---

**UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION**
  Washington, D.C. 20549

FORM 20-F

 ̈ REGISTRATION
  STATEMENT PURSUANT TO SECTION 12(b) or 12(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 December 31, 2004

OR

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

For the transition period from _______________ to _______________

Commission file number 0-32255

BALATON POWER INC.(Exact name of Registrant specified in its charter)

N/A(Translation of Registrant’s name into English)

BRITISH COLUMBIA, CANADA(Jurisdiction of incorporation or organization)

19 East Fourth AvenueHutchinson, Kansas 67501(Address of principal executive offices)

COMMON SHARES WITHOUT PAR VALUE(Title of Class)

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                           
|                    |                                          




COMMON SHARES WITHOUT PAR VALUE
  (Title of Class)

Securities for which there is a reporting obligation pursuant
  to Section 15(d) of the Act. None

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- ii -

Number of outstanding shares of the Company’s only class
  of capital stock as at December 31, 2004 (date of last audited financial statement
  herein) was 73,433,160 Common Shares Without Par Value.

Indicate by check mark whether Registrant (1) has filed all
  reports required to be filed by Section 13 or 15(d) of the Securities Exchange
  Actof 1934 during the preceding 12 months (or for such shorter period that
  Registrant was required to file such reports), and (2) has been subject to such
  filing requirements for the past 90 days.

YES  ̈ NO x

Indicate by check mark which financial statement item Registrant
  has elected to follow:

Item 17 xItem
  18  ̈

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TABLE OF CONTENTS
  to Form 20-F of
  Balaton Power Inc. (“Balaton”)

|          |                                                                                    | Page
|--------- | ---------------------------------------------------------------------------------- | ----
|         
|GLOSSARY  |                                                                                    | 1   
|         
|PART I    |                                                                                    | 3   
|         
|Item 1.   | Identity of Directors, Senior Management
      and Advisers                        | 3   
|Item 2.   | Offer Statistics and Expected Timetable                                            | 3   
|Item 3.   | Key Information                                                                    | 3   
|Item 4.   | Information on the Company                                                         | 7   
|Item 5.   | Operating and Financial Review and Prospects                                       | 19  
|Item 6.   | Directors, Senior Management and Employees                                         | 24  
|Item 7.   | Major Shareholders and Related Party Transactions                                  | 29  
|Item 8.   | Financial Information                                                              | 30  
|Item 9.   | The Offer and Listing                                                              | 31  
|Item 10.  | Additional Information                                                             | 32  
|Item 11.  | Quantitative and Qualitative Disclosures
      About Market Risk                   | 44  
|Item 12.  | Description of Securities Other Than Equity
      Securities                       | 44  
|         
|PART II   |                                                                                    | 45  
|         
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                                    | 45  
|Item 14.  | Material Modifications to the Rights of
      Security Holders and Use of Proceeds | 45  
|Item 15.  | Controls and Procedures                                                            | 45  
|Item 16.  | [Reserved]                                                                         | 46  
|Item 16A. | Audit Committee Financial Expert                                                   | 46  
|Item 16B. | Code of Ethics                                                                     | 46  
|Item 16C. | Principal Accountant Fees and Services                                             | 46  
|         
|PART III  |                                                                                    | 46  
|         
|Item 17.  | Financial Statements                                                               | 46  
|Item 18.  | Financial Statements                                                               | 47  
|Item 19.  | Exhibits                                                                           | 47  

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GLOSSARY

|Term               | Definition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Acquisition        | The Company’s acquisition of CRL in October 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Act                | Securities Actof 1933, as amended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Balco              | Bharat Aluminium Co.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|BRIMAC             | Balaton Remote Intergrated Monitoring and Control System                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|BSA                | Balaton Power Corporation S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|CDN GAAP           | Generally accepted accounting principles in Canada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|CFC                | Controlled foreign corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|CIMM               | Canadian Institute of Mining and Metallurgy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Code               | Internal Revenue Code                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Committee          | Board of directors of the Company who will be Plan administrators                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Company            | Balaton Power Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|COMPL              | Continental Orissa Mining Private Limited                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Continental        | Continental Resources Ltd., a company incorporated under Québec                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|CRL                | Continental Resources (USA) Ltd., a wholly-owned subsidiary
      of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|EDTA               | Ethylene-diamene-tetra-acetic acid technique, industry standard
      for analyses for radicals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|FERC               | Federal Energy Regulatory Commission                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|GSI                | Geological Survey of India                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Gandhamardan       | The second largest bauxite deposit in Asia, situated in the
      Gandharmardan Hill,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Bauxite Deposit    | Duragali, State of Orissa, India                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Exchange Act       | Securities Exchange Act of 1934                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Indicated Resource | That part of the Mineral Resource for
        which quantity, grade or quality, densities, shape and physical characteristics
        can be estimated with a level of confidence sufficient to allow the appropriate
        application of technical and economic parameters, to support mine planning
        and evaluation of the economic viability of the deposit. The estimate
        is based on detailed and reliable exploration and testing information
        gathered through appropriate techniques from locations such as outcrops,
        trenches, pits, workings and drill holes that are spaced closely enough
        for geological and grade continuity to be reasonably assumed.
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Inferred Resource  | That part of the Mineral Resource for
        which quantity and grade or quality can be estimated on the basis of geological
        evidence and limited sampling and reasonably assumed, but not verified,
        geological and grade continuity. The estimate is based on limited information
        and sampling gathered through appropriate techniques from locations such
        as outcrops, trenches, pits, workings and drill holes. An Inferred Resource
        has a lower level of confidence than that applied to an Indicated Resource.                                                                                                                                               

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|Investment Act          | Investment Canada Act                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|IRS                     | Internal Revenue Service                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ISO Options             | Incentive stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Joint Venture Agreement | The joint venture agreement between Continental and OMC
      dated April 18, 1997                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Lease                   | The mining lease issued in the name of OMC for over
        285 hectares named Block 7 of the Gandhamaradan Bauxite Deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Measured
      Resource | That part of a Mineral Resource for which quantity,
        grade or quality, densities, shape, physical characteristics are so well
        established that they can be estimated with confidence sufficient to allow
        the appropriate application of technical and economic parameters, to support
        production planning and evaluation of the economic viability of the deposit.
        The estimate is based on limited information and sampling gathered through
        appropriate techniques from locations such as outcrops, trenches, pits,
        workings and drill holes that are spaced closely enough to confirm both
        geological and grade continuity. An Indicated Resource has a higher level
        of confidence than an Inferred Resource but has a lower level of confidence
        than a Measured Resource.
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|MECL                    | Mineral Exploration Corp. Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Mineral Reserve         | Economically mineable part of a Measured or Indicated
        Resource demonstrated by at least a comprehensive study of the viability
        of a mineral property that has advanced to a stage where the mining method,
        in the case of underground mining, or the pit configuration, in the case
        of an open pit, has been established, and where an effective method of
        mineral processing has been determined.                                                                                                                                                                                                                                                                                                                                                                                                                  
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Mineral Resource        | Concentration or occurrence of natural, solid, inorganic
        or fossilized organic material in or on the earth’s crust in such
        form and quantity and of such a grade or quality that it has reasonable
        prospects for economic extraction. The location, quantity, grade, geological
        characteristics and continuity of a mineral resource are known, estimated
        or interpreted from specific geological evidence and knowledge. Mineral
        Resources are sub-divided, in order of increasing geological confidence,
        into Inferred, Indicated and Measured categories.                                                                                                                                                                                                                                        
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|NQSO Options            | Non-qualified stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ODM                     | Orissa Directorate of Mines                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|OMC                     | Orissa Mining Corporation Limited, an Orissa State
        owned government corporation, the Company’s joint venture partner                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Perial                  | Perial Ltd., a company incorporated under the laws
        of the Province of Ontario, a major shareholder of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|PFIC                    | Passive foreign investment companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Pisces Process          | Fish protective water inlet device                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Plan                    | The Company’s 2004 incentive stock option plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|QEF                     | Qualified electing fund                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Ravenscroft             | Vernon Ravenscroft                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Ravenscroft Site        | Ravenscroft’s hydroelectric power production facility and site
      situated in Bliss, Idaho                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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|Report  | A report prepared by E.A. Gallo, P. Geo, titled “The
        Summary Report Gandhamardan Bauxite Deposit Sambupar and Balangir Districts,
        State of Orissa, India, dated April 8, 2003
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                              
|SEC     | United States Securities and Exchange Commission                                                                                                                                             
|        |                                                                                                                                                                                              
|System  | Low-impact run-of-the-river hydroelectric power production system                                                                                                                            
|        |                                                                                                                                                                                              
|Tax Act | Income Tax Act (Canada) Treaty Canada-United States Income Tax
      Convention, 1980                                                                                                        
|        |                                                                                                                                                                                              
|US GAAP | Generally accepted accounting principles in the United States of America                                                                                                                     

PART I

ITEM 1.IDENTITY OF DIRECTORS, SENIOR
  MANAGEMENT AND ADVISERS

A.     Directors and Senior Management

Not applicable.

B.     Advisers

Not applicable.

C.     Auditors

Not applicable.

ITEM 2.      OFFER STATISTICS AND EXPECTED
  TIMETABLE

Not applicable.

ITEM 3.     KEY INFORMATION

A.     Selected Financial Data

The following constitutes selected financial data derived from
  the audited financial statements for the Company for the last five fiscal years
  ended December 31, 2004 (see Item 17). The financial statements are presented
  in United States dollars and have been prepared in accordance with generally
  accepted accounting principles in Canada (“CDN GAAP”). Financial
  statements include information relating to the Company’s wholly-owned
  subsidiary Continental Resources (USA) Ltd. (“CRL”).

|(US$)                           | 2004      |  | 2003      |  | 2002      |  | 2001      |  | 2000      | 
|------------------------------- | --------- |  | --------- |  | --------- |  | --------- |  | --------- | 
|                                |           |  |           |  |           |  |           |  |           | 
|Balance Sheet Data              |           |  |           |  |           |  |           |  |           | 
|Total assets according to       |           |  |           |  |           |  |           |  |           | 
|financial statements (CDN GAAP) | 1,089,524 |  | 1,632,818 |  | 1,664,408 |  | 2,389,251 |  | 2,404,638 | 

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|(US$)                                 | 2004       |   | 2003        |   | 2002       |   | 2001       |   | 2000       |  
|------------------------------------- | ---------- | - | ----------- | - | ---------- | - | ---------- | - | ---------- | -
|                                     
|Total assets (US GAAP)                | 1,089,524  |   | 1,632,818   |   | 1,664,408  |   | 2,389,251  |   | 2,404,638  |  
|Total liabilities                     | 488,618    |   | 1,727,812   |   | 1,663,097  |   | 50,387     |   | 34,104     |  
|Share capital                         | 4,022,851  |   | 2,738,402   |   | 2,598,000  |   | 2,400,000  |   | 2,400,000  |  
|Retained earnings (deficit)           | (4,103,856 | ) | (2,910,886  | ) | (2,596,689 | ) | (61,136    | ) | (29,466    | )
|(CDN GAAP)                            |            |   |             |   |            |   |            |   |            |  
|Retained earnings (deficit) (US GAAP) | 4,103,856  |   | (2,910,886  | ) | (2,596,689 | ) | (61,136    | ) | (29,466    | )
|                                     
|(US$)                                 |            |   |             |   |            |   |            |   |            |  
|Period End Balances (as at)           |            |   |             |   |            |   |            |   |            |  
|Working capital                       | 44,182     |   | 1,664,886   |   | (1,598,581 | ) | (50,387    | ) | (34,104    | )
|Resource properties                   | 0          |   | 1,145,163   |   | 1,145,163  |   | 2,389,251  |   | 2,404,638  |  
|Shareholders’ equity                  | 600,906    |   | (94,994     | ) | 1,311      |   | 2,389,251  |   | 2,404,638  |  
|                                     
|(US$)                                 | 2004       |   | 2003        |   | 2002       |   | 2001       |   | 2000       |  
|                                     
|Number of outstanding shares          | 73,433,160 |   | 66,762,2141 |   | 64,988,194 |   | 55,878,194 |   | 55,878,194 |  
|                                     
|(US$)                                 |            |   |             |   |            |   |            |   |            |  
|Statement of Operations Data          |            |   |             |   |            |   |            |   |            |  
|Revenue                               | -          |   | –           |   | 24,899     |   | 35,158     |   | 10,937     |  
|Production costs                      | -          |   | –           |   | 22,398     |   | 30,687     |   | 11,219     |  
|Writedown of resource properties      | 1,145,163  |   | –           |   | 1,895,987  |   |            |   |            |  
|General and administrative expenses   | 715,196    |   | 195,286     |   | 232,587    |   | 20,755     |   | 3,007      |  
|Income (loss) according to financial  |            |   |             |   |            |   |            |   |            |  
|statements (CDN GAAP)                 | 1,192,970  |   | (314,917    | ) | (2,126,073 | ) | (31,671    | ) | (8,237     | )
|Loss per common share (CDN GAAP) 2    | (0.02      | ) | N/A         |   | (0.05      | ) | (0.01      | ) | (0.01      | )
|Loss per common share (US GAAP)2      | (0.02      | ) | N/A         |   | (0.05      | ) | (0.01      | ) | (0.01      | )

|(1) | During the year 2003, a shareholder subscribed for
        1,200,000 common shares for net cash proceeds of $77,490 to the Company.
        Such shares were not issued to the shareholder until after the year-end.
        As such, the number of issued and outstanding shares and retained earnings
        as at December 31, 2003 do not reflect this transaction.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Stock options and warrants outstanding were not included in the computation
      of diluted loss per share as their inclusion would be antidilutive.                                                                                                                                                                                                                   

See Item 17 for accompanying audited year end financial statements (prepared in accordance with CDN GAAP) for further details.

B.     Capitalization and Indebtedness

Not applicable.

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- 5 -

C.     Reasons for the Offer and Use of Proceeds

Not applicable.

D.     Risk Factors

Company with No History of Earnings.The
  Company has no operating history, no revenues and is subject to all the risks
  inherent in a start-up business enterprise including lack of cash flow and no
  source of revenue. The Company’s only source of revenue will be from the
  sale of interests in the Gandhamardan Bauxite Deposit and/or sale of bauxite
  from those deposits. The Company does not currently generate any revenue from
  the sale of its products, and will require significant additional capital to
  place its property into production.

Liquidity; Need for Additional Financing.Historically, the Company has funded its operations through the sale of
  equity capital. The Company has had and will continue to have capital requirements
  in excess of its currently available resources. The Company is not able to meet
  its financial commitments as they become due. The Company is dependent on the
  proceeds of future financing to finance the final phase of the feasibility study
  on the Gandhamardan Bauxite Deposit. To the extent that any such financing involves
  the sale of equity capital, the interests of the Company’s then existing
  shareholders would be substantially diluted. There is no assurance the Company
  will be successful in raising additional financing.

Reliance Upon Directors and Officers; Management.The Company is wholly dependent at present upon the personal efforts and
  abilities of its officers and directors, who exercise control over the day-to-day
  affairs of the Company. The loss of any director or officer could have an adverse
  effect on the Company.

Issuance of Additional Shares. The Company
  is authorized to issue 700,000,000 common shares. As at December 31, 2004, 74,433,160
  common shares were issued and outstanding. The Board of Directors has the power
  to issue such shares. Although the Company presently has no commitments or contracts
  to issue any additional shares to other persons, except as otherwise disclosed
  in this document, the Company may in the future attempt to issue shares to acquire
  products, equipment or properties, or for other corporate purposes. Any additional
  issuance by the Company, from its authorized but unissued shares, would have
  the effect of diluting the interest of existing shareholders.

Indemnification of Officers and Directors for Securities
  Liabilities.The laws of the Province of British Columbia provide
  that the Company could indemnify any director, officer, agent and/or employee
  as to those liabilities and on those terms and conditions as are specified in
  the British Columbia Business Corporations Act. Further, the Company
  may purchase and maintain insurance on behalf of any such persons whether or
  not the corporation would have the power to indemnify such person against the
  liability insured against. The foregoing could result in substantial expenditures
  by the Company and prevent any recovery from such officers, directors, agents
  and employees for losses incurred by the Company as a result of their actions.
  Further, the Company has been advised that in the opinion of the Securities
  and Exchange Commission (the “SEC”), indemnification is against
  public policy as expressed in the Securities Actof 1933 (the “Act”),
  as amended, and is, therefore, unenforceable.

The Company’s Management May Not Be Subject to
  U.S. Legal Process. As Canadian citizens and residents, certain
  of the Company’s directors and officers may not subject themselves to
  U.S. legal proceedings so that recovery on judgments issued by U.S. courts may
  be difficult or impossible. While reciprocal enforcement of judgment legislation
  exists between Canada and the U.S., the Company’s insiders may have defences
  available to avoid, in Canada, the effect of U.S. judgments under Canadian law,
  making enforcement difficult or impossible. The Company’s management may
  not have any personal assets available in the U.S. to satisfy judgments of U.S.
  courts. Therefore, the Company’s shareholders in the United States may
  have to avail themselves of remedies under Canadian corporate and securities
  laws for perceived oppression, breach of fiduciary duty and like legal complaints.
  Canadian law may not provide for remedies equivalent to those available under
  U.S. law.

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- 6 -

Exploration of Resource Property. Exploration
  of natural resources involves a high degree of risk. The long-term profitability
  of the Company will, in part, be directly related to the cost and success of
  the exploration and future development of the Gandhamardan Bauxite Deposit in
  Orissa State, India. Substantial expenditures are required to establish resources
  and reserves through drilling, to develop processes for extraction and, in the
  case of new properties, to develop the extraction and processing facilities
  and infrastructure at any site chosen for extraction. No assurance can be given
  that Mineral Resources will be converted to Mineral Reserves, that funds required
  for the development can be obtained on a timely basis, that funds will be adequate
  to complete a feasibility study and /or that bauxite can be economically extracted
  from the Gandhamardan Bauxite Deposit.

Operating Hazards and Risks. Exploration and
  development of natural resources involves many risks, which, even with a combination
  of experience, knowledge and careful examination may not be mitigated. Operations
  in which the Company has a direct or indirect interest will be subject to all
  the hazards and risks normally incidental to exploration, development and production
  of resources, any of which could result in work stoppages, damage to persons
  or property and possible environmental damage. Although the Company has or will
  obtain liability insurance in an amount which it considers adequate, the nature
  of these risks is such that the liabilities might exceed policy limits, the
  liabilities and hazards might not be insurable against, or the Company might
  not elect to insure itself against such liabilities due to high premium costs
  or other reasons, in which event the Company could incur significant costs that
  could have a material adverse effect upon its financial condition.

Fluctuating Prices. The Company’s revenues,
  if any, are expected to be in large part derived from the extraction and sale
  of bauxite. Commodity prices fluctuate and are affected by numerous factors
  beyond the Company’s control including international, economic and political
  trends, expectations of inflation, currency exchange fluctuations, interest
  rates, global or regional consumptive patterns, speculative activities and increased
  production due to extractive developments and improved extractive production
  methods. The effect of these factors on the price of bauxite, and therefore
  the economic viability of the Company’s exploration projects cannot be
  accurately predicted.

