BERKLEY RESOURCES INC.

BALANCE SHEETS

(Prepared by Management)

	September 30,			December 31,
As at	2006			2005
	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash	$	459,471		$	1,894,681
Accounts receivable		567,935			278,856
Taxes recoverable		5,237			22,325
Prepaid expenses		69,768			101,689
Due from related party		-			3,454
		1,102,411			2,301,005
Prepaid oil and gas costs		-			295,350
Oil and gas properties and equipment (Note 3)		6,977,370			3,939,531
Rental property (Note 4)		2,038,924			2,049,015
Other property plant and equipment (Note 5)		5,785			6,449
	$	10,124,490		$	8,591,350
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	$	1,338,359		$	353,363
Bank loans (Note 6)		3,389,402			1,922,146
Due to related parties (Note 9(a))		33,869			124,917
		4,761,630			2,400,426
Site restoration liabilities		89,339			85,439
		4,850,969			2,485,865
SHAREHOLDERS' EQUITY
Share Capital (Note 7)		8,962,421			8,762,671
Contributed Surplus		734,054			589,036
Deficit		(4,422,954	)		(3,246,222	)
		5,273,521			6,105,485
	$	10,124,490		$	8,591,350

NOTE 1 - NATURE OF OPERATIONS

Approved by the Directors:

“Matt Wayrynen”                 Director             “Lindsay Gorrill”            Director

BERKLEY RESOURCES INC.

STATEMENTS OF OPERATIONS

(Unaudited - Prepared by Management)

	Three Months ended						Nine Months ended
	September 30,						September 30,
	2006			2005			2006			2005
OIL AND GAS REVENUE	$	382,094		$	282,766		$	1,190,394		$	1,137,854
Oil and gas production expenses
Operating costs		269,067			134,582			600,964			448,825
Interest on bank loan		8,837			-			8,837			-
Amortization and depletion		83,000			60,000			532,000			350,000
Accretion of site restoration liabilities		1,300			3,340			3,900			6,300
		362,204			197,922			1,145,701			805,125
NET OIL AND GAS INCOME		19,890			84,844			44,693			332,729
RENTAL REVENUE		63,727			61,780			185,742			179,751
Rental operations expenses
Operating costs		50,246			46,592			143,465			147,780
Interest on bank loan		74,559			34,611			166,409			68,416
Amortization		3,363			3,363			10,091			10,091
		128,168			84,566			319,965			226,287
NET RENTAL LOSS		(64,441	)		(22,786	)		(134,223	)		(46,536	)
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative, office services and premises		72,190			86,294			245,397			289,032
Stock based compensation		50,918			29,060			145,018			148,037
Management fees		57,586			47,580			179,747			139,580
Consulting fees		52,661			24,936			195,227			75,061
Professional fees		22,126			41,857			93,954			89,394
Filing and transfer agent fees		6,009			3,221			22,177			15,532
Shareholder information		4,307			12,403			22,049			67,282
Amortization		367			-			1,098			-
		(266,164	)		(245,351	)		(904,667	)		(823,918	)
OTHER INCOME (EXPENSES)
Interest expense		(4	)		(4,357	)		(849	)		(4,357	)
Loan advancement fee (Note 6)		(196,000	)		-			(196,000	)		-
Interest and other income		2,685			277			14,314			1,080
		(193,319	)		(4,080	)		(182,535	)		(3,277	)
LOSS FOR THE PERIOD	$	(504,034	)	$	(187,373	)	$	(1,176,732	)	$	(541,002	)
LOSS PER SHARE	$	(0.04	)	$	(0.02	)	$	(0.08	)	$	(0.06	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		14,243,174			9,917,310			14,205,216			9,805,172

BERKLEY RESOURCES INC.

STATEMENTS OF DEFICIT

(Unaudited - Prepared by Management)

	Nine Months ended
	September 30,
	2006			2005
DEFICIT, beginning of period	$	(3,246,222	)	$	(1,323,764	)
Loss for the period		(1,176,732	)		(541,002	)
DEFICIT, end of period	$	(4,422,954	)	$	(1,864,766	)

BERKLEY RESOURCES INC.

