BREK Energy (BREK) 10QSB 2006 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended September 30, 2006

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

For the transition period from _____________ to _____________ 

Commission file number 000-27753

BREK ENERGY CORPORATION

(Exact name of small business issuer as specified in its charter)

Incorporated in the State of Nevada	98-0206979
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3388 - Via Lido, 4th Floor, Newport Beach, California, 92663
(Address of principal executive offices)
1-778-668-1944
(Issuer’s telephone number)
Third Floor, 346 Kensington High Street, London, W14 8NS, United Kingdom
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.

[ X ] Yes [   ] No

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

[   ] Yes [ X ] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Class	Outstanding at November 10, 2006
Shares of common stock - $0.001 par value	82,647,095

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PART I - FINANCIAL INFORMATION

Item 1.Financial Statements.

BREK ENERGY CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2006 and December 31, 2005 and

for the three and nine month periods ended September 30, 2006 and 2005

UNAUDITED

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BREK ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

AT SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

UNAUDITED

	September 30,				December 31,
		2006			2005
Assets
Current assets
Cash	$	10,045		$	58,113
Accounts receivable		51			120,110
Prepaids		-			3,415
		10,096			181,638
Oil and gas properties, net of $139,906 and $82,377 accumulated amortization (Note 4)		6,033,853			5,914,210
Total assets	$	6,043,949		$	6,095,848
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	760,245		$	756,375
Due to related parties (Note 5)		209,096			455,750
Total current liabilities		969,341			1,212,125
Commitments and contingencies (Notes 3 and 9)
Minority interest		38,805			74,916
Stockholders' equity (Notes 6, 7, 8 and 12)
Common stock, $0.001 par value, 300,000,000 authorized; 61,649,012 and 59,498,090
Issued and outstanding at September 30, 2006 and December 31, 2005, respectively		61,649			59,498
Additional paid in capital		66,130,058			65,364,249
Common stock purchase warrants		1,035,473			977,973
Accumulated deficit		(62,191,377	)		(61,592,913	)
Total stockholders' equity		5,035,803			4,808,807
Total liabilities and stockholders' equity	$	6,043,949		$	6,095,848

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

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BREK ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005

UNAUDITED

		Three Months						Nine Months
	Ended September 30,							Ended September 30,
		2006			2005			2006			2005
Revenue	$	83,242		$	235,142		$	353,322		$	521,451
Operating expenses
General and administrative		293,605			268,739			900,001			601,122
Depletion		12,799			23,609			57,529			64,953
Total operating expenses		306,404			292,348			957,530			666,075
Net loss from continuing operations before franchise tax,
discontinued operations and minority interest		(223,162	)		(57,206	)		(604,208	)		(144,624	)
Franchise Tax		-			-			(4,033	)		-
Net loss from continuing operations before discontinued
operations and minority interest		(223,162	)		(57,206	)		(608,241	)		(144,624	)
Loss from discontinued operations		(10,083	)		(1,933	)		(26,335	)		(3,407	)
Net loss before minority interest		(233,245	)		(59,139	)		(634,576	)		(148,031	)
Minority interest		4,084			(711	)		36,112			(2,881	)
Net loss for the period	$	(229,161	)	$	(59,850	)	$	(598,464	)	$	(150,912	)
Net loss per share - basic and diluted:
Continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Discontinued operations		(0.00	)		(0.00	)		(0.00	)		(0.00	)
Net Loss Per Share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Weighted average number of shares outstanding -
basic and diluted		61,361,174			59,311,496			61,011,657			58,805,415

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

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BREK ENERGY CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005

AND THE THREE MONTH PERIOD ENDED DECEMBER 31, 2005

UNAUDITED

	Common Stock Issued				Additional			Common Stock
	Number of				Paid in			Purchase			Accumulated
	Shares		Amount		Capital			Warrants			Deficit			Total
Balance, January 1, 2005	55,331,420	$	55,331	$	56,706,041		$	8,515,348		$	(61,335,708	)	$	3,941,012
Units issued for cash	3,333,336		3,334		746,666			250,000			-			1,000,000
Units issued for debt	333,334		333		74,667			25,000			-			100,000
Warrants exercised for cash	500,000		500		124,500			-			-			125,000
Finders fees	-		-		(100,000	)		-			-			(100,000	)
Common stock purchase warrants, exercised	-		-		18,750			(18,750	)		-			-
Common stock purchase warrants, expired	-		-		7,793,625			(7,793,625	)		-			-
Net loss for the nine month period ended,
September 30, 2005	-		-		-			-			(150,912	)		(150,912	)
Balance, September 30, 2005	59,498,090		59,498		65,364,249			977,973			(61,486,620	)		4,915,100
Net loss for the three month period ended,
December 31, 2005	-		-		-			-			(106,293	)		(106,293	)
Balance, December 31, 2005	59,498,090		59,498		65,364,249			977,973			(61,592,913	)		4,808,807
Units issued for cash	800,000		800		299,200			100,000			-			400,000
Common stock issued for debt	300,922		301		150,159			-			-			150,460
Warrants exercised for cash	250,000		250		74,750			-			-			75,000
Common stock purchase warrants, exercised	-		-		42,500			(42,500	)		-			-
Warrants exercised for debt	800,000		800		199,200			-			-			200,000
Net loss for the nine month period ended,
September 30, 2006	-		-		-			-			(598,464	)		(598,464	)
Balance, September 30, 2006	61,649,012	$	61,649	$	66,130,058		$	1,035,473		$	(62,191,377	)	$	5,035,803

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

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 BREK ENERGY CORPORATION

 CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2006 AND 2005

 UNAUDITED

		2006			2005
Cash flows from operating activities:
Net loss	$	(598,464	)	$	(150,912	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depletion, oil and gas		57,529			64,953
Minority interest		(36,111	)		2,881
Changes in operating assets and liabilities:
Accounts receivable		120,059			(27,380	)
Prepaids		3,415			(2,247	)
Due from related party		-			116,594
Accounts payable and accrued liabilities		(146,533	)		(253,469	)
Due to related parties		103,806			135,308
Net cash used in operating activities		(496,299	)		(114,272	)
Cash flows from investment activities:
Cash spent on oil and gas properties		(46,769	)		(1,222,283	)
Proceeds from sale of oil and gas property		20,000			-
Net cash used in investment activities		(26,769	)		(1,222,283	)
Cash flows from financing activities:
Issuance of units		400,000			1,000,000
Exercise of warrants		75,000			125,000
Cash flows from financing activities		475,000			1,125,000
Decrease in cash		(48,068	)		(211,555	)
Cash at the beginning of the period		58,113			230,848
Cash at the end of the period	$	10,045		$	19,293
Supplemental disclosure of non-cash investing and financing activities:
Cash paid during the period:
Interest	$	-		$	-
Taxes	$	4,033		$	-
Non-cash financing transactions:
Issuance of common stock to related parties in settlement of debt	$	150,460		$	-
Exercise of warrant offset against amount due to a director	$	200,000		$	-
Issuance of units to an officer in payment of finders fees	$	-		$	100,000
Accounts payable and accruals for oil and gas well expenditures	$	150,403		$	-

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

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION

Organization

First Ecommerce Asia Limited (“FEAL”) was incorporated in Hong Kong on September 16, 1998. On January 28, 1999, FEAL, entered into an agreement and plan of merger with JRL Resources Corp., (“JRL Resources”) a company incorporated in the State of Florida on November 13, 1996. Pursuant to the terms of the agreement, plan of merger and related agreements, 3,015,000 newly issued shares of JRL Resources and 985,000 shares held by existing shareholders of JRL Resources were exchanged for two shares of FEAL. As a result of this business combination FEAL became a wholly-owned subsidiary of JRL Resources.

