| Management’s Responsibility for Financial Reporting | 2      |
|-----------------------------------------------------------|--------|
|                                                      |   |
| Independent Auditors’ Report                        | 3      |
|                                                      |   |
| Consolidated Statements of Financial Position             | 4      |
|                                                      |   |
| Consolidated Statements of Shareholders’ Equity     | 5      |
|                                                      |   |
| Consolidated Statements of Comprehensive Loss             | 6      |
|                                                      |   |
| Consolidated Statements of Cash Flows                     | 7      |
|                                                      |   |
| Notes to the Consolidated Financial Statements            | 8      |

----

----

----

|                                   |   | Note    |   |   | December 31, 2011$ |      |       | December 31, 2010$ |   |      | January 1,2010$ |   |
|----------------------------------------|--------|---------|--------|--------|--------------------|-----------|------------|--------------------|--------|-----------|-----------------|--------|
|                                   |   |    |   |   |               |      |       | (Note 16)          |   |      | (Note 16)       |   |
| ASSETS                                 |   |    |   |   |               |      |       |               |   |      |            |   |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |
| CURRENT                                |   |    |   |   |               |      |       |               |   |      |            |   |   |
| Cash                                   |   |    |   |   |               | 34,180    |       |               |   | 171,237   |            |   |   | - |   |
| HST/GST Recoverable                    |   |    |   |   |               | 25,228    |       |               |   | 13,204    |            |   |   | 13,844 |   |
| Share Subscription Receivable          |   | 9(b)(i) |   |   |               | -         |       |               |   | 20,374    |            |   |   | - |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      | 59,408     |               |   |      | 204,815         |   |   |   | 13,844 |   |
| NON-CURRENT                            |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| Property and Equipment                 |   | 6       |   |   |               | 1,397     |       |               |   | 333       |            |   |   | 440 |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      | 60,805     |               |   |      | 205,148         |   |   |   | 14,284 |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| LIABILITIES                            |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| CURRENT                                |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| Bank Indebtedness                      |   |    |   |   |               |      | -          |               |   |      | -               |   |   |   | 10,986 |   |
| Trade and Other Payables               |   | 7       |   |   |               | 187,128   |       |               |   | 129,940   |            |   |   | 271,443 |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      | 187,128    |               |   |      | 129,940         |   |   |   | 282,429 |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| SHAREHOLDERS' EQUITY                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
| Share Capital                          |   | 9(b)    |   |   |               | 2,922,923 |       |               |   | 2,786,932 |            |   |   | 2,241,445 |   |
| Share Subscriptions                    |   | 17(b)   |   |   |               | 41,064    |       |               |   | 196,263   |            |   |   | 5,384 |   |
| Share Purchase Warrants Reserve        |   |    |   |   |               |      | 276,310    |               |   |      | 276,310         |   |   |   | 318,651 |   |
| Accumulated Other Comprehensive Income |   |    |   |   |               |      | -          |               |   |      | -               |   |   |   | - |   |
| Deficit                                |   |    |   |   |               |      | (3,366,620 | )                  |   |      | (3,184,297      | )      |   |   | (2,833,625 | ) |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      | (126,323   | )                  |   |      | 75,208          |   |   |   | (268,145 | ) |
|                                   |   |    |   |   |               |      |       |               |   |      |            |   |   |   |   |   |
|                                   |   |    |   |   |               |      | 60,805     |               |   |      | 205,148         |   |   |   | 14,284 |   |

| “Paul Heney” |   | “Brad Moynes”   |
|--------------------------|--------|-----------------------------|
| Paul E. Heney, Director  |   | Bradley J. Moynes, Director |

----

|                                                 |   |   Note  |   |   | Number of Common Shares  |        |       | Share Capital$ |   |      | Share Subscriptions$ |   |   | Share Purchase Warrants Reserve$ |    |   | Deficit$ |    |    | Total Shareholders’ Equity$ |   |
|------------------------------------------------------|--------|-------------------|--------|--------|-------------------------------|-------------|------------|----------------|--------|-----------|----------------------|--------|--------|----------------------------------|---------|--------|----------|---------|---------|-----------------------------------|--------|
| Balance, January 01, 2010(Pre-Share Consolidation)   |   |              |   |   |                          | 27,838,852  |       |           |   | 2,241,445 |                 |   |   | 5,384                            |    |   |     | 318,651 |    |                              |   | (2,833,625 | ) |   |   | (268,145 | ) |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |
| Share Consolidation                                  |   | 9(b)              |   |   |                          | (25,054,944 | )          |           |   | -         |                 |   |   | -                                |    |   |     | -       |    |                              |   | - |   |   |   | - |   |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |   |
| Balance, March 22, 2010(Post-Share Consolidation)    |   |              |   |   |                          |        | 2,783,908  |           |   |      | 2,241,445            |   |   |                             | 5,384   |   |     |    | 318,651 |                              |   |   | (2,833,625 | ) |   |   | (268,145 | ) |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |   |
| Shares Issued for Cash, Net of Issuance Costs        |   | 9(b)(i)           |   |   |                          | 10,660,000  |       |           |   | 198,215   |                 |   |   | (5,384                           | )       |   |     | -       |    |                              |   | - |   |   |   | 192,831 |   |
| Shares Issued for Debt                               |   | 9(b)(ii)          |   |   |                          | 15,130,000  |       |           |   | 152,600   |                 |   |   | -                                |    |   |     | -       |    |                              |   | - |   |   |   | 152,600 |   |
| Shares and Warrants Issued for Business Acquisition  |   | 5                 |   |   |                          | 4,000,000   |       |           |   | 80,000    |                 |   |   | -                                |    |   |     | 18,600  |    |                              |   | - |   |   |   | 98,600 |   |
| Shares Issued for Exercise of Warrants               |   | 5                 |   |   |                          | 5,000,000   |       |           |   | 101,386   |                 |   |   | -                                |    |   |     | -       |    |                              |   | - |   |   |   | 101,386 |   |
| Fair Value of Warrants Exercised                     |   | 5                 |   |   |                          | -           |       |           |   | 13,286    |                 |   |   | -                                |    |   |     | (13,286 | )       |                              |   | - |   |   |   | - |   |
| Fair Value of Expired Warrants                       |   |              |   |   |                          |        | -          |           |   |      | -                    |   |   |                             | -       |   |     |    | (47,655 | )                                 |   |   | 47,655 |   |   |   | - |   |
| Share Subscriptions Received                         |   | 9(b)(iii)         |   |   |                          | -           |       |           |   | -         |                 |   |   | 196,263                          |    |   |     | -       |    |                              |   | - |   |   |   | 196,263 |   |
| Net Comprehensive Loss                               |   |              |   |   |                          |        | -          |           |   |      | -                    |   |   |                             | -       |   |     |    | -       |                              |   |   | (398,327 | ) |   |   | (398,327 | ) |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010(Post-Share Consolidation) |   |              |   |   |                          |        | 37,573,908 |           |   |      | 2,786,932            |   |   |                             | 196,263 |   |     |    | 276,310 |                              |   |   | (3,184,297 | ) |   |   | 75,208 |   |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |   |
| Shares Issued for Cash, Net of Issuance Costs        |   | 9(b)(iii)         |   |   |                          | 1,703,334   |       |           |   | 233,327   |                 |   |   | (196,263                         | )       |   |     | -       |    |                              |   | - |   |   |   | 37,064 |   |
| Shares Surrendered and Cancelled                     |   | 5                 |   |   |                          | (4,500,000  | )          |           |   | (97,336   | )                    |   |   | -                                |    |   |     | -       |    |                              |   | - |   |   |   | (97,336 | ) |
| Share Subscriptions Received                         |   | 17(b)             |   |   |                          | -           |       |           |   | -         |                 |   |   | 41,064                           |    |   |     | -       |    |                              |   | - |   |   |   | 41,064 |   |
| Net Comprehensive Loss                               |   |              |   |   |                          |        | -          |           |   |      | -                    |   |   |                             | -       |   |     |    | -       |                              |   |   | (182,323 | ) |   |   | (182,323 | ) |
|                                                 |   |              |   |   |                          |        |       |           |   |      |                 |   |   |                             |    |   |     |    |    |                              |   |   |   |   |   |   |   |   |
| Balance, December 31, 2011(Post-Share Consolidation) |   |              |   |   |                          |        | 34,777,242 |           |   |      | 2,922,923            |   |   |                             | 41,064  |   |     |    | 276,310 |                              |   |   | (3,366,620 | ) |   |   | (126,323 | ) |