Competition. The resource industry is intensely
  competitive in all of its phases, and the Company competes with many companies
  possessing greater financial resources and technical facilities than itself.
  Competition could adversely affect the Company’s ability to develop the
  Gandhamardan Bauxite Deposit.

Options and Joint Ventures. In order to conserve
  financial resources, the Company intends to enter into option, joint venture,
  or development agreements and form a consortium to finance the exploration and
  possible development of the Gandhamardan Bauxite Deposit. If such agreements
  are entered into, the Company’s position in the Gandhamardan Bauxite Deposit
  would change, and the Company could lose control of the exploration and development
  of the deposit. There is no assurance that a consortium will be formed, or if
  formed, will be formed on terms favourable to the Company, or that the exploration
  and development of the Gandhamardan Bauxite Deposit will proceed.

Title to Assets. While the Company has or will
  receive title opinions for any properties in which it has or will acquire a
  material interest, such opinions cannot be viewed as a guarantee of title. Title
  may not be affected by unregistered interests and claims to title, which could
  adversely affect the Company’s ability to develop its properties.

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Inadequate Working Capital. The Company does
  not have adequate working capital to conduct the final phase of the feasibility
  study on the Gandhamardan Bauxite Deposit and must raise funds through private
  placements or public offerings of treasury shares, through debt financing, if
  available, or sale of a portion of its interest in its projects. If the Company
  is not successful in raising further funds, it may not be able to complete its
  development plans.

Interruption by Local Residents. The Company
  may require the support of local residents to be able to proceed with the development
  of the Gandharmadan Bauxite Deposit. Past development of the Gandhamardan Bauxite
  Deposit has been thwarted by local residents who opposed development in the
  Gandharmadan and successfully suspended operations. There is no assurance that
  the Company will be able to obtain the support of local residents.

Mining Leases. Orissa Mining Corporation (“OMC”),
  the Company’s joint venture partner, currently holds a mining lease for
  Block 7, which contains an estimated 20% of the estimated Mineral Resource (including
  the Inferred Resources) comprised in the Gandhamardan Bauxite Deposit. Block
  7 is one of ten Blocks comprising the Gandharmadan Bauxite Deposit. The Company
  and OMC intend to mine one Block at a time and other mining leases will be obtained
  as needed from the State of Orissa. Although OMC does not express concern over
  obtaining additional mining leases for other Blocks of the Gandharmadan Bauxite
  Deposit, there is no assurance that OMC will be able to do so.

Exchange Rate Fluctuation. The profitability
  of the Company may be adversely affected by fluctuations in the rate of exchange
  of Indian Rupies into United States dollars. The Company does not take any steps
  to hedge against currency fluctuations.

Patents. The Company has a license to
  manufacture and sell the Pisces Process detailed in Item 4 of this document.
  There is no assurance, however, that third parties may not infringe on the patents.
  In order to protect the patent rights, the Company or the patent owners may
  have to file lawsuits and obtain injunctions. If the Company does that, it will
  have to spend large sums of money for attorney’s fees in order to obtain
  the injunctions. Even if the Company or patent holders obtain the injunctions,
  there is no assurance that those infringing on the patents will comply with
  the injunctions. Further, the Company or patent holders may not have adequate
  funds available to prosecute actions to protect the patents, in which case those
  infringing on the patents could continue to do so in the future.

ITEM 4.     INFORMATION ON THE COMPANY

A.      History and Development

The Company’s legal name is Balaton Power Inc. The Company
  was incorporated under the Company Act (British Columbia) (now the British
  Columbia Business Corporations Act) under the laws of the Province of
  British Columbia on June 25, 1986. The Company’s registered office is
  c/o its solicitors, Lang Michener LLP, 1500 – 1055 West Georgia Street,
  PO Box 11117, Vancouver, British Columbia, Canada, V6E 4N7, telephone number
  (604) 689-9111. The Company’s principal place of business is 19 East Fourth
  Street, Hutchinson, Kansas, U.S.A., 67501, telephone number (620) 662-3697 and
  facsimile number (620) 682-6861.

The Company is in the start-up stage and has initiated limited
  operations. Prior to the acquisition/merger with CRL in October 2002 (the “Acquisition”),
  the Company was in the business of construcing, installing and selling “low
  impact” run-of-the-river hydroelectric power production systems (the “System”)
  which incorporated a patent pending fish protective water inlet device (the
  “Pisces Process”). Following the Acquisition, the Company
  changed its primary business to exploring and developing the Gandhamardan Bauxite
  Deposit. Important events in the development of the Company’s business
  are noted below.

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The Company commenced business with certain hydro electric
  power assets known as the Pisces System and the Balaton Remote Integrated Monitoring
  and Control System BRIMAC. The Company's intent was to use these systems in
  connection with the development of hydro electric power projects in the Pacific
  Northwest. On January 14, 2001, the Company entered into a power purchase agreement
  with Idaho Power Company and an agreement in principle with Vernon Ravenscroft
  (“Ravenscroft”) of Bliss, Idaho, which superseded an earlier
  agreement dated August 25, 2000, to acquire a one-third interest in Ravenscroft’s
  hydroelectric power production facility and site (the “Ravenscroft
  Site”). Between 2000 and 2002, the Company spent $160,000 earning
  its interest in the Ravenscroft Site. Despite such expenditures, substantial
  obligations remained with no funding to fulfil them. As such, the Company decided
  that it was in its best interest to sell the Ravenscroft Site back to Ravenscroft.
  During 2002, the Company sold its interest in the Ravenscroft Site for $20,000
  and the Company was released from any ongoing commitments. During 2002, the
  Company also entered into agreements to acquire eleven unlicensed hydro power
  sites. These acquisitions were completed, however none of the sites have been
  developed, and the Company has no plans to develop these sites.

On September 30, 2002, the Company entered into a Stock Exchange
  Agreement with Perial Ltd. (“Perial”) for the purchase of
  CRL. The Company issued a total of 33,000,000 common shares in its own capital
  to acquire CRL of which 25,000,000 were allocated to Perial and 8,000,000 shares
  were issued as finder’s fees. CRL is a joint venture partner with OMC
  which has an interest on a significant bauxite deposit in Orissa, India, known
  as the “Gandhamardan” (the “Gandhamardan Bauxite Deposit”).
  The Acquisition was treated as a capital transaction by the Company and not
  a business combination. Prior to the Acquisition, CRL sold all of its oil and
  gas assets to its then parent company, Perial, for a promissory note in the
  amount of $481,724 and the assumption of CRL’s outstanding debts.
  The note is non-interest bearing and is repayable through the payment of a 25%
  interest in production from the oil and gas assets.

CRL’s sole asset at the time of the Acquisition, on
  or about October 2002, was a 50% interest and effective control of Continental
  Orissa Mining Private Limited (“COMPL”), which CRL acquired
  during 2002 in consideration for agreeing to direct the exploration and development
  of the Gandhamardan Bauxite Deposit.

During 2004 and subsequent to the year end, the Company focussed
  on establishing a strong working relationship with OMC, the 50% owner of COMPL.
  The Company and OMC have discussed the principal terms upon which the exploration
  and possible development of the Gandhamardan Bauxite Deposit, although no written
  agreement has yet been signed. In addition, during 2004 and subsequent to 2004
  management held discussions with potential partners to provide financial and
  technical resources to assist in the exploration and potential development of
  the Gandhamardan Bauxite Deposit. These discussions took substantially all of
  the time of the Company's management. During 2004, COMPL was voluntarily dissolved
  to make way for a new entity that will facilitate future joint venture agreements
  with OMC. As at the date of this report, the Company has not established the
  new entity.

The Company is currently seeking a manager, joint venture
  partner or purchaser for its hydroelectric power assets, which includes the
  Pisces Process and BRIMAC. The Company does not intend to install the System
  at any sites, and does not plan to develop any of its own hydroelectric sites.
  The System is designed to produce “green”/renewable electricity.
  A “green” system is one which generates electricity from non-carbon
  based fuels and does not adversely impact the flows of rivers or aquatic life
  and is considered “low impact” on the environment. As of the date
  hereof, the Company has not constructed, installed or sold any Systems, the
  Pisces Process (other than its tested prototypes) or BRIMACs and does not generate
  or distribute electricity to anyone. There is no assurance that the Company
  will ever construct, install or sell any Systems, the Pisces Process or BRIMACs
  and the Company has not received any significant expression of interest for
  the systems.

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B.     Business Overview

The Company’s business is focussed on the development of the Gandhamardan Bauxite Deposit.

Gandhamardan Bauxite Deposit

On April 18, 1997, Continental entered into an agreement with
  OMC to form a 50-50 joint venture company in the State of Orissa with its primary
  purpose to explore and exploit the Gandharmadan Bauxite Deposit (the “Joint
  Venture Agreement”). Continental managed the daily operations of COMPL,
  the joint venture company. Under the Joint Venture Agreement, OMC had an option
  to participate in Continental’s proposed aluminium complex (including
  refinery, power plant and smelter). This option was to be exercised within one
  year from the date of transfer of leases concerning the Gandhamardan Bauxite
  Deposit, of which such option could be extended by mutual consent. Pursuant
  to the Joint Venture Agreement, Continental bore all costs associated with the
  preparation of a feasibility report and exploration of the deposit. In 2002,
  Continental transferred its interest in the deposit to CRL, an unrelated company,
  with the result that CRL and OMC became joint venture partners. During 2004,
  COMPL was voluntarily dissolved. The Company wishes to incorporate a new entity
  to enter into joint venture relationships with OMC.

On September 30, 2002, the Company entered into a Stock Exchange
  Agreement with Perial for the purchase of CRL in consideration for 33,000,000
  common shares. See “History and Development” above for terms of
  the acquisition of the Gandhamardan Bauxite Deposit.

During 2004 and subsequent to year end, Continental met with
  OMC to discuss terms and conditions for a new joint venture agreement to develop
  the Gandhamardan Bauxite Deposit. Based upon these discussions, Continental’s
  interests in the mining phase would increase and place 100% of the downstream
  facilities (alumina plant and aluminium shelter) in favour of Continental.

In order to further explore and develop the Gandhamardan Bauxite
  Deposit, the Company will need to complete the final phase feasibility study.
  The Company has received an estimate of $2 million as the cost to complete
  the feasibility study. The Company does not currently have the resources to
  complete this study. Further funds will be required to develop the Gandhamardan
  Bauxite Deposit , if it is determined to be economical. The Company believes
  that the most efficient way to further explore and potentially develop the Gandhamardan
  Bauxite Deposit, including the feasibility study, is through the establishment
  of a consortium of entities. The Company has not yet confirmed specific consortium
  partners although several parties have expressed interest. There is no assurance
  that the Company will be able to form a consortium, or what the terms of any
  consortium formed will be. If the Company is unable to locate suitable partners,
  the Company will have seek additional financing to carry out the feasibility
  study.

The following information is summarized from a report prepared
  by E.A. Gallo, P.Geo. entitled “Summary Report Gandhamardan Bauxite Deposit
  Sambupar and Balangir Districts, State of Orissa, India, dated April 8, 2003”
  (the “Report”). This report summarizes exploration on the
  property by past operations, and was prepared and is disclosed by the Company
  under Canadian securities regulations.

Property Description And Location

The Gandhamardan Bauxite Deposit is located at the top of
  Gandhamardan hill near the town of Duragali, State of Orissa, India. This hill,
  which has a plateau top, is linear aligned in a Northeast-Southwest direction.
  The hill straddles the boundary, between Balangir District to the Southeast,
  and Sambalpur District to the Northwest, in the west central part of the State
  of Orissa, in eastern India.

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Gandhamardan is bounded by Latitudes 20 degrees and 50 minutes
  and 20 degrees 55 minutes North, and Longitudes 82 degrees 451 and 82 degrees
  54 minutes East. It plots on Survey of India topographic sheet NTS 64L/l3. Gandhamardan
  hill extends in a Northeast-Southwest direction for a length of 9.8 kms. Width
  ranges from 0.4 to 2.6 kms, and averages 0.75 km. The top of the hill is a plateau,
  with an areal extent of 7.4 kms2. The bauxite zone covers an area of 734 hectares.
  Due to its large size and lineal alignment, the deposit has been divided into
  10 l-km wide blocks, numbered 1 to 10.

Vegetation on the plateau consists primarily of tiger-grass,
  dwarf palm, chachar, chhena, bantulsi, etc., with small, isolated clumps of
  stunted hardwood trees such as char and kendu. The stunted trees rarely exceed
  4 meters in height. Vegetation on the hill flanks contrast greatly with that
  on the plateau. The flanks are densely forested by mature hardwood trees such
  as char, kendu, tenk, and sal. Underbrush consists mainly of bamboo clumps,
  leafy vines, shrubs, and medicinal herbs. Gandhamardan hill is a designated
  forest reserve. Regulations allow mining operations to be conducted in such
  reserves, however, the operator must establish a reserve area elsewhere that
  is equal in area to the mining lands.

Gandhamardan hill stands approximately 1,200 meters above
  sea level, and 700 meters above a plain at the base of the hill. The plateau
  top has a gentle relief of about 50 meters.

Accessibility, Physiography and Infrastructure

The property on which the Gandhamardan Bauxite Deposit sits
  is easily accessed by 4-wheel drive vehicle along a poorly maintained road up
  the NW flank of the hill. This road departs the village of Duragali, at the
  base of the hill, and winds 4 kms to the top. Duragali is connected by paved
  road to Paikmal, a town with all modern facilities, including power, water,
  transportation, communication, food, shelter, supplies, services, and labour.
  Paikmal is connected by paved roads to the State Capital, Bhubaneswar, about
  300 kms to the East, and to port cities along the Bay of Bengal, equidistant
  to the Southeast.

At the time the exploration work was performed, the hill top
  could also be accessed up the Southeast side. This road currently has 3 wash-outs.
  After repairs, this road will also be navigable by 4-wheel drive vehicle. The
  Southeast road is preferable, as it provides a slightly shorter route to the
  hill top, and access by paved roads southerly to the towns of Lakhna and Nawaspara,
  32 and 39 kms distant, respectively. Both these towns lie along the South Eastern
  Railway line. This rail line was recently constructed by the Indian Government
  to facilitate the development of bauxite deposits in Orissa State by linking
  them to the port city of Vishakhapnam on the Bay of Bengal.

The climate in the Gandhamardan area is sub-tropical, with
  summer temperatures averaging 33 degrees C, and winter temperatures averaging
  18 degrees C. Annual rainfall averages 150 cms, most of which falls during the
  monsoon season, between July and August. The months of January and February
  experience little or no rain. Previously, the monsoon rains came in 3-year cycles,
  however, they have failed to come for the past several years, resulting in impoverished
  drought conditions.

Title to Property

OMC currently holds a mining lease (the “Lease”)
  on Block 7, which contains about 20% of the deposit, or approximately 40 million
  tonnes. The Lease covers an area of 285 hectares. OMC has applied for a mining
  lease covering the rest of the deposit. A perimeter land survey must be performed
  before this second lease is granted.

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Geological Setting

The general geology of the Orissa region consists primarily
  of Precambrian rocks of the Indian Shield. These rocks have been divided into
  4 distinct sectors, based on their lithologies and structure. The sectors are
  named after the geographic region in which they occur - West, South, Coastal,
  and North sectors.

The West sector is where Gandhamardan is located. This sector
  is underlain primarily by Archean granitic gneisses, khondalites, charnockites,
  and migmatites. These rocks trend in a general Northeast-Southwest direction,
  gently curving eastward at their northern end. Khondalites are rocks formed
  by high-grade metamorphism of argillaceous, arenaceous, and calcareous sediments.
  They are unique to this part of the world, and they host major deposits of bauxite.
  The West sector is separated from the South and North sectors by the Eastern
  Ghat Boundary Fault and the North Orissa Boundary Fault, respectively.

The South sector is also underlain predominantly by Archean
  rocks. They are comprised of marbles, calc-granulites, carbonatites, gneisses,
  khondalites, and charnockites. This sector is composed of 4 fault blocks, each
  with distinct trends. The rocks in 2 of the blocks trend E-W. Trends in the
  other 2 blocks are Northeast-Southwest, and Northwest-Southeast, respectively.
  The North Orissa Boundary Fault separates the South sector from the North sector.

The Coastal sector is underlain primarily by quaternary laterite
  and alluvium. They appear to overlie the eastward extension of the South sector
  rocks.

The North sector is composed. mainly of Archean granites and
  greenstones.. The granites occur as large batholiths, and the greenstones as
  broad, intervening belts. The greenstones are comprised of mafic volcanics and
  banded iron formation. This assemblage of granites and greenstones is very similar
  to that which occurs in the Superior Province in NW Ontario. Ultramafic bodies
  intrude the granites and the volcanics. The western third of the North sector
  is Underlain by Grenville-type metasediments consisting of marble, quartzite,
  phyllite, and slate.

The local geology at Gandhamardan and the geology of the property
  are the same. Both consist exclusively of khondalites, represented by garnetiferous
  quartz-feldspar-sillimanite gneisses and schists with or without ilmenite and
  graphite. Subordinate garnetiferous quartzites are also present. The rocks have
  a pronounced Northeast-Southwest strike, conformable to the regional trend,
  and curve slightly to the east at their northern extremity. The rocks have been
  tightly folded, and now dip steeply to the Southeast at 45 degrees to 70 degrees.

Prolonged exposure to the elements has altered the khondalite
  at the top of Gandhamardan hill, resulting in the formation of bauxite as an
  extensive layer blanketing the parent rock throughout the plateau.

The bauxite is overlain by laterite, and the discontinuous
  layer of lateritic soil. This colour, granular, and high in silica and iron
  a thickness of up to several centimeters.

The laterite is also rusty-red in colour, and high in silica
  and iron. The weathered surface is irregular, porous, and craggy. The upper
  portion of the laterite is hard, reflecting a relatively higher silica content
  than the lower portion. Iron content also decreases with depth, while aluminous
  content increases. The laterite varies in. thickness from 0.3 to 12.0 meters,
  and averages 5.0 meters. The laterite grades downwards into bauxite.

The bauxite layer ranges from 4.3 to 35.0 meters in thickness,
  and averages 16.6 meters. It varies in colour from pinkish-red to yellowish-brown,
  buff, or brown. It is medium to fine grained, massive and compact. Vesicular
  and pisolitic textures may be displayed. Hardness varies from 2.5 to 3.5. Banding
  and foliation are sometimes evident. The bauxite is composed mainly of the minerals
  gibbsite and hematite, which together comprise about 95%. The remaining 5% is
  a mixture of several oxide minerals in minor and trace amounts.