The merger between JRL Resources and FEAL was a merger of a private operating company, (FEAL) into a public shell corporation, with nominal net assets, that resulted in the owners and management of the private company (FEAL) obtaining operating control of the combined company after the transaction. For accounting purposes, the transaction has been treated as a reverse merger, of JRL Resources by FEAL with FEAL deemed to be the accounting acquirer.

Pursuant to an agreement and plan of merger dated February 12, 1999, JRL Resources was merged with and into Brek Energy Corporation (formerly First Ecom.com, Inc.) (“BREK” or the Company”), a company incorporated in the State of Nevada on February 12, 1999, with no shares issued and outstanding. Pursuant to the agreement and plan of merger, all of the 12,040,000 outstanding common shares of JRL Resources were exchanged on a one-for-one basis for newly issued shares of BREK, with BREK being the surviving corporation. For accounting purposes, this merger was treated as a re-incorporation of JRL Resources as BREK.

Principal Activities

During 2001, the Company changed its primary business from electronic payment processing to that of oil and gas exploration. On July 19, 2001, the Company acquired a 26% non-dilutable voting interest in Gasco Energy, Inc., (“Gasco”). On July 16, 2002, the Company exchanged all of its shareholdings in Gasco for an undivided interest in all of Gasco’s undeveloped mineral leases in Utah, Wyoming, and California. At the same time, the Company acquired an additional undivided interest in Gasco’s undeveloped mineral leases from certain third parties in exchange for the issuance of 4,125,000 shares of the Company. The main focus of the Company’s oil and gas exploration business has been centered in the United States. (Note 11)

In March 2002, the Company acquired a 26% non-dilutable voting interest in Vallenar Energy Corp. (“Vallenar Energy”) another company engaged in oil and gas exploration. On June 28, 2002, the Company increased its ownership of Vallenar Energy to 51.53%. On August 24, 2006 the Company exchanged its 51.53% interest in Vallenar Energy for a 100% interest in Vallenar Holdings, Inc. (“Vallenar Holdings”). (Notes 2, 10 and 11)

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2006 and 2005 are not necessarily indicative of the results that may be expected for any interim period or the entire year. For further information, these consolidated financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2005 included in the Company’s annual report on Form 10-KSB.

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Accounting Estimates

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

The Company’s financial statements are based on a number of significant estimates, including oil and gas reserve quantities which is the basis for the calculation of depletion and impairment of oil and gas properties.

Accounts Receivable

Receivables represent valid claims against debtors for sales arising on or before the balance sheet date and are reduced to their estimated net realizable value. An allowance for doubtful accounts is based on an assessment of the collectibility of all past due accounts. At September 30, 2006 and December 31, 2005, all of the accounts receivable were considered collectable.

Revenue Recognition

Oil and gas revenue is recognized as income when the oil and gas is produced and sold.

Oil and Gas Properties

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

Depletion of exploration and development costs is computed using the units of production method based upon estimated proven oil and gas reserves. The costs of unproved properties are withheld from the depletion base until it is determined whether or not proved reserves can be assigned to the properties. The properties are reviewed annually for impairment.

Total well costs are transferred to the depletable pool even when multiple targeted zones have not been fully evaluated. For depletion and depreciation purposes, relative volumes of oil and gas production and reserves are converted at the energy equivalent rate of six thousand cubic feet of natural gas to one barrel of crude oil.

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Oil and Gas Properties, continued

Under the full cost method of accounting, capitalized oil and gas property costs less accumulated depletion and net of deferred income taxes may not exceed an amount equal to the present value, discounted at 10%, of estimated future net revenues from proved gas reserves plus the cost or estimated fair value, if lower, of unproven properties. In accordance with SFAS 143 and SAB 106, future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, have been excluded from the present value of estimated future net cash flows used in the ceiling test calculation. Should capitalized costs exceed this ceiling, an impairment is recognized. The present value of estimated future net revenues is computed by applying the current prices of oil and gas to the estimated future production of proved oil and gas reserves as of the period-end, less the estimated future expenditures to be incurred in developing and producing the proved reserves, assuming the continuation of existing economic conditions.

Discontinued Operations

SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” requires that costs associated with exit or disposal activities be recognized when the costs are incurred, rather than at the date of commitment of an exit or disposal plan. Under SFAS No. 146, a liability related to an exit or disposal activity is not recognized, or measured initially at fair value, until such liability has actually been incurred.

On August 24, 2006, the Company’s exchanged all of their shares in Vallenar Energy (a 51.53% interest) for all of the issued and outstanding shares of Vallenar Holdings, Inc. (4,000,000 common shares). This transaction resulted in the Company reclassifying and disclosing Vallenar Energy’s net operating losses, separately on their Statements of Operations for the three and nine month periods ended September 30, 2006 and 2005. (Notes 1, 10 and 11)

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140". This Statement amends FASB Statements No. 133, "Accounting for Derivative Instruments and Hedging Activities", and No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” This statement is effective for all financial instruments acquired or issued after the beginning of an entities first fiscal year that begins after September 15, 2006. Adoption of SFAS No 155 is not expected to have a material effect on the Company’s results of operations, financial condition or cash flows.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” with respect to accounting for separately recognized servicing assets and servicing liabilities.  SFAS No. 156 is effective for fiscal years that begin after September 15, 2006, with early adoption permitted as of the beginning of an entity’s fiscal year. The Company does not have any servicing assets or servicing liabilities and, accordingly, the adoption of SFAS No. 156 will not have any effect on the results of our operations, financial condition or cash flows.

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 3 - GOING CONCERN

During the nine month period ended September 30, 2006, the Company has been focusing on developing its oil and gas business. As such, the Company has accumulated a deficit of approximately $62 million to date and additional debt or equity financing will be required by the Company, to support development of its oil and gas properties, until such time as the Company increases its cash flow from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to achieve and maintain profitability and increased cash flow is dependent upon its ability to locate profitable oil and gas properties, generate revenues from its

oil and gas production and control production costs. Based upon current plans, the Company expects to incur operating losses in future periods. There is no assurance that the Company will be able to generate revenues in the future. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 - OIL AND GAS PROPERTIES

The Company has an approximate 15% interest in 113,348 gross acres (16,966 net acres) in the Uinta Basin region in Utah, an approximate 13% interest in 52,613 gross acres (6,811 net acres) in the Greater Green River Basin of Wyoming, an approximate 7% interest in 3,315 gross acres (219 net acres) in Kern County and San Luis Obispo County in California and an approximate 97% interest in 9,191 gross acres (8,865 net acres) in Edwards County in Texas.

During July 2006, the Company sold one of its oil and gas properties for $20,000. On September 18, 2006, the Company rescinded their consent to participate in the drilling of a well, resulting in the reversal of $560,294 in exploration and development expenditures that were accrued between March and August 2006.

