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

                                   FORM 10-KSB/A

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

                  For the fiscal year ended: December 31, 2004


|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                         For the transition period from _________ to __________.

                          Commission File Number: 27339

                               BPK RESOURCES, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

             Nevada                                88-0426887
--------------------------------       -----------------------------------
(State or other jurisdiction of       (IRS Employer Identification Number)
 incorporation or organization)

    264 Union Boulevard, First Floor
           Totowa, New Jersey                              07512
----------------------------------------                  ----------
(Address of Principal Executive Offices)                 (Zip Code)

                                 (973) 956-8400
   --------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

  Title of Each Class                       Name of Exchange on which Registered
         None                                               None

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

                     Common stock, $.001 par value per share

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

<PAGE>

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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. |_|

      State issuer's revenues for its most recent fiscal year: $142,309.

      The aggregate market value of the voting common equity held by
non-affiliates of the registrant based on the average bid and asked price of the
registrant's common stock as reported on the OTC Bulletin Board on May 2, 2005,
was $3,156,424.

      As of May 2, 2005, 54,259,503 shares of the registrant's common stock were
outstanding.

         Transitional Small Business Disclosure Format (check one):

         Yes |_| No |X|

<PAGE>

                                EXPLANATORY NOTE

         BPK Resources, Inc. (the "Company") is filing this Amendment No. 1 (the
"Amendment") to its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 filed with the Securities and Exchange Commission ("SEC") on
May 16, 2005 (the "Original Report") to amend Item 8A. Controls and Procedures
to clarify (i) the conclusions reached by our Chief Executive Officer and
Treasurer on the effectiveness of our disclosure controls and procedures; and
(ii) the changes in our internal control over financial reporting that occurred
during our fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

         This Amendment does not reflect events that have occurred after May 16,
2005, the date the Original Report was filed with the SEC, nor does it modify or
update the disclosures set forth in the Original Report, except as described in
the immediately preceding paragraph. Information with respect to any such events
has been or will be set forth as appropriate, in our filings with the SEC
subsequent to May 16, 2005. The remaining information contained in this
Amendment, which consists of all other information originally contained in the
Original Report, is not amended hereby, but is included for the convenience of
the reader.

<PAGE>

                               BPK RESOURCES, INC.
                          ANNUAL REPORT ON FORM 10-KSB
                     FOR FISCAL YEAR ENDED DECEMBER 31, 2004



                                TABLE OF CONTENTS

                                                                           Page
                                     PART I

Item 1.  Description of Business .............................................1
Item 2.  Description of Property ............................................23
Item 3.  Legal Proceedings ..................................................27

                                     PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and Small
         Business Issuer Purchases of Equity Securities .....................28
Item 6.  Management's Discussion and Analysis ...............................29
Item 7.  Financial Statements ...............................................38
Item 8A. Controls and Procedures.............................................38
Item 8B. Other Information...................................................39

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act...................41
Item 10. Executive Compensation .............................................43
Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters.....................................48
Item 12. Certain Relationships and Related Transactions .....................49
Item 13. Exhibits ...........................................................49
Item 14. Principal Accountant Fees and Services .............................52

<PAGE>

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included or incorporated by reference in this
report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and
plans and objective of management for future operations, are forward-looking
statements. In addition, forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "project," "estimate," "anticipate," or "believe" or the negative
thereof or any variation thereon or similar terminology. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to have
been correct.

         Important factors that could cause actual results to differ materially
from our expectations include, but are not limited to, our assumptions about
energy markets, production levels, reserve levels, operating results,
competitive conditions, technology, the availability of capital resources,
capital expenditure obligations, the price, supply and demand for oil, natural
gas and other products or services, limited operating history, the weather,
inflation, the availability of goods and services, successful exploration and
drilling, drilling risks, future processing volumes and pipeline throughput,
general economic conditions, either nationally or internationally or in the
jurisdictions in which we or any of our subsidiaries are doing business,
legislative or regulatory changes, including changes in environmental
regulation, environmental risks and liability under federal, state and foreign
environmental laws and regulations, the securities or capital markets and other
factors disclosed under "Risk Factors" and "Item 6. Management's Discussion and
Analysis" and elsewhere in this report. All subsequent written and oral
forward-looking statements attributable to us, or persons acting on its behalf,
are expressly qualified in their entirety by these cautionary statements. We
assume no duty to update or revise our forward-looking statements based on
changes in internal estimates or expectations or otherwise.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         BPK Resources, Inc. is a Nevada corporation formed on April 2, 1997.
Our principal executive offices are located at 264 Union Boulevard, First Floor,
Totowa, New Jersey 07512. Unless the context otherwise requires, references to
the "Company," "BPK Resources," "we," "us" or "our," mean BPK Resources, Inc.
and our consolidated subsidiaries.

Overview

         We are an independent energy company engaged primarily in oil and gas
exploration, development and production and the acquisition of producing
properties. We target high-potential oil and gas assets located primarily in the
traditional oil and gas producing states in the southern United States and
internationally.

<PAGE>

         Our operations are focused on the identification and evaluation of
prospective oil and gas properties and the contribution of capital to projects
that we believe have the potential to produce oil or gas in commercial
quantities. We participate in projects indirectly as equity participants in
limited partnerships and limited liability companies. We also assist and advise
companies and partnerships in identifying and leasing properties on favorable
terms, and provide such entities with additional reserve assessment analysis and
engineering services in connection with the exploration and development of
prospects.

         We do not serve as the operator for any of our oil and gas projects and
do not intend to serve as the operator of any of our oil and gas projects in the
future. Instead, third-party operators design and manage the development of
wells and supervise operation and maintenance activities in our projects on a
day-to-day basis. These operators employ drilling, production and reservoir
engineers, geologists, and other specialists who work to improve production
rates, increase reserves, and lower the cost of operating our oil and gas
properties.

         By outsourcing the operator functions, we are able to avoid the
substantial costs incurred by operators, such as direct operating costs, repair
and maintenance expenses, transportation expenses, production taxes and workover
costs. We pay the operators of the projects producing well overhead fees,
drilling well overhead fees and other fees related to the operation of the
projects. In addition, we reimburse the operators for our allocated share of
general and administrative charges, which is recorded as an increase to general
and administrative expenses in our financial statements.

         Our primary objective is to build reserves, production, cash flow and
earnings per share by optimizing production and value from existing oil and gas
properties and acquiring new oil and gas prospects. We plan to achieve this
objective by acquiring and developing high profit margin properties, disposing
of low producing, marginal and non-strategic properties, balancing reserves
between oil and gas, and maintaining a high degree of financial flexibility. We
focus our efforts on development wells and recompletions of wells in our
existing lease and well portfolio. By doing so, we believe we can maximize the
use of our otherwise limited resources, reduce the risk of unsuccessful drilling
efforts and capitalize on the experience of our management team and consultants.

Business Strategy

         Our business strategy is to provide long-term growth in shareholder
value by optimizing production and value from our existing oil and gas reserves
and acquiring additional interests in oil and gas properties. Some of the key
elements of our business strategy are as follows:

      o     Exploit and Develop Existing Property Base. We seek to maximize the
            value of the properties we acquire by developing and exploiting
            properties with the highest production and reserve growth potential
            and outsourcing operations to third parties to the extent possible.

      o     Selectively Grow Through Exploration. We have developed and
            implemented an active exploration program that is designed to
            complement our exploitation and development efforts with exploration


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<PAGE>

            projects offering superior reserve potential. We utilize seismic
            data and other technical applications, as appropriate, to manage our
            exploration risks.

      o     Pursue Strategic Acquisitions. We seek to leverage our extensive
            regional knowledge base by acquiring leasehold acreage and producing
            or non-producing properties in areas, such as Texas and other states
            located in the southern United States, that are in mature fields
            with complex geology that have multiple reservoirs and existing
            infrastructure.

      o     Participate in Joint Ventures. We intend to participate in joint
            ventures and seek joint venture partners in order to reduce our
            investment in projects and avoid the costs associated with operating
            the underlying prospects.

      o     Rationalize Property Portfolio. We seek to rationalize the portfolio
            of properties we acquire by selling marginal properties in an effort
            to redeploy capital to exploitation, development and exploration
            projects that offer a potentially higher overall return.

      o     Retain Additional Executive Management. We may retain additional
            executive management personnel with substantial experience in the
            oil and gas exploration and development business to help our
            business grow.

         We seek to acquire leasehold interests in properties with the following
characteristics:

      o     Locations within or close to areas with an established production
            history and infrastructure;

      o     Multiple productive sands and reservoirs; and

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


           To date, we have conducted our acquisition, exploration and
development activities primarily in Texas, Louisiana and Thailand. These regions
are characterized by long-lived reserves with predictable and relatively low
production depletion rates, multiple geologic targets that decrease risk, strong
natural gas prices, lower service costs than in more competitive or remote
areas, a favorable regulatory environment that encourages drilling efforts, and
virtually no federal land or land access impediments.


         We believe that attractive acquisition opportunities will continue to
arise in these regions as the major integrated oil companies and other large
independent oil and gas exploration and production companies continue to divest
small, less capital-intensive properties to focus on larger, more
capital-intensive projects that better match their long-term strategic goals. We
believe that these asset divestitures as well as the resource constraints of
major integrated oil companies and other large upstream companies may allow us
to acquire attractive prospects at favorable prices with a significant portion
of the up-front development expenses, such as infrastructure and seismic,
already invested.


                                       3
<PAGE>

Recent Acquisitions and Divestitures

         On December 31, 2004, we terminated our option to acquire an interest
in the Shadow Mountain Project in Mongolia and terminating all of our rights and
obligations in connection therewith. We owned an option to acquire up to a 50%
interest in the Shadow Mountain Project by contributing $CDN2.4 million to the
project. In the event we did not contribute the full $CDN 2.4 million, we could
acquire a decreased, pro-rata interest in the Shadow Mountain Project by
contributing at least $CDN 500,000 to the project. At December 31, 2004, we had
contributed a total of $US 77,000 to the Shadow Mountain Project and, based upon
our evaluation of the project in December 2004, believed that the cost of making
any further investments in the project would outweigh any benefits we would
realize from the project.

Drilling, Exploration and Production Activities

         We currently own interests in two oil and gas projects with
approximately 1,950 gross acres. Our projects have aggregate net estimated
proved developed producing, proved developed non-producing and possible reserves
of 3,775 barrels of oil and 12.5 million cubic feet of gas, all located in the
state of Texas. Two wells in each of our CSR-Waha Project and Hackberry Project
are currently in production. A description of our oil and gas projects is set
forth under "Item 2. Description of Property - Current Oil and Gas Projects" of
this report.

         Our exploration and development efforts are focused on exploiting
reserves on acreage already under lease. The investment associated with drilling
a well and future development of a project depends principally upon the
complexity of the geological formations involved, the depth of the well or
wells, whether the well or project can be connected to existing infrastructure
or will require additional investment in infrastructure, and, if applicable, the
water depth of the well or project.

         All of the approximate 1,950 gross acres in our oil and gas projects
are "held-by-production." Acreage held-by-production is attractive because it
permits us to maintain all of our exploration and development rights in the
leased area as long as production continues. Our held-by-production acreage has
significant existing infrastructure, which reduces development lead times and
cost. This infrastructure frequently allows for relatively quick tie back of
production from discoveries.

Sales and Marketing

         The operators of our projects market the majority of our oil and gas
production for both our account and the account of the other leasehold interest
owners. They market our products several different ways depending upon a number
of factors, including the availability of purchasers for the product at the
wellhead, the availability and cost of pipelines near the well or related
production platform, market prices, pipeline constraints and operational
flexibility.

         The principal target customers for our crude oil production are
refiners, remarketers and other companies, some of which have pipeline
facilities near the producing properties we acquire. The principal target
customers for our gas production are pipelines, utilities, gas marketing firms,
industrial users and local distribution companies. In the event pipeline


                                       4
<PAGE>

facilities are not conveniently available, we intend to truck or barge our oil
and gas to storage, refining or pipeline facilities.

         The operators of our projects normally sell our oil and gas production
to a relatively small number of customers, as is customary in the oil and gas
exploration, development and production business. Our oil and gas is sold under
both short-term (less than one year) and long-term (one year or more) agreements
at prices negotiated with third parties. Under both short-term and long-term
contracts, typically either the entire contract (in the case of short-term
contracts) or the price provisions of the contract (in the case of long-term
contracts) are renegotiated from intervals ranging in frequency from daily to
annual. Sales prices for oil and gas are negotiated based on factors normally
considered in the industry, such as the posted price for oil, the index or spot
price for gas, price regulations, distance from the well to the pipeline, well
pressure, estimated reserves, commodity quality and prevailing supply
conditions.

         Our operators use existing third-party gathering systems and interstate
and intrastate pipelines to transport our oil and gas, and incur gathering and
transportation expenses to move our oil and gas through these gathering systems
and pipelines. These expenses vary based on the volume and distance shipped, and
the fee charged by the third-party transporter. Transportation space on these
gathering systems and pipelines is occasionally limited and at times unavailable
because of repairs or improvements, or as a result of priority transportation
agreements with other oil and gas shippers. While the ability of our operators
to market our oil and gas has been only infrequently limited or delayed, if
transportation space is restricted or is unavailable, our cash flow from the
affected properties could be adversely affected.

Technology

         Our operators have accumulated detailed geological and geophysical
knowledge and have developed significant technical and operational expertise in
each of their core operating areas. They have developed considerable expertise
in "2-D" and "3-D" seismic imaging and interpretation. "3-D" seismic data is
geophysical data that depict the subsurface strata in three dimensions, and
typically provides a more detailed and accurate interpretation of the subsurface
strata than "2-D," or two-dimensional, seismic data. They use 2-D and 3-D
seismic data and other technical applications to identify prospects and develop
prospects having the highest production and reserve growth potential.

Title to Properties

         We believe that the title to our properties is good and defensible in
accordance with standards generally acceptable in the oil and gas industry,
subject to exceptions that are not so material as to detract substantially from
the use of the properties. Our properties are subject to royalty, overriding
royalty and other outstanding interests customary in the industry. The
properties may be subject to burdens such as liens incident to operating
agreements and taxes, development obligations under oil and gas leases, and
other encumbrances, easements and restrictions. We do not believe any of these
burdens will materially interfere with our use of these properties.


                                       5
<PAGE>

         As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by us. We rely upon the brokers of the
properties to conduct the title examination. We intend to perform necessary
curative work with respect to any significant defects in title prior to
proceeding with operations.

Competition

         The oil and natural gas business is highly competitive. We compete with
private, public and state-owned companies in all facets of the oil and gas
business, including suppliers of energy and fuel to industrial, commercial and
individual customers. Numerous independent oil and gas companies, oil and gas
syndicates and major oil and gas companies actively seek out and bid for oil and
gas prospects and properties as well as for the services of third-party
providers, such as drilling companies, upon which we rely. Many of these
companies not only explore for, produce and market oil and gas, but also carry
out refining operations and market the resultant products on a worldwide basis.
A substantial number of our competitors have longer operating histories and
substantially greater financial and personnel resources than we do.

         Competitive conditions may be substantially affected by various forms
of energy legislation and/or regulation considered from time to time by the
government of the United States and other countries, as well as factors that we
cannot control, including international political conditions, overall levels of
supply and demand for oil and gas, and the markets for synthetic fuels and
alternative energy sources. Intense competition occurs with respect to
marketing, particularly of natural gas.

Regulation

         General. The availability of a ready market for oil and gas projection
depends upon numerous factors beyond our control. These factors include local,
state, federal and international regulation of oil and gas production and
transportation, as well as regulations governing environmental quality and
pollution control, state limits on allowable rates of production by a well or
proration unit, the amount of oil and gas available for sale, the availability
of adequate pipeline and other transportation and processing facilities, and the
marketing of competitive fuels. For example, a productive gas well may be
"shut-in" because of an over-supply of gas or lack of an available pipeline in
the areas in which we may conduct operations. State and federal regulations are
generally intended to prevent waste of oil and gas, protect rights to produce
oil and gas between owners in a common reservoir, and control contamination of
the environment. Pipelines and gas plants are also subject to the jurisdiction
of various federal, state and local agencies that may affect the rates at which
they are able to process or transport gas from our properties.

         Applicable legislation is under constant review for amendment or
expansion. These efforts frequently result in an increase in the regulatory
burden on companies in our industry and a consequent increase in the cost of
doing business and decrease in profitability. Numerous federal and state
departments and agencies issue rules and regulations imposing additional burdens


                                       6
<PAGE>

on the oil and gas industry that are often costly to comply with and carry
substantial penalties for non-compliance. Production operations are affected by
changing tax and other laws relating to the petroleum industry, constantly
changing administrative regulations and possible interruptions or termination by
government authorities.

         Sales of Oil and Natural Gas. Sales of any oil produced in our projects
will be affected by the availability, terms and costs of transportation. The
rates, terms and conditions applicable to the interstate transportation of oil
by pipelines are regulated by the Federal Energy Regulatory Commission ("FERC")
under the Interstate Commerce Act. FERC has implemented a simplified and
generally applicable ratemaking methodology for interstate oil pipelines to
fulfill the requirements of Title VIII of the Energy Policy Act of 1992
comprised of an indexing system to establish ceilings on interstate oil pipeline
rates. FERC has announced several important transportation-related policy
statements and rule changes, including a statement of policy and final rule
issued February 25, 2000, concerning alternatives to its traditional
cost-of-serve rate-making methodology to establish the rates interstate
pipelines may charge for their services. The final rule revises FERC's pricing
policy and current regulatory framework to improve the efficiency of the market
and further enhance competition in natural gas markets.

         Sales of any natural gas produced in our projects will be affected by
the availability, terms and costs of transportation. The rates, terms and
conditions applicable to the interstate transportation of gas by pipelines are
regulated by FERC under the Natural Gas Acts, as well as under Section 311 of
the Natural Gas Policy Act. Since 1985, the FERC has implemented regulations
intended to increase competition within the gas industry by making gas
transportation more accessible to gas buyers and sellers on an open-access,
non-discriminatory basis.

         Pipelines. Pipelines used to gather and transport our oil and gas are
subject to regulation by the Department of Transportation ("DOT") under the
Hazardous Liquids Pipeline Safety Act of 1979, as amended ("HLPSA"), relating to
the design, installation, testing, construction, operation, replacement and
management of pipeline facilities. The HLPSA requires pipeline operators to
comply with regulations issued pursuant to HLPSA designed to permit access to
and allowing copying of records and to make certain reports and provide
information as required by the Secretary of Transportation.

         State Restrictions. State regulatory authorities have established rules
and regulations requiring permits for drilling operations, drilling bonds and
reports concerning operations. Many states have statutes and regulations
governing various environmental and conservation matters, including the
unitization or pooling of oil and gas properties and establishment of maximum
rates of production from oil and gas wells, and restricting production to the
market demand for oil and gas. Such statutes and regulations may limit the rate
at which oil and gas could otherwise be produced from our properties.

         Most states impose a production or severance tax with respect to the
production and sale of crude oil, natural gas and natural gas liquids within
their respective jurisdictions. State production taxes are generally applied as
a percentage of production or sales. In addition, in the event we conduct
operations on federal or state oil and gas leases, such operations must comply
with numerous regulatory restrictions, including various nondiscrimination


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<PAGE>

statutes, royalty and related valuation requirements, and certain of such
operations must be conducted pursuant to certain on-site security regulations
and other appropriate permits issued by the Bureau of Land Management or the
Minerals Management Service or other appropriate federal or state agencies.

         Other. Oil and gas rights may be held by individuals and corporations,
and, in certain circumstances, by governments having jurisdiction over the area
in which such rights are located. As a general rule, parties holding such rights
grant licenses or leases to third parties, such as us, to facilitate the
exploration and development of these rights. The terms of the licenses and
leases are generally established to require timely development. Notwithstanding
the ownership of oil and gas rights, the government of the jurisdiction in which
the rights are located generally retains authority over the manner of
development of those rights.

Environmental

         General. The activities conducted on our properties are subject to
local, state and federal laws and regulations governing environmental quality
and pollution control in the United States and may be subject to similar laws
and regulations in New Zealand. The exploration, drilling and production from
wells, natural gas facilities, including the operation and construction of
pipelines, plants and other facilities for transporting, processing, treating or
storing natural gas and other products, are subject to stringent environmental
regulation by state and federal authorities, including the Environmental
Protection Agency ("EPA"). Such regulation can increase our cost of planning,
designing, installing and operating such facilities.

         Significant fines and penalties may be imposed for the failure to
comply with environmental laws and regulations. Some environmental laws provide
for joint and several strict liability for remediation of releases of hazardous
substances, rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. In addition, we may be subject
to claims alleging personal injury or property damage as a result of alleged
exposure to hazardous substances, such as oil and gas related products.

         Waste Disposal. We currently lease, and intend in the future to lease,
numerous properties that have been used for production of oil and gas for many
years. Although our operators utilize operating and disposal practices that are
standard in the industry, hydrocarbons or other wastes may have been disposed of
or released on or under the properties that we currently own or lease or
properties that we may in the future own or lease. In addition, many of these
properties have been operated in the past by third parties over whom we had no
control as to such entities' treatment of hydrocarbons or other wastes or the
manner in which such substances may have been disposed of or released. State and
federal laws applicable to oil and gas wastes and properties have become
stricter in recent years. Under new laws, we could be required to remediate
property, including ground water, containing or impacted by previously disposed
wastes (including wastes disposed of or released by prior owners or operators)
or to perform remedial plugging operations to prevent future or mitigate
existing contamination.

         Wastes, including hazardous wastes, that are subject to the federal
Resource Conservation and Recovery Act ("RCRA") and comparable state statutes
may be generated on our properties. The EPA has limited the disposal options for
certain wastes that are designated as hazardous under RCRA ("Hazardous Wastes").
Furthermore, it is possible that certain wastes generated by our oil and gas


                                       8
<PAGE>

projects that are currently exempt from treatment as Hazardous Wastes may in the
future be designated as Hazardous Wastes, and therefore be subject to more
rigorous and costly operating and disposal requirements.

         CERCLA. The federal Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), also known as the "Superfund" law, generally
imposes joint and several liability for costs of investigation and remediation
and for natural resource damages, without regard to fault or the legality of the
original conduct, on certain classes of persons with respect to the release into
the environment of substances designated under CERCLA as hazardous substances
("Hazardous Substances"). These classes of persons or so-called potentially
responsible parties include the current and certain past owners and operators of
a facility where there is or has been a release or threat of release of a
Hazardous Substance and persons who disposed of or arranged for the disposal of
the Hazardous Substances found at such a facility. CERCLA also authorizes the
EPA and, in some cases, third parties to take action in response to threats to
the public health or the environment and to seek to recover from the potentially
responsible parties the costs of such action. Although CERCLA generally exempts
petroleum from the definition of Hazardous Substances, our operators may have
generated and may generate wastes that fall within CERCLA's definition of
Hazardous Substances. We may in the future be an owner of facilities on which
Hazardous Substances have been released by previous owners or operators of our
properties that are named as potentially responsible parties related to their
ownership or operation of such property.

         Air Emissions. Our projects are subject to local, state and federal
regulations for the control of emissions of air pollution. Major sources of air
pollutants are subject to more stringent, federally imposed permitting
requirements, including additional permits. Producing wells, gas plants and
electric generating facilities generate volatile organic compounds and nitrogen
oxides. Some of our producing wells may be in counties that are designated as
non-attainment for ozone and may be subject to restrictive emission limitations
and permitting requirements. If the ozone problems in the applicable states are
not resolved by the deadlines imposed by the federal Clean Air Act, or on
schedule to meet the standards, even more restrictive requirements may be
imposed, including financial penalties based upon the quantity of ozone
producing emissions. If we fail to comply strictly with air pollution
regulations or permits, we may be subject to monetary fines and be required to
correct any identified deficiencies. Alternatively, regulatory agencies could
require us to forego construction, modification or operation of certain air
emission sources.