----

|                                                                    |   | Note  |   |   | 2011$  |   |       | 2010$     |   |
|-------------------------------------------------------------------------|--------|------------|--------|--------|--------|--------|------------|-----------|--------|
|                                                                    |   |       |   |   |   |   |       | (Note 16) |   |
| EXPENSES                                                                |   |       |   |   |   |   |       |      |   |
|                                                                    |   |       |   |   |   |   |       |      |   |
| Accounting, Audit and Legal                                             |   |       |   |   |   | 56,638 |       |      |   | 44,025 |   |
| Advertising, Promotion and Website Development                          |   |       |   |   |   | 6,000  |       |      |   | 16,500 |   |
| Bad Debt                                                                |   | 9(b)(ii)   |   |   |   | -      |       |      |   | 5,900 |   |
| Consulting                                                              |   |       |   |   |   |   | 80,668     |      |   |   | 42,233 |   |
| Depreciation                                                            |   |       |   |   |   |   | 282        |      |   |   | 107 |   |
| Development Costs                                                       |   |       |   |   |   |   | 14,046     |      |   |   | 3,480 |   |
| Filing and Transfer Agent Fees                                          |   |       |   |   |   |   | 20,264     |      |   |   | 17,639 |   |
| Interest and Bank Charges                                               |   |       |   |   |   |   | 484        |      |   |   | 283 |   |
| Management Fees                                                         |   | 11(b)      |   |   |   | 60,000 |       |      |   | 105,817 |   |
| Office and Telephone                                                    |   |       |   |   |   |   | 1,267      |      |   |   | 1,036 |   |
| Property Investigation                                                  |   |       |   |   |   |   | 9,487      |      |   |   | - |   |
| Rent                                                                    |   |       |   |   |   |   | 10,267     |      |   |   | 4,635 |   |
| Travel and Automobile                                                   |   |       |   |   |   |   | 11,802     |      |   |   | 9,177 |   |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
|                                                                    |   |       |   |   |   |   | 271,205    |      |   |   | 250,832 |   |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| LOSS BEFORE OTHER ITEMS                                                 |   |       |   |   |   |   | (271,205   | )         |   |   | (250,832 | ) |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| Foreign Exchange Loss                                                   |   |       |   |   |   |   | (8,454     | )         |   |   | (9,917 | ) |
| Acquisition-Related Costs                                               |   | 5          |   |   |   | -      |       |      |   | (25,646 | ) |
| Loss on Settlement of Debts                                             |   | 9(b)(ii)   |   |   |   | -      |       |      |   | (13,332 | ) |
| Write-Down Intangible Asset                                             |   | 5          |   |   |   | -      |       |      |   | (98,600 | ) |
| Gain on Surrender of Shares                                             |   | 5          |   |   |   | 97,336 |       |      |   | - |   |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| NET LOSS FOR THE YEAR                                                   |   |       |   |   |   |   | (182,323   | )         |   |   | (398,327 | ) |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| Other Comprehensive Income                                              |   |       |   |   |   |   | -          |      |   |   | - |   |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| NET COMPREHENSIVE LOSS FOR THE YEAR                                     |   |       |   |   |   |   | (182,323   | )         |   |   | (398,327 | ) |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| BASIC AND DILUTED LOSS PER SHARE(POST-SHARE CONSOLIDATION)              |   |       |   |   |   |   | (0.01      | )         |   |   | (0.02 | ) |
|                                                                    |   |       |   |   |   |   |       |      |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING(POST-SHARE CONSOLIDATION) |   |       |   |   |   |   | 35,387,808 |      |   |   | 18,560,292 |   |

