2004
              Included**3.1**
              Amended
                  and Restated Articles of Incorporation filed as an Exhibit to Brek’s Form
                  10-K/A filed on May 14, 2002, and incorporated herein by
                  reference.
              Filed**3.2**
              Bylaws
                  filed as an Exhibit to Brek’s registration statement on Form 10 filed on
                  October 21, 1999, and incorporated herein by reference.
              Filed**4.1**
              Rights
                  Agreement dated March 1, 2002 between Brek Energy Corporation and
                  U.S.
                  Bank N.A., filed as an Exhibit to Brek’s Form 8-K (Current Report) filed
                  on March 6, 2002, and incorporated herein by reference.
              Filed**4.2**
              2001
                  Employee Stock Option / Warrant Plan, filed as an Exhibit to Brek’s Form
                  S-8 (Registration Statement) filed on July 10, 2002, and incorporated
                  herein by reference.
              Filed**10.1**
              Stock
                  Purchase Agreement dated March 16, 2000 among Brek Energy Corporation,
                  Balaji Exports Ltd., Rajan Chellarm Mahboobani, Ravi Kishinchand
                  Daswani,
                  and Asia Internet Limited, filed as an attached exhibit to Brek’s Form
                  10-KSB (Annual Report) filed on March 29, 2000, and incorporated
                  herein by
                  reference.
              Filed
      **10.2**
              Stock
                  Purchase Agreement dated March 12, 2002 between Vallenar Energy
                  Corp. and
                  Brek Energy Corporation, filed as an attached exhibit to Brek’s Form
                  10-K/A (Annual Report) filed on September 18, 2002, and incorporated
                  herein by reference.
              Filed**10.3**
              Purchase
                  Agreement dated July 16, 2002 among Gasco Energy, Inc., Pannonian
                  Energy
                  Inc., San Joaquin Oil & Gas Ltd., Brek Energy Corporation, Brek
                  Petroleum Inc., Brek Petroleum (California), Inc. and certain
                  stockholders, filed as an attached exhibit to Brek’s Form 8-K (Current
                  Report) filed on July 31, 2002, and incorporated herein by
                  reference.
              Filed**10.4**
              Share
                  purchase agreement dated October 19, 2001 among First Ecom.com,
                  Inc.,
                  First Commerce Asia Limited, FEDS Acquisition Corporation, First
                  Ecom
                  Systems Limited, Transworld Payment Solutions NV, and First Curacao
                  International Bank NV, filed as an attached exhibit to Brek’s Form 10-KSB
                  (2002 - Annual Report) filed on November 21,
                  2005, and incorporated herein by reference.
              Filed**10.5**
              License
                  agreements dated October 19, 2001 among First Ecom.com, Inc., First
                  Ecom
                  Systems Limited, and Transworld Payment Solutions NV, filed as
                  an attached
                  exhibit to Brek’s Form 10-KSB (2002 - Annual Report) filed on November
                  21,
                  2005, and incorporated herein by reference.
              Filed**10.6**
              Option
                  to Acquire Interests in Oil and Gas Properties dated May 1, 2004
                  between
                  Brek Petroleum Inc. and Griffin Asset Management, LLC
              Included**10.7**
              Natural
                  Gas Purchase Agreement dated December 23, 2004 between Brek Petroleum
                  Inc.
                  and Riverbend Gas Gathering, L.L.C.
              Included**21**
              List
                  of Subsidiaries, filed as an attached exhibit to Brek’s Form 10-KSB (2002
                  - Annual Report) filed on November 21,
                  2005, and incorporated herein by reference.
              Filed**31**
              Certifications
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
              Included**32**
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
              Included**99.1**
              Code
                  of Ethics.
              Included







**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES**






**(1)
      Audit Fees**






The
      aggregate fees billed for each of the last two fiscal years for professional
      services rendered by the principal accountant for Brek’s audit of annual
      financial statements and for review of financial statements included in Brek’s
      Form 10-QSB’s or services that are normally provided by the accountant in
      connection with statutory and regulatory filings or engagements for those fiscal
      years were:




2004
      -
      $0- Hall & Company, Certified Public Accountants Inc.


2003
      - $0
      - Hall & Company, Certified Public Accountants Inc.





2004
      - $0
      - Deloitte
      Touche Tohmatsu, Chartered Accountants


2003
      -
      $0- Deloitte
      Touche Tohmatsu, Chartered Accountants




***Page
          - 37***




**(2)
      Audit-Related Fees**




The
      aggregate fees billed in each of the last two fiscal years for assurance and
      related services by the principal accountants that are reasonably related to
      the
      performance of the audit or review of Brek’s financial statements and are not
      reported in the preceding paragraph were:




2004
      -
      $0- Hall & Company, Certified Public Accountants Inc.


2003
      - $0
      - Hall & Company, Certified Public Accountants Inc.





2004
      - $0
      - Deloitte
      Touche Tohmatsu, Chartered Accountants


2003
      -
      $0- Deloitte
      Touche Tohmatsu, Chartered Accountants




**(3)
      Tax Fees**




The
      aggregate fees billed in each of the last two fiscal years for professional
      services rendered by the principal accountant for tax compliance, tax advice,
      and tax planning were:




2004
      -
      $0- Hall & Company, Certified Public Accountants Inc.


2003
      - $0
      - Hall & Company, Certified Public Accountants Inc.





2004
      - $0
      - Deloitte
      Touche Tohmatsu, Chartered Accountants


2003
      -
      $0- Deloitte
      Touche Tohmatsu, Chartered Accountants




**(4)
      All Other Fees**




The
      aggregate fees billed in each of the last two fiscal years for the products
      and
      services provided by the principal accountant, other than the services reported
      in paragraphs (1), (2), and (3) above were:




2004
      -
      $0- Hall & Company, Certified Public Accountants Inc.


2003
      - $0
      - Hall & Company, Certified Public Accountants Inc.





2004
      - $0
      - Deloitte
      Touche Tohmatsu, Chartered Accountants


2003
      -
      $0- Deloitte
      Touche Tohmatsu, Chartered Accountants




(5)
      Brek’s audit committee’s pre-approval policies and procedures described in
      paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee
      pre-approve all accounting related activities prior to the performance of any
      services by any accountant or auditor.




(6)
      The
      percentage of hours expended on the principal accountant’s engagement to audit
      Brek’s financial statements for the most recent fiscal year that were attributed
      to work performed by persons other than the principal accountant’s full time,
      permanent employees was nil %.




***Page
          - 38***








**SIGNATURES**





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








**BREK
      ENERGY CORPORATION**




*By:
      Richard N. Jeffs*      ******


Name:  **Richard
      N. Jeffs**


Title **:**  **Director
      and CEO**


Dated:  **November**   **,
      2005**








Pursuant
      to the requirements of the Securities Exchange Act of 1934, the following
      persons on behalf of Brek and in the capacities and on the dates indicated
      have
      signed this report below.








**Signature**
            **Title**
            **Date***/s/
                Richard N. Jeffs*
            President,
                CEO, Principal Executive Officer, CFO, Principal Financial
                Officer
              and
                a member of the Board of Directors
            November
                2005*/s/
                Gregory Pek*
            Member
                of the Board of Directors
            November
                2005*/s/
                Ian Robinson*
            Member
                of the Board of Directors
            ****November
                2005*/s/
                Michael L. Nazmack*
            Member
                of the Board of Directors
            ****November
                2005*/s/
                Eugene Sweeney*
            Member
                of the Board of Directors
            ****November
                2005*/s/
                Shawne Malone*
            Member
                of the Board of Directors
            ****November
                2005





***Page
          - 39***











**Exhibit
      31**














***Page
          - 40***




**BREK
      ENERGY CORPORATION** ****


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**






**CERTIFICATION**




I,
      Richard N. Jeffs, certify that:




1.
 
      I have reviewed this annual report on Form 10-KSB of Brek Energy Corporation;




2.
      Based
      on my knowledge, this quarterly report does not contain any untrue statement
      of
      a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the small business issuer
      as
      of, and for, the periods presented in this report;




4.
      The
      small business issuer’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as defined
      in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
      small business issuer and have:




(a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the small business issuer, including its
      consolidated subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this report is being prepared;




(b)
      Designed such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles;




(c)
      Evaluated the effectiveness of the small business issuer’s disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of the
      period covered by this report based on such evaluation; and




(d)
      Disclosed in this report any change in the small business issuer’s internal
      control over financial reporting that occurred during the small business
      issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
      quarter in the case of an annual report) that has materially affected, or is
      reasonably likely to materially affect, the small business issuer’s internal
      control over financial reporting; and




5.
      The
      small business issuer’s other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial reporting,
      to
      the small business issuer’s auditors and the audit committee of the small
      business issuer’s board of directors (or persons performing the equivalent
      functions):




(a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer’s ability to record, process,
      summarize and report financial information; and




(b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer’s internal control over
      financial reporting.






Date:
      November   ,
      2005




***/s/
      Richard N. Jeffs*


Richard
      N. Jeffs


Chief
      Executive Officer




***Page
          - 41***




**BREK
      ENERGY CORPORATION** ****


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**




**CERTIFICATION**




I,
      Richard N. Jeffs, certify that:




1.
 
      I have reviewed this annual report on Form 10-KSB of Brek Energy Corporation;




2.
      Based
      on my knowledge, this quarterly report does not contain any untrue statement
      of
      a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the small business issuer
      as
      of, and for, the periods presented in this report;




4.
      The
      small business issuer’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as defined
      in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
      small business issuer and have:




(a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the small business issuer, including its
      consolidated subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this report is being prepared;




(b)
      Designed such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles;




(c)
      Evaluated the effectiveness of the small business issuer’s disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of the
      period covered by this report based on such evaluation; and




(d)
      Disclosed in this report any change in the small business issuer’s internal
      control over financial reporting that occurred during the small business
      issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
      quarter in the case of an annual report) that has materially affected, or is
      reasonably likely to materially affect, the small business issuer’s internal
      control over financial reporting; and




5.
      The
      small business issuer’s other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial reporting,
      to
      the small business issuer’s auditors and the audit committee of the small
      business issuer’s board of directors (or persons performing the equivalent
      functions):




(a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer’s ability to record, process,
      summarize and report financial information; and




(b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer’s internal control over
      financial reporting.






Date:
      November   ,
      2005






*/s/
      Richard N. Jeffs*


Richard
      N. Jeffs


Chief
      Financial Officer




***Page
          - 42***











**Exhibit
      32**










***Page
          - 43***




**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**






In
      connection with the Annual Report of Brek Energy Corporation (“Brek”) on Form
      10-KSB for the period ending December 31, 2004 as filed with the Securities
      and
      Exchange Commission on the date hereof (the “Report”), I, Richard N. Jeffs,
      President and Chief Executive Officer of Brek and a member of the Board of
      Directors, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:




(1)
        The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of the Company.






*/s/
      Richard N. Jeffs*


Richard
      N. Jeffs


Chief
      Executive Officer






November   ,
      2005




***Page
          - 44***




**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**






In
      connection with the Annual Report of Brek Energy Corporation (“Brek”) on Form
      10-KSB for the period ending December 31, 2004 as filed with the Securities
      and
      Exchange Commission on the date hereof (the “Report”), I, Richard n. Jeffs,
      Chief Financial Officer of Brek and a member of the Board of Directors, certify,
      pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:




(1)
        The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of the Company.








*/s/
      Richard N. Jeffs*


Richard
      N. Jeffs


Chief
      Financial Officer




November   ,
      2005




***Page
          - 45***







**Exhibit
      A**


**Financial
      Statements**







***Page
          - 46***






**BREK
        ENERGY CORPORATION**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **December
        31, 2004**






**REPORT
      OFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM**


**CONSOLIDATED
        BALANCE SHEETS**
 
 **CONSOLIDATED
        STATEMENTS OF
        OPERATIONS**
 
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND
        COMPREHENSIVE INCOME**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL
        STATEMENTS**
 
 
 ***Page
            - 47***
  16140
          SAND CANYON AVE., SUITE 100 IRVINE,
            CALIFORNIA 92618
 **H** **ALL** **&** **C** **OMPANY** *Certified
          Public Accountants, Inc* *.* (949)
          910-HALL (4255)
 TAX,
          FINANCIAL AND BUSINESS ADVISORY SERVICES FAX
          (949)
          910-4256
  **R****EPORT
          OF****I****NDEPENDENT****R****EGISTERED****P****UBLIC****A****CCOUNTING****F****IRM**
  September
          21, 2005
  To
          the
          Board of Directors and Stockholders of
 Brek
          Energy Corporation (Formerly First Ecom.com, Inc.)
 London,
          United Kingdom
  We
            have
            audited the accompanying consolidated balance sheets of Brek Energy Corporation
            as of December
            31, 2004 and 2003, and the related consolidated statements of operations,
            stockholders' equity,
            and cash flows for the two years then ended. These financial statements
            are the responsibility
            of the Company's management. Our responsibility is to express an opinion
            on
            these financial
            statements based on our audits.
  We
            conducted our audits in accordance with the standards of the Public Company
            Accounting Oversight
            Board (United States). Those standards require that we plan and perform
            the
            audits to obtain
            reasonable assurance about whether the financial statements are free
            of material misstatement.
            The Company is not required to have, nor were we engaged to perform,
            an audit of its
            internal control over financial reporting. Our audits included consideration
            of
            internal control over
            financial reporting as a basis for designing audit procedures that are
            appropriate in the circumstance,
            but not for the purpose of expressing an opinion on the effectiveness
            of the Company's
            internal control over financial reporting. Accordingly, we express no
            such
            opinion. An
            audit
            includes examining, on a test basis, evidence supporting the amounts
            and
            disclosures in the
            financial statements. An audit also includes assessing the accounting
            principles
            used and significant
            estimates made by management, as well as evaluating the overall financial
            statement presentation.
            We believe that our audits provide a reasonable basis for our
            opinion.
  In
            our
            opinion, the financial statements referred to above present fairly, in
            all
            material respects, the consolidated
            financial position of Brek Energy Corporation as of December 31, 2004
            and 2003, and
            the
            results of its operations and its cash flows for the two years then ended
            in
            conformity with accounting
            principles generally accepted in the United States of America.
   