         Clean Water Act. The Clean Water Act imposes restrictions and strict
controls regarding the discharge of wastes, including produced waters and other
oil and natural gas wastes, into waters of the United States, a term broadly
defined. These controls have become more stringent over the years, and it is
probable that additional restrictions will be imposed in the future. Permits
must be obtained to discharge pollutants into federal waters. The Clean Water
Act provides for civil, criminal and administrative penalties for unauthorized
discharges of oil, hazardous substances and other pollutants. It imposes
substantial potential liability for the costs of removal or remediation
associated with discharges of oil or hazardous substances. State laws governing
discharges to water also provide varying civil, criminal and administrative
penalties and impose liabilities in the case of a discharge of petroleum or its


                                       9
<PAGE>

derivatives, or other hazardous substances, into state waters. In addition, the
EPA has promulgated regulations that may require us to obtain permits to
discharge storm water runoff, including discharges associated with construction
activities. In the event of an unauthorized discharge of wastes, we may be
liable for penalties and costs.

         Oil Pollution Act. The Oil Pollution Act of 1990 ("OPA"), which amends
and augments oil spill provisions of the Clean Water Act, and similar
legislation enacted in Texas, Louisiana and other coastal states, impose certain
duties and liabilities on certain "responsible parties" related to the
prevention of oil spills and damages resulting from such spills in United States
waters and adjoining shorelines. A liable "responsible party" includes the owner
or operator of a facility or vessel that is a source of an oil discharge or
poses the substantial threat of discharge, or the lessee or permittee of the
area in which a facility covered by OPA is located. OPA assigns joint and
several liability, without regard to fault, to each liable party for oil removal
costs, remediation of environmental damage and a variety of public and private
damages. OPA also imposes ongoing requirements on a responsible party, including
proof of financial responsibility to cover at least some costs of a potential
spill. Few defenses exist to the liability imposed by OPA. In the event of an
oil discharge, or substantial threat of discharge from our properties, vessels
and pipelines, we may be liable for costs and damages.

         We believe that our operators and projects are in substantial
compliance with current applicable environmental laws and regulations and that,
absent the occurrence of an extraordinary event, compliance with existing local,
state, federal and international laws, rules and regulations governing the
release of materials in the environment or otherwise relating to the protection
of the environment will not have a material effect upon our business, financial
condition or results of operations.

Insurance

         We do not serve as the operator for any of our projects and do not
intend to serve as the operator for any projects in which we may acquire an
interest in the future. Instead, we acquire leasehold interests directly or own
equity interests in limited partnerships, limited liability companies or similar
entities that own leasehold interests in oil and gas prospects. A third-party
operator is responsible for maintaining insurance to cover our prospects with
policy limits and retention liability customary in the industry. We believe the
coverage and types of insurance maintained by the operators for our prospects
are adequate and therefore, we have not acquired our own insurance for such
prospects. However, the occurrence of a significant adverse event on such
prospects, the risks of which are not fully covered by the applicable operator's
insurance, could have a material adverse effect on our ownership interests and,
as a result, have a material adverse effect on our business, financial condition
and results of operations.

Seasonality

         Generally, but not always, the demand for oil and natural gas decreases
during the summer months and increases during the winter months. Seasonal
anomalies such as mild winters sometimes lessen the effect of this seasonal
fluctuation in demand. In addition, pipelines, utilities, local distribution


                                       10
<PAGE>

companies and industrial users utilize oil and natural gas storage facilities
and purchase some of their anticipated winter requirements during the summer.
This can also lessen seasonal fluctuations in demand. We do not expect seasonal
fluctuations in the demand for oil and gas to have a material effect on our
future sales of oil and gas.

Employees and Consultants

         We currently have one employee who is our sole executive officer. We
utilize the services of several consultants who provide, among other things,
technical support and accounting services to the Company. Since we do not serve
as the operator of any of our projects and do not intend to serve as the
operator of any projects in which we may acquire an interest in the future, we
do not intend to retain operating personnel as our business grows. We may,
however, retain additional executive management personnel with substantial
experience in the oil and gas exploration and development business. As a result,
we believe the number of our employees will increase modestly over the next 12
months as our business grows.

                                  RISK FACTORS

         The following risk factors, among others, may affect our financial
condition and results of operations.

                       Risks Associated With Our Business

We have had operating losses and limited revenues to date, need additional
capital to execute our business plan and do not expect to be profitable in the
foreseeable future.

         We have experienced net losses in each fiscal quarter since our
inception, and we expect to continue to incur substantial losses for the
foreseeable future. Net loss applicable to common stockholders for our fiscal
year ended December 31, 2004 was approximately $7,165,105, and as of December
31, 2004, we had an accumulated deficit of approximately $12,892,389. We have
also had limited revenues to date. Revenues for our fiscal year ended December
31, 2004 were $142,309.

         We may not be able to generate significant revenues in the future and
expect that our operating expenses will increase substantially over the next 12
months as we continue to pursue our gas and oil exploration activities. As a
result, we expect to continue to experience negative cash flow for the
foreseeable future and cannot predict when, if ever, we might become profitable.
We will need to raise additional funds, and such funds may not be available on
commercially acceptable terms, if at all. If we cannot raise funds on acceptable
terms, we may not be able to execute our business plan, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This may seriously harm our business, financial condition and results of
operations.

We are an early-stage company with a limited operating history in the oil and
gas industry.

         We are an early-stage company with a limited operating history in the
oil and gas industry upon which to base an evaluation of our current business


                                       11
<PAGE>

and future prospects. We have only been engaged in the oil and gas exploration
and development business since November 2001 and do not have an established
history of locating and developing properties that have oil and gas reserves. As
a result, the revenue and income potential of our business is unproven. In
addition, because of our limited operating history, we have limited insight into
trends that may emerge and affect our business. We may make errors in predicting
and reacting to relevant business trends and will be subject to the risks,
uncertainties and difficulties frequently encountered by early-stage companies
in evolving markets such as ours. We may not be able to successfully address any
or all of these risks and uncertainties. Failure to adequately do so could cause
our business, results of operations and financial condition to suffer.

Our operations will require significant capital expenditures for which we may
not have sufficient funding.

         We intend to make capital expenditures in excess of our existing
capital resources to exploit our existing reserves and discover new oil and gas
reserves. Specifically, we expect to incur capital calls and production costs of
approximately $25,000 in our oil and gas projects over the next 12 months, and
we owe the operator of our CSR-Waha Project approximately $280,000 for our share
of drilling and operating expenses previously incurred by the operator. We also
intend to make offers to acquire oil and gas properties in the ordinary course
of our business. If these offers are accepted, our capital needs may increase
substantially. We intend to rely on external sources of financing to meet our
capital requirements and to obtain such funding through the debt and equity
markets. We cannot assure you that we will be able to obtain additional funding
when it is required or that it will be available to us on commercially
acceptable terms, if at all. If we fail to obtain the funding that we need when
it is required, we may have to forego or delay potentially valuable
opportunities to acquire new oil and gas properties or default on existing
funding commitments to third parties and forfeit or dilute our rights in
existing oil and gas properties.

If we are unable to satisfy our debt obligations to third parties, our business
may be adversely affected.

         As of the date of this report, we had outstanding indebtedness to third
parties in the aggregate amount of approximately $170,000, all of which is due
during the next 12 months. We intend to obtain the funds necessary to repay this
indebtedness through sales of debt and equity securities. If we are unable to
repay this indebtedness as it becomes due, the lenders will have the right to
declare the indebtedness in default and seek all available remedies against us,
including executing upon all of our assets. In addition, the presence of this
indebtedness may have a negative effect on our ability to obtain additional
financing. There can be no assurance that additional debt or equity financing or
cash generated by operations will be available to meet these requirements.

The successful implementation of our business plan is subject to risks inherent
in the oil and gas business.

         Our oil and gas operations are subject to the economic risks typically
associated with exploration, development and production activities, including


                                       12
<PAGE>

the necessity of making significant expenditures to locate and acquire
properties and to drill exploratory wells. In addition, the cost and timing of
drilling, completing and operating wells is often uncertain. In conducting
exploration and development activities, the presence of unanticipated pressure
or irregularities in formations, miscalculations or accidents may cause our
exploration, development and production activities to be unsuccessful. This
could result in a total loss of our investment in a particular property. If
exploration efforts are unsuccessful in establishing proved reserves and
exploration activities cease, the amounts accumulated as unproved costs will be
charged against earnings as impairments.

         In addition, market conditions or the unavailability of satisfactory
oil and gas transportation arrangements may hinder our access to oil and gas
markets or delay our production. The availability of a ready market for our oil
and gas production depends on a number of factors, including the demand for and
supply of oil and gas and the proximity of reserves to pipelines and terminal
facilities. Our operators' ability to market our production depends in
substantial part on the availability and capacity of gathering systems,
pipelines and processing facilities, in some cases owned and operated by third
parties. Their failure to obtain such services on acceptable terms could
materially harm our business. They may be required to shut in wells for lack of
a market or because of inadequacy or unavailability of pipelines or gathering
system capacity. If that occurs, we would be unable to realize revenue from
those wells until arrangements are made to deliver our production to market.

Our future performance is dependent upon our ability to identify, acquire and
develop oil and gas properties.

         Our future performance depends upon our ability to identify, acquire
and develop oil and gas reserves that are economically recoverable. Our success
will depend upon our ability to acquire leasehold interests in properties upon
which oil and gas reserves are ultimately discovered in commercial quantities,
and the ability of our third-party operators to develop prospects that contain
proven oil and gas reserves to the point of production. Without successful
acquisition and exploration activities, we will not be able to develop oil and
gas reserves or generate revenues. We cannot provide you with any assurance that
we will be able to identify and acquire oil and gas reserves on acceptable
terms, or that oil and gas deposits will be discovered in sufficient quantities
to enable us to recover our exploration and development costs or sustain our
business.

         The successful acquisition and development of oil and gas properties
requires an assessment of recoverable reserves, future oil and gas prices and
operating costs, potential environmental and other liabilities, and other
factors. Such assessments are necessarily inexact and their accuracy inherently
uncertain. In addition, no assurance can be given that the exploitation and
development activities of our operators will result in the discovery of any
reserves. Their operations may be curtailed, delayed or canceled as a result of
lack of adequate capital and other factors, such as title problems, weather,
compliance with governmental regulations or price controls, mechanical
difficulties, or unusual or unexpected formations, pressures or and work
interruptions. In addition, the costs of exploitation and development may
materially exceed initial estimates.


                                       13
<PAGE>

We rely heavily upon reserve estimates when determining whether or not to
acquire or invest in a particular oil or gas property.

         The oil and gas reserve information that we present in our filings with
the Securities and Exchange Commission ("SEC") and use in evaluating oil and gas
prospects is based on reserve estimates involving a great deal of subjectivity.
Different reserve engineers may make different estimates of reserves and cash
flows based on the same available data. Reserve estimates depend in large part
upon the reliability of available geologic and engineering data which is
inherently imprecise. Geologic and engineering data are used to determine the
probability that a reservoir of oil and natural gas exists at a particular
location, and whether oil and natural gas are recoverable from a reservoir.
Recoverability is ultimately subject to the accuracy of data including, but not
limited to the following:

      o     geological characteristics of the reservoir structure;

      o     reservoir fluid properties;

      o     the size and boundaries of the drainage area;

      o     reservoir pressure; and

      o     the anticipated rate of pressure depletion.

         The evaluation of these and other factors is based upon available
seismic data, computer modeling, well tests and information obtained from
production of oil and natural gas from adjacent or similar properties, but the
probability of the existence and recoverability of reserves is less than 100%
and actual recoveries of proved reserves usually differ from estimates.

         Reserve estimates also require numerous assumptions relating to
operating conditions and economic factors, including:

      o     the price at which recovered oil and natural gas can be sold;

      o     the costs of recovery;

      o     assumptions concerning future operating costs, severance and excise
            taxes, development costs and workover and remedial costs;

      o     prevailing environmental conditions associated with drilling and
            production sites;

      o     availability of enhanced recovery techniques, ability to transport
            oil and natural gas to markets and governmental regulation; and

      o     other regulatory factors, such as taxes and environmental laws.


         A negative change in any one or more of these factors could result in
quantities of oil and natural gas previously estimated as proved reserves
becoming uneconomic to produce. For example, a decline in the market price of
oil or natural gas to an amount that is less than the cost of recovery of such
oil and natural gas in a particular location could make production commercially
impracticable. The risk that a decline in price could have that effect is
magnified in the case of reserves requiring sophisticated or expensive


                                       14
<PAGE>

production enhancement technology and equipment, such as some types of heavy
oil. Each of these factors, by having an impact on the cost of recovery and the
rate of production, will also affect the present value of future net cash flows
from estimated reserves. In addition, the 10% discount factor, which is required
by the SEC to be used to calculate discounted future net cash flows for
reporting purposes, is not necessarily the most appropriate discount factor
based on interest rates in effect from time to time and risks associated with us
or the oil and gas industry in general.

The geographic concentration of all of our projects in Texas and the southern
United States subjects us to an increased risk of loss of revenue or curtailment
of production from factors affecting this region.

         The prospects underlying our oil and gas projects are located in Texas.
We intend to acquire interests in additional projects with prospects located in
Texas and other states in the southern United States. The geographic
concentration of substantially all of our projects in these states means that
some or all of our properties could be affected by the same event should the
region experience:

      o     severe weather;

      o     delays or decreases in production, the availability of equipment,
            facilities or services;

      o     delays or decreases in the availability of capacity to transport,
            gather or process production; or

      o     changes in the regulatory environment.


Because substantially all of our properties could experience the same condition
at the same time, these conditions could have a relatively greater impact on our
results of operations than they might have had our properties been dispersed
over a greater geographic area.

         In addition, our ability to add reserves through drilling is dependent
upon our ability to time obtain drilling permits and regulatory approvals. The
permitting and approval process has been more difficult in recent years due to
increased activism from environmental and other groups and has extended the time
it takes us to receive permits. Because of our relatively small size and
concentrated property base, we can be disproportionately disadvantaged by delays
in obtaining or failing to obtain drilling approvals compared to companies with
larger or more dispersed property bases. For example, we are less able to shift
drilling activities to areas where permitting may be easier, and we have fewer
properties over which to spread the costs of complying with these regulations
and the cost of foregone opportunities resulting from delays.

We may be unable to identify liabilities associated with the properties we
acquire or obtain protection from sellers against such liabilities.

         The properties we acquire may be subject to liabilities that we are
unable to identify or from which we are unable to obtain protection from the
seller. Our reviews of acquired properties are inherently incomplete because it
is not generally feasible to review in depth every individual property involved
in each acquisition. Our assessment may not reveal all existing or potential
problems, nor will it permit us to become familiar enough with the properties to
assess fully their capabilities and deficiencies. Inspections may not reveal
structural or environmental problems, such as pipeline corrosion or groundwater


                                       15
<PAGE>

contamination, when they are made. Even a detailed review of records and
properties may not necessarily reveal existing or potential problems, nor will
it permit us to become sufficiently familiar with the properties to assess fully
their deficiencies and potential.

         In addition, we may not be able to obtain contractual indemnities from
the seller for liabilities that it created. We often assume certain
environmental and other risks and liabilities in connection with the acquired
properties. We may also be required to assume the risk of the physical condition
of the properties in addition to the risk that they may not perform in
accordance with our expectations.

The oil and gas exploration and production industry historically is a cyclical
industry and market fluctuations in the prices of oil and gas could adversely
affect our business.

         Prices for oil and gas tend to fluctuate significantly in response to
factors beyond our control. These factors include, but are not limited to:

      o     weather conditions in the United States and elsewhere;

      o     economic conditions in the United States and elsewhere;

      o     actions by OPEC, the Organization of Petroleum Exporting Countries;

      o     political instability in the Middle East and other major oil and gas
            producing regions;

      o     governmental regulations, both domestic and foreign;

      o     domestic and foreign tax policy;

      o     the pace adopted by foreign governments for the exploration,
            development, and production of their national reserves;

      o     the price of foreign imports of oil and gas;

      o     the cost of exploring for, producing and delivering oil and gas;

      o     the discovery rate of new oil and gas reserves;

      o     the rate of decline of existing and new oil and gas reserves;

      o     available pipeline and other oil and gas transportation capacity;

      o     the ability of oil and gas companies to raise capital;

      o     the overall supply and demand for oil and gas; and

      o     the availability of alternate fuel sources.

         Changes in commodity prices may significantly affect our capital
resources, liquidity and expected operating results. Price changes directly
affect revenues and can indirectly impact expected production by changing the
amount of funds available to reinvest in exploration and development activities.
Reductions in oil and gas prices not only reduce revenues and profits, but could
also reduce the quantities of reserves that are commercially recoverable.
Significant declines in prices could result in non-cash charges to earnings due
to impairment. We do not currently engage in any hedging program to mitigate our
exposure to fluctuations in oil and gas prices.


                                       16
<PAGE>

         Changes in commodity prices may also significantly affect our ability
to estimate the value of producing properties for acquisition and divestiture
and often cause disruption in the market for oil and gas producing properties,
as buyers and sellers have difficulty agreeing on the value of the properties.
Price volatility also makes it difficult to budget for and project the return on
acquisitions and the development and exploitation of projects. We expect that
commodity prices will continue to fluctuate significantly in the future.

Our ability to produce sufficient quantities of oil and gas from our properties
may be adversely affected by a number of factors outside of our control.

         The business of exploring for and producing oil and gas involves a
substantial risk of investment loss. Drilling oil and gas wells involves the
risk that the wells may be unproductive or that, although productive, the wells
may not produce oil and/or gas in economic quantities. Other hazards, such as
unusual or unexpected geological formations, pressures, fires, blowouts, loss of
circulation of drilling fluids or other conditions may substantially delay or
prevent completion of any well. Adverse weather conditions can also hinder
drilling operations. A productive well may become uneconomic if water or other
deleterious substances are encountered that impair or prevent the production of
oil and/or gas from the well. In addition, production from any well may be
unmarketable if it is impregnated with water or other deleterious substances.
There can be no assurance that oil and gas will be produced from the properties
in which we have interests. In addition, the marketability of oil and gas that
may be acquired or discovered may be influenced by numerous factors beyond our
control. These factors include the proximity and capacity of oil and gas
pipelines and processing equipment, market fluctuations of oil and gas prices,
taxes, royalties, land tenure, allowable production and environmental
protection. We cannot predict how these factors may affect our business.

We are dependent upon the efforts of various third parties that we do not
control and, as a result, we may not be able to control the timing of
development efforts, the associated costs, or the rate of production of
reserves.

         The success of our business is dependent upon the efforts of various
third parties that we do not control. We do not serve as the operator for any of
our oil and gas projects and do not intend to serve as the operator of any oil
or gas projects we may acquire in the future. As a result, we may have limited
ability to exercise influence over the operations of our properties or their
associated costs. Our dependence on the operator and other leasehold interest
owners for these projects and our limited ability to influence operations and
associated costs could prevent the realization of our targeted returns on
capital in drilling or acquisition activities. The success and timing of
development and exploitation activities on properties operated by others depend
upon a number of factors that will be largely outside of our control, including:

      o     the timing and amount of capital expenditures;

      o     the operator's expertise and financial resources;

      o     approval of other participants in drilling wells;

      o     selection of technology;


                                       17
<PAGE>

      o     the rate of production of the reserves; and

      o     the availability of suitable offshore drilling rigs, drilling
            equipment, production and transportation infrastructure, and
            qualified operating personnel.


         We rely upon various companies to assist us in identifying desirable
oil and gas prospects to acquire and to provide us with technical assistance and
services. We also rely upon the services of geologists, geophysicists, chemists,
engineers and other scientists to explore and analyze oil and gas prospects to
determine a method in which the oil and gas prospects may be developed in a
cost-effective manner. Although we have developed relationships with a number of
third-party service providers, we cannot assure you that we will be able to
continue to rely on such persons. If any of these relationships with third-party
service providers are terminated or are unavailable on commercially acceptable
terms, we may not be able to execute our business plan.

The unavailability or high cost of drilling rigs, equipment, supplies, personnel
and oil field services could adversely affect the ability of our operators to
execute their exploration and development plans on a timely basis and within
their budget.

         Shortages or the high cost of drilling rigs, equipment, supplies or
personnel could delay or adversely affect the exploitation and exploration plans
of our operators, which could have a material adverse effect on our business,
financial condition or results of operations. Our operators must currently
schedule rigs several months in advance to ensure availability for a particular
project. If the unavailability or high cost of rigs, equipment supplies or
personnel were particularly severe in Texas and other states located in the
southern United States, we could be materially and adversely affected because
our properties are concentrated in those areas.

We may be required to write-down the carrying values and/or estimates of total
reserves of our oil and gas properties.

         Accounting rules applicable to us require that we review periodically
the carrying value of our oil and gas properties for possible impairment. Based
on specific market factors and circumstances at the time of prospective
impairment reviews and the continuing evaluation of development plans,
production data, economics and other factors, we may be required to write down
the carrying value of our oil and gas properties.

         For our fiscal year ended December 31, 2004, we recorded an impairment
charge of $1,323,725 which resulted from an impairment of the carrying value of
our investment in the Shadow Mountain Project of $1,111,000 as a result of the
termination of our option to acquire an interest in the project on December 31,
2004, and an impairment of the carrying value of our investment in the CSR-Waha
Project of $212,725 as a result of a decrease in our estimate of the market
value of the project's underlying oil and gas prospects. A write-down
constitutes a noncash charge to earnings. See "Item 6. Management's Discussion
and Analysis - Critical Accounting Policies - Impairment of Properties" for a
discussion of when and how impairment of properties charges are determined. We
may incur additional noncash charges for impairment of our properties in the
future, which could have a material adverse effect on our results of operations


                                       18
<PAGE>

in the period taken. We may also reduce our estimates of the reserves that may
be economically recovered from our properties, which could have the effect of
reducing the total value of our reserves.

We may be unable to retain our leases and working interests in leases.

         We have historically held most of our properties under leases and
interests in leases and expect that we will continue to do so in the future. If
we or the holder of the lease fails to meet the specific requirements of each
lease, such lease may terminate or expire. We cannot assure you that any of the
obligations required to maintain each lease will be met. The termination or
expiration of our leases or our interests in leases may harm our business. Some
of our property interests will terminate unless we fulfill certain obligations
under the terms of our agreements related to such properties. If we are unable
to satisfy these conditions on a timely basis, we may lose our rights in these
properties. The termination of our interests in these properties may harm our
business.

         In addition, we will need significant funds to meet capital calls and
pay production costs on our various interests in oil and gas prospects.
Specifically, we expect to incur capital calls and production costs of
approximately $25,000 with respect to our oil and gas projects during the next
12 months and we owe the operator of our CSR-Waha Project approximately $280,000
for our share of drilling and operating expenses previously incurred by the
operator. If any of the other owners of the leasehold interests in any of the
projects in which we participate, or any of the limited partners or membership
interest holders in the limited partnerships or limited liability companies,
respectively, in which we own an interest fails to pay its equitable portion of
development costs or capital calls, we may need to pay additional funds to
protect our leasehold interests.

Title deficiencies could render our leases worthless.

         The existence of a material title deficiency can render a lease
worthless and can result in a large expense to our business. It is our practice
in acquiring oil and gas leases or undivided interests in oil and gas leases to
forgo the expense of retaining lawyers to examine the title to the oil or gas
interest to be placed under lease or already placed under lease. Instead, we
rely upon the judgment of oil and gas lease brokers or landmen who perform the
field work in examining records in the appropriate governmental office before
attempting to place under lease a specific oil or gas interest. This is
customary practice in the oil and gas industry. However, we do not anticipate
that we, or the person or company acting as operator of the wells located on the
properties that we intend to lease, will obtain counsel to examine title to the
lease until the well is about to be drilled. As a result, we may be unaware of
deficiencies in the marketability of the title to the lease. Such deficiencies
may render the lease worthless.

