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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

(Mark One)

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2009

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: ______________

ADIRA ENERGY LTD.(Formerly AMG
Oil Ltd.)(Exact name of Registrant as specified in its
charter)

Not applicable(Translation of
Registrants name into English)

Canada(Jurisdiction of incorporation
or organization)

Suite 901, 30 St. Clair Avenue WestToronto,
Ontario, Canada, M4V 3A1(Address of principal executive offices)

Alan FriedmanSuite 901, 30 St. Clair Avenue West
Toronto, Ontario, Canada, M4V 3A1 Telephone: +1 416 250 1955
Facsimile: +1 416 250 6330E-mail: afriedman@adiraenergy.com(Name, Telephone, Email and/or Facsimile number and Address of
Company Contact Person)

Securities registered or to be registered pursuant to section
12(b) of the Act:

|Title of each Class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | Not applicable                           

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

Common Shares(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:

- 1 -

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N/A(Title of Class)

The number of outstanding shares of each of the issuers classes
of capital or common stock as of September 30, 2009 was 62,640,001 common
shares.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [   ]    No [X]

If this report is an annual or a transition report, indicate by
check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes [X]No [   ]

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.

Yes [X]    No [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [X]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

International Financial
      Reporting Standards as issued by theU.S. GAAP [   ]
    International Accounting
      Standards Board [   ]
    Other [X]


If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the
registrant has elected to follow.

Item 17 [X]    Item 18 [   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).

Yes [   ]    No [X]

__________

2

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TABLE OF CONTENTS

|         |                                           |                                                                                    | Page No
|-------- | ----------------------------------------- | ---------------------------------------------------------------------------------- | -------
|         |                                           |                                                                                    |        
|         | GENERAL                                   |                                                                                    | - 4 -  
|         | NOTE REGARDING FORWARD LOOKING STATEMENTS | - 4 -                                                                             
|         | ITEM 1                                    | NOT APPLICABLE                                                                     | - 6 -  
|         | ITEM 2                                    | NOT APPLICABLE                                                                     | - 6 -  
|         | ITEM 3                                    | KEY INFORMATION                                                                    | - 6 -  
|         | ITEM 4                                    | INFORMATION ON THE COMPANY                                                         | - 22 - 
|         | ITEM 4A                                   | UNRESOLVED STAFF COMMENTS                                                          | - 34 - 
|         | ITEM 5                                    | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                       | - 34 - 
|         | ITEM 6                                    | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                         | - 40 - 
|         | ITEM 7                                    | MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS                                   | - 53 - 
|         | ITEM 8                                    | FINANCIAL INFORMATION                                                              | - 56 - 
|         | ITEM 9                                    | THE OFFER AND LISTING                                                              | - 57 - 
|         | ITEM 10                                   | ADDITIONAL INFORMATION                                                             | - 59 - 
|         | ITEM 11                                   | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                         | - 70 - 
|         | ITEM 12                                   | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                             | - 71 - 
|         |                                           |                                                                                    |        
|PART II  | - 71 -                                   
|         |                                           |                                                                                    |        
|         | ITEM 13                                   | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                    | - 71 - 
|         | ITEM 14                                   | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
      AND USE OF PROCEEDS | - 71 - 
|         | ITEM 15                                   | CONTROLS AND PROCEDURES                                                            | - 71 - 
|         | ITEM 16A                                  | AUDIT COMMITTEE FINANCIAL EXPERTS                                                  | - 71 - 
|         | ITEM 16B                                  | CODE OF ETHICS                                                                     | - 73 - 
|         | ITEM 16C                                  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                             | - 73 - 
|         | ITEM 16D                                  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                         | - 73 - 
|         | ITEM 16E                                  | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS        | - 73 - 
|         |                                           |                                                                                    |        
|PART III | - 75 -                                   
|         |                                           |                                                                                    |        
|         | ITEM 17                                   | FINANCIAL STATEMENTS                                                               | - 75 - 
|         | A)                                        | Consolidated balance sheet                                                         | - 75 - 
|         | B)                                        | Consolidated statement of operations, comprehensive loss
      and deficit         | - 75 - 
|         | C)                                        | Consolidated statement of cash flows                                               | - 75 - 
|         | D)                                        | Notes to consolidated financial statements                                         | - 75 - 
|         | ITEM 18                                   | FINANCIAL STATEMENTS                                                               | - 76 - 
|         | ITEM 19                                   | EXHIBITS                                                                           | - 76 - 

3

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GENERAL

This Form 20-F is filed as an annual report under the Exchange
Act.

In this Form 20-F, references to:

-  Adira means Adira Energy Ltd, a Canadian federal corporation (formerly
  AMG Oil Ltd)
- Adira Group means Adira Energy Ltd (formerly AMG Oil Ltd) together with
  its wholly owned subsidiaries Adira Energy Holdings Corp., Adira Israel Ltd
  and Adira Energy Services Ltd.
- Adira Energy means Adira Energy Holdings Corp., an Ontario corporation
  (formerly Adira Energy Corp.)
- Adira Israel means Adira Energy Israel Ltd., an Israel corporation
- Adira Services means Adira Energy Services Ltd., an Israel
      corporation
- We, us, our, and the Company means Adira Group
- AMG refers to AMG Oil Ltd. which was the name of the Company prior to its
  change of name to Adira Energy Ltd on December 17, 2009

Adira has historically used U.S. dollar as its reporting
currency. Adira Energy has historically used Canadian dollars as its reporting
currency. All references in this document to dollars or $ are to United
States dollars and all references to CDN$ are to Canadian dollars, unless
otherwise indicated.

Except as noted, the information set forth in this Form 20-F is
as of December 31, 2009 and all information included in this document should
only be considered correct as of such date.

NOTE REGARDING FORWARD LOOKING STATEMENTS

Much of the information included in this Form 20-F includes or
is based upon estimates, projections or other forward looking statements. Such
forward looking statements include any projections or estimates made by us and
our management in connection with our business operations. These statements
relate to future events or our future financial performance. In some cases you
can identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of those terms or other comparable
terminology. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Such estimates, projections or
other forward looking statements involve various risks and uncertainties and
other factors, including the risks in the section titled Risk Factors below,
that may cause our actual results, levels of activities, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. We caution the reader that important factors in some
cases have affected and, in the future, could materially affect actual results
and cause actual results to differ materially from the results expressed in any
such estimates, projections or other forward looking statements. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform those statements to actual results.

- 4 -

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The statements contained in Item 4.B.  the Business
Overview, Item 5  Operating and Financial Review and Prospects and Item 11 
Quantitative and Qualitative Disclosures About Market Risk are inherently
subject to a variety of risks and uncertainties that could cause actual results,
performance or achievements to differ significantly.

- 5 -

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ITEM 1

Not applicable

ITEM 2

Not applicable

ITEM
3              
KEY INFORMATION

A.        Selected
Financial Data

Adira Energy Ltd.

On August 31, 2009, Adira acquired Adira Energy by issuing
39,040,001 common shares of Adira to Adira Energys shareholders on a one for
one basis. As the shareholders of Adira Energy obtained control of Adira, the
share exchange is considered to be a reverse takeover transaction. Accordingly,
for accounting purposes Adira Energy is the acquirer.

The selected historical financial information presented in the
table below for the 175-day period ended September 30, 2009, comprises the
operating data of Adira Energy and its subsidiary companies from April 8, 2009
(date of incorporation of Adira Energy) and that of Adira (formerly AMG Oil Ltd)
from September 1, 2009. The selected historical information for each of the
fiscal years ended September 30, 2008, 2007, 2006 and 2005 is derived from the
audited consolidated financial statements of Adira (formerly AMG Oil Ltd) for
those periods. The audited financial statements of Adira (formerly AMG Oil Ltd)
for the fiscal years ended September 30, 2008, 2007 and 2006 are included in its
annual report on Form 20-F for the year ended September 30, 2008. The audited
financial statements of Adira (formerly AMG Oil Ltd) for the fiscal year ended
September 30, 2005 is included in previous filings. The selected financial
information presented below should be read in conjunction with the audited
consolidated financial statements and the notes thereto of Adira Group, and with
the information appearing under the headings, Information on the Company and
Operating and Financial Review and Prospects.

Under US GAAP (in US$)

As atSeptember30, 2009
      
      
      As at September 302009
      
      
      2008
      
      
      2007
      
      
      2006
      
      
      2005$
      
      
      $
      
      
      $
      
      
      $
      
      
      $Balance Sheet DataCash and Cash Equivalents
      
      2,354,628
      
      
      1,104,364
      
      
      1,318,132
      
      
      1,348,282
      
      
      14,526Working Capital
      
      2,250,066
      
      
      1,062,473
      
      
      1,307,442
      
      
      1,332,922
      
      
      10,138Total Assets
      
      2,756,305
      
      
      1,104,471
      
      
      1,318,282
      
      
      1,348,282
      
      
      15,760Total Liabilities
      
      126,977
      
      
      41,998
      
      
      10,690
      
      
      15,360
      
      
      5,622Total Stockholders Equity
      
      2,629,328
      
      
      1,062,473
      
      
      1,307,592
      
      
      1,332,922
      
      
      10,138


- 6 -

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175 DayPeriodEndedSeptember30, 2009
      
      
      Year Ended September 302009
      
      
      2008
      
      
      2007
      
      
      2006
      
      
      2005$
      
      
      $
      
      
      $
      
      
      $
      
      
      $Operating DataRevenues
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Expenses
      
      (1,383,335
      )
      
      (322,720
      )
      
      (90,640
      )
      
      (68,046
      )
      
      (19,133
      )Other Items
      
      14,708
      
      
      -
      
      
      -
      
      
      -
      
      
      -Net Loss from ContinuingOperations
      
      (1,368,627
      )
      
      (282,659
      )
      
      (25,330
      )
      
      (36,173
      )
      
      (18,773
      )Net and ComprehensiveLoss
      
      (1,368,627
      )
      
      (282,659
      )
      
      (25,330
      )
      
      (36,173
      )
      
      (18,773
      )Basic Loss per Share- From ContinuingOperations
      
      (0.05
      )
      
      (0.01
      )
      
      (0.00
      )
      
      (0.00
      )
      
      (0.00
      )- From DiscontinuedOperations
      
      (0.00
      )
      
      (0.00
      )
      
      (0.00
      )
      
      (0.00
      )
      
      (0.00
      )


We have never declared or paid any cash or other dividends.

Exchange Rate

The exchange rate between the Canadian dollar and the U.S.
dollar was CDN$1.0466 per US$1.00 (or US$0.9555 per CDN$1.00) as of December 31,
2009.

The average exchange rates for the financial years listed above
(based on the average exchange rate for each period using the average of the
exchange rates on the last day of each month during the period in accordance
with the exchange rates provided by the Bank of Canada are as follows:

2009
    2008
    2007
    2006
    2005Year End (1)
    1.0722
    1.2180
    0.9913
    1.1654
    1.1630Average
    1.1788
    1.0660
    1.0748
    1.1341
    1.2116High (2)
    1.3000
    1.3008
    1.1878
    1.1794
    1.2734Low (2)
    1.0338
    0.9711
    0.9066
    1.0948
    1.1427


The high and low exchange rates between the Canadian dollar and
the U.S. dollar for the past six months (provided by the Bank of Canada) are as
follows:

Month
      Exchange rate CDN$ per US$1.00High
      LowDecember 2009
      1.0713
      1.0405November 2009
      1.0743
      1.0460October 2009
      1.0845
      1.0292September 2009
      1.1085
      1.0613August 2009
      1.1121
      1.0670


- 7 -

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Month
      Exchange rate CDN$ per US$1.00July 2009
      1.1725
      1.0763


B.        Capitalization
and Indebtedness

Not Applicable

C.        Reasons for the
Offer and Use of Proceeds

Not applicable.

D.        Risk Factors

An investment in our Securities is highly speculative and
involves a high degree of risk. Our Company may face a variety of risks that may
affect our operations or financial results and many of those risks are driven by
factors that we cannot control or predict. Before investing in our Company's
Securities Investors should carefully consider the following risks. If any of
the following risks actually occurs, our Company's business, prospects,
financial condition and results of operations could be materially adversely
affected. In that case, investors may lose all or a part of their
investment.

Risks Associated with the Company

Our independent auditors have referred to circumstances
which might result in doubt about our ability to continue as a going concern,
which may hinder our ability to obtain future financing.

Adira incurred a net loss of $1,368,627 for the 175-day period
ended September 30, 2009. At September 30, 2009, Adira had an accumulated
deficit of $1,368,627. These circumstances raise doubt about our ability to
continue as a going concern, as described in the Note 1 to our consolidated
financial statements for the period ended September 30, 2009, which are included
herein. Although our consolidated financial statements refer to circumstances
which might raise doubt about our ability to continue as a going concern, they
do not reflect any adjustments that might result if we are unable to continue
our business.

We are an early-stage oil and gas exploration company
without revenues. Our ability to continue in business depends upon our continued
ability to obtain significant financing from external sources and the success of
our exploration efforts and any production efforts resulting therefrom, none of
which can be assured.

We are an early-stage oil and gas exploration company without
any revenues, and there can be no assurance of our ability to develop and
operate our projects profitably. We have historically depended entirely upon
capital infusion from the issuance of equity securities to provide the cash
needed to fund our operations, but we cannot assure you that we will be able to
continue to do so. Our ability to continue in business depends upon our
continued ability to obtain significant financing from external sources and the
success of our exploration efforts and any production efforts resulting
therefrom. Any reduction in our ability to raise equity capital in the future
would force us to reallocate funds from other planned uses and could have a
significant negative effect on our business plans and operations, including our
ability to continue our current exploration activities.

While we may in the future generate additional working
capital through the development, operation, sale or possible syndication of our
current property or any future properties, there is no assurance that our
Company will be successful in generating positive cash flow, or if successful,
that any such funds

- 8 -

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will be available for distribution to shareholders or to
fund further exploration and development programs.

We have had negative cash flows from operations, and our
current resources are not sufficient to fund our operations on an ongoing basis.
Our business operations may fail if our actual cash requirements exceed our
estimates and we are not able to obtain further financing.

We will require significant capital to complete our
seismic surveys, drill test wells, and to build the necessary infrastructure to
commence operations if our exploration activities result in the discovery of
sufficient oil and gas reserves to justify their exploitation and development.

Our Company has had negative cash flows from operations. Since
inception, we have not earned any revenues from operations, and due to the
length of time between the discovery of oil and gas reserves and their
exploitation and development, we do not anticipate earning revenues from
operation in the near future. To date, we have incurred significant expenses. As
at September 30, 2009, we had cash and equivalents on hand of $2,354,628. We
have sufficient funds to complete preliminary exploration on our Hula property
in Israel, as outline in the plan of operations described herein. However, we
anticipate that we will have to seek additional financing to fund the advanced
exploration on our property, if warranted. Further, we cannot assure you that
our actual cash requirements will not exceed our estimates, and in any case we
will require additional financing to bring our interests into commercial
operation, finance working capital, meet our contractual minimum expenditures
and pay for operating expenses and capital requirements until we achieve a
positive cash flow. Additional capital also may be required in the event we
incur any significant unanticipated expenses.

In light of our operating history, and under the current
capital and credit market conditions, we may not be able to obtain additional
equity or debt financing on acceptable terms if and when we need it. Even if
financing is available, it may not be available on terms that are favorable to
us or in sufficient amounts to satisfy our requirements.

If we require, but are unable to obtain, additional financing
  in the future, we may be unable to implement our business plan and our growth
  strategies, respond to changing business or economic conditions, withstand adverse
  operating results, and compete effectively. More importantly, if we are unable
  to raise further financing when required, our planned exploration activities
  may have to be scaled down or even ceased, and our ability to generate revenues
  in the future would be negatively affected.

Our lack of diversification increases the risk of an
investment in us, and our financial condition and results of operations may
deteriorate if we fail to diversify.

Our business focus is on oil and gas exploration on a limited
number of properties in Israel. As a result, we lack diversification, in terms
of both the nature and geographic scope of our business. We will likely be
impacted more acutely by factors affecting our industry or the regions in which
we operate than we would if our business were more diversified. If we cannot
diversify our operations, our financial condition and results of operations
could deteriorate.

We may not effectively manage the growth necessary to
execute our business plan.

Our business plan anticipates a significant increase in the
number of our contractors, strategic partners and equipment suppliers. This
growth will place significant strain on our current personnel, systems and
resources. We expect that we will be required to hire qualified consultants and
employees to help us manage our growth effectively. We believe that we will also
be required to improve our management, technical, information and accounting
systems, controls and procedures. We may not be able to maintain the quality of
our operations, control our costs, continue complying with all applicable
regulations and

- 9 -

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expand our internal management, technical information and
accounting systems to support our desired growth. If we fail to manage our
anticipated growth effectively, our business could be adversely affected.

All of our assets are outside the United States, with the
result that it may be difficult for investors to enforce within the United
States any judgments obtained against us or some of our directors or officers.

All of our assets are located outside the United States. In
addition, some of our directors and officers are nationals and/or residents of
countries other than the United States, and all or a substantial portion of such
persons' assets are located outside the United States. As a result, it may be
difficult for investors to enforce within the United States any judgments
obtained against us or our officers or directors, including judgments predicated
upon the civil liability provisions of the securities laws of the United States
or any state thereof. Consequently, you may be effectively prevented from
pursuing remedies under United States federal securities laws against them.

As a holding company, our ability to make payments
depends on the cash flows of our subsidiary.

The Company is a holding company that conducts substantially
all of its operations through its subsidiaries incorporated outside North
America. We have no direct operations and no significant assets other than the
shares of our subsidiaries. Therefore, we are dependent on the cash flows of
such subsidiaries to meet our obligations, including payment of principal and
interest on any debt we incur. The ability of our subsidiaries to provide us
with payments may be constrained by the following factors:

- the cash flows generated by operations, investment activities and financing
  activities;
- the level of taxation, particularly corporate profits and withholding
  taxes, in Israel; and
- the introduction of exchange controls and repatriation restrictions or the
  availability of hard currency to be repatriated.

If we are unable to receive sufficient cash from our
subsidiaries, we may be required to refinance any indebtedness we incur, raise
funds in a public or private equity or debt offering or sell some or all of our
assets. We can provide no assurances that an offering of our debt or equity or a
refinancing of our debt can or will be completed on satisfactory terms or that
it would be sufficient to enable us to make payment with respect to our debt.
The foregoing events could have an adverse impact on our future cash flows,
earnings, results of operations and financial condition.

We have agreed to indemnify our directors against
liabilities incurred by them as directors.

We have agreed to indemnify our directors from and against all
costs, charges and expenses reasonably incurred by them in respect of any civil,
criminal or administrative action or proceeding to which they are made a party
or with which they are threatened by reason of being or having been a director
of the Company, provided that (i) they have acted honestly and in good faith
with a view to the best interests of the Company; and (ii) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, they had reasonable grounds for believing that their conduct was
lawful. This indemnity may reduce the likelihood of derivative litigation
against our directors and may discourage or deter our shareholders from suing
our directors.

The loss of certain key management employees could have a
material adverse effect on our business.

Our ability to continue the development of our assets and
business and to compete with other energy companies depends, in large part, on
our ability to attract and maintain qualified key personnel.

- 10 -

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Competition for such personnel is intense, and we cannot assure
you that we will be able to attract and retain them. Our development now and in
the future will depend on the efforts of key management figures. The loss of any
of these key people could have a material adverse effect on our business. We do
not currently maintain key-man life insurance on any of our key employees.

We may be adversely affected by current global financial
conditions.

Current global financial conditions have been characterized by
increased volatility and several financial institutions have either gone into
bankruptcy or have had to be rescued by governmental authorities. Access to
public financing and bank credit has been negatively impacted by both the rapid
decline in value of sub-prime mortgages and the liquidity crisis affecting the
asset-backed commercial paper market. These and other factors may affect our
ability to obtain equity or debt financing in the future on favourable terms.
Additionally, these factors, as well as other related factors, may cause
decreases in our asset values that may be other than temporary, which may result
in impairment losses. If such increased levels of volatility and market turmoil
continue, or if more extensive disruptions of the global financial markets
occur, our operations could be adversely impacted and the market value of our
Common Shares may be adversely affected.

Currency fluctuations could have an adverse effect on our
business.

Our earnings and cash flow may also be affected by fluctuations
in the exchange rate between the U.S. dollar and other currencies, such as the
New Israeli Shekel, the Canadian dollar and the Euro. Our consolidated financial
statements are expressed in U.S.dollars. Our sales of oil and gas, if any, will
be denominated in U.S. dollars, while production costs and corporate
administration costs are, in part, denominated in Israel shekels and Canadian
dollars.

Fluctuations in exchange rates between the U.S. dollar and
other currencies may give rise to foreign exchange currency exposures, both
favourable and unfavourable, which have materially impacted and in the future
may materially impact our future financial results. We do not utilize a hedging
program to limit the adverse effects of foreign exchange rate fluctuations.

Our financial reporting may be subject to weaknesses in
internal controls.

Internal controls over financial reporting are procedures
designed to provide reasonable assurance that transactions are properly
authorized, assets are safeguarded against unauthorized or improper use, and
transactions are properly recorded and reported. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
with respect to the reliability of financial reporting and financial statement
preparation. As an early-stage company, our internal controls may be less formal
and easier to bypass than those of more established corporations.

The Company cannot be certain that current expected
expenditures and completion/testing programs will be realized.

The Company believes that the costs used to prepare internal
  budgets are reasonable, however, there are assumptions, uncertainties, and risk
  that may cause the Companys allocated funds on a per well basis to change
  as a result of having to alter certain activities from those originally proposed
  or programmed to reduce and mitigate uncertainties and risks. These assumptions,
  uncertainties, and risks are inherent in the completion and testing of wells
  and can include but are not limited to: pipe failure, casing collapse, unusual
  or unexpected formation pressure, environmental hazards, and other operating
  or production risk intrinsic in oil and or gas activities. Any of the above
  may cause a delay in the Companys completion program and its ability to
  determine reserve potential.

- 11 -

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Risks Associated with Our Business

We have not discovered any oil and gas reserves, and we
cannot assure you that that we or our venture ever will.

We are in the business of exploring for oil and natural gas,
and the development and exploitation of any significant reserves that are found.
Oil and gas exploration involves a high degree of risk that the exploration will
not yield positive results. These risks are more acute in the early stages of
exploration. We have not discovered any reserves, and we cannot guarantee you
that we ever will. Even if we succeed in discovering oil or gas reserves, these
reserves may not be in commercially viable quantities or locations. Until we
discover such reserves, we will not be able to generate any revenues from their
exploitation and development. If we are unable to generate revenues from the
development and exploitation of oil and gas reserves, we will be forced to
change our business or cease operations.

The Company might incur additional debt in order to fund
its exploration and development activities, which would continue to reduce its
financial flexibility and could have a material adverse effect on the Companys
business, financial condition or results of operation.

It is possible that the Company might incur debt in order to
fund its exploration and development activities, which would continue to reduce
its financial flexibility and could have a material adverse effect on the
Companys business, operations and results of operations and financial
condition. General economic conditions, oil and gas prices and financial,
business and other factors affect the Companys operations and future
performance. Many of these factors are beyond the Companys control. No
assurances can be made that the Company will be able to generate sufficient cash
flow to pay the interest on its debt or that future working capital, borrowings
or equity financing will be available to pay or refinance such debt. Factors
that will affect its ability to raise cash through an offering of Common Shares
or other types of equity securities, or a refinancing of debt include financial
market conditions, the value of its assets and performance at the time the
Company needs capital. No assurances can be made that the Company will have
sufficient funds to make such payments. If the Company does not have sufficient
funds and is otherwise unable to negotiate renewals of its borrowings or arrange
new financing, it might be required to sell significant assets. Any such sale
could have a material adverse effect on the Companys business, financial
condition and results of operations.

Our assets and operations are subject to government
regulation in Israel.

Our interests and operations in Israel may be affected in
varying degrees by government regulations relating to the oil and gas industry.
Any changes in regulations or shifts in political conditions are beyond the
control of the Company may adversely affect our business. Our operations may be
affected in varying degrees by new government regulations and changes to
existing regulations, including those with respect to restrictions on
exploration and production, price controls, export controls, income taxes,
employment, land use, water use, environmental legislation and safety
regulations.

Our future success depends upon our ability to find,
develop and acquire additional oil and natural gas reserves that are
economically recoverable.

In the event that we are able to find and develop oil and
natural gas reserves which are economically recoverable, the rate of production
from those reservoirs will decline as reserves are depleted. As a result, we
must locate and develop or acquire new oil and natural gas reserves to replace
those being depleted by production. We must do this even during periods of low
oil and natural gas prices when it is difficult to raise the capital necessary
to finance activities. Without successful exploration or acquisition activities,
our reserves and revenues will decline. We may not be able to find and develop
or acquire additional reserves at an acceptable cost or have necessary financing
for these activities.