The following table presents information regarding the Company’s costs incurred in the purchase of proved and unproved properties, in exploration and development activities and charges for depletion:

	September 30, 2006			December 31, 2005
Property acquisition costs:
Unproven	$	300		$	300
Proven		3,697,850			3,717,850
Exploration and development expenditures		2,475,609			2,278,437
Less: Accumulated depletion		(139,906	)		(82,377	)
		______________			_____________
Total	$	6,033,853		$	5,914,210
		=============			============

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 4 - OIL AND GAS PROPERTIES, continued

At September 30, 2006 and December 31, 2005, the Company’s proved and unproved oil and gas properties consisted of leasehold interests and exploration and development costs related to their interests in Texas, Utah, Wyoming and California. At September 30, 2006 and December 31, 2005, the Company’s oil and gas properties were valued as follows:

	September 30, 2006				December 31, 2005
Proven and Unproven Properties
Property acquisition costs:
Utah	$	3,697,850		$	3,717,850
Wyoming		100			100
California		100			100
Texas		100			100
Exploration & development costs:
Utah		2,413,548			2,264,489
Wyoming		55,243			13,948
California		6,818			-
Accumulated depletion:		(139,906	)		(82,377	)
	$	6,033,853		$	5,914,210

The Company’s proven and unproven properties are evaluated periodically for the possibility of potential impairment. During the period ended September 30, 2006 and the year ended December 31, 2005, no impairment charges were recorded against the Utah, Texas, California or Wyoming properties.

On May 8, 2006, the Company entered into a letter agreement with a Texas oil and gas company (the “operator”) for the development of the Company’s oil and gas properties in Texas. Under the agreement, the operator can earn a 75% working interest in the wells and production in exchange for drilling until it has completed a well capable of producing hydrocarbons in commercial quantities. When the operator has completed the first 10 wells and recovered 100% of the costs to drill the wells (“payout”), the Company can back in for a 25% working interest in the wells. On future wells, the Company can either participate from the outset to earn a 25% working interest, or back in after payout to earn a 6.25% working interest.

NOTE 5 - RELATED PARTY TRANSACTIONS

Due to Related Parties

At September 30, 2006 and December 31, 2005, the Company was indebted to a director in the amount of $0 and $123,463. On September 27, 2006, the Company issued 257,336 common shares at $0.50 per share to this director in payment of $128,668 in debt. (Notes 6 and 12)

At September 30, 2006 and December 31, 2005, the Company was indebted to a director in the amount of $0 and $12,000. On September 27, 2006, the Company issued 24,000 common shares at $0.50 per share to this director in payment of this debt. (Note 6)

At September 30, 2006 and December 31, 2005, the Company was indebted to a company controlled by an officer in the amounts of $9,505 and $22,845. During the nine month periods ended September 30, 2006 and 2005, the Company paid $274,208 and $139,478 in administrative fees to the same company.

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 5 - RELATED PARTY TRANSACTIONS, continued

Due to Related Parties, continued

At September 30, 2006 and December 31, 2005, the Company was indebted to a director in the amounts of $117,251 and $232,586. During the nine month periods ended September 30, 2006 and 2005, the Company paid or accrued $121,000 and $64,000 in administrative fees to this officer. During the nine month periods ended September 30, 2006 and 2005, the officer exercised 800,000 and 500,000 in share purchase warrants for 800,000 and 500,000 shares of the Company’s common stock at $0.25 per share. During the nine month period ended September 30, 2005 this officer received shares in payment of finder’s fees of $100,000. (Notes 6 and 8) 

At September 30, 2006 and December 31, 2005, the Company was indebted to a company controlled by an officer in the amounts of $0 and $21,000. During the nine month periods ended September 30, 2006 and 2005, the Company paid or accrued $14,000 and $56,000 in administrative fees to the same company.

At September 30, 2006 and December 31, 2005 the Company was indebted to the wife of an officer in the amounts of $70,656 and $25,000. During the nine month periods ended September 30, 2006 and 2005, the Company paid or accrued $45,000 and $40,000 in professional fees to the wife of this officer.

At September 30, 2006 and December 31, 2005, the Company had $11,684 and $18,856 in accounts payable to directors or companies controlled by officers or directors. On September 27, 2006, the Company issued 19,586 common shares at $0.50 per share to directors or companies controlled by directors in payment of $9,793 of this debt. (Note 6)

NOTE 6 - COMMON STOCK

On October 14, 2004, the Company issued a total of 1,396,956 units at $0.20 per unit by way of a private placement for cash of $279,392. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on October 14, 2006. The fair value of the warrants was estimated to be $69,848 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On November 30, 2004, the Company issued a total of 550,000 units at $0.20 per unit by way of a private placement for cash of $110,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.30. The warrants have a term of three years and will expire on November 30, 2007. The fair value of the warrants was estimated to be $27,500 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On November 30, 2004, the Company issued, to an officer of the Company, a total of 55,000 units at $0.20 per unit for finders’ fees of $11,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.30. The warrants have a term of three years and will expire on November 30, 2007. The fair value of the warrants was estimated to be $2,750 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On November 30, 2004, the Company issued a total of 75,000 units at $0.20 per unit by way of a private placement for cash of $15,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on November 30, 2006. The fair value of the warrants was estimated to be $3,750 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On November 30, 2004, the Company issued a total of 3,750,000 units at $0.20 per unit by way of a private placement for cash of $750,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on November 30, 2006. The fair value of the warrants was estimated to be $187,500 and has been recorded as a separate component of stockholders’ equity. (Note 8)

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 6 - COMMON STOCK, continued

On November 30, 2004, the Company issued, to an officer of the Company, a total of 382,500 units at $0.20 per unit for finders’ fees of $76,500. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on November 30, 2006. The fair value of the warrants was estimated to be $19,125 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On December 21, 2004, the Company issued a total of 500,000 units at $0.20 per unit by way of a private placement for cash of $100,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on December 21, 2006. The fair value of the warrants was estimated to be $25,000 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On December 21, 2004, the Company issued, to an officer of the Company, a total of 50,000 units at $0.20 per unit for finders’ fees of $10,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.35. The warrants have a term of two years and will expire on December 21, 2006. The fair value of the warrants was estimated to be $2,500 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On January 18, 2005, the Company issued a total of 2,166,668 units at $0.30 per unit by way of a private placement for cash of $650,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on January 18, 2007. The fair value of the warrants was estimated to be $162,500 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On January 18, 2005, the Company issued, to an officer of the Company, a total of 216,667 units at $0.30 per unit for finders’ fees of $65,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on January 18, 2007. The fair value of the warrants was estimated to be $16,250 and has been recorded as a separate component of stockholders’ equity. (Notes 5 and 8)

On January 24, 2005, the Company issued a total of 1,000,000 units at $0.30 per unit by way of a private placement for cash of $300,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on January 27, 2007. The fair value of the warrants was estimated to be $75,000 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On January 24, 2005, the Company issued, to an officer of the Company, a total of 100,000 units at $0.30 per unit for finders’ fees of $30,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on January 24, 2007. The fair value of the warrants was estimated to be $7,500 and has been recorded as a separate component of stockholders’ equity. (Notes 5 and 8)

On February 7, 2005, the Company issued a total of 133,334 units at $0.30 per unit by way of a private placement for cash of $40,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years, 40,000 warrants will expire January 17, 2007 and 93,334 warrants will expire on February 7, 2007. The fair value of the warrants was estimated to be $10,000 and has been recorded as a separate component of stockholders’ equity. (Note 8)

On July 7, 2005, the Company issued a total of 33,334 units at $0.30 per unit by way of a private placement for cash of $10,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on July 7, 2007. The fair value of the warrants was estimated to be $2,500 and has been recorded as a separate component of stockholders’ equity. (Note 8)

Page - 13

BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 6 - COMMON STOCK, continued