STATEMENTS OF CASH FLOWS

(Unaudited - Prepared by Management)

	Three Months ended						Nine Months ended
	September 30,						September 30,
	2006			2005			2006			2005
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the period	$	(504,034	)	$	(187,373	)	$	(1,176,732	)	$	(541,002	)
Items not requiring cash in the year:
Accretion of site restoration liability		1,300			3,340			3,900			6,300
Amortization and depletion		86,730			63,363			543,189			360,091
Loan advancement fee		196,000			-			196,000			-
Stock based compensation		50,918			29,060			145,018			148,037
		(169,086	)		(91,610	)		(288,625	)		(26,574	)
Net change in non-cash working capital balances:
Accounts receivable		(253,935	)		210,142			(289,079	)		(270,623	)
Taxes recoverable		12,012			17,357			17,088			22,187
Prepaid expenses		(9,438	)		(34,681	)		31,921			(33,463	)
Due from related parties		-			-			3,454			(3,454	)
Accounts payable and accrued liabilities		370,866			(26,892	)		984,996			(523,584	)
Due to related parties		8,573			2,500			(91,048	)		2,500
		(41,008	)		76,816			368,707			(833,011	)
INVESTING ACTIVITIES
Prepaid oil and gas costs		-			-			295,350			376,693
Oil and gas properties and equipment, net		(1,548,895	)		(368,911	)		(3,569,839	)		(1,521,989	)
Other capital assets		(434	)		360			(434	)		(5,957	)
		(1,549,329	)		(368,551	)		(3,274,923	)		(1,151,253	)
FINANCING ACTIVITIES
Bank loans		1,629,306			469,328			1,467,256			1,405,666
Issuance of common shares		-			1,300			3,750			91,492
		1,629,306			470,628			1,471,006			1,497,158
Increase (Decrease) in Cash		38,969			178,893			(1,435,210	)		(487,106	)
Cash, Beginning of Period		420,502			46,679			1,894,681			712,678
Cash, End of Period	$	459,471		$	225,572		$	459,471		$	225,572

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 1 - NATURE OF OPERATIONS

Berkley Resources Inc. (“the Company”) was created on the amalgamation of Fortune Island Mines Ltd., Kerry Mining Ltd. and Berkley Resources Ltd. under the Company Act (British Columbia) on July 18, 1986. The Company is in the business of acquisition, exploration, development and production from petroleum and natural gas interests in Alberta and Saskatchewan, Canada. The Company also rents commercial office space in a building it owns in Vancouver, Canada.

The Company will likely have to periodically raise additional funds to participate in future exploration and development work on its petroleum and natural gas properties. Management intends to issue additional shares in the upcoming year for this purpose.

NOTE 2 - BASIS OF PRESENTATION

These unaudited Financial Statements have been prepared in accordance with the instructions for the preparation of such financial statements contained in the CICA Handbook Section 1751. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such instructions. These Unaudited Financial Statements should be read in conjunction with the Audited Financial Statements and Notes thereto for the fiscal year ended December 31, 2005. These Financial Statements, and accompanying Notes, have not been reviewed by an auditor.

In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of these unaudited financial statements have been included and all such adjustments are of a normal recurring nature. Operating results for the nine month period ended September 30, 2006 are not necessarily indicative of the results that can be expected for the year ended December 31, 2006.

NOTE 3 - OIL AND GAS PROPERTIES AND EQUIPMENT

	2006			2005
Oil and gas properties and equipment, cost	$	12,818,997		$	8,155,795
Less: Accumulated amortization and depletion		(5,841,627	)		(3,594,127	)
	$	6,977,370		$	4,561,668

Oil and gas properties and equipment includes the cost of unproven properties of approximately $501,000 (2005 - $200,000), which are currently not subject to depletion.