If our operators fail to maintain adequate insurance, our business could be
materially and adversely affected.

         Our operations are subject to risks inherent in the oil and gas
industry, such as blowouts, cratering, explosions, uncontrollable flows of oil,
gas or well fluids, fires, pollution, earthquakes and other environmental risks.


                                       19
<PAGE>

These risks could result in substantial losses due to injury and loss of life,
severe damage to and destruction of property and equipment, pollution and other
environmental damage, and suspension of operations. Any offshore project that we
participate in will be subject to a variety of operating risks peculiar to the
marine environment, such as hurricanes or other adverse weather conditions, to
more extensive governmental regulation, including regulations that may, in
certain circumstances, impose strict liability for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs, and other environmental damages.

         We do not serve as the operator for our oil and gas projects and do not
intend to serve as the operator of any projects in which we may acquire an
interest in the future. We acquire leasehold interests in projects directly or
through equity interests in limited partnerships, limited liability companies
and similar entities that own leasehold interests in projects. The operator for
the prospect maintains insurance of various types to cover our operations with
policy limits and retention liability customary in the industry. We believe the
coverage and types of insurance maintained by the operators of such prospects
are adequate and, therefore, have not acquired our own insurance coverage for
such prospects. The occurrence of a significant adverse event on such prospects
that is not fully covered by insurance could result in the loss of all or part
of our investment in a particular prospect which could have a material adverse
effect on our financial condition and results of operations.

Complying with environmental and other government regulations could be costly
and could negatively impact our production.

         Our business is governed by numerous laws and regulations at various
levels of government in the countries in which our prospects are located. These
laws and regulations govern the operation and maintenance of our facilities, the
discharge of materials into the environment and other environmental protection
issues. Such laws and regulations may, among other potential consequences,
require that our operators acquire permits before commencing drilling, restrict
the substances that can be released into the environment with drilling and
production activities, limit or prohibit drilling activities on protected areas
such as wetlands or wilderness areas, require that reclamation measures be taken
to prevent pollution from former operations, require remedial measures to
mitigate pollution from former operations, such as plugging abandoned wells and
remediating contaminated soil and groundwater, and require remedial measures to
be taken with respect to property designated as a contaminated site.

         Under these laws and regulations, we could be liable for personal
injury, clean-up costs and other environmental and property damages, as well as
administrative, civil and criminal penalties. Our operators maintain limited
insurance coverage for sudden and accidental environmental damages as well as
environmental damage that occurs over time. However, we do not believe that
insurance coverage for the full potential liability of environmental damages is
available at a reasonable cost. Accordingly, we or our operators could be
liable, or could be required to cease production on properties, if environmental
damage occurs.

         The costs of complying with environmental laws and regulations in the
future may harm our business. Furthermore, future changes in environmental laws
and regulations could occur that result in stricter standards and enforcement,


                                       20
<PAGE>

larger fines and liability, and increased capital expenditures and operating
costs, any of which could have a material adverse effect on our financial
condition and results of operations.

The oil and gas industry is highly competitive.

         The oil and gas industry is highly competitive. We compete with oil and
natural gas companies and other individual producers and operators, many of
which have longer operating histories and substantially greater financial and
other resources than we do, as well as companies in other industries supplying
energy, fuel and other needs to consumers. Many of these companies not only
explore for and produce crude oil and natural gas, but also carry on refining
operations and market petroleum and other products on a worldwide basis. Our
larger competitors, by reason of their size and relative financial strength, can
more easily access capital markets than we can and may enjoy a competitive
advantage in the recruitment of qualified personnel. They may be able to absorb
the burden of any changes in laws and regulation in the jurisdictions in which
we do business and handle longer periods of reduced prices for oil and gas more
easily than we can. Our competitors may be able to pay more for productive oil
and natural gas properties and may be able to define, evaluate, bid for and
purchase a greater number of properties and prospects than we can. Further,
these companies may enjoy technological advantages and may be able to implement
new technologies more rapidly than our operators can. Our ability to acquire
additional properties in the future will depend upon our ability to evaluate and
select suitable properties and consummate transactions in a highly competitive
environment.

                           Risks Related to Our Stock

One stockholder owns a majority of our voting stock.

         BP Investments Group, LLC ("BP Investments") beneficially owns
approximately 51% of our outstanding shares of common stock. As a result, BP
Investments is able to control substantially all matters requiring approval by
our stockholders, including the election of directors and approval of
significant corporate transactions.

There is no significant market for our common stock.

         There is no active trading market for our common stock. Our common
stock is not eligible for trading on any national or regional securities
exchange or the Nasdaq Stock Market. Our common stock is eligible for trading on
the OTC Bulletin Board. This market tends to be substantially less liquid than
national and regional securities exchanges or the Nasdaq Stock Market. We cannot
provide you with any assurance that an active trading market for our common
stock will develop, or if such a market develops, that it will be sustained.

Applicable SEC Rules governing the trading of "penny stocks" limits the trading
and liquidity of our common stock which may affect the trading price of our
common stock.

         Our common stock currently trades on the OTC Bulletin Board. Since our
common stock continues to trade below $5.00 per share, our common stock is
considered a "penny stock" and is subject to SEC rules and regulations that
impose limitations upon the manner in which our shares can be publicly traded.


                                       21
<PAGE>

These regulations require the delivery, prior to any transaction involving a
penny stock, of a disclosure document explaining the penny stock market and the
associated risks. Under these regulations, brokers who recommend penny stocks to
persons other than established customers or certain accredited investors must
make a special written suitability determination for the purchaser and receive
the purchaser's written agreement to a transaction prior to sale. These
regulations may have the effect of limiting the trading activity of our common
stock and reducing the liquidity of an investment in our common stock.

We intend to raise additional capital in the future, and such additional capital
may be dilutive to stockholders or impose operational restrictions.

         We intend to raise additional capital in the future to help fund our
operations through sales of shares of our common stock or securities convertible
into shares of our common stock, as well as issuances of debt. Additional
convertible debt or equity financing may be dilutive to our stockholders and
debt financing, if available, may involve restrictive covenants that may limit
our operating flexibility. If additional capital is raised through the issuance
of shares of our common stock or securities convertible into shares of our
common stock, the percentage ownership of our stockholders will be reduced.
These stockholders may experience additional dilution in net book value per
share and any additional equity securities may have rights, preferences and
privileges senior to those of the holders of our common stock.

Our existing stockholders may experience substantial dilution of their ownership
interests due to the issuance of additional shares of our common stock.

         We currently have 54,259,503 shares of common stock issued and
outstanding. As of April 1, 2005, we had outstanding warrants exercisable into
2,995,000 shares of our common stock, options exercisable into 525,000 shares of
our common stock, and shares of our Series B Convertible Preferred Stock
convertible into 829,775 shares of our common stock. Some of these securities
contain anti-dilution provisions that will result in the issuance of additional
shares in the event we sell additional shares of our common stock at a price
less than the exercise or conversion price of such securities. The issuance of
additional shares of common stock upon the exercise or conversion of these
securities may result in substantial dilution to the equity interests of our
existing stockholders.

         We may also issue additional shares of our common stock in connection
with the hiring of additional personnel, future acquisitions of oil and gas
prospects, future offerings of our securities, and other business purposes. Such
issuances may further dilute the interests of our existing stockholders.

The trading price of our common stock is likely to be highly volatile.

         The trading price of our shares has from time to time fluctuated widely
and in the future may be subject to similar fluctuations. The trading price may
be affected by a number of factors including events described in the risk
factors set forth in this report as well as our operating results, financial
condition, announcements regarding our oil and gas activities, general
conditions in the oil and gas exploration and development industry, and other
events or factors. In addition, the stock market has experienced significant
price and volume fluctuations that have particularly affected the price of many


                                       22
<PAGE>

small capitalization companies and that often have been unrelated or
disproportionate to the operating performance of these companies. Market
fluctuations such as these may seriously harm the market price of our common
stock. Further, securities class action suits have been filed against companies
following periods of market volatility in the price of their securities. If such
an action is instituted against us, we may incur substantial costs and a
diversion of management attention and resources, which would seriously harm our
business, financial condition and results of operations.

We do not intend to pay dividends in the foreseeable future.

         We have never declared or paid a dividend on our common stock. We
intend to retain earnings, if any, for use in the operation and expansion of our
business and, therefore, do not anticipate paying any dividends in the
foreseeable future.

ITEM 2.  DESCRIPTION OF PROPERTY

         The properties in which we have an interest consist of our principal
executive offices and the oil and gas properties on which we conduct our
exploration, development and production activities.

Principal Executive Office

         Our principal executive office is located at 264 Union Boulevard, First
Floor, Totowa, New Jersey 07512. We rent this office space for a nominal monthly
rental fee. We believe our current office will be adequate to support our
operations for the foreseeable future.

Current Oil and Gas Projects

         We currently own an interest in two oil and gas projects with an
aggregate of 1,950 gross acres under lease. A description of each of our oil and
gas projects is provided below.

CSR-Waha Project

         We own a 99% limited partnership interest in CSR-Waha Partners, L.P.
("CSR-Waha"). CSR, LLC serves as the sole general partner, and Patterson-UTI
Energy, Inc. ("Patterson-UTI") serves as the operator of the project. CSR-Waha
owns a 12.5% leasehold interest in 1,650 acres in the Waha/Lockridge oil and gas
prospect located in Reeves County, Texas. The Waha/Lockridge prospect was being
drilled to test the Ellenburger Formation at depths in excess of 17,000 feet. To
date, four wells have been drilled in this project, two of which are in
production and the remainder of which are shut in awaiting evaluation for
recompletion. We may recomplete several of our existing wells during the
remainder of 2005.

         We currently owe Patterson-UTI approximately $280,000 for our share of
drilling and operating expenses previously incurred by Patterson-UTI.
Accordingly, our share of the revenues generated by this project is being
reduced by our share of Patterson-UTI's current and past operating and
development expenses.


                                       23
<PAGE>

Hackberry Project

         We own a 6.25% leasehold interest in the Hackberry Project. Touchstone
Resources USA, Inc., a Texas corporation ("Touchstone Texas"), serves as the
operator of the project. The Hackberry Project consists of the South French
prospect, which are contains an aggregate of 302 gross acres in the Hackberry
Trend located in Jefferson County, Texas. This prospect is currently producing
from hydrocarbons located in the Hackberry formation. The Hackberry formation is
located generally at a depth of about 10,900 feet. To date, two wells have been
drilled in this project and a third well has been acquired by the project. Of
these three wells, two wells are in production and the remaining well has been
plugged and abandoned.

Selected Oil and Gas Data

         We entered into the oil and natural gas business in November 2001. We
do not have any obligations under existing contracts or agreements calling for
the provision of fixed and determinable quantities of oil and gas over the next
three (3) years, and have not filed any information or reports with any federal
authority or agency since January 1, 2004, containing estimates of total, proved
developed or undeveloped net oil or gas reserves. Our oil and gas properties
consist primarily of oil and gas wells and our ownership in developed leasehold
acreage. A description of selected data regarding our oil and gas properties and
interests is set forth below.

Productive Wells

         The following table sets forth as of April 27, 2005 information
regarding the total gross and net productive wells, expressed separately for oil
and gas. As of April 27, 2005, all of our productive oil and gas wells were
located in the state of Texas. For the purposes of this subsection: (i) one or
more completions in the same bore hole have been counted as one well; and (ii) a
well with one or multiple completions at least one of which is an oil completion
has been classified as an oil well. As of April 27, 2005, we did not have any
wells with multiple completions.

                                      Oil                     Gas
                              Gross          Net      Gross          Net
Total Productive Wells          2           .091        2            .25

         A productive well is an exploratory well, development well, producing
well or well capable of production, but does not include a dry well. A dry well
(hole) is an exploratory or a development well found to be incapable of
producing either oil or gas in sufficient quantities to justify completion as an
oil or gas well.

         A gross well is a well in which a working interest is owned, and a net
well is the result obtained when the sum of fractional ownership working
interests in gross wells equals one. The number of gross wells is the total
number of wells in which a working interest is owned, and the number of net
wells is the sum of the factional working interests owned in gross wells
expressed as whole numbers and fractions thereof. The "completion" of a well


                                       24
<PAGE>

means the installation of permanent equipment for the production of oil or gas,
or, in the case of a dry hole, to the reporting of abandonment to the
appropriate agency.

Production and Price History

         The following table sets forth as of December 31, 2004, 2003 and 2002,
information regarding net production of oil and gas and certain price and cost
information. For the purposes of this table, the following terms have the
following meanings: (i) "Bbl" means one stock tank barrel or 42 U.S. gallons
liquid volume; (ii) "MBbls" means one thousand barrels of oil; (iii) "Mcf" means
one thousand cubic feet; (iv) "Mcfe" means one thousand cubic feet equivalent,
determined using the ratio of six Mcf of natural gas to one Bbl of oil; (v)
"MMcfe/d" means one million cubic feet equivalent per day, determined by using
the ratio of six Mcf of natural gas to one Bbl of oil; and (vi) "MMcf" means one
million cubic feet.

                                                    2004     2003    2002
                                                    ----     ----    ----
Production Data:
      Oil (MBbls)                                   1.11      1.8     4.8
      Natural gas (MMcf)                            15.6     39.5    30.4
      Total (Mcfe)                                22,600   50,300  59,200
      Daily (MMcfe/d)                             .00006   .00014  .00016

Average Prices:
      Oil (per Bbl)                               $39.79   $30.07  $24.76
      Natural gas (per Mcf)                         6.20     4.05    3.39
           Total (per Mcfe)                         6.22     4.14    3.60

Average Costs (per Mcfe):
      Lease operating expenses                     $1.06     $.24    $.23
      Gathering and transportation expense           .08      .08     .08
      Production tax expense                         .47      .21     .27
      Depreciation, depletion and amortization      2.15     2.04    5.84
      General and administrative expenses            .10      .05     .04

         Net production includes only production that is owned by us and
produced to our interest, less royalties and production due to others.
Production of natural gas includes only marketable production of gas on an "as
sold" basis. Production of natural gas includes only dry, residue and wet gas,
depending on whether liquids have been extracted before we passed title, and
does not include flared gas, injected gas and gas consumed in operations.
Recovered gas, lift gas and reproduced gas are not included until sold.

         The average price of oil and gas is the average sales price (including
transfers) per unit of oil and gas produced and has been determined in
accordance with Statement of Financial Accounting Standards No. 69 ("SFAS 69").
The average cost of oil and gas are the average production cost (lifting cost)
per unit of oil and gas produced and has been computed using production costs
required to be disclosed pursuant to and in accordance with SFAS No. 69.


                                       25
<PAGE>

Drilling Activity

         The following table sets forth information with respect to wells
completed during our fiscal years ended December 31, 2004, 2003 and 2002. The
information should not be considered indicative of future performance, nor
should it be assumed that there is necessarily any correlation between the
number of productive wells drilled, quantities of reserves found or economic
value. We did not engage in any drilling activities on development wells during
such years.

                                2004             2003              2002
                                ----             ----              ----
                          Gross       Net  Gross        Net  Gross        Net
Exploratory:
      Productive
           Texas              0         0      0          0      2        .49
           Louisiana          1      .094      0          0      0          0
           Thailand           0         0      1       .049      0          0
      Dry
           Texas              0         0      0          0      0          0
           Louisiana          0         0      1       .094      1       .165
           Thailand           0         0      0          0      0          0
                 Total        1      .094      2       .143      3       .655

         A productive well is an exploratory well, development well, producing
well or well capable of production, but does not include a dry well. A dry well
(hole) is an exploratory or a development well found to be incapable of
producing either oil or gas in sufficient quantities to justify completion as an
oil or gas well. The number of wells drilled refers to the number of wells
(holes) completed at any time during the fiscal year ended December 31, 2004,
regardless of when drilling was initiated. The "completion" of a well means the
installation of permanent equipment for the production of oil or gas, or, in the
case of a dry hole, to the reporting of abandonment to the appropriate agency.

         During the fiscal year ended December 31, 2004, we participated in
drilling one gross well which was completed and shut in awaiting facilities. No
gross wells were in the process of being completed or dewatered, nor were any
gross wells were determined to be dry holes, during such year. We did not
participate in drilling any net wells during our fiscal year ended December 31,
2004, nor did we recomplete any gross wells or net wells that were not included
in the totals above.


                                       26
<PAGE>

Acreage

         The following table sets forth as of April 27, 2005 information
regarding the Company's gross and net developed and undeveloped oil and natural
gas acreage under lease. All of such acreage is located in the state of Texas.

                                                 Gross            Net
Developed Acreage                               1957.9         220.33
Undeveloped Acreage                                  0              0
                                              ---------     ----------
                Total                           1957.9         220.33
                                              =========     ==========

         A developed acre is an acre spaced or assignable to productive wells, a
gross acre is an acre in which a working interest is owned, and a net acre is
the result that is obtained when the sum of fractional ownership working
interests in gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole numbers and
fractions thereof. Undeveloped acreage is considered to be those lease acres on
which wells have not been drilled or completed to a point that would permit the
production of commercial quantities of oil or natural gas, regardless of whether
or not such acreage contains proved reserves, but does not include undrilled
acreage held by production under the terms of a lease.

         As is customary in the oil and gas industry, we can retain our interest
in undeveloped acreage by drilling activity that establishes commercial
production sufficient to maintain the lease or by payment of delay rentals
during the remaining primary term of the lease. The oil and natural gas leases
in which we have an interest are for varying primary terms; however, most of our
developed lease acreage is beyond the primary term and is held so long as oil or
natural gas is produced.

ITEM 3.   LEGAL PROCEEDINGS

         We are not a party to any material pending legal proceeding, nor are we
aware of any proceeding contemplated by any governmental authority involving us.


                                       27
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES

         The Company's common stock currently trades on the OTC Bulletin Board
under the symbol "BPKR." The following table sets forth the range of high and
low bid prices per share of our common stock for each of the calendar quarters
identified below as reported by Nasdaq. These quotations represent inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions.

Fiscal Year Ended December 31, 2004           High                Low
- -----------------------------------           ----                ---

         Quarter ended December 31            $.12               $.07
         Quarter ended September 30            .20                .09
         Quarter ended June 30                 .24                .11
         Quarter ended March 31                .35                .17

Fiscal Year Ended December 31, 2003           High                Low
- -----------------------------------           ----                ---

         Quarter ended December 31            $.31               $.16
         Quarter ended September 30            .46                .23
         Quarter ended June 30                 .68                .33
         Quarter ended March 31                .80                .56

         The last price of our common stock as reported on the OTC Bulletin
Board on May 2, 2005 was $.17 per share.

Holders

         As of May 2, 2005, the number of stockholders of record of our common
stock was 64.

Dividends

         We have not paid any cash dividends on our common stock to date, and
has no intention of paying such cash dividends in the foreseeable future. The
declaration and payment of dividends is subject to the discretion of our Board
of Directors and to certain limitations imposed under Delaware corporate law.
The timing, amount and form of dividends, if any, will depend on, among other
things, our results of operations, financial condition, cash requirements and
other factors deemed relevant by our Board of Directors.

Transfer Agent

         The transfer agent for our common stock is StockTrans, Inc., 44 West
Lancaster Avenue, Ardmore, Pennsylvania, 19003, (610) 649-7300.


                                       28
<PAGE>

Recent Sales of Unregistered Securities

         On November 19, 2004, we issued a non-qualified stock option to acquire
500,000 shares of our common stock to Christopher H. Giordano in connection with
his appointment as our Chairman, Chief Executive Officer, Treasurer and
Secretary. The option was issued under the BPK Resources 2004 Stock Incentive
Plan, has an exercise price of $.13 per share, is vested in full immediately,
and has a term of five years. The option was issued to one accredited investor
in a private placement transaction exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) of the Securities Act directly by us
without engaging in any advertising or general solicitation of any kind and
without payment of underwriting discounts or commissions to any person.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

         This Management's Discussion and Analysis and other parts of this
report contain forward-looking statements that involve risks and uncertainties.
All forward-looking statements included in this report are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of a number of
factors, including those set forth in the section captioned "Risk Factors" in
Item 1 and elsewhere in this report. The following should be read in conjunction
with our audited financial statements and the related notes included elsewhere
herein.

Overview

         We are an independent energy company engaged in the acquisition,
development and production of oil and natural gas reserves. We target
high-potential oil and gas assets located primarily in the traditional oil and
gas producing states in the southern United States and internationally.

         We seek to create shareholder value by building oil and gas reserves,
production revenues and operating cash flow. We believe that building oil and
gas reserves and production, on a cost-effective basis, are the most important
indicators of performance success for an independent oil and gas company. We
seek to build oil and gas reserves, production and cash flow through a balanced
program of capital expenditures involving acquisition, exploitation and
exploration activities. Our business model has been specifically designed to
exploit the unique opportunities currently available to small companies in the
oil and gas industry. Major integrated oil companies and other large independent
oil and gas exploration and production companies are divesting themselves of
small, less capital-intensive properties to focus on larger, more
capital-intensive projects that better match their long-term strategic goals. We
believe that these asset divestitures as well as the resource constraints of
major integrated oil companies and other large upstream companies may allow us
to acquire attractive prospects at favorable prices with a significant portion
of the up-front development expenses, such as infrastructure and seismic,
already invested.

         We currently own interests in the CSR-Waha Project located in Reeves
County, Texas, and the Hackberry Project located in Jefferson County, Texas. We


                                       29
<PAGE>

expect to continue to acquire additional projects and may sell all or part of
our interests in existing projects to further diversify our holdings, spread
risk and reduce our obligations to make additional capital contributions. As our
business grows, we may retain additional executive management with substantial
experience in the oil and gas exploration and development business. We intend to
place primary emphasis on issuances of public and private debt and equity to
finance the growth of our business.

         Our ability to generate future revenues, operating cash flow and
earnings is dependent on the successful development of our inventory of capital
projects, the volume and timing of our production, our ability to identify,
acquire and successfully exploit properties containing oil and gas reserves in
commercial quantities, and the commodity prices for oil and gas. Such pricing
factors are largely beyond our control, and may result in fluctuations in our
financial condition and results of operations.

         In order to strengthen our balance sheet and put us in a better
position to raise the capital necessary to execute our business plan, during our
fiscal year ended December 31, 2004, we: (i) negotiated the conversion of
approximately $460,000 of our outstanding term indebtedness and $48,000 of
accrued interest and loan arrangement fees into preferred equity, (ii)
negotiated the conversion of approximately $3,600,000 face amount of outstanding
preferred stock subject to mandatory redemption into shares of our common stock,
and (iii) divested certain of our oil and gas interests in exchange for a
release from our obligations to repay approximately $2,800,000 of outstanding
indebtedness.

         Our ability to generate future revenues, operating cash flow and
earnings will also be influenced the by exploration and development expenses we
incur. Our exploration and development efforts are focused on discovering
reserves on acreage already under lease. The investment associated with the
development of a project depends principally upon the complexity of the
geological formations involved, the depth of the well or wells, whether the well
or project can be connected to existing infrastructure or will require
additional investment in infrastructure, and, if applicable, the water depth of
the well or project. If we underestimate the amount of exploration and
development costs necessary to exploit the oil or gas reserves of our prospects,
we may incur substantially more exploration and development costs than planned,
which may have a material adverse effect on our financial condition and results
of operations.

Critical Accounting Policies

         Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States. The preparation of our
financial statements requires us to make estimates and judgments that affect the
reported amount of assets, liabilities, revenues and expenses. These estimates
are based on information that is currently available to us and on various other
assumptions that we believe to be reasonable under the circumstances. Actual
results could vary significantly from those estimates under different
assumptions and conditions.