On July 7, 2005, the Company issued a total of 16,667 units at $0.30 per unit to an officer for finders’ fees of $5,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.50. The warrants have a term of two years and will expire on July 7, 2007. The fair value of the warrants was estimated to be $1,250 and has been recorded as a separate component of stockholders’ equity. (Notes 5 and 8)

On July 29, 2005, the Company issued 400,000 common shares at $0.25 per share for $100,000 cash when an officer of the Company exercised 400,000 share purchase warrants. (Notes 5 and 8)

On September 28, 2005, the Company issued 100,000 common shares at $0.25 per share for cash of $25,000 when an officer of the Company exercised 100,000 share purchase warrants. (Notes 5 and 8)

On January 31, 2006, the Company issued 800,000 common shares at $0.25 per share for cash of $200,000 when an officer of the Company exercised 800,000 share purchase warrants. (Notes 5 and 8) 

On February 7, 2006, the Company issued a total of 300,000 units at $0.50 per unit by way of a private placement for cash of $150,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.90. The warrants have a term of one year and will expire on

February 7, 2007. The fair value of the warrants was estimated to be $37,500 which has been recorded as a separate component of stockholders’ equity. (Note 8)

On February 8, 2006, the Company issued a total of 200,000 units at $0.50 per unit by way of a private placement for cash of $100,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.90. The warrants have a term of one year and will expire on February 8, 2007. The fair value of the warrants was estimated to be $25,000 which has been recorded as a separate component of stockholders’ equity. (Note 8)

On February 9, 2006, the Company issued a total of 100,000 units at $0.50 per unit by way of a private placement for cash of $50,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.90. The warrants have a term of one year and will expire on February 9, 2007. The fair value of the warrants was estimated to be $12,500 which has been recorded as a separate component of stockholders’ equity. (Note 8)

On February 17, 2006, the Company issued a total of 100,000 units at $0.50 per unit by way of a private placement for cash of $50,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.90. The warrants have a term of one year and will expire on February 17, 2007. The fair value of the warrants was estimated to be $12,500 which has been recorded as a separate component of stockholders’ equity. (Note 8)

On March 2, 2006, the Company issued a total of 100,000 units at $0.50 per unit by way of a private placement for cash of $50,000. Each unit is comprised of one common share and one common share purchase warrant entitling the holder to purchase one common share for $0.90. The warrants have a term of one year and will expire on March 2, 2007. The fair value of the warrants was estimated to be $12,500 which has been recorded as a separate component of stockholders’ equity. (Note 8)

On May 19, 2006, the Company issued 250,000 common shares at $0.30 per share for cash of $75,000 when 250,000 share purchase warrants were exercised. (Note 8) 

On September 27, 2006, the Company issued 300,922 common shares at $0.50 per share, to directors in settlement of debt in the amount of $150,461. (Notes 5 and 12)

Page - 14

BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 7 - STOCKHOLDER RIGHTS PLAN

On March 1, 2002, the Company approved a Rights Agreement whereby a dividend was declared of one right for each share of the Company’s common stock issued and outstanding on March 20, 2002, including any shares issued subsequent to March 20, 2002. Each right entitles the holder to purchase five shares of the Company’s common stock at an exercise price of $0.01 per right, if certain events occurred relating to a person or group acquiring or attempting to acquire 10% or more of the outstanding of common shares of the Company without the approval of the Company’s board of Directors. The rights are exercisable until December 31, 2020.

At September 30, 2006 and December 31, 2005, the Company had reserved 308,245,060 and 297,490,450 shares for the exercise of these rights for the issued, outstanding and subscribed shares and 100,572,300 and 101,822,300 for the potential exercise of outstanding options and warrants. At September 30, 2006, the Company would not be able to implement the Rights Plan unless the number of authorized shares of common stock increased to satisfy share issuances for all issued and outstanding shares and the exercise of all warrants and stock options. (Note 12)

NOTE 8 - STOCK OPTIONS AND WARRANTS

During the nine month periods ended September, 2006 and 2005 no stock options were issued or cancelled. (Note 12)

During the nine month periods ended September, 2006 and 2005, 800,000 and 3,666,670 share purchase warrants were issued, 1,050,000 and 500,000 share purchase warrants were exercised and 0 and 12,327,015 share purchase warrants expired. (Note 6)

On September 28, 2006, the directors of the Company passed a resolution whereby all warrant holders were offered the opportunity to exercise their share purchase warrants, wholly or partially, at an exercise price equal to 33.33% of the exercise price stated in their warrants, until October 31, 2006. (Note 12)

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Contingent liability

In February 2003 the debtor and guarantor of a note receivable commenced legal action against the Company, in Bermuda, claiming that the Company and its former subsidiary, First Ecom Systems Limited, had promised to develop and supply them with certain software. As a result of this litigation the debtor ceased making the required instalment payments on March 1, 2003. The directors believed that this lawsuit is without merit, as there was no condition to develop software for the debtor, and filed a defence and counterclaim on May 8, 2003. The debtor filed a reply and defence on May 21, 2003. No further action by either party has transpired since May 21, 2003.

Commitments

As is customary in the oil and gas industry, the Company may at times have commitments in place to reserve or earn certain acreage positions or wells. If the Company does not pay such commitments, the acreage positions or wells may be lost.

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BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 10 - BUSINESS ACQUISITIONS AND SALE OF SUBSIDIARY

Vallenar Holdings, Inc.

Pursuant to a share exchange agreement dated August 24, 2006, the Company acquired 100% of the issued and outstanding shares (4,000,000 common shares) of Vallenar Holdings by exchanging its 51.53% interest in Vallenar Energy (which consisted of 5,312,500 common shares and 733,333 preferred shares of Vallenar Energy) with Vallenar Holdings. The Company’s investment in Vallenar Holdings has been accounted for as a purchase, with the value of the 4,000,000 common shares of Vallenar Holdings being recorded on the Company’s books at a fair value of $755,552, which is the same value that the Company’s 51.53% investment in Vallenar Energy was recorded at prior to the share exchange. As a result of this business combination, the Company has included the accounts of Vallenar Holdings (including their operating losses from August 24, 2006), into their financial statements at September 30, 2006. Vallenar Holdings financial statements include the accounts of Vallenar Energy (including their operating losses from August 24, 2006) and a 48.47% adjustment for minority interest shareholders. (Notes 1, 2 and 11)

Gasco Energy, Inc.

On September 20, 2006 the Company entered into an agreement and plan of merger with Gasco Energy, Inc. (“Gasco”) whereby the Company agreed to sell certain of their California, Utah and Wyoming assets to Gasco in exchange for 11 million shares of Gasco's common stock. The completion of the merger is subject to the approval of the Company’s stockholders and the completion of the distribution and disposition of certain subsidiaries of the Company to its stockholders and others leaving only the California, Utah and Wyoming assets in the Company. Under the terms of the merger the Company will become a wholly-owned subsidiary of Gasco and the Company's stockholders will receive a number of Gasco's common shares calculated as follows: the number of common shares that each stockholder owns will be divided by the total number of shares of the Company’s common stock that is outstanding, fully diluted, on the date of the merger, times the 11 million common shares of Gasco.

As part of the merger the Company’s board of directors agreed to vote their shares in favour of the transaction; the Company’s president and CEO has agreed to deposit 550,000 of the shares of Gasco’s common stock that he will acquire in the transaction in escrow to satisfy any claims resulting from breaches of the Company’s representations and warranties; and in considerations for pledging the 550,000 Gasco shares, the Company’s board of directors approved a fee payable to the Company’s president equal to 20% of the value of the Gasco shares on the date the president’s 550,000 Gasco shares are deposited in escrow.