----

|                                            |   | Note  |   |   | 2011$  |     |     | 2010$  |   |
|-------------------------------------------------|--------|------------|--------|--------|--------|----------|----------|--------|--------|
|                                            |   |       |   |   |   |     |     |   |   |
| CASH PROVIDED BY (USED IN):                     |   |       |   |   |   |     |     |   |   |
|                                            |   |       |   |   |   |     |     |   |   |
| OPERATING ACTIVITIES                            |   |       |   |   |   |     |     |   |   |
|                                            |   |       |   |   |   |     |     |   |   |
| Net Loss for the Year                           |   |       |   |   |   | (182,323 | )        |   |   | (398,327 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |
| Non-Cash Items                                  |   |       |   |   |   |     |     |   |   |   |   |
| Bad Debt                                        |   |       |   |   |   | -        |     |   |   | 5,900 |   |
| Depreciation                                    |   |       |   |   |   | 282      |     |   |   | 107 |   |
| Loss on Settlement of Debts                     |   |       |   |   |   | -        |     |   |   | 13,332 |   |
| Write-Down Intangible Asset                     |   |       |   |   |   | -        |     |   |   | 124,246 |   |
| Gain on Surrender of Shares                     |   |       |   |   |   | (97,336  | )        |   |   | - |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |
|                                            |   |       |   |   |   | (279,377 | )        |   |   | (254,742 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |
| Change in Non-Cash Working Capital Accounts     |   | 10(a)      |   |   |   | 45,164   |     |   |   | (12,879 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
|                                            |   |       |   |   |   |     | (234,213 | )      |   |   | (267,621 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| FINANCING ACTIVITIES                            |   |       |   |   |   |     |     |   |   |   |   |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| Shares Issued for Cash, Net of Issuance Costs   |   |       |   |   |   |     | 37,064   |   |   |   | 279,227 |   |
| Share Subscription Receivable                   |   |       |   |   |   |     | 20,374   |   |   |   | - |   |
| Shares Subscriptions                            |   |       |   |   |   |     | 41,064   |   |   |   | 196,263 |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
|                                            |   |       |   |   |   |     | 98,502   |   |   |   | 475,490 |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| INVESTING ACTIVITIES                            |   |       |   |   |   |     |     |   |   |   |   |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| Acquisition of Equipment                        |   |       |   |   |   |     | (1,346   | )      |   |   | - |   |
| Acquisition of Subsidiary                       |   |       |   |   |   |     | -        |   |   |   | (25,646 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
|                                            |   |       |   |   |   |     | (1,346   | )      |   |   | (25,646 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| (DECREASE) INCREASE IN CASH                     |   |       |   |   |   |     | (137,057 | )      |   |   | 182,223 |   |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| Cash (Bank Indebtedness), Beginning of the Year |   |       |   |   |   |     | 171,237  |   |   |   | (10,986 | ) |
|                                            |   |       |   |   |   |     |     |   |   |   |   |   |
| CASH, END OF THE YEAR                           |   |       |   |   |   |     | 34,180   |   |   |   | 171,237 |   |

----

| a) | Statement of Compliance |
|----|-------------------------|

----

| b)  | Basis of Presentation |
|----------|-----------------------|

| c)  | Basis of Consolidation |
|----------|------------------------|

| Entity                        | Country of Incorporation | Holding        | Functional Currency |
|-------------------------------|--------------------------|----------------|---------------------|
| Rainchief Energy Inc.         | Canada                   | Parent Company | Canadian Dollar     |
| Jaydoc Capital Corp. (Note 5) | Canada                   | 100%           | Canadian Dollar     |
| Rainchief Renewable-1 S.R.L.  | Italy                    | 100%           | Canadian Dollar     |

| d)  | Foreign Currency |
|----------|------------------|

| i)  | Transactions and Balances in Foreign Currencies |
|----------|-------------------------------------------------|

|   | Foreign currency transactions are translated into the functional currency of the respective entity, using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognized in profit or loss. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction and are not retranslated.  Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii)  | Foreign Operations |
|-----------|--------------------|

|   | On consolidation, the assets and liabilities of foreign operations are translated into Canadian dollars at the exchange rate prevailing at the reporting date and their revenues and expenses are translated at exchange rates prevailing at the dates of the transactions.  The exchange differences arising on the translation are recognized in other comprehensive income and accumulated in the currency translation reserve in equity.  On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in earnings and recognized as part of the gain or loss on disposal. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| e)  | Property and Equipment |
|----------|------------------------|

| f)  | Project Development Costs |
|----------|---------------------------|

| g)  | Impairment of Non-Current Assets |
|----------|----------------------------------|

| h)  | Provisions |
|----------|------------|

| i) | Share Capital |
|----|---------------|

----

| j) | Share-Based Payments |
|----|----------------------|

| k)  | Loss per Share |
|----------|----------------|

| l)  | Income Taxes |
|----------|--------------|

| i)  | Current Income Tax |
|----------|--------------------|

|   | Current income tax assets and/or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date.  Current tax is payable on taxable profit, which differs from profit or loss in the consolidated financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii)  | Deferred Income Tax |
|-----------|---------------------|

|   | Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.  Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period.  Deferred tax liabilities are always provided for in full. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income.  Deferred tax assets and liabilities are offset only when the Company has a right and intention to offset current tax assets and liabilities from the same taxation authority. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Changesin deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| m) | Financial Instruments |
|----|-----------------------|

| i)  | Financial Assets |
|----------|------------------|

|   | For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Financial assets at fair value through profit or loss; |
|---------------------------|--------------------------------------------------------|

| ●    | Loans and receivables; |
|---------------------------|------------------------|

| ●    | Held-to-maturity investments; and |
|---------------------------|-----------------------------------|

| ●    | Available-for-sale financial assets. |
|---------------------------|--------------------------------------|