 **H** **ALL** **&
          C** **OMPANY**
 **Irvine,
          California**
  
 ***Page
            - 48***
 **BREK
          ENERGY CORPORATION**
 **CONSOLIDATED
          BALANCE SHEETS**
    **December
                    31,****2004**
                
                
                **2003****ASSETS****Current
                    Assets**Cash
                $
                230,848
                
                $
                2,318Trade
                    accounts receivable
                
                56,802
                
                
                6,028Prepaids
                
                1,238
                
                
                -Due
                    from related party
                
                116,594
                
                
                -405,482
                
                
                8,346Oil
                    and gas properties (Note 4)
                
                4,800,422
                
                
                2,339,345**TOTAL
                    ASSETS**
                **$**
                **5,205,904**
                
                **$**
                **2,347,691****LIABILITIES
                    AND STOCKHOLDERS' EQUITY****Current
                    Liabilities**Accounts
                    payable and accrued liabilities
                $
                1,026,158
                
                $
                1,347,517Due
                    to related parties (Note 5)
                
                168,733
                
                
                210,957**TOTAL
                    LIABILITIES**
                
                **1,194,891**
                
                
                **1,558,474****Commitments
                    and contingencies (Note 12)****Minority
                    interest**
                
                70,001
                
                
                65,342**STOCKHOLDERS'
                    EQUITY**Share
                    capital (Note 6)Authorized300,000,000
                    common shares, $0.001 par valueIssued
                    and outstanding55,331,420
                    and 28,713,630 common shares
                
                55,331
                
                
                28,714Additional
                    paid in capital
                
                56,706,041
                
                
                54,021,239Common
                    stock purchase warrants
                
                8,515,348
                
                
                8,016,124Deficit
                
                (61,335,708
                )
                
                (61,342,202
                )**TOTAL
                    STOCKHOLDERS' EQUITY**
                
                **3,941,012**
                
                
                **723,875****TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY**
                **$**
                **5,205,904**
                
                **$**
                **2,347,691**
 The
          accompanying notes are an integral part of these consolidated financial
          statements
  ***Page
            - 49***
  **BREK
          ENERGY CORPORATION**
 **CONSOLIDATED
          STATEMENTS OF OPERATIONS**
    **The
                    Years Ended****Ended
                    December 31,****2004**
                
                
                **2003****Revenue**
                $
                363,053
                
                $
                22,077**Expenses****Operating
                    expenses**General
                    and administrative
                
                351,900
                
                
                287,140Total
                    operating expenses
                
                351,900
                
                
                287,140**Income
                    (Loss from operations)**
                
                11,153
                
                
                (265,063
                )**Other
                    Income (expenses)**Interest
                    income
                
                -
                
                
                6,572Other
                    income
                
                -
                
                
                3,926Total
                    other (expenses) income
                
                -
                
                
                10,498**Net
                    Income (Loss) before Minority Interest**
                
                11,153
                
                
                (254,565
                )**Minority
                    Interest**
                
                (4,659
                )
                
                (7,314
                )**Net
                    Income (Loss)**
                **$**
                **6,494**
                
                **$**
                **(261,879**
                **)****Basic
                    and diluted earnings (loss) per share**
                $
                0.01
                
                $
                (0.01
                )**Weighted
                    Average Shares Outstanding**
                
                **41,903,934**
                
                
                **28,105,904**
 The
          accompanying notes are an integral part of these consolidated financial
          statements
  ***Page
            - 50***
  **BREK
          ENERGY CORPORATION**
 **CONSOLIDATED
          STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
          COMPREHENSIVE INCOME**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2004 and 2003**
    **Accumulated****Common
                    Stock Issued**
                
                **Additional**
                
                
                **Common
                    Stock**
                
                
                **Other****Number
                    of**
                
                
                
                
                
                **Paid
                    in**
                
                
                **Purchase**
                
                
                **Comprehensive****Shares**
                
                
                **Amount**
                
                
                **Capital**
                
                
                **Warrants**
                
                
                **(Loss)
                    Income**
                
                
                **Total****Balance
                    January 1, 2003**
                
                **26,560,037**
                
                **$**
                **26,561**
                
                **$**
                **53,635,745**
                
                **$**
                **8,016,124**
                
                **$**
                **(61,080,323**
                **)**
                **$**
                **598,107**Issuance
                    of common shares for cash
                
                277,776
                
                
                277
                
                
                49,723
                
                
                
                
                
                -
                
                
                50,000Issuance
                    of common shares for debt
                
                1,875,817
                
                
                1,876
                
                
                335,771
                
                
                -
                
                
                -
                
                
                337,647Net
                    loss for the year
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (261,879
                )
                
                (261,879
                )**Balance,
                    December 31, 2003**
                
                **28,713,630**
                
                
                **28,714**
                
                
                **54,021,239**
                
                
                **8,016,124**
                
                
                **(61,342,202**
                **)**
                
                **723,875**Units
                    issued for cash
                
                23,438,623
                
                
                23,438
                
                
                2,332,981
                
                
                785,474
                
                
                -
                
                
                3,141,893Units
                    issued for debt
                
                3,179,167
                
                
                3,179
                
                
                218,071
                
                
                73,750
                
                
                -
                
                
                295,000Finders
                    fees
                
                -
                
                
                -
                
                
                (226,250
                )
                
                -
                
                
                -
                
                
                (226,250
                )Common
                    stock purchase warrants, expired
                
                -
                
                
                -
                
                
                360,000
                
                
                (360,000
                )
                
                -
                
                
                -Net
                    income for the year
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                6,494
                
                
                6,494**Balance,
                    December 31, 2004**
                
                **55,331,420**
                
                **$**
                **55,331**
                
                **$**
                **56,706,041**
                
                **$**
                **8,515,348**
                
                **$**
                **(61,335,708**
                **)**
                **$**
                **3,941,012**
 The
          accompanying notes are an integral part of these consolidated financial
          statements
 
 ***Page
            - 51***
 **BREK
          ENERGY CORPORATION**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
    **The
                    Years Ended December 31,****2004**
                
                
                **2003****CASH
                    FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES**Net
                    income (loss) for the year
                $
                6,494
                
                $
                (261,879
                )Adjustments
                    to reconcile net income (loss) to net cash used in operating
                    activities:Minority
                    interest
                
                4,659
                
                
                7,314Issuance
                    of shares in settlement of debt
                
                -
                
                
                -Finders
                    fees paid with shares for debt
                
                -
                
                
                -11,153
                
                
                (254,565
                )Changes
                    in operating assets and liabilities:Increase
                    in trade accounts receivable
                
                (50,774
                )
                
                (5,150
                )(Increase)
                    decrease in prepaids
                
                (1,238
                )
                
                32,447Increase
                    in amounts due from related party
                
                (116,594
                )
                
                -(Decrease)
                    increase in accounts payable and accrued liabilities
                
                (288,954
                )
                
                365,058(Decrease)
                    increase in amounts due to related parties
                
                (5,879
                )
                
                117,212**NET
                    CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES**
                
                (452,286
                )
                
                255,002**CASH
                    FLOWS (USED IN) INVESTING ACTIVITIES**Cash
                    spent on oil and gas properties
                
                (2,461,077
                )
                
                (306,485
                )**NET
                    CASH (USED IN) INVESTING ACTIVITIES**
                
                (2,461,077
                )
                
                (306,485
                )**CASH
                    FLOWS PROVIDED BY FINANCING ACTIVITIES**Proceeds
                    from issuance of common stock
                
                3,141,893
                
                
                50,000**NET
                    CASH PROVIDED BY FINANCING ACTIVITIES**
                
                3,141,893
                
                
                50,000**Net
                    increase (decrease) in cash**
                
                **228,530**
                
                
                **(1,483**
                **)**Cash
                    at the beginning of year
                
                2,318
                
                
                3,801**Cash
                    at the end of year**
                **$**
                **230,848**
                
                **$**
                **2,318****Supplemental
                    cash information:****Cash
                    paid during the year/period for:**Interest
                $
                -
                
                $
                -**Non
                    Cash Transactions:**Issuance
                    of common shares in settlement of debt
                $
                32,405
                
                $
                65,675Issuance
                    of common shares in settlement of amounts due to related
                    parties
                $
                36,345
                
                $
                271,972Issuance
                    of common shares to an officer in payment of finders fees
                $
                226,250
                
                $
                -Expiry
                    of common stock purchase warrants
                $
                360,000
                
                $
                -Issuance
                    of common stock purchase warrants
                $
                859,224
                
                $
                -
 The
          accompanying notes are an integral part of these consolidated financial
          statements
 
 ***Page
            - 52***
  **BREK
        ENERGY CORPORATION**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2004**


**NOTE
        1 - ORGANIZATION AND PRINCIPAL ACTIVITIES**
 
 **Organization**
 First
        Ecommerce Asia Limited (“FEAL”) was incorporated in Hong Kong on September 16,
        1998. On January 28, 1999, FEAL, entered into an agreement and plan of merger
        with JRL Resources Corp., (“JRL Resources”) a company incorporated in the State
        of Florida on November 13, 1996. Pursuant to the terms of the agreement,
        plan of
        merger and related agreements, 3,015,000 newly issued shares of JRL Resources
        and 985,000 shares held by existing shareholders of JRL Resources were exchanged
        for two shares of FEAL. As a result of this business combination FEAL became
        a
        wholly-owned subsidiary of JRL Resources.
 
 The
        merger between JRL Resources and FEAL was a merger of a private operating
        company, (FEAL) into a public shell corporation, with nominal net assets,
        that
        resulted in the owners and management of the private company (FEAL) obtaining
        operating control of the combined company after the transaction. For accounting
        purposes, the transaction has been treated as a reverse merger, of JRL Resources
        by FEAL with FEAL deemed to be the accounting acquirer.
 
 Pursuant
        to an agreement and plan of merger dated February 12, 1999, JRL Resources
        was
        merged with and into Brek Energy Corporation (formerly First Ecom.com, Inc.)
        (“BREK” or the Company”), a company incorporated in the State of Nevada on
        February 12, 1999, with no shares issued and outstanding. Pursuant to the
        agreement and plan of merger, all of the 12,040,000 outstanding common shares
        of
        JRL Resources were exchanged on a one-for-one basis for newly issued shares
        of
        BREK, with BREK being the surviving corporation. For accounting purposes,
        this
        merger is treated as a re-incorporation of JRL Resources as BREK.
 
 The
        Company was originally established to facilitate electronic payment processing
        of e-commerce transactions for merchants and banks across the Internet. The
        Company developed an electronic gateway to convert consumers’ credit card
        information, collected by merchants on the Internet, into a format that could
        be
        processed by banks. The Company disposed of its payment processing business
        on
        September 30, 2002.
 
 During
        2001, the Company changed its primary business to that of oil and gas
        exploration and on July 19, 2001, acquired a 26% non-dilutable voting interest
        in Gasco Energy, Inc., (“Gasco”). On July 16, 2002, the Company exchanged all of
        its shareholdings in Gasco for an undivided interest in all of Gasco’s
        undeveloped mineral leases in Utah, Wyoming, and California. At the same
        time,
        the Company acquired an additional undivided interest in Gasco’s undeveloped
        mineral leases from certain third parties in exchange for the issuance of
        4,125,000 shares of the Company. The main focus of the Company’s oil and gas
        exploration business has been centered in the United States.
 
 In
        March
        2002, the Company acquired a 26% non-dilutable voting interest in Vallenar
        Energy Corp. (“Vallenar”) another company engaged in oil and gas exploration. On
        June 28, 2002, the Company increased its ownership of Vallenar to
        51.53%.
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 **Principles
        of Consolidation**
 The
        consolidated financial statements include the financial statements of the
        Company and its subsidiaries. All significant intercompany balances and
        transactions have been eliminated.
 
 **Cash
        and Cash Equivalents**
 For
        purposes of the balance sheets and statements of cash flows, the Company
        considers all highly liquid debt instruments purchased with maturity of three
        months or less to be cash equivalents.
 
 ***Page
            - 53***
  **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 **Accounting
        Estimates**
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
 The
        Company’s financial statements are based on a number of significant estimates,
        including oil and gas reserve quantities which is the basis for the calculation
        of depletion and impairment of oil and gas properties.
 
 **Concentration
        of Credit Risk**
 Financial
        instruments that potentially subject the Company to a concentration of credit
        risk consist primarily of cash and cash equivalents. The Company places its
        cash
        with various major financial institutions and, by policy, limits the amount
        of
        credit exposure with any one financial institution.
 
 **Fair
        Value of Financial Instruments**
 The
        carrying values reflected in the consolidated balance sheets for cash and
        cash
        equivalents, trade accounts receivable, accounts payable and accrued liabilities
        approximate their fair values because of the short term nature of these
        instruments. The fair value of the note receivable of $1 is an estimate based
        on
        the value the Company expects to realize within the next twelve months. Amounts
        due to related parties approximate their fair value due to the related party
        nature of the debt and the amount receivable from a related party approximates
        its fair value because it was repaid in the second quarter of 2005.
  **Revenue
        Recognition**
 Oil
        and
        gas revenue is recognized as income when the oil or gas is produced and
        sold.
 
 **Long-Lived
        Assets**
 At
        December 31, 2004 the Company’s only long lived asset is its oil and gas
        properties. At December 31, 2004 the Company determined that the oil and
        gas
        properties reflect their fair value and did not recognized an impairment
        loss.
 
 **Income
        Taxes**
 Income
        tax expense is based on pre-tax financial accounting income. The Company
        recognizes deferred tax assets and liabilities based on differences between
        the
        financial reporting and tax bases of assets and liabilities using the enacted
        tax rates and laws that are expected to be in effect when the differences
        are
        expected to be recovered. The Company provides a valuation allowance for
        deferred tax assets for which it does not consider realization of such assets
        to
        be more likely than not.
 
 **Research
        and Development and Advertising**
 Research
        and development and advertising costs are expensed as incurred. Research
        and
        development costs amounted to $Nil in each of the years ended December 31,
        2004
        and 2003. Advertising costs amounted to $18,368 and $2,037 for the years
        ended
        December 31, 2004 and 2003. **
 
 **Comprehensive
        Income**
 Comprehensive
        income reflects changes in equity that results from transactions and economic
        events from non-owner sources. The Company had no comprehensive income for
        the
        years ended December 31, 2004 and 2003.
 
 ***Page
            - 54***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 **Oil
        and Gas Properties**
 The
        Company follows the full cost method of accounting whereby all costs related
        to
        the acquisition of oil and gas leases and acquisition and development of
        oil and
        gas properties are capitalized into a single cost center (“full cost pool”).
        Such costs include lease acquisition costs, geological and geophysical expenses,
        overhead directly related to exploration and development activities and costs
        of
        drilling both productive and non-productive wells. Proceeds from property
        sales
        are generally credited to the full cost pool without gain or loss recognition
        unless such a sale would significantly alter the relationship between
        capitalized costs and the proved reserves attributable to these costs. A
        significant alteration would typically involve a sale of 25% or more of the
        proved reserves related to a single full cost pool.
 
 Depletion
        of exploration and development costs are computed using the units of production
        method based upon estimated proven oil and gas reserves. The costs of unproved
        properties are withheld from the depletion base until such time as they are
        either developed or abandoned. The properties are reviewed periodically for
        impairment. Total well costs are transferred to the depletable pool even
        when
        multiple targeted zones have not been fully evaluated. For depletion and
        depreciation purposes, relative volumes of oil and gas production and reserves
        are converted at the energy equivalent rate of six thousand cubic feet of
        natural gas to one barrel of crude oil.
 
 Under
        the
        full cost method of accounting, capitalized oil and gas property costs less
        accumulated depletion and net of deferred income taxes may not exceed an
        amount
        equal to the present value, discounted at 10%, of estimated future net revenues
        from proved oil and gas reserves plus the cost or estimated fair value, if
        lower, of unproven properties. Should capitalized costs exceed this ceiling,
        impairment is recognized. The present value of estimated future net revenues
        is
        computed by applying current prices of oil and gas to estimated future
        production of proved oil and gas reserves as of period-end, less estimated
        future expenditures to be incurred in developing and producing the proved
        reserves assuming the continuation of existing economic conditions. The
        Company’s oil and gas wells began producing during the first quarter of 2003, no
        depletion was recorded during the years ended December 31, 2004 or 2003 because
        at December 31, 2002, the Company’s oil and gas properties were either written
        down to a nominal value or written down to their net present value, based
        on a
        December 31, 2004 reserves study. (Note 4)
 
 **Basic
        and Diluted Net Income (Loss) Per Common Share (“EPS”)**
 Basic
        net
        loss per share is computed by dividing net loss attributable to the common
        stockholders by the weighted average number of common shares outstanding
        during
        the reporting period. The shares of restricted common stock granted to certain
        officers, directors and employees of the Company are included in the computation
        only after the shares become fully vested. Diluted net income per common
        share
        includes the potential dilution that could occur upon exercise of the options
        and warrants to acquire common stock computed using the treasury stock method
        which assumes that the increase in the number of shares is reduced by the
        number
        of shares which could have been repurchased by the Company with the proceeds
        from the exercise of the options and warrants (which were assumed to have
        been
        made at the average market price of the common shares during the reporting
        period). The outstanding common stock options and warrants have not been
        included in the computation of diluted net loss per share during all periods
        because their inclusion would have been anti-dilutive.
 
 As
        of
        December 31, 2004, the Company had 55,331,420 shares of common stock issued
        and
        outstanding. The Company also had 1,580,000 shares of common stock issuable
        upon
        exercise of outstanding options and 28,361,472 shares of common stock issuable
        upon exercise of outstanding warrants. Additional options or warrants may
        be
        granted to purchase 3,420,000 shares of common stock under the Company’s 2001
        stock option plan.
 