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The table below shows the mineralogical composition of the bauxite.

|CATEGORY | MINERAL                                                                       | COMPOSITION                                                                         |                                                            
|-------- | ----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -----------------------------------------------------------
|Major    | Gibbsite
      Hematite                                                       | (Al2O3.3H2O) AlO
      (OH)
      Fe2O3                                             |                                                            
|Minor    | Goethite
      Boehmite
      Anatase
      Quartz                            | HfeO2  
      A1O (OH)  
      TiO2
      TiO2                                      |                                                            
|Trace    | Zircon  
      Ilmenite 
      Kaolinite  
      Lepidocrocite  
      Garnet | ZrSiO4  
      FeTiO3  
      Al4(SiO10) (OH)8  
      FeO (OH)  
      A3B2(SiO4)3 | A = Ca, Fe, Mg, or  
      Mn  
      B = Al, Fe, Ti, or Cr




The basement khondalite rock is composed of a heterogeneous
  mix of minerals, including quartz, orthoclase, sillimanite, garnet, ilmenite,
  and graphite. Quartz predominates, forming up to 60% of the rock locally. The
  khondalite is gneissic, and the quartz is closely associated with orthoclase
  and sillimanite in gneissic bands of leucocratic minerals. Orthoclase locally
  forms up to 35% of the rock, sillimanite up to 20%, garnet up to 20%, and ilmenite
  and graphite together up to 3%. The contact between the khondalite and the bauxite
  is fairly sharp, although the khondalite immediately beneath the bauxite is
  partly altered. Orthoclase in altered khondalite displays varying stages of
  bauxitization, while sillimanite displays varying stages of gibbsitization.

History

The potential for bauxite at Gandhamardan was first recognized
  in the 1940’s by the Geological Survey of India (“GSI”)
  who recommended that the area be thoroughly prospected.

In 1948, Orissa Directorate of Mines (“ODM”)
  sank several pits which intersected only laterite.

In 1959, ODM identified bauxite at Gandhamardan and immediately
  undertook a programme of exploration and evaluation. GSI and Mineral Exploration
  Corp. Ltd. (“MECL”) participated, as did Aluminium Corp.
  of India, an aluminium producer.

ODM drilled 75 holes in 1959, and reported a resource of 6
  million tonnes grading +50% Al2O3 to a depth of 17 meters.

Subsequent phases of drilling were conducted between 1961-65.
  In the late 1960’s, Aluminium Corp. of India undertook detailed exploration
  with MECL, after which MECL reported a resource of 26 million tonnes of metallurgical
  grade bauxite, using a cut-off of +46% Al2O3.

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The deposit attracted no further attention until 1975, when
  the economic potential of the large, low-silica bauxite deposits in Orissa became
  recognized. Bharat Aluminium Co. (“Balco”) expressed interest
  in Gandhamardan as a source of feed for their aluminium plant at Korba, situated
  350 kms by rail to the North, in the adjoining State of Madhya Pradesh. At Balco’s
  request, an integrated exploration programme was undertaken jointly by MECL,
  GSI and ODM. The programme included line-cutting, topographic surveying, geological
  mapping, pitting, drilling, sampling, mineralogical studying, and metallurgical
  testing.

Balco commissioned a feasibility study on a portion of the
  deposit in 1980, and upon its conclusion, prepared to bring it into production.
  However, due to opposition of local villagers, Balco did not continue with the
  project.

The property remained idle until 1997, when Continental Resources
  Ltd. (“Continental”) and OMC agreed to jointly develop Gandhamardan
  pursuant to the Joint Venture Agreement. Continental commissioned SNC-Lavalin
  to undertake a feasibility study on the deposit, however the study was never
  done due to numerous delays. The author of the Report visited the property at
  this time, and during one of the visits, collected 6 samples, 2 from Pit GP-2,
  and 2 from each of 2 scarp sites. These samples were collected in the presence
  of E.A. Gallo, a Canadian geologist, who transported them to a Canadian commercial
  laboratory. Analyses were performed for 12 radicals, including Al2O3,
  SiO2, Fe2O3, TiO2, and LOI, by the
  x-ray fluorescence, fused-disc method. The Certificate of Analyses for these
  samples may be found in Appendix I of the Report. In 2002, Continental transferred
  its interest in the deposit to CRL, an unrelated company, with the result that
  CRL and OMC became joint venture partners.

Sampling Procedure and Analyses

Under the direct supervision of ODM and MECL geologists, samples
  of the bauxite zone were taken from selected scarp sites and from each pit and
  drill hole. Scarp samples of the bauxite were taken by ODM wherever accessible
  at the ends of cross lines. Channel samples were cut vertically along 1 meter
  intervals, forming channels 15 cms wide, 5 cms deep, and 1 meter long. A total
  of 130 samples were cut from 17 scarp sites, across a cumulative length of 121
  meters. The bauxite zone in the scarp faces is not fully exposed, the lower
  half being buried by talus. Recognizing this limitation, ODM nevertheless calculated
  average grades from the assay results. They are given in MECL’s Exploration
  Report, Volume I, 1980, as 47.03% Al2O3, 2.97% SiO2,
  22.00% Fe2O3, 2.09% TiO2, and 22.27% LOI, across
  an average thickness of +7.6 meters.

ODM also sampled the pits. Channel samples were cut in the same manner employed
  in scarp sampling. All 4 walls of each pit were sampled. As a check, and for
  comparison, the walls of 1 pit were sampled at 25 cm intervals. Surplus material
  from the channel samples was combined to form composite samples, which were
  also analysed. A total of 1,772 pit samples were collected and analysed. The
  bauxite zone exposed in the pits ranged from 2.0 to 30.0 meters in thickness,
  and averaged 18.7 meters. ODM calculated average grades from the pit sample
  results. MECL’s same report shows them as 46.31% Al2O3,
  4.37%SiO2, 20.34% Fe2O3, 1.78% TiO2,
  and 23.71% LOI.

Both ODM and MECL sampled the drill holes in their respective
  programmes, employing the same technique. Casing shoes were used in place of
  core barrels. The drill cuttings were carefully removed from the shoe, put into
  paper sleeves in the order drilled, identified by hole number and footage, and
  boxed. Cuttings were collected continuously across 1 meter intervals. If the
  upper or lower contact of the bauxite zone did not coincide exactly with a whole-integer
  meter mark then that particular sample was taken as a fraction of a meter. Within
  the bauxite zone, if “non-ore” material was recognized or suspected,
  then 2 sub-samples were taken from that 1 meter interval, separated by their
  geologic contact.

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All collected samples were geologically classified before
  being prepared for analyses. Samples of the drill cuttings were crushed to -60
  mesh, and quartered using a “Jones Sample Splitter”. Three-quarters
  of the sample was shipped to Balco for storage, and the remaining quarter was
  further crushed to -120 mesh. This -120 mesh fraction was further reduced by
  coning and quartering, and a 50-gram portion was weighed out, bagged, and shipped
  to the laboratory for analyses. Pit and scarp samples were prepared in a similar
  manner, except for their primary crushing, which was to -10 mesh rather than
  -60.

Samples were shipped for analyses to ODM’s own laboratory
  in Bhubaneswar; or to MECL’s laboratory in Nagpur. Minor and trace element
  analyses were conducted at a commercial laboratory in Bangalore operated by
  Esson and Co. All samples were analysed for Al2O3, SiO2,
  Fe2O3, TiO2, and LOI. Composite samples were
  analysed as well for V, Zn, S, P2O5, K2O, Na2O,
  CaO, adherent moisture, and organic carbon.

Analyses for all these radicals were determined by chemical
  method, employing the ethylene-diamene-tetra-acetic acid technique (“EDTA”),
  the industry standard at that time. LOI was determined thermally, by calculating
  the percentage loss on ignition of the resultant ash compared to the weight
  of the preheated sample.

Historical Resource Calculations

Cautionary Note to US Investors concerning estimates of Measured, Indicated and Inferred Resources

This section uses the terms “Measured Resources”
  and “Indicated Resources”. While these terms are recognized and
  required by Canadian regulations, the SEC does not recognize them. Investors
  are cautioned not to assume that any part or all of the mineral deposits in
  these categories will be converted to reserves.This section also uses the
  term “Inferred Resources”. While this term is recognized by Canadian
  regulations, the SEC does not recognize it. Inferred Resources are subject to
  a great degree of uncertainty as to their economic and legal feasibility. It
  cannot be assumed that all or any part of an inferred resource will ever be
  upgraded to a higher category. Under Canadian rules, estimates of inferred resources
  may not form the basis of feasibility or pre-feasibility studies. Investors
  are cautioned not to assume that all or part of an Inferred Resource exists,
  or is economically or legally mineable.

The Company has not received any estimates of Mineral Reserves,
  as that term is understood by the SEC. The Company has not made an independent
  resource calculation, and the following estimates can be viewed as historical
  estimates.

ODM and MECL independently calculated resource estimates,
  based exclusively on data obtained from the holes drilled at 200-meter intervals.
  Data obtained from the closer-spaced drill holes were also utilized, but only
  as a check on the validity of the calculations. Data from the inclined drill
  holes, and from the pits were similarly utilized for checking purposes.

The resource estimates are in-situ geological resources. No
  mining constraints were considered. The cut-off grades of +40% Al2O3
  and -5% SiO2 used in the calculations were specified by Balco, and
  were determined in anticipation of the bauxite being processed at their plant
  in Korba. Korba produces alumina.

A tonnage factor of 2.0 tonnes per cubic meter of bauxite
  was used in the calculations. This figure was based on bulk density tests performed
  on pit samples, and on specific gravity and porosity tests performed on pit
  and drill hole samples.

---

- 15 -

Three conventional techniques were followed in preparing the
  resource estimates: (i) average factor and area of influence method; (ii) cross
  section method; and (iii) isocline (isochore) method. The first two methods
  are similar in that they calculate area and multiply it by thickness to determine
  volume. Both methods are well suited to estimating a resource such as Gandhamardan,
  which is a uniform, homogeneous, horizontally-lying body.

The average factor and area of influence method is based on
  the assumption that all unit blocks are uniform in shape and in grade. An area
  of influence is established for each vertical drill hole, as one-half the horizontal
  distance to an adjacent hole. In the case of peripheral holes, it is the horizontal
  distance to the physical limit of the bauxite zone. This area is multiplied
  by the thickness of the bauxite intersected in that hole to give the volume,
  which is then converted to tonnage. Average grades are calculated by weighting
  grades against tonnages.

The cross section method utilizes cross sections, in this
  case prepared on a scale of 1:1,000. A cross-sectional area of bauxite is determined
  for each hole by taking one-half the distances to adjacent holes, and multiplying
  this area by the linear strike influence of the hole. The volume so obtained
  is then converted to tonnage.

The isocline method is based on the assumption that unit values
  gradually change from one point to another. Isograde maps and isochore maps
  are prepared, in this case 1% Al2O3 and 5 meters, respectively.
  The area encompassed between the respective isoclines and the two corresponding
  mid-points of assay value and thickness is used to estimate the resource.

The resource estimates calculated followed the Russian system
  of classification. Resource estimates made today classified by standards established
  by the Canadian Institute of Mining and Metallurgy (“CIMM”)
  parameters used to determine specific categories in the Russian system are analogous
  to those employed in the CIMM system. Under the CIMM classification system,
  MECL’s A Category resource would become a Measured Resource, the B and
  Cl would become an Indicated Resource, and the C2 would become an Inferred Resource.

Four categories of resources were established, based on the
  Russian system, and termed A, B, Cl, and C2. MECL’s 1980 Exploration Report,
  Volume I states “A Category reserves are considered suitable for mine
  planning”, and considers them to be 90% accurate. MECL’s Report
  describes the B Category resources as being “...sufficiently detailed to
  allow...broad outlining of the future mining activities and development of the
  deposit”. B Category resources were calculated in areas where technical
  data were less detailed than in A Category areas, and were deemed to be 70%
  accurate.

Cl Category resources were estimated for areas where the bauxite
  was sufficiently explored to provide a “...rough estimation of the nature
  of mineralization, shape and structure of the ore body...” (ibid). Accuracy
  of the CI resources is considered to be 50%.

C2 Category resources are estimated for irregular parts of
  the bauxite zone, where “...insufficient exploration data...do not permit
  proper evaluation of shape, quality, etc.” (ibid). The resources of Block
  10 fall into this category. Here the plateau is irregular in shape, and the
  bauxite varies in thickness.

B.K. Mohanty in ODM’s Resource Evaluation Report, 1981,
  states the total calculated tonnage as 207.37 million tonnes (including what
  would be categorized as inferred resources) with a weighted average grade of
  45.75% Al2O3, 2.23% SiO2, 23.23% Fe2O3,
  2.58% TiO2, 22.95% LOI. In the same report, S. M. Patnaik tabulates
  resource estimates for each of the 10 Blocks. His figures are shown in the table
  below. His calculated total tonnage is 213.43 million tonnes (including what
  would be categorized as inferred resources) with a weighted average grade of
  46.50% Al2O3, and 2.49% SiO2. The three other
  radicals were not calculated.

---

- 16 -

|BLOCK
      NUMBER | LENGTH
       (KMS) | AVERAGE
WIDTH
nbsp;(KMS) | AREA
      (KMS2) | AVERAGE
      COVER
      THICKNESS
      (METERS) | AVERAGEBAUXITETHICKNESS
      (METERS) | RESOURCES(MILLION
      TONNES) | AVERAGE GRADE
|------------------ | ------------------- | ------------------------ | ----------------- | -------------------------------------------------- | -------------------------------------- | ------------------------------- | -------------
|Al2O3(%)           | SiO2(%)            
|1                  | 0.65                | 0.25                     | 0.07              | 4.00                                               | 11.10                                  | 1.00                            | 44.28        
|2                  | 1.00                | 0.48                     | 0.48              | 3.70                                               | 18.78                                  | 15.46                           | 45.46        
|3                  | 1.00                | 0.98                     | 0.98              | 5.10                                               | 16.20                                  | 27.23                           | 45.85        
|4                  | 1.00                | 1.05                     | 1.05              | 5.85                                               | 15.54                                  | 24.36                           | 46.28        
|5                  | 1.00                | 1.12                     | 1.12              | 5.32                                               | 17.71                                  | 28.85                           | 46.20        
|6                  | 1.00                | 0.67                     | 0.67              | 4.03                                               | 11.72                                  | 28.08                           | 46.43        
|7(1)               | 1.00                | 2.20                     | 1.28              | 7.23                                               | 16.33                                  | 44.75                           | 47.16        
|8                  | 1.00                | 0.90                     | 0.82              | 5.91                                               | 20.43                                  | 27.65                           | 47.00        
|9                  | 1.00                | 0.78                     | 0.36              | 5.17                                               | 18.75                                  | 8.40                            | 47.05        
|10                 | 1.20                | 0.65                     | 0.33              | 7.63                                               | 9.81                                   | 7.70                            | 47.30        
|Total              |                     |                          |                   |                                                    |                                        | 213.48                          | 46.50        

|(1) | Mining lease currently held by OMC and subject agreement
        with the Company. The remaining blocks are not currently subject to mining
        leases.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

MECL calculated resources independently, and categorized them
  according to the Russian system. MECL’s 1980 Exploration Report, Volume
  I gives their total calculated resource (including what would be categorized
  as inferred resources) as 201.3 million tonnes averaging 46.40% Al2O3,
  2.44% SiO2, and estimates the Fe2O3, TiO2,
  and LOI contents to be 23.41%, 2.47% and 24.59%, respectively. MECL’s
  resource estimates by category are shown in the following table:

|CATEGORY                | TONNAGE
      (MILLION
      TONNES) | AVERAGE GRADE
|----------------------- | ------------------------------------ | -------------
|Al2O3                   | SiO2                                 | Fe2O2        
|A (Measured)            | 27.9                                 | 46.67        
|B (Indicated)           | 45.8                                 | 46.85        
|C1+ C2
      (Inferred) | 127.5                                | 46.18        
|Total                   | 201.3                                | 46.40        




The three resource calculations are in fairly close agreement.
  The total tonnage figures differ by a maximum of only 6%, and the calculated
  weighted average grades by 1.4% for Al2O3, 9.0% for SiO2,
  0.8% for Fe2O3, 1.2% for TiO2, and 6.7% for
  LOI.

The Company has not made an independent resource calculation
  and the foregoing estimates can only be viewed by the Company as historical
  estimates.

Data Verification

In examining the technical reports authored by ODM and MECL,
  it became apparent to E.A. Gallo, Canadian geologist, the author of the Report
  that the exploration evaluation programmes were conducted in a thorough, competent
  manner by knowledgeable, capable persons. The programmes followed a logical
  sequence of steps, justified by positive results, to determine the nature and
  extent of the Gandhamardan Bauxite Deposit, and its suitability for the production
  of alumina by the Bayer Process.

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- 17 -

Discussions with OMC technical staff verified the integrity
  of the data.

Three site visits verified the presence of bauxite, the extent
  of the deposit, the grid that was established, the holes that were drilled,
  and the pits that were sunk. Six bauxite samples were personally collected by
  the author, and transported to a Canadian commercial laboratory for analyses.
  The analytical results for these samples are in general agreement with the results
  reported by ODM and MECL.

Planned Development

Reliable government exploration agencies have performed exploration
  work at the Gandhamardan Bauxite Deposit to prove the quality and quantity of
  Al2O3 in place. Recent reports done by independents have
  presented data that qualifies the deposit as proven. Only a modest amount of
  confirmatory work is required before the deposit can be brought into production.

Despite the vast data collected from over 600 drill holes
  measuring a total of 6,685.87 meters, core analysis of 5,178 meters, 135 pit
  samples and 130 scarp samples, a baseline study (the “Baseline Study”)
  is still required on the Gandharmardan Bauxite Deposit before mining is commenced.
  The Baseline Study will constitute the final phase before the mining start-up.

A Baseline Study can take up to two years to complete at an
  estimated cost of $2,000,000. The Baseline Study will include (a) various
  environmental studies; (b) preparing local people with the overall understanding
  that their lifestyle will not be disturbed but that benefits would raise their
  standard of living; and (c) some topside sampling and chemical analysis. The
  following work programs for item (a) should be completed before the sampling
  can begin:

|Air quality                       | Dust measurement and assessment                    
|--------------------------------- | ---------------------------------------------------
|                                  |                                                    
|Water quality and measurements    | Surface water                                      
|                                  |                                                    
|Ground Water                      | Drill wells and obtain data on existing wells      
|                                  | Study streams and possible effects of drainage from
|                                  | mining operations                                  
|Possibilities of flash flooding   |                                                    
|                                  |                                                    
|Soil quality and quantity         | Determine if there are any Hazards that might be   
|                                  | caused by mining                                   
|Geo Technical                     |                                                    
|                                  |                                                    
|Including rock and soil stability | Especially around temple sites                     
|                                  |                                                    
|Sociological Impact Study         |                                                    
|                                  |                                                    
|Effects on traditional religious  | Effects on Life style                              
|                                  | Implement an assertive positive campaign           
|                                  | Drill new water wells for Locals                   
|                                  | Mobile medical unit for Locals                     
|                                  |                                                    
|Cultural and historical inventory | Social economical impact to ensure the locals their
|                                  | lifestyle won’t be harmed but improve              
|                                  |                                                    
|Noise Pollution                   | Audio assessment                                   

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- 18 -

|Forest, Herbs and Plants | Native plant inventory including herbs for medicinal      
|------------------------ | ----------------------------------------------------------
|                         | purposes                                                  
|                         | Endangered plants                                         
|                         | Reforestation program                                     
|                         | Vegetation – study for possible cash crop                 
|                         |                                                           
|Wildlife                 | Effects on wildlife habitat                               
|                         | List any endangered species, if any or those at
      risk
|                         |                                                           
|Blasting                 | Determine if any blasting in certain areas might          
|                         | affect Temples and surrounding areas                      

Contractors will be engaged to follow through with the individual
  studies. If necessary, bids will be taken where appropriate.