|   | The category determines subsequent measurement and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date.  Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired.  Different criteria to determine impairment are applied for each category of financial assets, which are described below. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Financial assets at fair value through profit or loss – Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or that meet certain conditions and are designated at fair value through profit or loss upon initial recognition. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments.  Assets in this category are measured at fair value with gains or losses recognized in profit or loss.  The Company’s cash falls into this category of financial instruments. |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Loans and receivables – Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortized cost using the effective interest method less any provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Company’s subscription receivable fall into this category of financial instruments. |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is based on recent historical counterparty default rates for each identified group.  The impairment losses are recognized in profit or loss. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| m) | Financial Instruments (Continued) |
|----|-----------------------------------|

| i)  | Financial Assets (Continued) |
|----------|------------------------------|

| ●    | Held-to-maturity investments – Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity, other than loans and receivables. Investments are classified as held-to-maturity if the Company has the intention and ability to hold them until maturity. The Company currently does not hold financial assets in this category. |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Held-to-maturity investments are measured subsequently at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired as determined by reference to external credit ratings, then the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in profit or loss. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Available-for-sale financial assets – Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Company currently does not hold financial assets in this category. |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Available-for-sale financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognized in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognized in other comprehensive income is reclassified from the equity reserve to profit or loss, and presented as a reclassification adjustment within other comprehensive income. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In respect of available-for-sale financial assets, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated in the revaluation reserve. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii)  | Financial Liabilities |
|-----------|-----------------------|

|   | For the purpose of subsequent measurement, financial liabilities are classified as either financial liabilities at fair value through profit or loss, or other financial liabilities upon initial recognition. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Financial liabilities at fair value through profit or loss – Financial liabilities at fair value through profit or loss include financial liabilities that are either classified as held for trading or that meet certain conditions and are designated at fair value through profit or loss upon initial recognition. Liabilities in this category are measured at fair value with gains or losses recognized in profit or loss.  The Company currently does not hold financial liabilities in this category. |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| m) | Financial Instruments (Continued) |
|----|-----------------------------------|

| ii)  | Financial Liabilities (Continued) |
|-----------|-----------------------------------|

| ●    | Other financial liabilities – Other financial liabilities are subsequently measured at amortized cost using the effective interest method.  Gains and losses are recognized in the income statement when the liabilities are derecognized as well as through the effective interest rate method amortization process.  The Company’s trade and other payables and amount due to related parties fall into this category of financial instruments. |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A financial liability is derecognized when it is extinguished, discharged, cancelled or expired. |
|--------|--------------------------------------------------------------------------------------------------|

| n)  | Comparative Figures |
|----------|---------------------|

| a)  | Deferred Tax Assets |
|----------|---------------------|

----

| b)  | Impairment of Non-Current Assets |
|----------|----------------------------------|

| c)  | Provision |
|----------|-----------|

| a)  | IFRS 9 – Financial Instruments |
|----------|--------------------------------------|

| b) | IFRS 10 – Consolidated Financial Statements |
|----|---------------------------------------------------|

----

| c)  | IFRS 11 – Joint Arrangements |
|----------|------------------------------------|

| d)  | IFRS 12 – Disclosure of Interest in Other Entities |
|----------|----------------------------------------------------------|

| e)  | IFRS 13 – Fair Value Measurement |
|----------|----------------------------------------|

|                                                                        |   | $      |   |
|-----------------------------------------------------------------------------|--------|--------|--------|
| Fair Value of 4,000,000 Common Shares Issued                                |   |   | 80,000 |   |
| Fair Value of 7,000,000 Share Purchase Warrants Issued                      |   |   | 18,600 |   |
|                                                                        |   |   |   |   |
| Total Consideration Paid, Being the Fair Value of Intangible Asset Acquired |   |   | 98,600 |   |

----

|                                     |   | Computer  |   |   | Furniture     |   |   |   |   |
|------------------------------------------|--------|-----------|--------|--------|---------------|--------|--------|--------|--------|
|                                     |   | Equipment |   |   | and Equipment |   |   | Total  |   |
|                                     |   | $         |   |   | $             |   |   | $      |   |
| COST                                     |   |      |   |   |          |   |   |   |   |
|                                     |   |      |   |   |          |   |   |   |   |
| At January 1, 2010 and December 31, 2010 |   |      | 3,890  |   |          |   | 1,656  |   |   |   | 5,546 |   |
|                                     |   |      |   |   |          |   |   |   |   |   |   |   |
| Additions                                |   |      | 1,346  |   |          |   | -      |   |   |   | 1,346 |   |
|                                     |   |      |   |   |          |   |   |   |   |   |   |   |
| At December 31, 2011                     |   |      | 5,236  |   |          |   | 1,656  |   |   |   | 6,892 |   |

| ACCUMULATED DEPRECIATION |   |   |   |   |   |   |   |   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                     |   |   |   |   |   |   |   |   |   |
| At January 1, 2010       |   |   | 3,699  |   |   |   | 1,407  |   |   |   | 5,106 |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation Charge      |   |   | 58     |   |   |   | 49     |   |   |   | 107 |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |
| At December 31, 2010     |   |   | 3,757  |   |   |   | 1,456  |   |   |   | 5,213 |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation Charge      |   |   | 242    |   |   |   | 40     |   |   |   | 282 |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |
| At December 31, 2011     |   |   | 3,999  |   |   |   | 1,496  |   |   |   | 5,495 |   |

| NET BOOK VALUE       |   |   |   |   |   |   |   |   |   |
|----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                 |   |   |   |   |   |   |   |   |   |
| At January 1, 2010   |   |   | 191    |   |   |   | 249    |   |   |   | 440 |   |
| At December 31, 2010 |   |   | 133    |   |   |   | 200    |   |   |   | 333 |   |
| At December 31, 2011 |   |   | 1,237  |   |   |   | 160    |   |   |   | 1,397 |   |

