Liquidity and Capital Resources

The Company has funded its business opportunities from private placement of common shares, loans, and from services provided by the officers of the Company.

During 2001, the Company completed a one-for-nine stock consolidation.  During 2001, the Company incurred $244,200 in promissory notes; the promissory notes payable are unsecured, bear interest at 15% per annum and are due on 12/30/2004.  Also during 2001, the Company incurred a loan payable of $75,000 to Dunross Capital Limited; this loan payable was unsecured, bears interest at 18% per annum and is due on 3/1/2002; the loan was extended to 1/15/2004; the Company paid a finder’s fee of $7,500 and in August 2002 issued 150,000 loan bonus shares valued at $0.10 per share with respect to this loan.

In February 2002, the Company issued 150,000 common shares at a deemed value of $0.10 per share as part of the $205,000 acquisition cost of the Wimberley No. 5 Gas Prospect.  In February 2002, the Company issued 80,000 common shares at a deemed value of $0.10 per share as a finder's fee related to the acquisition of the Wimberley No. 5 Gas Prospect.

In February 2002, the Company issued $400,000 of Convertible Debentures.  The convertible debentures bear interest at 15% per annum and mature 2/28/2007.  The debentures and accrued interest are convertible into units consisting of one common share and one share purchase warrant at $0.10 per unit in years one and two, at $0.15 per unit in year three, at $0.20 per unit in year four and at $0.25 per unit in year five.  The share purchase warrants entitle the holders the right to purchase one common share for each warrant held at $0.10 per share for two years from the conversion date for conversions in the first two years, at $0.15 per share for one year for conversions in the third year, at $0.20 per share for one year for conversions in the fourth year and at $0.25 per share for one year for conversions in the fifth year.  A total finders fee of $27,600 was paid with respect to this private placement.  As at 12/31/2002, $52,296 of interest had been accrued on these debentures.

In April 2002, the Company completed a 1,000,000 unit private placement at $0.10 per unit, with each unit consisting of one common share and a share purchase warrant entitling the holder to acquire an additional common share at $0.14 per share until 4/1/2004.

In November 2002, the Company issued 1,050,000 common shares to current/former Officers/Director to settle $126,000 of debt.

In August 2003, the Company completed a $300,000 private placement of 1,000,000 units of common shares and warrants at $0.30; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.30 per share for two years.

In October 2003, the Company completed a $500,000 private placement of 1,666,667 units of common shares and warrants at $0.30; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.30 per share for one years.

In October 2003, 26,733 common shares were issued pursuant to the exercise of stock options, raising $3,475.

In November 2003, 400,000 common units were issued pursuant to the conversion of debentures; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.10 for two years.

In January 2004, the Company completed a $200,000 private placement of 400,000 units of common shares and warrants at $0.50; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.60 per share until 1/30/2005; the cash proceeds of which were received prior to 12/31/2003.  6,000 common shares were issued as a finder’s fee.

In January 2004, the Company completed a $990,000 private placement of 2,200,000 units of common shares and warrants at $0.45; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.60 per share until 1/30/2006.

In February 2004, 3,600,000 common units were issued pursuant to the conversion of remaining 8% convertible debentures; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.10 for two years.

In 2004, 68,000 common shares were issued pursuant to the exercise of warrants, raising $30,600.

In April 2004, the Company completed a $720,000 private placement of 1,200,000 units of common shares and warrants at $0.60; each unit consisted of one common share and one share purchase warrant exercisable into an additional common share at a price of $0.75 per share for one year.

In 2004, 100,000 common shares were issued pursuant to the exercise of warrants, raising $30,000.

In 2004, 12,000 common shares were issued pursuant to the exercise of warrants, raising $5,400.

Fiscal 2003

Working Capital was a negative ($539,078) at 12/31/2003.

Cash Provided by Fiscal 2003 Operating Activities totaled $272,778, including the ($611,792) Net Loss.  Material adjustments included $28,954 in depletion, $13,875, ($255,709) in write-down and write-off of resource properties, and $586,032 increase in non-cash working capital (primarily reduced accounts payable.  Cash Used in Fiscal 2003 Investing Activities totaled ($1,419,878), primarily for acquisition/exploration of resource properties.  Cash Provided by Fiscal 2003 Financing Activities totaled $1,090,883, primarily from the aforementioned share issuances and loans.  The significant majority of the accounts payable of $604,511 was due to the Company’s joint venture partner, Spearhead Resources, as part of ongoing work in progress of ongoing drilling and exploration activities in the Alexander, Rainbow, and Prairie River projects.

Fiscal 2002

Working Capital was $90,028 at 12/31/2002.

Working Capital was a negative ($142,570) at 12/31/2001.

Cash Used in Fiscal 2002 Operating Activities totaled ($249,891), including the ($269,021) Net Loss.  Material adjustments included $8,758 in amortization, $15,000 in financing fees, and ($4,628) decrease in non-cash working capital.  Cash Used in Fiscal 2002 Investing Activities totaled ($193,247), for the Wimberley No. 5 Gas Prospect, excluding the non-cash deemed value ($23,000) of the 150,000 common shares issued for the property and 80,000 common shares issued as a finder's fee for the property.  Cash Provided by Fiscal 2002 Financing Activities totaled $475,773 from the aforementioned share issuances and loans.

Research and Development, Patents and Licenses, Etc.

No Disclosure Necessary