SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                          FORM 10-KSB

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

     For the fiscal year ended:   June 30, 2004

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

                      COMMISSION FILE NUMBER: 000 - 30254.

                      SHANNON INTERNATIONAL RESOURCES INC.
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)


              Nevada                             98-02049656
    ---------------------------               ------------------
   (State or other jurisdiction                 (IRS Employer
          of incorporation)                   Identification No.)


          Suite 2000, 715 - 5th Avenue, S.W., Calgary, Alberta T2P 2X6
          ------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (403) 538 3706

Securities registered under Section 12(b) of the Exchange Act: NONE.

 Securities registered under Section 12(g) of the Exchange Act:

                  Common Stock, $.001 par value
                  -----------------------------
                        (Title of class)

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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.$-0-

As of September 24, 2004, 20,845,000 shares of Common Stock of the Registrant
were deemed outstanding. (See Item 11). The aggregate market value of the voting
and non-voting common equity stock held by non-affiliates of the registrant
(20,725,000 shares) as of September 24, 2004: $6,839,250 (See Item 5)

Documents incorporated by reference: None.

Transitional Small Business Disclosure Format (check one): YES [ ]  NO [X]

Exhibit index on consecutive page 75          Page 1 of 77 Pages


<PAGE>




                             Part I.

Item 1. Development of Business
        -----------------------

Shannon International Resources Inc., hereafter Shannon has the objective of
increasing shareholder value through a strategy of "Find Value, Add Value".
Building from its origins in natural resources exploration, Shannon has moved
into the information technology sector. We plan to continue to make new
investments in the Information Technology field, and seek high quality
opportunities.

Natural Gas Exploration Program
-------------------------------

Shannon was incorporated on February 17, 1999 under the laws of the State of
Nevada for the purpose of financing and owning oil and natural gas development
properties.

During March 1999, Shannon sold 2,000,000 shares of common stock to CMB Energy
Corp. in exchange for a 25% working interest in Oil and Natural Gas Permit No.
9606 covering 116,279 acres of Prince Edward Island, Canada. In January 2002,
Shannon acquired a further five percent Working Interest in six additional
Permits totaling a gross acreage of 525,857 acres from CMB Energy Corp. The
purchase price for the additional interests was $190,368, plus the vendor
retained a Gross Overriding Royalty ("GORR") of 10% on this newly acquired
acreage. Together these are the "Prior Working Interests".

On July 23, 2004, the Prior Working Interests permits expired. Rally Energy
Corp., the Operator under the Joint Operating Agreement acquired new permits for
approximately 308,000 acres of approximately 640,000 acres covered by the
expired permits, including the acreage where the first two exploratory natural
gas wells were drilled. Please See Description of the Business of the Company -
Natural Gas Exploration Program page 10.

On September 23, 2004, Shannon entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits, the
"2004 Working Interest". Shannon has also agreed to enter into a new Joint
Venture Operating Agreement with the holders of the balance of the Working
Interests. Shannon acquired the 2004 Working Interest in consideration of a
promissory note in the principal amount of $168,561.74 Cdn., payable to Rally
Energy Corp., due on or before December 31, 2004 bearing interest at the prime
rate quoted by Toronto Dominion Bank as of September 30, 2004. Shannon also gave
Rally Energy Corp., a promissory note payable to Rally Energy Corp., in the
principal amount of $71,145 payable upon thirty days written notice for the
outstanding costs attributed to Shannon and CMB Energy Corp., from the Prior
Working Interests.


Logical Sequence Incorporated.
------------------------------

In October 2003, Shannon entered into an agreement to acquire fifty-one percent
of the equity ownership of Logical Sequence Incorporated, hereafter LSI, a
privately held Canadian corporation. The acquisition closed and became effective
on June 30, 2004.


                                       2
<PAGE>


A wholly owned Canadian subsidiary corporation, Shannon Investments Ltd., was
created which issued 5,100,000 shares of non-voting exchangeable stock to the
shareholders of Logical Sequence Incorporated at closing. These shares are
exchangeable into common stock of Shannon at the election of the holder at any
time over the next five years on a share for share basis. Shannon has agreed to
provide Logical Sequence Incorporated, up to $760,000 U.S. for software
development over the period ending October 31, 2004 of which $ 321,000 Cdn has
been provided through September 24, 2004. Shannon also has an option to acquire
the remaining forty-nine percent of the Logical Sequence Incorporated, common
stock for $2.00 US per share on or before October 20, 2005.