Subject to obtaining necessary financing, the Company plans
  to initiate the final phase of the feasibility study during the fourth quarter
  of 2005 and is expected to take two years to complete. Further subject to the
  receipt of a favourable feasibility study, the Company plans to seek participants
  for a consortium to facilitate the building of the mining and aluminium complex.

Hydroelectric Assets

The Company is currently reviewing alternative methods to
  continue development of its hydroelectric assets. However, the Company does
  not intend to inject any further funding into the development of its hydroelectric
  assets as its main focus is the Gandhamardan Bauxite Deposit.

The Company plans to follow through with one of the hydroelectric
  sites in the state of Washington during the next year. This project has been
  approved by Federal Energy Regulatory Commission (“FERC”).
  Consultants are currently seeking partners to assist the construction of this
  hydroelectric site. The Company does not plan to use its own funds to further
  develop its hydroelectric assets at this time.

The Pisces Process

The Pisces Process, a fish protective water inlet device,
  is a mechanical system designed to steer fish stocks around the water intake
  to prevent, reduce and/or eliminate their impingement and/or entrainment at
  irrigation, industrial use and hydroelectric production facility water intakes.
  Model testing of the Pisces Process was conducted in the spring of 2000 at a
  laboratory in North Vancouver, British Columbia, Canada. Initial results show
  that the Pisces Process works in the manner for which it was designed.

Patent

Rodney Smith, a former director and officer of the Company,
  and Colin Hall transferred all their right, title and interest in the Pisces
  Process and its derivatives to Balaton Power Corporation S.A. (“BSA”),
  a former controlling shareholder. BSA has achieved “patent pending”
  status of its application filed with the United States Patent and Trademark
  Office (Case Docket No. SMTT 321) and is patent-protected in 104 countries around
  the world for a float mounted intake system which will be marketed under the
  name of the “Pisces Process.”

BSA entered into a licensing agreement with the Company whereby
  the Company has the right to manufacture and sell the System, the Pisces Process
  and BRIMAC and to implement the System at Company owned hydroelectric power
  production sites in the United States and Canada. See “Material Contracts”
  for a description of the terms of this license.

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- 19 -

C.     Organizational Structure

The following table shows the organizational structure of the Company’s
  significant subsidiaries.



D.     Property, Plants and Equipment

Office Lease

The Company subleases its office space at 19 East Fourth Avenue,
  Hutchinson, Kansas, U.S.A. 67501. The Company leases its office space in Hutchinson
  pursuant to the terms of a written lease agreement. The terms of the lease is
  three (3) years with monthly rental payments of $4,800 the first and second
  years and $5,400 the third year. The lease expires in January 2007.

Gandhamardan Bauxite Deposit

For a description of this property, see “Business Overview, Gandhamardan Bauxite Deposit.”

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND
  PROSPECTS

General Discussion

During the year ended December 31, 2004, the Company continued
  to work on the Gandhamardan Bauxite Deposit through its wholly owned subsidiary
  CRL. The Company changed its business focus during the first quarter of 2003
  as a result of its acquisition of CRL. Formerly, the Company pursued the sale
  of its patented Pisces Process and certain hydro electric projects. Although
  the Pisces Process remains an asset, the Company has diverted all of its focus
  on the Gandhamardan Bauxite Deposit. The Company plans to seek the market potential
  for the Pisces Process after development arrangements for the Gandhamardan Bauxite
  Deposit have been consummated. Due to the limited market potential for the Pisces
  Process, the Company wrote down the value of the Pisces Process during its audit
  of the year ended December 31, 2002. However, the Company is pursuing an agreement
  with an interested party with respect to the remaining hydro electric project.

The Company plans to form a consortium for the development
  of the Gandhamardan Bauxite Deposit to fund the mining, alumina plant and aluminium
  smelter and auxiliary plants (power plants etc.). During fiscal 2004 several
  interested parties entered into discussions for possible participation with
  CRL which continued into 2005. During 2004 two trips were made by CRL to India
  to meet with OMC to discuss terms and conditions for a new joint venture agreement
  to develop the Gandhamardan Bauxite Deposit. Based upon these discussions, CRL’s
  interest in the mining phase would increase and would place 100% of the downstream
  facilities (alumina plant and aluminium smelter) in favour of CRL.

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- 20 -

A.     Operating Results

The Company is a development stage resource company. No revenues
  were reported in 2004 from operations. No revenues are anticipated in 2005 other
  than the potential for the opportunity to promote interests in the Gandhamardan
  Bauxite Deposit for cash. The Company ceased promoting the Pisces Process in
  2002 and has since devoted over 90% of its focus on its subsidiary, CRL’s
  bauxite deposit in India and the remaining percentage of time to the hydro electric
  project held by its subsidiary Snoqualmie River Hydro Inc.

The financial statements accompanying this Form 20-F are consolidated
  with its wholly owned subsidiary, CRL for the years 2004 and 2003. During the
  2004 fiscal year the Company wrote off $1,145,163 of investment in the joint-venture
  company, COMPL which was voluntarily dissolved. The Company wishes to incorporate
  another entity to enter into a new agreement with OMC. As of the date of this
  Form 20-F, the new agreement has yet to be finalized. The Company anticipates
  that it will enter into a new agreement with OMC during the third quarter of
  2005 with the approval of the State Government of Orissa. Prior to the acquisition
  of CRL, the Company wrote down $1,895,987 in fiscal year 2002 by decreasing
  the value of an oil and gas lease located in Kansas. There were no unusual items
  recorded in 2003.

The Company believes that the impact of foreign currency fluctuations
  will not adversely affect the Company. The Canadian/US dollar exchange rate
  did improve in favour of the Canadian dollar during fiscal year 2004. The Company
  does not take any steps to hedge against currency fluctuations. In addition
  the Company does not anticipate the impact of inflation to be material to the
  Company in its efforts to attract partners for its consortium for the development
  of the Gandhamardan Bauxite Deposit.

The Company relies heavily on the cooperation of the State
  Government of Orissa, OMC and other governmental agencies in the finalization
  of joint venture relationships and the issuance of permits and licenses for
  the development of the Gandhamardan Bauxite Deposit. The political climate in
  India with respect to the development of resources is positive. Orissa, a state
  in the eastern part of India, is a resource rich state that has initiated many
  discussions to develop local resources with several initial agreements entered
  into as recently as the first quarter of 2005.

During 2004, the Company’s main expenses were general
  and administrative in the amount of $715,196 compared to $195,286 in
  2003. This rise in cost is due to the increase of activity through extended
  travel to and visits in India and the settlement of certain debts unrelated
  to professional fees. The largest debt settlement was in the amount of $518,763
  with respect to services rendered for the Gandhamardan Bauxite Deposit. Such
  debt was settled through the issuance of 2,075,054 units, each unit consisting
  of one common share and one common share purchase warrant in the capital of
  the Company at a price of $0.40 per share exercisable until July 13, 2006.

Consulting fees increased due to the use of consultants in
  India in relation to the Gandhamardan Bauxite Deposit. Professional legal and
  accounting fees also increased to $196,352 for 2004 from $34,980 in
  2003. The increase was primarily related to the settlement of legal and accounting
  fees in arrears.

Currently, the Company has adequate working capital to maintain
  operations (exclusive of the exploration and development of the Gandhamardan
  Bauxite Deposit) for the next twelve months due to the exercise of warrants
  issued pursuant to previous private placements during 2004. Unless the Company
  is successful in forming a consortium for the exploration and development of
  the Gandhamardan Bauxite Deposit, the Company will require approximately $2
  million of working capital inclusive of funds needed for the development of
  the Gandhamardan Bauxite Deposit.

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- 21 -

The Company intends to hire additional employees on an as
  needed basis. At present, the Company does not expect to have significant changes
  in the number of employees as it intends to utilize consultants to facilitate
  any work required on its projects, primarily the Gandhamardan Bauxite Deposit.

B.     Liquidity and Capital Resources

During the 2004 fiscal year the Company raised a total of
  $430,000 through private placements of the Company’s common stock.
  Specifically, on March 30, 2004, the Company closed a private placement of 1,000,000
  units at $0,.25 per unit raising a total of $250,000. Each unit consisted
  of one common share and one common share purchase warrant exercisable for 18
  months from the date of issuance at $0.40 per share. On August 31, 2004,
  the Company closed a private placement of 600,000 units at $0.30 per Unit
  raising a total of $180,000. Again, each unit consisted of one common share
  and one common share purchase warrant exercisable for a period of two years
  from the date of issuance at $0.40 per share.

If outstanding warrants and options due to expire during the
  latter half of 2005 are fully exercised, the Company’s working capital
  will increase by approximately $2,000,000. In addition, if consortium partners
  do not participate in a timely fashion, the Company will obtain additional funding
  to finance the first development phase of Gandhamardan Bauxite Deposit.

The Company has adequate cash to maintain normal operations
  for the next year exclusive of exploration and development of the Gandhamardan
  Bauxite Deposit. The Company currently has working capital (current assets)
  of $532,800 of which $438,932 is cash. The increase in the Company’s
  cash position from December 31, 2003, is due to the exercise of warrants issued
  pursuant to previous private placements. Specifically, cash on hand increased
  from $4,690 on December 31, 2003 to $438,932 on December 31, 2004. Total
  assets of the Company as of December 31, 2004 totalled $1,089,524 compared
  to $1,632,818 as of December 31, 2003. The decrease in total assets is due
  to the write down of the mineral interest as previously discussed.

As at December 31, 2004, the Company had a working capital
  deficit of $4,103,856 compared to a deficit of $2,910,886 on December
  31, 2003. This increase in deficit is due directly to the increased expenditures
  related to the Gandhamardan Bauxite Deposit which resulted in losses totalling
  $1,192,970 in 2004.

During the year the Company reduced its liabilities through
  debt settlements. On December 31, 2004, the Company’s liabilities were
  $488,618 compared to $1,700,817 on December 31, 2003. Subsequent to
  the end of the 2004 fiscal year the Company entered into a settlement agreement
  with RoyCap Inc. to further reduce its debt by $211,198. The Company’s
  financial liquidity ratio of current assets to current liabilities is improving
  due to an increase in the Company’s cash position and decrease in current
  liabilities. This has placed the Company in a more viable financial position
  compared to recent financial history.

The Company’s principal commitment is CRL’s obligations
  to OMC on the Gandhamardan Bauxite Deposit. The Company is confident that a
  consortium will be formed which will help shelter CRL from the majority of potential
  feasibility study expenditures; interested third parties have approached CRL
  to conduct a feasibility study. Further, if a working relationship is established
  between CRL and a major aluminium company, the Company’s liquidity with
  respect to the Gandhamardan Bauxite Deposit will improve significantly. However,
  if the Company is unable to form a consortium to complete the feasibility study
  and, if warranted, to further explore and develop the project, the Company will
  have to seek additional financing which would strain the Company’s financial
  resources.

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- 22 -

C.     Research and Development, Patents and
  Licenses

The Company has one patent, Pisces Process, a fish protective
  water inlet device designed to steer fish stocks around the water intake to
  prevent, reduce and/or eliminate their impingement and/or entrainment at irrigation,
  industrial use and hydroelectric production facility water intakes. Currently
  the Company is not actively pursuing this sector of business as its current
  focus has been shifted to the development and promotion of the Gandhamardan
  Bauxite Deposit. The Company plans to seek ways to promote the Pisces Process
  at a later time.

D.     Trend Information

The Company continues to have capital requirements in excess
  of its current resources. As the Company continues to explore and develop the
  Gandhamardan Bauxite Deposit, the Company will continue to have increased expenses
  and corresponding increased losses. Currently and for the foreseeable future,
  the Company’s only source of revenue is from the sale of its securities.
  The Company expects that this trend will continue.

The Company believes that the impact of foreign currency fluctuations
  will not adversely affect the Company. The Canadian/U.S. dollar exchange rate
  has been improving in favour of the Canadian dollar. The current exchange rate
  is $1.30 Canadian dollars for each U.S. dollar. The Company does not take
  any steps to hedge against currency fluctuations.

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.

As used in this Item 5.E., the term off-balance sheet arrangement
  means any transaction, agreement or other contractual arrangement to which an
  entity unconsolidated with the company is a party, under which the company has:

(a) Any obligation under a guarantee
  contract that has any of the characteristics identified in paragraph 3 of FASB
  Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements
  for Guarantees, Including Indirect Guarantees of Indebtedness of Others (November
  2002) (“FIN 45”), as may be modified or supplemented, excluding
  the types of guarantee contracts described in paragraphs 6 and 7 of FIN 45;

(b) A retained or contingent interest
  in assets transferred to an unconsolidated entity or similar arrangement that
  serves as credit, liquidity or market risk support to such entity for such assets;

(c) Any obligation under a derivative
  instrument that is both indexed to the company’s own stock and classified
  in stockholders’ equity, or not reflected, in the company’s statement
  of financial position; or

(d) Any obligation, including a contingent
  obligation, arising out of a variable interest (as referenced in FASB Interpretation
  No. 46, Consolidation of Variable Interest Entities (January 2003), as may be
  modified or supplemented) in an unconsolidated entity that is held by, and material
  to, the company, where such entity provides financing, liquidity, market risk
  or credit risk support to, or engages in leasing, hedging or research and development
  services with, the company.

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- 23 -

F.     Tabular Disclosure of Contractual Obligations

|                        |         | Payments due by period
|----------------------- | ------- | ----------------------
|Contractual Obligations | Total   | Less Than             
|                        |         | One Year              
|Convertible Debt        | 180,000 | 180,000               
|Related Party Loans     | 81,000  | 81,000                

The safe harbour provided in Section 27A of the Act and Section
  21E of the Exchange Act applies to forward-looking information provided pursuant
  to Item 5.E and F above.

Reconciliation to US GAAP

The Company’s financial statements have been prepared
  in accordance with generally accepted accounting principles applicable to Canadian
  companies (see Note 17 to the audited financial statements).

Inflationary and Other Economic Pressures

The Company is not currently generating revenues from the
  sale of bauxite or its Systems. Future revenues will be generated from the sale
  of bauxite, which will be affected by world commodity prices. No immediate effect
  in respect to inflation and changes on prices is realized. However inflationary
  pressures affect the Company’s operation and development expenditure,
  which is primarily incurred in U.S. dollars. The directors’ estimation
  of inflation is considered with respect to the general state of the world economy
  of the United States in particular. At this stage the Company is unable to quantify
  the mix of inflationary pressures that will affect the price of bauxite.

Government Policies

The Company has considered the issue of political risk in
  India and will continue to do so as a matter of normal business practices.

Activities conducted by residents and non-residents in India
  and the flow of investment into the country and the return of capital out of
  the country are subject to regulation. All such controls and regulations are
  subject to change from time to time. Some of the interests of the Company are
  subject to the laws of Canada. These factors, in addition to the usual risks
  and the economic and political stability of the host country India are taken
  into account in relation to the Company’s operations.

These policies or factors do not affect investments by United
  States residents in the Company’s common shares.

---

- 24 -

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.     Directors and Senior Management

Richard Burdett, Director, President and Chief Executive Officer

Richard F. Burdett, who resides in Hutchinson, Kansas, U.S.A.,
  has served as a director of the Company since January 31, 2003 and as President
  and Chief Executive Officer since February 1, 2003. Mr. Burdett has been an
  independent consultant for the oil and gas industry since he retired from active
  duty as an officer of the U.S. Air Force in 1993. As a consultant he performs
  financial and landman services. He has leased land for oil and gas exploration
  in Wyoming, North and South Dakota and Kansas. Mr. Burdett also serves as a
  director of Perial, a major shareholder of the Company.

Robert Wyllie, Director and Chief Financial Officer

Robert Wyllie, who resides in Mississauga, Ontario, Canada,
  has served as a director of the Company since January 31, 2003 and as Chief
  Financial Officer since November 21, 2003. From August, 1990 to April 1999,
  Mr. Wyllie was Technical Co-ordinator at Ciba Specialty Chemicals (formerly
  Allied Colloids Canada Inc.). From September 1999 to April 2003, Mr. Wyllie
  held the position of Installation Technician at Dealervoice Marketing Technologies
  Inc. Mr. Wyllie is currently a Professional Foreign Exchange Contracts Trader.
  Mr. Wyllie also serves as a director of Perial, a major shareholder of the Company.

Michael Rosa, Director

Michael Rosa, who resides in Surrey, British Columbia, Canada,
  has served as director of the Company since January 31, 2003. Mr. Rosa is an
  experienced corporate director and has been involved in natural resource projects
  and other entrepreneurial activities. His resource experience is beneficial
  in assisting the Company in the development of the Gandhamardan Bauxite Deposit
  and also in evaluating other resource projects that may be presented to the
  Company.

David C. Wynn, Director

David C. Wynn, who resides in Chantilly, Virginia, U.S.A.,
  was elected as a director of the Company on June 25, 2004, at the Company’s
  shareholder meeting. From December 1989 to October 1996, Mr. Wynn worked for
  First Virginia Mortgage Company, the first four years as an Insurance Specialist,
  one year as a Real Estate Tax Specialist and the last two years as an Investor
  Accountant. From October 1996 to March 1999, Mr. Wynn worked for Washington
  Mortgage Financial Group, first as an Escrow Clerk and then a Local Area Network
  Administrator. From March 1999 to May 2005, Mr. Wynn was Senior Computer Analyst
  at the Lockheed Martin Corporation in the Lockheed Martin Simulation Division.
  Mr. Wynn is currently Systems Administrator at Value Options Inc.

Lois Zelenka, Secretary

Lois Zelenka has served as the Company’s Corporate Secretary
  since October 2002. Ms. Zelenka has been involved in principally managerial
  roles since 1997. Currently Ms. Zelenka is Corporate Secretary and employee
  for Titan Employment Services Inc. of Hutchinson, Kansas, and is responsible
  for compliance and regulatory filings of this temporary employment business.

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- 25 -

B.     Compensation

The Company has no standard arrangement pursuant to which
  directors and officers are compensated by the Company for their services in
  their capacity as directors and/or officers other than the unissued treasury
  shares reserved for the grant of directors’ stock options. There has been
  no other arrangement pursuant to which directors were compensated by the Company
  in their capacity as directors and/or officers during the Company’s financial
  year ended December 31, 2004. The Company intends to form a compensation committee
  when working capital is sufficient to carry on the Company’s operations
  including compensation to management, officers and directors.