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Oil and natural gas drilling is a high-risk activity.

Our future success will depend on the success of our
exploration and drilling programs. In addition to the numerous operating risks
described in more detail below, these activities involve the risk that no
commercially productive oil or natural gas reservoirs will be discovered. In
addition, we are uncertain as to the future cost or timing of drilling,
completing and producing wells. Furthermore, our drilling operations may be
curtailed, delayed or canceled as a result of a variety of factors, including,
but not limited to, the following:

- unexpected drilling conditions;
- pressure or irregularities in formations;
- equipment failures or accidents;
- adverse weather conditions;
- inability to comply with governmental requirements; and
- shortages or delays in the availability of drilling rigs and the delivery
  of equipment.

If we experience any of these problems, our ability to conduct
operations could be adversely affected.

The Company might not be able to determine reserve
potential, identify liabilities associated with the properties or obtain
protection from sellers against them, which could cause the Company to incur
losses.

Although the Company believes it has reviewed and evaluated the
Israel Project in a manner consistent with industry practices, such review and
evaluation might not necessarily reveal all existing or potential problems. This
is also true for any future acquisitions made by the Company. Inspections may
not always be performed on every well, and environmental problems, such as
groundwater contamination, are not necessarily observable even when an
inspection is undertaken. Even when problems are identified, a seller may be
unwilling or unable to provide effective contractual protection against all or
part of those problems, and the Company often assumes environmental and other
risks and liabilities in connection with the acquired properties.

You should not place undue reliance on reserve
information because reserve information represents estimates, and our seismic
surveying is still in the preliminary stages.

There are numerous uncertainties inherent in estimating
quantities of proved reserves and cash flows from such reserves, including
factors beyond our control and the control of engineers. Reserve engineering is
a subjective process of estimating underground accumulations of oil and natural
gas that can not be measured in an exact manner. The accuracy of an estimate of
quantities of reserves, or of cash flows attributable to these reserves, is a
function of many factors, including, but not limited to, the following:

- available data;
- assumptions regarding future oil and natural gas prices;
- estimates of future production rates;

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- expenditures for future development and exploitation activities; and
- engineering and geological interpretation and judgment.

Reserves and future cash flows may also be subject to material
downward or upward revisions based upon production history, development and
exploitation activities and oil and natural gas prices. Actual future
production, revenue, taxes, development expenditures, operating expenses,
quantities of recoverable reserves and value of cash flows from those reserves
may vary significantly from the estimates. In addition, reserve engineers may
make different estimates of reserves and cash flows based on the same available
data.

The nature of oil and gas exploration makes the estimates
of costs uncertain, and our operations may be adversely affected if we
underestimate such costs.

It is difficult to project the costs of implementing an
exploratory drilling program. Complicating factors include the inherent
uncertainties of drilling in unknown formations, the costs associated with
encountering various drilling conditions, such as over-pressured zones and tools
lost in the hole, and changes in drilling plans and locations as a result of
prior exploratory wells or additional seismic data and interpretations thereof.
If we underestimate the costs of such programs, we may be required to seek
additional funding, shift resources from other operations or abandon such
programs.

Factors beyond our control affect our ability to market
oil and gas.

Our ability to market oil and natural gas from our wells
depends upon numerous factors beyond our control. These factors include, but are
not limited to, the following:

- the level of domestic production and imports of oil and gas;
- the volatility of both oil and natural gas pricing;
- the proximity of natural gas production to natural gas facilities,
  pipelines and other means of transportation;
- the availability of pipeline capacity or other means of transportation;
- the demand for oil and natural gas by utilities and other end users;
- the availability of alternate fuel sources;
- the effect of inclement weather; and
- government regulation of oil and natural gas marketing.

If these factors were to change dramatically, our ability to
market oil and natural gas or obtain favorable prices for our oil and natural
gas could be adversely affected.

Prices and markets for oil are unpredictable and tend to
fluctuate significantly, which could reduce profitability, growth and the value
of our business if we or our venture ever begin exploitation of reserves.

Our future financial condition, results of operations and the
carrying value of our oil and natural gas properties depend primarily upon the
prices we receive for our oil and natural gas production, if any. Oil

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and natural gas prices historically have been volatile and
likely will continue to be volatile in the future, especially given current
world economic conditions. Significant changes in long-term price outlooks for
crude oil could by the time that we start exploiting oil and gas reserves, if we
ever discover and exploit such reserves, could have a material adverse effect on
revenues as well as the value of licenses or other assets.

Our future cash flow from operations, if any, will be highly
dependent on the prices that we receive for oil and natural gas. This price
volatility also affects the amount of our cash flow available for capital
expenditures and our ability to borrow money or raise additional capital. The
prices for oil and natural gas are subject to a variety of additional factors
that are beyond our control. These factors include:

- the level of consumer demand for oil and natural gas;
- the domestic and foreign supply of oil and natural gas;
- the ability of the members of the Organization of Petroleum Exporting
  Countries to agree to and maintain oil price and production controls;
- the price of foreign oil and natural gas;
- the price and availability of alternative fuel sources;
- governmental regulations;
- weather conditions;
- market uncertainty;
- political conditions in oil and natural gas producing regions, including
  Israel and the Middle East;
- war, or the threat of war, in oil producing regions; and
- worldwide economic conditions.

These factors and the volatility of the energy markets
generally make it extremely difficult to predict future oil and natural gas
price movements with any certainty. Also, oil and natural gas prices do not
necessarily move in tandem. Declines in oil and natural gas prices would not
only reduce revenue, but could reduce the amount of oil and natural gas that we
can produce economically and, as a result, could have a material adverse effect
upon our financial condition, cash flows, results of operations, oil and natural
gas reserves, the carrying values of our oil and natural gas properties and the
amounts we can borrow under any bank credit facilities we may obtain in the
future.

Even if we discover and then develop oil and gas
reserves, we may have difficulty distributing our production.

If our exploration activities result in the discovery of oil
and gas reserves, and if we are able to successfully develop and exploit such
reserves, we will have to make arrangements for storage and distribution of oil
and gas. We would have to rely on local infrastructure and the availability of
transportation for storage and shipment of oil and gas products, but any readily
available infrastructure and storage and transportation facilities may be
insufficient or not available at commercially acceptable terms. The
marketability of our production depends in part upon the availability,
proximity, and capacity of oil and natural gas pipelines, crude oil trucking,
natural gas gathering systems and processing facilities.

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This could be particularly problematic to the extent that
operations are conducted in remote areas that are difficult to access, such as
areas that are distant from shipping or pipeline facilities. Furthermore,
weather conditions or natural disasters, actions by companies doing business in
one or more of the areas in which we or our venture will operate, or labor
disputes may impair the distribution of oil and gas. These factors may affect
the ability to explore and develop properties and to store and transport oil and
gas and may increase our expenses to a degree that has a material adverse effect
on operations.

Our inability to obtain necessary facilities could hamper
our operations.

Oil and gas exploration activities depend on the availability
of equipment, transportation, power and technical support in the particular
areas where these activities will be conducted, and our access to these
facilities may be limited. Demand for such limited equipment and other
facilities or access restrictions may affect the availability of such equipment
to us and may delay exploration and development activities. The quality and
reliability of necessary facilities may also be unpredictable and we may be
required to make efforts to standardize our facilities, which may entail
unanticipated costs and delays. Shortages or the unavailability of necessary
equipment or other facilities will impair our activities, either by delaying our
activities, increasing our costs or otherwise.

Our success depends on our ability to attract and retain
qualified personnel

Recruiting and retaining qualified personnel is critical to our
success. The number of persons skilled in the acquisition, exploration and
development of oil and gas properties is limited and competition for such
persons is intense. As our business activity grows, it will require additional
key financial, administrative and mining personnel as well as additional
operations staff. Although we believe that we will be successful in attracting,
training and retaining qualified personnel, there can be no assurance of such
success. If we are not successful in attracting and training qualified
personnel, the efficiency of our operations could be affected, which could have
an adverse impact on our future cash flows, earnings, results of operations and
financial condition.

We face strong competition from other energy companies that
may negatively affect our ability to carry on operations.

We operate in the highly competitive areas of oil and natural
gas exploration, development and production. Factors which affect our ability to
successfully compete in the marketplace include, but are not limited to, the
following:

- the availability of funds and information relating to a property;
- the standards established by us for the minimum projected return on
  investment;
- the availability of alternate fuel sources; and
- the intermediate transportation of gas.

Our competitors include major integrated oil companies,
substantial independent energy companies, affiliates of major interstate and
intrastate pipelines, and national and local natural gas gatherers. Many of
these competitors possess greater financial and other resources than we do.

Operating hazards may adversely affect our ability to
conduct business.

Our future operations, if any, will be subject to risks
inherent in the oil and natural gas industry, including, but not limited to, the
following:

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- blowouts;
- cratering;
- explosions;
- uncontrollable flows of oil, natural gas or well fluids;
- fires;
- pollution; and
- other environmental risks.

These risks could result in substantial losses to us from
injury and loss of life, damage to and destruction of property and equipment,
pollution and other environmental damage and suspension of operations.
Governmental regulations may impose liability for pollution damage or result in
the interruption or termination of operations.

Losses and liabilities arising from uninsured or
under-insured hazards could have a material adverse effect on our business.

If we develop and exploit oil and gas reserves, those
operations will be subject to the customary hazards of recovering, transporting
and processing hydrocarbons, such as fires, explosions, gaseous leaks, migration
of harmful substances, blowouts and oil spills. An accident or error arising
from these hazards might result in the loss of equipment or life, as well as
injury, property damage or other liability. We cannot assure you that we will
obtain insurance on reasonable terms or that any insurance we may obtain will be
sufficient to cover any such accident or error. Our operations could be
interrupted by natural disasters or other events beyond our control. Losses and
liabilities arising from uninsured or underinsured events could have a material
adverse effect on our business, financial condition and results of operations.

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

All phases of the oil and gas business present environmental
risks and hazards and are subject to environmental regulation pursuant to a
variety of laws and regulations. Our operations are subject to laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. The recent trend toward stricter
standards in environmental legislation and regulation is likely to continue. The
enactment of stricter legislation or the adoption of stricter regulation could
have a significant impact on our operating costs, as well as on the oil and
natural gas industry in general.

Our existing property, and any future properties that we
may acquire, may be subject to pre-existing environmental liabilities.

Pre-existing environmental liabilities may exist on the
property in which we currently hold an interest or on properties that may be
subsequently acquired by us which are unknown to the Company and which have been
caused by previous or existing owners or operators of the properties. In such
event, we may be required to remediate these properties and the costs of
remediation could be substantial. Further, in such circumstances, we may not be
able to claim indemnification or contribution from other parties. In the

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event we were required to undertake and fund significant
remediation work, such event could have a material adverse effect upon the
Company and the value of our common shares.

Our business will suffer if we cannot obtain or maintain
necessary licenses.

Our operations require licenses, permits and in some cases
renewals of licenses and permits from various governmental authorities.
Specifically, the licenses awarded to us by the Government of Israel have terms
of three years and must renewed in order to extend the license beyond this
initial term. Among other factors, our ability to obtain, sustain or renew such
licenses and permits on acceptable terms is subject to change in regulations and
policies and to the discretion of the applicable governments. Our inability to
obtain, maintain or acquire extensions for these licenses or permits could
hamper our ability to produce revenues from operations. Other oil and gas
companies may seek to acquire property leases and licenses that we will need to
operate our business. This competition has become increasingly intense as the
price of oil on the commodities markets has risen in recent years. This
competition may prevent us from obtaining licenses we deem necessary for our
business, or it may substantially increase the cost of obtaining these licenses.

Penalties we may incur could impair our business.

Failure to comply with government regulations could subject us
to civil and criminal penalties, could require us or our venture to forfeit
property rights or licenses, and may affect the value of our assets. We may also
be required to take corrective actions, such as installing additional equipment,
which could require substantial capital expenditures. We could also be required
to indemnify our employees in connection with any expenses or liabilities that
they may incur individually in connection with regulatory action against them.
As a result, our future business prospects could deteriorate due to regulatory
constraints, and our profitability could be impaired by our obligation to
provide such indemnification to our employees.

Strategic relationships upon which we may rely are
subject to change, which may diminish our ability to conduct our operations.

Our ability to successfully acquire additional licenses, to
discover reserves, to participate in drilling opportunities and to identify and
enter into commercial arrangements depends on developing and maintaining close
working relationships with industry participants and government officials and on
our ability to select and evaluate suitable properties and to consummate
transactions in a highly competitive environment. We may not be able to
establish these strategic relationships, or if established, we may not be able
to maintain them. In addition, the dynamics of our relationships with strategic
partners may require us to incur expenses or undertake activities we would not
otherwise be inclined to undertake in order to fulfill our obligations to these
partners or maintain our relationships. If our strategic relationships are not
established or maintained, our business prospects may be limited, which could
diminish our ability to conduct our operations.

Political instability or fundamental changes in the
leadership or in the structure of the governments in the jurisdictions in which
the Company operates could have a material negative impact on the
Company.

The Companys interests may be affected by political and
economic upheavals. Although the Company currently operates in jurisdictions
that welcome foreign investment and are generally stable, there is no assurance
that the current economic and political situation in these jurisdictions will
not change drastically in coming years. Local, regional and world events could
cause the jurisdictions in which the Company operates to change the mining laws,
tax laws, foreign investment laws, or to revise their policies in a manner that
renders the Companys current and future projects non-economic. Further,
there

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is always the possibility of the governments in the
jurisdictions in which the Company operates deciding to nationalize the oil and
gas industry, or imposing such restrictions and penalties on foreign-owned
entities that the Companys current and future projects would become uneconomic,
or the Company would be prevented from selling its assets or operating its
business. The occurrence of any such fundamental change could have a materially
adverse effect on the Companys business, financial condition and results of
operations.

We may enter into hedging agreements but may not be able
to hedge against all such risks.

If the Company is able to discover commercially exploitable
quantities of oil or gas and is able to enter into commercial production, from
time to time the Company may enter into agreements to receive fixed or a range
of prices on its oil and natural gas production to offset the risk of revenue
losses if commodity prices decline; however, if commodity prices increase beyond
the levels set in such agreements, the Company will not benefit from such
increases. Similarly, from time to time the Company may enter into agreements to
fix the exchange rate of certain currencies to US dollars in order to offset the
risk of revenue losses if the other currencies increase in value compared to the
US dollar; however, if other currencies decline in value compared to the US
dollar, the Company will not benefit from the fluctuating exchange rate. In
addition to the potential of experiencing an opportunity cost, other potential
costs or losses associated with hedging include the risk that the other party to
a hedge transaction does not perform its obligations under a hedge agreement,
the hedge is imperfect or our hedging policies and procedures are not
followed.

The Company is incorporated in Canada.

The Company is a Canadian corporation governed under the Canada
Business Corporations Act and as such, its corporate structure, the rights and
obligations of shareholders and its corporate bodies may be different from those
of the home countries of international investors. Furthermore, non-Canadian
residents may find it more difficult and costly to exercise shareholder rights.
International investors may also find it costly and difficult to effect service
of process and enforce their civil liabilities against the Company or some of
its directors, controlling persons and officers.

To the extent that the Company establishes natural gas
and oil reserves, it will be required to replace, maintain or expand its natural
gas and oil reserves in order to prevent its reserves and production from
declining, which could adversely affect cash flows and income.

In general, production from natural gas and oil properties
declines over time as reserves are depleted, with the rate of decline depending
on reservoir characteristics. If the Company establishes reserves, of which
there is no assurance, and is not successful in its subsequent exploration and
development activities or in subsequently acquiring properties containing proved
reserves, its proved reserves will decline as reserves are produced. The
Companys future natural gas and oil production is highly dependent upon its
ability to economically find, develop or acquire reserves in commercial
quantities.

To the extent cash flow from operations is reduced, either by a
decrease in prevailing production volume prices for natural gas and oil or an
increase in finding and development costs, and external sources of capital
become limited or unavailable, the Companys ability to make the necessary
capital investment to maintain or expand its asset base of natural gas and oil
reserves would be impaired. Even with sufficient available capital, its future
exploration and development activities may not result in additional proved
reserves, and the Company might not be able to drill productive wells at
acceptable costs.

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Risks Associated with our Common Shares

We expect to be classed as a passive foreign investment
company for United States tax purposes, which will have adverse tax consequences
for all United States holders of our shares.

As we do not generate revenues from our sole material asset, we
expect to be classified for United States income tax purposes as a passive
foreign investment company. This means that any dividends we pay you will be
taxed as ordinary income and not at preferential qualifying dividend tax rates,
and upon any sale of our Common Shares, any capital gain will be taxed as
ordinary income and not at preferential capital gains rates. This will continue
to be true even after we commence active operations.

The exercise of all or any number of outstanding warrants or
stock options, the issuance of any annual bonus shares, the award of any
additional options, bonus shares or other stock-based awards or any issuance of
shares to raise funds or acquire a business may dilute your Common Shares.

We may in the future grant to some or all of our directors,
officers, insiders, and key employees options to purchase our Common Shares,
bonus shares and other stock based awards as non-cash incentives to those
persons. We may grant these options and other stock based awards at exercise
prices equal to or less than market prices, and we may grant them when the
market for our securities is depressed. The issuance of any equity securities
could, and the issuance of any additional shares will, cause our existing
shareholders to experience dilution of their ownership interests.

Any additional issuance of shares or decision to enter into
joint ventures with other parties to raise financing or acquire other businesses
through the sale of equity securities, may dilute our investors' interests in
the Company, and investors may suffer dilution in their net book value per share
depending on the price at which such securities are sold. Such issuance may
cause a reduction in the proportionate ownership and voting power of all other
shareholders. The dilution may result in a decline in the price of our Common
Shares or a change in the control of the Company.

We do not expect to pay dividends for the foreseeable
future.

We do not intend to declare dividends for the foreseeable
future, as we anticipate that we will reinvest any future earnings in the
development and growth of our business. Therefore, investors will not receive
any funds unless they sell their Common Shares, and shareholders may be unable
to sell their shares on favorable terms or at all. We cannot assure you of a
positive return on investment or that you will not lose the entire amount of
your investment in our Common Shares. Prospective investors seeking or needing
dividend income or liquidity should not purchase our Common Shares.

An investment in our Company will likely be
diluted.

We may issue a substantial number of our common shares without
investor approval to raise additional financing and we may consolidate the
current outstanding common shares. Any such issuance or consolidation of our
securities in the future could reduce an investors ownership percentage and
voting rights in the Company and further dilute the value of your investment.

The value of securities issued by the Company might be
affected by matters not related to the Companys own operating performance for
reasons that include the following:

- general economic conditions in Canada, the US, Israel and globally;
- industry conditions, including fluctuations in the price of oil and
  natural gas;
- governmental regulation of the oil and gas industry, including
  environmental regulation;
- fluctuation in foreign exchange or interest rates;

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- liabilities inherent in oil and natural gas operations;
- geological, technical, drilling and processing problems;
- unanticipated operating events which can reduce production or cause
  production to be shut-in or delayed;
- failure to obtain industry partner and other third party consents and
  approvals, when required;
- stock market volatility and market valuations;
- competition for, among other things, capital, acquisition of reserves,
  undeveloped land and skilled personnel;
- the need to obtain required approvals from regulatory authorities;
- worldwide supplies and prices of and demand for natural gas and oil;
- political conditions and developments in Israel, Canada, the US, and
  globally;
- political conditions in natural gas and oil producing regions;
- revenue and operating results failing to meet expectations in any
  particular period;
- investor perception of the oil and gas industry;
- limited trading volume of the Common Shares;
- change in environmental and other governmental regulations;
- announcements relating to the Companys business or the business of its
  competitors;
- the Companys liquidity; and
- the Companys ability to raise additional funds.

In the past, companies that have experienced volatility in
their value have been the subject of securities class action litigation. The
Company might become involved in securities class action litigation in the
future. Such litigation often results in substantial costs and diversion of
managements attention and resources and could have a material adverse effect on
the Companys business, financial condition and results of operation.

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ITEM
4              
INFORMATION ON THE COMPANY

We are Canadian corporation governed under the Canada Business
Corporations Act (the CBCA) which conducts business as an oil and gas
exploration company with operations in the State of Israel. We have been granted
the following petroleum licenses from the State of Israel:

- Eitan License - covering 31,060 acres (125.7 sq.km.) in the Hula Valley
  located in Northern Israel. The license was issued in December, 2008 for an
  initial three year period and may be renewed upon fulfillment of certain
  conditions for a further four year period;
- Gabriella License - covering 97,000 acres (392 sq. km.) approx. 10km
  offshore Israel between Netanya and Ashdod. The license was issued in July,
  2009 for an initial three year period and may be renewed upon fulfillment of
  certain conditions for a further four year period; and
- Yitzhak License- covering 31,555 acres (127.7 sq.km) approx. 17km offshore
  Israel between Hadera and Netanya, directly to the North of and contiguous to
  Gabriella. The license was issued in October, 2009 for an initial three year
  period and may be renewed upon fulfillment of certain conditions for a further
  four year period

Our Gabriella License and Yitzhak License are collectively
referred to as our Offshore Licenses.

All of the licenses are subject to 12.5% royalty payable to the
government of Israel.

Our business plan is to carry out exploration activities on our
Eitan License in order to assess the existence of commercially exploitable
quantities of natural gas. In addition, we also plan to conduct minor evaluation
work on each of the Offshore Licenses to establish whether exploration is
justified. We presently do not produce any oil or gas and do not earn any
revenues. The Eitan License is our sole material license at present. Neither of
the Offshore Licenses are presently material to the Companys operations.

A.        History and
Development of the Company

Name

Our legal and commercial name is Adira Energy Ltd.

Principal Office

Our principal office is located at Suite 901, 30 St. Clair
Avenue West, Toronto, Ontario, Canada, M4V 3A1. Our telephone number is (416)
250-6500.

Incorporation and Continuation

We are a Canadian corporation governed under the Canada
Business Corporations Act (the CBCA).

We were incorporated on February 20, 1997 under the name Trans
New Zealand Oil Company by filing our Articles of Incorporation with the
Secretary of State of Nevada. We changed our name to AMG Oil Ltd. on July 27,
1998. On December 17, 2009, we changed our name to Adira Energy Ltd. Our
fiscal year end is September 30.

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On November 25, 2008, the Companys shareholders approved the
change of our jurisdiction of incorporation from the State of Nevada to the
Canadian federal jurisdiction under the CBCA by way of continuation. The Company
completed the filing of its Articles of Conversion with the Nevada Secretary of
State on November 25, 2008, and the Companys Articles of Continuance were
accepted for filing by Industry Canada effective November 27, 2008. The effect
of these filings was to transfer the jurisdiction of incorporation of the
Company from the State of Nevada to the Canadian federal jurisdiction under the
CBCA. Copies of the Articles of Conversion, Articles of Continuance, Certificate
of Continuance and By-Laws, are incorporated by reference to this Form 20-F as
exhibits.

The Companys common shares remain registered under Section
12(g) of the Exchange Act after completion of the continuation as a result of
the operation of Rule 12g-3 of the Exchange Act. The Companys current trading
symbol on the OTCBB is AMGOF.

Acquisition of Adira Energy

We completed the acquisition of Adira Energy, a company
incorporated in the Province of Ontario, on August 31, 2009. As a result of the
completion of this acquisition, we are now the owner of all the issued and
outstanding shares of Adira Energy and we have ceased to be a shell company,
as defined in Rule 12b-2 of the Exchange Act. The acquisition was completed
pursuant to a securities exchange agreement dated August 4, 2009 among Adira,
Adira Energy and Dennis Bennie, Ilan Diamond and Alan Friedman, as principal
shareholders, and concurrent securities exchange agreements among Adira and each
of the minority shareholders of Adira Energy. We issued an aggregate of
39,040,001 common shares to the shareholders of Adira Energy as consideration
for the acquisition of Adira Energy.

Immediately prior the acquisition, Adira Energy completed a
private placement (Private Placement) of 7,600,000 units (Units) at a price
of $0.25 per Unit. Sandfire Securities Inc. acted as lead agent to Adira Energy
in connection with the Private Placement. Each Unit was comprised of one common
share of Adira Energy and one-half of one share purchase warrant. The common
shares and share purchase warrants issued by Adira Energy were exchanged
concurrently with the closing of the Acquisition. Each resulting share purchase
warrant entitles the holder to purchase one additional common share of the
Company at the exercise price of $0.50 per share for a two year period following
closing, expiring on August 31, 2011. In connection with the Private Placement,
500,770 compensation warrants were issued to agents which will entitle the
holders thereof to purchase an equal amount of common shares of the Company at
the exercise price of $0.25 per common share for a two year period following
closing expiring on August 31, 2011.