 ***Page
            - 55***
  **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 **Stock-based
        Compensation**
 The
        Company accounts for its stock-based compensation using Accounting Principles
        Board Opinion No. 25 (“APB 25”) and related interpretations. Under APB 25,
        compensation expense is recognized for stock options with an exercise price
        that
        is less than the market price on the grant date of the option. For stock
        options
        with exercise prices at or above the market value of the stock on the grant
        date, the Company adopted the disclosure-only provisions of Statement of
        Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation”
(“SFAS 123”) for the stock options granted to the employees and directors of the
        Company. Accordingly, no compensation cost has been recognized for these
        options. Compensation expense has been recognized in the accompanying financial
        statements for stock options that were issued to our outside consultants.
        Had
        compensation expense for the options granted to our employees and directors
        been
        determined based on the fair value at the grant date for options, consistent
        with the provisions of SFAS 123, the Company’s net loss and net loss per share
        for the years ended December 31, 2004 and 2003 would have been increased
        to the
        pro forma amounts indicated below:
 
 **For
                  the Year Ended**
              
              **For
                  the Year Ended****December
                  31, 2004**
              
              
              **December
                  31, 2003**Net
                  Income (loss) attributable to common shareholders:As
                  reported
              
              $
              6,494
              
              $
              (261,879
              )Stock-based
                  employee compensationdetermined
                  under the fair valuebased
                  method
              
              
              -
              
              
              (490
              )Pro
                  forma
              
              $
              6,494
              
              $
              (262,369
              )Net
                  loss per common share:As
                  reported
              
              $
              0.01
              
              $
              (0.01
              )Pro
                  forma
              
              $
              0.01
              
              $
              (0.01
              )
 
 The
        fair
        value of the common stock options granted during the years ended December
        31,
        2004 and 2003, for disclosure purposes was estimated on the grant dates using
        the Black Scholes Pricing Model and the following assumptions.
 
 2004
              2003Expected
                  dividend yield
              -
              -Expected
                  price volatility
              131%
                  - 151%
              131%
                  - 151%Risk-free
                  interest rate
              3%
                  to 5.5%
              3%
                  to 5.5%Expected
                  life of options
              5
                  years
              5
                  years
 
 The
        Company accounts for equity instruments issued to non-employees in accordance
        with the provisions of SFAS 123, and Emerging Issues Task Force No. 96-18
        (“EITF
        96-18”). All transactions in which goods or services are consideration received
        for the issuance of equity instruments are accounted for based on the fair
        value
        of the consideration received or the fair value of the equity instrument,
        whichever is more reliably measurable.
 
 ***Page
            - 56***
  **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 **Stock-based
        Compensation, continued**
 The
        Company accounts for the re-pricing and re-issuing of stock options under
        the
        variable accounting provisions of FIN 44.
 
 **Recent
        Accounting Pronouncements**
 The
        Securities and Exchange Commission issued Staff Accounting Bulletin SAB No.
        106
        (“SAB 106”) in September 2004 regarding the application of SFAS 143 for oil and
        gas producing entities that follow the full cost accounting method. SAB 106
        states that after adoption of SFAS 143, the future cash outflows associated
        with
        settling asset retirement obligations that have been accrued on the balance
        sheet should be excluded from the present value of estimated future net cash
        flows used for the full cost ceiling test calculation. The Company has
        calculated its ceiling test computation in this manner since the adoption
        of
        SFAS 143 and therefore when SAB 106 was adopted in the third quarter of 2004,
        it
        did not have a material effect on the Company’s financial
        statements.
 
 During
        March 2004, the Emerging Issues Task Force (“EITF”) determined that mineral
        rights as defined in EITF Issue 04-2, “Whether Mineral Rights are Tangible or
        Intangible Assets”, are tangible assets and should not be considered intangible
        assets in SFAS 141, “Business Combinations” (“SFAS 141”) and SFAS 142, “Goodwill
        and Intangible Assets” (”SFAS 142”). The FASB, in agreement with this
        determination, amended SFAS 141 and 142 through the issuance of FASB Staff
        Position (“FSP”) FSP 141-1 and 142-1. In addition, the proposed FSP 142-b
        confirms that SFAS 142 did not change the balance sheet classification or
        disclosures of mineral rights of oil and gas producing entities. The Company
        classifies its oil and gas leaseholds as tangible oil and gas properties
        which
        is consistent with EITF 04-02, FSP 141-1 and 142-1 and therefore such
        pronouncements did not have a material effect on the Company’s financial
        condition or results of operations.
 
 In
        March
        2004, the FASB issued consensus on EITF 03-6, “Participating Securities and the
        Two-Class Method Under FASB Statement No. 128, Earnings Per Share,” related to
        calculating earnings per share with respect to using the two-class method
        for
        participating securities. This pronouncement is effective for all periods
        after
        March 31, 2004, and requires prior period to be restated. As the Company
        only
        has one class of shares and has incurred net losses in the current and prior
        periods, the adoption of EITF 03-6 did not have a material effect on the
        Company’s financial condition or results of operations.
 
 In
        December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” (“SFAS
        123(R)”), which is a revision of SFAS No. 123, Accounting for Stock-Based
        Compensation. SFAS 123 (R) is effective for public companies for the first
        fiscal year beginning after June 15, 2005, supersedes APB Opinion No. 25,
        Accounting for Stock Issued to Employees, and amends SFAS 95, Statement of
        Cash
        Flows.
 
 SFAS
        123(R) requires all share-based payments to employees, including grants of
        employee stock options, to be recognized in the income statement based on
        their
        fair values. Pro-forma disclosure is no longer an alternative. The new standard
        will be effective for the Company, in the quarter beginning July 1, 2005.
        SFAS
        123(R) permits companies to adopt its requirements using either a “modified
        prospective” method or a “modified retrospective” method. Under the “modified
        prospective” method, compensation cost is recognized in the financial statements
        beginning with the effective date, based on the requirements of SFAS 123(R)
        for
        all share-based payments granted after that date, and based on the requirements
        of SFAS 123 for all unvested awards granted prior to the effective date of
        SFAS
        123(R). Under the “modified retrospective” method, the requirements are the same
        as under the “modified prospective” method, but it also permits entities to
        restate financial statements of previous periods, either for all periods
        presented or to the beginning of the fiscal year in which the statement is
        adopted, based on previous pro forma disclosures made in accordance with
        SFAS
        123. The Company has not yet determined which of the methods it will use
        upon
        adoption. The Company has not yet completed its evaluation but expects the
        adoption of SFAS 123(R) to have an effect on the financial statements similar
        to
        the pro forma effects reported in the Stock Based Compensation disclosure
        above.
  ***Page
            - 57***
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
 **Reclassifications**
 Certain
        prior year amounts in the accompanying consolidated financial statements
        have
        been reclassified to conform to the current year’s presentation. These
        reclassifications had no effect on the results of operations of financial
        position for any year presented.
 
 **NOTE
        3 - NOTE RECEIVABLE**
 At
        December 31, 2002, as a result of a dispute with Transworld, the Company
        undertook an assessment on its notes receivable and recorded an impairment
        charge of $1,901,106 to reduce the carrying value of the asset to $Nil which
        is
        the estimated fair value that the Company expects to receive within the next
        twelve months. (Note 12)
 
 **NOTE
        4 - OIL AND GAS PROPERTIES**
 The
        Company has a 25% interest in 129,514 gross acres (17,881 net acres) in the
        Uinta Basin region in Utah, 125,572 gross acres (21,307 net acres) in the
        Greater Green River Basin of Wyoming and 3,868 gross acres (880 net acres)
        in
        Kern County and San Luis Obispo County in California and a 50% interest in
        51,194 gross acres (8,865 net acres) in Edwards County in Texas.
 
 The
        following table presents the Company’s oil and gas property acquisitions,
        exploration and development expenditures and an adjustment for impairment
        charges:
 
 December
                  31,2004
              
              
              2003Property
                  acquisition costs
              
              $
              18,937,141
              
              $
              18,137,141Exploration
                  and development expenditures
              
              
              2,497,468
              
              
              836,39121,434,609
              
              
              18,973,532Less:
                  Impairment charges
              
              
              (16,634,187
              )
              
              (16,634,187
              )$
              4,800,422
              
              $
              2,339,345
 
 
 ***Page
            - 58***
 
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 **NOTE
        4 - OIL AND GAS PROPERTIES, continued**
 At
        December 31, 2004 and 2003, the Company’s proved and unproved oil and gas
        properties consisted of leasehold interests and exploration and development
        costs related to their interests in Texas, Utah, Wyoming and California.
        The
        Company’s proven and unproven properties are evaluated periodically for the
        possibility of potential impairment. At December 31, 2004 and 2003, the
        Company’s oil and gas properties were valued as follows:
 
 
 **December
                  31,**
                **2004**
              **December
                  31, 2003****Proved
                and Unproved Properties**Property
                acquisition costs:Utah
              
              $
              2,832,560
              
              $
              2,032,560Wyoming
              
              
              100
              
              
              100California
              
              
              100
              
              
              100Texas
              
              
              100
              
              
              100Exploration
                & development costs:Wyoming
              
              
              -
              
              
              -Utah
              
              
              1,967,562
              
              
              306,485California
              
              
              -
              
              
              -Texas
              
              $
              4,800,422
              
              $
              2,339,345
 During
        the years ended December 31, 2004 and 2003, no impairment charges were recorded
        against the Texas, California and Wyoming properties. At December 31, 2002,
        the
        Company recorded impairment charges against their Utah properties based on
        a
        December 31, 2004, reserves study. As a result of this study the Company
        valued
        the Utah oil and gas properties at an amount equal to the present value,
        discounted at 10%, of the estimated future net revenues from proved oil and
        gas
        reserves of approximately $5.7 million (calculated, based on estimated net
        revenues of $18.5 million) plus the cost, or estimated fair value, if lower
        of
        unproved properties, less estimated future expenditures to be incurred in
        developing and producing the proved reserves of approximately $900,000. The
        present value of estimated future net revenues was computed by applying current
        prices of oil and gas to estimated future production of proved oil and gas
        reserves as of December 31, 2004, assuming the continuation of existing economic
        conditions.
 
 **NOTE
        5 - RELATED PARTY TRANSACTIONS**
 During
        the years ended December 31, 2004 and 2003, the Company paid $nil and $30,000
        in
        consulting fees to a director of the Company. At December 31, 2004 and 2003,
        the
        Company was indebted to this director in the amount of $123,463.
 
 During
        the years ended December 31, 2004 and 2003, the Company paid $nil and $12,000
        in
        consulting fees to a director of the Company. At December 31, 2004 and 2003,
        the
        Company was indebted to this director in the amount of $12,000.
 
 ***Page
            - 59***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 
 **NOTE
        5 - RELATED PARTY TRANSACTIONS, continued**
 At
        December 31, 2004 and 2003, the Company had $33,270 and $22,403 in accounts
        payable to directors, former directors or companies controlled by directors.
 
 At
        December 31, 2004 and 2003, the Company had $116,594 and $nil in accounts
        receivable from a limited partnership controlled by relatives of two of the
        Company’s directors. These funds were repaid during the second quarter of 2005.
 
 At
        December 31, 2004, an officer of the Company received shares in payment of
        finder’s fees of $226,250 and in payment of debt of $25,951. (Note
        6)
 
 During
        the year ended December 31, 2003, the Company settled $271,972 in related
        party
        debt by issuing 1,510,958 common shares at $0.18 per share. (Note
        6)
 
 **NOTE
        6 - COMMON STOCK**
 On
        April 14, 2003, the Company issued 277,776 common shares at $0.18 per share
        by
        way of a private placement for total proceeds of $50,000.
 
 On
        April
        14, 2003, the Company converted $308,947 in accounts payable and $28,700
        in
        loans payable into 1,875,817 common shares at $0.18 per share. (Note
        5)
 
 On
        March
        3, 2004, the Company issued a total of 8,750,000 units at $0.05 for each
        unit,
        by way of a private placement for cash of $437,500. Each unit is comprised
        of
        one common share and one common share purchase warrant entitling the holder
        to
        purchase one common share for $0.35. The warrants have a term of one year
        and
        will expire on March 3, 2005. The fair value of the warrants was estimated
        to be
        $109,375 and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        March
        3, 2004, the Company issued a total of 875,000 units, to an officer of the
        Company, at $0.05 for each unit, for finders’ fees of $43,750. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.35. The warrants have a term
        of
        one year and will expire on March 3, 2005. The fair value of the warrants
        was
        estimated to be $10,938 and has been recorded as a separate component of
        stockholders’ equity. (Notes 5 and 9)
 
 On
        March
        3, 2004, the Company issued a total of 519,020 units, to an officer of the
        Company, at $0.05 for each unit, in exchange for debt totaling $25,951. Each
        unit is comprised of one common share and one common share purchase warrant
        entitling the holder to purchase one common share for $0.35. The warrants
        have a
        term of one year and will expire on March 3, 2005. The fair value of the
        warrants was estimated to be $6,488 and has been recorded as a separate
        component of stockholders’ equity. (Note 9)
 
 On
        May 6,
        2004, the Company issued a total of 4,666,667 units at $0.15 for each unit,
        by
        way of a private placement for cash of $700,000. Each unit is comprised of
        one
        common share and one common share purchase warrant entitling the holder to
        purchase one common share for $0.25. The warrants have a term of three years
        and
        will expire on May 6, 2007. The fair value of the warrants was estimated
        to be
        $175,000 and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        May 6,
        2004, the Company issued a total of 66,667 units, to an officer of the Company,
        at $0.15 for each unit, for finders’ fees of $10,000. Each unit is comprised of
        one common share and one common share purchase warrant entitling the holder
        to
        purchase one common share for $0.25. The warrants have a term of three years
        and
        will expire on May 6, 2007. The fair value of the warrants was estimated
        to be
        $2,500 and has been recorded as a separate component of stockholders’ equity.
        (Notes 5 and 9)
 
 ***Page
            - 60***
  **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 **NOTE
        6 - COMMON STOCK, continued**
 On
        May 6, 2004, the Company issued a total of 855,980 units at $0.05 for each
        unit,
        in exchange for debt totaling $42,799. Each unit is comprised of one common
        share and one common share purchase warrant entitling the holder to purchase
        one
        common share for $0.35. The warrants have a term of one year and will expire
        on
        May 6, 2005. The fair value of the warrants was estimated to be $10,700 and
        has
        been recorded as a separate component of stockholders’ equity. (Note
        9)
  On
        May
        24, 2004, the Company issued a total of 2,000,000 units at $0.20 for each
        unit,
        by way of a private placement for cash of $375,000 and an accounts receivable
        for $25,000. Each unit is comprised of one common share and one common share
        purchase warrant entitling the holder to purchase one common share for $0.30.
        The warrants have a term of three years and will expire on May 24, 2007.
        The
        fair value of the warrants was estimated to be $100,000 and has been recorded
        as
        a separate component of stockholders’ equity. The $25,000 account receivable was
        collected in July, 2004. (Note 9)
 
 On
        May
        24, 2004, the Company issued a total of 1,500,000 units at $0.20 for each
        unit,
        by way of a private placement for cash of $300,000. Each unit is comprised
        of
        one common share and one common share purchase warrant entitling the holder
        to
        purchase one common share for $0.35. The warrants have a term of two years
        and
        will expire on May 24, 2006. The fair value of the warrants was estimated
        to be
        $75,000 and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        May
        24, 2004, the Company issued a total of 350,000 units to an officer of the
        Company, at $0.20 for each unit, for finders’ fees of $70,000. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.30. The warrants have a term
        of
        three years and will expire on May 24, 2007. The fair value of the warrants
        was
        estimated to be $17,500 and has been recorded as a separate component of
        stockholders’ equity. (Notes 5 and 9)
 
 On
        May
        28, 2004, the Company issued a total of 250,000 units at $0.20 for each unit,
        by
        way of a private placement for cash of $50,000. Each unit is comprised of
        one
        common share and one common share purchase warrant entitling the holder to
        purchase one common share for $0.30. The warrants have a term of three years
        and
        will expire on May 28, 2007. The fair value of the warrants was estimated
        to be
        $12,500 and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        May
        28, 2004, the Company issued a total of 25,000 units to an officer of the
        Company, at $0.20 for each unit, for finders’ fees of $5,000. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.30. The warrants have a term
        of
        three years and will expire on May 28, 2007. The fair value of the warrants
        was
        estimated to be $1,250 and has been recorded as a separate component of
        stockholders’ equity. (Notes 5 and 9)
 
 On
        October 14, 2004, the Company issued a total of 1,396,956 units at $0.20
        per
        unit by way of a private placement for cash of $279,392. Each unit is comprised
        of one common share and one common share purchase warrant entitling the holder
        to purchase one common share for $0.35. The warrants have a term of two years
        and will expire on October 14, 2006. The fair value of the warrants was
        estimated to be $69,848 (25% of the $279,392 in proceeds received from the
        sale
        of the units) and has been recorded as a separate component of stockholders’
equity. (Note 9)
 