----

|                               |   | December 31, 2011$ |    |   | December 31, 2010$ |   |    | January 1,2010$ |   |
|------------------------------------|--------|--------------------|---------|--------|--------------------|--------|---------|-----------------|--------|
|                               |   |               |    |   |               |   |    |            |   |
| Trade Payables                     |   |               | 88,700  |   |               |   | 45,190  |            |   |   | 89,483 |   |
| Accrued Liabilities                |   |               | 18,000  |   |               |   | 24,000  |            |   |   | 29,400 |   |
| Provision (Note 8)                 |   |               | 60,750  |   |               |   | 60,750  |            |   |   | 60,750 |   |
| Related Party Payable (Note 11(a)) |   |               | 19,678  |   |               |   | -       |            |   |   | 91,810 |   |
|                               |   |               |    |   |               |   |    |            |   |   |   |   |
|                               |   |               | 187,128 |   |               |   | 129,940 |            |   |   | 271,443 |   |

| a)  | Authorized Capital |
|----------|--------------------|

| b)  | Issued and Outstanding Common Shares |
|----------|--------------------------------------|

| i)  | Private Placements in 2010 |
|----------|----------------------------|

|   | On March 22, 2010, the Company completed a private placement of 50,000 units at US$0.10 per unit, raising total gross proceeds of $5,384 (US$5,000). Each unit consisted of one common share and one warrant exercisable into one common share at US$1.00 per share until March 22, 2011.  The subscription proceeds were received in 2009. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On May 19, 2010, the Company completed a private placement of 9,110,000 units at US$0.02 per unit, raising gross proceeds of $191,505 (US$182,200). Each unit consisted of one common share and one warrant exercisable into one common share at US$0.02 per share until March 30, 2015. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On October 5, 2010, the Company completed a private placement of 500,000 units at US$0.04 per unit, raising gross proceeds of $20,276 (US$20,000).  Each unit consisted of one common share and one warrant exercisable into one common share at US$0.04 per share until October 15, 2015. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On November 22, 2010, the Company completed a private placement of 1,000,000 units at US$0.02 per unit, raising gross proceeds of $20,374 (US$20,000).  Each unit consisted of one common share and one warrant exercisable into one common share at US$0.02 per share until October 28, 2015.  The subscription proceeds owing by a Director of the Company was received subsequently in April 2011. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company incurred share issue costs totaling $39,324. |
|--------|----------------------------------------------------------|

----

| b)  | Issued and Outstanding Common Shares (Continued) |
|----------|--------------------------------------------------|

| ii)  | Shares Issued for Debt in 2010 |
|-----------|--------------------------------|

|   | On May 19, 2010, the Company issued 15,000,000 common shares with a fair value of $150,000 for settlement of debts totaling $97,710, and accordingly recorded a loss of $52,290 on debt settlement. These debts were owed, on the date of settlement, to arm’s length parties who acquired the debts from related parties of the Company for a nominal consideration of $10.  Concurrent with the debt settlement, the Company wrote off $5,900 in an amount owed by a related party. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On November 2, 2010, the Company paid $5,000 in cash and issued 130,000 common shares with a fair value of $2,600 for settlement of accounts payable totaling $46,558 owing to arm’s length parties.  The Company recorded a gain of $38,958 on debt settlement. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iii)  | Private Placements in 2011 |
|------------|----------------------------|

|   | On January 24, 2011, the Company completed a private placement of 1,300,001 shares at US$0.15 per share, raising gross proceeds of $196,263 (US$195,000).  The subscription proceeds were received in 2010. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On March 14, 2011, the Company completed a private placement of 403,333 shares at US$0.15 per share, raising gross proceeds of $59,356 (US$60,500). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| c) | Share Purchase Warrants |
|----|-------------------------|

|  Expiry Date               |   | Exercise Price |   |   | December 31,2010 |   |       |  Issued |   |   |  Exercised |   |   | Expired/Cancelled |   |   | December 31, 2011 |   |
|---------------------------------|--------|----------------|--------|--------|------------------|--------|------------|--------------|--------|--------|-----------------|--------|--------|-------------------|--------|--------|-------------------|--------|
|                            |   |           |   |   |             |   |       |         |   |   |            |   |   |              |   |   |              |   |
| March 22, 2011                  |   | $              | US1.00 |   |             |   | 50,000     |         |   |   | -               |   |   |              | -      |   |              |   | (50,000 | ) |   |   | - |   |
| June 30, 2014                   |   | $              | US0.80 |   |             |   | 320,000    |         |   |   | -               |   |   |              | -      |   |              |   | - |   |   |   | 320,000 |   |
| March 30, 2015                  |   | $              | US0.02 |   |             |   | 9,110,000  |         |   |   | -               |   |   |              | -      |   |              |   | - |   |   |   | 9,110,000 |   |
| October 15, 2015                |   | $              | US0.04 |   |             |   | 500,000    |         |   |   | -               |   |   |              | -      |   |              |   | - |   |   |   | 500,000 |   |
| October 28, 2015                |   | $              | US0.02 |   |             |   | 1,000,000  |         |   |   | -               |   |   |              | -      |   |              |   | - |   |   |   | 1,000,000 |   |
|                            |   |           |   |   |             |   |       |         |   |   |            |   |   |              |   |   |              |   |   |   |   |   |   |   |
| Total                           |   |           |   |   |             |   | 10,980,000 |         |   |   | -               |   |   |              | -      |   |              |   | (50,000 | ) |   |   | 10,930,000 |   |
|                            |   |           |   |   |             |   |       |         |   |   |            |   |   |              |   |   |              |   |   |   |   |   |   |   |
| Weighted Average Exercise Price |   |           |   |   |             | $      | US0.05     |         |   |   | -               |   |   |              | -      |   |              | $      | US1.00 |   |   | $ | US0.04 |   |