Concurrent with the completion of the Acquisition, Michael
Hart, Michael Murphy and John Campbell, resigned from the board of Adira and
Dennis Bennie (Chair), Glen Perry, Alan Friedman and Ilan Diamond (CEO) were
appointed as the new directors of Adira.

In September 2009, Adira completed a private placement of an
additional 400,000 Units on a non-brokered basis (the September Private
Placement) at a price of $0.25 per Unit. Each Unit comprised of one common
share of Adira Energy and one-half of one share purchase warrant. Together with
pre-existing cash on hand and after deducting commissions payable in connection
with the Private Placement, we had a cash and cash equivalents balance as of
September 30, 2009 of $2,354,628. Our plan of operations is to commence drilling
operations on its Eitan License in Northern Israel.

Prior Operations of Adira

We were previously engaged in the acquisition and, formerly,
exploration of resource properties.

- 23 -

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We had been inactive for approximately the last four years up
until our acquisition of Adira Energy and were considered a shell company
within the meaning assigned to that term in Rule 12b-2 of the Exchange Act prior
to the acquisition of Adira Energy because we had no operations and our assets
consisted solely of cash. In previous years, we had conducted oil and gas
exploration activities in New Zealand but withdrew from the permit and assigned
our interest to other participants in the permit during the 2003 fiscal year.

We do not receive any revenue from our discontinued oil and gas
operations in New Zealand and had no significant assets, tangible or intangible
except for cash on hand. We have no history of earnings and there is no
assurance that our business will be profitable. We expect to continue incurring
operating losses and accumulating deficits in future periods.

Reporting Issuer Status under Canadian Securities Laws

On February 1, 2006, the British Columbia Securities Commission
granted our application to be designated as a reporting issuer under the
Securities Act (British Columbia). Accordingly, we and our insiders became
subject to the continuous disclosure requirements under the securities laws of
the Province of British Columbia, Canada.

Capital Expenditures and Divestitures

During the last three fiscal years ended September 30, 2009,
Adira did not undertake any capital expenditures.

During the 175-day period ended September 30, 2009, The Company
put a deposit of $372,600 down on the purchase of drilling equipment.

Our planned capital expenditures for the next twelve months are
summarized below under Plan of Operations. These anticipated expenditures
relate to our drilling exploration program in connection with our Hula Valley
property in Israel.

Other than described above, we do not expect any significant
purchases of plant and equipment or the hiring of employees within the next
twelve months, unless acquired in connection with the acquisition of a business
opportunity which may be identified.

Takeover Offers

We are not aware of any indication of any public takeover
offers by third parties in respect of our common shares during our last and
current financial years.

B.        Business
Overview

Eitan License

Through its subsidiaries, the Company was granted the Eitan
License from the State of Israel on December 15, 2008. The original term of the
Eitan License is three years; however, the term is may be extended for an
additional four years under Israeli Petroleum Law, 5712  1952 (the
Petroleum Law). The area of the permit is approximately 125.7 square
kilometers. The permit area is subject to a 12.5% royalty payable to the Israeli
government. The Company has a 100% working interest in the Eitan License and all
wells.

The Eitan License area is situated in the Hula Valley in the
upper Galilee in Israel and is land owned by the State of Israel. The Hula
Valley is located in Northern Israel near the head of the Jordan River Valley.
The valley is bordered on the west by the Naftali Mountains, to the east by the
Golan Heights, to the north

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by the Metulla High, and to the south by the Korazim High. The
Hula Valley is some 25 km long and 6 km wide providing an area of 150
km2 (37,065 acres) at an elevation of approximately 60 meters to 70
meters above sea level. The subject permit area is 125.7 km2.

The Hula Valley area in which the Eitan License is located has
  experienced some minor shallow gas exploration but with no commercial discovery
  of any gas field. There are 142 line kilometers of seismic data available for
  review.

According to the Petroleum Law, where state land is reasonably
required by the holder of a petroleum right for a petroleum purpose, such holder
may make a demand from the Israel Lands Authority that the land or any right
therein be leased to such holder on the conditions prescribed by the Petroleum
Law and the regulations under the Petroleum Law.

The Eitan License area forms part of the lands on which Kibbutz
  Neot Mordechai is situated (in terms of a long term lease agreement between
  the Kibbutz Neot Mordechai and the Israel Lands Authority). This is the area
  on which the Company anticipates focusing its work program for the next 18 months.
  The result of this situation is that Adira Energy will have to reach an agreement
  with Kibbutz Neot Mordechai in order to secure access to the land in question.
  Negotiations in connection with securing this agreement are underway and the
  Company believes an agreement will be signed in the near future.

Eitan License Rights

Subject to the provisions of the Petroleum Law, the Eitan
License confers upon the Company the right:

- to explore for petroleum in the licensed area;
- the right to do exploration work outside the licensed area bearing on the
  petroleum prospects of the licensed area, to such extent and subject to such
  conditions as the Israeli Petroleum and Mining Commissioner (the
  Commissioner) may prescribe;
- the exclusive right to conduct tests or development drilling in the
  licensed area and to produce petroleum there from; and
- the right to obtain a lease after having made a discovery in the licensed
  area.

Under the Petroleum Law, the Company, as the holder of a
petroleum right, is entitled, subject to any other relevant law, to drill and
search for water in the area of its petroleum right and to use the water
discovered by it either by drilling for water or in any of its other operations
and/or to use any other water situated in the area of its petroleum right to the
extent required for its operations, provided that it does not thereby prejudice
any persons right in such water or having the benefit thereof.

Eitan License Requirements

The Eitan License is subject to the following requirements:

- 25 -

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| | The Company shall commence petroleum exploration within four
      months from the day on which the Eitan License is granted and shall continue
      the same with due diligence as long as the Eitan License is in force.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company shall commence test drilling on the date prescribed
      therefore in the conditions of the license and not later than two years
      following the grant of the license and shall continue such drilling with
      due diligence until he makes a discovery. The interval between the completion
      of                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | the drilling of one well and the commencement
        of the drilling of another well shall not exceed four months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company shall submit to the Commissioner
        reports on the petroleum exploration carried out. The Company may require
        that the information supplied in the report shall be kept secret to the
        extent that it relates to prospects of discovering petroleum. Furthermore,
        the Company shall at the time of drilling, carry out tests and measurements
        and take samples and retain samples and forward them to the Commissioner
        as the Commissioner may demand, having regard to the other tests and measurements
        carried out by the Company and to the damages which may be caused by complying
        with the demand.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Within one month after the expiration of every
        three months period from the grant of the Eitan License onwards, the Company
        is required to deliver to the Commissioner a report, in duplicate, on
        the exploration work done by him under the License during the three months,
        setting out:                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | As the holder of a petroleum right, the Company
        shall, not later than fourteen days before commencing the drilling of
        any test, development or water well or further drilling and work at an
        old drill hole, notify the Commissioner in writing of his intention to
        do so and in the case of a new well shall notify the location of the proposed
        well by means of a spot map certified by a qualified surveyor, the well
        drilling plan (including the estimated stratigraphic sections and the
        water-bearing horizons) and the date on which drilling will begin.                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | After drilling has commenced, the Company,
        as the holder of the petroleum right, shall within ten days after the
        end of each month report to the Commissioner in writing, the depth of
        the well at the end of the month and the geological horizon to which,
        according to the holders determination then, the well has penetrated.                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Within fifteen days after the completion of
        a petroleum well, whether as a producing well or a dry hole, and within
        fifteen days after the completion of any further work at an old drill
        hole, the Company, as the holder of the petroleum right, shall submit
        to the Commissioner a completion report showing:                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |  | the plugging and abandonment record of the well if it has
      been abandoned, such record being signed and certified by the person
      responsible for the plugging.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The report shall be accompanied by
samples taken of strata penetrated and analyses of such samples and samples of
all fluids entering the well with the depths and geological horizons at which
they were found and analyses of all such fluids.

Recommended Exploration Program

The target of the Companys exploration activities will be the
Esther field which is located within the area covered by the Eitan License (the
Esther Field). The Esther Field has identified shallow gas and CBM from
the prior drilling of a total of 145 wells (see below).The Company has
determined, based on the recommendations of a technical report that it has
received, to pursue a re-entry program to work-over and test the shallow gas in
two to three of the previously drilled shallow gas wells. If the testing of the
shallow gas is successful, the Company plans to then design a development
program based on the local market demands for the gas. For the CBM, it is
recommended to test the selected shallow coal seams from 445 to 489 metres in
the Esther #2 well with a stimulation program (hydraulic fracture treatment
using foam or water). If the testing of the CBM is successful, a development
program can be designed in conjunction with the seismic data acquisition program
in order to determine the areal extent of the CBM in the area. The Company plans
to undertake the plan of operations provided below in order to carry out these
recommendations.

Plan of Operations for the Eitan License

The plan of operations and associated cost estimate of the work
program on the Eitan License is as follows:

Activity
      CostAcquire 10 to 20
      km of 2-D seismic survey, processing and interpretation
    $ 150,000CBM: Re-entry, stimulate and test Esther #1 well with
      TD of 1,293 metres (500 metre section-coal seam)
    $ 225,000CBM: Re-entry, stimulate and test Esther #2 well with
      TD of 525 metres (500 metre section-coal seam)
    $ 220,000CBM: Drill and core, complete and test deep CBM well to
      1050 metres. Core both 500 metre coals and 1000 metre coals with wireline
      core system. Perforate and complete by hydraulic fracturing 500 metre coal
      section
    $ 660,000Conventional Well: Re-entry, complete and test Esther
      #3A well with TD of 952 metres (this well was recorded as a gas well) Test
      the D Sand (140m +/-)
    $ 150,000Conventional Well: Drill, complete and test shallow
      sand well to 200 metres
    $ 200,000Total
      Estimate
    $1,605,000


The current cost estimate includes mobilization and
de-mobilization of a drilling/completion rig to the field in the Hula Valley.

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The Companys plan of operations, including the projected
timeframe and budget, are subject to change. The Companys board of directors
may determine, based on the results of exploration activities or other
identified opportunities, to change its plan of operations. In addition, the
risks identified hereinafter (see Risk Factors) may result in delays
and costs overruns, each of which could adversely impact on the Companys
ability to complete its plan of operations within the projected timeframes and
within the budget.

Seismic Data

The Company has reprocessed 142.9 km of seismic data. The
seismic surveys were acquired over the potential hydrocarbon traps in the
central and southern part of the Hula Valley Basin. The areas include the
central valley in the Neot Mordechai area where the Esther wells were drilled
and the southern Agamon Natural Preserve area where the Notera, Gonen, and Suzie
wells were drilled.

Exploration History

The presence of gas was first reported in 1950 during
exploration of the valley for peat to be used for fuel. Early exploration
focused on the lignite stringers. Twenty shallow boreholes were drilled ranging
in depths from 72 metres (236 feet) to 175 meters (574 feet). The early
exploration also defined three zones or levels: Shallow (surface to 200 meters
(656 feet)), Medium (200 metres to 600 metres (656 to 1,968 feet)), and Deep
(600 metres to 2,800 metres (1,968 feet to 9,186 feet)). These different levels
were explored in four projects as follows:

|1. | Notera Project between 1980 and 1982 - Notera-1 well, was
      drilled in 1980, and reached a depth of 505 metres (1,658 feet). Dry gas
      was discovered between 476 - 482 metres (1,562  1,581 feet) and the well
      was completed for production. The well was connected to Kibbutz Gonen in
      October, 1981 and 7 MMcf of gas were sold. Total production including
      testing and flaring was estimated to be 14.7 MMcf. The well died on
      September 7, 1982 probably due to the influx of water from what appeared
      to be a strong water drive confirmed by a constant bottom hole pressure of
      674 psig throughout the life of the well. The Notera-2 well, also drilled
      in 1980, penetrated to a depth of 749 meters (2,457 feet). It discovered
      gas and the well tested in the interval 120 - 175 meters (394 574 feet).
      After a long period of testing, it was considered non- commercial due to
      the large quantities of formation water produced. In 1981, Notera-3 well
      was drilled to a total depth of 2,786 metres (9,140 feet) but no gas was
      found. In 1982, Notera-6 well was drilled to a total depth of 560 meters
      (1,837 feet) but also found no commercial gas.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | Gonen Project in 1983  10 shallow wells were drilled
      based on the well data of Notera 6 because of the multi-stringers of sand
      between 450 and 550 metres (1,476 and 1,820 feet). None of these wells
      tested any commercial production rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3. | Susie Project from 1985  1986  Three shallow wells of
      less than 150 metres were drilled in this area. Additional two wells were
      drilled but no success in finding commercial gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4. | ABJAC Operations between 1990 and 2002. Two structural
      traps were identified resulting in the drilling of the prospect in the
      Lily 1 well with a total depth of 1,260 metres (4,133 feet) but no
      commercial gas discovery. The Esther 1 and 2 wells were drilled to a total
      depth of 1,293 metres (4,244 feet) and 525 meters (1,722 feet)
      respectively. Both Esther 1 and 2 wells encountered numerous coal seams.
      Cores were taken to determine reservoir evaluation. Subsequent to the two
      Esther wells, nine more wells were drilled but no commercial gas discovery
      but encountered coal seams at various depths.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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Exploration Summary

Most of the wells drilled in this area encountered gas. These
wells varied in depth from 146 metres (479 feet) in Esther-4 well to the deepest
at 2,786 metres (9,140 feet) in Notera-3 well. During the Notera project, all
drilled wells were electrically logged with also conducted composite logs. A
total of 42 gas exploration wells have been drilled in the Hula Valley. In
addition, 20 unlisted lignite test boreholes were drilled to an average depth of
150 metres (~500 feet) and Naphtha drilled three structural boreholes. There
were no absolute open flow tests or any extended tests to indicate or support a
commercial discovery. However, coal seams have been identified in some of the
wells to provide some data for potential coal-bed methane potentials.

Geology Description and Resource Estimate

The Hula Valley is a small segment of what is tectonically
called the Great Rift Valley. This long complex geological feature extends from
Mozambique through central Africa, the Red Sea, Israel, Lebanon, into northern
Syria and terminates in the East Anatolian Fault in Turkey. Comprised of rifts,
transform faults and in some places, accompanied by volcanism, this tectonic
element is called the Jordan Valley System (JVS) within Israel. It is comprised
of south to north; the Arava Valley, Dead Sea Rift, Jordan Valley, Sea of
Galilee (Kinneret), Hula Valley and the Metulla High. At present, tectonic
activity in the Jordan Valley System resulted in about 105 km of left-lateral
motion along the Dead Sea Fault.

Esther Field Gas Prospect

The Company has received a technical report which has
identified the Esther Field as a gas prospect. A total of 14 wells (1, 2, 3, 3A,
4, 4A, 5, 6, 6A, 7, 8, 8A, 11, 12 and 13) were drilled in the field with no
commercial gas discovery in all depths due to completion and production
problems. The gas potentials in the Esther Field can be divided into three
segments according to depths. The shallow depth is around 200 metres (650 feet)
between the surface and the top of the Yarda Basalt. The middle depth is the
coal beds between 400 and 1,000 metres (1,300 and 3,280 feet). The deep depth is
the limestone and fracture basalts from 1,000 to 4,000 metres (3,280 and 13,000
feet). The most prospective is the gas from the coal beds between the 400 and
1,000 metres and will be discussed in the section later. Coal-bed methane (CBM)
wells get more expensive, generally, with depth and the gas contents generally
also increase with depth, thus the economics tend to get tighter as CBM wells
get deeper. The economics of the Estimated Ultimate Recovery (EUR) of a well
become problematic with low EUR and production numbers from deeper wells and
often deeper CBM fields cannot be economically developed without significant
production and reserves.

The electric logs of Esther 1 well has identified coal seams.
To better understand CBM, tests were performed on coal samples from the
continuously cored Esther 2, drilled as a twin to the Esther 1 that found coal
in the Neot Mordechai area. The results were as follows:

- Interval 339 - 354 metres (1,112  1,161 feet) had lignite or lignitic
  coals. Five distinct coal beds, separated by clayey marls and carbonaceous and
  fossiliferous silty clays, were recognized. Minor amounts of gas were observed
  bubbling from the coal when the core was removed from the core barrel. There
  is 8  17 metres of coal in this section.
- Interval 390 - 407 metres (1,280  1,335 feet) was lignite. Seven distinct
  coal beds are within this unit. These coal beds, similar to the Unit A above
  are interbedded with clay and carbonaceous, fossiliferous marls. The coals
  have a high dirty ash with only one thin (0.05 m) clean coal seam. The coals
  are dull black and exhibit a minor amount of faulting. There was a noticeable
  increase in gas evolving from the coal upon removal from the core barrel when
  compared to Unit A. This section has 6  8 metres of coal.

- 29 -

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- Interval 445 - 490 metres (1,460 - 1,608 feet) showed an increase in rank
  and quality over the units above. This unit has eleven different coal seams,
  all sub-bituminous. A dramatic increase of evolving gas over the above units
  was observed when the core was removed from the core barrel. This section has
  by far the most coal with 16  26 metres.

Desorption tests revealed the cores had gas contents of over
200 cuft/ton in the sub-bituminous section from 445-489 metres while the
shallower, less mature coals had somewhat less gas contents. The coals from
850-1,000 metres have not been cored and tested yet.

For the CBM, the Company plans to test the 500 metre coal
section in both the Esther 1 and 2 with a stimulation program. Also, drill a CBM
well to the 1000 metre coal section. A production test will be completed on the
500 metre coals and all the coals will cored. Analytical testing will include
gas content, coal descriptions, desorption isotherms and relative permeability.
Field testing will include reservoir pressure and permeability, water
saturation, desorption and gas production. If the testing of the CBM is
successful, a development program can be designed in conjunction with the
seismic data acquisition program in order to determine the areal extent of the
CBM in the area.

To determine whether there is any potential of the shallow gas
and as part of the committed work program, the technical report recommended the
re-entry of the two to three shallow wells in the Esther Field to test for
commercial gas. The re-entry would require cleaning up the formation,
stimulation if required and flow test the well for an extended period of time.
The Company plans to undertake this exploration work as part of its plan of
operations, as described above under Plan of Operations for the Eitan
License.

Equipment

As at the date of this report, the Company has completed the
purchase and taken possession of a drill rig and associated equipment in order
to commence drilling operations on the Eitan License.

Offshore Licenses

With respect to our Offshore Licenses, the Company is required
to conduct the following work prior to October 2010:

| | 1. | Collect and study the existing geological and geophysical
      information available.                                                       
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                              
| | 2. | Reprocess and reinterpret old seismic lines acquired and
      submit a summary report regarding the potential of each of the
      licenses.

The Company is currently formulating a work program in order to
complete the above required milestones within the required timeline.

Additional Information on the Eitan License

Current well status is as follows:

Well Name
      Depth (m)
      Spud Date
      StatusEsther 1
    1,293
    10/15/91
    TS; partial production testEsther 2
    525
    10/01/92
    TS; partial production test, cored for coal, 600psig SITPEsther 3
    205
    02/15/93
    PA; Blowout at 205m


- 30 -

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Esther 3A
    925
    04/18/93
    GW-TS; production unknownEsther 4
    146
    04/24/94
    GW-TS; Completed through drill pipe, tested 450 McfpdEsther 4A
    152
    01/16/02
    TS; Pulled too hard and sanded up on initial testEsther 5
    223
    06/19/95
    TSEsther 6
    236
    07/20/94
    PAEsther 6A
    174
    05/15/95
    GW-TSEsther 7
    223
    12/18/94
    DH PAEsther 8
    319
    04/02/96
    DH PAEsther 8A
    164
    12/28/97
    TSEsther 11
    263
    09/17/96
    TSEsther 12
    300
    11/04/97
    GW-TSEsther 13
    183
    12/31/95
    GW-TS


TS-temporarily suspended PA-plug and abandoned GW-gas
well (producing or has produced) GW-TS-gas well then temporarily suspended
DH-TS-downhole temporarily suspended

Figure 1 (below) is a map showing the location of the wells and
seismic lines.

- 31 -

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- 32 -

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- 33 -

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C.        Organizational
  Structure

We operate:

- in Canada through our wholly owned subsidiary Adira Energy, an Ontario corporation
    incorporated on April 8, 2009; and
- in Israel, through Adira Energys wholly owned subsidiaries,
      namely:
- Adira Israel, an Israel corporation; and
- Adira Services, an Israel
corporation.

D.        Property, Plant
  and Equipment

Corporate Offices

Our executives offices are comprised of approximately 400
square feet at Suite 901, 30 St. Clair Avenue West, Toronto, Ontario, Canada,
M4V 3A1. The lease cost is CDN$800 per month.

Our only material exploration property is our Eitan license
which is described above.

ITEM
4A           UNRESOLVED STAFF
COMMENTS

Not applicable.

ITEM
5              
OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of the Companys plan of
operations and historical financial and operating results should be read in
conjunction with:

- the audited financial statements of Adira (formerly AMG Oil Ltd.) for the
  years ended September 30, 2008, 2007, and 2006, together with the notes
  related thereto, as filed with Adiras (formerly AMG Oil Ltds) Form 20-F for
  the year ended September 30, 2008 on December 22, 2008,
- the interim financial statements of Adira (formerly AMG Oil Ltd.) for the
  three and nine month periods ended June 30, 2009 and 2008, as furnished with
  the Companys Form 6-K filed with the SEC on September 8, 2009,
- the audited financial statements of Adira Energy for the 22-day period
  ended April 30, 2009, as filed with Adiras Form 20-F report on September 4,
  2009,
- the audited consolidated financial statements of the Company for the
  175-day period ended September 30, 2009, as filed herewith, and
- Item 4 - Information on the Company.

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A.        Operating Results

Summary

Adira acquired Adira Energy on August 31, 2009 by issuing 39,040,001
  common shares of Adira to Adira Energys shareholders on a one for one
  basis. As the shareholders of Adira Energy obtained control of Adira, the share
  exchange is considered to be a reverse takeover transaction. Accordingly, for
  accounting purposes Adira Energy is deemed to be the acquirer.

Our plan of operations is to carry out the exploration business
and to complete the plan of operations described above in Item 4.B under Plan
of Operations.

Results of Operations

Consolidated results of operations for the 175 day period
ended September 30, 2009.

The Company has not earned any revenues from operations to
date.

The major categories of expense are detailed as follows:

|                                     |   | 175 Day Period ended |  |  |                     | 
|------------------------------------ | - | -------------------- |  |  | ------------------- | 
|Expenses                             |   | September 30, 2009   |  |  | % of Total Expenses | 
|                                     |   |                      |  |  |                     | 
|Consulting fees                      | $ | 634,081              |  |  | 46%                 | 
|                                     |   |                      |  |  |                     | 
|Share-based compensation             |   | 418,907              |  |  | 30%                 | 
|                                     |   |                      |  |  |                     | 
|Professional fees                    |   | 127,811              |  |  | 9%                  | 
|                                     |   |                      |  |  |                     | 
|Technical
      consulting           |   | 102,664              |  |  | 7%                  | 
|                                     |   |                      |  |  |                     | 
|Travel
      and entertainment       |   | 76,249               |  |  | 5%                  | 
|                                     |   |                      |  |  |                     | 
|Office
      and general             |   | 13,177               |  |  | 1%                  | 
|                                     |   |                      |  |  |                     | 
|Transfer
      agent and filing fees |   | 5,878                |  |  | 1%                  | 
|                                     |   |                      |  |  |                     | 
|Marketing                            |   | 4,568                |  |  | 1%                  | 
|                                     |   |                      |  |  |                     | 
|Total expenses                       | $ | 1,383,335            |  |  | 100%                | 

Consulting fees

Consulting fees during the 175 day period ended September 30,
2009 included amounts paid for corporate management services. Consulting fees
included $148,152 in consulting fees paid to individuals that are directors and
officers of the Company or to private companies that are controlled by directors
and officers of the Company. Consulting fees of $32,809 were paid to former
officers of the Company for the period they held office.

Stock-based compensation

Stock based compensation during the 175 day period ended
September 30, 2009 was attributable to stock options granted to our directors,
officers, employees and consultants during this period.