LSI, is the developer of comprehensive and integrated software applications for
the automotive industry. LSI had an exclusive distribution agreement with
Electronic Data Systems Inc., (EDS) to market, distribute and support its
web-based Dealer Management software. In April 2004, Logical Sequence
Incorporated terminated its agreement with Electronic Data Systems Inc., in
response to Electronic Data Systems Inc.'s announced sale of its Automotive
Retail Group to Automated Data Processing Inc. - LSI's largest competitor. LSI
is currently seeking new partners to enter into distribution agreements for its
software.


EnerVision-Helical Investment
-----------------------------

In May 2003, Shannon entered into a subscription agreement with EnerVision
Incorporated ("EnerVision") and its subsidiary Helical Systems Inc. ("Helical")
of Dartmouth, Nova Scotia, whereby Shannon will participate in the development
and commercialization of the Helical Software Platform for Very Large Data Base
(VLDB) management. The Helical Software Platform capabilities allow for the
acquisition, visualization, fusion, management and archiving of near limitless
quantities of data in real time at the desktop level. The software platform is
based on Helical's proprietary implementation of HHCode technology, known as
Self Defining Structure (SDS).

Shannon subscribed for 1,250,000 units of EnerVision securities at a
subscription price of CDN $150,000 or CDN $0.12 per unit. Each unit consists of
one common share of EnerVision and one common share purchase warrant. Each
warrant will entitle the holder to acquire one common share upon exercise and
payment of CDN $0.18 per common share, within two years of the date of the
warrant.

Helical and Shannon will jointly develop a software application for the
processing, visualization and archiving of seismic data built on the Helical
Software Platform.

Under the terms of the subscription agreement, Helical will develop a Proof of
Concept for the application. Shannon will receive a 15% interest in the venture,
as a condition of the above private placement and can earn additional interest
through providing additional financing up to a maximum of CDN $350,000, for a
potential 50% interest in the venture. Helical will provide technology to the
venture and hold the balance of the interest in the venture. Any subsequent
venture funding required beyond the CDN $350,000 above, will be the pro-rata
responsibility of venture partners.


                                       3
<PAGE>

Description of the Businesses of The Company
--------------------------------------------


Information Technology:   Logical Sequence Incorporated.
--------------------------------------------------------

Summary
-------

     o    Logical Sequence Incorporated (LSI) develops software applications for
          the North American automotive industry. LSI's legacy product, the TIM
          system, is currently running in over 300 dealerships across Canada.
          LSI's next generation product, Lynxphere, is currently being
          piloted/beta tested in a Nova Scotia dealership. The Lynxphere product
          is built on a purely web-based technology architecture. LSI's current
          legacy product suite has gained a high degree of success in Canada. In
          a Canadian industry-wide customer satisfaction survey conducted by
          Price Waterhouse Coopers and DesRosiers Automotive Consultants in
          2000, LSI software placed first by a wide margin, winning out over ADP
          and Reynolds & Reynolds, among others.

     o    LSI's next generation software suite, LynXphere, is now in pilot and
          is slated for general release in December 2004. The new suite consists
          of dealership Accounting & Vehicle Inventory, Parts Inventory, Service
          Management, Leasing and Sales, and Customer Relationship Management or
          CRM tools that are full-featured and fully integrated. LSI is
          differentiated from its competition by its ability to seamlessly
          handle all transactions for the automotive dealer in a true web-based
          environment.

LSI's installed products have been traditionally distributed through direct
selling of licensing agreements. However, the Company intends to enter
agreements with large distribution partners with the infrastructure required to
deploy LSI products on a mass scale. In addition, LSI will build on its OEM
relationships, while continuing direct sales where necessary. As of the date of
this report, LSI has not entered into any third party distribution agreements.

Automotive dealers are increasingly opting to rent applications from an
Application Service Provider or ASP. This lowers the overall cost of ownership
by eliminating both a large up-front investment of capital and the resource
investment required to maintain local servers. LSI's market plans include
seeking distribution partners who possess expertise as ASPs.

Our mission is to establish LSI products as world leaders in software-based
automobile dealership management solutions.


Product And Services
--------------------

LSI's products consist of automobile dealership management software that fully
integrates back-office and front office functions with full-featured Accounting,
Inventory Control, Parts, Service, Electronic Time Clock, Contact Management,
F&I, CRM, and Management Reporting tools, among others. The dealership suite
consists of:


                                       4
<PAGE>

     o    Accounting - This full-featured and fully integrated accounting
          package contains all the features you expect from any professional
          accounting package and much more. In particular, the package works in
          concert with Glove, i.e. General Ledger Open View Environment. Glove
          is an invaluable management tool within the LSI System. This powerful
          tool offers dealers an up to the moment or "Real Time" screen snapshot
          of financial statements and Daily Operating Control (DOC). Just place
          your pointer on "statement balance" and Glove drills down to reveal
          all transactions for the selected balance. The Glove Daily Operating
          Control offers standard or user-defined department-by-department
          layout breakdowns, including budget graphical presentations, pie
          charts, bar graphs, etc.

