UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC 20549
                                 FORM 10-QSB

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

                For the quarterly period ended January 31, 2002

                      Commission File Number: 000-29475

                          MALAHAT ENERGY CORPORATION
              (Exact name of Registrant as specified in charter)

                     NEVADA                     87-0640430
            (State of incorporation)    (I.R.S. Employer ID Number)




        700 - 101 Convention Centre Drive, Las Vegas, NV     89109
          (Address of principal executive offices)         (Zip Code)

                               1-800-631-8127
                         (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares outstanding as of January 31, 2002 of the Registrant's
only class of common stock, $0.001 par value per share, was 15,500,000 Common
Shares.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

MALAHAT ENERGY CORPORATION
QUARTERLY REPORT ON FORM 10-QSB

Quarterly Period Ended January 31, 2002

This Report on Form 10-QSB contains express or implied forward-looking
statements. The words "believes," "expects," "anticipates," "intends,"
"forecasts," "projects," "plans," "estimates," and similar expressions identify
forward-looking statements. Such statements reflect the Company's current views
with respect to future events and financial performance or operations and speak
only as of the date the statements are made. Such forward-looking statements
involve risks and uncertainties and readers are cautioned not to place undue
reliance on forward-looking statements. The Company's actual results may differ
materially from such statements. Factors that cause or contribute to such
differences include, but are not limited to, those discussed elsewhere in this
Form 10-QSB in, for example, Item 2, in the section entitled "Risk Factors."
Although the Company believes that the assumptions underlying its forward-
looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the results
contemplated in such forward-looking statements will be realized. The inclusion
of such forward-looking information should not be regarded as a representation
by the Company or any other person that the future events, plans or
expectations contemplated by the Company will be achieved. The Company
undertakes no obligation to publicly update, review or revise any forward-
looking statements to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

                                Malahat Energy Corporation
                               (A Development Stage Company)
                                Consolidated Balance Sheet

                                                          January 31, 2002
                                                             (Unaudited)

ASSETS

Current Assets:
   Cash                                                  $            -
   Accounts receivable - other                                  189,624
   Recoverable tax credits                                       55,084
      Total Current Assets                                      244,708

Property and equipment, net                                      16,236

Other Assets - biofuel system                                    63,489
                                                         $      324,433
                                                              =========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                                      $      131,311
   Bank Overdraft                                                 2,202
   Current portion of long-term debt                             53,363
   Due to related parties                                         7,052
      Total Current Liabilities                                 193,928

Stockholders' equity
   Common stock, $.001 par value,
    100,000,000 shares authorized,
    15,500,000 shares issued and outstanding                     15,500
   Additional paid in capital                                 1,895,773
   Deficit accumulated during the development stage          (1,775,779)
                                                                135,494
Other comprehensive income:
   Currency translation adjustment                               (4,989)
                                                                130,505
                                                         $      324,433
                                                              =========

The accompanying notes are an integral part of the consolidated financial
statements.

                                Malahat Energy Corporation
                               (A Development Stage Company)
                           Consolidated Statements of Operations
        For the Three Months and Six Months Ended January 31, 2001 and 2002, and
               the Period From Inception (July 26, 1994) to January 31, 2002
                                        (Unaudited)

<table>
<caption>

                            <c>               <c>               <c>              <c>              <c>
                                        Three Months                         Six Months                Inception to
                               January 31,        January 31,       January 31,      January 31,       January 31,
                               2001               2002              2001             2002              2002


Revenue                       $          -      $           -     $          -     $        7,239     $      13,497

Operating expenses:
  Research and development          52,177            (44,069)          82,717           (174,918)          251,548
   Interest                              -                  -            9,790                  -           235,645
  General and administrative
   expenses                         74,667            109,672          137,847            300,831         1,302,083
                                   126,844             65,603          230,354            125,913         1,789,276

Net (loss)                        (126,844)           (65,603)        (230,354)          (118,674)       (1,775,779)
                                ----------        -----------       ----------       ------------       -----------
Other comprehensive income:
  Currency translation
   adjustment                            -               (953)               -             (8,603)           (4,989)
                                ----------        -----------       ----------       ------------       -----------
Comprehensive (loss)          $   (126,844)     $     (66,556)    $   (230,354)    $     (127,277)    $  (1,780,768)
                                ==========        ===========       ==========       ============       ===========
Per share information -
 basic and fully diluted

Weighted average shares
 outstanding                     8,065,890         15,500,000        7,574,576         15,500,000         5,550,423
                                ==========        ===========       ==========       ============       ===========
Net (loss) per share          $      (0.02)     $       (0.00)    $      (0.03)    $        (0.01)    $       (0.32)
                                ==========        ===========       ==========       ============       ===========
</table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                Malahat Energy Corporation
                               (A Development Stage Company)
                           Consolidated Statements of Cash Flows
                  For the Six Months Ended January 31, 2001 and 2002, and
               the Period From Inception (July 26, 1994) to January 31, 2002
                                        (Unaudited)