- 35 -

---

The Company has 4 categories of stock options that have
different vesting periods.

|1) | Type A Stock options vest over 2 years, with 12.5%
      vesting each quarter.                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                         
|2) | Type B Stock options vest 8.5% at the end of each quarter
      for the first two years and 8% at the end of each quarter
    thereafter.                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                         
|3) | Type C Stock options vest over 4 years, with 6.25%
      vesting at the end of each quarter                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                         
|4) | Type D Stock options vest at 12.5% each quarter and the
      initial amount vests on the business day immediately on which each of the
      optionees is elected or appointed as a director of the Corporation. In
      event they are not elected as a director, all options granted shall expire
      immediately.

Type A, B and C stock options all begin to vest at their
respective percentages three months after their grant date.

Professional fees

Our professional fees during the 175 day period ended September
30, 2009 included audit and tax advisory fees and legal fees in connection with
our corporate organization and the business combination of Adira Energy Corp
(and its subsidiary companies) and AMG Oil Ltd.

Technical consulting

Technical consulting charges during the 175 day period ended
September 30, 2009 included $75,000 in technical consulting fees paid to a
company of which a former director was the president and chief operating officer
and CDN$20,000 in technical consulting fees paid to a private corporation
controlled by an officer of the Company. These expenses relate to the Companys
exploration activities.

Net Loss

We reported a net loss and comprehensive loss during the 175
day period ended September 30, 2009 of $1,368,627 which was attributable
entirely to our expenses incurred during this period and a foreign exchange gain
of $14,708.

Office and general expenses

Includes expenses incurred for stationary, entertainment and
office supplies.

B.        Liquidity and
  Capital Resources

Liquidity

As at September 30, 2009, the Companyhad $2,354,628in cash and cash
equivalents and $2,250,066 in working capital. This compares to $1,104,364 in
cash and cash equivalents and $1,062,473 in working capital as at September 30,
2008.

We presently believe that we have sufficient capital resources
to fund our plan of operations for the next twelve months, as described in Item
4.B of this Form 20-F. However, we will require additional funds to continue
advanced exploration of our existing exploration property or to acquire and
undertake exploration of new properties that we may acquire.

- 36 -

---

Cash on hand is currently our only source of liquidity. We do
not have any lending arrangements in place with banking or financial
institutions and we do not anticipate that we will be able to secure these
funding arrangements in the near future.

The Company has historically maintained its liquidity and has
funded its operations primarily from the sale of its common shares. The Company
relies on its ability to raise additional capital through the issuance of common
shares, which may have a dilutive effect on the Companys shareholders, to fund
its operations. If the Company chooses to raise additional funding, the Company
cannot give assurance that it will be able to secure outside sources of capital
in an amount that is sufficient for it to undertake its plan of operations. In
the event that future equity financing cannot be raised or negotiations for
joint venture funding are not successful, our activities may be curtailed and
this may adversely affect our ability to carry out exploration of our existing
property and to acquire any new exploration properties. There can be no
assurance that additional financing, if required, will be available to the
Company on acceptable terms or at all.

Cash Flows

As detailed in Item 4A above, the Company received net proceeds
of $2,195,771 from the issuance of common shares during the 175 day period ended
September 30, 2009.

During the 175 day period ended September 30, 2009, $372,600
was issued as deposits on equipment and $6,662 on oil and gas licenses.
Equipment deposits relate to the purchase of a drilling rig in Israel.

Cash of $359,229 was used for operating activities during the
175-day period ended September 30, 2009.

Adira

The following discussion of cash flows for the years ended
2008, 2007 and 2006 relate to the cash flows of AMG Oil Ltd., the accounting
acquiree, prior to the acquisition of Adira Energy.

The Company did not conduct any financing activities for the
years ended September 30, 2008 and September 30, 2007. During the 2006 fiscal
year, financing activities provided cash of approximately $1,358,957 from the
issuance of common shares.

Adira did not conduct any investing activities for the 2008,
2007 or 2006 fiscal years.

The net impact of all cash activities during the twelve months
ended September 30, 2008 resulted in a net decrease in cash of $213,768, a net
decrease in cash of $30,150 for the year ended September 30, 2007 and a net
increase in cash of $1,333,756 for the year ended September 30, 2006.

Material Commitments for Capital Expenditures

As at the date of this Form 20-F, we do not have any material
commitments for capital expenditures.

Inflation

Inflation has not had a material impact on our operations.

- 37 -

---

Foreign Currency Fluctuations

Fluctuations in foreign currency have not had a material impact
on our operations.

Government Regulation

There is no governmental regulation that the Company is aware
of or that would affect us.

Critical Accounting Policies

Foreign Currency Translation

The Companys functional and reporting currency is the United
States (US) dollar.

All transactions in currencies other than the US dollar are
translated as follows:

- Monetary assets and liabilities are translated at the rate of exchange in
  effect as at the balance sheet date;
- Non-monetary assets and liabilities, at the exchange rates prevailing on
  the date of the acquisition of the asset or assumption of the liabilities; and
- Expenses, at the rate in effect on the date of the transaction.

Exchange gains or losses are included in operations in the
period in which they occur.

Share-based Compensation

The Company accounts for share-based compensation using a fair
value based method with respect to all stock-based payments measured and
recognized, to directors, employees and non-employees. For payments of services
through the issuance of shares, the fair value is the market price of the shares
issued by the Company or the value of the services received, depending on which
is the more reliable measure.

For directors and employees, the fair value of the options is
measured at the date of grant. For non-employees, the fair value of the options
or warrants are measured on the earlier of the date at which the counterparty
performance is completed or the date the performance commitment is reached or
the date at which the equity instruments are granted if they are fully vested
and non-forfeitable. The fair value of the options or warrants are accrued and
charged either to operations, oil and gas interests, or share issue costs with
the offset credit to contributed surplus. For directors and employees the
options are recognized over the vesting period, and for non-employees the
options are recognized over the related service period. If and when the stock
options are ultimately exercised, the applicable amounts of contributed surplus
are transferred to share capital.

Oil and Gas Property

The Company follows the successful efforts method of accounting
for its exploration activities. Under the successful efforts method, acquisition
costs of proved and unproved properties are capitalized. Costs of unproved
properties are transferred to proved properties when proved reserves are
confirmed. Exploration costs, including geological and geophysical costs, are
expensed as incurred. Exploratory drilling costs are initially capitalized. If
it is determined that a specific well does not contain proved reserves, the
related capitalized exploratory drilling costs are charged to expense. To date
all exploration costs have been charged to operations.

- 38 -

---

Development costs, which include the costs of wellhead
equipment, development drilling costs and handling facilities, applicable
geological and geophysical costs, and the costs of acquiring or constructing
support facilities and equipment, are capitalized. Costs incurred to operate and
maintain wells and equipment and to lift oil and gas to the surface will be
expensed as operating costs. If and when the Company achieves production,
acquisition costs of proved properties will be depleted using the
unit-of-production method based on proved reserves. Capitalized exploratory
drilling costs and development costs will be depleted on the basis of proved
developed reserves by area. Support facilities and equipment will be depreciated
on a straight-line basis over their useful lives.

Property costs by area are reviewed for impairment at least
annually to consider whether there are conditions that may indicate impairment.
The carrying value of each property is compared to its net recoverable amount as
estimated by quantifiable evidence of the market value of similar land or
geological resources. If the carrying value is found to exceed the estimated net
recoverable amount, a write down will be recorded.

C.        Research and
Development, Patents and Licences

Not applicable.

D.        Trend
Information

The Company is not aware of any trends that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors. For information on risks associated to the Company refer to Item 3.D
 Risk Factors.

E.        Off-Balance Sheet
  Arrangements

The Company does not have any 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, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

F.        Tabular
Disclosure of Contractual Obligations

The following sets forth the Companys contractual obligations
as at September 30, 2009.

Payments due by periodLess than 1
      
      
      More than 5Contractual Obligations
      Total
      year
      1-3 years
      3-5 years
      yearsLong-Term Debt Obligations
      -
      -
      -
      -
      -Capital (Finance) Lease
      -
      -
      -
      -
      -ObligationsOperating Lease Obligations
      -
      -
      -
      -
      -Purchase obligations
      -
      -
      -
      -
      -Other Long-Term
      -
      -Obligations
      
      
      -
      -
      -Other Long-Term LiabilitiesReflected on the CompanysBalance Sheet under theGAAP of the primaryfinancial statements
      -
      -
      -
      -
      -Total
      -
      -
      -
      -
      -


- 39 -

---

G.        Safe Harbor

The safe harbor provided in s. 27A of the Securities Act and s.
21E of the Exchange Act shall apply to forward-looking information provided
pursuant to Item 5.E and F where applicable.

ITEM
6              
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.        Directors and
Senior Management

The size of our board of directors is currently set at 6. All
of our directors are elected annually by the shareholders and hold office until
our next annual general meeting or until their successors are duly elected and
qualified, unless their office is earlier vacated in accordance with the CBCA
and our articles of incorporation

The following table sets forth information relating to our
directors and senior management as at the date of this Form 20-F:

|Name (1)          | Residence                  | Position                                                
|----------------- | -------------------------- | --------------------------------------------------------
|Dennis Bennie (2) | Toronto, ON, Canada        | Director (Chairman)                                     
|Ilan Diamond      | Morningside, South Africa  | Chief Executive Officer and Director                    
|Alan Friedman     | Toronto, ON, Canada        | Executive Vice-President,, and
      Director           
|Alan Rootenberg   | Thornhill, ON Canada       | Chief Financial Officer                                 
|Daniel Bloch      | Toronto, ON, Canada        | Secretary                                               
|Denny Johnson     | Denham Springs, LA, USA    | Senior Vice-President, Exploration and
      Development
|Colin Kinley      | Overland Park, Kansas, USA | Senior Vice-President,
      Operations and Director    
|Ohad Marani       | Ramat Efal, Israel         | Director                                                

|(1) | Neither age nor date of birth of directors or senior
      managers is required to be reported in the Companys home country (Canada)
      nor otherwise publicly disclosed.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                              
|(2) | Member of Audit Committee.                                                                                                                                                   

The following is biographical information on each of the
persons listed above:

Mr. Dennis Bennie, Director (Chairman). Mr.
Bennie became a director of the Company on August 31, 2009. Mr. Bennie is a
pioneer, entrepreneur and innovator in the Canadian technology industry. Over
the past 20 years, Mr. Bennies entrepreneurial management has powered Mission
Electronics, Ingram Canada and Delrina. Mr. Bennie entered the world of
technology in 1979, when he co-founded Mission Electronics. He drove the
expansion of this leading British audio equipment manufacturer to become a
dominant force in the high-end stereo market. In 1997, he founded the XDL
Venture Capital Fund, focusing on information technology opportunities. Mr.
Bennie currently manages an experienced team investing in private equity
opportunities as the XDL Capital Group. From 1988 to 1996, Mr. Bennie was CEO of
Delrina Corporation, an independent software developer and publisher, which he
founded, which forged the new software categories of electronic forms and PC fax
communications.

Mr. Ilan Diamond, Chief Executive Officer and Director.Mr. Diamond became CEO and a director of the Company on August 31, 2009.
  Prior to becoming CEO and Director at the Company, Mr. Diamond was a director
  at Stratus Capital LLP. Stratus Capital focused on trading of physical commodities
  (primarily copper and cobalt), mainly from Africa to the East. Mr. Diamond is
  also the

- 40 -

---

former Chief Operating Officer of a large investment group with
interests in resources, financial services, technology, media and consulting,
and private equity specialist Buffet Investments.

Mr. Alan Friedman, Executive Vice-President and Director.
  Mr. Friedman became a director of the Company on August 31, 2009 prior to assuming
  his current role at the Company. Mr. Friedman is a South African attorney and
  a Director of the Canada-South Africa Chamber of Business. He is the founder,
  President and CEO of Rivonia Capital Inc., a firm that identifies opportunities
  in emerging markets, and enhances value through combining quality assets, management
  and financial and marketing support for early stage companies in the resource
  sector. He was formerly the Executive Vice-President for a Canadian finance
  firm, through which he facilitated significant capital raising for a number
  of public companies.

Mr. Alan Rootenberg, Chief Financial Officer. Mr.
Rootenberg is a chartered accountant with experience in the mineral exploration
and technology industries. He has served as a senior executive in a number of
publicly traded companies including serving as Chief Financial Officer and
consultant to OTCBB and TSXV listed mineral exploration companies. Mr.
Rootenberg was President and Chief Executive Officer of a publicly traded (TSXV)
technology company from 1999 to 2007. Prior to that, he was a founding partner
in a company that pioneered the development of multimedia and new media
applications for the advertising industry. He has a Bachelor of Commerce degree
from the University of the Witwatersrand in Johannesburg, South Africa and
received his Chartered Accountant designation in both South Africa and in
Ontario, Canada.

Mr. Daniel Bloch, Corporate Secretary.Mr. Bloch
became corporate secretary of the Company on August 31, 2009. Mr. Bloch is a
partner at Aird & Berlis LLP in Toronto, and member of the firm's Corporate
Finance Group and the Natural Resources Team. Mr. Blochs practice focuses on
all areas of corporate finance, mergers and acquisitions and securities law. Mr.
Bloch regularly represents and provides general corporate and securities law
advice to publicly and privately held corporations in a wide variety of
industries. He has developed a particular expertise in advising issuers and
underwriters in connection with public and private financings.

Mr. Denny Johnson, Senior Vice-President, Exploration and
Development and Officer.Mr. Johnson became a director of the Company on
August 31, 2009. Mr. Johnson has been the President of Highlands Consulting
group since 2008. Prior to that, he was a drilling engineer for Range Resources,
a natural gas producer, and a petroleum field engineer for Schlumberger, an
oilfield service provider, for 3 and 4 years respectively.

Mr. Colin Kinley, Senior VP, Operations and Officer and
Director. Mr. Kinley became a director of the Company on August 31,
2009. Mr. Kinley is responsible for the leadership and overall management of
Kinley Exploration. Prior to Kinley Exploration, Mr. Kinley worked for Saber
Energy as President and provided the project management skills necessary to
prove up an unconventional gas field in the central Kalahari Desert in sub
Saharan Africa. Prior to his employment with Saber, Mr. Kinley spent 26 years as
an executive for Layne Christensen Company and its predecessor companies. He was
responsible for the management of specialized engineered drilling and
development projects, executive oversight of multiple service companies and
exploration and production operations, both domestically and internationally.

Mr. Ohad Marani, Director.Mr. Marani is
  currently Chairman of the Board, Israel Natural Gas Lines Ltd., a company that
  builds and operates the natural gas pipelines and infrastructure in Israel.
  Since November 2008, Mr. Marani has also acted as Chairman of the Board of Alumot
  Investment House, a financial institution that manages provident funds, trust
  funds, and private investments. From March 2004 to July 2007, Mr. Marani served
  as Executive Chairman of the Board, Oil Refineries Ltd., the second largest
  industrial conglomerate in Israel whose holdings include oil refineries and
  petrochemical assets. The conglomerate has $4 billion annual sales volume
and Mr. Marani was responsible for its privatization. Prior to March 2004, Mr.
Marani served in various Israeli government ministries, including the Israel
Finance Ministry, initially as head of the Budget Department and subsequently as
Director General of the Israel Finance Ministry. Mr. Marani has a Masters Degree
in Public Administration (major in economics and finance) from Harvard
University, an MBA (majoring in finance) from Hebrew University of Jerusalem and
a BA in Economics (majoring in accounting and statistics) from Hebrew University
of Jerusalem.

- 41 -

---

No director or any member of senior management has any family
relationships with any other director or manager. There is no arrangement with
any major shareholder, customer, supplier or other party pursuant to which any
person was selected as a director or member of senior management.

B.        Compensation

Executive Compensation

The following table sets forth the aggregate compensation paid
for services rendered during the period ended September 30, 2009:

Compensation
      Common
        Shares Under OptionNamed and Principal Position
      Year Ended
      Salary (CDN$)
      Other Annual Compensation
        ($)
      Number of Options
      Exercise Price
      Expiry DateDennis Bennie 
        Director (Chairman)
      2009
      Nil
      Nil
      396,000
      $0.25
      August 20, 2014Ilan Diamond 
        Chief Executive 
        Officer and Director
      2009
      80,000
      Nil
      781,000
      $0.25
      August 20, 2014


- 42 -

---

Alan Friedman(1) Executive Vice-
      President and Director
    2009
    72,000(1)
    Nil
    646,000
    $0.25
    August 20, 2014Alan Rootenberg (2) Chief
      Financial Officer
    2009
    1,500(2)
    Nil
    150,000
    $0.25
    September 23, 2014Daniel Bloch Secretary
    2009
    Nil
    Nil
    75,000
    $0.25
    August 20, 2014Denny Johnson Senior
      Vice-President, Exploration and Development
    2009
    Nil
    Nil
    150,000
    $0.25
    September 23, 2014Colin KinleySenior VP, Operations
    2009
    Nil
    Nil
    400,000 250,000
    $0.25 $0.25
    August 20, 2014 September 23, 2014Glen PerryChairman Technical
      Advisory Board, Director and Officer
    2009
    Nil
    Nil
    -
    -
    -Ohad Marani Director
    2009
    Nil
    Nil
    250,000
    $0.25
    August 20, 2014


| | (1) | Paid to Rivonia Capital Inc.
| | --- | ----------------------------
| |     |                             
| | (2) | Paid to The M&S Group Inc.  

Compensation of Named Executive Officers

Named Executive Officer means each Chief Executive Officer,
each Chief Financial Officer and each of the three most highly compensated
executive officers, other than each Chief Executive Officer and Chief Financial
Officer, who were serving as executive officers at the end of the most recently
completed fiscal year and whose total salary and bonus exceeds $150,000. Mr.
Ilan Diamond acted as our Chief Executive Officer and Mr. Alan Rootenberg acted
as our Chief Financial Officer during the financial period ended September 30,
2009. None of our executive officers received total compensation exceeding
$150,000 during 2009.

The following table sets forth the compensation paid or awarded
to the Named Executive Officers for the period ended September 30, 2009:

- 43 -

---

Name
        andprincipalposition
      Year
      Salary(CDN$)
      Share-basedawards($)
      Option-basedawards($)
      Non-equity
        incentiveplan compensation($)
      Pensionvalue($)
      All othercompensation($)
      Totalcompensation($)Annualincentiveplans
      Long-termincentiveplansIlan 
        Diamond, 
        Chief 
        Executive 
        Officer (1)(3)
      2009 
        (30 days  
        from 
        September 
        1, 2009  
        September 
        30, 2009) 
        April 8, 
        2009  
        August 
        31, 2009
      10,000 
        70,000
      Nil
      781,000 
        Options
      Nil
      Nil
      Nil
      Nil
      10,000 
        70,000Alan 
        Rootenberg, 
        Chief 
        Financial 
        Officer (1) (2)
      2009 
        (30 days  
        from 
        September 
        23, 2009)
      1,500
      Nil
      150,000 
        Options
      Nil
      Nil
      Nil
      Nil
      1,500Michael Hart, 
        President, 
        Chief 
        Executive 
        Officer, 
        Secretary, 
        Treasurer and 
        Director (1)
      2009
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      NilGarth 
        Johnson, 
        Chief 
        Financial 
        Officer (1)
      2009
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


Notes:

|(1) | As a result of the Companys business combination with
      Adira Energy, which occurred on August 31, 2009 (the
      Transaction), as described in Item 4, Michael Hart, John
      Campbell, Dan Brown and Garth Johnson resigned from the Company on August
      31, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                   
|(2) | Alan Rootenberg was appointed Chief Financial Officer on
      September 23, 2009.                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                   
|(3) | Ilan Diamond is Chief Executive Officer of Adira Energy
      and would be its Named Executive Officer prior to the close of the
      Transaction on August 31, 2009.                                                                                                            

Incentive Plan Awards

*Outstanding Share-Based Awards and Option-Based Awards*

The following table sets forth all awards outstanding for each
of the Named Executive Officers as at September 30, 2009:

- 44 -

---

Option-Based
        Awards
      Share-Based
        AwardsName
      Number
        of securities underlying unexercised
        options (#)
      Option
        exercise price ($)
      Option
        expiration date
      Value
        of unexercised in-the-money options(1) ($)
      Number
        of shares or units of shares that have
        not vested (#)
      Market
        or payout value of share based awards
        that have not vested ($)Ilan Diamond
      781,000
      US$0.25
      August 19, 2014
      $39,050
      N/A
      N/AAlan Rootenberg
      150,000
      US$0.25
      August 19, 2014
      $7,500
      N/A
      N/AMichael Hart
      Nil
      N/A
      N/A
      N/A
      N/A
      N/AGarth Johnson
      Nil
      N/A
      N/A
      N/A
      N/A
      N/A


Note:

(1) ****The value of unexercised in-the-money options is calculated based on
the difference between the closing price of US$0.30 for the Common Shares on
September 30, 2009 and the exercise price of the options, multiplied by the
number of unexercised options.

Incentive Plan Awards - Value Vested or Earned During the
Year

No incentive plan awards are considered vested for any Named
Executive Officer for the financial period ended September 30, 2009.

Name
      Option-based awards  Value vested during
      the year ($)
      Share-based awards  Value vested during the
      year ($)
      Non-equity incentive plan compensation 
      Value earned during the year ($)Ilan Diamond
    Nil
    Nil
    NilAlan Rootenberg
    Nil
    Nil
    NilMichael Hart
    Nil
    Nil
    NilGarth Johnson
    Nil
    Nil
    Nil


Director Compensation

The Company has no arrangements, standard or otherwise,
pursuant to which Directors are compensated by the Company for their services in
their capacity as Directors, or for committee participation, involvement in
special assignments or for services as consultant or expert during the most
recently completed financial year or subsequently, up to and including the date
of this Form 20-F, except the Rivonia Agreement described as Section 7.A Related
Party Transactions.

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth the value of all incentive plan
  awards vested or earned for each of the Directors, other than Directors who
  are also Named Executive Officers, for the financial period ended September
  30, 2009:

- 45 -

---

Option-Based Awards
      Share-Based AwardsName
      Number of securities
        underlying unexercised options (#)
      Option exercise
        price ($)
      Option expiration
        date
      Value of unexercised
        in-the-money options(1) ($)
      Number of shares or units
        of shares that have not vested (#)
      Market or payout value of share based
        awards that have not vested ($)Dennis Bennie
      396,000
      US$0.25
      August 19, 2014
      $19,800
      N/A
      N/AAlan Friedman
      646,000
      US$0.25
      August 19, 2014
      $32,300
      N/A
      N/AGlen Perry
      Nil
      N/A
      N/A
      N/A
      N/A
      N/A


Note:

(1) ****The value of unexercised in-the-money options is calculated based on
the difference between the closing price of US$0.30 for the Common Shares on
September 30, 2009 and the exercise price of the options, multiplied by the
number of unexercised options.

Incentive Plan Awards - Value Vested or Earned During the
Year

The following table sets forth the value of all incentive plan
awards vested or earned for each of the Directors, other than Directors who are
also Named Executive Officers, for the financial year ended September 30, 2009:

Name
      Option-based awards  Value vested during
      the year ($)
      Share-based awards  Value vested during the
      year ($)
      Non-equity incentive plan compensation 
      Value earned during the year ($)Dennis Bennie
    Nil
    N/A
    NilAlan Friedman
    Nil
    N/A
    NilGlen Perry
    Nil
    N/A
    Nil


Note:

(1) ****No amounts calculated as no options had vested as at September 30,
2009.

Securities Authorized For Issuance Under Equity Compensation
Plans

The Company has a stock option plan for the granting of
incentive stock options to the officers, employees, consultants and directors.
See Item 6E Share Ownership  Equity Compensation Plans for more
information.

No stock options were granted by the Company during the fiscal
year ended September 30, 2008. No stock options were exercised by any of the
directors or executive officers of the Company during the fiscal year ended
September 30, 2008. The Company granted options to purchase 3,334,000 common
shares on August 31, 2009 at an exercise price of $0.25 per share, subject to
various vesting provisions, to the holders of the Adira Energy options and in
exchange for the cancellation of their Adira Energy option agreements.

On September 23, 2009, the Company granted options to purchase
650,000 common shares at an exercise price of $0.25 per share, subject to
various vesting provisions.

No stock options were exercised by any of the directors or
executive officers of Adira Energy during the period ended September 30,
2009.

- 46 -

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Long-Term Incentive Plan Awards

The Company did not make any long-term incentive plan awards
during the period ended September 30, 2009 and the year ended September 30,
2008.

Pension, Retirement or Similar Benefits

We do not have any amounts set aside to provide for pension,
retirement or similar benefits.

C.        Board Practices

Our Directors have served in their respective capacities since
their election or appointment and will serve until our next annual general
meeting or until a successor is duly elected and qualified, unless their office
is earlier vacated in accordance with the CBCA and our articles of
incorporation. Our officers serve at the discretion of the board.