     o    Parts - LSI's Parts Inventory System operates in "Real Time" with
          Vehicle and Service departments. The system offers greatly increased
          efficiency by fully eliminating time consuming manual tasks such as
          generating and tracking customer orders, placing parts orders, and
          effectively managing and maintaining the shop's requirements and
          wholesale accounts. LSI records all sales, tabulates inventory, tracks
          activity history, and enables access to all transactional detail on
          screen and/or in print indefinitely.

     o    Service - LSI's fully integrated Service Repair system works hand in
          hand with both LSI Parts and Vehicle Inventory. It features electronic
          repair orders and a "Real Time" computerized time clock for automatic
          pricing and labor costing, tracking productivity and efficiency, and
          updating payroll. Dealers experience higher hours per repair order, as
          the system reduces the tendency to discount. With real-time
          integration to Vehicle Inventory, the exact cost of every unit is
          available on-screen, accurate to the second, as all service invoices
          are automatically posted against applicable units. Open repair orders
          are displayed on-screen. A detailed profit analysis can be accessed
          any time beginning with the estimate process.

     o    Sales Tracking - LSI's Sales Tracking system is designed to help sales
          staff maximize unit sales by tracking and profiling prospects,
          maintaining customer databases through successive purchases, and
          employing user-defined follow-up procedures.

     o    Financing and Insurance - This is a fully integrated Windows-based
          Finance and Insurance (F&I) System, which utilizes open database
          compliant architecture to provide dealers with a powerful tool to
          improve profitability through user-friendly input screens. LSI's F&I
          can function in a stand-alone environment or as a fully integrated
          module with Accounting and Vehicle Inventory Programs.

     o    Electronic Time Clock - LSI offers an integrated time clock, which
          enables service and body shop technicians to electronically log into
          repair and/or orders, made available to them. This Electronic Time
          Clock keeps an electronic listing of not only available time, but also
          clocked time and flat rate time on a work order. As well, this
          function automatically charges technician time to the appropriate work
          order. These times are available to be printed on a report or on a
          warranty invoice as needed.

                                       5
<PAGE>

     o    Customer Relationship Management (CRM) - LSI's CRM increases
          absorption and customer satisfaction. This program includes customized
          reminder letters, postcards, phone lists, and more, offering you the
          ability to target a specific group of customers with a number of
          variables or choices. With the Service History and Next Service Due
          right on the Repair Order screen, personnel will have the tools to
          sell more effectively, efficiently, and professionally.

Our solutions are configurable, sophisticated, easy to use, scalable and
affordable. They fit any size of dealer from the single location to large
multi-branch and multi-franchise enterprises.


Installed Products
------------------

Our installed products are for auto-dealers that choose to host our automobile
management solution on their own in house server. Implementation consists of
installing our software on a server and PC's at the client's site, followed by
training.


ASP Products
------------

Our ASP or Application Service Provider products are for auto-dealers that
choose to rent our solution on a monthly basis. Implementation consists of
configuring the ASP server for the client's specific needs, followed by
training. Our product suite is currently in pilot and will be ASP capable by
October 2004.


Sales and Distribution
----------------------

Distributor Sales
-----------------

LSI will train all distributor sales representatives. In addition, LSI will
regularly provide refresher training and pre-rollout product education to its
partner sales teams.

Sales Model
-----------

Our partner's sales process is expect to include the following steps:

Lead generation from advertising, trade shows, customer references, visitors to
our Website and cold calling;

Initial contact and qualification performed by telephone;

Provision of product information electronically or by mail;

Telephone follow-up and additional qualification;

Product demonstrations performed on-line;

Customer evaluation and decision;

Price negotiation if the customer is considered strategic;


                                       6
<PAGE>


Collection of a deposit if hardware is bought with our installed product line.


Sources of Revenue
------------------

Sources of revenue expected to be and are:

Monthly recurring revenue in the form of license & support fees for installed
products and ASP fees for ASP products. Monthly fees for existing users are
currently $200 per user per month. Contracts are expected to be 5 years in
duration and subject to renewal following expiration.

Training fees, charged at the rate of $85 per hour. LSI will regularly provide
sales and product training for its partner sales representatives.


The Market for LSI Products and Services
----------------------------------------

Definition of Dealership Management Solutions
---------------------------------------------

We define automobile dealership management solutions as hardware and software
used to handle the various aspects of automobile dealer operations. Primary
functions include accounting, inventory control, time management, job costing,
parts and service. These systems often include a central computer or server that
may control or augment several transaction terminals or PCs.