<table>
<caption>

                                                   <c>                 <c>                 <c>

                                                                                                Inception to
                                                        January 31,          January 31,        January 31,
                                                        2001                 2002               2002

Cash flows from operating activities:
Net cash (used in) operating activities             $   (62,286)        $    (216,500)        $   (739,686)

Cash flows from investing  activities:
Net cash (used in) investing activities                       -               (63,489)             (84,306)

Cash flows from financing activities:
Net cash provided by financing activities               118,277                53,363              828,981

Net increase (decrease) in cash                          55,991              (226,626)               4,989
Effect of exchange rate on changes in cash                    -                (8,603)              (4,989)
Beginning - cash balance                                 54,806               235,229                    -
                                                      ---------           -----------           ----------
Ending - cash balance                               $   110,797         $           -         $          -
                                                      =========           ===========           ==========
</table>

The accompanying notes are an integral part of the consolidated financial
statements.

                                Malahat Energy Corporation
                       Notes to Consolidated Financial Statements
                                     January 31, 2002
                                        (Unaudited)

(1)     Basis Of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America ("GAAP") for interim financial information and Item 310(b) of
Regulation SB.  They do not include all of the information and footnotes
required by GAAP for complete financial statements.  In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.  The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.  For further information, refer to
the financial statements of the Company as of July 31, 2001, including notes
thereto.

(2)     Earnings Per Share

The Company calculates net income (loss) per share as required by SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share is calculated by dividing
net income (loss) by the weighted average number of common shares outstanding
for the period. Diluted earnings (loss) per share is calculated by dividing net
income (loss) by the weighted average number of common shares and dilutive
common stock equivalents outstanding. During the periods presented common stock
equivalents, if any, were not considered as their effect would be anti
dilutive.

(3)     Impairment of Long Lived Assets

Long lived assets and certain identifiable intangibles held and used by the
Company are reviewed for possible impairment whenever events or circumstances
indicate the carrying amount of an asset may not be recoverable or is impaired.
Management has not identified any impairment losses as of January 31, 2002.

(4)     Research and Development

During the period ended January 31, 2002 the Company negotiated a refund of
certain research and development expenses which it had incurred aggregating
$174,918. This amount is included in accounts receivable - other in the
accompanying balance sheet.

Item 2. Management's Discussion and Analysis or Plan of Operations

The following discussion and analysis should be read in conjunction with the
financial statements and notes to financial statements included elsewhere in
this interim report on Form 10-QSB. This report and the financial statements
and notes to financial statements contain forward-looking statements, which
generally include the plans and objectives of management for future operations,
including plans and objectives relating to future economic performance and our
current beliefs regarding revenues we might earn if we are successful in
implementing our business strategies. The Company does not undertake to update,
revise or correct any forward-looking statements.

The information contained in this report is not a complete description of the
Company's business or the risks associated with an investment in our common
stock. Before deciding to buy or maintain a position in its common stock, you
should carefully review and consider the various disclosures we made in this
report, and in other materials filed with the Securities and Exchange
Commission that discuss the Company's business in greater detail and that
disclose various risks, uncertainties and other factors that may affect
business, results of operations or financial condition.

DESCRIPTION OF BUSINESS

Overview

Malahat Energy Corporation ("Malahat" or the "Company") is a Nevada corporation
that was formed on July 13, 1994 under the name Granada Mineral Products, Inc.
On May 9, 2001, it acquired, through a merger, Sarenghetti Enterprises, a
private Nevada corporation ("SARG") formed on March 27, 2001, that had
previously acquired all the assets, liabilities and properties of Malahat
Systems Corporation, a producer of thermal and electrical energy using biomass
waste as fuel. Upon the effectiveness of the merger, it changed its name to
Malahat Energy Corporation and also changed its fiscal year end from December
31 to July 31.

The merger involved an exchange by the former stockholders of SARG of all of
the outstanding shares of SARG for newly issued shares of its company,
representing a majority ownership interest in its company. Because the merger
resulted in a change in control of its company, the merger was accounted for as
a reverse acquisition, and historical financial information of SARG is used as
the historical financial information of the Company. Prior to the merger, it
had no significant operations and had never commenced any operational
activities. Upon the consummation of the merger, it acquired and assumed the
properties, intellectual property rights, operations, assets, liabilities and
obligations of SARG.

The Company's principal executive offices are located at

700 - 101 Convention Centre Drive, Las Vegas, NV 89109

The telephone number of the Company is 1-800-631-8127.

The Company main operations office is located in Delta, British Columbia.

BioFuel System

Malahat has developed a proprietary BioFuel System that the Company believes
can deliver a reliable, price competitive on-site power source for energy
intensive commercial and industrial operations. The BioFuel System produces a
green, renewable fuel called SynGas, from biomass wastes, such as wood
residues; sugar cane residuals rice husks or other organic waste materials.