Term of Office

All directors have a term of office expiring at our next annual
general meeting, unless a directors office is earlier vacated in accordance
with our Articles or the provisions of the CBCA. All officers serve at the
discretion of the Board.

As at the date hereof:

|Name            | Position                                                 | Position Held Since
|--------------- | -------------------------------------------------------- | -------------------
|                |                                                          |                    
|Dennis Bennie   | Director (Chairman)                                      | August 2009        
|                |                                                          |                    
|Ilan Diamond    | Chief Executive Officer and Director                     | August 2009        
|                |                                                          |                    
|Alan Friedman   | Executive Vice-President, and Director                   | August 2009        
|                |                                                          |                    
|Daniel Bloch    | Secretary                                                | August 2009        
|                |                                                          |                    
|Alan Rootenberg | Chief Financial Officer                                  | September 2009     
|                |                                                          |                    
|Denny Johnson   | Senior Vice-President, Exploration
      and Development | August 2009        
|                |                                                          |                    
|Colin Kinley    | Senior VP, Operations                                    | August 2009        
|                |                                                          |                    
|Ohad Marani     | Director                                                 | December 2009      

Benefits on Termination of Employment

The Company has an employment agreement with its President and
  CEO, namely Ilan Diamond. It has verbal agreements with its other officers and
  consultants. Written employment and consulting agreements are currently under
  negotiation.

- 47 -

---

We have no compensatory plan, contract or arrangement where an
executive officer is entitled to receive more than $100,000 to compensate such
executive officers in the event of resignation, retirement or other termination,
a change of control of the Company or a change in responsibilities following a
change in control, other than as described in this Form 20-F.

Audit and Compensation Committees

The Company has an audit committee and audit committee charter.
A copy of the Companys audit committee charter was filed as an exhibit to the
Companys Form 10-KSB filed for the Companys 2003 fiscal year. The function of
the audit committee is to monitor the veracity of the financial and regulatory
reports produced by the Company, and the controls that are in place to ensure
the opportunities for fraud or material error in the financial statements of the
Company are minimized. The current audit committee is comprised of Dennis
Bennie. We anticipate appointing additional members to our audit committee as we
increase the size of our board of directors.

The Board has determined that Mr. Bennie meets the SECs
definition of an audit committee financial expert, as defined in Item
401(e)(2) of Regulation S-B. The Board has also determined that Mr. Bennie meets
the definition of an independent director, as defined in Rule 121A of the
American Stock Exchange Company Guide.

The Company does not have a compensation committee. Currently,
any material commitments, inclusive of remuneration, are required to be
pre-approved by the Board.

The Company has a disclosure committee and a disclosure
committee charter. Our disclosure committee is comprised of all of our officers
and directors. The purpose of the committee is to provide assistance to the
Chief Executive Officer and the Chief Financial Officer in fulfilling their
responsibilities regarding the identification and disclosure of material
information about us, and the accuracy, completeness and timeliness of our
financial reports.

D.        Employees

The Company has one employee, and receives various consulting
and advisory services from consultants.

We are party to the following employment and consulting
agreements:

- a contract of employment with Ilan Diamond,
- a verbal consulting agreement with Rivonia Capital Inc., a company
  controlled by Alan Friedman,
- a verbal consulting agreement with The M&S Group Inc., a company
  controlled by Alan Rootenberg,
- a verbal consulting arrangement with Highlands Consulting Group, Inc. a
  company controlled by Denny Johnson and
- a verbal consulting arrangement with Kinley Exploration LLC, a company
  controlled by Colin Kinley.

The other consulting agreements are through our Israeli
subsidiary.

E.        Share Ownership

- 48 -

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Shares

The shareholdings of our officers and directors are set forth
below as of the date hereof.

Name and Position
    Number of Common Shares
    Percentage of Outstanding Common
      Shares Owned(1)Dennis Bennie 
        Director (Chairman)
      5,947,068
      9.49%Ilan Diamond 
        Chief Executive Officer and Director
      4,569,883  7.30%Alan Friedman 
        Executive Vice-President and Director
      5,838,267 (2)
    9.32%Alan Rootenberg 
        Chief Financial Officer
      Nil
    NilDaniel Bloch 
        Secretary
      Nil
      NilDenny Johnson Senior Vice-President,
      
        Exploration and Development
      4,000
    0.0%Colin Kinley 
        Senior VP, Operations
      Nil
    NilOhad Marani Director
      Nil
    NilTotal:
    16,359,218
    26.12%


| | (1) | Based on 62,640,001 common shares issued and outstanding
      as of September 30, 2009.
| | --- | ----------------------------------------------------------------------------------------
| | (2) | Includes 884,667 held by spouse.                                                        

Options

Details of the stock options held by our officers and directors
are set forth below as of the date hereof.

Name and
      Position
    Grant Date
    Expiry Date
    Exercise Price
    TotalDennis Bennie 
        Director (Chairman)
      August 20, 2009
      August 20, 2014
      US$0.25
      396,000(1)Ilan Diamond 
        Chief Executive Officer and Director
    August 20, 2009 
        August 20, 2009
    August 20, 2014 
        August 20, 2014
    US$0.25 
        US$0.25
    396,000(1) 
        385,000(3)


- 49 -

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Name and
      Position
    Grant Date
    Expiry Date
    Exercise Price
    TotalAlan Friedman 
        Executive Vice- President and Director
    August 20, 2009 
        August 20, 2009
    August 20, 2014 
        August 20, 2014
    US$0.25 
        US$0.25
    396,000(1) 
        250,000(3)Alan Rootenberg 
        Chief Financial Officer
      September 23, 2009  September 23, 2014  US$0.25  150,000(1)Daniel Bloch Secretary
    August 14, 2009
    August 20, 2014
    US$0.25
      75,000Denny Johnson 
        Senior Vice- President, Exploration and Development
      August 14, 2009
    August 20, 2014
      US$0.25
      150,000(3)Colin Kinley 
        Senior VP, Operations
    August 14, 2009 
        September 23, 2009
    August 20, 2014 
        September 23, 2014
    US$0.25 
        US$0.25
    400,000(2) 
        250,000(4)Ohad Marani 
        Director  September 23, 2009
      September 23, 2014
      US$0.25
      250,000(4)Total:
    
    
    
    3,098,000


Notes:

| | (1) | Options vest over 2 years, with 12.5% vesting at the end
      of each quarter.                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Options vest 8.5% at the end of each quarter over two
      years and 8.0% at the end of each quarter thereafter.                                                                                                                                                                         
| | (3) | Options vest over 4 years, with 6.25% vesting at the end
      of each quarter.                                                                                                                                                                                                           
| | (4) | Options vest 12.5% at the end of each quarter and,
      notwithstanding this three month vesting period, the initial amount will
      vest on the business day immediately following the day on which each of
      the optionees is elected or appointed as a director of the
  Company

Each option may be exercised to purchase one of our common
shares at the exercise price.

- 50 -

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Warrants

Details of the share purchase warrants held by our officers and
directors are set forth below as of the date hereof.

Name and
      Position
    Grant Date
    Expiry Date
    Exercise Price
    TotalDennis Bennie 
        Director (Chairman)
      August 31, 2009
      August 31, 2011
      US$0.50
      118,200Ilan Diamond 
        Chief Executive Officer and Director
      N/A
      N/A
      Nil
      NilAlan Friedman 
        Executive Vice-President
      and Director
      August 31, 2009
      August 31, 2011
      US$0.50
      9,000Alan Rootenberg Chief Financial Officer
      N/A
    N/A  Nil  NilDaniel BlochSecretary
    N/A
    N/A
    Nil
    NilColin Kinley 
        Senior VP, Operations
      N/A  N/A  Nil
      NilDenny Johnson 
        Senior Vice-President, Exploration and Development  August 31, 2009
      August 31, 2011
      US$0.50
      2,000Ohad MaraniDirector
    N/A
    N/A
    Nil
    NilTotal:
    
    
    
    129,200


Each warrant may be exercised to purchase one of our common
shares at the exercise price.

- 51 -

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Equity Compensation Plans

The following table summarizes our compensation plans under
which equity securities are authorized for issuance as at September 30, 2009.

Plan Category
    Number of securities to be
      issued upon exercise of outstanding options,
      warrants and rights
    Weighted-average exercise
      price of outstanding options, warrants and
      rights
    Number of securities remaining
      available for future issuance under equity
      compensation plans (excluding securities reflected
      in the second column)Equity compensation plans approved by securityholders
    Nil
    Nil
    N/AEquity compensation plans not approved by
      securityholders
    3,984,000
    $0.25
    2,280,000Total:
    3,984,000
    $0.25
      2,280,000


|(1) | The number of securities remaining available for future
        issuance under our 10% rolling stock option plan as at the end of our
        most recently completed financial year is calculated on the basis of 10%
        of the Companys issued and outstanding shares as at such date (being
        10% of 62,640,001 =6,264,000).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On August 31, 2009, our board of directors adopted a new 10%
rolling stock option plan (the New Stock Option Plan) to replace the existing
plan The New Stock Option plan was ratified by the shareholders of the Company
of December 17, 2009.

The purpose of the New Stock Option Plan continues to be to
allow the Company to grant options to directors, officers, employees and
consultants, as additional compensation, and as an opportunity to participate in
the success of the Company. The granting of such options is intended to align
the interests of such persons with that of the shareholders. Options will be
exercisable over periods of up to ten years as determined by the Board of
Directors of the Company and are required to have an exercise price no less than
the fair market value of the Companys common shares, as determined in
accordance with the New Stock Option Plan. Pursuant to the New Stock Option
Plan, the Board of Directors may from time to time authorize the issue of
options to directors, officers, employees and consultants of the Company and its
subsidiaries or employees of companies providing management or consulting
services to the Company or its subsidiaries.

The maximum number of common shares which may be issued
pursuant to options previously granted and those granted under the New Stock
Option Plan will be a maximum of 10% of the issued and outstanding common shares
at the time of the grant. In addition, the number of shares which may be
reserved for issuance to any one individual may not exceed 5% of the issued
shares on a yearly basis or 2% if the optionee is engaged in investor relations
activities or is a consultant. The New Stock Option Plan contains no vesting
requirements, but permits the Board of Directors to specify a vesting schedule
in its discretion.

As of September 1, 2009, 3,334,000 options had been granted
under the 2009 Stock Option Plan to the former holders of Adira Energy stock
options, in exchange for previously outstanding Adira Energy options. All of the
3,334,000 options that were granted as of September 1, 2009 will expire on
August 20, 2014 and are subject to various vesting terms. On September 23, 2009,
an additional 650,000 options were issued to certain directors and officers of
the Company. A copy of the 2009 Stock Option Plan is incorporated by reference
hereto.

- 52 -

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ITEM
7              
MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS

A.        Major
Shareholders

Major Shareholders

We are a publicly-held corporation, with our shares held by
residents of the United States, Canada and other countries. To the best of our
knowledge, no person, corporation or other entity beneficially owns, directly or
indirectly, or controls more than 5% of our common shares, except as follows:

Name and Municipality of Residence
    Number of Common Shares
      Owned(1)
    Percentage(2)Dennis Bennie Toronto, Canada
    5,947,068
    9.49%Ilan Diamond Morningside, South Africa
    4,569,883
    7.30%Alan Friedman Toronto, Canada
    5,838,267 (3)
    9.32%Rael Diamond Toronto, Canada
    4,077,849 (4)
    6.51%


|(1) | Based on beneficial share ownership data as of the date
      hereof. For these purposes, beneficial ownership means the sole or
      shared power to vote or direct the voting or to dispose or direct the
      disposition of any security. Unless otherwise indicated, each shareholder
      listed has sole voting or dispositive power with respect to such common
      shares.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | Based on 62,640,001 of our common shares issued and
      outstanding as of September 30, 2009.                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | Includes 884,667 held by spouse.                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | Includes shares held by spouse.                                                                                                                                                                                                                                                                                                                                                           

Each of our common shares entitles the holder thereof to one
vote.

Geographic Breakdown of Shareholders

As of December 31, 2009, our shareholder register indicates
that our common shares are held as follows:

Location
    Number of Shares
    Percentage of Total Shares
    Number of Registered
      Shareholders of RecordUnited States
    6,984,807
    11.15%
    37Canada
    45,917,478
    73.30%
    106Other
    9,737,716
    15.55%
    14Total
      62,640,001
    100%
    157


Shares registered in intermediaries were assumed to be held by
residents of the same country in which the clearing house was located.

Transfer Agent

Our securities are recorded in registered form on the books of
our transfer agent, Computershare Trust Company of Canada, located at
3rd Floor, 510 Burrard Street, Vancouver, BC V6C 3B9. However,
the

- 53 -

---

majority of such shares are registered in the name of
intermediaries such as brokerage houses and clearing houses (on behalf of their
respective brokerage clients). We do not have knowledge or access to the
identities of the beneficial owners of such shares registered through
intermediaries.

Control

To the best of our knowledge, we are not directly or indirectly
owned or controlled by any other corporation, by any foreign government or by
any other natural or legal person, severally or jointly.

Insider Reports under the British Columbia Securities Act

Under the British Columbia Securities Act, insiders
(generally officers, directors and holders of 10% or more of our shares) were
required to file insider reports of changes in their ownership in the first ten
days of the month following a trade in our securities. Copies of such reports
are available for public inspection at the offices of the British Columbia
Securities Commission, 9th Floor, 701 West Georgia Street, Vancouver,
British Columbia V7Y 1L2 (telephone (604) 899-6500) or at the British Columbia
Securities Commission website (www.bcsc.bc.ca). Since 2002, in British Columbia
all insider reports must be filed electronically ten days following the date of
the trade at www.sedi.ca. The public is able to access these reports at
www.sedi.ca.

B.        Related Party
  Transactions

No director or senior officer of the Company, and no associate
or affiliate of the foregoing persons, and no insider has or has had any
material interest, direct or indirect, in any transactions, or in any proposed
transaction, which in either such case has materially affected or will
materially affect us or our predecessors since the beginning of our last
completed fiscal year except as follows:

| | (a) | During the period ended September 30, 2009, a total of
      CDN$80,000 in consulting fees was paid to the President and CEO of the
      Company.                                                                                                                                                                                       
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (b) | During the period ended September 30, 2009, a total of
      CDN$10,000 in consulting fees was paid to the a former Chief Financial
      Officer of the Company                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (c) | During the period ended September 30, 2009, a total of
      CDN$72,000 in consulting fees were paid to a private company controlled by
      Alan Friedman and the Company has agreed to pay the private company a fee
      of CDN$8,000 per month for consulting.                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (d) | During the period ended September 30, 2009, a total of
      CDN$1,500 was paid to a private company controlled by Alan Rootenberg for
      his services as Chief Financial Officer of the company and the Company has
      agreed to pay the private company a fee of $3,000 per month for services
      provided by Alan Rootenberg.
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (e) | During the period ended September 30, 2009, a total of
      $20,000 in consulting fees was paid to a company controlled by an officer
      of the Company.                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (f) | During the period ended September 30, 2009, a total
      $75,000 in consulting fees was paid to a company of which a former
      director of the Company, Glen Perry, was an officer and
director.                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                          
| | (g) | Dennis Bennie, Ilan Diamond and Alan Friedman purchased
      an aggregate of 9,736,167 common shares of Adira Energy (3,493,270,
      2,670,589 and 3,572,308 common shares,                                                                                                                                                           

- 54 -

---

respectively) at a price of CDN$0.05 per share, such amount
being the approximate amount of personal expenses incurred primarily by the
Dennis Bennie, Ilan Diamond, Alan Friedman in conducting the business prior to
incorporation. An aggregate of 1,250,000 common shares of Adira Energy (625,000,
625,000 and 0 common shares, respectively) were subsequently directly and
beneficially purchased at a price of $0.05 per share. The shares of Adira Energy
were subsequently split resulting in these three individuals holding,
beneficially and directly, 10,986,167 shares (4,118,270, 3,572,308 and 3,295,589
respectively). Post split, an aggregate of 236,400 common shares of Adira Energy
(236,400, 0 and 0 common shares, respectively) were subsequently purchased at a
price of $0.25 per share. These shares were subsequently exchanged for an
equivalent number of shares of the Company on completion of the acquisition of
Adira Energy pursuant to the Securities Exchange Agreement dated August 4, 2009
among the Company, Adira Energy, Dennis Bennie, Ilan Diamond and Alan Friedman.

C.        Interests of
  Experts and Counsel

No applicable.

- 55 -

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ITEM
8              
FINANCIAL INFORMATION

A.        Consolidated
Statements and Other Financial Information

Financial Statements

The financial statements required as part of this Form 20-F are
filed under Item 17 of this Form 20-F.

Legal Proceedings

We are not a party to any legal or arbitration proceedings nor,
to our knowledge, are any such proceedings contemplated.

Dividends

We have not paid any dividends on our common shares since
incorporation. Our management anticipates that we will retain all future
earnings and other cash resources for the future operation and development of
our business. We do not intend to declare or pay any cash dividends in the
foreseeable future. Payment of any future dividends will be at our board of
directors discretion after taking into account many factors including our
operating results, financial condition and current and anticipated cash needs.

B.        Significant Changes

We have not experienced any significant changes since the date
of the financial statements included with this Form 20-F except as disclosed in
this Form 20-F.

- 56 -

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ITEM
9              
THE OFFER AND LISTING

Common Shares

Our authorized capital consists of an unlimited number of
common shares without par value, of which 62,640,001 common shares and are
issued and outstanding as of September 30, 2009. All shares are initially issued
in registered form. There are no restrictions on the transferability of our
common shares imposed by our constituting documents.

The common shares entitle their holders to: (i) vote at all
meetings of our shareholders except meetings at which only holders of specified
classes of shares are entitled to vote, having one vote per common share, (ii)
receive dividends at the discretion of our board of directors; and (iii) receive
our remaining property on liquidation, dissolution or winding up.

A.        Offer and
Listing Details

Trading Markets

Our common shares are traded on the OTC Bulletin Board in the
United States under the symbol AMGOF. The following table shows the
progression in the high and low closing trading prices of our common shares on
the OTC Bulletin Board for the periods listed.

|                     | High ($) | Low ($)
|-------------------- | -------- | -------
|Annual (fiscal year) |          |        
|2009                 | 0.38     | 0.03   
|2008                 | 0.50     | 0.11   
|2007                 | 0.90     | 0.32   
|2006                 | 1.41     | 0.125  
|2005                 | 0.27     | 0.022  
|Quarterly            |          |        
|Fiscal 2009          |          |        
|Fourth Quarter       | 0.38     | 0.21   
|Third Quarter        | 0.38     | 0.06   
|Second Quarter       | 0.10     | 0.05   
|First Quarter        | 0.12     | 0.03   
|Fiscal 2008          |          |        
|Fourth Quarter       | 0.33     | 0.11   
|Third Quarter        | 0.50     | 0.21   
|Second Quarter       | 0.39     | 0.21   
|First Quarter        | 0.50     | 0.27   
|Fiscal 2007          |          |        
|Fourth Quarter       | 0.65     | 0.33   
|Third Quarter        | 0.90     | 0.60   
|Second Quarter       | 0.80     | 0.45   
|First Quarter        | 0.75     | 0.32   
|Monthly              |          |        
|September 2009       | 0.30     | 0.22   
|August 2009          | 0.30     | 0.21   
|July 2009            | 0.38     | 0.25   
|June 2009            | 0.38     | 0.29   
|May 2009             | 0.37     | 0.29   
|April 2009           | 0.35     | 0.06   
|March 2009           | 0.07     | 0.06   

- 57 -

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B.        Plan of
Distribution

Not applicable.

C.        Markets

Our common shares are traded in the United States on the OTC
Bulletin Board.

D.        Selling
Shareholders

Not applicable.

E.        Dilution

Not applicable.

F.        Expenses of the
Issue

Not applicable.

- 58 -

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ITEM
10              ADDITIONAL
INFORMATION

A.        Share Capital

We are authorized to issue an unlimited number of common
shares. 62,640,001 common shares are issued and outstanding as of September 30,
2009 and at December 31, 2009. The common shares entitle their holders to: (i)
vote at all meetings of our shareholders except meetings at which only holders
of specified classes of shares are entitled to vote, having one vote per common
share, (ii) receive dividends at the discretion of our board of directors; and
(iii) receive our remaining property on liquidation, dissolution or winding up.
All of our common shares rank equally for the payment of any dividends and
distributions in the event of a windup.

B.        Memorandum and
Articles of Incorporation

We were incorporated on February 20, 1997 as Trans New Zealand
Oil Company under the laws of the State of Nevada, USA. We changed our name to
AMG Oil Ltd. on July 27, 1998. On November 27, 2008, we changed our
jurisdiction of incorporation from Nevada to the Canadian federal jurisdiction
under the Canada Business Corporation Act.Our corporate constituting
documents are comprised of our Articles of Association ("Articles") and our
By-Laws (By-Laws). Information regarding out Articles and By-laws is
incorporated by reference from our Form 20-F filed previously on September 4,
2009.

C.        Material Contracts

The material contracts to which we are a party which were
entered into during the last two years are as follows:

- Securities Exchange Agreement dated August 4, 2009 among the Company, Adira
  Energy, Alan Friedman, Dennis Bennie and Ilan Diamond.
- Securities Exchange Agreement dated effective August 4, 2009 among the
  Company and the minority shareholders of Adira Energy
- Agency Agreement between Adira Energy and Sandfire Securities Inc. dated
  August 31, 2009 pursuant to which Adira Energy issued 7,600,000 Units in the
  Private Placement as described in Item 4.A of this Form 20-F.
- Subscription Agreement entered into between Adira Energy and the
  subscribers for the 7,600,000 Unit Private Placement described in Item 4.A of
  this Form 20-F.
- Form of Subscription Agreement entered into between the Company Oil Ltd and
  the subscribers for the 400,000 Unit Private Placement described in Item 4.A
  of this Form 20-F.

D.        Exchange Controls

There is no law or governmental decree or regulation in Canada
that restricts the export or import of capital, or affects the remittance of
dividends, interest or other payments to a non-resident holder of common shares
of the Company, other than withholding tax requirements. See Taxation.

There is no limitation imposed by Canadian law or by the
charter or other constituent documents of the Company on the right of a
non-resident to hold or vote common shares of the Company, other than as
provided in the Investment Canada Act (Canada) (the Investment Act).

- 59 -

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The following discussion summarizes the principal features of
the Investment Act for a non-resident who proposes to acquire common shares of
the Company. It is general only, it is not a substitute for independent legal
advice from an investors own advisor, and it does not anticipate statutory or
regulatory amendments.

The Investment Act is a federal statute of broad application
regulating the establishment and acquisition of Canadian businesses by
non-Canadians, including individuals, governments or agencies thereof,
corporations, partnerships, trusts or joint ventures (each an entity).
Investments by non-Canadians to acquire control over existing Canadian
businesses or to establish new ones are either reviewable or notifiable under
the Investment Act. If an investment by a non-Canadian to acquire control over
an existing Canadian business is reviewable under the Investment Act, the
Investment Act prohibits implementation of the investment unless after review
the Director of Investments, who is appointed by the Minster of Industry, is
satisfied that the investment is likely to be of net benefit to Canada.

A non-Canadian would acquire control of the Company for the
purposes of the Investment Act through the acquisition of common shares if the
non-Canadian acquired a majority of the common shares of the Company. Further,
the acquisition of less than a majority but one third or more of the common
shares of the Company would be presumed to be an acquisition of control of the
Company unless it could be established that, on the acquisition, the Company was
not controlled in fact by the acquirer through the ownership of common shares.

For a direct acquisition that would result in an acquisition of
control of the Company, subject to the exception for WTO-investors that are
controlled by persons who are resident in World Trade Organization (WTO)
member nations, a proposed investment would be reviewable where the value of the
acquired assets is CAD $5 million or more, or if an order for review was made by
the federal cabinet on the grounds that the investment related to Canadas
cultural heritage or national identity, regardless of the value of the assets of
the Company.

For a proposed indirect acquisition that would result in an
acquisition of control of the Company through the acquisition of a non-Canadian
parent entity, the investment would be reviewable where (a) the value of the
Canadian assets acquired in the transaction is CAD $50 million or more, or (b)
the value of the Canadian assets is greater than 50% of the value of all of the
assets acquired in the transaction and the value of the Canadian assets is CAD
$5 million or more.

In the case of a direct acquisition by or from a WTO
investor, the threshold is significantly higher, and is adjusted for inflation
each year. The 2008 threshold was CAD$295 million. Other than the exception
noted below, an indirect acquisition involving a WTO investor is not reviewable
under the Investment Act.