 On
        November 30, 2004, the Company issued a total of 550,000 units at $0.20 per
        unit
        by way of a private placement for cash of $110,000. Each unit is comprised
        of
        one common share and one common share purchase warrant entitling the holder
        to
        purchase one common share for $0.30. The warrants have a term of three years
        and
        will expire on November 30, 2007. The fair value of the warrants was estimated
        to be $27,500 (25% of the $110,000 in proceeds received from the sale of
        the
        units) and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 ***Page
            - 61***
  **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 **NOTE
        6 - COMMON STOCK, continued**
 On
        November 30, 2004, the Company issued a total of 55,000 units, to an officer
        of
        the Company at $0.20 per unit for finders’ fees of $11,000. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.30. The warrants have a term
        of
        three years and will expire on November 30, 2007. The fair value of the warrants
        was estimated to be $2,750 (25% of the $11,000 in debt) and has been recorded
        as
        a separate component of stockholders’ equity. (Note 9)
 
 On
        November 30, 2004, the Company issued a total of 75,000 units at $0.20 per
        unit
        by way of a private placement for cash of $15,000. Each unit is comprised
        of one
        common share and one common share purchase warrant entitling the holder to
        purchase one common share for $0.30. The warrants have a term of two years
        and
        will expire on November 30, 2006. The fair value of the warrants was estimated
        to be $3,750 (25% of the $15,000 in proceeds received from the sale of the
        units) and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        November 30, 2004, the Company issued a total of 3,750,000 units at $0.20
        per
        unit by way of a private placement for cash of $750,000. Each unit is comprised
        of one common share and one common share purchase warrant entitling the holder
        to purchase one common share for $0.35. The warrants have a term of two years
        and will expire on November 30, 2006. The fair value of the warrants was
        estimated to be $187,500 (25% of the $750,000 in proceeds received from the
        sale
        of the units) and has been recorded as a separate component of stockholders’
equity. (Note 9)
 
 On
        November 30, 2004, the Company issued a total of 382,500 units, to an officer
        of
        the Company at $0.20 per unit for finders’ fees of $76,500. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.35. The warrants have a term
        of
        two years and will expire on November 30, 2006. The fair value of the warrants
        was estimated to be $19,125 (25% of the $76,500 in debt) and has been recorded
        as a separate component of stockholders’ equity. (Note 9)
 
 On
        December 21, 2004, the Company issued a total of 500,000 units at $0.20 per
        unit
        by way of a private placement for cash of $100,000. Each unit is comprised
        of
        one common share and one common share purchase warrant entitling the holder
        to
        purchase one common share for $0.35. The warrants have a term of two years
        and
        will expire on December 21, 2006. The fair value of the warrants was estimated
        to be $25,000 (25% of the $500,000 in proceeds received from the sale of
        the
        units) and has been recorded as a separate component of stockholders’ equity.
        (Note 9)
 
 On
        December 21, 2004, the Company issued a total of 50,000 units, to an officer
        of
        the Company at $0.20 per unit for finders’ fees of $10,000. Each unit is
        comprised of one common share and one common share purchase warrant entitling
        the holder to purchase one common share for $0.35. The warrants have a term
        of
        two years and will expire on December 21, 2006. The fair value of the warrants
        was estimated to be $2,500 (25% of the $10,000 in debt) and has been recorded
        as
        a separate component of stockholders’ equity. (Note 9)
 
 ***Page
            - 62***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 **NOTE
        7 - STOCKHOLDER RIGHTS PLAN**
 On
        March 1, 2002, the Company approved a Rights Agreement whereby a dividend
        was
        declared of one right for each share of the Company’s common stock issued and
        outstanding on March 20, 2002, including any shares issued subsequent to
        March
        20, 2002. Each right entitles the holder to purchase 5 shares of the Companies
        common stock at an exercise price of $0.01 per right, if certain events occur
        relating to a person or group acquiring or attempting to acquire 10% or more
        of
        the outstanding common shares of the Company without the approval of the
        Company’s board of directors. The rights are exerciseable until December 31,
        2020.
 
 At
        December 31, 2004 and 2003, the Company had reserved 276,657,100 and 143,568,150
        shares for the potential rights for the issued, outstanding and subscribed
        shares and 147,624,025 and 17,118,410 for the potential exercise of outstanding
        options and warrants.
 
 **NOTE
        8 - STOCK OPTIONS**
 The
        Company’s 2001 stock option/warrant plan provides for the granting of up to
        5,000,000 stock options or warrants to officers, consultants, directors and
        key
        employees. All share options/warrants granted under the 2001 option/warrant
        plan
        either vest immediately, at 25% per quarter over a period of one year or
        on a
        performance basis. The options do not cancel upon termination of employment
        and
        all options, if remaining unexercised, expire five years after the date of
        issue.
 
 During
        the year ended December 31, 2004, the Company no stock options were granted
        or
        cancelled.
 
 During
        the year ended December 31, 2003, the Company did not grant any additional
        options to purchase shares of common stock to employees, directors or
        consultants. During the first quarter of 2003, the Company cancelled 50,000
        options to purchase shares of commons stock, with an exercise price of $0.55
        per
        share.
 
 The
        following is a summary of the activity of the Company’s 2001 stock
        option/warrant plan for the year ended December 31, 2004:
 
 Shares
                  Under
              
              Weighted
                  AverageOption
              
              
              Exercise
                  PriceOutstanding,
                  at December 31, 2002
              
              1,630,000
              
              $
              0.40Cancelled
              
              (50,000
              )
              
              0.55Outstanding,
                  at December 31,
                2003
                  and 2004
              
              1,580,000
              
              $
              0.44
 
 The
        weighted average fair value of the options granted in 2004 and 2003 was
        $0.65.
 
 At
        December 31, 2004 and 2003 the weighted-average remaining contractual life
        of
        the outstanding options was 1.64 and 2.45 years.
 
 ***Page
            - 63***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 
 **NOTE
        8 - STOCK OPTIONS, continued**
 The
        following table presents additional information related to the options
        outstanding as of December 31, 2004.
 
 **Exercise
                  Price per Share**
              **Number
                  of Shares Outstanding**
              **Number
                  of Shares Exercisable**$0.40
              1,210,000
              1,210,000$0.55
              370,000
              370,000Total
              1,580,000
              1,580,000
 
 During
        the years ended December 31, 2004 and 2003, the Company did not recorded
        any
        compensation costs.
 
 **NOTE
        9 - WARRANTS**
 During
        the year ended December 31, 2003, the Company did not issue or cancel any
        warrants.
 
 During
        the year ended December 31, 2004, the Company issued 26,617,790 warrants
        exercisable at between $0.25 and $0.35 for one to three year periods. (Note
        6)
        During the year ended December 31, 2004, 516,667 warrants expired.
 
 **Warrants
        Outstanding**
 At
        December 31, 2004, the Company had the following share purchase warrants
        outstanding:
 
 Number
                  of Shares
              Exercise
                  Price Per Share
              Expiry
                  Date10,144,020
              0.35
              March
                  3, 20051,076,167
              11.40
              March
                  5, 200526,923
              7.80
              March
                  9, 2005223,925
              11.40
              March
                  9, 2005855,980
              0.35
              May
                  6, 20051,500,000
              0.35
              May
                  24, 20061,396,956
              0.35
              October
                  14, 200675,000
              0.30
              November
                  30, 20064,132,500
              0.35
              November
                  30, 2006550,000
              0.35
              December
                  21, 20064,733,334
              0.25
              May
                  6, 20072,350,000
              0.30
              May
                  24, 2007275,000
              0.30
              May
                  28, 2007605,000
              0.30
              November
                  30, 200727,944,805
 
 
 ***Page
            - 64***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
 **NOTE
        10 - INCOME TAXES**
 Income
        tax expense has not been recognized for the years ended December 31, 2004
        and
        2003 and no taxes were payable at December 31, 2004 or 2003, because the
        Company
        has incurred losses since its inception.
 
 The
        components of the Company’s net losses are as follows:
 
 2004
              
              2003United
                  States of America
              $
              (4,275,642
              )
              $
              (4,043,273
              )Hong
                  Kong
              
              (
                  126
              )
              
              (13,312
              )Other
                  countries (British Virgin Islands, Bermuda and Canada)
              
              -
              
              
              -$
              (4,275,768
              )
              $
              (4,056,585
              )
 
 As
        of
        December 31, 2004 and 2003, the Company had the following deferred tax assets
        that primarily relate to net operating losses. A 100% valuation allowance
        has
        been established, as management believe it is more likely than not that the
        deferred tax assets will not be realized.
 
 2004
              
              
              2003Federal
                  loss carryforwards
              
              $
              10,113,232
              
              $
              8,916,052State
                  loss carryforwards, Nevada
              
              
              -
              
              
              -Foreign
                  loss carryforwards
              
              
              2,925,783
              
              
              2,925,763Less:
                  Valuation allowance
              
              
              (13,039,015
              )
              
              (11,841,815
              )$
              -
              
              $
              -
 
 The
        Company’s valuation allowance increased during 2004 and 2003 by $1,197,200 and
        $1,134,246.
 
 At
        December 31, 2004 and 2003 the Company had the following net operating loss
        carryforwards (“NOL’s”):
 
 2004
              
              2003United
                  States
              
              $
              35,023,896
              
              $
              30,748,254Foreign
                  (Hong Kong, Bermuda and British Virgin Islands)
              
              
              20,282,399
              
              
              20,282,273$
              55,306,295
              
              $
              51,030,527
 
 The
        federal NOL’s expire through December 31, 2024 and the Hong Kong NOL’s can be
        carried forward indefinitely.
 
 ***Page
            - 65***
 
 **BREK
          ENERGY CORPORATION**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
          31, 2004**
  **NOTE
        11 - SEGMENTED INFORMATION**
 During
        the year ended December 31, 2002, the Company disposed of its payment processing
        business, the Company now has only one business, an oil and gas business
        in the
        United States of America.
 
 **NOTE
        12 - COMMITMENTS AND CONTINGENCIES**
 **Lease
        Commitments**
 The
        Company had no lease commitments at December 31, 2004 or 2003.
 
 Rent
        expense for the years ended December 31, 2004 and 2003, was $nil and $11,441.
 
 **Going
        Concern**
 During
        the year ended December 31, 2002, the Company changed its business direction
        and
        has been focusing on its oil and gas business. As such, the Company has
        accumulated a deficit in excess of approximately $61 million to date and
        additional financing will be required by the Company to support development
        of
        its oil and gas properties until such time as the Company achieves positive
        cash
        flow from operations. These factors raise substantial doubt about the Company’s
        ability to continue as a going concern. The Company’s ability to achieve and
        maintain profitability and positive cash flow is dependent upon its ability
        to
        locate profitable oil and gas properties, generate revenues from its oil
        and gas
        production and control production costs. Based upon current plans, the Company
        expects to incur operating losses in future periods. There is no assurance
        that
        the Company will be able to generate revenues in the future. The accompanying
        financial statements do not include any adjustments that might be necessary
        if
        the Company is unable to continue as a going concern.
 
 **Contingent
        liability**
 In
        February 2003 the debtor and guarantor of the note receivable commenced legal
        action against the Company, in Bermuda, claiming that the Company and its
        former
        subsidiary, First Ecom Systems Limited, had promised to develop and supply
        them
        with certain software. As a result of this litigation the debtor ceased making
        the required installment payments on March 1, 2003. Although the directors
        believed that this lawsuit is without merit as there was no condition to
        develop
        software for the debtor, due to lack of financial resources the Company did
        not
        defend its position and no further actions by either party have transpired
        since
        February 2003. (Note 3)
 
 **Commitments**
 On
          March
          1, 2004, the Company entered into a settlement agreement whereby the Company
          agreed to pay a total of $691,874, in twelve equal monthly payments, commencing
          August 14, 2004.
  As
        is
        customary in the oil and gas industry, the Company may at times have commitments
        in place to reserve or earn certain acreage positions or wells. If the Company
        does not pay such commitments, the acreage positions or wells may be lost.
 
 **NOTE
        13 - SUBSEQUENT EVENTS**
 The
        Company has an option to acquire an additional 2.5% interest in certain of
        their
        undeveloped mineral leases by paying $5,250,000 on or before January 1, 2004
        and
        if they exercise this option, the Company has the option of acquiring an
        additional undivided 2.5% interest by paying $5,250,000 on or before January
        1,
        2005. The Company did not exercise either of these options.
 
 **Common
        Shares and Warrants**
 During
        2005, the Company issued 3,333,335 units for cash of $1,000,000 and 333,334
        units, to an officer, as a finder’s fee of $100,000, for arranging placement of
        these units. The units were issued at $0.30 per unit. Each unit is comprised
        of
        one common share and one share purchase warrant, each warrant entitles the
        holder to purchase one share of the Company’s common stock, is exercisable at
        $0.50 per share and expires within two years of the date of issuance. The
        fair
        value of the warrants was estimated to be $275,000 (25% of the $1,100,000
        in
        debt or proceeds received from the sale of the units).
  On
        July
        25, 2005, an officer of the Company exchanged 400,000 warrants for 400,000
        shares of the Company’s stock at $0.25 per share.
  On
        September 29, 2005, an officer of the Company exchanged 100,000 warrants
        for 100,000 shares of the Company's stock, at $0.25 per share.