----

| c) | Share Purchase Warrants (Continued) |
|----|-------------------------------------|

| Expiry Date                     |   | ExercisePrice |   |   | December 31,2009 |   |    |   Issued |   |   |   Exercised |   |   | Expired/Cancelled |       |   | December 31,2010 |   |
|---------------------------------|--------|---------------|--------|--------|------------------|--------|---------|---------------|--------|--------|------------------|--------|--------|-------------------|------------|--------|------------------|--------|
|                            |   |          |   |   |             |   |    |          |   |   |             |   |   |              |       |   |             |   |
| March 27, 2010                  |   | $US           | 1.00   |   |             |   | 10,000  |          |   |   | -                |   |   |              | -          |   |             |   | (10,000 | ) |   |   | - |   |
| March 31, 2010                  |   | $US           | 1.00   |   |             |   | 48,000  |          |   |   | -                |   |   |              | -          |   |             |   | (48,000 | ) |   |   | - |   |
| April 30, 2010                  |   | $US           | 1.00   |   |             |   | 150,000 |          |   |   | -                |   |   |              | -          |   |             |   | (150,000 | ) |   |   | - |   |
| May 29, 2010                    |   | $US           | 1.00   |   |             |   | 189,000 |          |   |   | -                |   |   |              | -          |   |             |   | (189,000 | ) |   |   | - |   |
| August 5, 2010                  |   | $US           | 1.00   |   |             |   | 5,000   |          |   |   | -                |   |   |              | -          |   |             |   | (5,000 | ) |   |   | - |   |
| October 31, 2010                |   | $US           | 1.00   |   |             |   | 50,000  |          |   |   | -                |   |   |              | -          |   |             |   | (50,000 | ) |   |   | - |   |
| November 22, 2010               |   | $US           | 0.02   |   |             |   | -       |          |   |   | 7,000,000        |   |   |              | (5,000,000 | )      |             |   | (2,000,000 | ) |   |   | - |   |
| March 22, 2011                  |   | $US           | 1.00   |   |             |   | -       |          |   |   | 50,000           |   |   |              | -          |   |             |   | - |   |   |   | 50,000 |   |
| June 30, 2014                   |   | $US           | 0.80   |   |             |   | 320,000 |          |   |   | -                |   |   |              | -          |   |             |   | - |   |   |   | 320,000 |   |
| March 30, 2015                  |   | $US           | 0.02   |   |             |   | -       |          |   |   | 9,110,000        |   |   |              | -          |   |             |   | - |   |   |   | 9,110,000 |   |
| October 15, 2015                |   | $US           | 0.04   |   |             |   | -       |          |   |   | 500,000          |   |   |              | -          |   |             |   | - |   |   |   | 500,000 |   |
| October 28, 2015                |   | $US           | 0.02   |   |             |   | -       |          |   |   | 1,000,000        |   |   |              | -          |   |             |   | - |   |   |   | 1,000,000 |   |
|                            |   |          |   |   |             |   |    |          |   |   |             |   |   |              |       |   |             |   |   |   |   |   |   |   |
| Total                           |   |          |   |   |             |   | 772,000 |          |   |   | 17,660,000       |   |   |              | (5,000,000 | )      |             |   | (2,452,000 | ) |   |   | 10,980,000 |   |
|                            |   |          |   |   |             |   |    |          |   |   |             |   |   |              |       |   |             |   |   |   |   |   |   |   |
| Weighted Average Exercise Price |   |          |   |   |             | $US    | 0.92    |          |   | $US    | 0.02             |   |   | $US               | 0.02       |   |             | $US    | 0.20 |   |   | $US | 0.05 |   |

| d) | Share-Based Payments |
|----|----------------------|

| Risk-Free Annual Interest Rate  |   |      | 0.89   | % |
|---------------------------------|--------|-----------|--------|---|
| Expected Annual Dividend Yield  |   |      | 0      | % |
| Expected Stock Price Volatility |   |      | 98     | % |
| Expected Life of Warrants       |   | 0.1 years |   |

| e)  | Escrow Shares |
|----------|---------------|

----

|   |   |   |                                        | 2011$  |   |    | 2010$  |   |
|--------|--------|--------|---------------------------------------------|--------|--------|---------|--------|--------|
|   | a      | )      | Change in Non-Cash Working Capital Accounts |   |   |    |   |   |   |
|   |   |   |                                        |   |   |    |   |   |   |
|   |   |   | Accounts Receivable                         |   |   | -       |   |   |   | - |   |
|   |   |   | HST/GST Recoverable                         |   |   | (12,024 | )      |   |   | 640 |   |
|   |   |   | Inventory                                   |   |   | -       |   |   |   | - |   |
|   |   |   | Trade and Other Payables                    |   |   | 57,188  |   |   |   | (13,519 | ) |
|   |   |   |                                        |   |   |    |   |   |   |   |   |
|   |   |   |                                        |   |   | 45,164  |   |   |   | (12,879 | ) |
|   |   |   |                                        |   |   |    |   |   |   |   |   |
|   | b      | )      | Significant Non-Cash Financing Activities   |   |   |    |   |   |   |   |   |
|   |   |   |                                        |   |   |    |   |   |   |   |   |
|   |   |   | Shares Issued for Business Acquisition      |   |   | -       |   |   |   | 80,000 |   |
|   |   |   | Warrants Issued for Business Acquisition    |   |   | -       |   |   |   | 18,600 |   |
|   |   |   | Shares Issued for Settlement of Debts       |   |   | -       |   |   |   | 152,600 |   |
|   |   |   |                                        |   |   |    |   |   |   |   |   |
|   |   |   |                                        |   |   | -       |   |   |   | 251,200 |   |

|   | c      | )      | Other Information |   |   |   |   |   |   |
|--------|--------|--------|-------------------|--------|--------|--------|--------|--------|--------|
|   |   |   |              |   |   |   |   |   |   |
|   |   |   | Interest Paid     |   |   | -      |   |   |   | 1,787 |   |
|   |   |   | Income Taxes Paid |   |   | -      |   |   |   | - |   |

| a)  | Related Party Balances |
|----------|------------------------|

| b)  | Compensation of Key Management Personnel |
|----------|------------------------------------------|

| Management Fees      |   |   | 60,000 |   |   |   | 105,817 |   |
|----------------------|--------|--------|--------|--------|--------|--------|---------|--------|
| Share-Based Payments |   |   | -      |   |   |   | -       |   |
|                 |   |   |   |   |   |   |    |   |
|                 |   |   | 60,000 |   |   |   | 105,817 |   |