Summary Compensation Table

During the Company’s financial year ended December 31,
  2004, the aggregate direct remuneration paid or payable to the Company’s
  directors and executive officers by the Company and its subsidiaries, all of
  whose financial statements are consolidated with those of the Company, was nil.
  The compensation paid to the Company’s directors and officers during the
  most recently completed financial year is as set out below:

|                                                                           |      | Annual Compensation | Long Term Compensation |                                                        
|-------------------------------------------------------------------------- | ---- | ------------------- | ---------------------- | -------------------------------------------------------
|                                                                           |      |                     |                        |                                                        
|Name and Principal
      Position                                          | Year | Salary ($)          | Bonus($)               | Other
      Annual
      Compen
      -sation
      ($)
|Richard F. Burdett(1)  
      President and Chief 
      Executive Officer | 2004 | Nil                 | Nil                    | Nil                                                    
|Robert Wyllie  
      Chief Financial  
      Officer                      | 2004 | Nil                 | Nil                    | Nil                                                    
|Michael Rosa  
      Director                                              | 2004 | Nil                 | Nil                    | Nil                                                    
|Lois Zelenka  
Secretary                                                   | 2004 | Nil                 | Nil                    | Nil                                                    

|(1) | Mr. Burdett was appointed President and Chief Executive Officer as of
      February 1, 2003.
|--- | ---------------------------------------------------------------------------------------------

Neither the Company nor any of its subsidiaries have any plan
  or arrangement with respect to compensation to its directors or executive officers
  which would result from the resignation, retirement or any other termination
  of the executive officers’ employment with the Company and its subsidiaries
  or from a change of control of the Company or any subsidiary of the Company
  or a change in the executive officers’ responsibilities following a change
  in control, where in respect of any executive officer the value of such compensation
  exceeds $100,000.

C.     Board Practices

All directors hold office until the next annual meeting of
  shareholders and until their successors have been elected and qualified. Mr.
  Burdett, Mr. Rosa and Mr. Wyllie have all served as directors of the Company
  since January 31, 2003.

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- 26 -

Mr. Wynn recently joined the Company’s Board of Directors
  on June 25, 2004. The Company’s officers are elected by the Board of Directors
  at the annual meeting after each annual meeting of the Company’s shareholders
  and hold office until their death, or until they resign or have been removed
  from office. The Company has an audit committee on which Richard F. Burdett,
  Michael Rosa and David C. Wynn are members. The Company currently does not have
  a compensation or executive committee. There are no director service contracts
  that provide for benefits upon termination.

D.     Employees

The Company has no employees other than its officers and directors.
  The Company has two directors/officers involved in management and administration
  of the Company. These employees are not compensated for their services, and
  will not be compensated until the Company obtains funding for the development
  of the Gandhamardan Bauxite Deposit.

E.     Security Holdings of Directors and Officers
  (as at May 31, 2005)

Common Shares

|Name of Insider    | Shares owned or beneficially controlled(1) | Percentage of 68,356,790
      outstanding common shares
|------------------ | ------------------------------------------ | --------------------------------------------------------
|Richard F. Burdett | 100,000                                    | less than 0.1%                                          
|Robert Wyllie      | Nil                                        | Nil                                                     
|Michael Rosa       | 50,000                                     | less than 0.1%                                          
|David C. Wynn      | 120,000                                    | less than 0.1 %                                         
|Lois Zelenka       | Nil                                        | Nil                                                     
|TOTAL:             | 270,000                                    | -                                                       

|(1) | Numbers do not include shares held through options.
|--- | ---------------------------------------------------

The following chart details all outstanding options as at
  May 31, 2005. Optionees listed under the heading “Grants on Individual
  Basis” are no longer directors or officers of the Company.

|Name and Position          | Shares Optioned | Option Price | Expiry Date    | Percentage of Total
      Outstanding
      Options
|-------------------------- | --------------- | ------------ | -------------- | ---------------------------------------------------
|Grants on Individual Basis
|Martina F. Kaessner        | 300,000         | US$0.50      | Sept. 30, 2005 | 7.1%                                               
|Paul A. Trudel             | 300,000         | US$0.50      | Sept. 30, 2005 | 7.1%                                               
|Andrew Finneran            | 400,000         | US$0.50      | Sept. 30, 2005 | 9.5%                                               
|Robert Stewart             | 500,000         | US$0.50      | Sept. 30, 2005 | 12.0%                                              
|Maureen O’Brien            | 400,000         | US$0.50      | Sept. 30, 2005 | 9.5%                                               
|Rod Smith                  | 400,000         | US$0.50      | Sept. 30, 2005 | 9.5%                                               

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- 27 -

|Name and Position                | Shares Optioned | Option Price | Expiry Date    | Percentage of Total
      Outstanding
      Options
|-------------------------------- | --------------- | ------------ | -------------- | ---------------------------------------------------
|Paul Davey                       | 50,000          | US$0.50      | Sept. 30, 2005 | 1.2%                                               
|Lois VanHoover                   | 50,000          | US$0.50      | Sept. 30, 2005 | 1.2%                                               
|Jeanine Ward                     | 50,000          | US$0.50      | Sept. 30, 2005 | 1.2%                                               
|Douglas Weltz                    | 50,000          | US$0.50      | Sept. 30, 2005 | 1.2%                                               
|Dan Pfeiffer                     | 400,000         | US$0.50      | Jan. 31, 2007  | 9.5%                                               
|Under the 2004 Share Option Plan
|Richard F. Burdett               | 300,000         | US$0.40      | June 25, 2009  | 7.1%                                               
|Michael Rosa                     | 300,000         | US$0.40      | June 25, 2009  | 7.1%                                               
|David C. Wynn                    | 300,000         | US$0.40      | June 25, 2009  | 7.1%                                               
|Robert Wyllie                    | 300,000         | US$0.40      | June 25, 2009  | 7.1%                                               
|Lois Zelenka                     | 100,000         | US$0.40      | June 25, 2009  | 2.4%                                               
|Total                            | 4,200,000       | -            |                | 100%                                               

The Company has not in the past adopted any stock option plans,
  retirement, pension, or profit sharing plans for the benefit of the Company’s
  officers and directors other than as described herein. However, the Company
  has granted incentive stock options on an individual basis to provide compensation
  for performance.

No share options were granted to the directors and officers
  during the financial year December 31, 2003 and no share options were exercised
  by the directors and officers during the financial year ended December 31, 2003.
  The value of the unexercised in-the-money options of the directors and officers
  at the financial year December 31, 2003 was nil.

2004 Stock Option Plan

After the financial year end, the Company adopted a stock
  option plan (the “Plan”) in order to attract and retain employees
  and consultants and to provide additional incentive for directors, officers,
  employees and consultants, upon whose efforts and judgment the success of the
  Company is largely dependent, in order to grant either non-qualified stock options
  (“NQSO Options”) or incentive stock options (“ISO
  Options”) under the features provided for by the Code. Both NQSO Options
  and ISO Options (together, the “Options”) are available for
  grant under the Plan.

The Committee

The Plan provides for the granting by the Committee of Options
  to directors, officers, employees and consultants of the Company. The common
  shares subject to the Plan will be registered at the Company's expense pursuant
  to the Act and applicable state securities acts, or will be issued by the Company
  pursuant to exemptions from the registration requirements of the Act and applicable
  state securities acts. The Committee administers and interprets the Plan and
  has authority to grant Options to all eligible persons. The Committee also determines,
  at the time the Option is granted, the number of shares granted, the type of
  option (NQSO Options or ISO Options), the purchase or exercise price, the vesting
  and expiration period of the option and other applicable terms of the option
  grant. At the present time, the entire board acts as the Committee.

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- 28 -

Stock Options

The Plan provides for the issuance of either NQSO Options
  or ISO Options to employees, directors and consultants of the Company and its
  subsidiaries, including any officer or director who is an employee of the Company
  for the purchase of common shares from the number of common shares which have
  been set aside for such purpose. Under the provisions of the Plan, it is intended
  that the ISO Options granted thereunder will qualify as options granted pursuant
  to Section 422 of the Code, which will provide certain favourable tax consequences
  to participants who are granted and elect to exercise such Options. The Committee
  may grant either NQSO Options or ISO Options for such number of shares to eligible
  participants as the Committee from time to time shall determine and designate.
  Common shares involved in the unexercised portion of any terminated or expired
  Option may again be subjected to Options. The Committee is vested with discretion
  in determining the terms, restrictions and conditions of each Option. The option
  price of the common shares to be issued under the Plan will be determined by
  the Committee, provided that such price may not be less than 85% of the fair
  market value of the shares on the day prior to the date of grant for NQSO Options
  and 100% for the fair market value for ISO Options. Furthermore, if the participant
  owns greater than 10% of the total combined voting power of all classes of capital
  stock of the Company, the exercise price of ISO Options may not be less than
  110% of the fair market value of the common shares on the day prior to the date
  of the grant. The fair market value of a share of the Company's common shares
  will initially be determined by averaging the closing high bid and low asked
  quotations for such share on the date of grant in the over-the-counter market
  (NASD Electronic Bulletin Board).

Options granted under the Plan are exercisable in such amounts,
  at such intervals and upon such terms as the Committee shall provide in such
  Option. With respect to ISO Options, the aggregate fair market value (determined
  as of the date the ISO Option is granted) of the stock with respect to which
  any ISO Option is exercisable for the first time by a participant during any
  calendar year under the Plan (and under all incentive stock option plans of
  the Company and its subsidiaries qualified under the Code) shall not exceed
  $100,000. Upon the exercise of a NQSO Option or an ISO Option, the option
  price and any applicable withholding taxes must be paid in full by:

- cash or cheque for an amount equal to the aggregate stock
      option exercise price for the number of shares being purchased;
- in the discretion of the Committee, upon such terms as
      the Committee may approve, common shares owned by the optionee, duly endorsed
      for transfer to the Company, with a fair market value on the date of delivery
      equal to the aggregate purchase price of the shares with respect to which
      such stock option or portion is thereby exercised; or
- in the discretion of the Committee, upon such terms as
      the Committee may approve, a copy of instructions to a broker directing
      such broker to sell the common stock for which such Option is exercised,
      and to remit to the Company the aggregate exercise price of such Option;
- other consideration having equivalent value at the time
      of purchase as the Committee may determine.

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- 29 -

An employee or consultant option will terminate at the earliest of the following
  dates:

- the termination date specified in the applicable option
      agreement;
- three (3) months after employment or consultant agreement
      with the Company or its subsidiaries terminates; or
- one (1) year after employment or the consultant agreement
      with the Company or its subsidiaries terminates due to retirement, permanent
      and total disability and death.

Options otherwise expire a maximum of ten (10) years after
  the date on which the Option is granted, the actual term to be determined by
  the Committee. An Option is not transferable or assignable except by will or
  the laws of descent and distribution.

Options will become exercisable by the participants in such
  amounts and at such times as shall be determined by the Committee in each individual
  grant. Options are not transferable except by will or by the laws of descent
  and distribution.

Stock Subject To The Plan

The total number of common shares allotted and reserved for
  issuance under the Plan is 3,000,000 common shares, equivalent to approximately
  4.39% of the issued and outstanding share capital of the Company, as at June
  30, 2004. Such common shares will be reserved for Options to be granted at the
  discretion of the Committee. Options to purchase an aggregate of 3,300,000 common
  shares have been granted on an individual basis and remain outstanding, all
  of which are held by former directors, officers, employees or consultants of
  the Company. Options to purchase an aggregate of 1,300,000 common shares have
  been granted under the Plan and are outstanding.

ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY
  TRANSACTIONS

A.     Major Shareholders

The Company is controlled by Perial by virtue of its beneficial
  ownership of 25,000,000 common shares or 36.57% of all issued and outstanding
  shares as at May 31, 2005. There are no agreements in place that could result
  in a change of control of the Company. The common shares held by Perial do not
  have different voting rights than those held by other shareholders. The total
  number of common shares held by US residents is 20,193,746 held by 142 shareholders.

The following table sets forth the common share ownership
  of each person known by the Company to be the beneficial owner of five percent
  or more of the Company’s common shares. Each person has sole voting and
  investment power with respect to the shares of common stock shown, and all ownership
  is of record and beneficial.

|                                                                                                                                               | Number of
      Shares | Position    | Percent
      of Class | Increase/Decrease in  percentage
      held over
      2001
|---------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ----------- | ---------------------- | -----------------------------------------------------------
|Name and address of owner  
      Perial Ltd. 
      155 Hillcrest Avenue 
      Unit 1109  
      Mississauga, Ontario  
      Canada L5B 3E2 | 25,000,000             | Shareholder | 36.57%                 | N/A                                                        

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- 30 -

On October 31, 2002, CRL sold its oil and gas properties to
  Perial to facilitate the reorganization of CRL and the Company. Perial acquired
  from its then wholly owned subsidiary, CRL, all of the oil and gas interests
  held by the subsidiary in exchange for a promissory note and the assumption
  of debt. No gain or loss was recognized on this transaction. The note is non-interest
  bearing and is payable from 25% of the gross production revenue of the oil and
  gas properties.

B.     Related Party Transactions

Except as disclosed herein, directors, senior officers and
  principal shareholders of the Company, or any associate or affiliate of the
  foregoing, have not participated in and have no other interest, direct or indirect,
  in any material transactions in which the Company has participated, or in any
  proposed transaction which has materially affected or will materially affect
  the Company during the previous three fiscal years.

Currently, Perial is loaning funds to the Company to enable
  the Company to meet its day to day working capital requirements. The amounts
  loaned have no fixed rate of interest or repayment date. As at May 31, 2005,
  approximately $85,000 was owed by the Company to Perial.

On July 31, 2000, BSA purchased 12,500,000 shares of the Company
  for a price of $.001 per share and subsequently issued a license to the
  Company to manufacture and sell the System, the Pisces Process and the BRIMAC
  and to implement the System at Company owned hydroelectric power production
  sites in the United States and Canada. As further consideration, the Company
  is obligated to make a payment of $150,000 to BSA as advance payment of
  royalties of five percent (5%) of gross revenues. Under the terms of the agreement,
  the Company has paid $50,000 to BSA and has agreed to pay the balance of
  $100,000 upon receipt of funding by the Company in the aggregate amount
  of not less than $4,000,000. Subsequent to the year ended December 31, 2003,
  the parties amended the agreement to reduce the royalty to 2% and eliminated
  all further obligations of the Company. The Company issued 500,000 common shares
  to BSA in consideration for this amendment.

There are no additional interests of management in transactions
  involving the Company except for those stated in the Notes to the Financial
  Statements.

C.     Interests of Experts and Counsel

Not applicable.

ITEM 8.     FINANCIAL INFORMATION

A.     Consolidated Statements and Other Financial
  Information

See “Item 17 Financial Statements” and pages 3 to 4 of this document.

Legal Proceedings

No material legal proceedings to which the Company is a party
  are pending nor are any known to be contemplated and the Company knows of no
  legal proceedings pending or threatened, or judgments entered against, any director
  or officer of the Company in his or her capacity other than as disclosed herein.

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- 31 -

On July 27, 2000, the Company entered into an employment agreement
  with Ron Brown, the Company’s former President and later Vice President.
  Under the terms of the agreement Mr. Brown agreed to perform the services commonly
  associated with President and Chief Executive Officer in consideration of a
  salary of at least $15,000 per month, reimbursement of all expenses incurred,
  a life insurance policy in the amount of $1,500,000, medical and health
  benefits for Mr. Brown and all of his family members, and a vehicle allowance.
  In addition to the foregoing, the Company was obligated to issue to Mr. Brown
  options to acquire 5% of the shares issued and outstanding after the first year;
  5% of the shares issued and outstanding after the second year, and 5% of the
  shares issued and outstanding at the end of the third year or a total of 15%
  of the total outstanding shares of the Company after three years. The term of
  the agreement was from June 30, 2000 to May 31, 2003. The Company has the right
  to terminate the agreement for just cause or for any act or omission that is
  a breach under the agreement that is not remedied within thirty days. It is
  also a term of the agreement that Mr. Brown be terminated for cause. On February
  12, 2001, Mr. Brown was terminated for cause. Mr. Brown brought an action in
  the Chancery Court for Williamson County, Tennessee, Case No. 27720, seeking
  a declaratory judgment that the foregoing employment contract is in full force
  and effect. The Company has filed an Answer denying the claim and is vigorously
  defending the lawsuit. As at the date of this annual report, no trial date has
  been set and the case remains outstanding.

On March 29, 2004, an action was brought by Roderick Christie
  against the Company in the Supreme Court of British Columbia. The Statement
  of Claim alleges that Christie acquired 260,000 shares of the Company from Balaton
  Power Corporation S.A. and that the Company has an obligation to transfer these
  shares to Mr. Christie but has refused to do so. Mr. Christie seeks $260,000
  in damages or 260,000 common shares in the Company plus that amount of Canadian
  currency that is equal to the difference between the price at which the shares
  are trading at the time of delivery and $1.00. The Company has filed a Statement
  of Defence and brought on a court application to have Mr. Christie's claim struck
  or security for costs posted in court and Mr. Christine has filed a cross application
  for judgment. As at the date of this annual report, neither applications have
  proceeded.

Dividends Policy

No dividend has been paid on the Common Shares since inception, and none is
  contemplated in the foreseeable future.

B.     Significant Changes

Not Applicable.

ITEM 9.     THE OFFER AND LISTING

A.     Offer and Listing Details

For the five most recent full financial years, the annual high and low market
  prices for the Company’s common stock were as follows:

|     | 2004  | 2003  | 2002   | 2001  | 2000
|---- | ----- | ----- | ------ | ----- | ----
|High | $1.00 | $0.17 | $0.95  | $1.25 | N/A 
|Low  | $0.16 | $0.06 | $ 0.02 | $0.50 | N/A 

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- 32 -

For the two most recent full financial years, the high and
  low market prices for each full financial quarter for the Company’s common
  stock were as follows:

|     | 2004  | 2003 
|---- | ----- | -----
|     | Q1    | Q2   
|High | $0.84 | $1.00
|Low  | $0.16 | $0.31

For the most recent six months, the high and low market prices for each month
  for the Company’s common stock were as follows:

|     | May 05 | Apr 05 | Mar 05 | Feb 05 | Jan 05 | Dec 04
|---- | ------ | ------ | ------ | ------ | ------ | ------
|High | $0.62  | $0.65  | $0.68  | $0.80  | $0.88  | $0.74 
|Low  | $0.36  | $0.48  | $0.46  | $0.51  | $0.58  | $0.45 

Not applicable.

C.     Markets

The shares of the Company have traded on the Over-the-Counter
  Bulletin Board Quotation System under the symbol “BPWRF” since November
  26, 2001.

D.     Selling Shareholders

Not applicable.

E.     Dilution

Not applicable.

F.     Expenses of the Issue

Not applicable.

ITEM 10.     ADDITIONAL INFORMATION

A.     Share Capital

Not applicable.

B.     Memorandum and Articles of Association

Information regarding the Company’s Memorandum and Articles
  of Association is set out in the Company’s Annual Report on Form 20-F
  filed July 15, 2002 and is incorporated herein by reference.