The higher WTO threshold for direct investments and the
exemption for indirect investments do not apply where the relevant Canadian
business is carrying on the following businesses that have been deemed to be
sensitive: (i) the production of oil and gas and the ownership of an interest in
a producing oil and gas property in Canada; (ii) the provision of any financial
service; (iii) the provision of any transportation service; or (iv) a
cultural business.

Certain transactions relating to common shares of the Company
are exempt from the Investment Act, including

| | (a) | acquisition of common shares of the Company by a person
      in the ordinary course of that persons business as a trader or dealer in
      securities,
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

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| | (b) | acquisition of control of the Company in connection with
      the realization of security granted for a loan or other financial
      assistance and not for a purpose related to the provisions on the
      Investment Act, and                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                      
| | (c) | acquisition of control of the Company by reason of an
      amalgamation, merger, consolidation or corporate reorganization following
      which the ultimate direct or indirect control in fact of the Company,
      through the ownership of common shares, remained
  unchanged.

E.       
Taxation

Material Canadian Federal Income Tax Consequences for United
States Residents

The following summarizes the material Canadian federal income
tax consequences generally applicable to the holding and disposition of our
shares by a holder (in this summary, a U.S. Holder) who, (a) for the purposes
of the Income Tax Act (Canada) (the Tax Act) and at all relevant times, is not
resident in Canada, deals at arms length with us, holds our shares as capital
property and does not use or hold our shares in the course of carrying on, or
otherwise in connection with, a business in Canada, and (b) for the purposes of
the Canada-United States Income Tax Convention, 1980 (the Treaty) and at all
relevant times, is a resident solely of the United States, has never been a
resident of Canada, and has not held or used (and does not hold or use) our
shares in connection with a permanent establishment or fixed base in Canada.
This summary does not apply to traders or dealers in securities, limited
liability companies, tax-exempt entities, insurers, financial institutions
(including those to which the mark-to-market provisions of the Tax Act apply),
or any other holder in special circumstances.

This summary is based on the current provisions of the Tax Act
including all regulations thereunder, the Treaty, all proposed amendments to the
Tax Act, the regulations and the Treaty publicly announced by the Government of
Canada to the date hereof, and our understanding of the current administrative
practice of the Canada Revenue Agency. It has been assumed that all currently
proposed amendments will be enacted as proposed and that there will be no other
relevant change in any governing law or administrative practice, although no
assurances can be given in these respects. The summary does not take into
account Canadian provincial, U.S. federal (which follows further below), state
or other foreign income tax law or practice. The tax consequences to any
particular U.S. Holder will vary according to the status of that holder as an
individual, trust, corporation, partnership or other entity, the jurisdictions
in which that holder is subject to taxation, and generally according to that
holders particular circumstances. Accordingly, this summary is not, and is not
to be construed as, Canadian tax advice to any particular U.S. Holder. All U.S.
Holders are advised to consult with their own tax advisors regarding their
particular circumstances. The discussion below is qualified accordingly.

Dividends

Dividends paid or deemed to be paid to a U.S. Holder by us will
be subject to Canadian withholding tax. The Tax Act requires a 25% withholding
unless reduced under a tax treaty. Under the Treaty, provided that a holder can
demonstrate that it is a qualifying U.S. Holder, the rate of withholding tax on
dividends paid to a U.S. Holder is generally limited to 15% of the gross amount
of the dividend (or 5% if the U.S. Holder is a corporation and beneficially owns
at least 10% of our voting shares). We will be required to withhold the
applicable withholding tax from any dividend and remit it to the Canadian
government for the U.S. Holders account.

Disposition

For purposes of the following discussion, we have assumed that
our shares will remain listed on the TSX. A U.S. Holder is not subject to tax
under the Tax Act in respect of a capital gain realized on the

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disposition of our shares in the open market unless the shares
are taxable Canadian property to the holder thereof and the U.S. Holder is not
entitled to relief under the Treaty. Our shares will be taxable Canadian
property to a U.S. Holder (a) if, at any time during the 60 months preceding the
disposition, the U.S. Holder or persons with whom the U.S. Holder did not deal
at arms length alone or together owned 25% or more of our issued shares of any
class or series, or (b) in other specific circumstances, including where shares
were acquired for other securities in a tax-deferred transaction. If our shares
constitute taxable Canadian property to the holder, the holder will (unless
relieved under the Treaty) be subject to Canadian income tax on any gain. The
taxpayers capital gain or loss from a disposition of the share is the amount,
if any, by which the proceeds of disposition exceed (or are exceeded by) the
aggregate of the adjusted cost base and reasonable expenses of disposition.
One-half of the capital gain is included in income and one-half of the capital
loss is deductible from capital gains realized in the same year. Unused capital
losses may be carried back three taxation years or forward indefinitely and
applied to reduce capital gains realized in those years.

A U.S. Holder whose shares do constitute taxable Canadian
property should consult with the holders own tax advisors regarding any
possible relief (if any) from Canadian tax under the Treaty based on applicable
circumstances at the relevant time. Such Treaty relief should not be anticipated
under current circumstances.

United States Tax Consequences

United States Federal Income Tax Consequences

The following is a discussion of all material United States
federal income tax consequences, under current law, generally applicable to a
U.S. Holder (as hereinafter defined) of our common shares. This discussion does
not address all potentially relevant federal income tax matters and it does not
address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local or foreign tax consequences. (See Taxation - Canadian Federal
Income Tax Consequences above). Accordingly, we urge holders and prospective
holders of our common shares to consult their own tax advisors about the
specific federal, state, local and foreign tax consequences to them of
purchasing, owning and disposing of our common shares, based upon their
individual circumstances.

The following discussion is based upon the sections of the
Internal Revenue Code of 1986, as amended (the Code), Treasury Regulations,
published Internal Revenue Service (IRS) rulings, published administrative
positions of the IRS and court decisions that are currently applicable, any or
all of which could be materially and adversely changed, possibly on a
retroactive basis, at any time and which are subject to differing
interpretations. This discussion does not consider the potential effects, both
adverse and beneficial, of any proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.

U.S. Holders

As used herein, a U.S. Holder means a holder of our common
shares who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, an entity created or
organized in or under the laws of the United States or of any political
subdivision thereof which has elected to be treated as a corporation for United
States federal income tax purposes (under Treasury Regulation Section 301.7701
-3), an estate whose income is taxable in the United States irrespective of
source or a trust subject to the primary supervision of a court within the
United States and control of a United States fiduciary as described in Section
7701(a)(30) of the Code. This summary does not address the tax consequences to,
and U.S. Holder does not include, persons subject to specific provisions of
federal income tax law, such as tax-exempt organizations, qualified retirement
plans, individual retirement accounts and other tax-deferred

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accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals, persons or entities that have a functional
currency other than the U.S. dollar, shareholders subject to the alternative
minimum tax, shareholders who hold common shares as part of a straddle, hedging
or conversion transaction, and shareholders who acquired their common shares
through the exercise of employee stock options or otherwise as compensation for
services. This summary is limited to U.S. Holders who own our common shares as
capital assets and who own (directly and indirectly, pursuant to applicable
rules of constructive ownership) no more than 5% of the value of our total
outstanding stock. This summary does not address the consequences to a person or
entity holding an interest in a shareholder or the consequences to a person of
the ownership, exercise or disposition of any options, warrants or other rights
to acquire common shares. In addition, this summary does not address special
rules applicable to United States persons (as defined in Section 7701(a)(30) of
the Code) holding common shares through a foreign partnership or to foreign
persons holding common shares through a domestic partnership.

Distribution on Our Common Shares

In general, U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to our common shares are
required to include in gross income for United States federal income tax
purposes the gross amount of such distributions, equal to the U.S. dollar value
of such distributions on the date of receipt (based on the exchange rate on such
date), to the extent that we have current or accumulated earnings and profits,
without reduction for any Canadian income tax withheld from such distributions.
Such Canadian tax withheld may be credited, subject to certain limitations,
against the U.S. Holders federal income tax liability or, alternatively, may be
deducted in computing the U.S. Holders federal taxable income by those who
itemize deductions. (See more detailed discussion at Foreign Tax Credit
below). To the extent that distributions exceed our current or accumulated
earnings and profits, they will be treated first as a return of capital up to
the U.S. Holders adjusted basis in the common shares and thereafter as gain
from the sale or exchange of property. Preferential tax rates for long-term
capital gains are applicable to a U.S. Holder which is an individual, estate or
trust. There are currently no preferential tax rates for long-term capital gains
for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is
not converted by the recipient into U.S. dollars on the date of receipt, a U.S.
Holder will have a tax basis in the foreign currency equal to its U.S. dollar
value on the date of receipt. Generally any gain or loss recognized upon a
subsequent sale or other disposition of the foreign currency, including the
exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized gain does not exceed $200 will not recognize that
gain, provided that there are no expenses associated with the transaction that
meet the requirements for deductibility as a trade or business expense (other
than travel expenses in connection with a business trip) or as an expense for
the production of income.

Dividends paid on our common shares generally will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A U.S. Holder which is a
corporation and which owns shares representing at least 10% of our voting power
and value may, under certain circumstances, be entitled to a 70% (or 80% if the
U.S. Holder owns shares representing at least 20% of our voting power and value)
deduction of the United States source portion of dividends received from us
(unless we qualify as a passive foreign investment company, as defined below).
We do not anticipate that we will earn any United States income, however, and
therefore we do not anticipate that any U.S. Holder will be eligible for the
dividends received deduction.

Under current Treasury Regulations, dividends paid on our
common shares, if any, generally will not be subject to information reporting
and generally will not be subject to U.S. backup withholding tax. However,
dividends and the proceeds from a sale of our common shares paid in the U.S.
through a U.S. or U.S. related paying agent (including a broker) will be subject
to U.S. information reporting requirements

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and may also be subject to the 28% U.S. backup withholding tax,
unless the paying agent is furnished with a duly completed and signed Form W-9.
Any amounts withheld under the U.S. backup withholding tax rules will be allowed
as a refund or a credit against the U.S. Holders U.S. federal income tax
liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions)
Canadian income tax with respect to the ownership of our common shares may be
entitled, at the option of the U.S. Holder, to either receive a deduction or a
tax credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a credit because a credit reduces United States federal
income taxes on a dollar-for-dollar basis, while a deduction merely reduces the
taxpayers income subject to tax. This election is made on a year-by-year basis
and generally applies to all foreign taxes paid by (or withheld from) the U.S.
Holder during that year. There are significant and complex limitations which
apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate share of the U.S. Holders United States income
tax liability that the U.S. Holders foreign source income bears to his or its
worldwide taxable income. In the determination of the application of this
limitation, the various items of income and deduction must be classified into
foreign and domestic sources. Complex rules govern this classification process.
In addition, this limitation is calculated separately with respect to specific
classes of income such as passive income,  high withholding tax interest,
financial services income, shipping income, and certain other
classifications of income. Dividends distributed by us will generally constitute
passive income or, in the case of certain U.S. Holders, financial services
income for these purposes. The availability of the foreign tax credit and the
application of the limitations on the credit are fact specific, and U.S. Holders
of our common shares should consult their own tax advisors regarding their
individual circumstances.

Disposition of Our Common Shares

In general, U.S. Holders will recognize gain or loss upon the
sale of our common shares equal to the difference, if any, between (i) the
amount of cash plus the fair market value of any property received, and (ii) the
shareholders tax basis in our common shares. Preferential tax rates apply to
long-term capital gains of U.S. Holders which are individuals, estates or
trusts. In general, gain or loss on the sale of our common shares will be
long-term capital gain or loss if the common shares are a capital asset in the
hands of the U.S. Holder and are held for more than one year. Deductions for net
capital losses are subject to significant limitations. For U.S. Holders that are
not corporations, any unused portion of such net capital loss may be carried
over to be used in later tax years until such net capital loss is thereby
exhausted. For U.S. Holders that are corporations (other than corporations
subject to Subchapter S of the Code), an unused net capital loss may be carried
back three years and carried forward five years from the loss year to be offset
against capital gains until such net capital loss is thereby exhausted.

Other Considerations

Set forth below are certain material exceptions to the
above-described general rules describing the United States federal income tax
consequences resulting from the holding and disposition of common shares:

Foreign Investment Company

If 50% or more of the combined voting power or total value of
our outstanding shares is held, directly or indirectly, by citizens or residents
of the United States, United States domestic partnerships or corporations, or
estates or trusts other than foreign estates or trusts (as defined by the Code
Section 7701(a)(31)), and we are found to be engaged primarily in the business
of investing, reinvesting, or trading in securities, commodities, or any
interest therein, it is possible that we may be treated as a foreign investment
company as defined in Section 1246 of the Code, causing all or part of any
gain

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realized by a U.S. Holder selling or exchanging common shares
to be treated as ordinary income rather than capital gain. We do not believe
that we currently qualify as a foreign investment company. However, there can be
no assurance that we will not be considered a foreign investment company for the
current or any future taxable year.

Passive Foreign Investment Company

United States income tax law contains rules governing passive
foreign investment companies (PFIC) which can have significant tax effects on
U.S. Holders of foreign corporations. These rules do not apply to non-U.S.
Holders. Section 1297 of the Code defines a PFIC as a corporation that is not
formed in the United States if, for any taxable year, either (i) 70% or more of
its gross income is passive income, which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the corporation is not publicly traded and either is a controlled
foreign corporation or makes an election, by adjusted tax basis), of its assets
that produce or are held for the production of passive income is 50% or more.
We appear to have been a PFIC for the fiscal year ended August 31, 2006, and at
least certain prior fiscal years. In addition, we expect to qualify as a PFIC
for the fiscal year ending August 31, 2007 and we may also qualify as a PFIC in
future fiscal years. Each of our U.S. Holders is urged to consult a tax advisor
with respect to how the PFIC rules affect such U.S. Holders tax situation.

Each of our U.S. Holders who holds stock in a foreign
corporation during any year in which such corporation qualifies as a PFIC is
subject to United States federal income taxation under one of three alternative
tax regimes at the election of such U.S. Holder. The following is a discussion
of such alternative tax regimes applied to such U.S. Holders of our stock. In
addition, special rules apply if a foreign corporation qualifies as both a PFIC
and a controlled foreign corporation (as defined below) and a U.S. Holder
owns, actually or constructively, 10% or more of the total combined voting power
of all classes of stock entitled to vote of such foreign corporation (See more
detailed discussion at Controlled Foreign Corporation below).

A U.S. Holder who elects to treat us as a qualified electing
fund (QEF) will be subject, under Section 1293 of the Code, to current federal
income tax for any taxable year to which the election applies in which we
qualify as a PFIC on his pro rata share of our (i) net capital gain (the
excess of net long-term capital gain over net short-term capital loss), which
will be taxed as long-term capital gain, and (ii) ordinary earnings (the
excess of earnings and profits over net capital gain), which will be taxed as
ordinary income, in each case, for the shareholders taxable year in which (or
with which) our taxable year ends, regardless of whether such amounts are
actually distributed. A U.S. Holders tax basis in the common shares will be
increased by any such amount that is included in income but not distributed.

The procedure a U.S. Holder must comply with in making an
effective QEF election, and the consequences of such election, will depend on
whether the year of the election is the first year in the U.S. Holders holding
period in which we are a PFIC. If the U.S. Holder makes a QEF election in such
first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF
election by simply filing the appropriate documents at the time the U.S. Holder
files his tax return for such first year. If, however, we qualified as a PFIC in
a prior year during the U.S. Holders holding period, then, in order to avoid
the Section 1291 rules discussed below, in addition to filing documents, the
U.S. Holder must elect to recognize under the rules of Section 1291 of the Code
(discussed herein) (i) any gain that he would otherwise recognize if the U.S.
Holder sold his stock on the qualification date or (ii) if we are a controlled
foreign corporation, the U.S. Holders pro rata share of our post-1986 earnings
and profits as of the qualification date. The qualification date is the first
day of our first tax year in which we qualified as a QEF with respect to such
U.S. Holder. For purposes of this discussion, a U.S. Holder who makes (i) a
timely QEF election or (ii) an untimely QEF election and either of the
above-described gain-recognition elections under Section 1291 is referred to
herein as an Electing U.S. Holder. A U.S. Holder who holds

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common shares at any time during a year in which we are a PFIC
and who is not an Electing U.S. Holder (including a U.S. Holder who makes an
untimely QEF election and makes neither of the above-described gain-recognition
elections) is referred to herein as a Non-Electing U.S. Holder. An Electing
U.S. Holder (i) generally treats any gain realized on the disposition of his
common shares as capital gain and (ii) may either avoid interest charges
resulting from PFIC status altogether or make an annual election, subject to
certain limitations, to defer payment of current taxes on his share of our
annual realized net capital gain and ordinary earnings subject, however, to an
interest charge. If the U.S. Holder is not a corporation, any interest charge
imposed under the PFIC regime would be treated as personal interest that is
not deductible.

In order for a U.S. Holder to make (or maintain) a valid QEF
election, we must provide certain information regarding our net capital gains
and ordinary earnings and permit our books and records to be examined to verify
such information. We intend to make the necessary information available to U.S.
Holders to permit them to make (and maintain) QEF elections with respect to us.
We urge each U.S. Holder to consult a tax advisor regarding the availability of,
and procedure for making, the QEF election.

A QEF election, once made with respect to us, applies to the
tax year for which it was made and to all subsequent tax years, unless the
election is invalidated or terminated, or the IRS consents to revocation of the
election. If a QEF election is made by a U.S. Holder and we cease to qualify as
a PFIC in a subsequent tax year, the QEF election will remain in effect,
although not applicable, during those tax years in which we do not qualify as a
PFIC. Therefore, if we again qualify as a PFIC in a subsequent tax year, the QEF
election will be effective and the U.S. Holder will be subject to the rules
described above for Electing U.S. Holders in such tax year and any subsequent
tax years in which we qualify as a PFIC. In addition, the QEF election remains
in effect, although not applicable, with respect to an Electing U.S. Holder even
after such U.S. Holder disposes of all of his or its direct and indirect
interest in our shares. Therefore, if such U.S. Holder reacquires an interest in
us, that U.S. Holder will be subject to the rules described above for Electing
U.S. Holders for each tax year in which we qualify as a PFIC.

In the case of a Non-Electing U.S. Holder, special taxation
rules under Section 1291 of the Code will apply to (i) gains realized on the
disposition (or deemed to be realized by reasons of a pledge) of his common
shares and (ii) certain excess distributions, as defined in Section 1291(b),
by us.

A Non-Electing U.S. Holder generally would be required to pro
rate all gains realized on the disposition of his common shares and all excess
distributions on his common shares over the entire holding period for the common
shares. All gains or excess distributions allocated to prior years of the U.S.
Holder (excluding any portion of the holders period prior to the first day of
the first year (i) which began after December 31, 1986, and (ii) for which we
were a PFIC) would be taxed at the highest tax rate for each such prior year
applicable to ordinary income. The Non-Electing U.S. Holder also would be liable
for interest on the foregoing tax liability for each such prior year calculated
as if such liability had been due with respect to each such prior year. A
Non-Electing U.S. Holder that is not a corporation must treat this interest
charge as personal interest which, as discussed above, is wholly
non-deductible. The balance, if any, of the gain or the excess distribution will
be treated as ordinary income in the year of the disposition or distribution,
and no interest charge will be incurred with respect to such balance. In certain
circumstances, the sum of the tax and the PFIC interest charge may exceed the
amount of the excess distribution received, or the amount of proceeds of
disposition realized, by the U.S. Holder.

If we are a PFIC for any taxable year during which a
Non-Electing U.S. Holder holds our common shares, then we will continue to be
treated as a PFIC with respect to such common shares, even if we are no longer
definitionally a PFIC. A Non-Electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common shares had been
sold on the last day of the last taxable year for which we were a PFIC.

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Effective for tax years of U.S. Holders beginning after
December 31, 1997, U.S. Holders who hold (actually or constructively) marketable
stock of a foreign corporation that qualifies as a PFIC may elect to mark such
stock to the market annually (a mark-to-market election). If such an election
is made, such U.S. Holder will generally not be subject to the special taxation
rules of Section 1291 discussed above. However, if the mark-to-market election
is made by a Non-Electing U.S. Holder after the beginning of the holding period
for the PFIC stock, then the Section 1291 rules will apply to certain
dispositions of, distributions on and other amounts taxable with respect to our
common shares. A U.S. Holder who makes the mark-to-market election will include
in income for each taxable year for which the election is in effect an amount
equal to the excess, if any, of the fair market value of our common shares as of
the close of such tax year over such U.S. Holders adjusted basis in such common
shares. In addition, the U.S. Holder is allowed a deduction for the lesser of
(i) the excess, if any, of such U.S. Holders adjusted tax basis in the common
shares over the fair market value of such shares as of the close of the tax
year, or (ii) the excess, if any, of (A) the mark-to-market gains for our common
shares included by such U.S. Holder for prior tax years, including any amount
which would have been treated as a mark-to-market gain for any prior tax year
but for the Section 1291 rules discussed above with respect to Non-Electing U.S.
Holders, over (B) the mark-to-market losses for shares that were allowed as
deductions for prior tax years. A U.S. Holders adjusted tax basis in our common
shares will be adjusted to reflect the amount included in or deducted from
income as a result of a mark-to-market election. A mark-to-market election
applies to the taxable year in which the election is made and to each subsequent
taxable year, unless our common shares cease to be marketable, as specifically
defined, or the IRS consents to revocation of the election. Because the IRS has
not established procedures for making a mark-to-market election, U.S. Holders
should consult their tax advisor regarding the manner of making such an
election. No view is expressed regarding whether our common shares are
marketable for these purposes or whether the election will be available.

Under Section 1291(f) of the Code, the IRS has issued Proposed
Treasury Regulations that, subject to certain exceptions, would treat as taxable
certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally
not otherwise taxed, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death. Generally, in such cases the basis of
our common shares in the hands of the transferee and the basis of any property
received in the exchange for those common shares would be increased by the
amount of gain recognized. Under the Proposed Treasury Regulations, an Electing
U.S. Holder would not be taxed on certain transfers of PFIC stock, such as
gifts, exchanges pursuant to corporate reorganizations, and transfers at death.
The transferees basis in this case will depend on the manner of the transfer.
In the case of a transfer by an Electing U.S. Holder upon death, for example,
the transferees basis is generally equal to the fair market value of the
Electing U.S. Holders common shares as of the date of death under Section 1014
of the Code. The specific tax effect to the U.S. Holder and the transferee may
vary based on the manner in which the common shares are transferred. Each U.S.
Holder of our shares is urged to consult a tax advisor with respect to how the
PFIC rules affect his or its tax situation.

Whether or not a U.S. Holder makes a timely QEF election with
respect to our common shares, certain adverse rules may apply in the event that
we are a PFIC and any foreign corporation in which we directly or indirectly
hold shares is a PFIC (a lower-tier PFIC). Pursuant to certain Proposed
Treasury Regulations, a U.S. Holder would be treated as owning his or its
proportionate amount of any lower-tier PFIC shares, and generally would be
subject to the PFIC rules with respect to such indirectly-held PFIC shares
unless such U.S. Holder makes a timely QEF election with respect thereto. We do
not currently have any subsidiaries. If we obtain any subsidiaries, we intend to
make the necessary information available to U.S. Holders to permit them to make
(and maintain) QEF elections with respect to each subsidiary of ours that is a
PFIC.

Under the Proposed Treasury Regulations, a U.S. Holder who does
not make a timely QEF election with respect to a lower-tier PFIC generally would
be subject to tax (and the PFIC interest charge) on (i) any

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excess distribution deemed to have been received with respect
to his or its lower-tier PFIC shares and (ii) any gain deemed to arise from a
so-called indirect disposition of such shares. For this purpose, an indirect
disposition of lower-tier PFIC shares would generally include (i) a disposition
by us (or an intermediate entity) of lower-tier PFIC shares, and (ii) any other
transaction resulting in a diminution of the U.S. Holders proportionate
ownership of the lower-tier PFIC, including an issuance of additional common
shares by us (or an intermediate entity). Accordingly, each prospective U.S.
Holder should be aware that he or it could be subject to tax even if such U.S.
Holder receives no distributions from us and does not dispose of its common
shares. We strongly urge each prospective U.S. Holder to consult a tax advisor
with respect to the adverse rules applicable, under the Proposed Treasury
Regulations, to U.S. Holders of lower-tier PFIC shares.

Certain special, generally adverse, rules will apply with
respect to our common shares while we are a PFIC unless the U.S. Holder makes a
timely QEF election. For example under Section 1298(b)(6) of the Code, a U.S.
Holder who uses PFIC stock as security for a loan (including a margin loan)
will, except as may be provided in regulations, be treated as having made a
taxable disposition of such shares.