***Page
            - 66***


**Exhibit
      10.6**








***Page
          - 67***




**OPTION
        TO ACQUIRE INTERESTS**
  **IN
        OIL AND GAS PROPERTIES**
  This
        agreement dated
        for reference May 1, 2004, is between Brek Petroleum, Inc., a Nevada corporation
        (“Brek”), and Griffin Asset Management, LLC, a Delaware limited liability
        company (“Griffin”). Brek and Griffin are collectively referred to as the
        Parties and individually as a Party.
  RECITALS
  A.  On
        July
        16, 2002, Brek and others entered into a purchase agreement with Gasco Energy,
        Inc. Pannonian Energy Inc. and San Joachin Oil & Gas Ltd. (together, “
Gasco”) under which Brek acquired interests in certain oil and gas leases,
        wells, related equipment, and other lands and participatory rights in Wyoming,
        Utah and California identified in the agreement (the “Gasco Agreement”). Brek
        has 25% of whatever interest Gasco had on July 16, 2002. Gasco is usually
        but
        not always the operator. Gasco and Brek are entitled to a share of production
        net of various royalties, overriding royalties and other burdens (the “Burdens”)
        that must be paid before any production is distributed to Brek and Gasco
        (the
“Net Interest”).
  B.  Griffin
        wishes to acquire an interest in production from wells that Brek is entitled
        to
        drill under the Gasco Agreement on leases in Wyoming and Utah by contributing
        to
        the drilling costs as described by Gasco or another operator in its written
        notices and authorizations for expenditure (“AFEs”) or by Brek in an AFE if Brek
        initiates a drilling program.
  Now
        therefore ,
        in
        consideration of the foregoing recitals and the following respective
        representations, warranties, covenants and agreements, and other good and
        valuable consideration, the receipt and sufficiency of which the Parties
        acknowledge, the Parties agree as follows:
  **AGREEMENT**
  **ARTICLE I**
 **Offer
        to Acquire**
  Section 1.1   **The
        Interest** .
        Brek
        grants Griffin the right to acquire an interest in production by contributing
        cash for the drilling of wells on the Wyoming and Utah properties that it
        owns
        together with Gasco or has a right to acquire as described in the Gasco
        Agreement (the “Properties”). This right applies to drilling programs for a
        total of one hundred wells to be drilled on the Properties for which Brek
        receives a notice and AFE from Gasco or another joint owner, or for which
        Brek
        initiates a drilling program, after the day on which both Parties have signed
        this agreement (the “Effective Date”). The right is subject to the following
        terms and conditions:
  a.  Griffin
        may contribute 50% of the amount of Brek’s portion of the AFE in return for 50%
        of Brek’s working interest in each well and 50% of Brek’s Net Interest minus a
        7% royalty (the “Royalty”) payable to Brek (“Griffin’s Net Interest”). Griffin’s
        Net Interest cannot be less than 75% of 50% of Brek’s Net Interest. If Griffin’s
        Net Interest is less than 75% of 50% of Brek’s Net Interest, then the Royalty
        must be adjusted: i.e, if the sum of the Burdens is more than 18%, then the
        Royalty is reduced so that the sum of the two is equal to 25% and Griffin’s Net
        Interest is equal to 75% of 50% of Brek’s Net Interest; if the sum of the
        burdens and the Royalty is less than 25%, then Brek is entitled to the entire
        Royalty, and Griffin’s net interest is more than 75%. 1
  *1.For
          example: if Brek’s share of production equals $100,000 and the Burdens equal
          12.5%, then Brek’s Royalty is equal to 7% and Griffin’s Net Interest is equal to
          80.5% of $50,000; if the Burdens equal 20%, then Brek’s Royalty is equal to 5%
          and Griffin’s Net Interest is equal to 75% of $50,000.*
 ***Page
            - 68***
  b.  Gasco,
        or another party with the right to initiate drilling, delivers to Brek notices
        that it intends to drill in accordance with the terms of the joint operating
        agreement that governs the drill site (“JOA”). These notices are written or, if
        a drill rig is on the site, telephoned. Brek has 30 days from its receipt
        of a
        written notice and 48 hours (excluding Saturday, Sunday and legal holidays)
        from
        a telephoned notice in which to notify Gasco that it consents to the drilling.
        Brek will deliver the notice to Griffin on the next business day following
        the
        day that it receives the notice. Griffin will inform Brek within twenty-one
        days
        if it elects to contribute, or within 36 hours of the telephoned notice.
        Griffin
        is liable for its portion of all costs of the drilling program in accordance
        with the terms of the governing JOA as of the date on which it notifies Brek
        that it intends to contribute to the drilling program.
  c.  The
        operator delivers to Brek invoices for drilling in accordance with the terms
        of
        the governing JOA. Brek will deliver each invoice to Griffin on the next
        business day following its receipt with an invoice for its contribution.
        Griffin
        will pay its contribution directly to the operator within the time required
        by
        the JOA and deliver confirmation to Brek that it has paid its contribution.
        If
        Griffin fails to pay the invoiced contribution as required, then it is deemed
        to
        have elected to decline to participate and loses its right to contribute
        and
        share in the production of the well.
  d.  If
        Brek
        initiates a drilling program then the notice provisions and response times
        of
        the governing JOA apply to AFEs and invoices.
  e.  If
        Griffin elects to contribute, Griffin will pay Brek a fee equal to 7.5% of
        the
        amount of Griffin’s contribution to the drilling and completion costs (the
“Fee”) as consideration for the right to contribute and acquire the working
        interests and net share of production. Griffin will pay the Fee when it delivers
        its written consent to Brek. The
        amount of the Fee must be adjusted when the well is completed to reflect
        the
        actual costs: if the costs are more than the AFE, then Griffin will pay Brek
        7.5% of the difference; if the costs are less, then Brek will refund 7.5%
        of the
        difference to Griffin.
  f.  When
        Griffin has paid its contributions for drilling and completion and the Fee
        to
        Brek, it has earned its working interest and share of production and is subject
        to the terms of the governing JOA. Brek then will inform Gasco (or whoever
        is
        the operator if Gasco is not) of Griffin’s interest with instructions to record
        Griffin’s interest and send Griffin’s net share of production on Griffin’s
        instructions. Nothing in this agreement grants Griffin a right to acquire
        an
        interest in the Properties or a right under the Gasco Agreement.
  g.  If
        Griffin fails to contribute its portion of the costs that accrue to its working
        interest in wells, then its entire interest reverts to Brek and Griffin is
        not
        entitled to any further share of production or the return of any costs that
        it
        has contributed.
  h.  If
        Griffin elects to contribute to an AFE for drilling a well but does not elect
        to
        contribute to the completion of a well following the drilling, then its entire
        interest reverts to Brek and Brek is entitled to 100% of the working interest
        and the share of production to which Griffin would otherwise be
        entitled.
  i.  Griffin’s
        right is not exclusive. If Griffin declines to contribute to a well, then
        Brek
        may invite others to contribute to the drilling of the well that Griffin
        declined.
  Section 1.2   **Invited
        Participants** .
        Griffin
        may invite others to participate in its contribution and share of production.
        If
        it does, then it must deliver to Brek a notice with the name, address, and
        payment instructions of the invited participant. When Griffin has earned
        its
        interest, Brek will instruct Gasco to make a division order in the favor
        of the
        invited participants. Nothing in this arrangement, however, requires that
        Brek
        or Gasco deal directly with the invited participants or relieves Griffin
        of any
        obligations under this agreement; all dealings are between Griffin and the
        invited participants and Brek is entitled to rely on Griffin’s instructions and
        representations in connection with the invited participants and their
        participation until they have earned their interests, at which point they
        will
        deal directly with the operator under the JOA.
  ***Page
            - 69***
  Section 1.3   **Non-consent** .
        If Brek
        elects not to participate in a drilling program, then Griffin may contribute
        Brek’s portion to earn Brek’s entire interest and the well is counted as one
        well for the purpose of counting the 100 wells in which Griffin can acquire
        an
        interest under this agreement. If Brek does not participate at Griffin’s
        request, then the well is counted as two wells. In either case, if Griffin
        contributes Brek’s portion of a drilling program, Brek remains entitled to the
        Royalty and the Fee calculated on the whole of Griffin’s participation and
        interest.
  Section 1.4   **Conflict
        of Terms** .
        Where
        the terms of this agreement and a governing JOA conflict, the terms of this
        agreement prevail unless they cause a Party to breach the JOA, in which case
        the
        terms of the JOA prevail.
  Section 1.5   **Programs
        Underway** .
        The
        Parties acknowledge that Brek received two AFEs from Gasco during the month
        of
        April before the terms of this agreement were finalized for which drilling
        programs are underway. Griffin may contribute to the AFEs. The Parties will
        work
        out the terms of payment for these two wells if Griffin elects to
        contribute.
  Section 1.6   **Notice
        to Others** .
        Brek
        will notify the other parties to a JOA of the terms of this agreement as
        required by the governing JOA.
  **Section 1.7**  **Term** .
        This
        agreement and Griffin’s right to acquire the interests described above end when
        Griffin has acquired its interests in 100 wells under this agreement or at
        the
        end of eight years from the date of this agreement, whichever is the
        earlier.
  **Section 1.8**  **Force
        Majeure** .
        If
        Gasco or Brek is unable to drill on the Properties during the term of this
        agreement because of force majeure (as defined in Article XI of the AAPL
        Form
        610-Model Form Operating Agreement-1982 attached to the Gasco Agreement as
        Exhibit D, a copy of which Griffin acknowledges having received) then Brek
        will
        inform Griffin and Article XI in the exhibited model form operating agreement
        applies.
  **ARTICLE II**
 **Representations
        and Warranties of Brek**
  Brek
        represents to Griffin as follows:
  **Section 2.1**  **Organization
        and Qualification** .
        Brek is
        a corporation duly organized, validly existing and in good standing under
        the
        laws of Nevada, and has the requisite corporate power and authority to own
        or
        lease all material property that it purports to own or lease and to carry
        on its
        business as now being conducted. It is duly qualified as a foreign corporation,
        and is in good standing in each jurisdiction where the character of its
        properties owned or held under lease or the nature of its activities makes
        such
        qualification necessary, unless the failure to so qualify would not have
        a
        material adverse effect on its business or financial condition. It is qualified,
        to its Knowledge and where qualification is required, with all applicable
        governmental authorities to own and operate the properties and interests
        which
        are the subject matter of this agreement.
  **Section 2.2**  **Authorization
        of Agreement** .
        It has
        full right, power and authority to enter into this agreement and to deliver
        the
        interests to Griffin. The execution and delivery of this agreement and the
        performance of the transactions contemplated by it have been duly authorized
        by
        its board of directors. The consummation of the transactions contemplated
        herein
        do not and will not, whether with or without the giving of notice or passage
        of
        time or both, conflict with or constitute a breach of, or default under,
        or
        result in the creation or imposition of any tax, lien, charge or encumbrance
        upon the properties or interests which are the subject matter of this agreement
        pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
        agreement, note, license, lease or other agreement or instrument to which
        it is
        a party or by which it may be bound, or to which any of its property or assets
        is subject, nor will such action result in any violation of the provisions
        of
        its articles of incorporation or bylaws or any applicable treaty, law, statute,
        rule, regulation, judgment, order, writ or decree of any government,
        governmental instrumentality or court, domestic or foreign, having jurisdiction
        over it or any of its properties.
  ***Page
            - 70***
  **Section 2.3**  **Title
        to the Properties** .
        Brek
        makes the following representations and warranties regarding the interests
        which
        are the subject matter of this agreement.
  **a.**  **No
        Liens** .
        To its
        Knowledge it will convey the interests to the Purchasers as required from
        time
        to time free and clear of all liens, restrictions and encumbrances created
        by,
        through or under it or any Affiliate which would have a material adverse
        affect
        upon the value, operation or use of the interests unless they were created
        as a
        result of a drilling program to which Griffin contributed under this agreement.
        As used in this agreement, “Affiliate” means, with respect to a specific person
        or entity, another person or entity that directly, or indirectly through
        one or
        more intermediaries, Controls or is Controlled by or is under common Control
        with the specified person or entity; and “ Control, ”
and
        its
        correlative forms, means the possession, directly or indirectly, of the power
        to
        direct or cause the direction of the management or policies of a person or
        entity, whether through the ability to exercise voting power, by contract
        or
        otherwise.
  **Section 2.4**  **Absence
        of Further Requirements** .
        Except
        for applicable reporting requirements under the Securities Act of 1933, the
        Securities Exchange Act of 1934, or any other applicable legislation, no
        filing
        with, or consent, approval, authorization, order, registration, notification
        or
        decree of any court or governmental authority or agency, domestic or foreign,
        is
        necessary or required for the performance of its obligations hereunder or
        in
        connection with the sale and delivery of the interests hereunder or the
        consummation of the transactions contemplated by this agreement.
  **Section 2.5**  **No
        Bankruptcy** .
        No
        bankruptcy proceedings are pending, being contemplated by or, to its Knowledge,
        threatened against it.
  **Section 2.6**  **No
        Broker Fees** .
        It has
        not engaged any broker, finder or investment banker for which Griffin could
        be
        liable for any fees or commissions in connection with the transactions
        contemplated hereby.
  **Section 2.7**  **Compliance
        with Law** .
        To its
        Knowledge, all of the properties owned or operated by it are so operated
        in
        compliance with applicable laws and regulations (including, without limitation,
        Environmental Laws) in all material respects. With respect to Environmental
        Laws, compliance therewith is deemed to include, without limitation that,
        to its
        Knowledge:
  a.  With
        respect to the properties operated by it, it has acquired all material permits,
        licenses and authorization required under any Environmental Laws in order
        to
        conduct its business as it has been historically conducted and such is in
        compliance with all such permits, licenses and authorizations;
  b.  With
        respect to the properties operated by it, there has been no material Release
        by
        it or by any other person of any Hazardous Substances, Oils, Pollutants or
        Contaminants or any other wastes produced by, or resulting from, any business,
        commercial, or industrial activities operations, or processes, on, beneath,
        or
        adjacent to any of the properties for which it may be held liable under any
        Environmental Laws; and
  c.  There
        exists no written or tangible report, synopsis or summary of any asbestos,
        toxic
        waste or Hazardous Substances, Oils, Pollutants or Contaminants investigation
        made with respect to all or any portion of the properties operated by
        it.
  ***Page
            - 71***
  The following
        definitions apply to the foregoing provisions regarding Environmental
        Laws:
  i.  “Environmental
        Laws” means all federal, state and local laws, regulations, rules and ordinances
        relating to pollution or protection of the environment, including, without
        limitation, laws relating to Releases or threatened Releases of Hazardous
        Substances, Oils, Pollutants or Contaminants into the indoor or outdoor
        environment (including, without limitation, ambient air, surface water,
        groundwater, land, surface and subsurface strata) or otherwise relating to
        the
        manufacture, processing, distribution, use, treatment, storage, Release,
        transport or handling of Hazardous Substances, Oils, Pollutants or
        Contaminants.
  ii.  “Hazardous
        Substances, Oils, Pollutants or Contaminants” means all substances defined as
        such in the National Oil and Hazardous Substances Pollutant Contingency Plan,
        40
        C.F.R. §300.6, or defined as such under any Environmental Laws.
  iii.  “Release”
        means any release, spill, emission, discharge, leaking, pumping, injection,
        deposit, disposal, discharge, dispersal, leaching or migration into the indoor
        or outdoor environmental (including, without limitation, ambient air, surface
        water, groundwater and surface or subsurface strata) or into or out of any
        property, including the movement of Hazardous Substances, Oils, Pollutants
        or
        Contaminants through or in the air, soil, surface water, groundwater or arty
        property.
  **d.**  **Litigation** .
        No
        action, suit, proceeding, claim or investigation by any person, entity,
        administrative agency or governmental body is pending before or, to its
        Knowledge, threatened against it by any governmental authority that impedes
        or
        is likely to impede its ability to consummate the transactions contemplated
        by
        this agreement.
  **ARTICLE III**
 **REPRESENTATIONS
        AND WARRANTIES OF Griffin**
  Griffin
        hereby represents and warrants to
        the
        Brek as follows:
  **Section 3.1**  **Organization
        and Qualification** .
        Griffin
        is a limited liability company formed and in good standing under the laws
        of
        Delaware  and has
        the power and authority to carry on its business as it applies to this
        agreement.
  **Section 3.2**  **Authorization
        of Agreement** .
        It has
        full right, power and authority to enter into this agreement. The execution
        and
        delivery of this agreement and the performance of the transactions contemplated
        hereby have been duly authorized by all necessary corporate or other action.
        The
        consummation of the transactions contemplated herein do not and will not,
        whether with or without the giving of notice or passage of time or both,
        conflict with or constitute a breach of, or default under, or result in the
        creation or imposition of any tax, lien, charge or encumbrance upon pursuant
        to
        any contract, indenture, mortgage, deed of trust, loan or credit agreement,
        note, license, lease or other agreement or instrument to which it is a party
        or
        by which it may be bound, or to which any of its property or assets of it
        is
        subject, nor will such action result in any violation of the provisions of
        its
        articles of incorporation or bylaws or other organizational document, if
        any, or
        any applicable treaty, law, statute, rule, regulation, judgment, order, writ
        or
        decree of any government, governmental instrumentality or court, domestic
        or
        foreign, having jurisdiction over it or any of its properties. This agreement
        has been duly authorized, executed and delivered by it and constitutes a
        legal,
        valid and binding obligation of it, enforceable against it in accordance
        with
        its terms (except as may be limited by bankruptcy, insolvency, moratorium,
        reorganization or similar laws affecting the rights of creditors generally
        and
        the availability of equitable remedies).
  **Section 3.3**  **Absence
        of Further Requirements** .
        No
        filing with, or consent, approval, authorization, order, registration,
        notification or decree of, any court or governmental authority or agency,
        domestic or foreign, is necessary or required for the performance of its
        obligations hereunder or the consummation of the transactions contemplated
        by
        this agreement.
  ***Page
            - 72***
  **Section 3.4**  **No
        Bankruptcy.** No
        bankruptcy proceedings are pending, being contemplated by or, to its Knowledge,
        threatened against it.
  **Section 3.5**  **No
        Broker Fees** .
        It has
        not engaged any broker, finder or investment banker for which it could be
        liable
        for any fees or commissions in connection with the transactions contemplated
        hereby.
  **Section 3.6**  **Litigation** .
        No
        action, suit, proceeding, claim or investigation by any person, entity,
        administrative agency or governmental body is pending before or, to its
        Knowledge, threatened against it by any governmental authority that impedes
        or
        is likely to impede its ability to consummate the transactions contemplated
        by
        this agreement.
  **ARTICLE IV**
 **Survival
        of Representations and Warranties and Indemnification**
  **Section 4.1**  **Survival
        of Representations and Warranties** .
        The
        representations and warranties contained in Articles II and III of this
        agreement as well as those contained in this Article shall survive the Effective
        Date and shall not be deemed to merge into any conveying documents executed
        as
        of the Effective Date or subsequently as provided for in this
        agreement.
  **Section 4.2**  **Indemnification** .
        With
        respect to those warranties and representations of Brek contained in Article
        II
        of this agreement, Brek will hold harmless, indemnify and defend Griffin
        from
        and against all suits, causes of action, proceedings, liabilities, damages,
        penalties, assessments, injuries, fees and costs, including reasonable attorneys
        fees (whether suit is instituted or not) arising from or related to their
        breach
        of such warranties and representations.
  **ARTICLE V**
 **Miscellaneous**
  **Section 5.1**  **Notices** .
        Any
        notice or communication required or permitted hereunder shall be sufficiently
        given if in writing and (i) delivered in person or by overnight delivery
        or
        courier service or (ii) sent by facsimile or electronic transmission (provided
        that any notice given pursuant to clause (ii) is also confirmed by the means
        described in clause (1), as follows:
  To
        Brek:
 