The Company's BioFuel System produces a clean, efficient replacement for fossil
fuels, such as diesel used in electrical generators and natural gas used in
heating boilers.

The BioFuel System can be used to generate thermal or electrical energy. The
Company's BioFuel System breaks down the complex structures of various biomass
feed stocks by the action of heat. This process called pyrolysis, results in
the division of the large molecules and their reformation into a green,
renewable SynGas. The company's BioFuel System can therefore produce high-
value energy such as electricity without the need for expensive steam
generation or steam turbine systems. This SynGas can be used as a replacement
fuel in reciprocating combustion engines, used for the production of
electricity, or as a replacement for natural gas in boiler applications and gas
fired dry kilns.

The Company's technology is an environmentally friendly energy solution in the
rapidly expanding alternate energy field, having completed the research and
development phase on the M500 BioFuel System and is launching its first
commercial model. The Company has identified the greenhouse industry, waste
disposal and developing countries as the three areas where the Company believes
its BioFuel System will receive wide acceptance. The Company also believes that
it has developed an efficient business model using an equipment lease agreement
targeted directly at the greenhouse industry.

In addition to commercialization of its operations, the Company's future
development plans include designing and building larger scale BioFuel Systems
which will produce more electricity or heat energy, and the adaptation of the
BioFuel System to other biomass feed stocks such as municipal solid waste,
waste paper, waste plastics and crude oils.

The Company believes its BioFuel System will benefit the agricultural and
forestry sectors. Firstly, it will provide the industry with an efficient
method of disposing of its wood wastes in compliance with government
guidelines. Secondly, it will provide a method of disposal at a relatively low
capital cost when compared to other technologies. Thirdly, it will provide them
with low cost energy.

The Technology

The Company developed the M500 BioFuel System through several years of
prototype testing. The M500 is capable of processing about six tons (metric) of
waste wood per day. It is fed by an automated material handling system capable
of sizing the incoming feedstock. It has a computerized control system that can
be operated in a manual or fully automatic mode. In the automatic mode, a
programmable logic control monitors the temperature throughout the system and
continuously adjusts the fuel rate and air mix, and can be monitored from
remote locations. The M500 produces sufficient fuel to produce up to 240 KWHs
of electrical energy per hour.

The Company's BioFuel System requires organic waste, heat, water and air to
produce BioFuel through a conversion process known as pyrolysis.

Pyrolysis is the thermal degradation of material in the absence of oxygen.

Malahat's patent pending system employs computer-controlled sensors to regulate
the elements with extreme precision, producing a high quality BioFuel.

The Company's BioFuel System breaks down the complex structures of various
biomass feed stocks by the action of heat. This results in the division of
large molecules and their reformation into a green, renewable SynGas. Compared
with other available gasification technology, the company's Biofuel System
achieves a greater breakdown making the gas suitable for use in a reciprocating
combustion engine. The result is that the BioFuel System can produce high-
value energy such as electricity without the need for expensive steam
generation or steam turbine systems. Also, the gas can be utilized as an
economical, green replacement for natural gas in greenhouse operations and gas
fired dry kilns.

The Company has achieved a design breakthrough in a BioFuel System unit that is
simple and easy to operate. As a result, the Company believes its BioFuel
Systems are competitive with conventional energy systems in a wide range of
situations.

The Company has research and development plans for an M3000 System as well as a
turbine system. The M3000 System will have essentially the same material
handling and control system as the M500 however it will be capable of
processing up to 36 tons (metric) of wood waste per day and producing up to 1.5
MWH of electricity per hour. Customers who have a requirement to process more
wood waste can implement multiple units connected together. All models can be
installed in a multiple unit system. In order to develop the technology for a
steam turbine system, while not vastly different than supplying fuel to
reciprocating engines, it will require changes to the control systems. Such
development will be driven by the growing interest in small turbine engines due
to their efficiency over reciprocating engines.

Environmental Considerations

The BioFuel System produces a clean, permanent BioFuel, which consumes wood
chips, and other organic wastes that usually become landfill. Millions of tons
of wood waste become landfill each year in North America. Malahat's BioFuel
System can use these mountains of wood waste and can convert them into a
renewable energy resource.

Reducing landfills decreases the amount of methane gas and CO2 emitted into the
atmosphere.

The use of the SynGas from the BioFuel System also reduces the level of
greenhouse gas emissions due to the absence of sulphur-containing compounds.
There are no atmospheric emissions from the BioFuel System as the gas is fed
directly into boilers or into the intake manifold of a reciprocating engine.

Burning fossil fuels release large amounts of carbon dioxide into the
atmosphere. The company's technology is a CO2 neutral power solution. BioFuel
combustion does not add more carbon dioxide to the atmosphere than would occur
through the natural decomposition of the organic waste.

Malahat may earn valuable carbon credits in the developing carbon credit
trading market.