Controlled Foreign Corporation

If more than 50% of the total combined voting power of all our
of shares entitled to vote or the total value of our shares is owned, actually
or constructively, by citizens or residents of the United States, United States
domestic partnerships or corporations, or estates or trusts other than foreign
estates or trusts (as defined by the Code Section 7701(a)(31)), each of which
own, actually or constructively, 10% or more of the total combined voting power
of all of our classes of shares entitled to vote (each, a United States
Shareholder), we could be treated as a controlled foreign corporation (CFC)
under Subpart F of the Code. This classification would affect many complex
results, one of which is the inclusion of certain income of a CFC which is
subject to current U.S. tax. The United States generally taxes United States
Shareholders of a CFC currently on their pro rata shares of the Subpart F income
of the CFC. Such United States Shareholders are generally treated as having
received a current distribution out of the CFCs Subpart F income and are also
subject to current U.S. tax on their pro rata shares of increases in the CFCs
earnings invested in U.S. property. The foreign tax credit described above may
reduce the U.S. tax on these amounts. In addition, under Section 1248 of the
Code, gain from the sale or exchange of shares by a U.S. Holder of our common
shares which is or was a United States Shareholder at any time during the
five-year period ending on the date of the sale or exchange is treated as
ordinary income to the extent of earnings and profits attributable to the shares
sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the
foreign corporation generally will not be treated as a PFIC with respect to
United States Shareholders of the CFC. This rule generally will be effective for
taxable years of United States Shareholders beginning after 1997 and for taxable
years of foreign corporations ending with or within such taxable years of United
States Shareholders. Special rules apply to United States Shareholders who are
subject to the special taxation rules under Section 1291 discussed above with
respect to a PFIC. Because of the complexity of Subpart F, a more detailed
review of these rules is outside of the scope of this discussion. We do not
believe that we currently qualify as a CFC. However, there can be no assurance
that we will not be considered a CFC for the current or any future taxable year.

F.        Dividends and
  Paying Agents

Not applicable.

- 68 -

---

G.        Statement by
Experts

Not applicable.

H.        Documents on
Display

Exhibits attached to this Form 20-F are also available for
viewing at our offices, Suite 901, 30 St. Clair Avenue West, Toronto, Ontario,
Canada, M4V 3A1; or you may request them by calling our office at (416)
250-6500. Copies of our financial statements and other continuous disclosure
documents required under securities rules are available for viewing on the
internet at www.sedar.com.

I.        Subsidiary
Information

See Item 4.C of this Form 20-F.

- 69 -

---

ITEM
11             
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not subject to any material market risks.

a)        Transaction
Risk and Currency Risk Management

Our operations do not employ complex financial instruments or
derivatives, and given that we keep our excess funds in high-grade short-term
instruments, we do not have significant or unusual financial market risks. In
the event we experience substantial growth in the future, our business and
results of operations may be materially affected by changes in interest rates on
new debt financings, the granting of credit options to our customers, and
certain other credit risks associated with our operations.

b)        Interest Rate
  Risk and Equity Price Risk

We are equity financed and do not have any debt which could be
subject to significant interest rate change risks. We have raised equity funding
through the sale of securities denominated in Canadian dollars, and will likely
raise additional equity funding denominated in Canadian dollars in the future.

c)        Exchange Rate
  Sensitivity

A significant portion of our administrative operations are in
  Canada. We typically hold most of our funds in U.S. dollars and Adira Energy
  reports the results of its operations in Canadian dollars. We incur most of
  our exploration expenditures in U.S. dollars.

d)        Commodity Price
  Risk

While the value of our exploration properties can always be
said to relate to the price of the commodity and the outlook for same, we do not
have any operating mines nor economic ore and therefore do not have any hedging
arrangements.

- 70 -

---

ITEM
12              DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES

A.        Debt
Securities

Not applicable.

B.        Warrants and
Rights

Not applicable.

C.        Other
Securities

Not applicable.

D.        American
Depository Shares

Not applicable.

PART II

ITEM
13             
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM
14              MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM
15              CONTROLS
AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange
Act) to mean controls and other procedures of an issuer that are designed to
ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SECs rules
and forms and includes, without limitation, controls and procedures designed to
ensure that such information is accumulated and communicated to the issuers
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.

Under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, our management conducted an
evaluation of the effectiveness of our Companys disclosure controls and
procedures as of September 30, 2009. Our Chief Executive Officer and Chief
Financial Officer, after completing this evaluation, concluded that, as of such
date, our disclosure controls and procedures were effective in ensuring that
information required to be disclosed by the Company was recorded, processed,
summarized and reported within the time periods specified in the Exchange Act
Rules and forms.

Managements Annual Report on Internal Control Over
Financial Reporting

- 71 -

---

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. The Exchange Act in Rule
13a-15(f ) and 15d-15(f ) defines this as a process designed by, or under the
supervision of, the companys principal executive and principal financial
officers and effected by the companys board of directors, management and other
personnel, 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 and
includes those policies and procedures that:

- pertain to the maintenance of records that, in reasonable detail,
  accurately and fairly reflect the transactions and dispositions of the assets
  of the company;
- provide reasonable assurance that transactions are recorded as necessary to
  permit preparation of financial statements in accordance with generally
  accepted accounting principles, and that receipts and expenditures of the
  company are being made only in accordance with authorizations of management
  and directors of the company; and
- provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use or disposition of the companys assets that may
  have a material effect on the financial statements.

Under the supervision and with the participation of our chief
executive officer and chief financial officer, our management assessed the
effectiveness of the Companys internal control over financial reporting as at
September 30, 2009. In making this assessment, the Companys management used the
criteria, established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
upon this assessment, our management concluded that the Companys internal
control over financial reporting was effective as at September 30, 2009.

During the 175 day period ended September 30, 2009, there were
  no changes in our internal control over financial reporting (as defined in Rules
  13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected,
  or are reasonably likely to materially affect, our internal control over financial
  reporting.

This Annual Report does not include an attestation report of
the Companys registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by the
Companys registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only managements report in the Annual
Report.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness of internal control over financial reporting
to future periods are subject to risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

ITEM
16A            AUDIT
COMMITTEE FINANCIAL EXPERTS

The board of directors of the Company has determined that Mr.
Bennie meets the SECs definition of an audit committee financial expert, as
defined in Item 401(e)(2) of Regulation S-B. The Board has also determined that
Mr. Bennie meets the definition of an independent director, as defined in Rule
121A of the American Stock Exchange Company Guide.

- 72 -

---

ITEM
16BCODE
OF ETHICS

The Company has not adopted a formal code of ethics, as it has
only recently completed its acquisition of Adira Energy and its corporate
reorganisation, and is in the process of developing a formal code of ethics that
will apply to the Companys principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. On completion, the code will be presented to the board of
directors for approval.

ITEM
16C            PRINCIPAL
ACCOUNTANT FEES AND SERVICES

The following table sets forth information regarding the amount
billed to us by our independent auditors, Smythe Ratcliffe LLP, for each of our
fiscal periods ended September 30, 2009 and 2008.

Period ended September 302009
      2008Audit Fees:
      $33,000
      $13,650Audit Related Fees:
      $0
      $0Tax Fees:
      $0
      $0All Other Fees:
      $2,500
      $8,400Total:
      $35,500
      $22,050


Audit Fees

Audit Fees are the aggregate fees billed by our independent
auditor for the audit of our consolidated annual financial statements, reviews
of interim financial statements and attestation services that are provided in
connection with statutory and regulatory filings or engagements.

Other Fees

Other fees relate to the review of our quarterly financial
statements by our auditors.

Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

The policy of our Audit Committee is to pre-approve all audit
and permissible non-audit services to be performed by our independent auditors
during the fiscal year.

ITEM
16D            EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM
16E            PURCHASE
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable

- 73 -

---

ITEM
16F            CHANGES TO
REGISTRANTS CERTIFYING ACCOUNTANT

Not applicable.

ITEM
16G            CORPORATE
GOVERNANCE

Not applicable.

- 74 -

---

PART III

ITEM
17              FINANCIAL
STATEMENTS

The following attached financial statements are incorporated
herein:

|1. | Consolidated Financial Statements of AMG Oil Ltd. for the
      175 day period ended September 30, 2009, comprised of the
  following:
|-- | --------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                       
|   | A)                                                                                                                                    
|   |                                                                                                                                       
|   | B)                                                                                                                                    
|   |                                                                                                                                       
|   | C)                                                                                                                                    
|   |                                                                                                                                       
|   | D)                                                                                                                                    

- 75 -

ADIRA ENERGY LTD.(formerly AMG OIL LTD.)(An Exploration Stage Company)
  Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009
  (Expressed in United States Dollars) 
  Restated

---



| | Index                                                                      | Page  
| | -------------------------------------------------------------------------- | ------
| |                                                                            |       
| | Independent Auditors Report to the Shareholders                           | 2     
| |                                                                            |       
| | Consolidated Financial Statements                                          |       
| |                                                                            |       
| | Consolidated Balance Sheet                                                 | 3     
| |                                                                            |       
| | Consolidated Statement of Operations, Comprehensive
      Loss and Deficit | 4     
| |                                                                            |       
| | Consolidated Statement of Cash Flows                                       | 5     
| |                                                                            |       
| | Notes to Consolidated Financial Statements                                 | 6 - 21

1

---

INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF ADIRA ENERGY LTD. (An Exploration Stage
  Company) (Formerly AMG OIL LTD.)

We have audited the consolidated balance sheet of Adira Energy
  Ltd., (formerly AMG Oil Ltd.) (an exploration stage company) as at September
  30, 2009 and the consolidated statements of operations, comprehensive loss and
  deficit, and cash flows for the 175-day period then ended. These financial statements
  are the responsibility of the Companys management. Our responsibility
  is to express an opinion on these financial statements based on our audit.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  September 30, 2009 and the results of its operations and its cash flows for
  the 175-day period then ended in accordance with Canadian generally accepted
  accounting principles.

Smythe Ratcliffe LLP (signed)

Chartered Accountants

Vancouver, Canada 
  November 13, 2009, except as to notes 1, 8 and 14 
           which are as of January 6,
  2010.

COMMENTS BY AUDITORS FOR US READERSON CANADA  UNITED STATES REPORTING DIFFERENCES

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast substantial
  doubt on the Company's ability to continue as a going concern, such as those
  described in Note 1 to the consolidated financial statements. Our report to
  the shareholders dated November 13, 2009, except as to notes 1, 8 and 14 which
  are as of January 6, 2010, is expressed in accordance with Canadian reporting
  standards which do not permit a reference to such events and conditions in the
  auditors report when these are adequately disclosed in the consolidated
  financial statements.

Smythe Ratcliffe LLP (signed)

Chartered Accountants

Vancouver, Canada 
  November 13, 2009, except as to notes 1, 8 and 14 
           which are as of January 6,
  2010.

2

| | 
| | 

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Consolidated Balance Sheet
  As at September 30, 2009 
  (Expressed in United States Dollars)

|Assets                                     |   |            |  
|------------------------------------------ | - | ---------- | -
|Current Assets                             |   |            |  
|Cash and cash equivalents (note 6)         | $ | 2,354,628  |  
|Goods and services tax receivable          |   | 9,437      |  
|Prepaid expenses                           |   | 12,978     |  
|Total Current Assets                       |   | 2,377,043  |  
|                                           |   |            |  
|Equipment Deposit (note 7)                 |   | 372,600    |  
|Oil and Gas Licenses (notes 8 and 14(a))   |   | 6,662      |  
|Total Assets                               | $ | 2,756,305  |  
|                                           |   |            |  
|Liabilities and Shareholders Equity       |   |            |  
|Current Liabilities                        |   |            |  
|Accounts payable and accrued liabilities   | $ | 126,977    |  
|Total Current and Long-Term Liabilities    |   | 126,977    |  
|                                           |   |            |  
|Shareholders Equity                       |   |            |  
|Share Capital (note 10)                    |   | 3,478,894  |  
|Contributed Surplus (notes 9 and 10(e))    |   | 519,061    |  
|Deficit                                    |   | (1,368,627 | )
|Total Shareholders Equity                 |   | 2,629,328  |  
|Total Liabilities and Shareholders Equity | $ | 2,756,305  |  

Nature of Operations, Basis of Presentation and Going Concern
  (notes 1 and 14(b))

Approved on Behalf of the Board

|Alan Friedman(signed) | Director
|----------------------- | --------
|                        |         
|Ilan Diamond(signed)  | Director

See notes to consolidated financial statements

3

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Consolidated Statement of Operations, Comprehensive Loss and Deficit 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars)

|Expenses                                             |   |            |  
|---------------------------------------------------- | - | ---------- | -
|Consulting fees (note 9)                             | $ | 634,081    |  
|Share-based compensation
      (note 10(c))          |   | 418,907    |  
|Professional fees                                    |   | 127,811    |  
|Technical consulting (note
      9)                  |   | 102,664    |  
|Travel and entertainment                             |   | 76,249     |  
|Office and general                                   |   | 13,177     |  
|Transfer agent and filing fees                       |   | 5,878      |  
|Marketing                                            |   | 4,568      |  
|Loss before other item                               |   | (1,383,335 | )
|Foreign exchange gain                                |   | 14,708     |  
|Net loss and comprehensive loss for the period       |   | (1,368,627 | )
|Deficit, beginning of period                         |   | -          |  
|Deficit, end of period                               | $ | (1,368,627 | )
|                                                     |   |            |  
|Basic and diluted loss per share                     | $ | (0.05      | )
|Weighted average number of common shares outstanding |   | 26,415,343 |  

See notes to consolidated financial statements

4

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Consolidated Statement of Cash Flows 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars)

|Operating Activities                                                  |   |            |  
|--------------------------------------------------------------------- | - | ---------- | -
|Net loss for the period                                               | $ | (1,368,627 | )
|Non-cash item                                                         |   |            |  
|Shares issued for consulting fees                                     |   | 485,929    |  
|Share-based compensation                                              |   | 418,907    |  
|                                                                      |   | (463,791   | )
|Changes in non-cash working capital                                   |   |            |  
|Goods and services tax receivable                                     |   | (9,437     | )
|Prepaid expenses                                                      |   | (12,978    | )
|Accounts payable and accrued liabilities                              |   | 126,977    |  
|Cash used for operating activities                                    |   | (359,229   | )
|                                                                      |   |            |  
|Investing Activities                                                  |   |            |  
|Equipment deposit                                                     |   | (372,600   | )
|Oil and gas licenses                                                  |   | (6,662     | )
|Cash used for investing activities                                    |   | (379,262   | )
|                                                                      |   |            |  
|Financing Activity                                                    |   |            |  
|Net proceeds from the issuance of common shares                       |   | 2,195,771  |  
|                                                                      |   |            |  
|Cash acquired through the acquisition of AMG Oil Ltd.                 |   | 897,348    |  
|                                                                      |   |            |  
|Increase in cash and cash equivalents                                 |   | 2,354,628  |  
|Cash and cash equivalents, beginning of period                        |   | -          |  
|Cash and cash equivalents, end of period                              | $ | 2,354,628  |  
|                                                                      |   |            |  
|Supplemental cash flow information                                    |   |            |  
|Interest paid                                                         | $ | -          |  
|Income taxes paid                                                     | $ | -          |  
|Shares issued as finders
      fees related to the reverse takeover  | $ | 60,000     |  
|transaction                                                           |   |            |  
|Warrants issued to agents as compensation
      for services provided | $ | 100,154    |  

See notes to consolidated financial statements

5

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|1. | Nature of Operations, Basis of Presentation and Going
        Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Adira Energy Ltd. was incorporated on February 20, 1997
        under the name Trans New Zealand Oil Company in the State of Nevada, United
        States of America. It changed its name to AMG Oil Ltd. (AMG
        or the Company) on July 27, 1998. On November 25, 2008, the
        Company's shareholders approved the change of its jurisdiction of incorporation
        from the State of Nevada to the Canadian federal jurisdiction. On September
        1, 2009, AMG completed a share exchange with Adira Energy Corp. (Adira),
        an oil and gas exploration and development company incorporated under
        the Ontario Business Corporations Act, on April 8, 2009 which resulted
        in a reverse takeover by Adira of AMG (note 2). On December 17, 2009,
        the Company changed its name to Adira Energy Ltd (note 14(b)).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements have been prepared
        on a going concern basis, which assumes the realization of assets and
        liquidation of liabilities in the normal course of business. To September
        30, 2009, the Company has incurred losses of $1,368,627 since inception.
        The ability of the Company to continue as a going concern depends upon
        the discovery of economically recoverable reserves, the ability of the
        Company to obtain financing to complete development, and upon future profitable
        operations from the properties or proceeds from their disposition. The
        Company is an exploration stage company and has not earned any revenues
        to date.                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | There can be no assurance that the Company will be able
        to continue to raise funds in which case the Company may be unable to
        meet its obligations. Should the Company be unable to continue as a going
        concern, the net realizable value of its assets may be materially less
        than amounts recorded on the consolidated balance sheet. These consolidated
        financial statements do not include any adjustments to the recoverability
        and classification of recorded asset amounts and classification of liabilities
        that might be necessary, should the Company be unable to continue as a
        going concern.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | Share Exchange Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | On April 29, 2009, AMG entered into a letter of intent
        to purchase all of the issued and outstanding shares of Adira in exchange
        for shares of AMG. As part of the arrangement, Adira conducted a share
        split to increase Adiras number of issued and outstanding common
        shares from 22,500,000 to 31,200,000. The share exchange ratio was one
        common share of AMG for each issued and outstanding common share of Adira.
        The proposed transaction was further subject to Adira completing a private
        placement of a minimum of $2,000,000 by issuance of 8,000,000 units (note
        10(b)).                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Pursuant to the share exchange agreement dated September
        1, 2009, AMG acquired all of the issued and outstanding common shares
        of Adira by issuing 39,040,001 common shares of the Company to Adiras
        shareholders on a one for one basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | As a result, the original shareholders of AMG own 37%
        of the shares of the resulting Company and the former shareholders of
        Adira own 63% of the resulting Company as follows.:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | Issued and outstanding number of shares after share exchange | Percentage
| | ------------------------------------------------------------ | ----------
| | AMG                                                          | 23,200,000
| | Adira                                                        | 39,040,001
| | Total outstanding shares                                     | 62,240,001

6

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|2. | Share Exchange Agreement(continued)                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | As the shareholders of Adira obtained control of the
        resulting Company, the share exchange was considered to be a reverse takeover
        (RTO) transaction. Accordingly for accounting purposes Adira
        is the acquirer. The assets and liabilities of Adira are included at carrying
        value and the assets and liabilities of AMG are included at fair value.                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Share capital represents the authorized and issued number
        of shares of AMG (the legal parent) and the share capital amount, contributed
        surplus and deficit of Adira (the legal subsidiary), the ongoing operating
        company (note 10).                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|3. | Significant Accounting Policies Basis of Presentation                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | These consolidated financial statements have been prepared
        in accordance with Canadian generally accepted accounting principles (GAAP).
        Canadian GAAP differs in certain respects from accounting principles generally
        accepted in the United States, as described in note 13.                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | These consolidated financial statements include the
        accounts of the Company and its wholly-owned legal subsidiary, Adira,
        and its wholly-owned integrated subsidiaries, Adira Energy Israel Ltd.
        and Adira Energy Service Israel Ltd., hereinafter collectively referred
        to as the Company. All intercompany account balances and transactions
        have been eliminated.
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Companys functional and reporting currency
        is the United States (US) dollar.                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                               
|   | All transactions in currencies other than the US dollar
        are translated as follows:                                                                                                                                                                                                                                                                                                                    

- Monetary assets and liabilities are translated at the rate of exchange
      in effect as at the balance sheet date;
- Non-monetary assets and liabilities, at the exchange rates prevailing
      on the date of the acquisition of the asset or assumption of the liabilities;
      and
- Expenses, at the rate in effect on the date of the transaction.

Exchange gains or losses are included
  in operations in the period in which they occur.

Use of Estimates

The preparation of financial statements
  in conformity with Canadian GAAP 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 expenses during the reporting period. Significant areas
  requiring the use of management estimates relate to accrued liabilities, the
  determination of variables used in the calculation of share-based compensation
  and warrants issued to agents, and determination of the valuation allowance
  for future income tax assets. While management believes the estimates are reasonable,
  actual results could differ from those estimates and could impact future results
  of operations and cash flows.

7

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|3. | Significant Accounting Policies(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Cash and cash equivalents include all cash balances
        and highly liquid investments with an initial maturity of three months
        or less. The Company places its temporary cash and cash equivalents with
        high credit quality financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Basic loss per share is calculated using the weighted
        average number of common shares outstanding during the period. The Company
        uses the treasury stock method to compute the dilutive effect of options,
        warrants and similar instruments. Under this method the dilutive effect
        on earnings per share is calculated presuming the exercise of outstanding
        options, warrants and similar instruments. It assumes that the proceeds
        of such exercise would be used to repurchase common shares at the average
        market price during the period. However, the calculation of diluted loss
        per share excludes the effects of various conversions and exercise of
        options and warrants that would be anti-dilutive.                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | All financial instruments are classified as one of the
        following: held-to-maturity, loans and receivables, held- for-trading,
        available-for-sale or other financial liabilities. Financial assets and
        liabilities held-for-trading are measured at fair value with gains and
        losses recognized in net income (loss). Financial assets held-to-maturity,
        loans and receivables, and other financial liabilities are measured at
        amortized cost using the effective interest method. Available-for-sale
        instruments are measured at fair value with unrealized gains and losses
        recognized in other comprehensive income (loss) and reported in shareholders
        equity. Any financial instrument may be designated as held-for-trading
        upon initial recognition.                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Transaction costs that are directly attributable to
        the acquisition or issue of financial instruments that are classified
        as other than held-for-trading, which are expensed as incurred, are included
        in the initial carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Comprehensive income or loss is defined as the change
        in equity from transactions and other events from sources other than the
        Companys shareholders. Other comprehensive income or loss refers
        to items recognized in comprehensive income or loss that are excluded
        from operations calculated in accordance with GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has no items of other comprehensive income
        in the period presented. Therefore, net loss as presented in the Companys
        consolidated statement of operations equals comprehensive loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Share-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company accounts for share-based compensation using
        a fair value based method with respect to all stock- based payments measured
        and recognized, to directors, employees and non-employees. For payments
        of services through the issuance of shares, the fair value is the market
        price of the shares issued by the Company or the value of the services
        received, depending on which is the more reliable measure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | For directors and employees, the fair value of the options
        is measured at the date of grant. For non-employees, the fair value of
        the options or warrants are measured on the earlier of the date at which
        the counterparty performance is completed or the date the performance
        commitment is reached or the date at which the equity instruments are
        granted if they are fully vested and non-forfeitable. The fair value of
        the options or warrants are accrued and charged either to operations,
        oil and gas interests, or share issue costs with the offset credit to
        contributed surplus. For directors and employees the options are recognized
        over the vesting period, and for non-employees the options are recognized
        over the related service period. If and when the stock options are ultimately
        exercised, the applicable amounts of contributed surplus are transferred
        to share capital.