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 4 - RENTAL PROPERTY

	2006			2005
Building, at cost	$	447,652		$	447,652
Less: Accumulated amortization		(147,722	)		(134,822	)
		299,930			312,830
Land, at cost		1,738,994			1,738,994
	$	2,038,924		$	2,051,824

NOTE 5 - OTHER CAPITAL ASSETS

	2006							2005
	Cost		Accumulated amortization			Net		Net
Computer equipment	$	28,382	$	(25,240	)	$	3,142	$	5,340
Furniture and fixtures		8,521		(5,879	)		2,642		2,936
Truck		39,040		(39,039	)		1		1
	$	75,943	$	(70,158	)	$	5,785	$	8,277

NOTE 6 - LOANS PAYABLE

	2006		2005
Canadian Imperial Bank of Commerce	$	589,402	$	351,722
Quest Capital Corp.		2,800,000		-
IMOR Capital Corp.		-		1,500,000
	$	3,389,402	$	1,851,722

The bank loan payable to the Canadian Imperial Bank of Commerce (“CIBC”) bears interest at prime plus 1.00% per annum, is due on demand, and is secured by a first mortgage in the amount of $650,000 over the Company’s rental property (Note 4) and an assignment of rents and insurance. Also, one director has supplied a guarantee of $300,000. The Company is currently making monthly payments of $8,000 towards interest and reduction of principal.

The bank loan payable to Quest Capital Corp (“Quest”) bears interest at 12.00% per annum with monthly interest only payments of approximately $28,000 and is secured by a promissory note, a second mortgage and assignment of rents over the Company’s real estate, a first charge debenture over the oil and gas assets and a general security agreement. In consideration for the advance of the loan, a bonus payment of $196,000 was paid to Quest in the form of 301,538 common shares of the Company. The balance of the loan is due September 7, 2007. The lender, at its option, may extend the maturity date of this loan by one year at the request of the Company. Partial proceeds of this loan were used to pay out the IMOR Capital Corp. loan.

In addition, the Company has a $50,000 revolving demand credit line with the CIBC that bears interest at prime plus 1% per annum. As at September 30, 2006, there was a nil balance outstanding with regard to the credit line.

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 7 - SHARE CAPITAL

(a) Authorized

Unlimited common shares without par value

	2006				2005
	Number of shares		Amount		Number of shares		Amount
Balance, beginning of period		14,184,955	$	8,762,671		9,681,977	$	5,734,921
Issued in the year for cash:
Exercise of warrants		2,500		3,750		-		-
Exercise of stock options		-		-		237,000		89,010
Share issuance for Quest loan		301,538		196,000		-		-
Share issuance costs recovery		-		-		-		2,482
Balance, end of period		14,488,993	$	8,962,421		9,918,977	$	5,826,413

(b) Management incentive options

	2006					2005
	Number of shares subject to option			Weighted average exercise price per share		Number of shares subject to option			Weighted average exercise price per share
Balance outstanding, beginning of period		1,634,000		$	0.72		1,226,000		$	0.47
Activity in the period:
Granted		600,000			0.56		-			-
Exercised		-			-		(237,000	)		0.38
Cancelled		(20,000	)		0.78		-			-
Lapsed		-			-		-			-
Balance outstanding, end of period		2,214,000		$	0.68		989,000		$	0.60

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 7 - SHARE CAPITAL (continued)

A summary of management incentive options outstanding is as follows:

Exercise Price Per Share	Expiry date	Number of Shares Remaining Subject to Options at End of Period
		2006	2005
$0.52	September 19, 2008	580,500	580,500
$0.57	September 19, 2008	150,000	150,000
$0.74	September 19, 2008	6,000	21,000
$0.81	October 19, 2009	200,000	200,000
$0.77	October 29, 2009	37,500	37,500
$0.90	December 23, 2010	640,000	-
$0.56	September 21, 2011	600,000	-
		2,214,000	989,000

The Company has adopted a 2006 Stock Option Plan (the “Plan”) which provides for the granting of options to acquire up to 2,837,000 shares. The Plan provides for the granting of options to employees and service providers, with no single optionee to be granted options in excess of 5% of the number of issued shares of the Company. All options are to be granted at fair value, and the term of the options granted is not to exceed five years. Options to acquire a total of 2,214,000 shares have been granted and are outstanding at September 30, 2006 under the Plan.