NOTE 11 - DISCONTINUED OPERATIONS

On August 24, 2006, the Company exchanged their 51.53% interest in Vallenar Energy (which consisted of 5,312,500 common shares and 733,333 preferred shares of Vallenar Energy) with Vallenar Holdings, for 100% of the issued and outstanding shares (4,000,000 shares) of Vallenar Holdings.

As a result of this exchange the Company reclassified Vallenar Energy’s net operating losses, up to August 24, 2006, in losses from discontinued operations. For the three and nine months ended September 30, 2006, the Company recorded losses from discontinued operations of $10,083 and $26,335, respectively and for the three and nine months ended September 30, 2005, the Company recorded losses from discontinued operations of $1,933 and $3,407, respectively. No gain or loss on the Company’s investment in Vallenar Energy (of $755,552) was recorded on this exchange of shares. (Notes 1, 2 and 10)

NOTE 12 - SUBSEQUENT EVENTS

Stock Options

On October 31, 2006, 1,210,000 stock options that enabled the holders to purchase up to 1,210,000 common shares of the Company at $0.40 per share, expired. (Notes 7 and 8)

Page - 16

BREK ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

UNAUDITED

NOTE 12 - SUBSEQUENT EVENTS, continued

Shares for Debt

Subsequent to September 30, 2006, a director returned 10,410 shares that he received in settlement of $5,205 in debt in exchange for cash. The returned shares were be cancelled by the Company. (Notes 5 and 6)

Warrants

On September 28, 2006, the directors of the Company passed a resolution whereby all warrant holders were offered the opportunity to exercise their share purchase warrants, wholly or partially, at an exercise price equal to 33.33% of the exercise price stated in their warrants, until October 31, 2006. (Note 8)

Based on this resolution the following share purchase warrants were exercised at 33.33% of their stated exercise price subsequent to September 30, 2006:

The Company received $1,302,730 in cash in payment for 9,300,003 common shares when 9,300,003 share purchase warrants with exercise prices between $0.25 and $0.90 per share, were exercised at prices between $0.08 and $0.30 per share.

The Company received $258,040 in cash in payment for 2,544,414 common shares when 2,544,414 share purchase warrants with exercise prices between $0.30 and $0.50 per share, were exercised by directors and officers of the Company at prices between $0.10 and $0.17 per share.

The Company received $524,466 in cash in payment for 4,709,819 common shares when 4,709,819 share purchase warrants with exercise prices between $0.30 and $0.35 per share, were exercised by companies controlled by directors and officers of the Company at prices between $0.10 and $0.12 per share.

The Company offset debt of $82,251 in payment for 987,109 common shares when 987,109 share purchase warrants with an exercise price of $0.25 per share, were exercised by a director of the Company at $0.08 per share.

The Company offset debt of $75,657 in payment for 793,115 common shares when 793,115 share purchase warrants with an exercise prices between $0.25 and $0.35 per share, were exercised by a wife of a director of the Company at prices between $0.08 and $0.12 per share.

Page - 17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

THE FOLLOWING IS MANAGEMENT’S DISCUSSION AND ANALYSIS OF CERTAIN SIGNIFICANT FACTORS THAT WILL AFFECT OR HAVE AFFECTED OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. CERTAIN STATEMENTS UNDER THIS SECTION MAY CONSTITUTE “FORWARD-LOOKING STATEMENTS”. YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES INCLUDED IN OUR FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2005.

Overview

We are in the oil and gas exploration business in the United States. We have properties in Utah, Wyoming, California and Texas. Our primary focus is on our operations in Utah.

We have participated in the drilling or re-completion of twelve wells and have ten producing wells in which we have net revenue interests of between 8% and 20%. One well, an earning well drilled by Burlington in 2002, generated some revenue for two years but is now shut in. We re-completed one well during the summer of 2005, which increased both production and revenue.

A thirteenth well was completed in March of 2006. In September 2006 we rescinded our consent to participate in the well and the operator credited us for the $560,294 that had been billed to date.

On June 16, 2006, we signed farmout agreements with Gasco for ten non-consent wells as we had agreed in December 2005. Under the farmout agreements, we agreed to forfeit 100% of our interest in all of the wells and wellbores, and to relinquish our leasehold interest in 188 net acres surrounding the wells (800 gross acres) in exchange for the right to back in to a 10% working interest in nine wells and wellbores and a 4.09% working interest in one well and wellbore when Gasco has recovered 100% of its drilling and operating costs. We now have sixteen farmouts: fifteen in Utah and one in California.

We did not consent to the drilling of a total of twenty wells proposed by Gasco as of December 31, 2005 (ten of which we farmed out in the June 2006 farmout agreements), and did not consent to the drilling of twenty-five wells proposed in 2006. This figure includes one well in which we had agreed to participate but later rescinded our participation with Gasco’s consent. As a result of our non-consent, Gasco has drilled (or will drill) the wells bearing 100% of the costs and is entitled to all of the revenue generated from the sale of oil and gas until they have recovered 300% of their drilling costs, 150% of the costs of newly acquired equipment in the well, and 100% of the operating costs and the costs of any newly acquired surface equipment beyond the wellhead connections, at which time we are entitled to our percentage of the revenue. The average cost of these non-consent wells is almost $4 million, so we do not expect to see any revenue from them for some time, if ever. We have not, however, forfeited any leasehold interests, other than those associated with the farmouts discussed above, and can participate in future drilling that is proposed for other locations on the same leases.

Our oil and gas production decreased by approximately 26% during the first nine months of 2006 as compared with the first nine months of 2005. During 2005, on a combined basis, our oil and gas reserve quantities decreased by approximately 19%, primarily because we reduced our reserves when we agreed to farm out ten wells to Gasco, and we revised our prior estimates on the basis of our actual production.

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Our reserve and production information as of September 30, 2006 and 2005 is set out in Table 1.

Table 1

Production and reserves
	For the nine months ended September 30
	2006		2005
Natural gas production (Mcf)	55,035		75,292
Average sales price per Mcf	$	5.67	$	6.83
Year-end proved gas reserves (Mcf)		5,653,612		6,853,310
Oil production (Bbl)		735		861
Average sales price per Bbl	$	55.60	$	55.41
Year-end proved oil reserves (Bbl)		27,405		51,495
Production (Mcfe)*		59,445		80,458
Year-end proved reserves (Mcfe)*		5,818,042		7,162,280
*Assumes a conversion of 6 Mcf for each Bbl of oil.

Vallenar Energy Corp. (“Vallenar Energy”), through its subsidiary, Nathan Oil Partners LP, in May 2006 reached an agreement with an American oil and gas company with operations in Texas for the development and operation of the Texas properties. Under the agreement, the operator can earn a 75% working interest in the wells and production in exchange for drilling until it has completed a well capable of producing hydrocarbons in commercial quantities. When the operator has completed the first ten wells and recovered 100% of the costs to drill and operate the wells, Nathan Oil can back in for a 25% working interest in the wells. On future wells, Nathan Oil can either participate from the outset to earn a 25% working interest or back in after payout to earn a 6.5% working interest.

On August 24, 2006, we transferred our 51.53% interest in Vallenar Energy to Vallenar Holdings, Inc. in exchange for 4,000,000 common shares of Vallenar Holdings. We own all of the issued and outstanding shares of Vallenar Holdings. As a result of the business combination, we have consolidated the accounts of Vallenar Holdings into our financial statements at September 30, 2006. We accounted for our investment in Vallenar Holdings as a purchase and valued our 4,000,000 shares of Vallenar Holdings at $755,552. This transaction did not result in any gain or loss on our or Vallenar Energy’s books at September 30, 2006.