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- 33 -

C.     Material Contracts

Joint Venture Agreement dated April 18, 1997

On April 18, 1997, Continental entered the Joint Venture Agreement
  with OMC to form a 50-50 joint venture company in the State of Orissa with its
  primary purpose to explore and exploit the Gandharmadan Bauxite Deposit. Continental
  managed the daily operations of COMPL, the joint venture company. Under the
  Joint Venture Agreement, OMC had an option to participate in Continental’s
  proposed aluminium complex (including refinery, power plant and smelter). This
  option was to be exercised within one year from the date of transfer of leases
  concerning the Gandhamardan Bauxite Deposit, of which such option could be extended
  by mutual consent. Pursuant to the Joint Venture Agreement, Continental bore
  all costs associated with the preparation of a feasibility report and exploration.

License Agreement with Balaton Power Corporation, S.A. dated July 31,
  2000

Rodney Smith, a former director and officer of the Company
  and Colin Hall have transferred all their right, title and interest in the Pisces
  Process design and its derivatives to BSA. BSA has achieved “patent pending”
  status of its application filed with the United States Patent and Trademark
  Office (Case Docket No. SMTT 321) and is patent-protected in 104 countries around
  the world for a float mounted intake system which will be marketed under the
  name of the “Pisces Process.” The Pisces Process is a mechanical
  device designed to steer fish stocks around the water intake to prevent, reduce
  and/or eliminate their impingement and/or entrainment at irrigation, industrial
  use and hydroelectric production facility water intakes. Model testing of the
  Pisces Process was conducted in the spring of 2000 at the Northwest Hydraulic
  Consultants’ laboratory in North Vancouver, British Columbia, Canada.

Licensing Agreement dated January 29, 2001

BSA entered into a licensing agreement with the Company whereby
  the Company has the right to manufacture and sell the System, the Pisces Process
  and the BRIMAC and to implement the System at Company owned hydroelectric power
  production sites in the United States and Canada. In consideration of the license,
  the Company is obligated to make the payment of $150,000 to BSA as advance
  payment of royalties of five percent (5%) of gross revenues. Under the terms
  of the agreement, the Company has paid $50,000 to BSA and has agreed to
  pay the balance of $100,000 upon receipt of funding by the Company in the
  aggregate amount of not less than $4,000,000. Subsequent to the year ended
  2002, the parties agreed to reduce the royalty to 2%, and waive all further
  obligations of the Company, in consideration for 500,000 common shares of the
  Company.

Stock Exchange Agreement dated September 30, 2002

On September 3, 2002 the Company entered into an agreement
  to acquire 100% of CRL from Perial in consideration for 33,000,000 common shares
  of the Company. 25,000,000 of these shares were issued to Perial and 8,000,000
  were issued as a finder’s fee. The transaction completed on October 31,
  2002 and resulted in the change of control of the Company and the focus of the
  Company’s business on the Gandhamardan Bauxite Deposit. See “Information
  on the Company” for a description of this transaction.

Loan Agreement dated February 11, 2002

On February 11, 2002, the Company entered into a loan agreement
  arranged by S.J. Roth Capital Placement Inc. with RoyCap Inc. Under the terms
  of the agreement, the “Lender” is to make four consecutive loans
  to the Company, each loan in the amount of $125,000 (the “Loans”)
  a total of $163,436 was advanced to the Company. Each Loan is evidenced
  by a Promissory Note, accruing interest at approximately 7.3% per annum and
  maturing and payable December 31, 2002. Each Loan has conversion privileges
  whereby the Lender may convert each of the Loans or any portion thereof outstanding,
  including interest, into “Units”. Each Unit consists of one
  common share of the Company and one share purchase warrant entitling the Lender
  to purchase from the Company, one additional common share at an exercise price
  of $0.50 at any time prior to the expiry date of December 31, 2004. On May
  4, 2005, pursuant to a settlement agreement with RoyCap Inc., the Company settled
  the Loans for $100,000 and the issuance of 100,000 common shares in the
  capital of the Company.

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- 34 -

D.     Exchange Controls

There are no exchange controls or other limitations which
  affect security holders other than the shares of common stock issued to BSA
  which are “restricted securities” as that term is defined in Reg.
  144 of the Act and may only be resold in compliance with Reg. 144 of the Act.

In general, under Reg. 144, an affiliate of the Company (officers,
  directors, and owners of more than ten percent (10%) of the outstanding shares
  of common stock of the Company) may sell in ordinary market transactions through
  a broker or with a market maker, within any three (3) month period a number
  of shares which does not exceed the greater of one percent (1%) of the number
  of outstanding shares of common stock or the average of the weekly trading volume
  of the common stock during the four calendar weeks prior to such sale. Sales
  under Reg. 144 require the filing of Form 144 with the Securities and Exchange
  Commission. If the shares of common stock have been held for more than two (2)
  years by a person who is not an affiliate, there is no limitation on the manner
  of sale or the volume of shares that may be sold and no Form 144 is required.
  Sales under Reg. 144 may have a depressive effect on the market price of the
  Company’s common stock.

The Company is a Province of British Columbia, Canada corporation.
  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, other than withholding
  tax requirements. Any such remittances to United States residents are generally
  subject to withholding tax, however no such remittances are likely in the foreseeable
  future. See “Taxation”.

There is no limitation imposed by the laws of Canada or by
  the charter or other constituent documents of the Company on the right of a
  non-resident to hold or vote its common shares, other than as provided in theInvestment Canada Act(Canada) (the “Investment Act”).
  The following discussion summarizes the material features of the Investment
  Act for a non-resident who proposes to acquire a controlling number of the Company’s
  common shares. The disclosure herein is not a substitute for independent advice
  from an investor’s own advisor and does not anticipate statutory or regulatory
  amendments. The Company does not believe the Investment Act will have any affect
  on it or its non-Canadian shareholders due to a number of factors including
  the nature of its operations and the Company’s relatively small capitalization.

The Investment Act generally prohibits implementation of a
  “reviewable” investment by an individual, government or agency thereof,
  corporation, partnership, trust or joint venture (each an “entity”)
  that is not a “Canadian” as defined in the Investment Act (i.e.
  a “non-Canadian”), unless after review the Director of Investments
  appointed by the minister responsible for theInvestment Act is satisfied
  that the investment is likely to be of net benefit to Canada. The size and nature
  of a proposed transaction may give rise to an obligation to notify the Director
  to seek an advance ruling. An investment in the Company’s common shares
  by a non-Canadian (other than a “WTO Investor” as that term is defined
  in theInvestment Act and which term includes entities which are nationals
  of or are controlled by nationals of member states of the World Trade Organization)
  when the Company was not controlled by a WTO Investor, would be reviewable under
  the Investment Actif it was an investment to acquire control of the
  Company and the value of the assets of the Company, as determined in accordance
  with the regulations promulgated under the Investment Act, was over a certain
  figure, 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.

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An investment in the Common Shares by a WTO Investor, or by
  a non-Canadian when the Company was controlled by a WTO Investor, would be reviewable
  under the Investment Act if it was an investment to acquire control of the Company
  and the value of the assets of the Company, as determined in accordance with
  the regulations promulgated under the Investment Act, was not less than a specified
  amount. A non-Canadian would acquire control of the Company for the purposes
  of the Investment Act if the non-Canadian acquired a majority of the Common
  Shares. The acquisition of less than a majority but one-third or more of the
  Common Shares 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 acquiror through the ownership of the Common Shares.

The foregoing assumes the Company will not engage in the production
  of uranium or own an interest in a producing uranium property in Canada, or
  provide any financial service or transportation service, as the rules governing
  these businesses are different. Certain transactions relating to the Common
  Shares would be exempt from the Investment Act, including:

(a) an acquisition of the Common Shares
  by a person in the ordinary course of that person’s business as a trader
  or dealer in securities,

(b) an 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 of
  the Investment Act, and

(c) an 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 the 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 common
  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”),
  is not resident in Canada, deals at arm’s length with the Company, holds
  the common shares as capital property and does not use or hold the common 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”), 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) common 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 U.S. Holder to which special considerations apply.

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 the current administrative practices of the
  Canada Customs and 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 immediately following summary does not take
  into account Canadian provincial, U.S. federal (which follows further below),
  state or other foreign income tax law or practice.

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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.

Dividends

Dividends paid or deemed to be paid to a U.S. Holder by the
  Company will be subject to Canadian withholding tax. Under the Treaty, 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 the Company’s voting shares). the
  Company will be required to withhold the applicable withholding tax from any
  such dividend and remit it to the Canadian government for the U.S. Holder’s
  account.

Disposition

A U.S. Holder is not subject to tax under the Tax Act in respect
  of a capital gain realized on the disposition of a Common Share in the open
  market unless the share is “taxable Canadian property” to the holder
  thereof and the U.S. Holder is not entitled to relief under the Treaty. A common
  share will be taxable Canadian property to a U.S. Holder 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,
  or had rights to acquire, 25% or more of the Company’s issued shares of
  any class or series.

A U.S. Holder whose common shares do constitute taxable Canadian
  property, and who might therefore be liable for Canadian income tax under the
  Tax Act, will generally be relieved from such liability under the Treaty unless
  the value of such shares at the time of disposition is derived principally from
  real property situated in Canada. The value of the Company’s common shares
  is not currently derived principally from real property situated in Canada.

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 common shares of the Company. 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 common shares of the Company to consult their
  own tax advisors about the specific federal, state, local, and foreign tax consequences
  to them of purchasing, owning and disposing of common shares of the Company,
  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.

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U.S. Holders

As used herein, a “U.S. Holder” means a
  holder of common shares of the Company 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 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 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 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 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 the total outstanding stock of the Company. 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 Common Shares of the Company

In general, U.S. Holders receiving dividend distributions
  (including constructive dividends) with respect to common shares of the Company
  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 the Company has 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 current or accumulated earnings and profits of the Company, 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.

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Dividends paid on the common shares of the Company 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 the voting
  power and value of the Company may, under certain circumstances, be entitled
  to a 70% (or 80% if the U.S. Holder owns shares representing at least 20% of
  the voting power and value of the Company) deduction of the United States source
  portion of dividends received from the Company (unless the Company qualifies
  as a “foreign personal holding company” or a “passive foreign
  investment company,” as defined below). The Company does not anticipate
  that it will earn any United States income, however, and therefore does not
  anticipate that any U.S. Holder will be eligible for the dividends received
  deduction.

Under current Treasury Regulations, dividends paid on the
  Company’s 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 the Company’s 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 and may
  also be subject to the 31% 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 common shares of the Company
  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 the Company 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 common
  shares of the Company should consult their own tax advisors regarding their
  individual circumstances.

Disposition of Common Shares of the Company

In general, U.S. Holders will recognize gain or loss upon
  the sale of common shares of the Company 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 the common shares of the Company.
  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
  common shares of the Company 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.

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Deductions for net capital losses are subject to significant
  limitations. For U.S. Holders which 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 Personal Holding Company

If at any time during a taxable year more than 50% of the
  total combined voting power or the total value of the Company’s outstanding
  shares is owned, directly or indirectly (pursuant to applicable rules of constructive
  ownership), by five or fewer individuals who are citizens or residents of the
  United States and 60% or more of the Company’s gross income for such year
  is derived from certain passive sources (e.g., from certain interest and dividends),
  the Company may be treated as a “foreign personal holding company.”
  In that event, U.S. Holders that hold common shares would be required to include
  in gross income for such year their allocable portions of such passive income
  to the extent the Company does not actually distribute such income. The Company
  does not believe that it currently qualifies as a foreign personal holding company.
  However, there can be no assurance that the Company will not be considered a
  foreign personal holding company for the current or any future taxable year.

Foreign Investment Company

If 50% or more of the combined voting power or total value
  of the Company’s 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 the Company is found to be engaged
  primarily in the business of investing, reinvesting, or trading in securities,
  commodities, or any interest therein, it is possible that the Company may be
  treated as a “foreign investment company” as defined in Section
  1246 of the Code, causing all or part of any gain realized by a U.S. Holder
  selling or exchanging common shares to be treated as ordinary income rather
  than capital gain. the Company does not believe that it currently qualifies
  as a foreign investment company. However, there can be no assurance that the
  Company 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) 75% 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. Each U.S. Holder of the Company
  is urged to consult a tax advisor with respect to how the PFIC rules affect
  such U.S. Holder’s tax situation with respect to ownership of the Company’s
  shares.

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Each U.S. Holder 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 the Company. 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 (Seemore detailed discussion
  at “Controlled Foreign Corporation” below).

A U.S. Holder who elects to treat the Company 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 the Company qualifies as a PFIC on his pro rata share
  of the Company’s (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) the Company’s 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 the Company is 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,
  the Company 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 the Company is a controlled foreign corporation, the U.S. Holder’s
  pro rata share of the Company’s post-1986 earnings and profits as of the
  qualification date. The qualification date is the first day of the Company’s
  first tax year in which the Company 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 common shares at any time during
  a year of the Company in which the Company is 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 the Company
  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 the Company’s
  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, the Company must provide certain information regarding its net capital
  gains and ordinary earnings and permit its books and records to be examined
  to verify such information. the Company intends to make the necessary information
  available to U.S. Holders to permit them to make (and maintain) QEF elections
  with respect to the Company. The Company urges each U.S. Holder to consult a
  tax advisor regarding the availability of, and procedure for making, the QEF
  election.

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A QEF election, once made with respect to the Company, 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 the Company
  ceases 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 the
  Company does not qualify as a PFIC. Therefore, if the Company again qualifies
  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 the Company qualifies
  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 the shares of the Company.
  Therefore, if such U.S. Holder reacquires an interest in the Company, that U.S.
  Holder will be subject to the rules described above for Electing U.S. Holders
  for each tax year in which the Company qualifies 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 Balaton
  common shares and (ii)certain “excess distributions,” as defined
  in Section 1291(b), by the Company.

A Non-Electing U.S. Holder generally would be required to
  pro rate all gains realized on the disposition of his Balaton common shares
  and all excess distributions on his Balaton 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 of the Company (i) which began
  after December 31, 1986, and (ii) for which the Company was 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 the Company is a PFIC for any taxable year during which
  a Non-Electing U.S. Holder holds the Company common shares, then the Company
  will continue to be treated as a PFIC with respect to such Balaton common shares,
  even if it is 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
  the Company’s common shares had been sold on the last day of the last
  taxable year for which it was a PFIC.

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 the Company’s 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 the common shares of the Company 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 the common shares in the Company 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.

---

- 42 -

A U.S. Holder’s adjusted tax basis in the common shares
  of the Company 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 the Company’s 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 common shares of the
  Company 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 Balaton 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 the Company
  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 common shares of the Company, certain adverse rules may apply in
  the event that both the Company and any foreign corporation in which the Company
  directly or indirectly holds 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. The Company intends 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 the Company 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 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 the Company (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 the Company (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 the Company and does not dispose of its common shares. The Company strongly
  urges 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.

---

- 43 -

Certain special, generally adverse, rules will apply with
  respect to Balaton common shares while Balaton is 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
  classes of shares entitled to vote or the total value of the shares of Balaton
  is owned, actually or constructively, by citizens or residents of the United
  States, United States domestic partnerships or corporation, 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 classes of shares entitled to vote of Balaton (“United
  States Shareholder”), Balaton could be treated as a controlled foreign
  corporation (“CFC”) under Subpart F of the Code. This classification
  would effect 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 common shares of Balaton 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 of Balaton
  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 Section1291
  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.
  The Company does not believe that it currently qualifies as a CFC. However,
  there can be no assurance that Balaton will not be considered a CFC for the
  current or any future taxable year.

F.     Dividends and Paying Agents

Not applicable.

G.     Statement by Experts

Not Applicable.

H.     Documents on Display

Exhibits attached to this Form 20-F are also available for
  viewing at the offices of the Company, 19 East Fourth Avenue, Hutchinson, Kansas
  67501 or on request of the Company at the same address, attention: Corporate
  Secretary. Copies of the Company’s financial statements and other continuous
  disclosure documents required under the British Columbia Securities Act
  are available for viewing on the internet at www.SEDAR.com.

---

- 44 -

I.     Subsidiary Information

Not applicable.

ITEM 11.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
  ABOUT MARKET RISK

The principal market risks (i.e., the risk of loss arising from adverse changes
  in market rates and prices) to which the Company is exposed are:

|1. | interest rates on debt; and,
|-- | ----------------------------
|   |                             
|2. | foreign exchange rates.     

The following risk management discussion and the estimated
  amounts generated from analytical techniques are forward looking statements
  of market risk assuming certain market conditions occur. The Company’s
  actual results in the future may differ materially from these projected results
  due to actual developments in the global financial markets.

Interest rates

The Company currently does not have a material debt which
  would be affected by a fluctuation in interest rates could affect.

Foreign exchange rates

The Company has not generated any revenues to date. In the
  future the Company intends to hedge transactions because of its exposure to
  foreign exchange fluctuations.

Operating in international markets involves exposure to movements
  in currency exchange rates that typically affect economic growth, inflation,
  interest rates, governmental actions and other factors.

The Company’s revenue streams and operating expenses
  are denominated in three primary currencies: the US dollar, Canadian dollar
  and Indian Rupies. The currency movement that would have the greatest impact
  upon the Company’s operations is the US dollar/Indian Rupies exchange
  rate. Strengthening the U.S. dollar will have the affect of decreasing the Company’s
  earnings.

Inflation

Inflation had no material impact on the Company’s operations
  during the years ended December 31, 2004, 2003, and 2002.

ITEM 12.     DESCRIPTION OF SECURITIES OTHER THAN
  EQUITY SECURITIES

A.     Debt Securities

Not applicable.

B.     Warrants and Rights

Not applicable. (The Company’s warrants are non-transferable and no
  market exists for them. The Company has issued no rights.)

---

- 45 -

C.     Other Securities

Not applicable.

D.     American Depositary 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

The Company carried out an evaluation of the effectiveness
  of the design and operation of the Company’s disclosure controls and procedures
  as of December 31, 2004 being the date of our most recently completed fiscal
  year. Based upon that evaluation, our chief executive officer and our chief
  financial officer concluded that the Company’s disclosure controls and
  procedures are effective in timely alerting management to material information
  relating to us required to be included in our periodic SEC filings.

Disclosure controls and procedures are controls and other
  procedures that are designed to ensure that information required to be disclosed
  in our reports filed or submitted under the Securities Exchange Act of 1934
  (the “Exchange Act”) is recorded, processed, summarized and
  reported, within the time periods specified in the Securities and Exchange Commission's
  rules and forms. Disclosure controls and procedures include, without limitation,
  controls and procedures designed to ensure that information required to be disclosed
  our reports filed under the Exchange Act is accumulated and communicated to
  management, including our chief executive officer and chief financial officer
  to allow timely decisions regarding required disclosure.

During our most recently completed fiscal year ended December
  31, 2004, there were no changes in the Company’s internal control over
  financial reporting that have materially affected, or are reasonably likely
  to affect, our internal control over financial reporting.