Fossil fuels, such as diesel, generate sulphur dioxide, nitrous oxide and other
hazardous toxics. The company's syngas burns clean. It can replace diesel and
natural gas in some industrial applications.

Results of Operations

For the quarter ended January 31, 2001 the Company expended $52,177 on research
and development. For the quarter ended 2002, the Company showed a recovery of
$44,069 of research and development expenditures, attributable to Federal
government contribution it received.

The Company's operating loss was $66,566, a decrease of $60,278 from the
quarter ended January 31, 2001. This decrease is attributable to the above
noted Federal government contribution.

The loss per common share decreased from $0.02 in 2001 to $0.004 in 2002.

Cash used in operating activities for the second quarter of 2002 was $216,500.

Cash used for the same quarter in 2001 in operating activities was $62,286.

On March 8, 2002, the Company received a cash contribution of CDN $247,759.40
from Natural Resources Canada, a Federal government department with expertise
in science and technology policy and programs whose mandate is to support
sustainable development and use of natural resources.  The Company expects
further contributions from Natural Resources Canada.

The company is concluding manufacturing arrangements with two manufacturers for
the manufacture and installation of the M500  Bio-fuel Systems in Canada and
the US.  The program established with Alliance Financing group Inc accelerates
the opportunities for the Company to provide more M500 Bio-fuel Systems for its
customers, which potentially leads to increased monthly revenue flow.

Liquidity and Capital Resources

As of January 31, 2002 non-cash current assets were $244,708.

Net working capital was $50,780 for the quarter ended January, 2002

Accounts payable were $131,311 for the quarter ended January, 2002

Loans payable were $53,363 for the quarter ended January, 2002.

Successful completion of the Company's product from research and development to
a commercial unit phase, and its transition, ultimately, to attaining
profitable operations is dependent upon obtaining additional financing adequate
to continue its research and development activities, manufacturing the
Company's M500 BioFuel System commercially and achieving a level of revenue
adequate to support and enhance the Company's operation. Management intends to
obtain this funding through government contributions and grants, incentive
environmental credit programs, the offering of securities and other forms of
financing. However, there can be no assurance that the Company will be able to
obtain such financing, which may impact the Company's ability to continue as a
going concern. While the Company believes that it has sufficient operating
revenue and cash reserves to fund ongoing operations for the year 2002, it is
in the process of seeking additional funding as described above to assist in
the Company's operations and launch into commercial production of the Company's
products.

Recent Developments and Future Events

In November 14, 2001, the Company announced a CDN $350,000 contribution from
Natural Resources Canada (NRCan) to support ongoing research and development of
its BioFuel System. NRCan is a federal government department with expertise in
science and technology policy and programs. As of January 31, 2002, the Company
had invoiced the Natural Resources Canada CDN $ 271,722.

On January 18, 2002 the Company announced a joint venture agreement with
Fentons Limited of Sri Lanka to create FM Energy Corporation Limited, to
market, supply, and operate Malahat's propriety BioFuel M500 systems into the
Sri Lankian marketplace.

On February 26, 2002, the Company announced that Crusader Technologies Corp, of
Boulder Colorado, will become a market representative for the Company to
represent the M500 Bio-fuel System in Brazil, Japan and the Caribbean nations.

On March 8, 2002, the Company received its contribution, net of holdback, from
Natural Resources Canada for CDN $247,759.40 as part of its ongoing support
with development of the M500 Biofuel System for the Company.

On March 14,2002, the Company announced an energy lease program established
with Alliance Financing Group Inc. of Toronto, Canada for CDN $6,000,000 with
respect to its proprietary M500 Bio-Fuel Ststems, to enable Malahat customers
in the greenhouse industry to lease the systems.  This energy lease program
helps accelerate Malahat's manufacture and use of the M500 systems by its
customers.

Risk Factors

There are a number of uncertainties and risk factors that may bear on the
ability of the Company to achieve its business goals and reduce the possibility
of successfully fulfilling its plans. The risks and uncertainties described
below are not the only ones facing the Company. If any of the following risks
actually occur, its business, financial condition or results of operations
could be materially adversely affected. In that case, the trading price of the
common stock could decline, and you may lose all or part of your investment in
its common stock.

The Company has a limited operating history. The Company has not yet generated
significant revenue from its business operations. As a new operating entity,
the Company faces risks and uncertainties relating to its ability to
successfully implement its strategy. Some of these include:

- ability to develop and sustain revenue growth; - managing expanding
operations;

- competition;

- attracting, retaining and motivating qualified personnel; - maintaining and
developing new, strategic relationships; and - ability to anticipate and adapt
to the changing energy market and any changes in government regulation.