 Brek
        Petroleum, Inc.
 Attention:
        Rick Jeffs
 42
        Brook
        Street
 London
        W1K 5DB
 E-mail:  rick@brekenergy.com
 
 R.H.
        Daignault Law Corporation
 1100
        Melville Street, Suite 600
 Vancouver,
        BC, V6E 4A6
 Attention:
        Rene Daignault
 E-mail:
        Rene@rhdlawcorp.com
  ***Page
            - 73***
 
 To
        Griffin:
  Griffin
        Asset Management, LLC
 Attention:
        Shawne Malone
 1529
        S.
        State St. Suite 4L
 Chicago,
        Il 60605
 347-733-2565
 E-mail:
        Shawnepmalone@yahoo.com
 
 Such
        notice or other communication shall be deemed given when so delivered
        personally, or sent by facsimile or electronic transmission (or, if it is
        transmitted during non-business hours at the recipient’s location, at the
        opening of business on the next business day), or, if sent by overnight delivery
        or courier service, when delivered. Griffin will notify Brek concurrently
        by
        email of any notice that it is sending by another means under this
        agreement.
  **Section 5.2**  **Knowledge** .
        As used
        herein, the term “Knowledge” means (i) with respect to Brek, the actual
        knowledge of officers and employees of them involved in the transactions
        contemplated by this agreement or in the ownership or operation of the
        properties or interests which are the subject matter of this agreement, and
        (ii)
        with respect to a Griffin, the actual knowledge of officers and employees
        of it
        involved in the transactions contemplated by this agreement. “Known” shall have
        a correlative meaning.
  **Section 5.3**  **Governing
        Law** .
        Except
        as otherwise provided for herein or any exhibit hereto, this agreement and
        the
        legal relations between the Parties shall be governed by and construed in
        accordance with the internal laws of the State of Colorado without taking
        into
        account provisions regarding choice of law.
  **Section 5.4**  **Entire
        Agreement** .
        This
        agreement constitutes the entire agreement between the Parties with respect
        to
        the matters herein and supersedes all prior agreements and understandings
        between the Parties with respect thereto.
  **Section 5.5**  **Amendments
        and Waivers** .
        This
        agreement may not be amended except upon a written consent authorized and
        approved by each Party. By an instrument in writing, Griffin may waive
        compliance by the Brek with any term or provisions of this agreement that
        Brek
        was or is obligated to comply with or perform; provided, however, that such
        waiver shall not operate as a waiver of; or estoppel with respect to, any
        other
        or subsequent failure. No failure to exercise and no delay in exercising
        any
        right, remedy or power hereunder shall operate as a waiver thereof, nor shall
        any single or partial exercise of any right, remedy or power hereunder preclude
        any other or further exercise thereof or the exercise of any right, remedy
        or
        power hereunder shall operate as a waiver thereof, nor shall any single or
        partial exercise of any right, remedy or power hereunder preclude any other
        or
        further exercise thereof or the exercise of any other right, remedy or power
        provided herein or by law or in equity. The waiver by any Party of the time
        for
        performance of any act or condition hereunder shall not constitute a waiver
        of
        the act or condition itself.
  **Section 5.6**  **Time** .
        Time is
        of the essence of this agreement and any amendment to it.
  **Section 5.7**  **Severability** .
        If any
        provision of this agreement, or the application thereof to any Party, place
        or
        circumstance, shall be held by a court of competent jurisdiction to be invalid,
        unenforceable or void, the remainder of this agreement and such provisions
        as
        applied to other parties, places and circumstances shall remain in full force
        and effect only if, after excluding the portion deemed to be unenforceable,
        the
        remaining terms shall provide for the consummation of the transactions
        contemplated hereby is substantially the same manner as originally set forth
        at
        the later of the date this agreement was executed or last amended.
  **Section 5.8**  **Counterparts** .
        This
        agreement may be executed in multiple counterparts, each of which shall
        constitute one and the same instrument.
  ***Page
            - 74***
  **Section 5.9**  **Interpretation
        of Agreement** .
        The
        article, section and other headings used in this agreement are for reference
        purposes only and shall not constitute a part hereof or affect the meaning
        or
        interpretation of this agreement.
  **Section 5.10**  **Expenses** .
        Whether
        or not the transactions contemplated by this agreement are consummated, all
        costs and expenses incurred in connection with this agreement and the
        transactions contemplated hereby, will be paid by the Party incurring such
        costs
        and expenses, including but not limited to the cost of legal counsel,
        accountants and any other professionals.
  **Section 5.11**  **Specific
        Performance** .
        The
        Parties agree that irreparable damage would occur in the event that any of
        the
        provisions of this agreement were not performed in accordance with their
        specific terms or were otherwise breached. It is accordingly agreed that
        the
        Parties shall be entitled to an injunction or injunctions to prevent breaches
        of
        this agreement and to enforce specifically the terms and provisions hereof
        in
        any court of the United States or any state having jurisdiction, this being
        in
        addition to any other remedy to which they are entitled at law or in
        equity.
  **Section 5.12**  **No
        Circumvention** .
        Griffin
        will not circumvent Brek and deal directly with Gasco in any manner in
        connection with any of Brek’s properties that are subject to the Gasco
        Agreement, whether those properties are the subject of this agreement or
        excluded from it.
  **Section 5.13**  **Attorneys’
        Fees** .
        If any
        legal action is brought for the enforcement of this agreement or because
        of an
        alleged dispute, breach or default in connection with this agreement, the
        prevailing Party shall be entitled to recover reasonable attorneys’ fees and
        other costs incurred in such action or proceeding, in addition to any other
        relief to which it may he entitled.
  **Section 5.14**  **Binding
        Effect** .
        This
        agreement is binding upon and inures to the benefit of the Parties and their
        respective successors and permitted assigns.
  **Section 5.15**  **Third
        Parties** .
        Except
        as otherwise provided herein, this agreement does not benefit or create any
        right or cause of action or remedy of any nature whatsoever in any person
        or
        entity other than the Parties.
  **Section 5.16**  **No
        Presumption of Drafting** .
        Each
        Party participated in the drafting of this agreement and therefore no
        presumption that either Party or any other drafted it applies in any
        interpretation, construction, or enforcement of this agreement.
  In
        witness whereof ,
        each
        Party has executed this agreement as of the date written below.
  **Griffin
        Asset Management, LLC**
 a
        Delaware limited liability company
 
 
 By:*/s/
        Shawne Malone*
 Its:
        President
 On:
        June
        1, 2004
 
  
 **Brek
        Petroleum, Inc.** ,
        a
        Nevada corporation
 
 By:*/s/
        Richard N. Jeffs*
 Its:
        President
 On:
        May
        28, 2004
 
 
 ***Page
            - 75***







Exhibit
      10.7








***Page
          - 76***




**NATURAL
        GAS**  **PURCHASE
        AGREEMENT**
 Date: December 23, 2004
 
 
 **Seller:**
                
                BREK
                  PETROLEUM, INC.
                
                1100
                  Melville Street, Suite 600
                Vancouver
                  BC V6E 4A
                Telephone:
                Facsimile:
                  604 664 0672
                E-mail:rick@jeffsco.com
                anne@dacostacorp.com
                Contact:Rick
                  Jeffs
                Anne
                  McFadden
                Tax
                  ID No.: 98-0355707
              **Buyer:**
                
                RIVERBEND
                  GAS GATHERING,L.L.C.
                
                14
                  Inverness Drive East, Suite H-236
                Englewood,
                  Colorado 80112
                Telephone:
                  Telephone: (303) 483-0044
                Facsimile:
                  (303) 483-0011
                E-Mail:**mchoury@gascoenergy.com
                Contact:
                  Marl J. Choury
                Tax
                  ID No.: 43-2049794
 
 Seller
        owns or controls quantities of natural gas which it desires to sell to Buyer,
        and Buyer desires to purchase quantities of natural gas from Seller, all
        on the
        terms and provisions set forth below. Seller and Buyer therefore agree as
        follows:
 
 1.  Seller’s
        Commitment of Natural Gas. Subject
        to the terms of this Agreement and the terms and conditions set forth in
        the
        form of Confirmation Letter attached as Exhibit “A” hereto and as may be
        executed by the parties from time to time, Seller hereby commits to this
        Agreement all of Seller’s natural gas (hereinafter “Gas”) produced and saved
        from the leases and leasehold interests now owned and as described on Exhibit
        “B” and any leases and leasehold interests hereinafter acquired within the Area
        of Mutual Interests depicted on Exhibit “B-1” (hereinafter collectively “the
        Leases”) for a period of fifteen (15) years from the effective date. Thereafter,
        this Agreement and Seller’s commitment of Gas hereunder shall continue
        automatically for consecutive renewal terms of one (1) year until terminated
        by
        either party providing written notice to the other party at least ninety.
        (90)
        days prior to the expiration of the primary term, or any subsequent renewal
        term. Seller covenants and agrees to sell and deliver the same to Buyer at
        the
        points of delivery set forth in the Confirmation Letters to be executed by
        the
        parties without other disposition except as herein otherwise provided. The
        foregoing shall be covenants running with the land and any conveyance,
        assignment, sale or other transfer, including any contribution to the drilling
        and/or exploration effort of another producer, of all or a portion of the
        Leases
        covered by these covenants shall include and be subject thereto. Seller shall
        require any purchaser, assignee or transferee of any portion of Seller’s
        interest in the Leases to ratify this Agreement and to expressly assume and
        agree to the terms hereto to the extent of the portion of the Leases received
        from Seller by that party. Seller agrees to notify Buyer promptly of any
        such
        conveyance, assignment, transfer or contribution.
   2.  Nomination
        Confirmation. Approximately
        ten (10) business days prior to the first day of each production month or
        at a
        time mutually agreed upon by the parties, Seller and Buyer will reach agreement
        on the quantities of natural gas to be purchased and sold during that period
        at
        the points of delivery set forth in the Confirmation Letter. Seller shall
        transmit this “nomination confirmation” via fax and e-mail to
        Buyer.
  3.  Purchase
        Price. The
        purchase price for sold volumes shall be set forth in the Confirmation Letter(s)
        as executed by and between the parties from time to time. The purchase price,
        however, shall at all times be equal to the amount per MMBtu paid to and
        received by Gasco Energy, Inc. or any of its subsidiaries or affiliates
        (“GASCO”), on all gas sold during same timeframe from said points of delivery
        under such purchase agreements, either with Seller or with third parties
        as may
        be entered into by GASCO from time to time. Said amount shall equal the gross
        sales price of the gas sold minus: (a) a gathering and transportation fee
        of not
        more than $0.23 per MMBtu adjusted as provided herein; (b) fuel, line loss,
        shrinkage and unaccounted for gas not to exceed 6% under normal operating
        conditions; and (c) compression charges in an amount not to exceed $0.07
        per
        MMBtu per stage of compression from the points of delivery to the receipt
        point(s) on the Questar mainline, adjusted as provided herein. The parties
        acknowledge and agree that the deductions authorized under 3.(b) above may
        temporarily exceed 6% due to unavoidable losses resulting from construction,
        maintenance and other necessary and appropriate operations on the gathering
        system. In no event shall the deductions provided for in 3.(b) above exceed
        6%
        for more than 15 consecutive days or 30 days in the aggregate during any
        12
        month period or a maximum of 8%. The gathering fee and compression fee will
        be
        adjusted on an annual basis in proportion to the percentage change in the
        Consumer Price Index for All Urban Consumers (CPI-U) as published by the
        United
        States Department of Labor. The adjustment shall be made effective January
        1 of
        each year beginning January 1, 2006, and shall reflect the percentage change
        in
        the aforesaid Consumer Price Index for All Urban Consumers (CPI-U) as it
        existed
        for January of the immediately preceding year. In no event will the adjustment
        in any year be less than a 2% nor more than a 4% increase over the previous
        year’s fees.
  ***Page
            - 77***
  4.  Additional
        Fees .
        In
        addition, Seller shall pay its proportionate share on a leasehold basis of
        meter
        fees in the amount of $250.00 per month per well for each well up to the
        first
        50 wells connected to Seller’s gas gathering system. For each well over 50
        wells, Seller shall pay its proportionate share of a meter fee of $150.00
        per
        month per well. The metering fee will be adjusted on an annual basis in
        proportion to the percentage change in the Consumer Price Index for All Urban
        Consumers (CPI-U) as it existed for January of the immediately preceding
        year.
        In no event will the adjustment in any year be less than a 2% or more than
        a 4%
        increase over the previous year’s fees. Seller shall pay Buyer $0.03 per MMBtu
        as a marketing fee for the marketing of Seller’s gas and shall reimburse Buyer
        for Seller’s proportionate share of any third party marketing fees incurred by
        Buyer up to $0.05 per MMBtu. The combined total of such marketing fees shall
        not
        exceed $0.08 per MMBtu.
  5.  Payment. Buyer
        shall pay Seller by check, using its best efforts to courier the check to
        Seller
        by the end of fourteen days following the Buyer’s receipt of payment for the
        sale of Seller’s gas. The parties will review this payment provision after six
        months. Any change to this payment provision requires the written consent
        of
        both parties. In the event of any inaccuracy in or dispute as to any billing
        or
        payment, the parties shall cooperate in good faith to resolve such matter
        expeditiously. Buyer shall send a statement to Seller with the check detailing
        the following: (a) total volume (MMBtu) and gallons per Mcf of Seller’s gas
        measured at the points of delivery and total field volume; (b) total fuel
        gas
        quantity and lost and unaccounted for gas quantity attributable to Seller’s sold
        volumes; (c) gas plant products, if any, and the volume of residue gas
        attributable to Seller’s sold volumes. At the request of Seller, or if required
        by law, rule or regulation, Buyer shall withhold from sums otherwise due
        Seller
        hereunder and shall pay all production, severance or similar taxes and all
        royalties, overriding royalties and similar burden payments levied, assessed,
        charged against, or attributable to the natural gas sold hereunder prior
        to
        delivery to Buyer hereunder. Seller shall furnish such assessments, statements,
        invoices, division orders, or other documents as Buyer may reasonably require
        for the purpose of identifying each such payment and the persons entitled
        thereto.
  Each
        party shall have the right, at its own expense, and upon reasonable notice
        and
        at reasonable times, to inspect and audit the books and records of the other
        party to the extent necessary to verify the accuracy of any charge, adjustment,
        payment or computation hereunder. In addition, Buyer shall make available
        upon
        request and Seller shall have the right, at its own expense and upon reasonable
        notice and at reasonable times, to inspect and audit the books, records and
        natural gas purchase and sales agreements of GASCO to the extent necessary
        to
        verify the gross sales price and net sales amounts received by GASCO, together
        with all gathering, transportation, compression, and other charges paid by
        Gasco
        for gas transported from the points of delivery common to GASCO and Seller.
        All
        charges and payments shall be conclusively deemed final unless objected to
        in
        writing within twelve months following the month of delivery of the natural
        gas
        which is the subject of such charge or payment.
  6.  Measurement
        and Title. The
        measurement of natural gas delivered hereunder shall be performed by Buyer
        at
        the inlet of Buyer’s metering facilities located at Seller’s lease line or
        separation point or at such other points of delivery as may be mutually agreed
        upon in writing by the parties from time to time and as set forth in
        Confirmation Letter(s). Title shall pass to Buyer at said points of delivery.
        Seller shall have responsibility for and assume any liability with respect
        to
        natural gas prior to delivery to Buyer at the points of delivery, and Buyer
        shall have responsibility for and assume any liability with respect to natural
        gas after delivery to Buyer at the points of delivery. Seller warrants that
        it
        will have and deliver good and merchantable title to all natural gas sold
        hereunder, tree of all liens, claims, and encumbrances. Buyer, at its expense,
        shall furnish, install, operate, and maintain a suitable orifice meter at
        all
        points of delivery of the gas covered hereby. Each meter installed by Buyer
        shall be a meter acceptable in the industry and each meter shall be installed
        and operated in accordance with the requirements of applicable provisions
        in
        ANSI/API 2530, “Orifice Metering of Natural Gas” (American Gas Association Gas
        Measurement Committee Report No.3) of the Natural Gas Department of the American
        Gas Association as amended from time to time, or by any other method commonly
        used in the industry and mutually acceptable to the parties. In the event
        of any
        question arising as to the accuracy of any meters, the meter or meters shall
        be
        tested upon demand of either party. The expense of any such test shall be
        borne
        by the party demanding same if the meter registration is found to be correct,
        and by Buyer if found to be incorrect Seller may, at its option and sole
        expense, install, maintain, and operate check meters and other equipment
        to
        check Buyer’s meters provided, however, that such check meters and other
        equipment shall not interfere with the operation of any of Buyer’s facilities.
        At least semi--annually, Buyer shall calibrate all meters installed at Seller’s
        points of delivery in accordance with industry standards and make adjustments
        as
        necessary.
  7.  Indemnification .
        Seller
        shall indemnify Buyer and save it harmless from all losses, costs, and
        liabilities of whatsoever nature (including, without limitation, attorneys
        fees
        and costs) arising out of claims of title, personal injury or death, and
        property damage from natural gas delivered hereunder or charges thereon which
        attach prior to the passage of title to Buyer. Buyer shall indemnify Seller
        and
        save it harmless from all losses, costs, and liabilities of whatsoever nature
        (including, without limitation, attorneys fees and costs) arising out of
        claims
        of title, personal injury or death, and property damage from natural gas
        delivered hereunder or charges thereon which attach after the passage of
        title
        to Buyer. In the event of any claim adverse to Seller’s title, Buyer may, but
        shall not be required to, withhold payment for the natural gas at issue pending
        the resolution of such claim or the posting of security in form and amount
        acceptable to Buyer.
  ***Page
            - 78***
  8.  Force
        Maieure. The
        term
“force majeure” as used in this Agreement shall mean any cause or causes not
        reasonably within the control of the party claiming suspension and which,
        by the
        exercise of reasonable diligence, such party is unable to prevent or overcome.
        Such term shall likewise include, but not be limited to: Acts of God; acts,
        omissions to act and or delays in action of an Indian Tribe or federal, state
        or
        local government or any agency thereof; compliance with rules, regulations
        or
        orders of any governmental authority or any office, department, agency or
        instrumentality thereof; strikes, lockouts or other industrial disturbances;
        acts of the public enemy; wars; blockades; insurrections; riots; epidemics;
        landslides; lightning; earthquake; fires; storms; floods; washouts; winter
        weather, spring thaw or other inclement weather; civil disturbances;
        interruptions by governmental or court orders; present and future valid orders
        of any regulatory body having jurisdiction; explosions; the interruption
        or
        suspension of the receipt or delivery of Gas hereunder due to the inability,
        failure or refusal of any party not a party to this Agreement to receive
        or
        deliver such gas; breakage or accident to, or routine maintenance and repair
        of,
        machinery or lines or pipes, compressors or plants; well blowouts; freezing
        of
        Wells, or lines of pipe, sudden partial or sudden entire failure of gas wells;
        failure to obtain materials and supplies due to governmental regulations;
        or the
        inability of either party to acquire, or the delays on the part of such party
        in
        acquiring at reasonable cost and after the exercise of reasonable diligence,
        materials and supplies; permits and consents, and easements and/or
        rights-of-way.
  In
        the
        event either party hereto is rendered, wholly or in part, by force majeure,
        unable to carry out its obligations under this Agreement other than to indemnify
        or to make payments of any amount due hereunder, it is agreed that, upon
        such
        party giving notice and full particulars of such force majeure, in writing
        (which can be effected by facsimile, an e-mail, or other electronic media)
        to
        the other party as soon as possible after the occurrence of the causes relied
        on, then the obligation of the party giving such notice, so far as they are
        affected by such force majeure, shall be suspended during the continuance
        of any
        inability *so* caused,
        but for no longer period, and such cause shall, so far as possible, be remedied
        with all reasonable dispatch; provided, however, that this provision shall
        not
        require the settlement of strikes, lockouts or litigation by acceding to
        the
        demands of the opposing parties when such course is inadvisable in the
        discretion of the party hereto having the difficulty. Notwithstanding the
        foregoing, Buyer’s inability to make payments to Seller for gas that is lost due
        to explosion, breakage or accident of Buyer’s pipelines, compressors or plants
        not reasonably within the control of Buyer or which, by the exercise of
        reasonable diligence, Buyer was unable to prevent or control, shall constitute
        an event of force majeure hereunder.
 