The term “internal control over financial reporting”
  is defined as a process designed by, or under the supervision of, the registrant's
  principal executive and principal financial officers, or persons performing
  similar functions, and effected by the registrant'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:

| | 1. | Pertain to the maintenance of records that in reasonable
        detail accurately and fairly reflect the transactions and dispositions
        of the assets of the registrant;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 46 -

| | 2. | 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 registrant are being made only in accordance with
        authorizations of management and directors of the registrant;and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                 
| | 3. | Provide reasonable assurance regarding prevention
        or timely detection of unauthorized acquisition, use or disposition of
        the registrant's assets that could have a material effect on the financial
        statements.                                                                                                                                         

ITEM 16.     [RESERVED]

ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not have a financial expert serving on its
  audit committee. The Company has had some difficulty in attracting financial
  experts to serve on its board of directors, due to the Company’s small
  size. The Company’s financial statements are not complex, and the Company
  does not view the retention of a financial expert as critical to its further
  development. Regardless, the Company is currently considering appointing a director
  to the board and to the audit committee who would be a financial expert.

ITEM 16B.     CODE OF ETHICS

The Company has not formally adopted a written code of ethics.
  The Company is reviewing the adoption of a formal code of ethics. The Company
  has guided its conduct by the provisions of the British Columbia Business
  Corporations Actand the securities legislation applicable to it. Due to
  its size, management had not deemed it necessary to adopt a formal written code
  of ethics at this time.

ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

A.     Audit Fees

The aggregate fees billed by the auditors the Company US$25,000
  and US$7,012.31 for the fiscal years ended 2004 and 2003, respectively.

B.     Audit-Related Fees

Nil

C.     Tax Fees

Nil

D.     All Other Fees

Nil

PART III

ITEM 17.     FINANCIAL STATEMENTS

This Annual Report on Form 20-F includes the Company’s
  audited financial statements for the years ended December 31, 2004 and 2003,
  including the following:

---

- 47 -

|1. | Independent Auditors’ Report of Danziger and Hochman dated April
      30, 2005.                       
|-- | -------------------------------------------------------------------------------------------------------
|   |                                                                                                        
|2. | Independent Auditors’ Report of Harris and Partners dated may 18,
      2004.                          
|   |                                                                                                        
|3. | Consolidated Balance Sheets as at December 31, 2004 and December 31,
      2003.                       
|   |                                                                                                        
|4. | Consolidated Statements of Operations and Deficit for the years ended
      December 31, 2004 and 2003.
|   |                                                                                                        
|5. | Consolidated Statements of Cash Flows for the years ended December 31,
      2004 and 2003.            
|   |                                                                                                        
|6. | Notes to the Consolidated Financial Statements.                                                        

ITEM 18.     FINANCIAL STATEMENTS

Not applicable.

ITEM 19.     EXHIBITS

The following financial statements, related schedules and exhibits are included
  in this Form 20-F:

|EXHIBIT
      NUMBER | DESCRIPTION OF EXHIBIT                                                                                                                                                          
|-------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|12.1                 | Certification of Chief Executive
      Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)                                                                     
|12.2                 | Certification of Chief Financial
      Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)                                                                     
|13.1                 | Certification
        of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
        as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)
|13.2                 | Certification
        of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
        as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)

|(1) | Filed as an exhibit to this Annual Report on Form 20-F for the fiscal
      year ended December 31, 2004.
|--- | ---------------------------------------------------------------------------------------------------------

---

BALATON POWER INC. 
  (A Development Stage Company) Consolidated Financial Statements 
  (United States Dollars) 
  December 31, 2004



F-1

---

BALATON POWER INC.

INDEX

December 31, 2004

|                                                                       | PAGE      
|---------------------------------------------------------------------- | ----------
|                                                                       |           
|AUDITORS’ REPORT – DECEMBER
      31, 2004                             | F-3       
|                                                                       |           
|AUDITORS’ REPORT – DECEMBER
      31, 2003                             | F-4       
|                                                                       |           
|FINANCIAL STATEMENTS                                                   |           
|                                                                       |           
|Consolidated
      Balance Sheets - Statement I                        | F-5       
|                                                                       |           
|Consolidated
      Statements of Operations and Deficit - Statement II | F-6       
|                                                                       |           
|Consolidated
      Statements of Cash Flows – Statement III            | F-7       
|                                                                       |           
|NOTES TO CONSOLIDATED FINANCIAL
      STATEMENTS                       | F-8 - F-21

F-2

---

AUDITORS’ REPORT

To the Directors of 
  BALATON POWER INC.

We have audited the consolidated balance sheet of BALATON
  POWER INC. as at December 31, 2004 and the consolidated statements of loss
  and deficit and cash flows for the year then ended. These consolidated 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 December 31, 2004, and the results of its operations and cash flows for the
  year then ended, in accordance with Canadian generally accepted accounting principles.

The financial statements as at December 31, 2003 and for the
  year then ended were audited by other auditors who expressed an opinion without
  reservation on those statements in the report dated May 18, 2004.

|                 | /s/ Danziger & Hochman
|---------------- | ----------------------
|                
|Toronto, Ontario | Chartered Accountants 
|April 30, 2005   |                       

Comments by Auditors for U.S. Readers on Canada – United
  States Reporting Difference

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 financial statements. Our report to the directors
  dated April 30, 2005, 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 financial statements.

|                 | /s/ Danziger & Hochman
|---------------- | ----------------------
|                
|Toronto, Ontario | Chartered Accountants 
|April 30, 2005   |                       

F-3

---

AUDITORS’ REPORT

To the Shareholders of 
  Balaton Power Inc.

We have audited the consolidated balance sheets of Balaton
  Power Inc. as at December 31, 2003 and 2002 and the consolidated statements
  of operations and deficit and cash flows for the years then ended. These consolidated
  financial statements are the responsibility of the Company’s management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits.

We conducted our audits in accordance with generally accepted
  auditing standards in both Canada and the United States. Those standards require
  that we plan and perform an audit to obtain reasonable assurance as to 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
  December 31, 2003 and 2002 and the results of its operations and its cash flows
  for the years then ended in accordance with Canadian generally accepted accounting
  principles.

|                            | /s/ Harris & Partners, LLP
|--------------------------- | --------------------------
|                           
|Richmond Hill, Ontario      | Harris & Partners, LLP    
|May 18, 2004                | Chartered Accountants     
|(except as to Note 16 which |                           
|is as of June 22, 2004)     |                           

Comments by Auditors for U.S. Readers on Canada – United
  States Reporting Difference

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph when the financial statements are affected
  by conditions and events that cast doubt on the Company’s ability to continue
  as a going concern, such as those described in Note 1 to the financial statements.
  Our report to the shareholders dated May 18, 2004, 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 financial statements.

|                            | /s/ Harris & Partners, LLP
|--------------------------- | --------------------------
|                           
|Richmond Hill, Ontario      | Harris & Partners, LLP    
|May 18, 2004                | Chartered Accountants     
|(except as to Note 16 which |                           
|is as of June 22, 2004)     |                           

F-4

---

|BALATON POWER INC. (A Development Stage Company) Consolidated Balance Sheets 
      As at December 31, 2004 
      (United States Dollars) | Statement I
|------------------------------------------------------------------------------------------------------------------------------------------ | -----------

|                                                           |   |            |   |   |            |  
|---------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                           |   | 2004       |   |   | 2003       |  
|ASSETS                                                     |   |            |   |   |            |  
|CURRENT                                                    |   |            |   |   |            |  
|Cash                                                       |   | 438,932    |   | $ | 4,690      |  
|Accounts
      receivable                                  |   | 10,000     |   |   | -          |  
|Loan receivable
      (note 3)                             |   | 63,968     |   |   | -          |  
|Prepaid
      expenses                                     |   | 19,900     |   |   | 1,241      |  
|                                                          
|                                                           |   | 532,800    |   |   | 5,931      |  
|Note receivable (note 4)                                   |   | 481,724    |   |   | 481,724    |  
|Mineral property (note 5)                                  |   | -          |   |   | 1,145,163  |  
|Investment
      in shares of private corporation (note 6) |   | 75,000     |   |   | -          |  
|                                                          
|                                                           | $ | 1,089,524  |   | $ | 1,632,818  |  
|                                                          
|LIABILITIES                                                |   |            |   |   |            |  
|CURRENT                                                    |   |            |   |   |            |  
|Accounts
      payable and accrued liabilities             | $ | 227,715    |   | $ | 1,491,038  |  
|Convertible
      debt (note 8)                            |   | 179,779    |   |   | 179,779    |  
|Loan
      payable (note 9)                                |   | 81,124     |   |   | 30,000     |  
|                                                          
|                                                           |   | 488,618    |   |   | 1,700,817  |  
|Minority
      interest                                    |   | -          |   |   | 26,995     |  
|                                                          
|                                                           |   | 488,618    |   |   | 1,727,812  |  
|                                                          
|SHAREHOLDERS’ EQUITY                                       |   |            |   |   |            |  
|SHARE CAPITAL(note 10)                                     |   | 4,022,851  |   |   | 2,738,402  |  
|SHARE SUBSCRIPTION                                         |   | -          |   |   | 77,490     |  
|CONTRIBUTED SURPLUS                                        |   | 681,911    |   |   | -          |  
|DEFICIT– Statement II                                      |   | (4,103,856 | ) |   | (2,910,886 | )
|                                                          
|                                                           |   | 600,906    |   |   | (94,994    | )
|                                                          
|                                                           | $ | 1,089,524  |   | $ | 1,632,818  |  

APPROVED ON BEHALF OF THE BOARD

/s/ Robert Wyllie, Director

/s/ Richard Burdett, Director

|{See accompanying notes.} | F-5
|------------------------- | ---

---

|BALATON POWER INC.(A Development Stage Company) Consolidated Statements of Loss and Deficit 
        For the Year Ended December 31, 2004
        (United States Dollars) | Statement II
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------

|                                 |   |            |   |   |            |  
|-------------------------------- | - | ---------- | - | - | ---------- | -
|                                 |   | 2004       |   |   | 2003       |  
|                                
|REVENUE                          | $ | -          |   | $ | -          |  
|                                 |   |            |   |   |            |  
|EXPENSES                         |   |            |   |   |            |  
|Administration and general       |   | 715,196    |   |   | 195,286    |  
|Consulting fees and commissions  |   | 268,382    |   |   | 72,000     |  
|Professional fees                |   | 196,352    |   |   | 34,980     |  
|Interest                         |   | 13,040     |   |   | 11,931     |  
|                                 |   |            |   |   |            |  
|                                 |   | 1,192,970  |   |   | 314,197    |  
|                                 |   |            |   |   |            |  
|NET LOSS FOR THE YEAR            |   | (1,192,970 | ) |   | (314,197   | )
|                                 |   |            |   |   |            |  
|DEFICIT, BEGINNING OF YEAR       |   | (2,910,886 | ) |   | (2,596,689 | )
|                                
|DEFICIT, END OF YEAR             | $ | (4,103,856 | ) | $ | (2,910,886 | )
|                                 |   |            |   |   |            |  
|LOSS PER COMMON SHARE            |   |            |   |   |            |  
|Basic                            | $ | (0.02      | ) | $ | -          |  
|Diluted                          | $ | (0.02      | ) | $ | -          |  
|                                 |   |            |   |   |            |  
|AVERAGE NUMBER OF COMMON SHARES  |   |            |   |   |            |  
|OUTSTANDING                      |   | 70,338,720 |   |   | 65,689,379 |  
|                                 |   |            |   |   |            |  
|AVERAGE NUMBER OF DILUTED SHARES |   |            |   |   |            |  
|OUTSTANDING                      |   | 80,581,080 |   |   | 76,088,860 |  

|{See accompanying notes.} | F-6
|------------------------- | ---

---

|BALATON POWER INC.(A Development Stage Company) Consolidated Statements of Cash Flows 
        For the Year Ended December 31, 2004
        (United States Dollars) | Statement III
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------

|                                               |   |            |   |   |          |  
|---------------------------------------------- | - | ---------- | - | - | -------- | -
|                                               |   | 2004       |   |   | 2003     |  
|CASH PROVIDED BY (USED IN)                     |   |            |   |   |          |  
|                                              
|OPERATING ACTIVITIES                           |   |            |   |   |          |  
|Net loss for the year                          | $ | (1,192,970 | ) | $ | (314,197 | )
|Adjustments for items not affecting
      cash |   |            |   |   |          |  
|Shares issued for services                     |   | 330,210    |   |   | 117,402  |  
|Fair value of stock options
      issued       |   | 169,080    |   |   | -        |  
|                                              
|                                               |   | (693,680   | ) |   | (196,795 | )
|Changes in non-cash working capital components |   |            |   |   |          |  
|Prepaid expenses                               |   | (18,659    | ) |   | 8,200    |  
|Accounts payable and
      accrued liabilities |   | (145,156   | ) |   | 34,715   |  
|Accounts receivable                            |   | (10,000    | ) |   | -        |  
|                                              
|                                               |   | (867,495   | ) |   | (153,880 | )
|                                              
|INVESTING ACTIVITIES                           |   |            |   |   |          |  
|Investment in shares of
      private company  |   | (75,000    | ) |   | -        |  
|                                              
|FINANCING ACTIVITIES                           |   |            |   |   |          |  
|Loan receivable                                |   | (63,968    | ) |   | -        |  
|Loan payable                                   |   | 51,124     |   |   | 30,000   |  
|Debt assumed by a shareholder                  |   | 46,380     |   |   | -        |  
|Issue of share capital, warrants and share     |   |            |   |   |          |  
|subscriptions                                  |   | 1,343,201  |   |   | 100,490  |  
|                                              
|                                               |   | 1,376,737  |   |   | 130,490  |  
|                                              
|NET INCREASE (DECREASE) IN CASH                |   | 434,242    |   |   | (23,390  | )
|                                              
|CASH, BEGINNING OF YEAR                        |   | 4,690      |   |   | 28,080   |  
|                                              
|CASH, END OF YEAR                              | $ | 438,932    |   | $ | 4,690    |  

|{See accompanying notes.} | F-7
|------------------------- | ---

---

| | 
| | 

|1. | DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION
        AND GOING CONCERN
      Balaton Power Inc. (the Company) is attempting
        to develop a bauxite deposit in the State of Orissa in India. The Company
        is based in Hutchinson, Kansas in the United States of America. To date,
        the Company has not earned significant revenues and is considered to be
        in a development stage. The Company’s sole operation is the development
        of this bauxite deposit. All expenditures in 2003 and 2004 are related
        to this project.
      **Basis of Presentation**
      On October 31, 2002 the Company acquired
        all of the outstanding shares in Continental Resources (USA) Inc., (“CRI”)
        in an arm’s length transaction. In accordance with EIC-10, the transaction
        is a capital transaction in substance rather than a business combination.
        The purchase method has been applied by CRI and the net liability of the
        Company has been charged to the deficit. The transaction was an asset
        acquisition by the Company and not a business combination. Accordingly,
        while the Company will have issued sufficient shares such that control
        of the Company was acquired by the shareholders of CRI, the transaction
        was not accounted for as a reverse takeover.
      The consolidated financial statements have been prepared
        in accordance with accounting principles generally accepted in Canada
        and include the accounts of the Company and its’ wholly-owned subsidiary,
        Continental Resources (USA) Inc. A summary of the differences between
        accounting principles generally accepted in Canada (“Canadian GAAP”)
        and those generally accepted in the United States (“US GAAP”)
        which affect the Company is detailed in note 18 to the financial statements.
      **Going Concern**
      The financial statements of the Company have been prepared
        on a going concern basis which contemplates the realization of assets
        and discharge of obligations in the normal course of business as they
        come due. No adjustments have been made to assets or liabilities in these
        financial statements should the Company not be able to continue normal
        business operations.
      The business of mining and exploring for minerals involves
        a high degree of risk and there can be no assurance that current exploration
        will result in a profitable mining operation.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

---

| | 
| | 

|1. | DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | The Company has incurred several years of losses
        and during 2004, utilized $867,495 of cash in operations. At December
        31, 2004, the Company reported a deficit of $4,103,856 and continues
        to expend cash significantly in excess of its’ revenues. These conditions
        cast substantial doubt as to the ability of the Company to continue in
        business and meet its obligations as they come due. Management is considering
        various alternatives, including possible private placements and an IPO
        on the Toronto Venture Stock Exchange to raise capital in fiscal 2005.
        Nevertheless, there is no assurance that these initiatives if undertaken
        will be successful.                                                                                                                                      
|  
|   | The Company’s continuance as a going concern
        is dependent on the success of the efforts of its directors and principal
        shareholders in providing financial support in the short term, the success
        of the Company in raising additional long-term financing either from its
        own resources or from third parties, the commercialization of one of the
        mining operating projects and the Company achieving profitable operations.
        In the event that such resources are not secured, the assets may not be
        realized or liabilities discharged at their carrying amounts, and differences
        from the carrying amounts reported in these financial statements could
        be material.                                                                                                                                   
|  
|2. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | **Financial instruments**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | The fair value of financial instruments reported
        in these consolidated financial statements approximates book value unless
        otherwise indicated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | The Company is exposed to risks arising from fluctuations
        in interest rates and the degree of volatility of these rates. The Company
        does not use derivative instruments to reduce its exposure to interest
        risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | **Stock based compensation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | The Company accounts for stock-based compensation
        in accordance with CICA Handbook section 3870 “Stock-Based Compensation
        and Other Stock-Based Payments”. This standard requires that stock-based
        payments to non-employees and direct awards of stock to employees and
        non-employees are accounted for using a fair-value method of accounting.
        For fiscal years beginning before January 1, 2004, this standard allows
        the estimated fair value of stock awards granted to employees to be either
        recognized as a compensation expense, or alternatively, disclosed in the
        notes to the financial statements, with accompanying disclosure of pro-forma
        net earnings and earnings per share data as if the estimated fair-value
        of the stock-based compensation had been recognized in earnings.

F-9

---

| | 
| | 

|2. | SIGNIFICANT ACCOUNTING POLICIES(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | Effective January 1, 2003, the Company has voluntarily
        adopted early application of the portion of the standard related to grants
        of stock options to employees. Under the standard, grants of stock options
        to employees are recognized in earnings as a compensation expense, based
        on the estimated fair value at the date of the grant. This accounting
        change has been applied prospectively for options granted to employees
        on or after January 1, 2003.                                                                                                                                                                                                               
|  
|   | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | The preparation of financial statements in conformity
        with generally accepted accounting principles requires management to make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities, the disclosure of contingent assets and liabilities at the
        date of the financial statements and reported amounts of revenues and
        expenses during the reporting period. Actual results could differ from
        those estimates.                                                                                                                                                                                                                                
|  
|   | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Cash and cash equivalents include deposits at Canadian
        and United States financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | Mineral Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | The Company expenses all exploration costs incurred
        on properties other than acquisition costs prior to the establishment
        of proven and probable reserves. The Company performs evaluations of its
        assets to assess the recoverability of its investments in these assets.
        All long-lived assets are reviewed for impairment whenever events or circumstances
        change which indicate the carrying amount of an asset may not be recoverable
        utilizing established guidelines based upon discounted future net cash
        flows from asset or upon the determination that certain exploration properties
        do not have sufficient potential for economic mineralization.