The Company has incurred losses and expects losses may continue. The Company
has incurred operating losses since its inception and expect to continue to
incur losses in the foreseeable future. As at January 31, 2002, the Company had
an accumulated deficit of $1,775,779.  To date, the Company has not produced
any revenue; operations have been funded through government grants and private
equity. The Company needs to generate significant revenue to achieve
profitability and cannot be assured that it will realize sufficient revenue to
achieve profitability. The Company also expects to incur significant research
and development, product development, sales and marketing and administrative
expenses and, as a result, expects to continue to incur losses for the
foreseeable future.

The Company may not be able to obtain sufficient funds to grow its business and
any financing may be on terms adverse to the interests of the Company's
shareholders. The Company may need financing to continue to grow its business.
If financing is not available when required or is not available on acceptable
terms, the Company may be unable to fund its expansion, successfully promote
its business, take advantage of business opportunities or respond to
competitive pressures, any of which could have a material adverse effect on the
Company's ongoing business. If the Company is able to raise funds, and it does
so by issuing equity securities, holders of the Common Stock may experience
significant dilution of their ownership interest and holders of these
securities may have rights senior to those of the current holders of the Common
Stock. If the Company obtains financing by issuing debt securities, the terms
of these securities could restrict or prevent the Company from paying dividends
and could limit its flexibility in making business decisions. Because the
Company expects to generate losses for the foreseeable future, it does not
expect that income from its operations will be sufficient to meet its capital
needs. The Company expects to raise funds in the future in order to fund its
anticipated growth, more aggressive marketing programs or the acquisition of
complementary businesses, technologies and services. Obtaining financing will
be subject to a number of factors including: market and economic conditions;
the Company's financial condition and operating performance; and investor
sentiment. These factors may make the timing, amount, terms and conditions of
additional financing unattractive for the Company.

The Company cannot be certain that its technology and products will achieve
market acceptance or whether it will be able to achieve significant revenue.
The Company is therefore very limited in its ability to predict future revenue.
The combination of the Company's limited operating experience, the uncertain
market acceptance for its products, and other factors that are beyond its
control make it difficult for the company to accurately forecast its revenue on
a quarterly and annual basis.

The Company's business includes research and development, engineering,
modification and introduction of the M500 unit and new products and may include
entry into new business segments. Such initial entry into any new segment has
no historical proven data or prior business records.

Company's Products

The Company may not be able to successfully introduce new or enhanced products
and services. The failure of any new or enhanced products and services to
achieve market acceptance and generate revenue could result in a material
adverse effect on the Company's revenues. The Company expects to introduce
enhanced products and services in order to generate additional revenues,
attract and retain more employers and respond to competition. Any new or
enhanced product or service introduced that is not favorably received could
damage the Company's reputation and the perception of its service mark and
brand.

The Company has a limited product line and is dependent on the successful
commercialization of its M500 Biofuel System. It may also be necessary to
develop in a timely manner new and enhanced products that achieve market
acceptance. The Company has only one principle product that has passed
significant testing and trials and is ready for installation at customer sites.
In order to experience future revenue targets the successful implementation and
customer acceptance of its M500 BioFuel System is essential. Even if the
Company is able to develop and commercially introduce new technology, products
or enhancements, they may not achieve market acceptance.

Improvements may also be made to the existing alternatives to the Company's
products that could render the company's technology less desirable or obsolete.

Customers may defer orders in anticipation of new products from the Company or
other providers of alternate energy systems.

The timing of orders from its customers and the possibility that these
customers may change their order requirements with little or no advance notice
to the Company.

Potential customers of the Company's technology may have invested substantial
resources in their existing power systems and, as a result, may be reluctant or
slow to adopt a new approach. Moreover, the Company's technology is an
alternative to existing fossil fuel sources of energy and may never be accepted
by the Company's customers or may be made obsolete by other advances in energy
technology.

Alternative energy as a new, viable source of energy

There is uncertainty regarding the ongoing need for on site power generation as
well as the uncertainty regarding the adoption of the Company's current and
future products, including its recently introduced M500 BioFuel System which it
expects to be commercially introduced by the end of 2002 and the rate of growth
of the markets for its products.

The Company's business is dependent on a market for on-site biomass power
technology, and if this market does not expand as it anticipates, or if
alternatives to its products are successful, its business will suffer. The
market for biomass power technology is rapidly evolving and it is difficult to
predict its potential size or future growth rate.

Biomass Feedstock Supply

The Company's technology and business model depend on the availability of
sufficient biomass feedstock. The Company's research suggests that the
availability of feedstock and the logistics of transportation of sufficient
feedstock to customers' premises at an acceptable cost can be achieved for the
present and foreseeable future. However, any major increase in the costs of
supplying feedstock can adversely affect the viability of the Company's
business model. As biomass to energy technology becomes more established and
the Company's competitors prove to be successful in commercializing their
technology there is a risk that biomass feedstock such as wood chips could
become commoditized increasing the costs of supply and delivery thereby
affecting the profitability of the Company's operations.