         Critical accounting policies are defined as those significant
accounting policies that are most critical to an understanding of a company's
financial condition and results of operation. We consider an accounting estimate
or judgment to be critical if: (i) it requires assumptions to be made that were


                                       30
<PAGE>

uncertain at the time the estimate was made, and (ii) changes in the estimate or
different estimates that could have been selected could have a material impact
on our results of operations or financial condition.

         We believe that the following significant accounting policies will be
most critical to an evaluation of our future financial condition and results of
operations.

Revenue Recognition

         Oil and gas revenues are recognized when production is sold to a
purchaser at a fixed or determinable price, when delivery has occurred and title
has transferred, and if the collection of the revenue is probable. When we have
an interest in a property with other producers, we use the sales method of
accounting for our oil and gas revenues. Under this method of accounting,
revenue is recorded based upon our physical delivery of oil and gas to our
customers, which can be different from our net working interest in field
production. These differences create imbalances that are recognized as a
liability only when the estimated remaining reserves will not be sufficient to
enable the under-produced party to recoup its entitled share through production.
As of December 31, 2004, deliveries of oil and gas in excess of or less than our
working interest were not significant.

Proved Oil and Natural Gas Reserves

         Proved reserves are defined by the SEC as the estimated quantities of
crude oil, condensate, natural gas and natural gas liquids that geological and
engineering data demonstrate with reasonable certainty are recoverable in future
years from known reservoirs under existing economic and operating conditions.
Prices include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions.
Prices do not include the effect of derivative instruments, if any, entered into
by the Company.

         Proved developed reserves are those reserves expected to be recovered
through existing equipment and operating methods. Additional oil and gas
expected to be obtained through the application of fluid injection or other
improved recovery techniques for supplementing the natural forces and mechanisms
of primary recovery are included as proved developed reserves only after testing
of a pilot project or after the operation of an installed program has confirmed
through production response that increase recovery will be achieved.

         Proved undeveloped oil and gas reserves are reserves that are expected
to be recovered from new wells on non-drilled acreage, or from existing wells
where a relatively major expenditure is required for re-completion. Reserves on
non-drilled acreage are limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved reserves
for other non-drilled units are claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation.

         Volumes of reserves are estimates that, by their nature, are subject to
revision. The estimates are made using all available geological and reservoir
data as well as production performance data. There are numerous uncertainties in
estimating crude oil and natural gas reserve quantities, projecting future


                                       31
<PAGE>

production rates and projecting the timing of future development expenditures.
Oil and gas reserve engineering must be recognized as a subjective process of
estimating underground accumulations of oil and gas that cannot be measured in
an exact way and estimates of engineers that we use may differ from those of
other engineers. The accuracy of any reserve estimate is a function of the
quantity of available data and of engineering and geological interpretation and
judgment. Accordingly, future estimates are subject to change as additional
information becomes available.

Successful Efforts Accounting

         We utilize the successful efforts method to account for our crude oil
and natural gas operations. Under this method of accounting, all costs
associated with oil and gas lease acquisition costs, successful exploratory
wells and all development wells are capitalized and amortized on a
unit-of-production basis over the remaining life of proved developed reserves
and proved reserves on a field basis. Unproved leasehold costs are capitalized
pending the results of exploration efforts. Exploration costs, including
geological and geophysical expenses, exploratory dry holes and delay rentals,
are charged to expense when incurred.

Impairment of Properties

         We review our proved properties at the field level when management
determines that events or circumstances indicate that the recorded carrying
value of the properties may not be recoverable. Such events include a projection
of future oil and natural gas reserves that will be produced from a field, the
timing of this future production, future costs to produce the oil and natural
gas, and future inflation levels. If the carrying amount of an asset exceeds the
sum of the undiscounted estimated future net cash flows, we recognize impairment
expense equal to the difference between the carrying value and the fair value of
the asset which is estimated to be the expected present value of future net cash
flows from proved reserves, utilizing a risk-free rate of return. We cannot
predict the amount of impairment charges that may be recorded in the future.
Unproved leasehold costs are reviewed periodically and a loss is recognized to
the extent, if any, that the cost of the property has been impaired.

Property Retirement Obligations

         We are required to make estimates of the future costs of the retirement
obligations of its producing oil and gas properties. This requirement
necessitates that we make estimates of property abandonment costs that, in some
cases, will not be incurred until a substantial number of years in the future.
Such cost estimates could be subject to significant revisions in subsequent
years due to changes in regulatory requirements, technological advances and
other factors that may be difficult to predict.

Income Taxes

         We are subject to income and other related taxes in areas in which we
operate. When recording income tax expense, certain estimates are required by
management due to the timing and impact of future events on when we recognize
income tax expenses and benefits. We will periodically evaluate our tax


                                       32
<PAGE>

operating loss and other carryforwards to determine whether a gross deferred tax
asset, as well as a related valuation allowance, should be recognized in our
financial statements.

Recent Accounting Pronouncements

         In January 2003, the Financial Accounting Standards Board ("FASB")
issued Financial Interpretation No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46")
to address the consolidation by business enterprises of variable interest
entities. The primary objective of FIN 46 is to provide guidance on the
identification of, and financial reporting for, entities over which control is
achieved through means other than voting rights. Such entities are known as
variable interest entities. FIN 46 requires an enterprise to consolidate a
variable interest entity if that enterprise has a variable interest that will
absorb a majority of the entity's expected losses if they occur, receive a
majority of the entity's expected residual returns if they occur, or both. An
enterprise is required to consider the rights and obligations conveyed by its
variable interests in making this determination. FIN 46 applies to all variable
interest entities created after January 31, 2004. In December 2003, FASB issued
a revision to FIN 46 that, among other things, deferred the effective date for
certain variable interest entities created prior January 31, 2004. Our adoption
of FIN 46, as revised, did not have a material impact on our financial
statements.

         In April 2003, FASB issued Statement of Financial Accounting Standards
No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging
Activities" ("SFAS No. 149") to amend and clarify financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 149 requires
that contracts with comparable characteristics be accounted for similarly to
achieve more consistent reporting of contracts as either derivative or hybrid
instruments. The statement is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003, and is being applied prospectively. Since we do not currently hedge our
production, the adoption of SFAS No. 149 did not have a material impact on our
financial statements.

         In May 2003, FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" ("SFAS No. 150") to classify certain financial
instruments as liabilities in statements of financial position. Specifically,
SFAS No. 150 applies to mandatorily redeemable shares which the issuing company
is obligated to buy back in exchange for cash or other assets, put options and
forward contracts, instruments that do or may require the issuer to buy back
some of its shares in exchange for cash or other assets, and obligations that
can be settled with shares, the monetary value of which is fixed, tied solely or
predominantly to a variable, such as a market index, or varies inversely with
the value of the issuer's shares. SFAS No. 150 is generally effective for all
financial instruments entered into or modified after May 31, 2003 and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. Our adoption of SFAS No. 150 did not have a material impact on our
financial instruments.

         In December 2004, FASB issued Statement of Financial Accounting
Standards No. 123R, "Share-Based Payment" ("SFAS No. 123R") to revise Statement
of Financial Accounting Standards No. 123. SFAS No. 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity


                                       33
<PAGE>

instruments for goods or services. This Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires that the fair value of
such equity instruments be recognized as expense in the historical financial
statements as services are performed. Prior to SFAS No. 123R, only certain pro
forma disclosures of fair value were required. SFAS No. 123R will be effective
for small business issuers as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. The impact of the adoption
of this new accounting pronouncement would be similar to the Company's
calculation of the pro forma impact on net income of SFAS 123 included in Note 2
to our consolidated financial statements beginning on page F-1.

         For a more complete discussion of our accounting policies and
procedures, see our Notes to Consolidated Financial Statements beginning on page
F-9.

Comparison of Fiscal Years Ended December 31, 2004 and 2003

Revenues

         Revenues consist of our allocated portion of the proceeds generated by
our various oil and gas projects from the sale of oil and gas. Revenue increased
$28,004 to $142,309 for our fiscal year ended December 31, 2004 from $114,305
for our fiscal year ended December 31, 2003. The increase of $28,004 resulted
primarily from a reclassification of the majority of our 2003 revenues to
discontinued operations, partially offset by a decrease in 2004 revenues
associated with our interests in certain of our oil and gas projects that we
disposed of on July 20, 2004. We expect revenues to remain constant during 2005
as we continue to receive our allocated portion of the proceeds generated by our
CSR-Waha Project and Hackberry Project.

Exploration and Production Expenses

         Exploration and production expenses consist of geological and
geophysical costs, exploratory dry hole expenses, leasehold abandonment
expenses, production expenses, and other exploration and development expenses
related to our oil and gas projects. Exploration and production expenses
decreased $26,019 to $31,627 for our fiscal year ended December 31, 2004 from
$57,646 for our fiscal year ended December 31, 2003. The decrease of $26,019
resulted primarily from a decrease in 2004 expenses associated with certain of
our interests in oil and gas projects that we disposed of on July 20, 2004. We
expect exploration and production expenses to remain constant during 2005 as we
continue to conduct exploration activities on the prospects in these projects
and engage in exploration activities on various prospects that we may acquire in
the future.

Impairment of Oil and Gas Properties and Mining Option

         We review our long-lived assets, including our interests in oil and gas
projects and mining option, whenever events or circumstances indicate that the
carrying value of those assets may not be recoverable. Impaired property
expenses decreased $850,115 to $1,323,725 for our fiscal year ended December 31,
2004 from $2,173,840 for our fiscal year ended December 31, 2003. The decrease
of $850,115 resulted primarily from a decrease in impairment charges related to


                                       34
<PAGE>

our investment in the CSR-Waha Project of $1,972,900, partially offset by an
increase in impairment charges related to our investment in the Shadow Mountain
Project of $1,111,000 as a result of the termination of our option to acquire an
interest in the project on December 31, 2004. We may incur additional charges
associated with the impairment of our oil and gas properties in the event we
abandon or withdrawal from oil and gas projects in the future.

General and Administrative Expenses

            General and administrative expenses consist of consulting and
engineering fees, professional fees, employee compensation, office rents, travel
and utilities, and other miscellaneous general and administrative costs. General
and administrative expenses decreased $404,177 to $716,801 for our fiscal year
ended December 31, 2004 from $1,120,978 for our fiscal year ended December 31,
2003. The decrease of $404,177 resulted primarily from the disposition of
certain of our interests in our oil and gas projects on July 20, 2004, partially
offset by expenses incurred in connection with our Shadow Mountain Project. The
$716,801 of general and administrative expenses that we incurred for our fiscal
year ended December 31, 2004 consisted of $515,450 of professional fees incurred
in connection with our acquisitions and dispositions of interests in oil, gas
and mining projects, financing transactions and compliance with our reporting
obligations under federal securities laws, and $201,751 of consulting and
engineering fees. We expect general and administrative expenses to remain
constant in future periods as a result of continued expenditures for consulting
and engineering fees, and for professional fees associated with acquisitions of
additional oil and gas properties and compliance with SEC public reporting and
corporate governance requirements.

Interest Expense

         Interest expense consists of certain noncash charges and interest
accrued on our various debt obligations. Interest expense decreased $1,048,971
to $774,677 for our fiscal year ended December 31, 2004 from $1,823,648 for our
fiscal year ended December 31, 2003. The decrease of $1,048,971 resulted
primarily from the disposition of our interests in certain of our oil and gas
projects on July 20, 2004 and the corresponding release by Trident Growth Fund,
L.P. ("Trident") and Endeavour International Corporation ("Endeavour") from our
debt obligations to them that we incurred in connection with our acquisition of
those interests. The $774,677 of interest expense that we incurred during our
fiscal year ended December 31, 2004 consisted primarily of a one-time noncash
charge of $90,000 associated with the beneficial conversion feature of the
Series A Convertible Preferred Stock that we issued to Ocean Resource Capital
Holdings, PLC ("Ocean Resource") in March 2003 and of interest expense under our
various debt obligations issued for the purpose of funding our oil and gas
exploration and development business. We expect interest expense to continue to
decrease in 2005 due to the release of the debt obligations that we had to
Trident and Endeavour.


                                       35
<PAGE>

Loss (Gain) on Sale of Stock

         Loss (gain) on sale of stock consists of losses and gains that we
recognized on the sale of securities held for investment. We recognized losses
on the sale of stock of $2,664,573 for our fiscal year ended December 31, 2003.
We did not recognize any losses or gains in the sale of stock for our fiscal
year ended December 31, 2004. We do not currently hold any securities for
investment and do not intend to acquire any in the foreseeable future. As a
result, we do not expect losses and gains on the sale of securities held for
investment to constitute a material component of our overall financial
performance for the foreseeable future.

Loss (Profit) From Limited Partnerships and Limited Liability Companies

         Loss (profit) from limited partnerships and limited liability companies
includes the income or losses that we recognize from the financial performance
of the oil and gas limited partnerships and limited liability companies in which
we own an equity interest of greater than 5% but less than 50% of the applicable
entity. Loss from limited partnerships and limited liability companies decreased
$394,428 to $67,758 for our fiscal year ended December 31, 2004 from $462,186
for our fiscal year ended December 31, 2003. The $394,428 decrease in loss from
limited partnerships and limited liability companies resulted primarily from the
disposition of our interests in certain of our oil and gas projects on July 20,
2004. We intend to make similar equity investments in additional limited
partnerships and limited liability companies in the future and expect loss
(profit) from limited partnerships and limited liability companies to continue
to constitute a material component of our overall financial performance for the
foreseeable future.

Gain (Loss) on Extinguishment of Debt

         Gain (loss) on extinguishment of debt consists of the gains and losses
that we recognized upon the extinguishment of various debt obligations. We
recognized a gain on extinguishment of debt of $316,499 for our fiscal quarter
ended March 31, 2004. We did not recognize any gain or loss on extinguishment of
debt for our fiscal quarter ended March 31, 2005. The gain on extinguishment of
debt of $316,499 resulted primarily from Ocean Resource releasing us from our
debt obligations to them upon our issuance of shares of our Series B Convertible
Preferred Stock and warrants to them on February 27, 2004, and represented the
difference between the value of the loans, interest and fees extinguished in
excess of the value of the securities we issued to Ocean Resource to satisfy
these obligations. We may in the future incur additional debt in connection with
the funding of our operations and the acquisition of additional interests in oil
and gas projects. However, we do not expect gains and losses on the
extinguishment of debt to constitute a material component of our overall
financial performance in the foreseeable future.

Liquidity and Capital Resources

         Since our inception, we have funded our operations primarily through
private sales of equity securities and the use of short- and long-term debt. As
of December 31, 2004, we had a cash balance of $16,036.

         Net cash used in continuing operating activities was $767,658 for our
fiscal year ended December 31, 2004 compared to $928,752 for our fiscal year
ended December 31, 2003. The $161,094 decrease in cash used in continuing
operating activities was primarily due to a decrease in net loss of $5,201,956
and an increase in stock issued for mining expenses of $950,000, partially
offset by decreases in realized losses on the sale of stock of $2,664,573,
impairment and abandonment of


                                       36
<PAGE>

proved properties charges of $1,965,786, amortization of note payable discounts
and loan costs of $758,408, accounts payable and accrued expenses of $295,507,
and equity losses in investments of $394,429, and an increase in gain on the
extinguishment of debt of $316,499.

         Net cash used in investing activities was $123,383 for our fiscal year
ended December 31, 2004 compared to net cash provided by investing activities of
$703,500 for our fiscal year ended December 31, 2003. The $580,117 decrease in
cash provided by investing activities was due primarily to a decrease in
proceeds that we received from the sale of investment securities of $1,735,897,
partially offset by a decrease in investments that we made in limited
partnerships and limited liability companies of $912,890.

         Net cash provided by financing activities was $894,000 for our fiscal
year ended December 31, 2004 compared to $217,865 for our fiscal year ended
December 31, 2003. The $676,135 increase in net cash provided by financing
activities was due primarily to an increase in the amount of net proceeds
received from the issuance of our common stock of $455,000 and a decrease in the
amount of debt we repaid of $1,680,688, partially offset by a decrease in the
proceeds we received upon the issuance of debt of $1,557,053.

         At December 31, 2004, we had a working capital deficit of $878,554
compared to a working capital deficit of $4,310,324 at December 31, 2003. The
$3,431,770 increase in working capital was due primarily to a decrease in
accounts payable and accrued expenses of $380,979, notes payable of $1,018,365,
dividends payable on our shares of Series A Convertible Preferred Stock of
$309,708, and net convertible notes payable of $1,998,768, partially offset by a
decrease in accounts receivable of $148,661.

         On April 21, 2004, we sold 2,500,000 shares of common stock and
warrants to acquire 1,250,000 shares of common stock to Ritchie Long/Short
Trading, Ltd. in consideration for which we received aggregate gross proceeds of
$500,000. These securities were sold in units comprised of two shares of common
stock and one warrant. The units were sold at a purchase price of $.40 per unit.
Each warrant is exercisable immediately into one share of common stock at an
exercise price of $.30 per share and expires three years after the date of
issuance.

         On March 21, 2005, we commenced a private offering of up to $975,000 of
units comprised of shares of our common stock and warrants to acquire shares of
common stock. Each unit is comprised of two shares of our common stock and one
warrant. The units are being sold at a purchase price of $.26 per unit. Each
warrant is exercisable immediately into one share of common stock at an exercise
price of $.30 per share and expires three years after the date of issuance. As
of April 15, 2005, we have sold approximately 1,500,000 units in the offering
for aggregate gross proceeds of approximately $390,000.

         The forgoing constitutes our principal sources of financing during the
past 12 months. We do not currently maintain a line of credit or term loan with
any commercial bank or other financial institution.

         We will need approximately $1,000,000 to execute our business plan,
satisfy capital calls, and pay drilling and production costs on our various
interests in oil and gas prospects during the next twelve months. Of this


                                       37
<PAGE>

amount, we will need approximately $25,000 for capital calls and production
costs with respect to our oil and gas projects, approximately $280,000 to repay
amounts owed to Patterson-UTI, approximately $170,000 to repay our outstanding
term indebtedness, and approximately $500,000 for general corporate expenses. In
the event that we locate additional prospects for acquisition, experience cost
overruns at our current prospects or fail to generate projected revenues, we
will need funds in excess of the forgoing amounts during the next 12 months. In
addition, if any of the other owners of leasehold interests in any of the
projects in which we participate, or any of the limited partners or membership
interest holders in the limited partnerships or limited liability companies in
which we invest, respectively, fails to pay their equitable portion of
development costs or capital calls, we may need to pay additional funds to
protect our ownership interests.

         Based on our available cash resources, cash flows that we are currently
generating from our oil and gas projects, and projected cash flows that we
expect to generate from our oil and gas projects in the future, we will not have
sufficient funds to continue to meet such capital calls, make such repayments
and operate at current levels for the next 12 months. Accordingly, we will be
required to raise additional funds through sales of our securities or otherwise.
If we are unable to obtain additional funds on terms favorable to us, if at all,
we may be required to delay, scale back or eliminate some or all of our
exploration and well development programs and may be required to relinquish our
interests in one or more of our projects.

Off-Balance Sheet Arrangements

         As of December 31, 2004, we did not have any relationships with
unconsolidated entities or financial partners, such as entities often referred
to as structured finance or special purpose entities, that had been established
for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As such, we are not materially exposed
to any financing, liquidity, market or credit risk that could arise if we had
engaged in such relationships.

ITEM 7. FINANCIAL STATEMENTS

            Our consolidated financial statements at December 31, 2004 and for
each of the two years then ended, and the footnotes related thereto, begin on
page F-1 of this report.

ITEM 8A. CONTROLS AND PROCEDURES

            An evaluation of the effectiveness of our "disclosure controls and
procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried
out by us under the supervision and with the participation of our Chief
Executive Officer and Treasurer, who serves as our principal financial officer.
Based upon that evaluation, our Chief Executive Officer and Treasurer concluded
that, as of the end of the period covered by this Annual Report, our disclosure
controls and procedures were not effective to provide reasonable assurance that
information we are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported in accordance
with the time periods specified in the Securities and Exchange Commission rules
and forms. Specifically, our Chief Executive Officer and Treasurer concluded
that our controls and procedures were not effective to provide reasonable
assurance that such reports are filed or submitted timely with the Securities
and Exchange Commission. In connection with the forgoing evaluation that
occurred during our most recent fiscal quarter, there were changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. Specifically, we recently changed our independent registered public
accounting firm and made adjustments to our internal accounting processes to
better ensure that reports that we file or submit under the Exchange Act are
filed or submitted within the time periods specified in the Securities and
Exchange Commission rules and forms.


                                       38
<PAGE>

ITEM 8B. OTHER INFORMATION

         The following information is included herewith in satisfaction of our
obligation to file such information with the SEC in a Current Report on Form
8-K.

Impairment of Investment and Disposal of Option in Shadow Mountain Project

         The description set forth below is included herewith for the purpose of
providing the information required under Items 1.02, 2.01 and 2.06 of Form 8-K
in connection with the impairment of our investment in the Shadow Mountain
Project and the termination of our rights and obligations with respect to the
Shadow Mountain Project.

         On December 31, 2004, we entered into a Mutual Termination and Release
(the "Termination and Release") with Bell Coast pursuant to which the binding
Letter of Intent dated November 11, 2003 by and between Montex Exploration, Inc.
("Montex") and Bell Coast Capital Corp. ("Bell Coast") and the respective rights
and obligations of us and Bell Coast thereunder were terminated. We originally
acquired our option in the Shadow Mountain Project in April 2004 when we assumed
certain rights and obligations under the Letter of Intent from Montex. The
Shadow Mountain Project holds two licenses to explore and develop a cooper and
gold mining prospect containing a total of approximately 138,000 acres in the
South Gobi Province of Mongolia. Under the terms of the Letter of Intent, we had
an option to acquire up to a 50% interest in the Shadow Mountain Project by
contributing $CDN2.4 million to the project within 18 months of the signing of
the agreement. In the event we did not contribute the full $CDN 2.4 million, we
had an option to acquire a decreased, pro-rata interest in the Shadow Mountain
Project by contributing at least $CDN 500,000 to the project.

         Prior to December 31, 2004, we had contributed a total of $US 77,000 to
the Shadow Mountain Project. Upon completing our evaluation of the project in
December 2004, we determined that the cost of making any further investments in
the project would outweigh any benefits we would realize from the project and,
in connection therewith, decided to terminate the agreement. We did not incur
any early termination penalties in connection with our termination of the Letter
of Intent and our rights and obligations thereunder.

         On December 31, 2004, we concluded that an impairment charge of
$1,111,000 was required under generally accepted accounting principles
applicable to us with respect to our investment in the Shadow Mountain Project.
We concluded that the impairment charge was necessary as a result of the
decision by us and Bell Coast to terminate the Letter of Intent and our
respective rights and obligations thereunder. We do not expect any portion of
the impairment charge to result in future cash expenditures by us. See "Item 6.
Management's Discussion and Analysis - Critical Accounting Policies - Impairment
of Properties" and our notes to condensed financial statements for a discussion
of when and how impairment of properties charges are determined.


                                       39
<PAGE>

            The terms of the Termination and Release were determined in
arm's-length negotiations between the parties thereto, and were approved by each
of such parties' respective board of directors. Except as disclosed above, there
was no material relationship between us or any of our affiliates, officers or
directors, or any associate of any such officer or director, on the one hand,
and Bell Coast, on the other hand, at the time we entered into the Termination
and Release.

            The foregoing description of the Termination and Release does not
purport to be complete and is qualified in its entirety by the terms of the
Mutual Termination and Release filed as Exhibit 10.9 to this report and
incorporated by reference herein.

Impairment of Investment in CSR-Waha Project

         The description set forth below is included herewith for the purpose of
providing the information required under Item 2.06 of Form 8-K in connection
with the impairment of our investment in the CSR-Waha Project.