 9.  Quality. All
        natural gas delivered to Buyer shall meet the quality and pressure
        specifications and requirements of the receiving pipeline. Seller shall be
        solely responsible for, and shall indemnify and save Buyer harmless against,
        all
        fees, charges, penalties, losses, costs, and liabilities of whatsoever nature
        (including without limitation, attorneys fees and costs) arising out of Seller’s
        failure to deliver natural gas meeting the applicable specifications and
        requirements. Buyer shall, concurrent with the execution of this Agreement,
        deliver to Seller, in writing, the applicable specifications and requirements
        for the gas to be delivered hereunder.
  Buyer
        may
        test Seller’s gas delivered hereunder for adherence to such specifications, such
        testing to be in accordance with generally accepted industry standards and
        procedures. If the gas delivered by Seller does not meet the specifications
        set
        forth above, Buyer may, at its option, refuse to accept delivery of said
        gas
        into its gathering facilities. If Seller shall deliver gas to Buyer which
        exceeds the maximum pressure specifications, or fails to meet the quality
        specifications above referenced, Seller shall be responsible for any damages
        caused to Buyer’s gathering facilities and any other damages resulting from
        Seller’s delivery of such non-conforming gas. If Seller fails to conform its gas
        to the specifications and requirements, Buyer may, at its option, elect to
        accept such non-conforming gas, condition the same to conform to the above
        specifications and charge Seller a mutually acceptable condition fee. If
        neither
        party elects to condition the gas to conform to the above specifications,
        then
        Seller, at its option and upon sixty (60) days prior written notice to Buyer,
        shall have the right to obtain the release of such non-conforming gas from
        the
        Agreement.
  Should
        Buyer elect to accept and pay for non-conforming gas, Buyer shall not be
        deemed
        to have waived any of its rights hereunder and shall nevertheless be entitled,
        at any time and from time to time, to enforce the quality provisions hereof
        and
        refuse to accept delivery of any volumes of non-conforming gas from
        Seller.
  At
        least
        semi-annually, Buyer shall take samples from each of Seller’s wells at the
        points of delivery and have such samples analyzed by chromatograph analysis
        or
        other mutually agreeable and generally accepted industry methodology to
        determine the liquids content by component and the heating value of such
        gas.
        Buyer shall have the right to take and analyze a spot gas sample prior to
        the
        regularly scheduled sampling. Additionally, upon Seller’s written request to
        Buyer and at Seller’s sole cost and expense, Buyer shall take and analyze gas
        samples more frequently. All gas samples taken hereunder shall be taken at
        such
        times as are reasonably mutually agreeable so to produce a representative
        sample
        of the gas produced and Seller shall be pennitted to be present at such sampling
        and permitted to take its own split sample. The gross heating value calculation
        of such samples will use the BTU values assigned to the various hydrocarbon
        components as adjusted and updated from time to time by using as a base those
        values set forth in the most current GPA publication 2145 in effect at the
        time
        the gross heating value calculation is derived under the provisions of this
        agreement.
  ***Page
            - 79***
  10.  **Miscellaneous** .
 a.  Imbalances. Each
        party shall use commercially reasonable efforts to avoid the imposition of
        imbalance charges and shall be responsible for the payment of any imbalance
        charges resulting from its actions or inactions.
  b. Notice.
        Any notice hereunder shall be in writing any may be personally delivered,
        sent
        by recognized overnight express courier, e-mail, or by facsimile, to the
        address
        or facsimile number set forth above (or to such other address or facsimile
        number as a party may direct by written notice to the other) and shall be
        effective upon receipt.
 c.  Governing
        Law. This
        agreement shall be construed in accordance with the laws of the State of
        Colorado, excluding any conflict of law rule, which would result in the
        application of the law of another jurisdiction.
  d.  Waiver. No
        waiver of any breach of this agreement shall constitute a waiver of any other
        or
        any subsequent breach.
  e.  Successors
        and Assigns. This
        agreement shall be binding upon and inure to the benefit of the respective
        successors and assigns of the parties. However, no party may assign this
        agreement, or any rights hereunder, without the prior written consent of
        the
        other party, not to be unreasonably withheld.
  f. Partial
        Invalidity. If any provision of this agreement is determined to be invalid
        or unenforceable, such determination shall not affect the validity or
        enforceability of any other provision of this agreement.
  g.  Integration. This
        agreement together with future Exhibit “A” confirmation letter(s) sets forth the
        entire agreement of the parties as to the subject matter hereof and 10
        supersedes all prior understandings and agreements, whether oral or written.
        Any
        amendment of supplement hereto shall be in writing.
  Paragraph
        headings used herein are for convenience only and. shall not be used in
        construing this Agreement.
  h. Authority.
        Each party represents that it has full authority to enter into this agreement
        and to perform its obligations hereunder.
  ***Page
            - 80***
  i.  Arbitration .
        In the
        event of any dispute hereunder, an authorized representative of each of the
        parties shall endeavor in good faith to resolve the matter in a timely manner.
        Any dispute not so resolved shall be submitted to a qualified arbitrator,
        acceptable to both parties, having expertise in the subject matter of the
        dispute, in arbitration proceedings conducted in Denver, Colorado, in accordance
        with the commercial Arbitration Rules of the American Arbitration Association.
        The arbitrator may, but shall not be required to, award fees and costs
        (including attorneys’ fees and costs) to the prevailing party.
  j.  Rules
        and Regulations. This
        agreement is subject to all laws, rules, regulations, and orders of governmental
        agencies having jurisdiction over the subject matter hereof.
  k.  Confidentiality. The
        terms and provisions of this Agreement are confidential and proprietary to
        the
        parties and shall not be disclosed by either party to third persons without
        the
        prior written consent of the other party, except as may be required by
        law.
  l.  Conflict
        with Confinnation Letter. In the
        event of a conflict between any term or provision of this Agreement and any
        term
        or provision of a Confirmation letter issued hereunder, the term or provision
        of
        the Confirmation Letter shall control.
 
 Executed
        as of the date written above.
 
 
 Seller:
                
                **BREK
                  PETROLEUM, INC.**
                
                
                *By:
                  /s/ Richard N. Jeffs*
                Title:**President**
                
                Date:
                  December 17, 2004
              Buyer:
                
                **RIVERBEND
                  GAS GATHERING, L.L.C****.**
                
                
                *By:
                  /s/ Michael K. Decker*
                Title:**Executive
                  V.P. and COO**
                
                Date:
                  December 23, 2004
 
 
 ***Page
            - 81***
  
 **CONFIRMATION
        LETTER ISSUED UNDER**
 **NATURAL
        GAS PURCHASE AGREEMENT**
 
 Date:
 
 Seller:        Buyer:
 
 **BREK
                  PETROLEUM, INC.**
                1100
                  Melville Street, Suite 600
                Vancouver
                  BC V6E 4A6 Telephone:
                Facsimile:
                  (604) 664-0672
                
                E-mail:________________________________
                
                Contact:________________________________
                
                Tax
                  ID No:________________________________
              **RIVERBEND
                  GAS GATHERING, L.L.C.**
                14
                  Inverness Drive East, Suite H-236
                Englewood,
                  Colorado 80112
                Telephone:
                  (303) 483-0044
                Facsimile:
                  (303) 483-0011
                
                E-mail:________________________________
                
                Contact:________________________________
                
                Tax
                  ID No:________________________________
 
 
 
 Buyer
        and
        Seller confirm the following transaction between Buyer and Seller pursuant
        to
        the Natural Gas Purchase Agreement identified above:
 
 Confirmation
        Date:________________________________
 
 Period
        of
        Delivery:________________________________
 
 Purchase
        Price:[insert contract price or prices, i.e. final sale price, incremental
        volumes based on index, shortfalls, etc.]
 
 Quantity:
        100% of Seller’s production from the points of delivery.
 
 Points
        of
        Delivery: Well or Lease meter facilities located at:
 
 In
        the
        event of a conflict between any terms or provision of the Natural Gas Purchase
        Agreement identified above and any term or provision of this Confirmation
        Letter, the term or provision of this Confirmation Letter shall
        control.