Technology and Intellectual Property

The M500 BioFuel System is the Company's proprietary technology, and the
Company is dependent on its intellectual property for the success of its
business. Without control over its intellectual property the Company may be
unable to compete, if its technology and secrets fall into the hands of
competitors. The Company has filed for patent protection in both the United
States and Canada.

The Company intends to use all efforts to maintain the integrity of its
intellectual property, however, unauthorized parties may attempt to copy or
otherwise obtain and use its technology. Monitoring unauthorized use of M500
BioFuel System may be difficult, especially as the system is placed on
customers' premises, and it cannot be certain that the steps it has taken will
prevent unauthorized use of its technology. The Company may also be unable to
defend its intellectual property rights in foreign countries where applicable
laws may not protect its proprietary rights as fully as in the United States.
In addition, the measures the Company undertake may not be sufficient to
adequately protect its proprietary technology and may not preclude competitors
from independently developing products with functionality or features similar
to those of the company's technology.

Failure to adequately protect the Company's intellectual property rights could
permit others to appropriate its proprietary technology. The unauthorized
reproduction or other misappropriation of the Company's proprietary technology
could enable third parties to benefit from its technology and brand without
paying the Company. If this were to occur, the Company's revenues could be
materially adversely affected, and the value of the Company's mark and brand
could be diminished. The steps the Company has taken to protect its proprietary
rights may not be adequate to deter misappropriation of proprietary
information. The Company may not be able to detect unauthorized use of its
proprietary information or take appropriate steps to enforce its intellectual
property rights. The laws of other countries in which the Company may market
its services in the future are uncertain and may afford little or no effective
protection of the Company's intellectual property. If the Company resorts to
legal proceedings to enforce its intellectual property rights, the proceedings
could be burdensome and expensive. The proceedings also could involve a high
degree of risk.

Defending against intellectual property infringement claims could be time
consuming and expensive, and the Company may be liable for infringing on the
intellectual property rights of others. If the Company is not successful in
defending against these claims, the Company could be subject to significant
damages and the disruption of its business. Successful intellectual property
infringement claims against the Company could result in monetary liability or a
material disruption in the conduct of its business. The Company cannot be
certain that its products, services, content and brand do not or will not
infringe valid patents, copyrights or other intellectual property rights held
by third parties. The Company expects that infringement claims in its markets
will increase in number as more participants enter the markets. The Company may
be subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of its business. The
Company may incur substantial expenses in defending against these third party
infringement claims, regardless of their merit.

Sales, Marketing and Distribution

The Company is dependent on certain distribution channels for marketing its
M500 BioFuel system to the greenhouse industry and therefore management of its
distribution relationships is essential to the Company's future success in
delivery of its technology to this industry. The future growth of the Company's
business will depend in part on its ability to create new relationships with
partners for the commercialization of its technology in other industries, to
identify and develop additional channels for the distribution its technology
and to manage these relationships. The Company will also look to identify and
develop relationships with additional partners that could serve as distributors
for its technology.

The Company has developed a business model to compete for customers business at
a discount to their existing energy pricing arrangements. Competition could
lead to a decrease in its prices as well as a reduction in sales, lower margins
and decreased market share. These and other competitive pressures could prevent
it from competing successfully against current or future competitors and could
materially harm its business.

Raw Materials and Suppliers

For the most part, the Company's products are custom designed and manufactured
with certain components that can be bought "off the shelf," and are not
intended to be produced for inventory. The Company's products are either
obtained from local sources or manufactured. Generally, lead-time for delivery
of materials or components ordered will be delivered on time, or that the
manufacture of the component parts will be completed on time, and if that is
not the case, the manufacture of the M500 can be delayed.

Manufacturing

The Company has no experience manufacturing its M500 BioFuel system, and the
Company is dependent on outsourcing this function to third party manufacturers.
While the Company has effectively managed this process for individual units the
company has no experience in replicating its technology in larger quantities.
In addition, the Company has yet to sign a manufacturing agreement and may have
difficulty in procuring production of its M500 BioFuel System at required
terms. To be financially successful, it will have to manufacture its M500
BioFuel System in commercial quantities at acceptable costs while also
preserving the quality levels and integrity achieved in manufacturing the M500
BioFuel System in limited number. This may present technological and
engineering difficulties for the product manufacturer that could adversely
affect the results of the Company's business. There can be no assurance that it
will be successful in executing a satisfactory manufacturing agreement.

The Company may not be successful in concluding a manufacturing capability in
time to meet its M500 BioFuel System commercialization schedule or to satisfy
the requirements of its customers.

The Company has intentionally chosen to use only a limited number of
manufacturers to produce components for its technologies. In the opinion of
management, the Company can have access to a readily available supply of raw
materials and components for all of its anticipated products from various
sources and does not anticipate any major difficulties in obtaining such raw
materials or components necessary for its business.