As a result of this exchange of shares, Vallenar Energy Corp. ceased to be our subsidiary and we included Vallenar Energy’s operating losses ($26,335) in our consolidated statements of operations to August 24, 2006. After August 24, 2006, any income or loss from Vallenar Energy, and the resulting minority interest, will be included in Vallenar Holdings’ consolidated financial statements.

On September 18, 2006, with the operator’s consent, we rescinded our participation in the drilling of the Sheep Wash well. The operator credited our account for $560,294 of costs that they had billed us.

Between January 1, 2006, and the end of this quarter, we received $75,000 in cash from the exercise of warrants and $400,000 in cash from the private placement of units. We have used this cash to cover operating expenses.

At the end of September, we offered all of the warrant-holders the opportunity to exercise their warrants at a discounted price equal to 33.33% of their warrants’ exercise prices if they exercised by October 31, 2006. All except two warrant-holders accepted the offer and purchased 18,334,460 shares of common stock for $2,243,143. Warrants for the purchase of 200,000 common shares at the exercise price of $0.90 remain outstanding. We intend to use the proceeds to pay our accounts payable and any other liabilities that we must satisfy to close the merger discussed below and to buy more shares of Vallenar Holdings, Inc.

Merger

On September 20, 2006, we agreed, subject to our stockholders’ approval, to merge with Gasco Energy, Inc. (“Gasco”) for equity consideration of 11 million shares of Gasco's common stock valued at approximately $30 million based on the closing price of Gasco's common stock on September 20, 2006. As a result of the merger, Gasco will acquire all of our California, Utah and Wyoming assets.

Page - 19

The directors of Brek and Gasco have approved the terms of the transaction, which we expect to close near the end of 2006 or early in 2007. The completion of the merger is subject to the approval of our stockholders and the completion of the distribution and disposition of certain of our subsidiaries to our stockholders and others, leaving only the California, Utah and Wyoming assets in Brek. Under the terms of the agreement, we will merge with and become a wholly owned subsidiary of Gasco. Our stockholders will receive the number of shares of Gasco's common stock that is equal to 11 million divided by the total number of shares of Brek's common stock outstanding, fully diluted, on the date of the merger.

As part of the merger, our directors have agreed to vote their shares in favor of the transaction; our president and CEO has agreed to deposit 550,000 of the shares of Gasco's common stock that he will acquire in the transaction in escrow to satisfy any claims resulting from breaches of our representations and warranties; and in consideration for pledging the 550,000 Gasco shares, our board of directors have approved a fee payable to our president equal to 20% of the value of the Gasco shares on the date his 550,000 Gasco shares are deposited in escrow.

Financial Condition

We had a net loss of $598,464 during the nine months ended September 30, 2006. As of September 30, 2006, we had a cash balance of $10,045 and trade accounts receivable of $51. When these current assets are offset against our current obligations of $760,245 in accounts payable and accrued liabilities and $209,096 in amounts due to related parties, we are left with a working capital deficit of $959,245 at September 30, 2006.

We believe that our cash and cash equivalents as of the date of this filing, which include the proceeds from the recent exercise of warrants, are adequate to satisfy our working capital needs. As our oil and gas revenues are not yet sufficient to satisfy our ongoing operational and working capital requirements, for the foreseeable future we must continue to raise funds through private loans, private placements of our common shares, or the issuance of shares for debt.

Our independent auditors have added an explanatory paragraph to their audit opinions issued in connection with our consolidated financial statements for the fiscal years 2005 and 2004, related to our ability to continue as a going concern depends upon our ability to resolve our liquidity problems, principally by obtaining capital and generating sufficient revenues to become profitable. Our ability to achieve and maintain profitability and positive cash flow depends upon our ability to develop our oil and gas properties, generate revenues from our oil and gas production, and control drilling, completion and production costs. As we have a minority interest in our oil and gas properties and are not the operator, we can do little to affect the generation of revenue or control drilling, completion and production costs, and we do not have the expertise to initiate development independently of the owner of the majority interest, who is also the operator. With our current plans, we expect to incur operating losses in future periods, and cannot assure that we will continue to generate revenues. The accompanying financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Related-Party Transactions

We owed $209,096 to related parties at September 30, 2006. This sum includes $36,684 and $172,412 in advances payable that we accrued during the periods ended December 31, 2005 and September 30, 2006, respectively. These advances include $144,505 in administrative and professional fees that were unpaid at September 30, 2006. None of the amounts due to related parties bear interest or have any fixed terms of repayment.

Since September 30, 2006, a director exercised 987,109 share purchase warrants by offsetting the exercise price of $82,251 against amounts that we owed to this director; the wife of a director exercised warrants for the purchase of 793,115 shares by offsetting the exercise price of $75,657 against amounts that we owed to this person; and directors and officers and companies controlled by directors and officers exercised warrants for the purchase of 7,254,233 shares for cash of $782,506.

COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005.

Overall Results of Operations

For the three months ended September 30, 2006, we had a net loss of $229,161, or $(0.01) per share, which was an increase of $169,311 from our net loss of $59,850 or $(0.01) per share for the three months ended September 30, 2005. The increase in net loss for the three months ended September 30, 2006 as compared to the three months ended September 30, 2005 was primarily due to increases in our administrative fees, professional fees and loss from discontinued operations and a decrease in revenues. These amounts were offset primarily by decreases in advertising, rent and depletion.

For the nine months ended September 30, 2005, we had a net loss of $598,464, or $(0.01) per share, which was an increase of $447,552 from our net loss of $150,912 or $(0.01) per share for the nine months ended September 30, 2005. The increase in net loss for the nine months ended September 30, 2006 as compared to the nine months ended September 30, 2005 was primarily due to increases in our administrative costs, professional fees, due diligence, loss from discontinued operations and a decrease in revenue. These amounts were offset by decreases in advertising and rent.

Revenue

Total revenue for the three months ended September 30, 2006 was $83,242 compared to $235,142 for the three months ended September 30, 2005. The $151,900 decrease in revenue during the third quarter of 2006 was due to reduced production and lower prices for gas and oil.

Total revenue for the nine months ended September 30, 2006 was $353,322 compared to $521,451 for the nine months ended September 30, 2005. The $168,129 decrease in revenue during the first nine months of 2006 was due to a decrease in the production from our Utah wells and lower prices for gas and oil.

Operating Expenses

For the three months ended September 30, 2006, our total expenses were $312,403, which was an increase of $17,411 from our total expenses of $294,992 for the three months ended September 30, 2005. The increase in expenses for the three months ended September 30, 2006 as compared to the three months ended September 30, 2005 was primarily due to increases in our administrative fees of $30,767, professional fees of $30,139, regulatory of $34,630 and loss from discontinued operations of $8,150. These amounts were offset primarily by decreases in advertising of $13,756, rent of $21,000 and depletion of $10,810.

For the nine months ended September 30, 2006, our total expenses were $947,753, which was an increase of $275,390 from our total expenses of $672,363 for the nine months ended September 30, 2005. The increase in net loss for the nine months ended September 30, 2006 as compared to the nine months ended September 30, 2005 was primarily due to increases in our administrative costs of $178,730, professional fees of $98,871, regulatory of $11,048, due diligence of $63,672 and loss from discontinued operations of $22,928. These amounts were offset by decreases in advertising of $12,363, rent of $42,000, and minority interest in loss from discontinued operations of $38,993.