Other management functions such as Leasing, Finance and Insurance and Customer
Relationship Management or CRM tools are often bundled together or interfaced
with dealer management systems, as is the case with LSI.

LSI's  Target Markets
---------------------

While our products are flexible enough to be used by broader categories of
retailers, LSI has developed a market niche that caters to automobile
dealerships. Our target markets have been divided into manufacturer sales,
direct dealer sales, and distributor sales. These segments are defined as
follows:

     o    Distributor Sales. Ford of Canada or Ford was the first Original
          Equipment Manufacturer or OEM to directly market LSI software to its
          dealers. This relationship became the model for LSI's software
          distribution strategy. LSI next entered a distribution agreement with
          Electronic Data Systems or EDS of Plano, Texas whereby EDS would
          provide Sales and Distribution, as well as Tier 1 and Tier 2 Support
          Services. LSI subsequently terminated this agreement in April 2004
          after EDS announced it was discontinuing its activity in the retail
          automotive industry.

LSI is currently seeking out large service providers and intends to negotiate an
agreement to have one or more providers distribute its new product offering. As
of the date of this report, LSI has not entered into any distribution
agreements.


                                       7
<PAGE>

Direct Dealer Sales. LSI software was sold and installed in approximately 100
automobile dealerships across Canada through direct sales. A number of qualified
leads have been generated and we anticipate that, with the rollout of LynXphere,
significant sales will be made in Year 1 going forward.

Manufacturer Sales. LSi's marketing plan has outlined opportunities with a
number of automobile manufacturers. Currently, LSI software applications operate
in dealer brands such as Chrysler, Ford, Honda, Hyundai, Kia, LandRover, Mazda,
Mitsubishi, Nissan, Subaru, Suzuki, and Volkswagen.

Ford of Canada utilizes software applications developed by LSI's
predecessorunder the T.I.M. label in over half its dealer network. LSI has
initiated discussions to advance opportunities within the Ford network for LSI's
new web-based suite of products.

Meetings and presentations are now being coordinated with other OEMs.

Automobile Dealership Management Market Size
--------------------------------------------

The automobile dealership management software market size is a function of the
number of dealerships, what they are willing to pay for management systems and
the percentage that are actively looking to upgrade their systems. Based on an
average of 25 seats per dealer with seat fees at $119 per month, this yields the
following 2003 market size in millions of CDN Dollars for North America, Europe,
the Rest of the World and in Total:

Current Market Size                  N. A.     Europe      RoW          Total
-------------------                  -----     ------      ---          -----
Estimated Dealership Count1          25,000    65,000      50,000       140,000
Avg 25 seats/ dealer(2)              625000    1.625M      1.250M       3.5M
Licensing per seat/year              1428      1428        1428         1428
Licensing Revenue (M's)              892       2,320       1,785        4,998
% of auto-dealers upgrading3         10%       10%         15%          12%
Market Size (M's)                    89        232         267          599

In a mature market like the automobile dealership management market, this
cumulative definition of market size is appropriate as it excludes those
auto-dealers that will not be upgrading their systems and focuses only on
investments in new systems that will take place over time. Of course, if one
includes amounts currently being spent maintaining dealer systems in the
definition of market size, the market would be much larger.

A key component of our plan is the delivery of automobile dealership management
solutions via the ASP model. The overall market for ASP applications targeted at
the high-end market, of which automobile dealerships are an example, is forecast
to grow from $600 million U.S. in 2001 to 8 billion U.S. in 2005 (Source: IDC).
Data was not available for the automobile dealership management component of the
projected ASP market.

(1) Source: Deloitte Consulting
(2) Source: Logical Sequence
(3) Source: Desrosiers Automotive Consultants


                                       8
<PAGE>


Status of New Products
----------------------

LSI's next generation software suite, LynXphere, is now in pilot testing at a
Dartmouth, Nova Scotia auto dealership and is slated for general release in
December 2004. The new suite consists of dealership Accounting & Vehicle
Inventory, Parts Inventory, Service Management, Leasing and Sales, and Customer
Relationship Management or CRM tools that are full-featured and fully
integrated. LSI is differentiated from its competition by its ability to
seamlessly handle all transactions for the automotive dealer in a true web-based
environment.


Competition
-----------

The software-based automobile dealership management marketplace was once
proprietary and dominated by only a few vendors. While a small number of players
are still dominant, small software vendors are much more common. LSI faces
competition from a number of sources.