Competition

The Company is not aware of any market ready direct competition, however, the
Company is aware that there are other companies throughout the world developing
or attempting to develop gasification processes, pyrolysis and conversion of
energy. Such companies may be developing products and technologies similar in
nature to the M500 BioFuel System, and the Company competes indirectly with
companies that are developing other types of energy technologies. The Company
is aware that many of its current and potential competitors have longer
operating histories, significantly greater resources, broader name recognition
and stronger financial assets. As a result, these competitors may have greater
credibility with its existing and potential customers. They also may be able to
adopt more aggressive pricing policies and devote greater resources to the
development, promotion and sale of their products than it can to the Company's,
which would allow them to respond more quickly than it to new or emerging
technologies or changes in customer requirements.

Employees

The Company has also expanded its staff and may continue to expand its staff
and facilities thereby increasing its expense levels in anticipation of future
gains in revenue. If revenue does not develop as anticipated, the company will
incur losses.

The Company has undergone growth in the number of its employees over the past
year; however, if the company is to realize full commercialization of its M500
BioFuel System there will be significant expansion the size of its staff as
well as its physical facilities and the scope of its operations. The Company
may experience difficulty in managing the expansion of its operations to
achieve its sales goals. The Company's prospects and financial condition could
be harmed if it encounters difficulties in effectively managing the budgeting,
forecasting and other process control issues presented by such a rapid
expansion.

The Company's business and growth will suffer if it is unable to hire and
retain highly skilled personnel. If the Company is unable to hire and retain
highly skilled personnel, its growth may be restricted, the quality of its
products and services reduced and its revenues may be reduced or grow at a
slower rate than expected. The Company's future success depends, in large part,
on its ability to attract, train, motivate and retain highly skilled employees.
Competition for highly skilled employees is intense. The Company may be unable
to retain its skilled employees or attract, assimilate and retain other highly
skilled employees in the future. The Company has, from time to time, in the
past, experienced, and it may experience in the future, difficulty in hiring
and retaining highly skilled employees with appropriate qualifications.

The Company may not be able to effectively manage its expanding operations. To
execute its business plan and strategy, the Company must continue to grow
significantly. If the Company is not able to expand its operations in an
efficient manner, its expenses could grow disproportionately to revenues or its
revenues could decline or grow at a slower rate than expected, either of which
could have a material adverse effect on its business, results of operations and
financial condition. The Company expects that the number of its employees will
double in the next fiscal year and may continue to increase for the foreseeable
future. The Company's growth is expected to result in increased responsibility
for both existing and new management personnel. Such growth has placed, and
anticipated future growth combined with the requirements the Company faces as a
public company will continue to place, a significant strain on the Company's
management, operations, systems and resources. The Company expects that it will
need to continue to improve its financial and managerial controls and reporting
systems and procedures, and will need to continue to expand, train and manage
its workforce. The Company's success depends to a significant extent on the
ability of its executive officers and other members of management to operate
effectively both independently and as a group. The Company will also need to
continue to expand and maintain close coordination among its products, services
and technology, finance and administration and sales and marketing
organizations. There can be no assurance that if the Company continues to grow,
management will be effective in attracting and retaining additional qualified
personnel, expanding its physical facilities, integrating acquired businesses,
if any, or otherwise managing growth. There can be no assurance the Company's
information systems, procedures or controls will be adequate to support its
operations or that management will be able to achieve the rapid execution
necessary to successfully offer its products and services and implement the
business plan and strategy. The Company's future performance may also depend on
its effective integration of acquired businesses, if any. Any such integration,
even if successful, may take a significant period of time and expense, and may
place a significant strain on the Company's resources. If the Company is not
able to manage existing or anticipated growth, its business, results of
operations and financial condition will be materially adversely affected.

The loss of any of key management and technical personnel or consultants could
negatively impact the Company's business. The Company has greatly benefitted
from the experience and dedication of its management personnel including Ben
Dulley, Jake Neufeld, Bruce Ramsay and with further assistance of engineering
and technical expertise and consultancy provided by Dr. David Wiles and Hans
Gostmann. The loss or departure of any of the Company's key employees could
materially adversely affect its ability to implement its business plan and
could lower its revenues or cause revenues to grow at a slower rate than
expected. The Company's future success depends to a significant extent on the
continued service and coordination of the Company's management team. In
addition, certain members of the management team have joined within the last
few months. In addition, if one or more key employees join a competitor or form
a competing company, though the Company has non-competition arrangements with
each of its key employees, the Company may lose existing or potential
customers, which could have a material adverse effect on the Company's
business, results of operations and financial condition. Though the Company
maintains confidentiality agreements with its employees, if the Company were to
lose a key employee, there can be no assurance that the Company would be able
to prevent the unauthorized disclosure or use of its procedures, practices, new
product development or customer lists.

Effect of Governmental and Environmental Protection Regulations and Permits

The Company may be subject to material federal, state, provincial or municipal
regulations, laws and permits for the installation and operation of its M500
units. The Company believes that it will be able to comply in all material
aspects with all such laws and regulations to the extent that they be deemed
applicable to the Company's products with minimal resources expected to be
required by the company in so complying.