----

| a)  | Income Tax Expense |
|----------|--------------------|

|                                                             |   | 2011$  |    |   | 2010$  |   |
|------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                             |   |   |    |   |   |   |
| Recovery of Income Tax Calculated at the Statutory Rate of 13.5% |   |   | (24,614 | )      |   |   | (53,774 | ) |
| Permanent Differences                                            |   |   | -       |   |   |   | - |   |
| Deferred Tax Assets Not Recognized                               |   |   | 34,193  |   |   |   | 45,845 |   |
| Effect of Change in Tax Rates                                    |   |   | (6,570  | )      |   |   | 8,387 |   |
| Expiration of Non-Capital Losses and Other                       |   |   | (3,009  | )      |   |   | (458 | ) |
|                                                             |   |   |    |   |   |   |   |   |
| Income Tax Expense                                               |   |   | -       |   |   |   | - |   |

| b)  | Deferred Tax Assets and Liabilities |
|----------|-------------------------------------|

|                              |   | December 31,2011$ |    |   | December 31,2010$ |   |    | January 1,2010$ |   |
|-----------------------------------|--------|-------------------|---------|--------|-------------------|--------|---------|-----------------|--------|
|                              |   |              |    |   |              |   |    |            |   |
| Deferred Tax Assets (Liabilities) |   |              |    |   |              |   |    |            |   |
|                              |   |              |    |   |              |   |    |            |   |
| Tax Losses                        |   |              | 415,046 |   |              |   | 374,357 |            |   |   | 337,709 |   |
| Property and Equipment            |   |              | 2,066   |   |              |   | 8,598   |            |   |   | 197 |   |
| Share Issuance Costs              |   |              | 7,138   |   |              |   | 7,102   |            |   |   | 6,306 |   |
|                              |   |              |    |   |              |   |    |            |   |   |   |   |
|                              |   |              | 424,250 |   |              |   | 390,057 |            |   |   | 344,212 |   |

| 2014   |   |   | 24,200    |   |
|--------|--------|--------|-----------|--------|
| 2015   |   |   | 86,300    |   |
| 2026   |   |   | 313,100   |   |
| 2027   |   |   | 515,300   |   |
| 2028   |   |   | 367,400   |   |
| 2029   |   |   | 1,157,900 |   |
| 2030   |   |   | 307,400   |   |
| 2031   |   |   | 301,400   |   |
|   |   |   |      |   |
|   |   |   | 3,073,000 |   |

----

|                         |   | Oil and Gas Exploration |   |   | Solar Energy Development |   |   | Wine and Spirits Distribution |   |   | Corporate |   |   | Total  |     |
|------------------------------|--------|-------------------------|--------|--------|--------------------------|--------|--------|-------------------------------|--------|--------|-----------|--------|--------|--------|----------|
|                         |   | 2011$                   |   |   | 2010$                    |   |   | 2011$                         |   |   | 2010$     |   |   | 2011$  |     |   | 2010$ |   |   | 2011$ |   |   | 2010$ |   |   | 2011$ |   |   | 2010$ |   |
|                         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenses and Other Items     |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                 |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | -        |   |   |   | - |   |   |   | - |   |   |   | (282 | ) |   |   | (107 | ) |   |   | (282 | ) |   |   | (107 | ) |
| Other (Expenses) Income      |   |                    | (9,487 | )      |                     |   | -      |                          |   |   | (14,046   | )      |   |   | (30,326  | ) |   |   | - |   |   |   | - |   |   |   | (255,844 | ) |   |   | (255,962 | ) |   |   | (279,377 | ) |   |   | (286,288 | ) |
| Loss on Settlement of Debts  |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (13,332 | ) |   |   | - |   |   |   | (13,332 | ) |
| Gain on Surrender of Shares  |   |                    | -      |   |                     |   | -      |                          |   |   | 97,336    |   |   |   | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 97,336 |   |   |   | - |   |
| Write-Down Intangible Assets |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | (98,600  | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (98,600 | ) |
|                         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (Loss) Income            |   |                    | (9,487 | )      |                     |   | -      |                          |   |   | 83,290    |   |   |   | (128,926 | ) |   |   | - |   |   |   | - |   |   |   | (256,126 | ) |   |   | (269,401 | ) |   |   | (182,323 | ) |   |   | (398,327 | ) |
|                         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | -        |   |   |   | - |   |   |   | - |   |   |   | 60,805 |   |   |   | 205,148 |   |   |   | 60,805 |   |   |   | 205,148 |   |
|                         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Liabilities          |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | -        |   |   |   | 60,750 |   |   |   | 60,750 |   |   |   | 126,378 |   |   |   | 69,190 |   |   |   | 187,128 |   |   |   | 129,940 |   |
|                         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Acquisitions         |   |                    |   |   |                     |   |   |                          |   |   |      |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equipment                    |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | -        |   |   |   | - |   |   |   | - |   |   |   | 1,346 |   |   |   | - |   |   |   | 1,346 |   |   |   | - |   |
| Intangible Asset             |   |                    | -      |   |                     |   | -      |                          |   |   | -         |   |   |   | 98,600   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 98,600 |   |

----

| a) | Liquidity Risk |
|----|----------------|

| b) | Interest rate risk |
|----|--------------------|

| c)  | Credit risk |
|----------|-------------|

| d)  | Foreign Exchange Risk |
|----------|-----------------------|

| e) | Commodity Price Risk |
|----|----------------------|

| f) | Fair Values |
|----|-------------|

| Level 1: | Quoted prices in active markets for identical assets or liabilities. |
|----------|----------------------------------------------------------------------|

| Level 2: | Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 3: | Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------|