         During the course of the audit being conducted by Malone & Bailey,
P.C., our independent accountants, in connection with the preparation of our
consolidated financial statements for our fiscal year ended December 31, 2004,
we concluded that an impairment charge of $212,725 was required under generally
accepted accounting principles with respect to our investment in the CSR-Waha
Project. We concluded that the impairment charge was necessary as a result of a
decrease in our estimate of the market value of the project's underlying oil and
gas prospects. We do not expect any portion of the impairment charge to result
in future cash expenditures by us. See "Item 6. Management's Discussion and
Analysis - Critical Accounting Policies - Impairment of Properties" and our
notes to condensed financial statements for a discussion of when and how
impairment of properties charges are determined.

Sale of Units Comprised of Common Stock and Warrants

            The description set forth below is included herewith for the purpose
of providing the information required under Item 3.02 of Form 8-K in connection
with our unregistered sale of equity securities on April 15, 2005.

            On March 21, 2005, we commenced a private offering of up to $975,000
of units comprised of shares of our common stock and warrants to acquire shares
of our common stock. Each unit is comprised of two shares of our common stock
and one warrant. The units are being sold at a purchase price of $.26 per unit.
Each warrant is exercisable immediately into one share of common stock at an
exercise price of $.30 per share and expires three years after the date of
issuance. The offering is being carried out on a "best efforts" basis solely to
a limited number of accredited investors.

            On April 15, 2005, we sold 1,500,000 units in the offering for
aggregate gross proceeds of $390,000. The units were sold to a single accredited
investor pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act and Rule 506 thereunder. We paid an investment banking fee of
$19,500 in connection with the sale of the units.


                                       40
<PAGE>

                                    PART III

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

         The following sets forth certain information about each of our
directors and executive officers.

         Christopher H. Giordano has served as our Chief Executive Officer,
Treasurer and Secretary and a member of our Board of Directors since July 14,
2004. Mr. Giordano has served as the President of Birchwood Capital Advisors
Group, Inc., a New Jersey based company that advises small to medium sized
companies in debt, equity and structured finance transactions, and bankruptcy
workouts and financings, since October 1991. Mr. Giordano has over 25 years
experience in corporate finance transactions in numerous industries, including
energy, financial services and communications.

Board of Directors

         Our Board of Directors consists of Christopher H. Giordano. Mr.
Giordano will serve until the next annual meeting of shareholders or until his
or her successor is duly elected and qualified. Directors hold office until the
next annual meeting of shareholders and the election and qualification of their
successor. Officers are elected by our Board of Directors and serve at the
discretion of the Board. We do not currently have any committees of our Board of
Directors.

Director Compensation

         Members of our Board of Directors receive no compensation for serving
on our Board, except that each director is entitled to be reimbursed for the
reasonable costs and expenses incurred in attending Board meetings.

Director Nominations

         We currently conduct limited operations and have only one employee,
Christopher H. Giordano, who is our sole executive officer. As a result, our
Board of Directors is currently comprised of only one individual. Mr. Giordano
is integrally involved with our business and operations and are able to
contribute valuable insights into the identification of suitable candidates for
nomination to the Board. As a result, we believe that it is in our best interest
that our entire Board oversee the composition and operations of our Board of
Directors and therefore, we have not created a standing nominating committee of
the Board.

Shareholder Communications

         In light of the limited operations we conduct and the limited number of
record shareholders that we have, we have not implemented any formal procedures
for shareholder communication with our Board of Directors. Any matter intended
for the Board, or for any individual member or members of the Board, should be
directed to our Secretary at BPK Resources, Inc., 264 Union Boulevard, First
Floor, Totowa, New Jersey 07512. In general, all shareholder communications


                                       41
<PAGE>

delivered to the Secretary for forwarding to the Board or specified Board
members will be forwarded in accordance with the shareholder's instructions.
However, the Secretary reserves the right to not forward to Board members any
abusive, threatening or otherwise inappropriate materials.

Audit Committee and Audit Committee Financial Expert

         Our Board of Directors has not created a standing audit committee of
the Board. Instead, our full Board of Directors acts as our audit committee.

         We currently have only one employee, Christopher H. Giordano, who
constitutes our entire Board of Directors and is actively involved in our
operations. In light of the foregoing, and upon evaluating the Company's
internal controls, our Board of Directors determined that our internal controls
are adequate to provide reasonable assurance that financial information is
recorded, processed, summarized and reported in a timely and accurate manner in
accordance with applicable rules and regulations of the SEC. Accordingly, our
Board of Directors concluded that the benefits of retaining an individual who
qualifies as an "audit committee financial expert," as that term is defined in
Item 401(e) of Regulation S-B promulgated under the Securities Act, would be
outweighed by the costs of retaining such a person. As a result, no member of
our Board of Directors is an "audit committee financial expert."

Section 16 Beneficial Ownership Reporting Compliance

         Section 16(a) of the Exchange Act requires our officers and directors
and persons who own more than 10% of our common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of our common
stock. Such officers, directors and 10% stockholders are also required by
applicable SEC rules to furnish us copies of all forms filed with the SEC
pursuant to Section 16(a) of the Exchange Act. Based solely on our review of the
copies of such forms received by us or written representations from such persons
that no other reports were required for such persons, we believe that during the
fiscal year ended December 31, 2004, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% stockholders were
satisfied in a timely fashion; except that: (i) BP Investments failed to file
timely a Form 3 upon becoming the beneficial owner of greater than 10% of our
common stock on March 24, 2004, (ii) BP Investments failed to file a Form 4 upon
converting all of its shares of our preferred stock into shares of our common
stock on April 1, 2004, and (iii) Montex failed to file a Form 3 upon becoming
the beneficial owner of greater than 10% of our common stock on April 19, 2004.

Code of Business Conduct and Ethics

         We have adopted a Code of Business Conduct and Ethics that applies to
our principal executive officer, principal financial officer, principal
accounting officer or controller, and persons performing similar functions. Our
Code of Business Conduct and Ethics is designed to deter wrongdoing and promote:
(i) honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
(ii) full, fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the SEC and in our other public


                                       42
<PAGE>

communications; (iii) compliance with applicable governmental laws, rules and
regulations; (iv) the prompt internal reporting of violations of our Code of
Business Conduct and Ethics to an appropriate person or persons identified in
the code; and (v) accountability for adherence to our Code of Business Conduct
and Ethics.

ITEM 10.   EXECUTIVE COMPENSATION

         The following table provides certain summary information concerning
compensation paid to or accrued by the executive officers named below during the
fiscal years ended December 31, 2004, 2003 and 2002.

<TABLE>
<CAPTION>
                                                  Summary Compensation Table

                                                                          Restricted  Securities              All Other
Name and                      Fiscal                       Other Annual   Stock      Underlying   LTIP         Compen-
Principal Position             Year  Salary($) Bonus($)  Compensation($)  Awards(#)   Options(#)  Payouts($)  sation($)
- ------------------             ----  --------- --------  ---------------  ---------   ----------  ----------  ---------
<S>                          <C>      <C>      <C>       <C>              <C>         <C>         <C>         <C>
Christopher H. Giordano (1)   2004    12,500       -0-          -0-            -0-     500,000         -0-        -0-
Chief Executive Officer,
Treasurer and Secretary

Cecile T. DiBona (2)          2004       -0-       -0-          -0-            -0-         -0-         -0-        -0-
Former Chief Executive Officer,
Treasurer and Secretary

John B. Connally, III (3)     2004    16,000       -0-          -0-            -0-         -0-         -0-        -0-
Former Chief Executive        2003    48,000       -0-          -0-            -0-         -0-         -0-        -0-
Officer, Treasurer and        2002    26,000       -0-          -0-            -0-         -0-         -0-        -0-
Secretary
</TABLE>

(1) Mr. Giordano was appointed our Chief Executive Officer, President, Treasurer
and Secretary and a member of our Board of Directors on July 20, 2004.

(2) Ms. DiBona served as our Treasurer and Secretary from April 19, 2002 until
her resignation on July 20, 2004, and served as our interim Chief Executive
Officer and President from April 30, 2004 until her resignation on July 20,
2004.

(3) Mr. Connally served as our Chief Executive Officer and President from
September 2002 until his resignation on April 30, 2004.


                                       43
<PAGE>

                      Option/SAR Grants in Last Fiscal Year
                               (Individual Grants)

         The following table sets forth all options granted to each named
executive officer during our fiscal year ended December 31, 2004. No stock
appreciation rights ("SARs") were granted to any named executive officer during
our fiscal year ended December 31, 2004.

<TABLE>
<CAPTION>
                                                       Percent of Total
                            Number of Securities      Options Granted to
                                 Underlying              Employees in       Exercise Price    Expiration
Name                        Options Granted (#)          Fiscal Year         ($ / Share)         Date
- ----                        -------------------          -----------         -----------         ----
<S>                         <C>                        <C>                   <C>             <C>
Christopher H. Giordano            500,000 (1)                   100%              $ .13     11/18/2009
Cecile T. DiBona                           -0-                      *                  *              *
John B. Connally, III                      -0-                      *                  *              *
</TABLE>

*     Not applicable.

(1)   The option was vested in full on the date of grant, which was November 19,
      2004.

                       Aggregated Option/SAR Exercises in
             Last Fiscal Year and Fiscal Year-End Option/SAR Values

         The following table sets forth for each named executive officer,
information regarding stock options exercised by such officer during the year
ended December 31, 2004, together with the number and value of stock options
held by such officer at December 31, 2004, each on an aggregated basis. We have
not issued any SARs to any of our named executive officers.

<TABLE>
<CAPTION>
                                                                    Number Of         Value Of Unexercised
                                                               Unexercised Options    In-The-Money Options
                            Number Of Shares                    At Fiscal Year-End     At Fiscal Year-End
                               Acquired On                         Exercisable/           Exercisable/
                                Exercise       Value Realized   Unexercisable (#)     Unexercisable ($) (1)
                                --------       --------------   -----------------     -----------------
<S>                          <C>                <C>            <C>                    <C>
Name
Christopher H. Giordano               *              *            500,000 / -0-               -0- / -0-
Cecile T. DiBona                      *              *                -0- / -0-               -0- / -0-
John B. Connally, III                 *              *                -0- / -0-               -0- / -0-
* Not applicable.
</TABLE>

(1) Based on a price per share of $.08, which was the closing price of our
common stock on December 30, 2004 as reported on the Over-the-Counter Bulletin
Board.

            Long-Term Incentive Plans and Awards in Last Fiscal Year

         We did not make any awards under long-term incentive plans to any of
our named executive officers during the fiscal year ended December 31, 2004.


                                       44
<PAGE>

                      Equity Compensation Plan Information

         The following table provides information as of December 31, 2004 with
respect to shares of our common stock that may be issued under our existing
equity compensation plans.

<TABLE>
<CAPTION>
                                                                                      Number of securities
                                       Number of securities    Weighted-average     remaining available for
                                         to be issued upon    exercise price of      future issuance under
                                            exercise of          outstanding       equity compensation plans
                                       outstanding options,   options, warrants      (excluding securities
                                        warrants and rights       and rights        reflected in column (a))
                                                (a)                  (b)                      (c)
<S>                                    <C>                     <C>                 <C>
Equity compensation plans
   approved by security holders                  *                    *                        *

Equity compensation plans not
   approved by security holders (1)           525,000                $.14                  7,000,000

         Total                                525,000                $.14                  7,000,000
</TABLE>

(1) Consists of the BPK Resources, Inc. 2004 Stock Incentive Plan and our
various compensation agreements and arrangements with individuals serving as our
officers or directors or as consultants to us since our inception in April 1997.

* Not applicable.

Description of Plans Not Approved by Security Holders

         Plans not approved by shareholders consist of the BPK Resources, Inc.
2004 Stock Incentive Plan adopted by our Board of Directors on November 19,
2004, and our various compensation agreements and arrangements with individuals
serving as our officers or directors or as consultants to us since our formation
in April 1997.

BPK Resources, Inc. 2004 Stock Incentive Plan

         On November 19, 2004, our Board of Directors adopted the BPK Resources,
Inc. 2004 Stock Incentive Plan (the "Plan"). The Plan reserves 7,500,000 shares
of our common stock for issuance pursuant to stock options, stock appreciation
rights, restricted stock awards, restricted stock units, unrestricted stock
awards, and other equity based or equity related awards to employees, officers
or directors of, or advisors to, us or any of our subsidiaries as well as
individuals who have entered into an agreement with us under which they will be
employed by us or any of our subsidiaries in the future. The Plan is
administered by our Board of Directors, which has full and final authority to
interpret the Plan, select the persons to whom awards may be granted, and
determine the amount and terms of any award. In order to comply with certain
rules and regulations of the SEC or the Internal Revenue Code of 1986, as


                                       45
<PAGE>

amended (the "IRC Code"), our Board can delegate authority to appropriate
committees of our Board. Although the Plan provides for the issuance of options
that qualify as incentive stock options ("ISOs") under the IRC Code, the Plan
was not approved by our stockholders in accordance with the IRC Code. As a
result, we cannot issue ISOs unless and until we obtain the requisite
shareholder approval.

         Stock options issued under the Plan have a term of no more than 10
years, an exercise price equal to at least 85% of the fair market value of our
common stock on the date of grant (100% in the case of ISOs), are subject to
vesting as determined by the Board, and unless otherwise determined by the
Board, may not be transferred except by will, the laws of descent and
distribution, or pursuant to a domestic relations order. Unless otherwise
determined by the Board, awards terminate three (3) months after termination of
employment or other association with us or one (1) year after termination due to
disability, or death or retirement. In the event that termination of employment
or association is for a cause, as that term is defined in the Plan, awards
terminate immediately upon such termination.

         The Plan provides for immediate vesting of all options and stock
appreciation rights upon the occurrence of a "Change in Control Event" (as
defined below), unless specifically provided to the contrary in any specific
option of stock appreciation right. In the event of a "Reorganization Event" (as
defined below) (regardless of whether such event also constitutes a "Change in
Control Event"), except as otherwise specifically provided to the contrary in
any option or stock appreciation right, the Plan provides for all outstanding
options and stock appreciation rights to either (i) be assumed by, or equivalent
options or rights substituted by, the acquiring or succeeding corporation; or
(ii) if the acquiring or succeeding corporation does not agree to assume or
substitute for such options or rights, all then unexercised options and stock
appreciation rights will become immediately exercisable in full as of a date
prior to the completion of such Reorganization Event and will terminate
immediately prior to the consummation of such Reorganization Event. In the event
that a Reorganization Event provides for the payment of cash to our
stockholders, the Board may instead provide that all outstanding options and
stock appreciation rights to terminate upon the consummation of such
Reorganization Event and for the holders of such options and stock appreciation
rights to receive a cash payment equal to the amount (if any) by which the price
paid to our stockholders exceeds the aggregate exercise price of such options or
rights.

         In the case of outstanding restricted stock or restricted unit awards,
the Plan provides that upon a Change in Control Event, all restrictions
applicable to such awards to automatically be deemed terminated or satisfied,
except as specifically set forth to the contrary in any award. In the event of a
Reorganization Event that is not a Change in Control Event, our repurchase and
other rights under such restricted stock or restricted unit awards shall inure
to the benefit of our successor and shall apply to the cash, securities or other
property that the common stock was converted into or exchanged for pursuant to
such Reorganization Event.

         The Plan defines "Reorganization Event" to mean: (i) any merger or
consolidation of us with or into another entity as a result of which all of the
outstanding shares of common stock are converted into or exchanged for the right
to receive cash, securities or other property; or (ii) any exchange of all
outstanding shares of common stock for cash, securities or other property
pursuant to a share exchange transaction.


                                       46
<PAGE>

         The Plan defines a "Change in Control Event" to mean: (i) the
acquisition by an individual, entity or group of 30% or more of the issued and
outstanding shares of our common or of the combined voting power of all of our
outstanding securities unless such acquisition was directly from us, was
acquired by an employee benefit plan of us, or resulted from an acquisition of
us in which our stockholders immediately prior to the acquisition continue to
own more than 50% of our outstanding voting securities and no person (except for
the acquiring corporation or an employee benefit plan of such entity)
beneficially owns in excess of 30% of our outstanding voting shares; (ii) an
event as a result of which persons who were members of our Board on the date the
Plan was adopted or were nominated or elected by at least a majority of such
directors fail to constitute a majority of our Board; or (iii) a merger,
consolidation, reorganization, recapitalization, share exchange or sale or other
disposition of all or substantially all of our assets unless immediately
following such transaction, our stockholders immediately prior to such
transaction continue to own more than 50% of our outstanding voting securities
and no person (except for the acquiring corporation or an employee benefit plan
of such entity) beneficially owns in excess of 30% of our outstanding voting
shares.

Compensation Arrangements With Officers, Directors and Consultants

         We have issued options and warrants under various compensation
agreements and arrangements to individuals serving as our officers or directors
or as consultants to us since our inception in April 1997 and intend to continue
to issue such securities to such persons in the future. The Options and warrants
have been issued at exercise prices equal to or in excess of the closing market
price of our common stock of the date of grant, have had terms ranging from 2 to
3 years, and have been exercisable in full on the date of grant. In the event of
a Change in Control, most of the options and warrants require us to deliver
written notice to each optionee fifteen (15) days prior to the occurrence of a
Change in Control, during which time such options or warrants may be exercised.
Thereafter, options and warrants that have not been exercised and that have
neither been assumed nor substituted in connection with such transaction
automatically expire, unless otherwise determined by the Board. Under the
options and warrants, a "Change in Control" is generally defined to include: (i)
a sale or transfer of substantially all of our assets; (ii) our dissolution or
liquidation; (iii) a merger, reorganization or consolidation in which we are
acquired by another person (other than a holding company formed by us); or (iv)
the issuance in a single transaction or a series of related transactions of
voting stock representing more than fifty percent (50%) of the voting power of
all of our outstanding securities.

                      Employment Contracts and Arrangements

            On November 19, 2004, we entered into a Letter Agreement with
Christopher H. Giordano pursuant to which Mr. Giordano agreed to serve as our
Chief Executive Officer, President, Treasurer and Secretary, in return for which
we agreed to pay Mr. Giordano an annual base salary of $75,000. The agreement
may be terminated at any time by the Company or Mr. Giordano upon thirty (30)
days prior written notice.


                                       47
<PAGE>

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

         The following table sets forth, as of May 2, 2005, information with
respect to the securities holdings of all persons that we have reason to
believe, pursuant to filings with the SEC, may be deemed the beneficial owner of
more than five percent (5%) of our outstanding common stock. The following table
also sets forth, as of such date, the beneficial ownership of our common stock
by all executive officers and directors, individually and as a group.

         The beneficial owners and amount of securities beneficially owned have
been determined in accordance with Rule 13d-3 under the Exchange Act and, in
accordance therewith, includes all shares of our common stock that may be
acquired by such beneficial owners within 60 days of May 2, 2005 upon the
exercise or conversion of any options, warrants or other convertible securities.
Unless otherwise indicated, each person or entity named below has sole voting
and investment power with respect to all common stock beneficially owned by that
person or entity, subject to the matters set forth in the footnotes to the table
below.


<TABLE>
<CAPTION>
                                                   Amount and Nature
                                                     of Beneficial              Percentage
Name and Address of Beneficial Owner                 Ownership (1)            of Class (1)
- ------------------------------------                 -------------            ------------
<S>                                                 <C>                         <C>
Christopher H. Giordano                               500,000 (2)                     1.0%
264 Union Boulevard, First Floor
Totowa, New Jersey 07512

BP Investments Group, LLC                              27,692,305                    51.0%
111 Presidential Boulevard, Suite 158A
Bala Cynwyd, Pennsylvania 19004

Montex Exploration, Inc.                                5,000,000                     9.2%
43 Addison Road
London, United Kingdom W14 8JH

Millennium International Pension Scheme "JS"        4,500,000 (3)                     8.0%
P.O. Box 100
Sydney Van House
Admiral Park
St. Peter Port Guernsey
United Kingdom GY

All officers and directors as a group (1 person)          500,000                     1.0%
</TABLE>

- ---------------------

*     Less than 1%.

(1)   This table has been prepared based on 54,259,503 shares of common stock
      outstanding as of May 2, 2005.

(2)   Consists of 500,000 shares issuable upon the exercise of options.

(3)   Includes 1,500,000 shares issuable upon the exercise of warrants.


                                       48
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We may be deemed to have been in a material relationship with one or
more of the parties to the following transactions engaged in by us during our
fiscal years ended December 31, 2004 and 2003.

Employment Agreement With Christopher H. Giordano

         On November 19, 2004, we entered into a Letter Agreement with
Christopher H. Giordano pursuant to which Mr. Giordano agreed to serve as our
Chief Executive Officer, President, Treasurer and Secretary, in return for which
we agreed to pay Mr. Giordano an annual base salary of $75,000. The agreement
may be terminated at any time by the Company or Mr. Giordano upon thirty (30)
days prior written notice.

Disposition of Oil and Gas Properties to BP Acquisition, LLC

         On July 20, 2004, we entered into a Purchase and Sale Agreement with BP
Preferred Acquisition, LLC ("BP Acquisition"). Pursuant to the terms of the
Agreement, we disposed of 100% of our ownership interests in CSR-Hackberry
Partners, L.P., BPK South Valentine, L.P., PH Gas, L.P., Touchstone Resources
2001-Hackberry Drilling Fund, L.P., Louisiana Shelf Partners, L.P., PHT
Partners, L.P. and LS Gas, LLC in consideration for which BP Acquisition agreed
to cause us to be released from our obligations to repay an aggregate of
approximately $2,800,000 of outstanding indebtedness to Trident and Endeavour.
At the time we entered into the agreement with BP Acquisition: (i) BP
Investments was the beneficial owner of approximately 54% of our then
outstanding shares of common stock, (ii) FEQ Investments, Inc. was the manager
of both BP Investments and BP Acquisition, and (iii) Montex owned a 50%
membership interest in BP Investments and a 16% membership interest in BP
Acquisition.

Consulting Agreement with ESC Consulting Services, Corp.

         On May 31, 2002, we entered into a three-year consulting agreement with
ESC Consulting Services, Corp. ("ESC Consulting") to provide management services
to us in consideration of monthly consulting fees in the amount of $6,000.
During our fiscal years ended December 31, 2004, 2003 and 2002, we recorded
consulting fees under this agreement of $72,000, $72,000 and $48,000,
respectively. Cecile T. DiBona, our former Chief Executive Officer, Treasurer
and Director, is the sole owner of ESC Consulting.

ITEM 13.  EXHIBITS

The following documents are filed as exhibits to this report.