Other Risks

The Company's stock price may experience extreme price and volume fluctuations.
The market price of the Company's Common Stock has fluctuated in the past and
is likely to continue to be volatile and subject to wide fluctuations. The
stock market in general and the market prices of shares in energy companies
have been extremely volatile and have experienced fluctuations that have often
been unrelated or disproportionate to the operating performance of such
companies. The market price of the Company's Common Stock may be subject to
wide fluctuations in response to many factors, some of which are largely beyond
the Company's control. These factors include:

- quarterly variations in results of operations; - adverse business
developments;

- changes in financial estimates by securities analysts; - investor perception
of the Company and online recruiting and staffing services in general;

- announcements by competitors of new products and services; and - general
economic conditions both in the United States and in foreign countries.

Since the Company's stock price is volatile, the Company may become subject to
securities litigation, which is expensive and could result in a diversion of
resources. Litigation brought against the Company could result in substantial
costs to the Company in defending against the lawsuit and a diversion of
management's attention. Securities class action litigation has often been
brought against companies that experience volatility in the market price of
their securities. Since the Company's stock price is volatile, the Company
could be subject to securities litigation and incur higher expenses than
expected, which could have a material adverse effect on its business and
results of operations.

Future sales of the Company's Common Stock may negatively affect its stock
price. The market price of the Company's Common Stock could decline as a result
of sales of a large number of shares of Common Stock in the market or as a
result of sales by existing shareholders, or the perception that these sales
could occur. These sales might make it more difficult for the Company to sell
equity securities in the future at a time and at a price that the Company deems
appropriate. The certain shares of the Company's Common Stock currently
outstanding are or will become eligible for sale without registration pursuant
to Rule 144 under the Securities Act, subject to certain conditions of Rule
144.

The Company's officers, directors and existing stockholders, whose interests
may differ from other shareholders, will have the ability to exercise
significant control over the Company. The Company's executive officers and
directors and entities affiliated with them will, in the aggregate,
beneficially own a majority of the Company's Common Stock. These shareholders
will be able to exercise significant influence over all matters requiring
approval by the Company's shareholders, including the election of directors and
the approval of significant corporate transactions, including a change of
control of the Company. The interests of these shareholders may differ from the
interests of the Company's other shareholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We develop products in Canada and sell them in North America, Asia and Europe.
As a result, our financial results could be affected by factors such as changes
in foreign currency exchange rates or weak economic conditions in foreign
markets. As most of our sales are currently made in U.S. dollars, a
strengthening of the dollar could make our products less competitive in foreign
markets. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments. We regularly assess these risks and have established
policies and business practices to protect against the adverse effects of these
and other potential exposures. As a result, the Company does not anticipate
material losses in these areas. Due to the nature of our short-term
investments, we have concluded that there is no material market risk exposure.
Therefore, no quantitative tabular disclosures are required.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

The Registrant is not involved in any material legal proceedings.

Item 2. Changes in Securities.

None.

Item 3.      Defaults Upon Senior Securities.

                     None.

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

                     None.

Item 5.      Other Information

             None.

Item 6.      Exhibits and Reports on Form 8-K

(a) Exhibits

EXHIBIT
NUMBER  DESCRIPTION

2.0     Stock Exchange Agreement between Granada Mineral Products, Inc. and
Sarenghetti Enterprises, dated May 8, 2001, incorporated by reference to
Exhibit No. 2 to the Registrant's Form 8-K, filed May 9, 2001.

3.1     Articles of Incorporation Certificate of Amendment of Articles of
Incorporation, incorporated by reference to Exhibit No. 3.1 to Registrant's
Form 10SB12G, filed February 11, 2000.

3.2     By-Laws, incorporated by reference to Exhibit No. 3.2 to Registrant's
Form 10SB12G, filed February 11, 2000.

3.3     Articles of Merger of Granada Mineral Products, Inc. and Sarenghetti
Enterprises, dated May 8, 2001, incorporated by reference to Exhibit No. 3 to
Registrant's Form 8-K, filed May 9, 2001.

(b)     Reports on Form 8-K.

        A Report on Form 8-K was filed by the Registrant on September 18, 2001,
announcing that, as of September 10, 2001, the Registrant has completed the
merger reported earlier under its former name, pursuant to a Stock Exchange
Agreement (the Agreement), dated May 8, 2001, entered into with Sarenghetti
Enterprises, a Nevada corporation (SARG), which provided for the merger of SARG
with and into the Registrant which is the surviving entity, pursuant to a tax-
free reorganization in accordance with Section 354 and 368 of the Internal
Revenue Code of 1986, as amended.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

MALAHAT ENERGY CORPORATION

By: /s/   BEN DULLEY
          ---------------------
          Ben Dulley, President


Dated:    March 15, 2002