Effective January 1, 2004, the Company adopted the provisions of CICA Handbook Section 3870 “Stock Based Compensation and Other Stock Based Payments” with respect to the fair market value accounting for stock options granted to employees. In prior years, the Company recorded the fair market value of the stock options granted to non-employees only as compensation expense.

During the three months ended September 30, 2006 the Company granted incentive stock options for the purchase of up to 600,000 shares at a price of $0.56 per share exercisable on or before September 21, 2011 to directors, officers, employees and consultants of the Company. The fair value of the options to be charged to operations over the eighteen month vesting period is $198,900. The fair value of the options granted was estimated at the date of granting using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.913%, dividend yield of 0%, volatility factor of 54.62%, and an average life of 3 years.

The Black-Scholes valuation model was developed for use in estimating the fair value of traded options which are fully transferable and freely traded. In addition, option valuation models require the input of highly subjective assumptions including estimated stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 7 - SHARE CAPITAL (continued)

(c) Warrants

A summary of share purchase warrants outstanding is as follows:

Exercise Price Per Share	Expiry date	Number of Warrants
		2006	2005
$1.25	November 10, 2006	241,110	241,110
$1.50	November 10, 2006	551,250	553,750
$1.25	November 30, 2006	129,000	129,000
$1.50	November 30, 2006	319,500	319,500
$1.36	December 10, 2006	45,872	45,872
$1.25	December 28, 2007	636,000	-
		1,922,732	1,289,232

NOTE 8 - INCOME TAXES

The potential benefit of net operating loss carry forwards has not been recognized in the financial statements since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years.

NOTE 9 - RELATED PARTY TRANSACTIONS

(a)  Due to related parties consists of $7,000 (2005 - $2,500) due to Directors of the Company for Directors fees and expense reimbursements and $26,869 (2005 - $22,640) to a private company owned by public companies having common Directors that provides administrative services, office supplies and accounting services.

(b)  Management and consulting fees totaling $179,747 (2005 - $139,580) were paid to Directors and their private companies in the period.

(c)  Consulting fees totaling $72,000 (2005 - $72,000) were paid to a former Director and his spouse in the period.

(d)  Administrative services, office supplies and accounting charges totaling $91,008 (2005 - $84,499) were paid to a private company owned by public companies having common Directors.

NOTE 10 - COMMITMENT

Under the terms of Consulting Agreements with a former Director and his spouse, the Company is required to make the future payments of $24,000 in the 2006 fiscal year. Upon payment of this amount by December 31, 2006, the terms of the agreement will be fulfilled and no further obligation will exist.

BERKLEY RESOURCES INC.

NOTES TO FINANCIAL STATEMENTS

September 30, 2006

(Unaudited - Prepared by Management)

NOTE 11 - COMPARATIVE FIGURES

Certain of the comparative figures for 2005 have been reclassified, where applicable, to conform to the presentation adopted for the current year.

NOTE 12 - SUBSEQUENT EVENTS

Subsequent to the period ended September 30, 2006 the Company closed the following private placements:

i.  A first tranche of a non-brokered private placement of 813,000 flow-through shares at a price of $0.90 per share. The Company has paid cash of $49,644 in finders’ fees.

ii.  A second tranche of a non-brokered private placement of 919,200 flow-through shares at a price of $0.90 per share and 715,600 units at a price of $0.90 per unit with each unit consisting of one common share and one-half non-transferable share purchase warrant. Each whole warrant under the Non Flow Through Offering will entitle the investor to purchase one additional share at a price of $1.20 until April 30, 2007 and then at a price of $1.50 until December 31, 2007. The Company has paid cash of $55,547 in finders’ fees.

Subsequent to the period ended September 30, 2006, the Company entered into a consulting agreement with an unrelated party. The consultant will provide assistance in various financing activities. The Company will pay a cash fee of 7% and 3% of the gross proceeds on any equity or debt financing sourced by the consultant respectively. The agreement terminates on November 9, 2007.