Page - 20

Our administrative, professional fees and regulatory expenses increased during the nine months ended September 30, 2006 due to the increasing amount of work required to meet our SEC, Sarbanes-Oxley and tax filing obligations, and to the increase in legal and other advisers’ fees incurred in negotiating the Gasco merger agreement. During the next year we expect our operating costs to stabilize.

Other expenses

We have filed all of our corporate income tax returns, which resulted in our paying franchise taxes of approximately $4,000 as of September 30, 2006.

Off-Balance-Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. We do not have any non-consolidated, special-purpose entities.

Liquidity and capital resources

As of September 30, 2006, we had a cash balance of $10,045 and a negative cash flow from operations of $496,299 for the nine months then ended. During the nine months ended September 30, 2006, we funded our operations through revenue from our oil and gas properties of $353,322, the exercise of 250,000 warrants from which we received cash of $75,000 and the private placement of 800,000 units for which we received cash of $400,000. Each unit consists of one common share and one common share purchase warrant.

In the notes to our consolidated financial statements as of September 30, 2006, we caution that our ability to continue as a going concern is uncertain. We have not generated sufficient revenues to cover our expenses, and we have an accumulated deficit of $62,191,377. As of September 30, 2006, we had $969,341 in current liabilities. When this is offset against our current assets of $10,096, we are left with a working capital deficit of $959,245. Although we have sufficient cash from the exercise of the warrants to satisfy our liabilities, we cannot assure that we will succeed in developing our business and achieving a profitable level of operations sufficient to meet our ongoing cash needs. We have, however, successfully generated sufficient working capital and liquidity through oil and gas revenues and the private placement of our shares until the date of this filing, and believe that we can continue to do so for the next twelve months.

Table 2 summarizes our sources and uses of cash for the nine months ended September 30, 2006 and 2005.

Table 2

Sources and uses of cash
	For the nine months ended September 30
	2006			2005
Net cash used in operating activities	$	(496,299	)	$	( 114,272	)
Net cash used in investing activities		( 26,769	)		(1,222,283	)
Net cash provided by financing activities		475,000			1,125,000
Net cash flow	$	( 48,068	)	$	( 211,555	)

Net cash used in operating activities

The cash used in operations of $496,299 was primarily comprised of: payment of $146,533 in trade accounts payable and accrued liabilities, our expenditures exceeding our revenue by $598,464, and an adjustment to minority interest for losses incurred by Vallenar Energy Corp. of $36,111. These decreases were offset by our collecting trade accounts receivable of $120,059, using $3,415 of prepaid expenses, an increase of $103,806 that is due to related parties and by the depletion of our oil and gas properties of $57,529.

Net cash used in investing activities

During the nine months ended September 30, 2006, we spent $46,769 on exploration and development of our oil and gas properties and we received net proceeds of $20,000 on the sale of our Prickly Pear acreage in Utah.

Net cash provided by financing activities

We issued 800,000 units for $400,000 cash and we also issued 250,000 common shares on the exercise of share purchase warrants for $75,000 cash during the nine months ended September 30, 2006. We used this cash to pay operating expenses and to cover exploration and development expenses.

On September 20, 2006, we resolved to offer our warrant-holders the opportunity to exercise their warrants at a discounted price equal to 33.33% of the original exercise price of their warrants if they exercised them by October 31, 2006. As of October 31, 2006, warrant-holders exercised warrants and purchased 18,334,460 shares of common stock for $2,085,235 in cash and $157,908 in debt owed to related parties.

Contingencies and commitments

We had no contingencies or long-term commitments at September 30, 2006, except for the Transworld litigation which is disclosed in the commitments and contingencies section of the notes to our consolidated financial statements appearing elsewhere in this report and in the contingent liability section of the following critical accounting estimates.

As is customary in the oil and gas industry, we may at times have agreements to reserve or earn acreage or wells. If we do not pay as required by the agreements, we may lose the acreage or wells.

CRITICAL ACCOUNTING ESTIMATES

An appreciation of our critical accounting policies is necessary to understand our financial results. These policies may require that we make difficult and subjective judgments regarding uncertainties, and, as a result, our estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. Other than our accounting for our oil and gas properties, our critical accounting policies do not involve a choice between alternative methods of accounting. We applied our critical accounting policies and estimation methods consistently.

Oil and gas reserves

We follow the full cost method of accounting whereby all costs related to the acquisition and development of oil and gas properties are capitalized into a single cost center referred to as a full cost pool. Depletion of exploration and development costs is computed using the units of production method based upon estimated proved oil and gas reserves. Under the full cost method of accounting, capitalized oil and gas property costs less accumulated depletion cannot exceed an amount equal to the present value, discounted at 10%, of estimated future net revenues from proved oil and gas reserves plus the cost, or the estimated fair value if lower, of unproved properties. If capitalized costs exceed this ceiling, we would recognize the impairment.

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Estimated reserve quantities and future net cash flows have the most significant impact on the results of operations because these reserve estimates are used in providing a measure of the Company's overall value. We also use these estimates in our quarterly calculations of depletion and impairment of the proved properties.

Estimating accumulations of gas and oil is complex and is not exact because of the numerous uncertainties inherent in the process. The process relies on interpretations of available geological, geophysical, engineering and production data. The extent, quality and reliability of these technical data can vary. The process also requires certain economic assumptions, some of which are mandated by the Securities and Exchange Commission, such as gas and oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The accuracy of a reserve estimate is a function of the quality and quantity of available data; the interpretation of that data; the accuracy of various mandated economic assumptions; and the judgment of the persons preparing the estimate.

The most accurate method of determining proved reserve estimates is based upon a decline analysis method, which consists of extrapolating future reservoir pressure and production from historical pressure decline and production data. The accuracy of the decline analysis method generally increases with the length of the production history. Since most of our wells have been producing for fewer than five years, their production history is relatively short, so we used other (generally less accurate) methods such as volumetric analysis and analogy to the production history of wells of other operators in the same reservoir in conjunction with the decline analysis method to determine our estimates of proved reserves, including developed producing, developed non-producing and undeveloped. As our wells produce over time and more data are available, we will re-determine the estimated proved reserves on an annual basis and they may be adjusted based on that data.

Actual future production, gas and oil prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable gas and oil reserves most likely will vary from our estimates. Any significant variance could materially affect the quantities and present value of our reserves. In addition, we may adjust estimates of proved reserves to reflect production history, acquisitions, divestitures, ownership interest revisions, results of exploration and development and prevailing gas and oil prices. Our reserves may also be susceptible to drainage by operators on adjacent properties.

Impairment of long-lived assets

The cost of our unproved properties is withheld from the depletion base as described above until the properties are either developed or abandoned. We review these properties periodically for possible impairment.

Revenue recognition

We derive our revenue by selling the oil and gas produced from our wells. We recognize this revenue as income when we sell the oil and gas. We generally receive payment for the oil and gas sold one to three months after the month in which we sell it. For this reason, we must estimate the revenue that we have earned but not yet received as of our reporting date. We use actual production reports to estimate the quantities sold and the estimated average wellhead prices from the Natural Gas Weekly Update bulletin to estimate the price of the production. We record variances between our estimates and the amounts we actually receive in the month that we receive the payment.