----

| f) | Fair Values (Continued) |
|----|-------------------------|

| a)  | First-time Adoption Exemptions Applied |
|----------|----------------------------------------|

| i)  | Business Combinations |
|----------|-----------------------|

|   | The Company has elected not to retrospectively apply IFRS 3 “Business Combinations” to business combinations that occurred before the Transition Date. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| a)  | First-time Adoption Exemptions Applied (Continued) |
|----------|----------------------------------------------------|

| ii)  | Share-Based Payment Transactions |
|-----------|----------------------------------|

|   | The Company has elected not to apply IFRS 2 “Share-Based Payment” to equity instruments that vested prior to the Transition Date. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| b)  | First-time Adoption Exception Applied |
|----------|---------------------------------------|

| c)  | Notes to the Reconciliation of Canadian GAAP to IFRS |
|----------|------------------------------------------------------|

| i)  | Equity Reserves |
|----------|-----------------|

|   | Under Canadian GAAP, a balance within contributed surplus existed to record the issuance of stock options and share purchase warrants.  Such amounts remained in contributed surplus upon the expiry of these equity instruments. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under IFRS, the components of contributed surplus are presented separately and reclassified into “reserve for stock options” and “reserve for share purchase warrants.”  Such amounts are transferred to retained earnings or deficit upon expiry of the equity instruments.  On the Transition Date, the Company transferred the value of expired equity instruments in the amount of $48,137 from reserves to deficit. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii)  | Acquisition-Related Costs |
|-----------|---------------------------|

|   | Under Canadian GAAP, acquisition-related costs incurred prior to January 1, 2011 were included in the total cost of a business combination and allocated to the assets acquired and liabilities assumed. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under IFRS, acquisition-related costs are expensed in the statement of operations as incurred.  Upon adoption of IFRS, the Company expensed legal fees of $25,646 incurred in connection with the acquisition of Jaydoc Capital Corp. on December 22, 2010 (Note 5).  The net impact of this adjustment to the net loss for the year ended December 31, 2010 was $Nil as the Company wrote off the intangible assets acquired from the business combination in 2010. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| d) | Reconciliation of Consolidated Statements of Financial Position |
|----|-----------------------------------------------------------------|

|                                       |     |   | January 1, 2010 |       |   | December 31, 2010             |   |
|--------------------------------------------|----------|--------|-----------------|------------|--------|-------------------------------|--------|
|                                       | Note     |   | Canadian GAAP$  |       |   | Effect of Transition to IFRS$ |   |   | IFRS$ |   |   | Canadian GAAP$ |   |   | Effect of Transition to IFRS$ |   |   | IFRS$ |   |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                               |     |   |            | 14,284     |   |                          |   | - |   |   |   | 14,284 |   |   |   | 205,148 |   |   |   | - |   |   |   | 205,148 |   |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES                          |     |   |            | 282,429    |   |                          |   | - |   |   |   | 282,429 |   |   |   | 129,940 |   |   |   | - |   |   |   | 129,940 |   |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHAREHOLDERS’ (DEFICIENCY) EQUITY    |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share Capital                              |     |   |            | 2,241,445  |   |                          |   | - |   |   |   | 2,241,445 |   |   |   | 2,786,932 |   |   |   | - |   |   |   | 2,786,932 |   |
| Share Subscription Advance                 |     |   |            | 5,384      |   |                          |   | - |   |   |   | 5,384 |   |   |   | 196,263 |   |   |   | - |   |   |   | 196,263 |   |
| Contributed Surplus                        |     |   |            | 366,788    |   |                          |   | (366,788 | ) |   |   | - |   |   |   | 372,102 |   |   |   | (372,102 | ) |   |   | - |   |
| Share Purchase Warrants Reserve            | 16(c)(i) |   |            | -          |   |                          |   | 318,651 |   |   |   | 318,651 |   |   |   | - |   |   |   | 276,310 |   |   |   | 276,310 |   |
| Deficit                                    |     |   |            | (2,881,762 | )      |                          |   | 48,137 |   |   |   | (2,833,625 | ) |   |   | (3,280,089 | ) |   |   | 95,792 |   |   |   | (3,184,297 | ) |
|                                       |     |   |            |       |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |     |   |            | (268,145   | )      |                          |   | - |   |   |   | (268,145 | ) |   |   | 75,208 |   |   |   | - |   |   |   | 75,208 |   |
| Total Liabilities and Shareholders' Equity |     |   |            | 14,284     |   |                          |   | - |   |   |   | 14,284 |   |   |   | 205,148 |   |   |   | - |   |   |   | 205,148 |   |

| e) | Reconciliation of Consolidated Statement of Comprehensive Loss |
|----|----------------------------------------------------------------|

|                            | Note      |   | CanadianGAAP$ |    |   | Effect of Transition to IFRS$ |   |    | IFRS$  |   |
|---------------------------------|-----------|--------|---------------|---------|--------|-------------------------------|--------|---------|--------|--------|
|                            |      |   |          |    |   |                          |   |    |   |   |
| EXPENSES                        |      |   |          | 250,832 |   |                          |   | -       |   |   |   | 250,832 |   |
|                            |      |   |          |    |   |                          |   |    |   |   |   |   |   |
| OTHER ITEMS                     |      |   |          |    |   |                          |   |    |   |   |   |   |   |
| Acquisition-Related Costs       | 16(c)(ii) |   |          | -       |   |                          |   | 25,646  |   |   |   | 25,646 |   |
| Foreign Exchange Loss           |      |   |          | 9,917   |   |                          |   | -       |   |   |   | 9,917 |   |
| Net Loss on Settlement of Debts |      |   |          | 13,332  |   |                          |   | -       |   |   |   | 13,332 |   |
| Write-Down Intangible Asset     | 16(c)(ii) |   |          | 124,246 |   |                          |   | (25,646 | )      |   |   | 98,600 |   |
|                            |      |   |          |    |   |                          |   |    |   |   |   |   |   |
| NET LOSS                        |      |   |          | 398,327 |   |                          |   | -       |   |   |   | 398,327 |   |
|                            |      |   |          |    |   |                          |   |    |   |   |   |   |   |
| Other Comprehensive Income      |      |   |          | -       |   |                          |   | -       |   |   |   | - |   |
|                            |      |   |          |    |   |                          |   |    |   |   |   |   |   |
| NET COMPREHENSIVE LOSS          |      |   |          | 398,327 |   |                          |   | -       |   |   |   | 398,327 |   |

| f) | Reconciliation of Cash Flows |
|----|------------------------------|

----

| a)  | Gulf Jensen Oil Prospect |
|----------|--------------------------|

| b)  | Private Placements |
|----------|--------------------|

| c) | Exercise of Share Purchase Warrants |
|----|-------------------------------------|

| d)  | Repurchase and Cancellation of Units |
|----------|--------------------------------------|

| e)  | Promissory Notes Payable |
|----------|--------------------------|