***Page
          - 82***







**Exhibit
      99.1**


**Code
      of Ethics**









***Page
          - 83***


**Brek
        Energy Corporation**
 
 **Code
        of Ethics**
 
 **Overview**
  Brek
        has
        adopted a code of ethics (the “ **Code** ”)
        that
        is applicable to every officer, director, employee and consultant of the
        company
        and its affiliates (collectively the “ **Employee** ”
or
        “ **Employees** ”).
        The
        Code reaffirms the high standards of business conduct required of all Employees.
        The Code is part of Brek’s continuing efforts to (1) ensure that it complies
        with all applicable laws, (2) have an effective program in place to prevent
        and
        detect violations of law, and (3) educate and train its Employees to be aware
        and understand ethical business practices. In most circumstances, the Code
        sets
        standards that are higher than the law requires.
  Brek
        has
        also adopted eight corporate values: Focus, Respect, Excellence, Accountability,
        Teamwork, Integrity, Open Communications and Positive Attitude. See Schedule
“A”
for a statement on each value. The values have been adopted to provide a
        framework for all Employees in conducting themselves in their jobs. These
        values
        are not intended to substitute for the Code, but will serve as guidelines
        in
        helping the Employees to conduct Brek’s business in accordance with the Code.
  The
        Code
        is not intended to cover every possible situation in which an Employee may
        find
        himself or herself. It is meant to give each Employee the boundaries within
        which Brek expects each Employee to conduct himself or herself while
        representing Brek. An Employee may find himself or herself in a situation
        where
        there is no clear guidance given by the Code. If that occurs, return to the
        objective stated below: common sense, good judgment, high ethical standards
        and
        integrity, and refer to Brek‘s values. In addition, there are many resources
        upon which an Employee may rely, including the President and other Brek officers
        and management. Together all Employees can continue to make Brek a company
        that
        sets a standard for all natural gas and oil exploration companies.
  **Objective**
  One
        of
        Brek’s objectives is to conduct all business operations in the utmost ethical
        manner utilizing common sense, good judgment, high ethical standards and
        integrity. Brek cares about its Employees, shareholders, clients, suppliers,
        and
        the communities in which it conducts its business operations. In the course
        of
        meeting its business objectives, Brek considers it essential that all Employees
        understand and comply with the Code and therefore share and participate in
        Brek’s way of conducting business.
  **Standard
        of Conduct**
  Brek
        insists that all aspects of its business operations are conducted with honesty,
        integrity and fairness, and with respect for the interests of those affected
        by
        its business and activities. Brek also expects the same in its relationships
        with all those with whom it does business.
  ***Page
            - 84***
  Each
        Employee must maintain and foster integrity and honesty in all dealings with
        clients and all business transactions. Each Employee must commit to act
        according to the highest ethical standards and is expected to apply ethical
        business practices in administrative and financial aspects of the business
        operations of Brek.
  No
        code
        of conduct can hope to lay down appropriate behavior for every situation,
        nor
        should it seek to do so. Each Employee is required to make a careful and
        considered judgment of what is right and proper in any particular
        situation.
  It
        is the
        obligation of every Employee in conducting the business operations of Brek
        to be
        responsible, honest, trustworthy, conscientious, and dedicated to the highest
        standards of ethical business practices. Accordingly, all Employees are required
        to avoid not only impropriety, but also the appearance of impropriety in
        conducting the business operations of Brek.
  **Obeying
        the Law**
  All
        Employees of Brek are required to comply with (1) the letter and the spirit
        of
        laws and regulations of the countries in which Brek conducts business
        operations, (2) the accepted business practices in commercial markets, and
        (3)
        any contractual terms and conditions applicable to any business
        transaction.
  It
        is
        expected that each Employee will use common sense, good judgment, high ethical
        standards and integrity in all the Employee’s business dealings.
  Each
        Employee must commit to know and abide by all applicable laws and regulations.
        Employees are expected to be familiar with the Code as it applies to their
        duties. Each Employee is required to follow and to comply with the Code.
        A
        refusal by any Employee to agree to be bound by the Code will be grounds
        for
        discipline up to and including dismissal.
  A
        breach
        of any law, regulation or ethical standard by any Employee will not be justified
        by the pursuit of profit or the departure from acceptable practice by
        competitors.
  **Enforcement
        of Code**
  The
        Code
        will be enforced at all levels fairly and without prejudice. Any breach of
        any
        standard of the Code may result in disciplinary action, up to and including
        termination.
  Richard
        N. Jeffs, Brek’s CEO and President, has been appointed as Compliance Officer of
        Brek, responsible for overseeing compliance with, and enforcement of, the
        Code.
        John daCosta, Brek’s Treasurer, has been appointed as Assistant Compliance
        Officer. If an Employee encounters a situation that the Employee is not able
        to
        resolve by reference to the Code, the Employee should ask for help from the
        Compliance Officer or the Assistant Compliance Officer if they need assistance
        in understanding or interpreting any part of the Code.
  Any
        Employee who, in good faith, has reason to believe any operation or activity
        of
        Brek is in violation of the law or of the Code must call the matter to the
        attention of the Compliance Officer. See Schedule “B” for a non-exhaustive list
        of reportable violations.
  If
        the
        Employee has reason to believe that it would be inappropriate to report the
        operation or activity to the Compliance Officer, the Employee should report
        it
        to the Assistant Compliance Officer. All reports will be reviewed and
        investigated and as necessary under the circumstances, and the reporting
        Employee should provide sufficient information to enable a complete
        investigation to be undertaken.
  Any
        Employee who makes an allegation in good faith reasonably believing that
        a
        person has violated the law or the Code will be protected against
        retaliation.
  ***Page
            - 85***
  Violations
        of the law or the Code will subject Employees to disciplinary action, up
        to and
        including termination of employment. In addition, Employees involved may
        subject
        themselves and Brek to severe penalties, including fines and possible
        imprisonment. Compliance with the law and high ethical standards in the conduct
        of Brek’s business should be a top priority for each Employee.
  **Insider
        Trading, Securities Compliance and Public Statements**
  Securities
        laws prohibit anyone who is in possession of material, non-public information
        (“ **Insider
        Information** ”)
        about
        a company from purchasing or selling stock of that company, or communicating
        the
        information to others. Information is considered “ **material** ”
if
        a
        reasonable investor would consider it to be important in making a decision
        to
        buy or sell that stock. Some examples include financial results and projections,
        new products, acquisitions, major new contracts or alliances prior to the
        time
        that they are publicly announced. Employees who become aware of such Inside
        Information about Brek must refrain from trading in the shares of Brek until
        the
        Inside Information is publicly announced.
  Employees
        must also refrain from disclosing the insider Information to persons who
        do not
        have a need to know, whether they are inside Brek or outside, such as spouses,
        relatives or friends.
  Brek
        makes regular formal disclosures of its financial performance and results
        of
        operations to the investment community. Brek also regularly issues press
        releases. Other than those public statements, which go through official
        channels, Employees are prohibited from communicating outside Brek about
        Brek’s
        business, financial performance or future prospects. Such communications
        include
        questions from securities analysts, reporters or other news media, but also
        include seemingly innocent discussions with family, friends, neighbors or
        acquaintances.
  **Financial
        Reporting**
  Brek
        is
        required to maintain a variety of records for purposes of reporting to the
        government. Brek requires all Employees to maintain full compliance with
        applicable laws and regulations requiring that its books of account and records
        be accurately maintained. Specifics of these requirements are available from
        the
        Compliance Officer.
  **Accuracy
        of R** **ecords**
  Brek’s
        accounting records and supporting documents must accurately describe and
        reflect
        the nature and result of Brek’s business operations. All activities and results
        of Brek’s business operations must be presented in a fair and balanced manner.
  All
        business transactions must be properly authorized as well as completely and
        accurately recorded on Brek ’s
        books.
        Procedures for doing so must comply with Brek ’s
        financial policy and follow Brek ’s
        policy
        for authorization and documentation, as well as follow generally accepted
        accounting practices. Budget proposals and other financial evaluations and
        forecasts must fairly represent all information relevant to the business
        transaction. In addition, no unrecorded cash funds or other asset accounts
        will
        be established or maintained for any purpose. Misapplication or improper
        use of
        corporate or property or false entry to records by any Employee or by others
        must be reported to Brek’s
        Board of Directors .
  ***Page
            - 86***
  **Record
        Keeping and Retention**
  To
        help
        maintain the integrity of Brek’s record-keeping and reporting systems, each
        Employee must know his or her area’s records retention procedures, including how
        data is stored and retrieved. It is that person’s responsibility to know how to
        document and transact any entries or records that he or she is responsible
        for.
        All Employees are expected to comply fully and accurately with all audits,
        including responding in a timely fashion to requests for records or other
        material from or on behalf of Brek’s auditors or management.
  **Communicating
        Accurate and Timely Information**
  In
        all
        interactions and communications, whether with shareholders, the public, clients,
        government agencies, or others inside or outside of Brek, each Employee is
        expected to be truthful and forthright. This includes making accurate
        statements, not misrepresentations or statements intended to mislead or
        misinform; and responding promptly, accurately, and with full disclosure
        to
        requests from governmental agencies for information or documents.
  **Confidentiality**
  Employees
        must respect the confidentiality of information received in the course of
        business dealings and must never use such information for personal gain.
        Information given by Employees in the course of business dealings must be
        true
        and fair and never designed to mislead.
  Confidential
        information can only be revealed upon written authorization of
        management.
  Employees
        must not use or disclose Brek’s trade secrets, proprietary, or confidential
        information, or any other confidential information gained in the performance
        of
        Brek as a means of making private profit, gain or benefit.
  Employees
        must not use Internet bulletin boards or chat rooms to discuss matters or
        opinions related to Brek or any of its industries, or to respond to comments
        about Brek. In today’s electronic age, posting information on Internet bulletin
        boards or even communicating in chat rooms is the same as “speaking to the
        media”.
  **Environmental,
        Health and Safety**
  Brek
        is
        committed to running its business in an environmentally sound and sustainable
        manner. Brek’s objective is to ensure that its business operations have the
        minimum adverse environmental impact commensurate with the legitimate needs
        of
        its business operations.
  Brek
        is
        committed to protecting the health and safety of its Employees, as well as
        the
        environment in general. Brek expects employees to obey all laws and regulations
        designed to protect the environment, and the health and safety of all Employees,
        and to obtain and fully observe all permits necessary to do
        business.
  ***Page
            - 87***
  Natural
        gas and oil exploration and development is a dangerous business. At the very
        least, all Employees should be familiar with and comply with safety regulations
        applicable to their work areas. Brek will make, to the extent possible,
        reasonable accommodations for the known physical or mental limitations of
        its
        Employees. Employees who require a special accommodation should contact the
        Compliance Officer. Brek will then engage in an interactive process to determine
        what reasonable accommodations may exist.
  **Declaration
        of Interest**
  Each
        Employee is expected to avoid any activity, investment or association that
        interferes with the independent exercise of his or her judgment in Brek’s best
        interests (“ **Conflicts
        of Interest** ”).
        Conflicts of Interest can arise in many situations and occur most often in
        cases
        where the Employee or the Employee’s family obtains some personal benefit at the
        expense of Brek’s best interests.
  No
        Employee, or any member of Employee’s immediate family, is allowed to accept
        money, gifts of other than nominal value, unusual entertainment, loans, or
        any
        other preferential treatment from any customer or supplier of Brek where
        any
        obligation may be incurred or implied on the giver or the receiver or where
        the
        intent is to prejudice the recipient in favor of the provider. Likewise,
        no
        Employee is allowed to give money, gifts of other than nominal value, unusual
        entertainment or preferential treatment to any customer or supplier of Brek,
        or
        any employee or family members thereof, where any obligation might be incurred
        or implied, or where the intent is to prejudice the recipient in favor of
        Brek.
        No Employee is allowed to solicit or accept kickbacks, whether in the form
        of
        money, goods, services or otherwise, as a means of influencing or rewarding
        any
        decision or action taken by a foreign or domestic vendor, customer, business
        partner, government employee or other person whose position may affect Brek’s
        business.
  No
        Employee will use Brek’s property, services, equipment or business for personal
        gain or benefit.
  Each
        Employee is required to reveal any personal interest that may impinge or
        might
        reasonably be deemed by others to impinge on the Employee’s business dealings
        with any industry partners of Brek.
  Employees
        may not: (1) act on behalf of, or own a substantial interest in, any company
        or
        firm that does business, or competes, with Brek; (2) conduct business on
        behalf
        of Brek with any company or firm in which the Employee or a family member
        has a
        substantial interest or affiliation. Exceptions require advance written approval
        from Brek’s Board of Directors. ****
  Employees
        should not create the appearance that they are personally benefiting in any
        outside endeavor as a result of their employment by Brek, or that Brek is
        benefiting by reason of their outside interests. Any Employee who is not
        sure
        whether a proposed action would present a conflict of interest or appear
        unethical should consult with the Compliance Officer.
  Brek
        expects its Employees to avoid (1) personal activities and financial interests
        that could conflict with their responsibilities and obligations and (2) giving
        assistance to competitors, which could be in conflict with the interests
        of Brek
        or its clients. All Employees are required to seek the consent of Brek
        management if they intend to become partners or shareholders in companies
        outside Brek’s corporate structure.
  ***Page
            - 88***
  **Fair
        Competition**
  Brek’s
        policy is to comply fully with competition and antitrust laws throughout
        the
        world. Brek is committed to vigorous yet fair competition and supports the
        development of appropriate competition laws. Each Employee must avoid any
        business arrangement that might prevent the effective operation of fair
        competition. It is advised that each Employee consult with the Compliance
        Officer before attending a meeting with a party who may be viewed as a
        competitor.
  **International
        Trade**
  Brek
        must
        comply with a variety of laws around the world regarding its activities.
        In some
        cases, the law prohibits the disclosure of information, whether the disclosure
        occurs within the U.S. or elsewhere, and whether or not the disclosure is
        in
        writing.
  U.S.
        law
        and the Code prohibits giving, offering, or promising anything of value to
        any
        public official in the U.S. or any foreign country to influence any official
        act, or to cause an official to commit or omit any act in violation of his
        or
        her lawful duty. The Foreign Corrupt Practices Act precludes payments to
        non-U.S. government officials for the purpose of obtaining or retaining
        business, even if the payment is customary in that country. This law applies
        anywhere in the world to U.S. citizens, nationals, residents, businesses
        or
        employees of U.S. businesses. Because Brek is a U.S. company, this law applies
        to Brek and all of its subsidiaries. Any questions on this policy should
        be
        directed to the Compliance Officer.
  **Government
        Relations**
  Brek
        is
        prohibited by law from making any contributions or expenditures in connection
        with any U.S. national election. This includes virtually any activity that
        furnishes something of value to an election campaign for a federal office.
        Use
        of Brek’s name in supporting any political position or ballot measure, or in
        seeking the assistance of any elected representative, requires the specific
        approval of the President of Brek. Political contributions or expenditures
        are
        not to be made out of Brek’s funds in any foreign country, even if permitted by
        local law, without the consent of the President of Brek.
  **Vendors,
        Contractors, Consultants and Temporary Workers**
  Vendors,
        contractors, consultants or temporary workers who are acting on Brek’s behalf,
        or are on Brek’s property, are expected to follow the law, the Code, and honor
        Brek’s values. Violations will subject the person or firm to sanctions up to and
        including loss of the contract, the contracting or consulting agreement,
        or the
        discharge from temporary assignment.
  **Compliance
        with the Code**
  It
        is the
        responsibility of Brek’s Board of Directors to ensure that the standards
        embodied in the Code are communicated to, understood and observed by all
        Employees. Brek’s Board of Directors will not criticize management for any loss
        of business resulting from adherence to the Code. Equally, Brek’s Board of
        Directors undertakes that no Employee will suffer as a consequence of bringing
        to their attention, or that of senior management, a breach or suspected breach
        of the Code.
  ***Page
            - 89***
  The
        standards set out in the Code directly reflect Brek’s high ethical standards.
        Brek expects and requires each and every Employee, as a representative of
        Brek,
        to fulfill Brek’s ethical commitment in a way that is visible to the outside
        world with which Brek conducts its business operations.
  Each
        Employee is responsible for complying with the standards set out in the Code
        and
        must ensure that their personal conduct is above reproach.
  Each
        Employee has an obligation to assure that the conduct of others around him
        or
        her complies with the Code.
  All
        Employees have a legal, moral, and ethical duty to report to Brek’s Board of
        Directors and the appropriate authorities any known or suspected violations
        of
        law, regulations or corporate policy, including the Code.
  Breaches
        of law, regulations and the standards of conduct listed above may lead to
        serious consequences for the Employee concerned.
  **Annual
        Acknowledgement**
  Each
        Employee will be required to sign a statement annually that he or she has
        read
        and understands Brek’s Code of Ethics. This statement will also require that the
        Employee state that he or she is in full compliance with the Code. The form
        of
        statement is attached as Schedule “C”.
 ***Page
              - 90***
 **Schedule
        “A”**
  **VALUES**
   ***FOCUS:*** We
        exist
        only because we are in the natural gas and oil business.
  ***RESPECT:*** We value
        all people, treating them with dignity at all times.
  ***EXCELLENCE:*** We
        strive for “Best in Class” in everything we do.
  ***ACCOUNTABILITY:*** We do
        what we say we will do and expect the same from others.
  ***TEAMWORK:*** We
        believe that cooperative action produces superior results.
  ***INTEGRITY:*** We are
        honest with each other, our customers, our partners, our shareholders and
        ourselves
  ***OPEN
        COMMUNICATION:*** We share
        information, ask for feedback, acknowledge good work, and encourage diverse
        ideas.
  ***POSITIVE
        ATTITUDE:*** We work
        hard, are rewarded for it, and maintain a positive attitude with a good sense
        of
        perspective, humor and enthusiasm.
   ***Page
            - 91***
  **Schedule
        “B”**
  **Reportable
        Violations - Anonymous Reporting Program**
  Accounting
        Error
 Accounting
        Omissions
 Accounting
        Misrepresentations
 Auditing
        Matters
 Compliance/Regulation
        Violations
 Corporate
        Scandal
 Domestic
        Violence
 Discrimination
 Embezzlement
 Environmental
        Damage
 Ethics
        Violation
 Fraud
 Harassment
 Industrial
        Accidents
 Misconduct
 Mistreatment
 Poor
        Customer Service
 Poor
        Housekeeping
 Sabotage
 Securities
        Violation
 Sexual
        Harassment
 Substance
        Abuse
 Theft
 Threat
        of
        Violence
 Unfair
        Labor Practice
 Unsafe
        Working Conditions
 Vandalism
 Waste
 Waste
        of
        Time and Resources
 Workplace
        Violence
   ***Page
            - 92***
  **Schedule
        “C”**
 
 **Acknowledgement
        and Certification Statement**
 
 
 I
        acknowledge and certify that I have read and understand the information set
        forth in the Code of Ethics of Brek Energy Corporation and will comply with
        these principles in my daily work activities. I am not aware of any violation
        of
        the standards of Brek’s Code of Ethics.
 
 
 Date:
        _________________________________________________________________________________
  Name
        (print):
        _________________________________________________________________________________
  Position:
        _________________________________________________________________________________
  Address:
        _________________________________________________________________________________
  *Signature:*_________________________________________________________________________________
   ***Page
            - 93***