    Exhibit No.                         Exhibit
    -----------                         -------

         3.1      Articles of Incorporation (incorporated by reference to
                  Exhibit 3.1 to the Company's Registration Statement on Form
                  10-SB filed with the SEC on December 20, 1999)


                                       49
<PAGE>

         3.2      Bylaws (incorporated by reference to Exhibit 3.2 to the
                  Company's Registration Statement on Form 10-SB filed with the
                  SEC on December 20, 1999)

         3.3      Certificate of Amendment to Articles of Incorporation filed
                  October 21, 2002 (incorporated by reference to Exhibit 3.3 to
                  the Company's Quarterly Report on Form 10-QSB for the
                  quarter ended September 30, 2002)

         3.4      Certificate of Designation of Series A 10% Convertible
                  Preferred Stock (incorporated by reference to Exhibit 3.4 to
                  the Registrants Annual Report on Form 10-KSB for the year
                  ended December 31, 2002)

         3.5      Certificate of Designation of Series B Convertible Preferred
                  Stock (incorporated by reference to Exhibit 3.5 to the
                  Company's Annual Report on Form 10-KSB for the year ended
                  December 31, 2003)

         3.6      Amended and Restated Certificate of Designation of Series A
                  10% Convertible Preferred Stock (incorporated by reference to
                  Exhibit 3.6 to the Company's Annual Report on Form 10-KSB
                  for the year ended December 31, 2003)

         10.1     Limited Partnership Agreement of CSR-Waha Partners, LP dated
                  June 27, 2002 (incorporated by reference to Exhibit 10.15 to
                  the Company's Quarterly Report on Form 10-QSB for the quarter
                  ended March 31, 2003)

         10.2     Amendment to Limited Partnership Agreement of CSR-Waha
                  Partners, L.P. dated January 15, 2003 (incorporated by
                  reference to Exhibit 10.16 to the Company's Quarterly Report
                  on Form 10-QSB for the quarter ended March 31, 2003)

         10.3     Assignment and Assumption dated April 19, 2004 by and between
                  the Company and Montex Exploration, Inc. (incorporated by
                  reference to Exhibit 10.1 to the Company's current report on
                  Form 8-K, dated April 19, 2004)

         10.4     Purchase and Sale Agreement dated July 20, 2004 by and between
                  the Company and BP Preferred Acquisition, LLC (incorporated by
                  reference to Exhibit 2.1 to the Company's current report on
                  Form 8-K, dated August 4, 2004)

         10.5     First Amendment to Purchase and Sale Agreement dated October
                  12, 2004 by and between the Company and BP Preferred
                  Acquisition LLC (incorporated by reference to Exhibit 2.2 to
                  Amendment No. 1 to the Company's current report on Form 8-K/A,
                  dated July 20, 2004)


                                       50
<PAGE>

         10.6     BPK Resources, Inc. 2004 Stock Incentive Plan (incorporated by
                  reference to Exhibit 10.22 to the Company's Quarterly Report
                  on Form 10-QSB for the quarter ended September 30, 2004)

         10.7     Letter Agreement dated November 19, 2004 by and between the
                  Company and Christopher H. Giordano (incorporated by reference
                  to Exhibit 10.23 to the Company's Quarterly Report on Form
                  10-QSB for the quarter ended September 30, 2004)

         10.8     Non-Qualified Stock Option Agreement under the BPK Resources,
                  Inc. 2004 Stock Incentive Plan dated November 19, 2004 by and
                  between the Company and Christopher H. Giordano (incorporated
                  by reference to Exhibit 10.24 to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended September 30,
                  2004)

         10.9     Mutual Termination and Release, dated December 31, 2004, by
                  and between the Company and Bell Coast Capital
                  Corp.(incorporated by reference to Exhibit 10.9 to the
                  Company's Annual Report on Form 10-KSB for the year ended
                  December 31, 2003)


         14.1     Code of Business Conduct and Ethics (incorporated by reference
                  to Exhibit 14.1 to the Company's Annual Report on Form 10-KSB
                  for the year ended December 31, 2003)

         21.1     Subsidiaries of the Company (incorporated by reference to
                  Exhibit 21.1 to the Company's Annual Report on Form 10-KSB for
                  the year ended December 31, 2003)

         31.1     Certification of Chief Executive Officer of the Company
                  required by Rule 13a-14(a) under the Securities Exchange Act
                  of 1934, as amended

         31.2     Certification of Treasurer of the Company required by Rule
                  13a-14(a) under the Securities Exchange Act of 1934, as
                  amended

         32.1     Certification of Chief Executive Officer and Chief Financial
                  Officer of the Company required by Rule 13a-14(b) under the
                  Securities Exchange Act of 1934, as amended


                                       51
<PAGE>

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table presents fees for professional audit services
performed by Malone & Bailey, PC for the audit of our annual financial
statements for the fiscal year ended December 31, 2004 and fees billed for other
services rendered by Malone & Bailey, PC during such year, and professional
audit services performed by L J Soldinger Associates, LLC for the audit of our
annual financial statements for the fiscal year ended December 31, 2003, and
fees billed for other services rendered by L J Soldinger Associates, LLC during
such year.

                                  2004                       2003
                                  ----                       ----

Audit Fees:                $    30,000                   $199,000

Audit-Related Fees:                  0                          0

Tax Fees:                            0                     10,000

All Other Fees:                      0                          0
                       ----------------        -------------------

Total:                     $    30,000                   $209,000
                       ================        ===================

         Audit Fees consist of fees billed for professional services rendered
for the audit of our financial statements and review of the interim financial
statements included in quarterly reports and services that are normally provided
by our independent accountants in connection with statutory and regulatory
filings or engagements.

         Audit-Related Fees consist of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees."

         Tax Fees consist of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal and state tax compliance, tax audit defense, customs and
duties, and mergers and acquisitions.

         All Other Fees consist of fees billed for products and services
provided by the principal accountant, other than those services described above.

Audit Committee Pre-Approval Procedures

         Our Board of Directors serves as our audit committee. Our Board of
Directors approves the engagement of our independent auditors, and meets with
our independent auditors to approve the annual scope of accounting services to
be performed and the related fee estimates. It also meets with our independent
auditors, on a quarterly basis, following completion of their quarterly reviews
and annual audit and prior to our earnings announcements, if any, to review the


                                       52
<PAGE>

results of their work. During the course of the year, our chairman has the
authority to pre-approve requests for services that were not approved in the
annual pre-approval process. The chairman reports any interim pre-approvals at
the following quarterly meeting. At each of the meetings, management and our
independent auditors update the Board of Directors with material changes to any
service engagement and related fee estimates as compared to amounts previously
approved. During 2004, all audit and non-audit services performed by our
independent accountants were pre-approved by the Board of Directors in
accordance with the foregoing procedures.


                                       53
<PAGE>

                                   SIGNATURES

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

                                       BPK RESOURCES, INC.


Date:  September 14, 2005              /s/ Christopher H. Giordano
                                       -------------------------------------
                                       Christopher H. Giordano
                                       Chief Executive Officer and Treasurer


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

Signature                    Title                                 Date
---------                    -----                                 ----

/s/ Christopher H. Giordano  Chief Executive Officer,         September 14, 2005
---------------------------- Treasurer and Director
Christopher H. Giordano      (Principal Executive
Christopher H. Giordano      Officer and Principal Financial
                             and Accounting Officer)


                                       54
<PAGE>

                                  EXHIBIT INDEX

     Exhibit No.                     Exhibit
     -----------                     -------


         31.1     Certification of Chief Executive Officer of the Company
                  required by Rule 13a-14(a) under the Securities Exchange Act
                  of 1934, as amended

         31.2     Certification of Treasurer of the Company required by Rule
                  13a-14(a) under the Securities Exchange Act of 1934, as
                  amended

         32.1     Certification of Chief Executive Officer and Treasurer of the
                  Company required by Rule 13a-14(b) under the Securities
                  Exchange Act of 1934, as amended


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
   BPK Resources, Inc.
   Totowa, New Jersey

We have audited the accompanying consolidated balance sheet of BPK Resources,
Inc. as of December 31, 2004, and the related consolidated statements of
operations, stockholders' deficit and of cash flows for the year then ended.
These financial statements are the responsibility of the management of BPK
Resources, Inc. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BPK Resources, Inc.
as of December 31, 2004, and the results of its operations, changes in
stockholders' equity and of its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that BPK
Resources, Inc. will continue as a going concern. As shown in the financial
statements, BPK Resources, Inc. has suffered recurring losses from operations
and has a working capital deficit and a deficiency in equity at December 31,
2004. These factors raise substantial doubt about BPK Resources, Inc.'s ability
to continue as a going concern. Management's plans regarding these matters are
described in Note 3 to the financial statements. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets, or to the amounts and classification of liabilities that might
be necessary in the event BPK Resources cannot continue in existence.

MALONE & BAILEY, PC
www.malone-bailey.com
Houston, Texas

April 27, 2005


                                      F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
BPK Resources, Inc.
Totowa, New Jersey

We have audited the consolidated statements of operations, stockholders' equity,
and cash flows of BPK Resources, Inc. for the year ended December 31, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations,
stockholders' equity and its cash flows of BPK Resources, Inc. for the year
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has incurred net losses since inception. Also,
the Company does not have sufficient funds to execute its business plan. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding those matters are also described in
Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Also as discussed in Notes 2 and 10 to the financial statements, in 2003 the
Company changed its method of accounting for its Series A Preferred Stock which
is subject to mandatory redemption features, and implemented the accounting
required under the provisions of Statement of Financial Accounting Standards
No.150 "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity".

L J SOLDINGER ASSOCIATES, LLC

Deer Park, Illinois
April 11, 2004


                                      F-2
<PAGE>

                               BPK RESOURCES, INC.
                           Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                                    As of December 31,
                                       Assets                                             2004
                                                                                      ------------

Current assets:

<S>                                                                                   <C>
     Cash and cash equivalents                                                        $     16,036
     Accounts receivable                                                                    21,315
     Notes and interest receivable                                                          19,439
     Prepaid expenses                                                                        4,698
                                                                                      ------------

                           Total current assets                                             61,488

Developed oil and gas interests net, using successful efforts                               75,646
                                                                                      ------------

                                                                                      $    137,134
                                                                                      ============

                        Liabilities and Stockholders' Deficit

Current liabilities:

     Accounts payable and accrued expenses                                            $    768,475
     Accounts payable and accrued expenses - related party                                   3,389
     Notes payable                                                                          58,178
     Notes payable - related party                                                         110,000
                                                                                      ------------

                           Total current liabilities                                       940,042
                                                                                      ------------


Commitments and contingencies

Stockholders' deficit:

     Series B preferred stock; $.001 par value; authorized - 100,000,000 shares;
       829,755 shares issued and outstanding                                                   830
     Common stock; $.001 par value; authorized - 100,000,000 shares;
       51,259,503 shares issued and outstanding                                             51,259
     Additional paid in capital                                                         12,037,392
     Accumulated deficit                                                               (12,892,389)
                                                                                      ------------

                           Total stockholders' deficit                                    (802,908)
                                                                                      ------------

                                                                                      $    137,134
                                                                                      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                               BPK RESOURCES, INC.
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                                             2004               2003
                                                         ------------       ------------
<S>                                                      <C>                <C>
Revenues                                                 $    142,309       $    114,305
                                                         ------------       ------------

Operating expenses:

    Exploration and Production expenses                        31,627             57,646
    Impairment of mining interest option                    1,111,000                 --
    Depletion and amortization                                 42,921             34,753
    Impaired properties                                       212,725          2,173,840
    General and administrative                                716,801          1,020,037
    General and administrative - related party                     --            100,941
                                                         ------------       ------------

Total operating expenses                                    2,115,074          3,387,217
                                                         ------------       ------------

Loss from operations                                       (1,972,765)        (3,272,912)
                                                         ------------       ------------

Other (income) expense:

    Interest income                                            (1,665)            (5,323)
    Interest expense - related party                            2,170                 --
    Interest expense                                          682,507          1,642,159
    Interest expense - Series A Preferred                      90,000            181,489
    Loss (gain) on sale of stock                                   --          2,664,573
    Partnership investment loss                                67,758            462,186
                                                         ------------       ------------

Total other expenses, net                                     840,770          4,945,084
                                                         ------------       ------------

Loss from continuing operations before minority interest   (2,813,535)        (8,217,996)
                                                         ------------       ------------

Minority interest                                                  --              3,700
                                                         ------------       ------------

Net Loss after minority interest                           (2,813,535)        (8,214,296)
Loss from discontinued operations                             (15,762)          (148,222)
Extraordinary gain on extinguishment of debt                  316,499                 --
Cumulative effect of change in Accounting Principle                --            647,764
                                                         ------------       ------------

Net loss                                                   (2,512,798)        (7,714,754)

Preferred dividend on series A preferred stock              4,652,307            128,219
                                                         ------------       ------------
Net Loss To Common Shareholders                          $ (7,165,105)      $ (7,842,973)
                                                         ============       ============

Net Loss Per Common Share -

    Basic and Diluted                                    $      (0.17)      $      (0.54)
                                                         ============       ============

Weighted Average Number of
    Common Shares Outstanding -

    Basic and Diluted                                      42,013,455         14,520,760
                                                         ============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                              BPK Resources, Inc.
           Consolidated Statements of Stockholders' Equity (Deficit)
                     Years Ended December 31, 2003 and 2004

<TABLE>
<CAPTION>
                                                                           Preferred Series B
                                                                     ----------------------------
                                                                        Shares           Amount
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
Balance, December 31, 2002                                                    --               --

Issuance of common stock for CSR Waha purchase
     on 1/15/2003 at $0.78 per share                                          --               --
Payment of subscription receivable - January 2003                             --               --
Options issued to Rhodes Ventures to purchase 400,000
     shares of common stock at $0.68 issued in connection
     with Series A Preferred Stock                                            --               --
Cash Paid in connection with the ORCH Series A Preferred
     Stock Issuance                                                           --               --
Warrants issued for Gemini waiving covenants - March 2003                     --               --
Warrants issued for Gemini loan inducement - July 2003                        --               --
Warrants issued to extend maturity date on Gemini debt                        --               --
Debt discount in connection with beneficial conversion
  feature on Gemini debt                                                      --               --
Options issued to Echotech for consulting services                            --               --
Option issued to directors - January 2003                                     --               --
Issuance of Common stock for CSOR promissory note extension                   --               --
Issuance of Common stock for LS Gas interest purchase                         --               --
Amortization of deferred compensation                                         --               --
Other comprehensive loss:
     Reclassification of realized gain on securities                          --               --
Net Loss                                                                      --               --
                                                                     -----------      -----------

Total comprehensive loss
Balance, December 31, 2003                                                    --               --
                                                                     ===========      ===========

Issuance of Series B preferred stock for debt - February 2004            829,755              830
Issuance of common stock for converison of convertible debt
  - January 2004                                                              --               --
Issuance of common stock at $0.20 in private offering - Feb 2004              --               --
Issuance of common stock for mineral option interest - May 2004               --               --
Issuance of common stock                                                      --               --
Additional discount for Trident note for price reset                          --               --
Conversion of Series A Preferred stock to common stock                        --               --
Collection of subscription receivable - June 2004                             --               --
Sale of assets, reorganization                                                --               --
Issuance of warrants for transfer of liabilities                              --               --
Amortization of deferred compensation                                         --               --
Net Loss                                                                      --               --
                                                                     -----------      -----------

Total comprehensive loss
Balance, December 31, 2004                                               829,755      $       830
                                                                     ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                              BPK Resources, Inc.
           Consolidated Statements of Stockholders' Equity (Deficit)
                     Years Ended December 31, 2003 and 2004
                                  (Continued)

<TABLE>
<CAPTION>
                                                   Common stock                Additional
                                             ---------------------------         paid-in        Subscription        Deferred
                                               Shares          Amount            capital         Receivable        Compensation
                                             ----------      ------------      ------------     ------------       ------------
<S>                                          <C>             <C>               <C>              <C>                <C>
Balance, December 31, 2002                   13,817,198      $     13,817      $  3,076,661     $   (305,000)      $    (44,000)

Issuance of common stock for CSR
     Waha purchase on 1/15/2003
     at $0.78 per share                         600,000               600           467,400                --                 --
Payment of subscription
     receivable - January 2003                       --                --                --           305,000                 --
Options issued to Rhodes Ventures to
     purchase 400,000 shares of common
     stock at $0.68 issued in connection
     with Series A Preferred stock                   --                --                --                --                 --
Cash Paid in connection with the ORCH
     Series A Preferred Stock Issuance               --                --           (97,500)               --                 --
Warrants issued for Gemini waiving
     covenants - March 2003                          --                --            15,000                --                 --
Warrants issued for Gemini loan
     inducement - July 2003                          --                --            39,600                --                 --
Warrants issued to extend maturity
  date on Gemini debt                                --                --            38,200                --                 --
Debt discount in connection with
  beneficial conversion feature
  on Gemini debt                                     --                --           118,547                --                 --
Options issued to Echotech for
     consulting services                             --                --             4,300                --                 --
Option issued to directors - January 2003            --                --             4,000                --             (4,000)
Issuance of Common stock for CSOR
     promissory note extension                  100,000               100            46,900                --                 --
Issuance of Common stock for LS
     Gas interest purchase                      100,000               100            41,900                --                 --
Amortization of deferred compensation                --                --                --                --             45,917
Other comprehensive loss:
     Reclassification of realized
         gain on securities                          --                --                --                --                 --
Net Loss                                             --                --                --                --                 --
                                             ----------      ------------      ------------      ------------       ------------

Total comprehensive loss
Balance, December 31, 2003                   14,617,198      $     14,617      $  3,755,008      $         --       $     (2,083)
                                             ==========      ============      ============      ============       ============

Issuance of Series B preferred stock
     for debt - February 2004                        --                --           187,019                --                 --
Issuance of common stock for converison
     of convertible debt - January 2004         150,000               150            29,850                --                 --
Issuance of common stock at $0.20 in
     private offering - Feb 2004              1,300,000             1,300           258,700           (30,000)                --
Issuance of common stock for mineral
     option - May 2004                        5,000,000             5,000           945,000                --                 --
Issuance of common stock                      2,500,000             2,500           497,500                --                 --
Additional discount for Trident note
     for price reset                                 --                --           441,853                --                 --
Conversion of Series A Preferred
     stock to common stock                   27,692,305            27,692         3,972,016                --                 --
Collection of subscription
     receivable - June 2004                          --                --                --            30,000                 --
Sale of assets, reorganization                       --                --         1,907,346                --                 --
Issuance of warrants for transfer
     of liabilities                                  --                --            43,100                --                 --
Amortization of deferred compensation                --                --                --                --              2,083
Net Loss                                             --                --                --                --                 --
                                             ----------      ------------      ------------      ------------       ------------

Total comprehensive loss
Balance, December 31, 2004                   51,259,503      $     51,259      $ 12,037,392      $         --       $         --
                                             ==========      ============      ============      ============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                              BPK Resources, Inc.
           Consolidated Statements of Stockholders' Equity (Deficit)
                     Years Ended December 31, 2003 and 2004
                                  (Continued)

<TABLE>
<CAPTION>
                                                   Accumulated
                                                       other                                           Total
                                                   Comprehensive   Accumulated                      Comprehensive
                                                       Loss          Deficit          Total             Loss
                                                   ------------    ------------    ------------     ------------
<S>                                                <C>             <C>             <C>              <C>
Balance, December 31, 2002                         $    (78,677)   $ (2,536,618)   $    126,183

Issuance of common stock for CSR
     Waha purchase on 1/15/2003
     at $0.78 per share                                      --              --         468,000     $         --
Payment of subscription
     receivable - January 2003                               --              --         305,000               --
Options issued to Rhodes Ventures to
     purchase 400,000 shares of common
     stock at $0.68 issued in connection
     with Series A Preferred stock                           --              --              --               --
Cash Paid in connection with the ORCH
     Series A Preferred Stock Issuance                       --              --         (97,500)              --
Warrants issued for Gemini waiving
     covenants - March 2003                                  --              --          15,000               --
Warrants issued for Gemini loan
     inducement - July 2003                                  --              --          39,600               --
Warrants issued to extend maturity
     date on Gemini debt                                     --              --          38,200               --
Debt discount in connection with
     beneficial conversion feature
     on Gemini debt                                          --              --         118,547               --
Options issued to Echotech for
     consulting services                                     --              --           4,300               --
Option issued to directors - January 2003                    --              --              --               --
Issuance of Common stock for CSOR
     promissory note extension                               --              --          47,000               --
Issuance of Common stock for LS
     Gas interest purchase                                   --              --          42,000               --
Amortization of deferred compensation                        --              --          45,917               --
Other comprehensive loss:
     Reclassification of realized
         gain on securities                              78,677              --          78,677           78,677
Net Loss                                                     --      (7,842,973)     (7,842,973)      (7,842,973)
                                                   ------------    ------------    ------------     ------------

Total comprehensive loss                                                                            $ (7,764,296)
                                                                                                    ============
Balance, December 31, 2003                         $         --    $(10,379,591)   $ (6,612,049)
                                                   ============    ============    ============

Issuance of Series B preferred stock
     for debt - February 2004                                --              --         187,849               --
Issuance of common stock for converison
     of convertible debt - January 2004                      --              --          30,000               --
Issuance of common stock at $0.20 in
     private offering - Feb 2004                             --              --         230,000               --
Issuance of common stock for mineral
     option - May 2004                                       --              --         950,000               --
Issuance of common stock                                     --              --         500,000               --
Additional discount for Trident note
     for price reset                                         --              --         441,853               --
Conversion of Series A Preferred
     stock to common stock                                   --              --       3,999,708               --
Collection of subscription
     receivable - June 2004                                  --              --          30,000               --
Sale of assets, reorganization                               --              --       1,907,346               --
Issuance of warrants for transfer
     of liabilities                                          --              --          43,100               --
Amortization of deferred compensation                        --              --           2,083               --
Net Loss                                                     --      (2,512,798)     (2,512,798)      (2,512,798)
                                                   ------------    ------------    ------------     ------------

Total comprehensive loss                                                                            $ (2,512,798)
                                                                                                    ============
Balance, December 31, 2004                         $         --    $(12,892,389)   $   (802,908)
                                                   ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

                              BPK Resources, Inc.
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                          Year ended December 31,
                                                                                          2004               2003
                                                                                       -----------       -----------
<S>                                                                                    <C>               <C>

Cash flows from operating activities:

      Net loss                                                                         $(2,512,798)      $(7,714,754)
      Adjustments to reconcile net loss to net cash used in operating activities:
          Loss from discontinued operations                                                 15,762           148,222
          Noncash payment of interest                                                       90,000           181,489
          Depletion                                                                         48,675            34,753
          Impairment and abandonment of proved properties                                  212,725         2,178,511
          Amortization of deferred compensation                                              2,083            45,917
          Warrants issued                                                                       --            15,000
          Options issued for services                                                           --             4,300
          Stock issued for mining expenses                                                 950,000                --
          Minority interest                                                                     --            (3,700)
          Loss on sale of marketable securities                                                 --         2,664,573
          Gain on extinguishment of debt                                                  (316,499)               --
          FAS 150 transition adjustment                                                         --          (647,764)
          Equity loss in investment                                                         67,757           462,186
          Amortization of note payable discount and loan costs                             619,232         1,377,640
      Changes in assets and liabilities:
          Accounts receivable                                                              (19,412)          (55,056)
          Prepaid expenses                                                                   6,590            15,997
          Accounts payable and accrued expenses                                             68,227           363,934
                                                                                       -----------       -----------

                      Net cash used in continuing operating activities                    (767,658)         (928,752)

Cash flows from investing activities:

      Repayment from unrelated party                                                        50,000            26,000
      Loan to related party                                                                 (3,500)          (13,650)
      Proceeds from sale of marketable securities                                               --         1,735,897
      Purchases of marketable securities                                                        --           (22,268)
      Purchases of partnership, net of cash received                                      (167,949)         (146,821)
      Purchases of oil and gas interests                                                    (1,934)               --
      Investment in partnerships                                                                --          (912,890)
      Distribution from partnerships                                                            --            37,232
                                                                                       -----------       -----------

                      Net cash used in continuing investing activities                    (123,383)          703,500

Cash flows from financing activities:

      Issuance of debt                                                                     134,000           504,000
      Issuance of debt - related party                                                          --         1,187,053
      Repayment of debt                                                                         --          (470,000)
      Repayment of debt - related party                                                         --        (1,210,688)
      Offering costs                                                                            --           (97,500)
      Issuance of common stock, net of issuance costs                                      760,000           305,000
                                                                                       -----------       -----------

                      Net cash provided by continuing financing activities                 894,000           217,865
                                                                                       -----------       -----------
Net cash used in discontinued operations                                                    (2,755)           (3,761)

                      Net increase (decrease) in cash and cash equivalents                     204           (11,148)

Cash and cash equivalents at beginning of year                                              15,832            26,980
                                                                                       -----------       -----------

Cash and cash equivalents at end of period                                             $    16,036       $    15,832
                                                                                       ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-8
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

NOTE 1 - DESCRIPTION OF BUSINESS

Nature of Operations

Bepariko Biocom, Inc. was incorporated in Nevada on April 2, 1997 and was an
inactive, publicly-quoted company until late 2001. On October 11, 2002, the
company changed its name to BPK Resources, Inc. ("BPK").