F-10

---

| | 
| | 

|2. | SIGNIFICANT ACCOUNTING POLICIES(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Costs related to the acquisition, exploration, development
        and inherent costs to the management of the mineral properties are capitalized
        by property until the commencement of commercial production. If commercially
        profitable ore reserves are developed, capitalized costs of the related
        property are reclassified as mining assets and amortized on the unit of
        production method. If it is determined that capitalized acquisition, exploration
        and development costs are not recoverable over the estimated economic
        life of the property, or the project is abandoned, the project is written
        down to its net realizable value. Recovery of the amounts recorded under
        mineral properties is dependent upon the ability of the Corporation to
        obtain the financing needed to complete the development, and future profitable
        production or proceeds from the disposal thereof. The amount shown for
        mineral property does not necessarily reflect future or present values.
|  
|   | Taxes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | Income taxes are recorded using the liability method.
        Future income and deduction amounts arise due to temporary differences
        between the accounting and income tax bases of the Company’s assets
        and liabilities. Future income tax assets and liabilities are measured
        using substantively enacted income tax rates in effect for the year in
        which those temporary differences are expected to be recovered or settled.
        The effect on future income tax assets and liabilities of a change in
        income tax rates is recognized in the period that includes the date of
        substantive enactment. Valuation allowances are provided to the extent
        that realization of such benefits is considered to be more unlikely than
        not.                                                                                                                                                                                                                                                                          
|  
|   | Earnings (Loss) Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | Basic earnings (loss) per share is computed by dividing
        the earnings (loss) for the period by the weighted average number of common
        shares outstanding during the period, including contingently issuable
        shares which are included when the conditions necessary for issuance have
        been met. Diluted earnings per share is calculated in a similar manner,
        except that the weighted average number of common shares outstanding is
        increased to include potentially issuable common shares from the assumed
        exercise of common share purchase options and warrants, if dilutive. The
        number of additional shares included in the calculation is based on the
        treasury stock method for options and warrants.                                                                                                                                                                                                                                                                                                

F-11

---

| | 
| | 

|2. | SIGNIFICANT ACCOUNTING POLICIES(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Foreign Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | Although the functional currency of the Company
        is the Canadian dollar, these financial statements use the US dollar as
        the unit of measurement. Monetary assets and liabilities denominated in
        foreign currencies are translated at year-end exchange rates. Other balance
        sheet items denominated in foreign currencies are translated at the rates
        of exchange in effect at the translation date. Income and expenses denominated
        in foreign currencies are translated at average rates prevailing during
        the year. Translation gains and losses are included in income.                                        
|  
|3. | LOAN RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | The loan receivable is due from a shareholder of
        the Company, it is non-interest bearing and due on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|4. | NOTE RECEIVABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | On October 31, 2002, Perial Ltd. ("Perial"), the
        former parent company of CRI, purchased the oil and gas properties belonging
        to CRI as part of the reorganization of CRI and the Company. Perial acquired
        from its then wholly owned subsidiary, all of the oil and gas interests
        held by CRI at that time in exchange for a promissory note and the assumption
        of certain debt. No gain or loss was recognized on this transaction by
        CRI. The note is non-interest bearing and is payable at the rate of 25%
        of the gross production revenue of the oil and gas properties purchased
        by Perial from CRI.
|  
|5. | MINERAL PROPERTY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | During the year, the Company wrote-off its’
        investment in a nominal property in India along with certain corresponding
        liabilities. The mineral property was owned by an Indian company that
        was dissolved during the year. Balaton Power Inc. had previously accounted
        for its’ purchase of shares in this now dissolved company as a purchase
        of assets and assumption of liabilities                                                                                                                                                                                                                                            
|  
|   | The Company is in the process of negotiating an
        agreement with a Joint Venture Partner, Orissa Mining Corporation ("OMC")
        to develop a bauxite deposit in India. These negotiations have not been
        completed..                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-12

---

| | 
| | 

|6. | INVESTMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | During the year, the Company purchased 500,000 shares
        in a private company called Cumberland Continental Corp. through a private
        placement for $75,000. The investment has been recorded at cost. Cumberland
        Continental Corp. is in the computer software business and is currently
        attempting a registration on the Nasdaq OTCBB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|7. | LICENSE AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   | The Company is party to a license agreement with
        Balaton Power Corporation S.A (“BPCSA”) to manufacture, market,
        sell/lease and otherwise commercialize BPCSA’s proprietary technology
        and related confidential data throughout Canada and the United States
        for a period of 20 years. The license has an ongoing option to be renewed
        for a further 20 years at the expiration of each 20 year period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   | In 2003, the agreement was amended to reduce the
        royalty payments in the license agreement from 5% to 2% and eliminate
        all other obligations of the Company under the license agreement. The
        Company issued 500,000 common shares as consideration for this amendment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|8. | CONVERTIBLE DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   | On February 11, 2002, the Company entered into a
        loan agreement arranged by S.J. Roth Capital Placement Inc. Under the
        terms of the agreement, the Lender was to make four consecutive loans
        to the Company, each in the amount of $125,000 ("the loans"). Each
        loan was to be evidenced by a Promissory Note, accruing interest at approximately
        7.3% per annum and all were to mature on December 31, 2002. Each loan
        had conversion privileges whereby the Lender could convert each of the
        loans or any portion of them including interest, into "Units". Each Unit
        was to consist of one common share of the Company and one Share Purchase
        Warrant entitling the Lender to purchase from the Company one additional
        common share at an exercise price of $0.50 at any time prior to the
        expiry date of December 31, 2004.
|  
|   | The Company received only $163,436 under the
        terms of these loans and incurred a penalty of $16,343.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | This convertible debt was settled subsequent to
        the year end as more fully described in note 16 below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-13

---

| | 
| | 

|9.  | LOAN PAYABLE                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | The loan payable is due to a shareholder of the Company and bears interest
      at 6.5% per annum. Both principle and interest are due on June 30, 2005.
|   
|10. | SHARE CAPITAL                                                                                                                                            
|   
|    | Authorized: 700,000,000 common shares without par value                                                                                                  
|    |                                                                                                                                                          

| | Issued and fully paid:                 | Shares     |   |   | Amount    | 
| | -------------------------------------- | ---------- | - | - | --------- | 
| |                                        |            |   |   |           | 
| | Balance, December 31, 2002             | 64,988,194 |   | $ | 2,598,000 | 
| | Issued for fees and services           | 1,174,020  |   |   | 117,402   | 
| | Private placements for cash            | 600,000    |   |   | 23,000    | 
| |                                        |            |   |   |           | 
| | Balance, December  31, 2003            | 66,762,214 |   |   | 2,738,402 | 
| | Private placements for cash            | 1,600,000  |   |   | 430,000   | 
| | Exercise of warrants                   | 2,953,333  |   |   | 807,167   | 
| | Issued for fees and services           | 340,800    |   |   | 330,210   | 
| | Share subscription – 2003 for services | 1,200,000  |   |   | 77,490    | 
| | Issued on settlement of debt           | 576,813    |   |   | 106,034   | 
| |                                        |            |   |   |           | 
| | Balance, December  31, 2004            | 73,433,160 |   | $ | 4,489,303 | 
| |                                        |            |   |   |           | 
| | Warrants                               |            |   |   |           | 
| |                                        |            |   |   |           | 
| | Balance, December  31, 2003            | 7,499,481  |   |   |           | 
| | Exercised                              | (2,953,333 | ) |   |           | 
| | Expired                                | (4,546,148 | ) |   |           | 
| | Issued in 2004                         | 3,433,037  |   |   |           | 
| |                                        |            |   |   |           | 
| |                                        | 3,433,037  |   |   |           | 

F-14

---

| | 
| | 

|10. | SHARE CAPITAL(continued)                                      
|--- | --------------------------------------------------------------
|   
|    | At December 31, 2004, the following warrants were outstanding:
|   

| | Amount    | Price | Expiry            
| | --------- | ----- | ------------------
| |           |       |                   
| | 1,000,000 | $0.40 | September 30, 2005
| | 472,154   | 0.40  | June 13, 2006     
| | 1,240,800 | 0.40  | July 13, 2006     
| | 600,000   | 0.40  | August 25, 2006   
| | 120,083   | 0.40  | August 31, 2006   

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Warrants are valued using the Black-Scholes option
        pricing model with the following assumptions: risk-free interest rate
        3.5%, expected life between 1.5 to 2 years, expected volatility 25% and
        no dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|11. | EMPLOYEE STOCK-BASED COMPENSATION
      Under the employee stock option plan, the Company may
        grant options to its officers, directors, employees and consultants. Options
        granted under the plan have a maximum term of 5 years, with vesting terms
        and conditions determined by the board of directors when granted.
      Stock options are valued using the Black-Scholes option
        pricing model with the following assumptions: risk-free interest rate
        3.5%, expected life 5 years, expected volatility 25% and no dividends.
        The total expense charged against income is related to options in 2004
        and was $169,080 (2003 - $Nil). These amounts are included in
        the contributed surplus account.
      A summary of the status of the Company's employee stock
        option plan as of December 31, 2004 and 2003 and changes during the years
        then ended are as follows:
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                                        |           | 2004     |           | 2003     | 
| | -------------------------------------- | --------- | -------- | --------- | -------- | 
| |                                        |           | Weighted |           | Weighted | 
| |                                        |           | Average  |           | Average  | 
| |                                        | Number of | Exercise | Number of | Exercise | 
| |                                        | Options   | Price    | Options   | Price    | 
|
| | Outstanding, beginning of year         | 2,900,000 | $0.50    | 2,900,000 | $0.50    | 
| | Granted                                | 1,500,000 | 0.41     | -         | -        | 
|
| | Outstanding, end of year               | 4,400,000 | 0.47     | 2,900,000 | 0.50     | 
|
| | Options exercisable, end of
      year | 4,400,000 | $0.47    | 2,900,000 | $0.50    | 

F-15

---

| | 
| | 

|11. | EMPLOYEE STOCK-BASED COMPENSATION(continued)                                
|--- | ----------------------------------------------------------------------------
|   
|    | At December 31, 2004, the following employee stock options were outstanding:
|   

| | Options    | Price | Expiry            
| | ---------- | ----- | ------------------
|
| | $2,500,000 | $0.50 | September 31, 2005
| | 400,000    | 0.50  | January 31, 2007  
| | 1,300,000  | 0.40  | June 25, 2009     
| | 200,000    | 0.50  | October 6, 2009   

|12. | INCOME TAXES
      In assessing the realizability of future tax assets,
        management considers whether it is more likely than not that some portion
        or all of the future income tax assets will not be realized. The ultimate
        realization of future income tax assets is dependant upon the generation
        of future taxable income and on the successful development of a mineral
        property.
      The following is a reconciliation comparing income taxes
        calculated at the statutory rates to the amounts provided in the accompanying
        financial statements:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                  |   | 2004       |   |   | 2003     |  
| | ------------------------------------------------ | - | ---------- | - | - | -------- | -
| | Combined federal and provincial income tax rates |   | 32%        |   |   | 34%      |  
| |                                                  |   |            |   |   |          |  
| | Loss before income taxes                         | $ | (1,192,970 | ) | $ | (314,197 | )
| |                                                  |   |            |   |   |          |  
| | Expected income tax (recovery)                   |   | (382,000   | ) |   | (107,000 | )
| | Non-deductible expenses                          |   | 54,000     |   |   | -        |  
| | Valuation allowance and other
      items        |   | 328,000    |   |   | 107,000  |  
| |                                                  |   |            |   |   |          |  
| | Actual income taxes                              | $ | -          |   | $ | -        |  

F-16

---

| | 
| | 

|12. | INCOME TAXES(continued)                                                              
|--- | -------------------------------------------------------------------------------------
|   
|    | The significant components of the company’s future income taxes
      are as follows:
|   

| | Future income tax assets                          |   | 2004     |   |   | 2003      |  
| | ------------------------------------------------- | - | -------- | - | - | --------- | -
|
| | Non-capital losses ($1,773,000 X 32%)             | $ | 567,360  |   | $ | 256,000   |  
| | Valuation allowance for future
      income taxes |   | (567,360 | ) |   | (256,000  | )
| |                                                   |   |          |   |   |           |  
| | Net future income tax assets                      | $ | -        |   | $ | -         |  
| |                                                   |   |          |   |   |           |  
| | The non-capital losses expire as follows:         |   |          |   |   | Losses    |  
| |                                                   |   |          |   |   |           |  
| | 2009                                              |   |          |   | $ | 289,000   |  
| | 2010                                              |   |          |   |   | 464,000   |  
| | 2011                                              |   |          |   |   | 1,020,000 |  
| |                                                   |   |          |   |   |           |  
| |                                                   |   |          |   | $ | 1,773,000 |  

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In assessing the realizability of future
        tax assets, management considers whether it is more likely than not that
        some portion or all of the future tax assets will not be realized. The
        ultimate realization of future tax assets is dependent upon the generation
        of future taxable income during the periods in which those temporary differences
        become deductible. Management considers the scheduled reversal of future
        tax liabilities, projected future taxable income and tax planning strategies
        in making this assessment. Management has provided for a valuation allowance
        on all of its’ losses as there is no assurance that future tax benefits
        will be realized.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|13. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-17

---

| | 
| | 

|13. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
        (continued)
|--- | -------------------------------------------------------------
|    |                                                              
|    |                                                              
|    |                                                              
|    | b)                                                           

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|14. | RELATED PARTY TRANSACTIONS
      Related party 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. Related
        party transactions include the following:
      A shareholder of the Company advanced $51,124 (2003
        - $30,000) to the Company during the year. The advance bears interest
        at 6.5% per annum. Interest and principal are payable at maturity on June
        30, 2005.
      During the year 340,800 Common Shares and 1,200,000
        Common Shares, that were subscribed for in 2003 (2003 – 1,174,020)
        were issued in exchange for fees and services in the amount of $330,210
        (2003 – $117,402 and $77,490 for subscribed shares).
      During the year, a shareholder assumed debt of the Company
        in the amount of $46,380 for nil consideration.
      During the year, 576,813 Common Shares were issued to
        a shareholder to settle outstanding third party debt totalling $106,034.

F-18

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| | 
| | 

|14. | RELATED PARTY TRANSACTIONS(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | During the year a shareholder of the Company assumed
        certain indebtedness of the Company amounting to $14,848 in exchange
        for 194,986 common shares of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | During the year a shareholder of the Company held
        in his personal bank account Company funds in the amount of $63,968
        which has been reflected as a loan receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|15. | CONTINGENT LIABILITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | On February 21, 2001, a lawsuit for wrongful termination
        was filed in the Chancery Court for Williamson County, Tennessee against
        the Company by the former president. The Company believes that it has
        meritorious defenses against the claim and intends to vigorously defend
        itself. As the outcome is not determinable, the Company has not accrued
        any amount for this claim.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | On March 29, 2004, an action was brought in the
        Supreme Court of British Columbia by a person associated with Balaton
        Power Corporation S.A. The claim alleges that the claimant acquired 260,000
        shares from Balaton Power Corporation S.A. and that the Company has an
        obligation to transfer the shares. The Company believes that the claimant
        does not have a strong claim and intends to vigorously defend itself.
        As the outcome is not determinable, the Company has not accrued any amount
        for this claim.                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|16. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    | On February 21, 2005, the Company settled $80,396
        of outstanding debt with respect to professional services rendered through
        the issuance of units (“Unit”) at a deemed price of $0.64
        per unit resulting in the issuance of 125,000 Units in the capital of
        the Company. Each Unit consists of one common share and one non-transferable
        share purchase warrant (“Warrant Share”) in the capital of
        the Company. Each Warrant Share entitles the holder for 24 months from
        the date of issue of the Warrant Share to acquire one additional common
        share in the capital of the Company at an exercise price of $0.66
        per warrant. The Warrant Shares will expire on February 21, 2007. The
        Shares and Warrant Shares are subject to a four-month hold period that
        will expire on June 22, 2005. No insiders of the Company participated
        in the shares for debt arrangement.

F-19

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| | 
| | 

|16. | SUBSEQUENT EVENTS(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    | On May 1, 2005, the Company settled $211,198
        of outstanding debt with respect to convertible loans and accrued interest
        thereon through the payment of $100,000 that shall be paid as follows:
        (i) the sum of $25,000 to be paid immediately upon execution of the
        settlement agreement and (ii) the sum of $12,500 to be paid on each
        of the following dates: August 1, 2005; November 1, 2005; February 1,
        2006; May 1, 2006; August 1, 2006; and November 1, 2006. In addition to
        payment of the settlement amount, the Company shall deliver 100,000 shares
        to the creditor. The settlement shares shall be restricted from resale
        for 4 months from the date of issuance.
|   
|17. | COMPARATIVE FIGURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    | Prior year financial statements were audited by
        another firm of chartered accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|18. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    | This reconciliation only covers measurement issues
        and not disclosure issues pursuant to the rules and regulations of the
        Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    | The consolidated financial statements of the Company
        for the years ended December 31, 2004 and 2003 have been prepared in accordance
        with generally accepted accounting principles as applied in Canada (“Canadian
        GAAP”). In the following respects, generally accepted accounting
        principles as applied in the United States (“US GAAP”) differ
        from those applied in Canada.                                                                                                                                                                                                                                                                                                                               
|   
|    | There would be no adjustments needed to arrive at
        net loss for the years ended December 31, 2004 and 2003 if US GAAP were
        employed. Similarly, there would be no adjustments needed to arrive at
        shareholders’ equity as at December 31, 2004 and 2003 if US GAAP
        were employed.                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-20

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| | 
| | 

|18. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTINGCONTINUED
        (continued)
      Accounting for future (deferred) income taxes
      The significant differences between U.S.
        GAAP and Canadian GAAP in the accounting for future income taxes relate
        to the treatment of proposed changes in income tax rates and terminology.
        Under
      Canadian GAAP, future income tax assets and liabilities
        are measured using substantively enacted tax rates and laws expected to
        apply when the differences between the accounting basis and tax basis
        of assets and liabilities reverse. Under U.S. GAAP, future income tax
        assets and liabilities are called deferred income tax assets and liabilities
        and are measured using only currently enacted tax rates and laws. As at
        December 31, 2004 and 2003, the difference in rate determination did not
        result in any adjustment from Canadian to U.S. GAAP since any deferred
        tax assets were not considered more likely than not to be realized and,
        accordingly, a full valuation allowance was recorded on such assets.
      Contributed surplus
      There is a difference between U.S. GAAP
        and Canadian GAAP for contributed surplus with respect to terminology.
        Under U.S. GAAP, contributed surplus is called “additional paid
        in capital”.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-21

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- 48 -

SIGNATURES

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

BALATON POWER INC.

Per: /s/ Robert Wyllie

___________________________
  ROBERT WYLLIE 
  Chief Financial Officer

DATED: June 29, 2005

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