Contingent liability

In February 2003, the debtor and guarantor of a note receivable took legal action against us in Bermuda, claiming that our former subsidiary, First Ecom Systems Limited, had promised to develop and supply them with certain software. The debtor then failed to pay the note installment that was due on March 1, 2003. The directors believe that this lawsuit is without merit, as there was no promise to develop software for the debtor, and filed a defense and counterclaim on May 8, 2003. The debtor-plaintiff filed a reply and defense on May 21, 2003, but neither party has taken any further action. If any of these circumstances change, the outcome could have a material impact on our operating results.

Contractual obligations

We did not have any contractual obligations at September 30, 2006.

Internal and external sources of liquidity

We have funded our operations principally through subscriptions for common shares, the exercise of share purchase warrants, the issuance of shares for debt and the sale of natural gas and oil.

Inflation

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

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Uncertainties relating to forward-looking statements

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

We have made all of our forward-looking statements as of the date of the filing of this Form 10-QSB and we disclaim any duty to update these statements.

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

Item 3. Controls and Procedures.

Disclosure Controls and Procedures

Richard N. Jeffs, our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act” )) as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on such evaluation, Mr. Jeffs has concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting us on a timely basis to material information required to be included in our reports filed or submitted under the Exchange Act.

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Changes in Internal Controls

During the quarter of the fiscal year covered by this report, there were no changes in our internal controls or, to our knowledge, in other factors that have materially affected, or are reasonably likely to materially affect, these controls and procedures subsequent to the date we carried out this evaluation.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

During the quarter of the fiscal year covered by this report, no legal proceeding involving us or our assets, to the best of our knowledge, became a reportable event and there have been no material developments in any legal proceedings previously reported by us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter of the fiscal year covered by this report, (i) we did not modify the instruments defining the rights of our shareholders, (ii) no rights of any shareholders were limited or qualified by any other class of securities, and (iii) we did not sell any unregistered equity securities.

Item 3. Defaults Upon Senior Securities.

During the quarter of the fiscal year covered by this report, no material default has occurred with respect to any of our indebtedness. Also, during this quarter, no material arrearage in the payment of dividends has occurred.

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

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

Item 5.Other Information

During the quarter of the fiscal year covered by this report, we reported all information that was required to be disclosed in a report in the form of a Form 8-K.

Item 6. Exhibits

(a)   Index to and Description of Exhibits

All Exhibits required to be filed with the Form 10-Q are incorporated by reference to our previously filed registration statements, annual reports, and Form 8-K’s (current reports).

Exhibit	Description	Status
2.1	Agreement and Plan of Merger, dated as of September 20, 2006, by and among Gasco Energy, Inc., Gasco Acquisition, Inc. and Brek Energy Corporation, filed as an Exhibit to our Form 8-K (Current Report) filed on September 21, 2006, and incorporated herein by reference.	Filed
3.1	Articles of Incorporation filed as an Exhibit to our registration statement on Form 10 filed on October 21, 1999, and incorporated herein by reference.	Filed
3.2	Amended Bylaws dated December 18, 2000, filed as an Exhibit to our Form 10-QSB (Quarterly Report) filed on May 15, 2006, and incorporated herein by reference.	Filed
3.3	Certificate of Amendment to Articles of Incorporation changing our name to Brek Energy Corporation filed as an Exhibit to our Form 10-KSB (Annual Report) filed on April 14, 2004, and incorporated herein by reference.	Filed
4.1	Voting Agreement, dated September 20, 2006, by and among Gasco Energy, Inc., Richard N. Jeffs, Gregory Pek, Ian Robinson, Michael L. Nazmack, Eugene Sweeney and Shawne Malone, filed as an Exhibit to our Form 8-K (Current Report) filed on September 21, 2006, and incorporated herein by reference.	Filed
10.1	Stock Purchase Agreement dated March 16, 2000 among Brek Energy Corporation, Balaji Exports Ltd., Rajan Chellarm Mahboobani, Ravi Kishinchand Daswani, and Asia Internet Limited, filed as an attached exhibit to our Form 10-KSB (Annual Report) filed on March 29, 2000, and incorporated herein by reference.	Filed
10.2	Stock Purchase Agreement dated March 12, 2002 between Vallenar Energy Corp. and Brek Energy Corporation, filed as an attached exhibit to our Form 10-K/A (Annual Report) filed on September 18, 2002, and incorporated herein by reference.	Filed
10.3	Purchase Agreement dated July 16, 2002 among Gasco Energy, Inc., Pannonian Energy Inc., San Joaquin Oil & Gas Ltd., Brek Energy Corporation, Brek Petroleum Inc., Brek Petroleum (California), Inc. and certain stockholders, filed as an attached exhibit to our Form 8-K (Current Report) filed on July 31, 2002, and incorporated herein by reference	Filed
10.4	Share purchase agreement dated October 19, 2001 among First Ecom.com, Inc., First Commerce Asia Limited, FEDS Acquisition Corporation, First Ecom Systems Limited, Transworld Payment Solutions NV, and First Curacao International Bank NV, filed as an attached exhibit to our Form 10-KSB (2002 - Annual Report) filed on November 21, 2005, and incorporated herein by reference.	Filed

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Exhibit     Description     Status

10.5	License agreements dated October 19, 2001 among First Ecom.com, Inc., First Ecom Systems Limited, and Transworld Payment Solutions NV, filed as an attached exhibit to our Form 10-KSB (2002 - Annual Report) filed on November 21, 2005, and incorporated herein by reference.	Filed
10.6	Option to Acquire Interests in Oil and Gas Properties dated May 1, 2004 between Brek Petroleum Inc. and Griffin Asset Management, LLC, filed as an attached exhibit to our Form 10-KSB (2004 - Annual Report) filed on November 21, 2005, and incorporated herein by reference .	Filed
10.7	Natural Gas Purchase Agreement dated December 23, 2004 between Brek Petroleum Inc. and Riverbend Gas Gathering, L.L.C., filed as an attached exhibit to our Form 10-KSB (2004 - Annual Report) filed on November 21, 2005, and incorporated herein by reference	Filed
14	Code of Ethics filed as an Exhibit to our Form 10-KSB (Annual Report) filed on November 21, 2005, and incorporated herein by reference.	Filed
21	List of Subsidiaries, filed as an attached exhibit to our Form 10-KSB (2002 - Annual Report) filed on November 21, 2005, and incorporated herein by reference.	Filed
31	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Included
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Included

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, Brek Energy Corporation has caused this report to be signed on its behalf by the undersigned duly authorized person.

BREK ENERGY CORPORATION

By:/s/ Richard N. Jeffs

Name: Richard N. Jeffs

Title:Director and CEO and CFO

Dated:November 14, 2006

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Exhibit 31

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BREK ENERGY CORPORATION

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Richard N. Jeffs, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2006

/s/ Richard N. Jeffs

Richard N. Jeffs

Chief Executive Officer

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BREK ENERGY CORPORATION

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Richard N. Jeffs, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 14, 2006

/s/ Richard N. Jeffs

Richard N. Jeffs

Chief Financial Officer

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Exhibit 32

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CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Brek Energy Corporation (“Brek Energy”) on Form 10-QSB for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard N. Jeffs, President and Chief Executive Officer of Brek Energy and a member of the Board of Directors, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Richard N. Jeffs

Richard N. Jeffs

Chief Executive Officer

November 14, 2006

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CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Brek Energy Corporation (“Brek Energy”) on Form 10-QSB for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard N. Jeffs, Chief Financial Officer of Brek Energy and a member of the Board of Directors, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Richard N. Jeffs

Richard N. Jeffs

Chief Financial Officer

November 14, 2006

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