On November 19, 2001, BPK experienced a change in management when all of its
directors and officers resigned from their positions and new officers and
directors were appointed. In April 2002, BPK's new management implemented a new
business plan and BPK began acquiring, exploring, and developing natural gas and
oil properties.

BPK is generally not involved as the operator of the projects in which it
participates. Instead, BPK relies on third parties for drilling, delivering any
gas or oil reserves that are discovered, and assisting in the negotiation of all
sales contracts with such purchasing parties. With the assistance of such third
parties, BPK plans to explore and develop these prospects and sell on the open
market any gas or oil that is discovered. BPK relies on Touchstone Resources
USA, Inc., a former related party, to assist and advise BPK regarding the
identification and leasing of properties on favorable terms. BPK also relies on
Touchstone Resources USA, Inc. to provide additional reserve assessment analysis
and engineering services in connection with the exploration and development of
the prospects. Touchstone Resources USA, Inc. has a significant level of
experience in exploring and developing gas and oil properties in the regions
where the prospects are located. This strategy is intended to reduce the level
of overhead and capital expenditures required to maintain drilling and
production operations. BPK does not own any drilling rigs, and all of the
drilling activities are conducted by independent drilling contractors. BPK's
properties are primarily located in Texas.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts
of BPK Resources, Inc. and its 99% owned subsidiary, CSR-Waha Partners, L.P., a
Delaware limited partnership purchased in January 2003. BPK consolidated two 99%
owned subsidiaries, CSR-Hackberry Partners, L.P., a Delaware Limited Partnership
formed in July 2002, and BPK-South Valentine Partners, L.P., a Delaware Limited
Partnership formed in October 2002, until these subsidiaries were divested in
July 2004 as disclosed in Note 6. Affiliate entities in which BPK Resources,
Inc. directly or indirectly owns more than 50% of the outstanding, voting
interest are accounted for under the consolidation method of accounting. Under
this method, an investee company's results of operations are reflected within
BPK's consolidated statement of operations. All significant intercompany
accounts and transactions have been eliminated.

Equity Method

Under the guidance of Emerging Issues Task Force D-46, "Accounting for Limited
Partnership Investments" the Company uses the equity method to account for all
of its limited partnership interests that exceed 5% and is less than 50%. Under
the equity method of accounting, the Company's proportionate share of the
investees' net income or loss is included in "Partnership investment losses" in
the consolidated statements of operations. Any excess investment is evaluated
each reporting period for impairment.

Development Stage

During the fourth quarter of 2004, BPK is no longer considered a development
stage entity as BPK has focused its activities on the production of its current
oil and gas properties.

Oil and Gas Accounting

BPK uses the successful efforts method of accounting for oil and gas producing
activities. Costs to acquire oil and gas properties, to drill and equip
exploratory wells that find proved reserves, and to drill and equip development
wells are capitalized. Costs to drill exploratory wells that do not find proved
reserves, associated geological and geophysical costs, and associated costs of
carrying and retaining unproved properties are expensed.

Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unproved
properties are amortized based on BPK's experience of successful drilling and
average holding period. Capitalized costs of producing oil and gas properties,
after considering estimated dismantlement and abandonment costs and estimated
salvage values, are depreciated and depleted by the unit-of-production method.
Support equipment and other property and equipment are depreciated over their
estimated useful lives.


                                      F-9
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Valuation allowances are provided if the net capitalized costs of gas and oil
properties at the field level exceed their realizable values based upon expected
future cash flows.

Upon the sale or retirement of a complete unit of a proved property, the cost
and related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. Upon
the retirement or sale of a partial unit of proved property, the cost is charged
to accumulated depreciation, depletion, and amortization with a resulting gain
or loss recognized in income.

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

Revenue is recognized at the time title passes on oil and gas quantities, less
any royalties due. Revenues related to natural gas are recognized using the
entitlement method of accounting for gas imbalances. Any quantities that are in
excess of sales quantities are recorded as a receivable at the lower of the
current market price or the market price at the time the imbalance occurred. Any
quantities that are lower than the sales quantities are recorded as deferred
revenue at the market price at the time the imbalance occurred. There were no
imbalances as of December 31, 2004.

Stock-Based Compensation Arrangements

BPK applies the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion ("APB") No. 25, "Accounting For Stock Issued To
Employees," and related interpretations, in accounting for its stock-based
grants to employees. Under the intrinsic value method of accounting,
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price. BPK applies the
disclosure provisions specified in Statement of Financial Accounting Standards
("SFAS") No. 148, "Accounting For Stock Based Compensation - Transition and
Disclosure - an Amendment of SFAS 123." BPK applies SFAS No. 123, "Accounting
for Stock-Based Compensation," in accounting for stock-based grants to
non-employees.

Had compensation expense for 2004 and 2003 been determined under the fair value
provisions of SFAS No. 123, as amended by SFAS No. 148, BPK's net loss to common
shareholders and net loss per share would have been:

<TABLE>
<CAPTION>
                                                                               2004              2003
                                                                            -----------       -----------
<S>                                                                         <C>               <C>
          Net loss to common shareholders, as reported                      $(7,165,105)      $(7,842,973)
          Add:  Stock-based employee compensation expense included
               in reported net income determined under APB No. 25,
               net of related tax effects                                         2,083             1,917
          Deduct:  Total stock-based employee compensation expense
              determined under fair-value-based method for all awards,
              net of related tax effects                                        (20,385)          (99,500)
                                                                            -----------       -----------

          Pro forma net loss to common shareholders                         $(7,183,407)      $(7,940,556)
                                                                            ===========       ===========

          Loss per share, basic and diluted:

               As reported                                                  $     (0.17)      $     (0.54)
               Pro forma                                                    $     (0.17)      $     (0.55)
</TABLE>


These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be issued in future years. The
estimated fair value of each option granted was calculated using the
Black-Scholes option pricing model. The following summarizes the weighted
average of the assumptions used in the model.



                                      F-10
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

                                                  2004         2003
                                               ----------   ----------
          Risk free rate                          2.15%        2.15%
          Expected years until exercise            3.1          3.1
          Expected stock volatility               100%         100%
          Dividend yield                           N/A          N/A

Use of Estimates

The preparation of financial statements 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.

Management believes that it is reasonably possible the following material
estimates affecting the financial statements could significantly change in the
coming year (1) estimates of proved oil and gas reserve, (2) estimates as to the
expected future cash flow from proved oil and gas properties, and (3) estimates
of future dismantlement and restoration costs.

The Company's business makes it vulnerable to changes in wellhead prices of
crude oil and natural gas. Such prices have been volatile in the past and can be
expected to be volatile in the future.

By definition, proved reserves are based on current oil and gas prices. Price
declines reduce the estimated quantity of proved reserves and increase annual
amortization expense (which is based on proved reserves).

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and investments in money market
funds. BPK considers all highly-liquid instruments with an original maturity of
90 days or less at the time of purchase to be cash equivalents.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits at financial institutions. To
mitigate this risk, the Company places its cash deposits only with high credit
quality institutions. At various times during the year, the Company may exceed
the federally insured limits. Management believes the risk of loss is minimal.

Capitalized Interest

BPK's policy is to capitalize interest on expenditures for significant
exploration and development projects while activities are in progress to bring
the assets to their intended use. There was no capitalized interest during 2004
and 2003.

Income Taxes

Income taxes are recorded in the period in which the related transactions are
recognized in the financial statements, net of the valuation allowances which
have been recorded against deferred tax assets. Deferred tax assets and
liabilities are recorded for the expected future tax consequences of temporary
differences between the tax basis and the financial reporting of assets and
liabilities. Net deferred tax assets and liabilities, relating primarily to
federal and state net operating loss carryforwards that have been deferred for
tax purposes, have been offset by a valuation reserve because management has
determined that it is more likely than not the deferred tax assets will not be
realized.

Dismantlement, Restoration and Environmental Costs

At the time proved property reaches the end of its useful life, equipment is
dismantled, wells are plugged and the property must be restored to a condition
required by environmental laws and regulations. Any estimated costs relating to
future dismantlement and restoration are amortized with capitalized development
costs by field based on proved reserves. The additional amortization will be
carried on the balance sheet as an accrued liability. Management does not
believe an accrual of such cost is required as of December 31, 2004.

Loss Per Share

Loss per common share is calculated in accordance with SFAS No. 128, "Earnings
Per Share". Basic loss per common share is computed based upon the weighted
average number of shares of common stock outstanding for the period and excludes
any potential dilution. Shares associated with stock options, warrants and
convertible debt are not included because their inclusion would be antidilutive
(i.e., reduce the net loss per share). Shares issuable during the year ended
December 31, 2003 amounted to 13,347,442.

Reclassifications

Certain reclassifications have been made to conform the prior year's data to the
current presentation. These reclassifications had no effect on reported
earnings.


                                      F-11
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classification and measurement by an issuer of certain
financial instruments with characteristics of both liabilities and equity. The
statement requires that an issuer classify a financial instrument that is within
its scope as a liability (or asset in some circumstances). Many of those
instruments were previously classified as equity. The adoption of the effective
provisions of SFAS No.150 had the effect of reclassifying the Series A
Convertible Preferred Stock (see Note 13) from stockholders' equity to
non-current liabilities and changing the valuation of the Series A Convertible
Preferred Stock, which resulted in the Company recording a gain, resulting from
the cumulative effect of change in accounting principle, of $647,764.

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
"Share-Based Payment" to revise SFAS No. 123. SFAS No. 123R establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires that the fair value of
such equity instruments be recognized as expense in the historical financial
statements as services are performed. Prior to SFAS No. 123R, only certain pro
forma disclosures of fair value were required. SFAS No. 123R shall be effective
for small business issuers as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. The impact of the adoption
of this new accounting pronouncement would be similar to the Company's
calculation of the pro forma impact on net income of SFAS 123 included in Note
2.

NOTE 3 - GOING CONCERN

The accompanying financial statements have been prepared in accordance with U.S.
generally accepted accounting principles, which contemplates continuation of BPK
as a going concern. BPK incurred net losses to common stockholders of $7,164,742
for 2004 and $17,544,333 for the period April 2, 1997 (date of inception) to
December 31, 2004. The net losses from inception to December 31, 2004 included
non-cash charges related to services provided, amortization of debt discount and
loan cost and preferred dividends of $5,361,539. Consequently, the
aforementioned items raise substantial doubt about BPK's ability to continue as
a going concern.

BPK has significant debt obligations to repay and its current liabilities exceed
its current assets. Additionally, BPK will need significant funds to meet its
cash calls on its various interests in oil and gas prospects to explore,
produce, develop, and eventually sell the underlying natural gas and oil
products under its interest and to acquire additional properties.

BPK believes that the release from its obligations under the Trident Notes and
CSOR Note (see Note 9), sales of equity and debt securities in private
placements in 2004 and projected nominal revenues from oil and gas operations
will provide sufficient funds to fund its operations through June 2005. BPK will
be required to raise additional capital in order to have the funds necessary to
meet its working capital requirements, and cash calls related to various
interest in oil and gas prospects, complete other acquisitions and continue its
operations in 2005.

BPK's ability to continue as a going concern is dependent upon raising capital
through equity and debt financing and other means on terms desirable to BPK. If
BPK is unable to obtain additional funds when they are required or if the funds
cannot be obtained on terms favorable to BPK, management may be required to
delay, scale back or eliminate its strategy of acquiring oil and gas interests
or even be required to relinquish some or all of its oil and gas interests or in
the extreme situation, cease operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

NOTE 4 - NOTES RECEIVABLE

BPK had an unsecured demand loan, which it had made to Pawnxchange, Inc. in the
amount of $50,000. The loan bears interest at 8% per annum. The loan was repaid
in 2004 and only the interest receivable of $8,340 remained outstanding as of
December 31, 2004.

During April and May 2003, BPK had loaned Touchstone Resources, Ltd., a former
related party, a total of $90,000. The loans bear interest at 10% per annum. On
May 30, 2003, BPK used these loans to purchase a 2% interest in LS Gas, LLC.
Only the interest receivable of $1,357 remained outstanding as of December 31,
2004.

As of December 31, 2004, CSR Waha Partners, L.P. had an unsecured demand loan,
which it had made to Louisiana Shelf Partners, L.P., in the amount of $2,000.
This loan bears interest at 10% per annum.


                                      F-12
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

As of December 31, 2004, CSR Waha Partners, L.P. had an unsecured demand loan,
which it had made to Knox Miss Partners, L.P., in the amount of $6,000. This
loan bears interest at 10% per annum.

As of December 31, 2004, CSR Waha Partners, L.P. had an unsecured demand loan,
which it had made to South Oil, Inc., in the amount of $1,000. This loan bears
interest at 3% per annum.

NOTE 5 - OIL AND GAS INTERESTS

On April 26, 2002, BPK acquired an interest in Hooks State Gas Unit Number 1
("Hooks") and an interest in Melton Well Number 1 ("Melton"), located in the
Hackberry Trend in Jefferson County, Texas (collectively, the "Prospects"), for
a purchase price of $350,000. BPK acquired these assets through an assignment
from Vitel Ventures Corporation ("Vitel"). Vitel held the right to purchase
these assets from Touchstone Resources USA, Inc. ("Touchstone") in exchange for
the cancellation of a loan in the principal amount of $350,000, which it had
previously extended to Touchstone. Upon receiving payment from BPK, Vitel
immediately exercised the rights and assigned them to BPK. Consequently,
Touchstone transferred the gross working interest in the Prospects to BPK. BPK
capitalized $5,612 in legal fees and recorded depletion expense in the amount of
$16,535 and $34,753 regarding this investment in 2004 and 2003, respectively.

CSR-WAHA has recorded an impairment charge of $938,592 during 2003 as a result
of certain wells going offline by the end of 2003. In addition, the Company has
recorded an impairment charge of $1,235,248 on its investment in CSR-WAHA during
2003.

Included below is BPK's investments and activity in oil and gas activities,
which consisted of the following at December 31, 2004:

          Proved oil and gas properties                       $ 2,072,346
          Accumulated depletion and impairment allowance       (1,996,700)
                                                              -----------
          Net capital assets                                  $    75,646
                                                              ===========

Results of Operations from Oil and Gas Producing Activities

Results of operations from oil and gas producing activities (excluding general
and administrative expense, and interest expense) consisted of the following:

<TABLE>
<CAPTION>
                                                                               2004               2003
                                                                            -----------       -----------
<S>                                                                         <C>               <C>
          Oil and gas sales                                                 $   154,155       $   257,776

          Production costs                                                      (45,613)         (121,869)
          Depletion, depreciation and amortization                              (48,675)         (102,513)
          Well impairment and abandonment charges                              (212,725)       (2,185,625)
                                                                            -----------       -----------

           Results of operations from oil and gas producing activities      $  (152,859)      $(2,152,231)
                                                                            ===========       ===========
</TABLE>

NOTE 6 - PARTNERSHIP INTERESTS

The Company incurred a loss on its investment in BPK-South Valentine Partners,
L.P. of $103,743 in 2003 as a result of the partnership drilling a well which
was a dry hole.

On July 20, 2004, BPK entered into a Purchase and Sale Agreement with BP
Preferred Acquisition, LLC, a Delaware limited liability company ("BP
Acquisition") an entity related through common ownership. Pursuant to the terms
of the Agreement, BPK sold 100% of its ownership interests in CSR-Hackberry
Partners, L.P., BPK South Valentine, L.P., PH Gas, L.P., Touchstone Resources
2001-Hackberry Drilling Fund, L.P., Louisiana Shelf Partners, L.P., PHT
Partners, L.P. and LS Gas, LLC, in consideration for which BP Acquisition agreed
to cause BPK to be released from any and all liabilities and obligations under
the Trident Notes and CSOR Note, and all agreements related thereto. BPK has
obtained releases from all such obligations.

The net results of operations for CSR-Hackberry Partners, L.P. and BPK South
Valentine, L.P. have been classified as discontinued operations for all periods
presented. The revenues for these entites for 2004 and 2003 were $11,846 and
$143,471, respectively.

In October 2004, BPK entered into the First Amendment to Purchase and Sale
Agreement with BP Acquisition. Pursuant to the terms of the Amendment, BPK
included the note receivable in the amount of $224,000 due from CSR Hackberry as
part of the original agreement dated July 20, 2004.


                                      F-13
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

CSR-Waha Partners, L.P.

On January 15, 2003, BPK purchased a 99% Limited Partnership Interest in
CSR-Waha Partners, LP ("CSR-Waha"), a Delaware limited partnership, from
Endeavour International Corporation, formerly known as Continental Southern
Resources, Inc. ("CSOR" or "Endeavour"), a then related party. The purchase
price of $2,000,000 consisted of $150,000, which was payable upon execution of
the agreement, a $1,500,000 promissory note due on April 30, 2003, and 600,000
shares of BPK's common stock which were valued at $468,000. The Company applied
the excess of the purchase price paid over the net asset received in the amount
of $1,235,248 to the value of the undeveloped oil and gas properties. The note
term was subsequently extended to June 30, 2004 in consideration of BPK's
issuance of 100,000 shares of common stock to CSOR. CSR-Waha owns a working
interest of 12-1/2% in the Waha/Lockridge oil and gas prospect located in Reeves
County, Texas. BPK and CSOR had one common director who was the President of BPK
at the time the transaction was completed.

As of December 31, 2004, CSR-Waha owed the operator of the wells approximately
$279,400. CSR-Waha has recorded impairment charges of $212,725 and $938,592
during the years ended December 31, 2004 and 2003, respectively, as a result of
certain wells going offline during 2004 and 2003. In addition, BPK recorded an
impairment charge of $1,235,248 on its investment in CSR-Waha during 2003.
CSR-Waha recorded depletion expense of $32,140 and $0 for 2004 and 2003,
respectively.

Since BPK divested all partnership interests, except CSR-Waha, during July 2004,
no supplemental information is provided at December 31, 2004. The following
schedule lists the results of operations of the limited partnerships for the
year ended December 31, 2003:

<TABLE>
<CAPTION>
                                                      Touchstone
                                                    Resources-2001
                                                       Hackberry          Louisiana Shelf
                                 PH Gas, LP         Drilling Fund, LP      Partners, LP
                                 ----------         -----------------      ------------
<S>                             <C>                   <C>                  <C>
Results of Operations

Sales                           $        --           $   716,892          $        --
Gross profit                    $        --           $   490,030          $        --
Net loss                        $   (87,191)          $   170,686          $(4,495,487)
</TABLE>

NOTE 7 - MINERAL INTERESTS OPTION

In April 2004, BPK entered into an Assignment and Assumption Agreement with
Montex Exploration, Inc. ("Montex") (the "Agreement") whereby BPK assumed all of
the rights and responsibilities of Montex under a binding letter of intent
entered into by Montex with Bell Coast Capital Corp. ("Bell Coast") with respect
to exploration of the Shadow Mountain Project in Mongolia (the "Interest"). The
Interest was designed to explore and develop a copper and gold mining prospect.
BPK paid $184,000 to Montex and issued 5,000,000 shares of its common stock
valued at $950,000 (based on the closing price of BPK's common stock on the date
of the agreement) to Montex, and reimbursed Montex for all fees and expenses
incurred by Montex in connection with the preparation, negotiation and execution
of the letter of intent in consideration for the assignment. On December 31,
2004, BPK decided to not continue to pursue the option in the Interest and
consequently impaired the previously capitalized cost of $1,034,000.

NOTE 8 - INCOME TAXES

Deferred income taxes result from the net tax effects of temporary timing
differences between the carrying amounts of assets and liabilities reflected on
the financial statements and the amounts recognized for income tax purposes. The
tax effects of temporary differences and net operating loss carryforwards that
give rise to significant portions of the deferred tax asset (liability) are as
follows at December 31, 2004:



                                      F-14
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

<TABLE>
<S>                                                                                    <C>
                Deferred tax asset

                    Allowance for impairment of oil and gas properties                 $   613,700
                    Other                                                                  117,200
                    Tax benefit arising from net operating loss carry forward            2,804,800
                                                                                       -----------

                                                                                         3,535,700

                Less valuation allowance                                                (3,535,700)
                                                                                       -----------

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

          Income tax benefit consists of the following at December 31, 2004:

                Deferred

                    Federal                                                            $   601,500
                    State                                                                  129,400
                Federal and state benefit of net operating loss carry forward            2,804,800
                                                                                       -----------
                                                                                         3,535,700

                Less valuation allowance                                                (3,535,700)
                                                                                       -----------

                Income tax benefit                                                     $        --
                                                                                       ===========
</TABLE>

At December 31, 2004, BPK had net operating loss carryforwards for federal and
state income tax purposes amounting to approximately $7,093,000. The federal and
state net operating loss carryforwards expire beginning 2018 through 2022.
However, these carryforwards may be limited due to changes in the ownership of
BPK as a result of equity offerings. Recognition of the benefits of the deferred
tax assets will require that BPK generate future taxable income. There can be no
assurance that BPK will generate any earnings or any specific level of earnings
in future years. Therefore, BPK has established a valuation allowance for
deferred tax assets (net of liabilities) of approximately $3,535,700 as of
December 31, 2004.

The following table presents the principal reasons for the difference between
BPK's effective tax rates and the United States federal statutory income tax
rate of 34%.

<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                               ----------------------------------
                                                                                  2004                    2003
                                                                               -----------            -----------
<S>                                                                            <C>                    <C>
          Federal income tax benefit at statutory rate                         $ 2,507,700            $ 2,700,200
          Nondeductible expenses                                                (2,545,900)              (573,600)
          State income tax benefit (net of effect of federal benefit)              327,700                373,400
          Less valuation allowance                                                (289,500)            (2,500,000)
                                                                               -----------            -----------

          Income Tax Benefit                                                   $        --            $        --
                                                                               ===========            ===========

          Effective Income Tax Rate                                                      0%                     0%
                                                                               ===========            ===========
</TABLE>


NOTE 9 - NOTES PAYABLE

Notes payable consisted of the following at December 31, 2004:

          10% Promissory note - related party          $110,000
          10% Promissory note                            58,878
                                                       --------

                                                       $168,878
                                                       ========



                                      F-15
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

In April 2002 and in July 2003, BPK entered into two loan agreements pursuant to
which it borrowed a total of $2,100,000 from Trident Growth Fund, L.P.
("Trident"). BPK's obligation to repay the loans were evidenced by two 12%
convertible promissory notes ("Trident Notes") in the principal amounts of
$1,500,000 and $600,000, respectively, and secured by substantially all of the
assets of BPK including a collateral mortgage and assignment of lease and
working interests in BPK's oil and gas wells. The loans originally matured on
October 31, 2003, and were amended to extend the maturity dates to June 30, 2004
and to July 31, 2004. As an inducement to make the loans and to extend their
maturity dates, BPK issued Trident warrants to purchase a total of 545,000
shares of BPK's common stock, with initial exercise prices ranging from $1.00 to
$0.38 per share and a term of 10 years. In February and March 2004, the
conversion price of the loan and warrants were reset to $0.20 and again to $0.13
per share, respectively.

Under Emerging Issues Task Force ("EITF") 00-27: "Application of Issue No. 98-5
to Certain Convertible Instruments," BPK allocated the proceeds from the
original issuances of the convertible promissory notes and warrants based on a
fair value basis of each item. The fair value of the warrants was determined to
be $225,000 for the 300,000 warrants issued with the original convertible loan
from April 2002 and $39,600 for the 120,000 warrants issued for the additional
loan in July 2003. A beneficial conversion discount of $1,275,000 for the
original convertible note was recorded in 2002. In 2003 BPK recorded a
beneficial conversion discount of $118,547 on the second loan from Trident. BPK
recorded an additional $441,853 beneficial conversion feature in 2004 related to
the resets of the conversion price. For 2004 and 2003, BPK amortized $499,997
and $1,275,833, respectively of the discount related to the value of the warrant
and beneficial conversion feature as interest expense.