8

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|3. | Significant Accounting Policies(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Impairment of Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Long-lived assets are assessed for impairment when events
        and circumstances warrant, when the carrying amounts of the assets exceeds
        its estimated undiscounted net cash flow from use or its fair value, at
        which time the impairment is charged to earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company follows the asset and liability method of
        accounting for income taxes. Under this method of tax allocation, future
        income tax assets and liabilities are determined based on differences
        between the financial statement carrying values and their respective income
        tax basis (temporary differences). Future income tax assets and liabilities
        are measured using the tax rates expected to be in effect when the temporary
        differences are likely to reverse. The effect on future income tax assets
        and liabilities of a change in tax rates is included in operations in
        the period in which the change is enacted or substantially assured. The
        amount of future income tax assets recognized is limited to the amount
        of the benefit that is more likely than not to be realized.                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Asset Retirement Obligations (ARO)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company recognizes an estimate of the liability
        associated with an ARO in the consolidated financial statements at the
        time the liability is incurred. The estimated fair value of the ARO is
        recorded as a long-term liability, with a corresponding increase in the
        carrying amount of the related asset. The capitalized amount will be depleted
        on a straight-line basis over the estimated life of the asset. The liability
        amount is increased each reporting period due to the passage of time and
        the amount of accretion is charged to earnings in the period. The ARO
        can also increase or decrease due to changes in the estimates of timing
        of cash flows or changes in the original estimated undiscounted cost.
        Actual costs incurred upon settlement of the ARO are charged against the
        ARO to the extent of the liability recorded. As at September 30, 2009,
        the Company has determined that it has no material AROs to record in the
        consolidated financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Oil and Gas Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company follows the successful efforts method of
        accounting for its exploration activities. Under the successful efforts
        method, acquisition costs of proved and unproved properties are capitalized.
        Costs of unproved properties are transferred to proved properties when
        proved reserves are confirmed. Exploration costs, including geological
        and geophysical costs, are expensed as incurred. Exploratory drilling
        costs are initially capitalized. If it is determined that a specific well
        does not contain proved reserves, the related capitalized exploratory
        drilling costs are charged to expense. To date all exploration costs have
        been charged to operations.                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Development costs, which include the costs of wellhead
        equipment, development drilling costs and handling facilities, applicable
        geological and geophysical costs, and the costs of acquiring or constructing
        support facilities and equipment, are capitalized. Costs incurred to operate
        and maintain wells and equipment and to lift oil and gas to the surface
        will be expensed as operating costs. If and when the Company achieves
        production, acquisition costs of proved properties will be depleted using
        the unit-of-production method based on proved reserves. Capitalized exploratory
        drilling costs and development costs will be depleted on the basis of
        proved developed reserves by area. Support facilities and equipment will
        be depreciated on a straight-line basis over their useful lives.                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Property costs by area are reviewed for impairment at
        least annually to consider whether there are conditions that may indicate
        impairment. The carrying value of each property is compared to its net
        recoverable amount as estimated by quantifiable evidence of the market
        value of similar land or geological resources. If the carrying value is
        found to exceed the estimated net recoverable amount, a write down will
        be recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

9

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|3. | Significant Accounting Policies(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Proceeds received on the issuance of units, consisting
        of common shares and warrants, are allocated first to common shares based
        on the market trading price of the common shares at the time the units
        are priced or issued, and any excess is allocated to warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Future accounting changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | International Financial Reporting Standards (IFRS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February 2008, the Canadian Accounting Standards
        Board (AcSB) confirmed that GAAP for publicly accountable
        enterprises will be converged with IFRS effective for fiscal years beginning
        on or after January 1, 2011. The Company will therefore be required to
        report using IFRS commencing with its unaudited interim financial statements
        for the three months ended December 31, 2011, which must include restated
        interim results for the three month period ended December 31, 2010, prepared
        on the same basis. The conversion to IFRS will impact the Companys
        accounting policies, information technology and data system, internal
        control over financial reporting, and disclosure controls and procedures.
        The Company is currently evaluating the future impact of IFRS on its consolidated
        financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Business Combinations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In January 2009, the CICA issued Section
        1582, Business Combinations, Section 1601, Consolidated
        Financial Statements, and Section 1602, Non-Controlling Interests.
        These sections replace the former Section 1581, Business Combinations,
        and Section 1600, Consolidated Financial Statements, and establish
        a new section for accounting for a non-controlling interest in a subsidiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Sections 1582 and 1602 will require net assets,
        non-controlling interests and goodwill acquired in a business combination
        to be recorded at fair value and non-controlling interests will be reported
        as a component of equity. In addition, the definition of a business is
        expanded and is described as an integrated set of activities and assets
        that are capable of being managed to provide a return to investors or
        economic benefits to owners. Acquisition costs are not part of the consideration
        and are to be expensed when incurred. Section 1601 establishes standards
        for the preparation of consolidated financial statements.                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | These new sections apply to the Companys
        interim and annual consolidated financial statements relating to fiscal
        years commencing October 1, 2011. Earlier adoption of these sections is
        permitted as of the beginning of a fiscal year. All three sections must
        be adopted concurrently. The Company is currently evaluating the impact
        of the adoption of these sections.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | Financial Instruments and Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Companys financial instruments have been designated
        as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | Cash and cash equivalents | - held-for-trading; and       
| | ------------------------- | ------------------------------
| | Accounts payable          | - other financial liabilities.

The carrying values of cash and cash
  equivalents, and accounts payable approximate their fair values due to the short-term
  maturity of these financial instruments.

Credit risk

The Company manages credit risk, in respect
  of cash and cash equivalents, by holding them at major Canadian financial institutions
  in accordance with the Companys investment policy. The Company places
  its temporary cash and cash equivalents with high credit quality financial institutions.
  As times such investments may be in excess of the Federal Deposit Insurance
  Corporation insurance limit.

Concentration of credit risk exists with
  respect to the Companys cash and cash equivalents. The Companys
  exposure is for cash held in bank accounts of $494,628 and term deposits totaling
  $1,860,000.

10

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|4. | Financial Instruments and Risk Management
        (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Liquidity risk is the risk that the Company
        will encounter difficulty in obtaining funds to meet current obligations
        and future commitments. The Company's approach to managing liquidity risk
        is to forecast cash requirements to provide reasonable assurance that
        it will have sufficient funds to meet its liabilities when due. The Company
        maintains sufficient working capital in order to meet short-term business
        requirements. As at September 30, 2009, the Company had cash and cash
        equivalents of $2,354,628, which will be used to settle current accounts
        payable and accrued liabilities in the amount of $126,977, fund the development
        of the Companys oil and gas properties and to meet administrative
        overhead costs for the ensuing year.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Companys accounts payable and accrued
        liabilities are due within 30 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Market risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Market risk is the risk that the fair value
        or future cash flows of a financial instrument will fluctuate because
        of changes in market prices. Market risk is comprised of three types of
        risk: interest rate risk, foreign currency risk and other price risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5. | Capital Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company is an exploration stage company
        and currently does not generate cash flows from operations. The Companys
        primary source of funds comes from the issuance of share capital. The
        Company does not use other sources of financing that require fixed payments
        of interest and principal and is not subject to any externally imposed
        capital requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | The Company defines its capital as share capital.
        To effectively manage the Companys capital requirements, the Company
        has a planning and budgeting process in place to ensure that adequate
        funds are available to meet its strategic goals. The Company monitors
        actual expenses to budget to manage its costs and commitments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

11

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|5. | Capital Management(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Companys capital management objective
        is to maximize investment returns to its equity-linked stakeholders within
        the context of relevant opportunities and risks associated with the Companys
        operating segment. Achieving this objective requires management to consider
        the underlying nature of exploration activities, availability of capital,
        the cost of various capital alternatives and other factors. Establishing
        and adjusting capital requirements is a continuous management process.                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Although the Company has been successful at
        raising funds in the past through the issuance of share capital, it is
        uncertain whether it will continue this financing due to uncertain economic
        conditions. The Company has sufficient funds to meet its exploration program,
        administrative overhead and working capital needs for the coming year.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has the following term deposits
        outstanding as at September 30, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7. | Equipment Deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Equipment deposit consists of a deposit for
        the purchase of drilling equipment in Israel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|8. | Oil and Gas Licenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has one onshore and two offshore
        licenses to explore for oil and gas in Israel. The onshore license awarded
        (the Eitan License) comprises an area of approximately 31,060
        acres in the Hula Valley in Northern Israel. The Eitan License was awarded
        in December 2008 for a term of three years, expiring in December 2011,
        and may be renewed upon fulfillment of certain conditions for a further
        four year period. The Eitan License was awarded prior to the incorporation
        of the Company. The license was awarded to a Company controlled by certain
        Directors of the Company and subsequent to the incorporation of Adira
        Energy Israel Ltd, was transferred to the Company (note 14(a)).                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The first offshore license awarded (the Gabriella
        License) comprises an area of approximately 97,000 acres. The Gabriella
        License was awarded to the Company in July 2009 for a term of three years,
        expiring July, 2012 and may be renewed upon fulfillment of certain conditions
        for a further four year period. The second offshore license awarded (the
        "Yitzhak License") comprises an area of approximately 31,555 acres. The
        Yitzhak License was awarded to the Company subsequent to the year-end,
        is effective until October 2012 and may be renewed upon fulfillment of
        certain conditions for a further four year period. The Yitzhak License
        is directly to the north of and contiguous to the Company's Gabriella
        License.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The revenues generated from all the licenses
        are subject to 12.5% royalty payable to the government of Israel (note
        14(a)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Environmental Expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The operations of the Company may be affected
        by changes in environmental regulations, including those for site restoration
        costs. Both the likelihood of new regulations and their overall effect
        upon the Company vary greatly from country to country and are not predictable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Environmental expenditures that relate to
        ongoing environmental and reclamation programs are charged against operations
        as incurred or capitalized and amortized depending on their expected future
        economic benefit. Estimated future removal and site restoration costs
        are recognized when the liability is reasonably determinable, and are
        charged against operations over the estimated remaining life of the related
        business operations.                                                                                                                                                                                                                                                                                                                         

12

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|9. | Related Party Transactions                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                              
|   | During the 175-day period ended September
        30, 2009, the Company incurred the following with related parties:                                                                                         
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   |                                                                                                                                                                                                              
|   | The above transactions are in the normal course
        of operations and are measured at the exchange amount, which is the amount
        of consideration established and agreed to by the related parties.

|10. | Share Capital
|--- | -------------
|    |              
|    | (a)          
|    |              
|    |              
|    |              
|    | (b)          

Number ofShares
      
      
      AmountAMGBalance, April 8, 2009 and September 1, 2009
      
      23,200,000
      
      $
      232AdiraBalance, April 8, 2009
      
      -
      
      
      -Shares issued for services rendered (note10(b)(i))
      
      12,000,000
      
      
      485,929Shares issued in private placement(note 10(b)(ii))
      
      10,500,000
      
      
      424,759Share split (note 10(b)(iii))
      
      8,700,000
      
      
      -Broker compensation shares issued(note 10(b)(iv))
      
      240,001
      
      
      60,000Shares issued in private placement(note 10(b)(iv))
      
      7,600,000
      
      
      1,900,000Balance September 1, 2009
      
      39,040,001
      
      
      2,870,688Shares exchanged on RTO (note 2)
      
      39,040,001
      
      
      897,116Shares issued in private placement(note 10(b)(iv))
      
      400,000
      
      
      100,000Share issue costs
      
      -
      
      
      (389,142
      )Balance, September 30, 2009
      
      62,640,001
      
      $
      3,478,894


| | (i)  | Adira issued 12,000,000 common shares upon incorporation
        to directors of the Company for services performed prior to incorporation.
        An expense equal to the estimated fair value of the shares issued (CDN
        $0.05 per share) totaling $485,929, was charged to consulting fees. The
        shares were valued at their fair value based on the price that arms
        length individuals subscribed to near the same date.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (ii) | In April 2009, Adira issued 10,500,000 common shares
        at CDN $0.05 per share for gross proceeds of $424,759.                                                                                                                                                                                                                                                                                                                                 

13

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|10. | Share Capital(continued)
|--- | ------------------------
|    |                         
|    | (b)                     
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    | (c)                     
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         

14

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|10. | Share Capital(continued)
|--- | ------------------------
|    |                         
|    | (c)                     
|    |                         
|    |                         

| |                             |  |             |  |  |                   |  |   | Weighted | 
| | --------------------------- |  | ----------- |  |  | ----------------- |  | - | -------- | 
| |                             |  | Number of   |  |  |                   |  |   | Average  | 
| |                             |  | Options     |  |  | Number of Options |  |   | Exercise | 
| |                             |  | Outstanding |  |  | Exercisable       |  |   | Price    | 
| |                             |  |             |  |  |                   |  |   |          | 
| | Balance, April 8, 2009      |  | -           |  |  | -                 |  | $ | -        | 
| | Granted                     |  | 3,984,000   |  |  | -                 |  | $ | 0.25     | 
| |                             |  |             |  |  |                   |  |   |          | 
| | Balance, September 30, 2009 |  | 3,984,000   |  |  | -                 |  | $ | 0.25     | 

AverageStock
      
      
      
      
      RemainingOption
      
      Grant Date
      Exercise
      Number of
      ContractualType
      Expiry
        Date
      Fair
        Value
      Price
      Options
      LifeType A
      August 20, 2014
      $ 0.30
      $ 0.25
      1,263,000
      4.89Type B
      August 20, 2014
      $ 0.30
      $ 0.25
      746,000
      4.89Type C
      August 20, 2014
      $ 0.30
      $ 0.25
      1,325,000
      4.89Type A
      September 23, 2014
      $ 0.23
      $ 0.25
      150,000
      4.98Type D
      September 23, 2014
      $ 0.23
      $ 0.25
      500,000
      4.983,984,000


| | (d) | Share purchase warrants                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                         
| |     | As at September 30, 2009, the Company has share purchase
        warrants outstanding entitling the holders to acquire common shares as
        follows:

| |                             |  |           |  |   | Weighted       | 
| | --------------------------- |  | --------- |  | - | -------------- | 
| |                             |  | Number of |  |   | Average        | 
| |                             |  | Warrants  |  |   | Exercise Price | 
| | Balance, April 8, 2009      |  | -         |  | $ | -              | 
| | Issued                      |  | 4,500,770 |  |   | 0.47           | 
| |                             |  |           |  |   |                | 
| | Balance, September 30, 2009 |  | 4,500,770 |  | $ | 0.47           | 

Grant Date
      Exercise
      NumberIssue Date
      Expiry
        Date
      Fair
        Value
      Price
      of
        OptionsAugust 4, 2009
      August 4, 2011
      $0.25
      $ 0.50
      4,000,000August 4, 2009
      August 4, 2011
      $ 0.25
      $ 0.25
      500,7704,500,770


15

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|10. | Share Capital(continued)
|--- | ------------------------

| | (e) | Contributed surplus
| | --- | -------------------

| |                             |   | 2009    | 
| | --------------------------- | - | ------- | 
| | Balance, April 8, 2009      | $ | -       | 
| | Stock options               |   | 418,907 | 
| | Agents warrants issued     |   | 100,154 | 
| |                             |   |         | 
| | Balance, September 30, 2009 | $ | 519,061 | 

The stock options granted and the share-based
  adjustment totaling $519,061 were expensed as share-based payments and the agents
  warrants issued totaling $100,154 were allocated to share issue costs.

The Company uses the Black-Scholes option
  pricing model to value stock options granted and compensatory share purchase
  warrants issued. The model requires management to make assumptions, which are
  subjective and may not be representative of actual results. Changes in assumptions
  can materially affect estimates of fair values. The following weighted average
  assumptions were used:

| |                                 | 2009      
| | ------------------------------- | ----------
| | Risk-free interest rate         | 2.19%     
| | Expected life                   | 4.67 years
| | Expected stock price volatility | 174.07%   
| | Expected dividend yield         | 0.00%     

Share-based compensation charges relating
  to stock options granted for the 175-day period ended September 30, 2009 was
  $1,095,833. The shares vest over the next three years, therefore, the expense
  will be recognized as follows:

| | 2009 | $ | 418,907   | 
| | ---- | - | --------- | 
| | 2010 |   | 418,907   | 
| | 2011 |   | 163,182   | 
| | 2012 |   | 94,837    | 
| |      | $ | 1,095,833 | 

For the purposes of the estimation of
  fair value of certain share purchase warrants, the following weighted average
  assumptions were used:

| |                                 | 2009      
| | ------------------------------- | ----------
| |                                 |           
| | Risk-free interest rate         | 1.32%     
| | Expected life                   | 1.92 years
| | Expected stock price volatility | 183.37%   
| | Expected dividend yield         | 0.00%     

16

---

|ADIRA ENERGY LTD.                              
|-----------------------------------------------
|(Formerly AMG OIL LTD.)                        
|(An Exploration Stage Enterprise)              
|Notes to Consolidated Financial Statements     
|For the 175-day period ended September 30, 2009
|(Expressed in United States Dollars)           
|Restated                                       

|11. | Income Taxes                                                                                                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                    
|    | A reconciliation of income tax provision computed at
        the statutory rate to the reported income tax provision is as follows:

2009Income tax benefit computed at statutory
        rate
      $
      (451,600
      )Share issue costs
      
      (12,700
      )Share-based compensation
      
      138,300Change in timing difference
      
      (56,100
      )Effects of change in tax rates
      
      46,400Change in valuation allowance
      
      335,700$
      0


Future income tax assets and liabilities
  are recognized for temporary differences between the carrying amounts of the
  balance sheet items and their corresponding tax values as well as for the benefit
  of losses available to be carried forward to future years for tax purposes that
  are likely to be realized.

The significant components of future
  income tax assets are as follows:

2009Future tax assetsShare issue costs
      $
      165,000Non-capital losses carried
        forward
      
      2,392,000Total future income tax assets
      
      2,557,000Tax rate
      
      29%741,500Valuation allowance
      
      (741,500
      )Net future income tax assets
      $
      0


The valuation allowance reflects the
  Company's estimate that the tax assets more likely than not will not be realized
  in the foreseeable future.

17

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|11. | Income Taxes(continued)                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                        
|    | As at September 30, 2009, the Company has approximately
        $2,391,900 of non-capital losses that may be applied to reduce future
        income for Canadian income tax purposes. The potential future tax benefit
        of these losses has not been recorded in these consolidated financial
        statements. The losses expire as follows:

Expiry Date
      
      Amount2017
      $
      21,8002018
      
      178,0002019
      
      89,0002020
      
      246,3002021
      
      124,3002022
      
      90,7002023
      
      62,6002024
      
      64,0002025
      
      18,8002026
      
      36,3002027
      
      25,3002028
      
      282,7002029
      
      1,152,100$
      2,391,900


|12. | Segmented Information
|--- | ---------------------

| |                           |   | Canada    |  |   | Israel  |  |   | Total     | 
| | ------------------------- | - | --------- |  | - | ------- |  | - | --------- | 
| | Cash and cash equivalents | $ | 2,354,628 |  | $ | -       |  | $ | 2,354,628 | 
| | Equipment deposit         |   | -         |  |   | 372,600 |  |   | 372,600   | 
| | Oil and gas licenses      |   | -         |  |   | 6,662   |  |   | 6,662     | 
| | Other assets              |   | 22,415    |  |   | -       |  |   | 22,415    | 
| | Total                     | $ | 2,377,043 |  | $ | 379,262 |  | $ | 2,756,305 | 

18

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|13. | Differences between Canadian GAAP and US
        GAAP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Recent accounting pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In June 2009, the Financial Accounting Standards
        Board (FASB) issued Accounting Standards Codification (ASC)
        105, Generally Accepted Accounting Principles. ASC 105 establishes
        the FASB Codification as the source of authoritative accounting principles
        recognized by the FASB to be applied by non-governmental entities in the
        preparation of financial statements in conformity with US GAAP for Securities
        and Exchange Commission (SEC) registrants. All guidance contained
        in the Codification carries an equal level of authority. The Codification
        supersedes all existing non-SEC accounting and reporting standards. The
        FASB will now issue new standards in the form of Accounting Standards
        Updates (ASU). The FASB will not consider ASUs as authoritative
        in their own right. ASUs will serve only to update the Codification, provide
        background information about the guidance and provide the basis for conclusions
        on the changes in the Codification. The Company has updated references
        to US GAAP.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In June 2009, the Company adopted guidance
        issued by the FASB and included in ASC 855, Subsequent Events,
        which establishes general standards of accounting for and disclosure of
        events that occur after the balance sheet date but before the financial
        statements are issued or are available to be issued. It requires the disclosure
        of the date through which an entity has evaluated subsequent events.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | In April 2009, the Company adopted guidance
        issued by the FASB and included in (a) ASC 805, Business Combinations,
        and (b) ASC 810, Non-Controlling Interests in Consolidated Financial
        Statements. The application of these ASCs is intended to improve,
        simplify and converge internationally the accounting for business combinations
        and the reporting of non-controlling interests in the Companys consolidated
        financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

19

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|13. | Differences between Canadian GAAP and US
        GAAP(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In August 2009, the FASB issued ASU 2009-05,
        Fair Value Measurements and Disclosures (Topic 820)  Measuring
        Liabilities at Fair Value. This ASU clarifies how an entity should
        measure the fair value of liabilities and that restrictions on the transfer
        of a liability should not be included in its fair value measurement. The
        effective date of this ASU is the first reporting period after issuance
        date, August 26, 2009. The Company adopted this ASU for the period ended
        September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | There are no material differences between
        Canadian and US GAAP; however, potential differences that could occur
        are summarized as follows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Exploration expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Under Canadian GAAP, acquisition costs of
        oil and gas properties and exploration expenditures are capitalized. Under
        US GAAP, exploration costs are expensed as incurred. When proven and probable
        reserves are determined for a property and a feasibility study is prepared,
        then subsequent exploration and development costs of the property would
        be capitalized. The capitalized costs of such properties are measured
        periodically for recoverability of carrying values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Development stage company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Pursuant to US GAAP, the Company would be
        subject to the disclosure requirements applicable to a development stage
        enterprise as the Company is devoting its efforts to establishing commercially
        viable mineral properties. However, the identification of the Company
        as such for accounting purposes does not impact the measurement principles
        applied to these consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Under US GAAP the provisions prescribe a recognition
        threshold and measurement attribute for the financial statement recognition
        and measurement of a tax position taken or expected to be taken in a tax
        return. The interpretation requires that the Company recognize the impact
        of a tax position in the financial statements if that position is more
        likely than not of being sustained on audit, based on the technical merits
        of the position. The requirement also provides guidance on de-recognition,
        classification, interest and penalties, accounting in interim periods
        and disclosure. In accordance with the provisions, any cumulative effect
        resulting from the change in accounting principle is to be recorded as
        an adjustment to the opening balance of deficit. The accounting policy
        did not result in a material impact on the Company's consolidated financial
        position or results of operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|14. | Restatement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

20

---

ADIRA ENERGY LTD.(Formerly AMG OIL LTD.)(An Exploration Stage Enterprise)
  Notes to Consolidated Financial Statements 
  For the 175-day period ended September 30, 2009 
  (Expressed in United States Dollars) 
  Restated

|14. | Restatement(continued)
|--- | ----------------------
|    |                       
|    | (a)                   
|    |                       
|    |                       
|    |                       
|    | (b)                   
|    |                       
|    |                       

21

---

ITEM 18            
   FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item
  17.

ITEM
19              EXHIBITS

The following exhibits are included in this Form 20-F:

|Exhibit |                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------
|Number  | Description                                                                                                                  
|        |                                                                                                                              
|1.1     | Articles of Conversion (1)                                                                                                   
|        |                                                                                                                              
|1.2     | Articles of Continuance (1)                                                                                                  
|        |                                                                                                                              
|1.3     | By-Laws (1)                                                                                                                  
|        |                                                                                                                              
|1.4     | Certificate and Articles of Amendment (3)                                                                                    
|        |                                                                                                                              
|4.1     | Securities Exchange Agreement
      among the Company, Adira Energy, Alan Friedman, Dennis Bennie and Ilan Diamond.
      (2)
|        |                                                                                                                              
|4.2     | Form of Securities Exchange Agreement
      among the Company, Adira Energy and the Minority Shareholders of Adira Energy.(2)
|        |                                                                                                                              
|4.3     | 2009 Stock Option Plan (2)                                                                                                   
|        |                                                                                                                              
|4.4     | Agency Agreement between Adira
      Energy and Sandfire Securities Inc. (2)                                                 
|        |                                                                                                                              
|4.5     | Form of Subscription Agreement
      for Adira Energy August 2009 Private Placement (2)                                      
|        |                                                                                                                              
|4.6     | Form
      of Subscription Agreement for September 2009 Private Placement (3)                                                
|        |                                                                                                                              
|12.1    | Certificate
      of Chief Executive Officer pursuant to Section 302 of the Sabanes-Oxley
      Act of 2002 (3)              
|        |                                                                                                                              
|12.2    | Certificate
      of Chief Financial Officer pursuant to Section 302 of the Sabanes-Oxley
      Act of 2002 (3)              
|        |                                                                                                                              
|13.1    | Certificate
      of Chief Executive Officer pursuant to Section 906 of the Sabanes-Oxley
      Act of 2002 (3)              
|        |                                                                                                                              
|13.2    | Certificate
      of Chief Financial Officer pursuant to Section 906 of the Sabanes-Oxley
      Act of 2002 (3)              

|(1) | Incorporated by reference from our current report on Form
      8-K filed with the SEC on December 2, 2008.     
|--- | ----------------------------------------------------------------------------------------------------------------
|    |                                                                                                                 
|(2) | Incorporated by reference from our Form 20-F shell
      company report filed with the SEC on September 4, 2009.
|    |                                                                                                                 
|(3) | Filed as an exhibit
hereto.                                                                                     

- 76 -

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SIGNATURES

The Registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this Form 20-F on its behalf.

ADIRA ENERGY LTD.

|Per:   | /s/ Ilan Diamond       
|------ | -----------------------
|Name:  | Ilan Diamond           
|Title: | Chief Executive Officer
|       |                        
|       |                        
|       |                        
|Date:  | January 15, 2010       

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