In February 2004, Trident exercised its rights under the loan agreements and
converted $30,000 of principal into 150,000 shares of common stock of BPK.

During July 2004, BPK entered into a Purchase and Sale agreement with BP
Acquisition whereby it sold its interests in various limited partnerships and
limited liability companies in consideration for which BP Acquisition agreed to
cause BPK to be released from any and all liabilities and obligations under the
Trident Notes, and all agreements related thereto, which cured the default of
the original $1,500,000 Trident Note. As of December 31, 2004, the remaining
outstanding principal balance of the loans was $0.

As an inducement to release BPK of the Trident loans, BPK issued Trident
warrants to purchase a total of 400,000 shares of BPK's common stock, with an
exercise price of $0.13 per share and a term of 10 years.

10% Promissory Notes - Related Party

In January 2003, BPK financed $1.5 million of the purchase price of CSR-Waha
with a promissory note issued to CSOR ("CSOR Note"). The note bears interest at
the rate of 10% per annum and initially matured on April 30, 2003, with an
option provision to extend the maturity date. On April 30, 2003, BPK exercised
its extension rights and extended the maturity date of the note to June 30,
2004. In consideration for the extension, BPK issued CSOR 100,000 shares of
BPK's common stock. BPK recorded financing costs of $47,000 in connection with
the extension and amortized the costs over the life of the extension.

During July 2004, BPK entered into a Purchase and Sale agreement with BP
Acquisition whereby it sold its interests in various limited partnerships in
consideration for which BP Acquisition agreed to cause BPK to be released from
any and all liabilities and obligations under the CSOR Note, and all agreements
related thereto. As of December 31, 2004, the remaining outstanding principal
balance of the loan was $0, and the financing cost referred to above was fully
amortized.

During December 2004, BPK borrowed a total of $90,000 from Montex and issued
various 5.25% demand promissory notes. The balance remained outstanding as of
December 31, 2004.

Other Notes Payable

During 2004, BPK borrowed an additional $44,000 from 1025 Investments and issued
various 3% demand promissory notes for a total outstanding principal balance of
$50,000 as of December 31, 2004.

As of December 31, 2004, BPK had other demand notes totaling $28,178.



                                      F-16
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Libor Loan Facility

In connection with the investment transaction in April 2003 with Ocean Resource
Capital Holdings, PLC ("ORCH"), BPK borrowed $587,053 under a loan facility with
a maturity date of May 31, 2003. The loan facility required interest payments at
the rate of the London Inter-Bank Offering Rate ("LIBOR") at the end of each
month the loan was outstanding plus two percent. The loan facility was secured
by the shares issued to BPK by ORCH. BPK also incurred an arrangement fee of 4%
on the amount of each draw on the facility. In August 2003, BPK repaid $130,687
of principal. On February 27, 2004, BPK satisfied all its outstanding
indebtedness to ORCH, including the loan facility, all accrued and unpaid
interest and the arrangement fee totaling $504,348 through the issuance of
829,755 shares of Series B Convertible Preferred Stock plus warrants to acquire
150,000 shares of common stock of BPK (see Note 11).

NOTE 10 - MANDATORILY REDEEMABLE PREFERRED STOCK

On February 21, 2003, BPK issued 5,538,461 of the 10,000,000 shares of Series A
10% Convertible Preferred Stock. Which was valued at $4,247,765. The holders of
shares of this stock were entitled to receive dividends at a rate of 10% per
annum which accrued from the date of issuance of each share payable
semi-annually in arrears on June 30 and December 31 of each year. These
dividends had preference over common stock cash dividends.

Each Series A Share was immediately convertible, at the option of the holder,
into one share of common stock, subject to a cap which prohibited conversion to
the extent that conversion would result in the holder beneficially owning in
excess of 4.99% of BPK's common stock. In the event of liquidation, dissolution
or winding up of BPK, or a merger or consolidation in which BPK is not the
surviving entity, all Series A Shares automatically would have converted into
shares of common stock. BPK had the option to redeem all Series A Shares at any
time by payment of an amount per share equal to $.65 plus all accrued and unpaid
dividends and was required to redeem all such shares by payment of such amount
no later than February 28, 2006. The Series A Shares contained anti-dilution and
conversion price adjustment provisions if certain events occur. Other than as
provided by applicable law, holders of the Series A Shares had no voting rights.

The shares were issued in consideration for 4,390,000 ordinary shares and
warrants to acquire 1,463,333 ordinary shares of ORCH.

On February 27, 2004, BP Investments, LP ("BP") entered into an agreement to
purchase 5,538,461 shares of BPK's Series A Convertible Preferred Stock from
ORCH. Subsequent to the sale, on March 23, 2004, BPK authorized certain
amendments to the certificate of designation of the Series A Convertible
Preferred Stock. The restriction limiting the number of shares convertible by
the holder of the Series A Convertible Preferred stock to an amount that would
result in the holder beneficially owning less than 4.99% of the issued and
outstanding common stock was eliminated. The conversion rate for the holder was
also increased from one share of Series A Convertible Preferred convertible into
one share of common stock to one share of Series A Convertible Preferred Stock
convertible into five shares of common stock. On the date of change in the
conversion rate of the Series A Shares, the closing price of the common stock of
BPK was $0.21 per share. In 2004, BPK recorded a preferred dividend, which
amounted to $4,652,307 based on the value of the additional shares of common
stock issuable on conversion at the new conversion rate. On April 12, 2004, BP
exercised its rights and converted 100% of the outstanding shares of Series A
Convertible Preferred Stock into 27,692,305 shares of common stock of BPK, which
may have resulted in a change in control of BPK, since this represented
approximately 65% of the issued and outstanding common stock of BPK on that
date. This resulted in BPK recording additional equity of $3,999,708, which
included the reversal of the accrued dividend of $399,708.


                                      F-17
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

NOTE 11 - STOCKHOLDERS' EQUITY

On January 15, 2003, BPK purchased a 99% Limited Partnership Interest in
CSR-Waha Partners, LP, a Delaware Limited Partnership from Endeavor. BPK issued
600,000 shares of its common stock as part of the purchase price. These shares
were valued at the fair market value of $0.78 per share.

On January 30, 2003, BPK issued options to purchase 200,000 shares of common
stock at an exercise price of $0.65 per share to the Chief Executive Officer,
also a Director of BPK. The options are immediately exercisable and terminate on
the earlier of three years from the date of grant or three months after
cessation of service to BPK. BPK recorded these options at the fair market value
of $0.66. As a result, deferred compensation of $2,000 was recorded and will be
amortized over three years.

On January 31, 2003, BPK issued options to purchase 100,000 shares of common
stock at an exercise price of $0.65 per share to an individual in connection
with their appointment to serve as director of BPK. The options are fully vested
and terminate on the earlier of three years from the date of grant or three
months after cessation of service to BPK. BPK recorded these options at the fair
market value of $0.66. Deferred compensation of $1,000 was recorded and will be
amortized over a three-year period.

In connection with the ORCH transaction, BPK is obligated to issue 400,000
options to Rhodes Ventures, S.A. at the closing of an equity transaction.

In March 2003, the Company issued Trident warrants to purchase 25,000 shares of
the Company's common stock as an inducement to waive the financial covenants
until December 2003. The warrants had an original exercise price of $0.55 per
share and were to originally expire in April 2002.

On April 30, 2003, BPK exercised its option to extend the due date of its
$1,500,000 promissory note to Endeavor, a related party, from April 30, 2003 to
June 30, 2004. BPK issued Endeavor 100,000 shares of common stock of BPK for
extending the note. These shares were recorded as a prepaid item at the fair
market value of $0.47 and will be expensed over the extension period of the
note.

On May 30, 2003, BPK purchased a 2% interest in LS Gas, LLC from Touchstone
Resources, Ltd. BPK issued 100,000 shares of its common stock as part of the
purchase price.

On July 1, 2003, BPK entered into an investor relations consulting agreement
with EchoTech Financial, Inc. The agreement is for a three month period ending
on September, 30, 2003 and will automatically renew for another term of three
months unless two weeks notice to terminate is given by either party, at a fee
of $3,000 per month as well as options to purchase 25,000 common shares of BPK
at an exercise price of $.040 per common share. The options are fully vested and
expire in two years.

On July 29, 2003 BPK granted Trident two warrants to purchase 120,000 and
100,000 shares of common stock with an exercise price of $0.38 expiring on
July 29, 2008 and April 30, 2012, respectively. The warrant to purchase 120,000
shares of common stock was issued in consideration for increasing the principal
of the note and the warrant to purchase 100,000 shares of common stock was
issued in consideration of the renegotiation to extend the maturity date of the
original note and for granting a waiver due to BPK's failure to meet certain of
its loan covenants.

In January 2004, BPK commenced raising capital through a private offering of up
to 7,500,000 shares of common stock, $.001 par value per share, and warrants to
acquire up to 3,750,000 shares of common stock. The shares and warrants were
sold in units comprised of two shares of common stock and one warrant ("units").
The units were sold at a purchase price of $0.40 per unit. Each warrant is
initially exercisable into one share of common stock at an exercise price of
$0.30 per share, subject to adjustment; for a period of three years from the
date of issuance. In February 2004, BPK sold a total of 650,000 units for
$260,000.

In January 2004, Trident exercised its conversion rights and converted $30,000
of principal from its convertible notes payable into 150,000 shares of BPK's
common stock.

On February 27, 2004 BPK entered into a securities purchase agreement with ORCH,
whereby ORCH purchased 829,755 shares of BPK's Series B Convertible Preferred
Stock and warrants to purchase 150,000 shares of BPK's common stock at an
exercise price of $0.55 per share which expire on February 27, 2007. On the date
of issuance, the closing price of the common stock of BPK was $0.21 cents per
share. Based on this closing price, BPK valued the Series B Convertible
Preferred Stock in the amount of $174,249 and using the Black-Scholes model,
valued the warrants at $13,600 for total consideration of $187,849. In
consideration for the receipt of the Series B Convertible Preferred Stock and
warrants, ORCH agreed to cancel the total outstanding principal balance on the
Libor Loan Facility and to waive the interest payable and the arrangement fee on
the facility, the total of which amounted to $504,348 as of February 27, 2004.


                                      F-18
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Under the guidance of SFAS No. 15 "Accounting by Debtors and Creditors for
Troubled Debt Restructurings", BPK recorded a gain in the amount of the
difference between the value of the loans, interest and fees extinguished in
excess of the value of the securities issued to satisfy those liabilities, which
amounted to $316,499 as of December 31, 2004.

The Series B Convertible Preferred Shares are non-voting and automatically
convert to common stock of BPK upon the bankruptcy or dissolution of BPK. The
holder of the Series B Convertible Preferred Stock may convert one preferred
share into one share of common stock at any time, subject to adjustment. BPK may
redeem the Series B Convertible Preferred Shares for $0.01 per share upon 30
days written notice provided that (i) the average of the closing bid price of
BPK's common stock is in excess of $1.00 per share for twenty (20) trading days
preceding the date of the redemption notice and (ii) the shares of common stock
issuable upon conversion of the Series B Convertible Preferred Stock are either
subject to an effective registration statement or transferable pursuant to rule
144(k) promulgated under the Securities Act of 1933. The redemption notice shall
call upon each holder of Series B Convertible Preferred Stock to either
surrender the Series B Convertible Preferred Stock held or convert it to common
stock prior to the date of redemption.

In April 2004, BPK entered into a Securities Purchase Agreement with Ritchie
Long/Short Trading, Ltd., a Cayman Islands exempted company ("Ritchie Trading").
Under the Securities Purchase Agreement, Ritchie Trading purchased from BPK
1,250,000 units, resulting in gross proceeds to BPK of $500,000. Each unit
consists of two shares of common stock of BPK and one warrant to acquire one
share of common stock of BPK with an exercise price of $0.30 cents per share and
an expiration date three years from the date of grant.

In July 2004, BPK issued warrants to purchase 400,000 shares of BPK's common
stock as an inducement for Trident to release BPK of its obligations under the
Trident notes.

During July 2004, BPK entered into a Purchase and Sale agreement with BP
Acquisition whereby BPK sold its interests in various limited partnerships and
limited liability companies in consideration for which BP Acquisition agreed to
cause BPK to be released from any and all liabilities and obligations under the
Trident Notes and CSOR note, and all agreements related thereto. Since certain
common ownership and control exist between BPK and BP Acquisition and in
accordance with Staff Accounting Bulletin 79, Topic 5T "Accounting for Expenses
or Liabilities Paid by Principal Stockholder," BPK accounted for the disposal of
the assets and releases from its liabilities under the original notes as a
contribution of additional paid in capital in the amount of $1,910,546.

The Company accrued $128,219 of dividends during 2003.

Stock Warrants

BPK had the following outstanding common stock warrants to purchase its
securities at December 31:

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

                                     Number of          Exercise Price          Number of           Exercise Price
Description of Series             Warrants issued          Per Share         Warrants issued          Per Share
- ----------------------------    -------------------    ----------------    -------------------    -----------------
<S>                                 <C>                     <C>                 <C>                 <C>
Expire April 2004                             --            $   0.13                310,000             $   1.25
Expire February 2007                     650,000            $   0.30                     --                   --
Expire February 2007                     150,000            $   0.55                     --                   --
Expire July 2007                       1,250,000            $   0.30                     --                   --
Expire July 2008                         120,000            $   0.13                120,000             $   0.38
Expire July 2014                         400,000            $   0.13                     --
Expire April 2012                        425,000            $   0.13                425,000             $   0.38
Expire November 2005                          --            $     --                702,666             $   0.60
                                -------------------                        -------------------

Common Stock                           2,995,000                                  1,557,666
                                ===================                        ===================
</TABLE>


                                      F-19
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Stock Options

BPK follows the provisions of SFAS No. 123. As permitted under SFAS No. 123, BPK
has continued to utilize APB No. 25 in accounting for its stock-based
compensation to employees. The following tables summarize BPK's stock option
activity and related information during 2004 and 2003.

<TABLE>
<CAPTION>
                                                             2004                                     2003
                                            -------------------------------------    --------------------------------------
                                                Number of        Weighted-Average        Number of         Weighted-Average
                                                 Shares           Exercise Price           Shares           Exercise Price
                                            ----------------    ----------------     -----------------    -----------------
<S>                                              <C>               <C>                     <C>                 <C>
          Balance at beginning of year           725,000           $   0.64                200,000             $   0.58

          Granted                                500,000               0.13                825,000                 0.64

          Expired                               (700,000)              0.65               (300,000)                0.59
                                                 -------           --------                -------             --------

          Balance at end of year                 525,000           $   0.14                725,000             $   0.64
                                                 =======           ========                =======             ========

</TABLE>

The weighted average grant-date fair value of options granted during 2004 and
2003 was $0.04 per share and $0.02 per share, respectively.

<TABLE>
<CAPTION>
                                          OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                       -----------------------------------------------------------    ----------------------------------
                            Number of               Weighted          Weighted             Number            Weighted
                        Outstanding Shares          Average            Average         Exercisable at         Average
     Exercise            at December 31,           Remaining          Exercise          December 31,         Exercise
      Price                    2004              Contract Life          Price               2004               Price
- -------------------    ---------------------     ---------------    --------------    ------------------    ------------
<S>                          <C>                    <C>               <C>                  <C>               <C>
$     0.40                     25,000                 0.50              $  0.40              25,000            $ 0.40
$     0.13                    500,000                 4.85              $  0.13             500,000            $ 0.13
</TABLE>


NOTE 12 - RELATED PARTY TRANSACTIONS - NOT DESCRIBED ELSEWHERE / CONCENTRATIONS

BPK entered into a consulting agreement with ESC Consulting Services Corp. on
May 31, 2002. This agreement is for 36 months with a total compensation of
$216,000, to be paid $6,000 on the first day of each month. BPK incurred $72,000
and $72,000 of consulting expense in 2004 and 2003, respectively. In April 2004,
the president of ESC Consulting became a director and sole officer of BPK after
the resignation of BPK's former director and sole officer. In July 2004, the
president of ESC Consulting resigned as BPK's director and sole officer and was
replaced by the current director and sole officer of BPK.

NOTE 13 - OPERATING LEASES

On September 9, 2002, BPK entered into a lease agreement with a former related
party for office space. The lease period was for one year with rent $18,000
annually. In September 2003, the lease agreement was extended for a period of
one year. BPK incurred rent expense of $5,000 and $18,000 for 2004 and 2003,
respectively.


                                      F-20
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

NOTE 14 - COMMITMENT AND CONTINGENCIES

General

The oil and gas industry is regulated by federal, state and local authorities.
In particular, gas and oil production operations and economics are affected by
environmental protection statutes, tax statutes and other laws and regulations
relating to the petroleum industry, as well as changes in such laws, changing
administrative regulations and the interpretations and application of such laws,
rules and regulations. BPK believes it is in compliance with all federal, state
and local laws, regulations, and orders applicable to BPK and its properties and
operations, the violation of which would have a material adverse effect on BPK
or its financial condition.

Operating Hazards and Insurance

The gas and oil business involves a variety of operating risks, including the
risk of fire, explosions, blow-outs, pipe failure, abnormally pressured
formation, and environmental hazards such as oil spills, gas leaks, ruptures or
discharges of toxic gases, the occurrence of any of which could result in
substantial losses to BPK due to injury or loss of life, severe damage to or
destruction of property, natural resources and equipment, pollution or other
environmental damage, cleanup responsibilities, regulatory investigation and
penalties and suspension of operations.

There can be no assurance that insurance, if any, will be adequate to cover any
losses or exposure to liability. Although BPK believes certain policies obtained
by operators provide coverage in scope and in amounts customary in the industry,
they do not provide complete coverage against all operating risks. An uninsured
or partially insured claim, if successful and of significant magnitude, could
have a material adverse effect on BPK and its financial condition via its
contractual liability to the Prospect.

Potential Loss of Oil and Gas Interests/ Cash Calls

BPK is subject to cash calls related to its various investments in oil and gas
prospects.

If BPK does not pay its share of cash calls it will forfeit all or some of its
rights in certain of its interests in the prospects and any related profits.
BPK's share of additional exploratory and drilling cost over the next year is
uncertain at this time. If one or more of the other members of the projects fail
to pay their share of the prospect costs, BPK may need to pay additional funds
to protect its investment.

NOTE 15 - SALES OF MARKETABLE SECURITIES

On February 21, 2003, BPK entered into an investment agreement with Ocean
Resources Capital Holding PLC ("ORCH"). In accordance with the agreement, the
Company issued 5,583,461 shares of its Series A 10% Convertible Preferred Stock
in exchange for 4,390,000 ordinary shares of ORCH, along with warrants to
purchase an additional 1,463,333 shares. ORCH trades on the London Stock
Exchange in the Alternative Investment Market ("AIM"). On July 24, 2003, the
Company sold the 4,390,000 shares of ORCH with warrants to purchase 1,463,333
shares attached for $1,408,136, and incurred $77,449 in commission expenses,
which resulted in a net loss of $2,917,077.

BPK received 207,044 shares of CyTrx common stock in partial settlement of a
note receivable in 2003. During July and August, 2003 BPK sold 207,044 shares of
CyTrx for $380,635. BPK recorded a gain of $251,158 on this transaction.

During October, 2003 BPK bought 10,000 shares of CyTrx for $22,268 and sold
11,526 shares of CYTR for $24,575. BPK recorded a gain of $1,346 on this
transaction.

NOTE 16 - SUBSEQUENT EVENTS

On January 5, 2005, BPK borrowed $5,000 from Montex, a related party, and issued
a 5.25% promissory note.

NOTE 17 - SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest expense and income taxes for 2004 and 2003 were as
follows:

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

          Interest                   $    --          $206,869
                                     =======          ========

          Income taxes, net          $    --          $     --
                                     =======          ========

NOTE 18 - SUPPLEMENTAL OIL AND GAS DISCLOSURES - UNAUDITED

Oil and Gas Reserves

The determination of oil and gas reserves is highly complex and interpretive.
The estimates are subject to continuing changes as additional information
becomes available.


                                      F-21
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas, and natural gas liquids, which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved development
oil and gas reserves are those reserves expected to be recovered through
existing wells with existing equipment and operating methods. The reserve data
is based on studies prepared by an outside petroleum engineer. All proved
developed reserves of oil and gas are located in Texas.

The following table presents estimates of BPK's net proved developed oil and gas
reserves:

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                          -------------------------
                                                                            2004             2003
                                                                          -------           -------
<S>                                                                         <C>               <C>
          Proved developed reserves (bbls), beginning of year               5,389             9,422

          Purchase of proved developed reserves (bbls), in place               --                --
          Production                                                       (2,178)           (6,243)
          Extension of reservoir                                               --                --
          Revisions of previous estimates                                   7,420             2,210
                                                                          -------           -------

          Proved developed reserves (bbls), end of year                    10,631             5,389
                                                                          =======           =======

          Equity in reserves in equity method investees                        --             1,991
                                                                          =======           =======
</TABLE>


Standardized Measure of Discounted Future Net Cash Flows

SFAS No. 69, "Disclosure about Oil and Gas Producing Activities", prescribes
guidelines for computing a standardized measure of future net cash flows and
changes therein relating to estimated proved reserves. BPK has followed these
guidelines, which are briefly discussed below.

Future cash inflows and future production and development costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be produced. Estimated future income taxes are computed using current
statutory income tax rates for where production occurs. The resulting future net
cash flows are reduced to present value amounts by applying a 10% annual
discount factor.

The assumptions used to compute the standardized measure are those prescribed by
the Financial Accounting Standards Board and, as such, do not necessarily
reflect BPK's expectations for actual revenues to be derived from those reserves
nor their present worth. The limitations inherent in the reserve quantity
estimation process, as discussed previously, are equally applicable to the
standardized measure computations since these estimates are the basis for the
valuation process.

The following summary sets forth BPK's future net cash flows relating to proved
oil and gas reserves based on the standardized measure prescribed in Statement
of SFAS No. 69.

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                              -----------------------------
                                                                                2004                 2003
                                                                              ---------           ---------
<S>                                                                             <C>               <C>
          Future cash inflows                                                   233,882           $ 160,120
          Future production costs                                               (44,316)            (17,188)
          Future development costs                                               (7,637)                 --
          Future income tax expense                                             (17,397)            (12,170)
                                                                              ---------           ---------

          Future net cash flows (undiscounted)                                  164,532             130,762

           Annual discount of 10% for estimated timing                          (34,067)            (11,957)
                                                                              ---------           ---------

           Standardized measure of future net                                   130,465           $ 118,805
                                                                              =========           =========

           Equity in standardized measure of equity method investees                 --           $  43,822
                                                                              =========           =========
</TABLE>


                                      F-22
<PAGE>

                               BPK RESOURCES, INC.
                   Notes to Consolidated Financial Statements

Changes in Standardized Measure

The following are the principal sources of change in the standardized measure of
discounted future net cash flows at December 31:

<TABLE>
<CAPTION>
                                                                                2004                2003
                                                                             ---------           ---------
<S>                                                                          <C>                 <C>
          Standardized measure, beginning of period                          $ 118,805           $ 154,655
          Net changes in prices and production costs                           (32,355)             46,021
          Future development costs                                              (7,637)                 --
          Revisions of previous quantity estimates                                  --              91,356
          Extension of reservoir                                                    --            (188,693)
          Sale of reserves in place                                             73,762              15,466
          Accretion of discount                                                (22,110)                 --
          Changes in income taxes, net                                              --                  --
          Purchased reserves                                                        --                  --
                                                                             ---------           ---------

          Standardized measure, end of period                                $ 130,465           $ 118,805
                                                                             =========           =========

          Equity in standardized measure of equity method investees          $      --           $  43,822
                                                                             =========           =========
</TABLE>