LSI has three large competitors, ADP and Reynolds & Reynolds and EDS. They have
a combined 70% of the North American market. Other Canadian providers of
automobile management solutions include Automate, PBS, DIS Limited, Mega-Wheels
Incorporated, and Oasis. LSI will also face competition from ASP traditionally
focused on other markets seeking to enter the automobile dealership management
software market. The nature of competition is functionality, service and
pricing. LSI has significantly less capital and resources than its major
competitors.


Trademarks and Intellectual Property
------------------------------------

LSI holds the following trademarks and servicemarks: "Lynxphere", and TIM. LSI
owns the source code for all of its software.


Research and Development
------------------------

Approximately $750,000 has been spent on research and development by LSI during
the past two fiscal years.


Governmental Regulation
-----------------------

LSI is not subject to any governmental regulation other than such as generally
effect all businesses. No governmental approval is necessary for any of LSI's
products and services.


Employees
---------

LSI has fifteen full time employees.



                                       9
<PAGE>



Natural Gas Exploration Program
-------------------------------

Prior to July 23, 2004, Shannon held a 25% working interest in Oil and Natural
Gas Permit No. 9606 covering 116,279 acres of Prince Edward Island, Canada.
Shannon also held a further five percent working interest in six additional Oil
and Natural Gas permits in Prince Edward Island, Canada (the "Prior Working
Interests").

On July 23, 2004, the Prior Interests permits expired. Rally Energy, Corp., the
Operator under the Joint Operating Agreements for the Prior Working Interests
acquired new permits for approximately 308,000 acres of approximately 640,000
acres covered by the Prior Working Interests, including the acreage where the
first two exploratory natural gas wells were drilled.

On September 23, 2004, Shannon entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits, the
"2004 Working Interest". Shannon has also agreed to enter into a new Joint
Venture Operating Agreement with the holders of the balance of the Working
Interests. Shannon acquired the 2004 Working Interest in consideration of a
promissory note in the principal amount of $168,561.74, Cdn., payable to Rally
Energy Corp., due on or before December 31, 2004 bearing interest at the prime
rate quoted by Toronto Dominion Bank as of September 30, 2004. Shannon also gave
Rally Energy Corp., a promissory note payable to Rally Energy Corp., in the
principal amount of $71,145 payable upon thirty days written notice for the
outstanding costs attributed to Shannon and CMB Energy Corp., from the Prior
Working Interests.

Shannon anticipates that the Joint Venture Operating Agreement will require a
division of costs and expenses for the area covered by the 2004 Working
Interest. Rally Energy Corp., is anticipated to be the Operator with management
responsibility for the operations on the property. Shannon anticipates entering
into the new Joint Venture Operating Agreement during the second fiscal quarter.

Shannon intends to raise additional funds as required through private equity
offerings in order to fund the exploration of the 2004 Working Interest and its
portion of the ongoing lease payments, described below.

However there is no assurance Shannon will be able to raise additional funds in
the future. Any financing program conducted by Shannon will most likely result
in the issuance of additional shares of common stock which will dilute the
ownership interests of Shannon's current shareholders.

Shannon and its joint operating partners will be obligated to maintain the
leases in good standing by to be determined expenditures per year. Shannon's
portion of this obligation will be twenty percent thereof.


Principal Products or Services And Markets
------------------------------------------

Shannon's principal target markets are natural gas transmission pipeline
companies, utilities and private end-users, which may purchase the natural gas
directly from Shannon or from pipeline companies.



                                       10
<PAGE>

Competitive Business Conditions, Competitive Position In The Industry And
Methods Of Competition
-------------------------------------------------------------------------

Shannon's planned petroleum and natural gas exploration activities in Prince
Edward Island are undertaken in a highly competitive and speculative business
atmosphere. Shannon is not the operator of the Joint Operating Agreements and,
therefore, will not be required to own any equipment. Shannon and its joint
operating partners have entered into joint operating agreements described above
to provide the necessary equipment and personnel to carry out the exploration of
the joint lands. There is significant competition in the exploration business
and Shannon is an insignificant participant. Shannon will have to raise
additional capital to fully participate in the exploration program. There are a
significant number of companies seeking funding for exploration programs, many
which are more developed than Shannon. Given its size and the lack of
significant exploration activity on the joint lands to date, Shannon may have
difficulty raising additional capital in order to successfully compete in this
exploration and development business.


Governmental Regulations And Environmental Laws
-----------------------------------------------

As of September 2004, Shannon does not offer or sell any products or services
and is not subject to material government regulations. However any venture in
which it participates, will be required to obtain permits for drilling oil or
gas wells.

Exploration and production activities relating to oil and gas permits and leases
are subject to extensive regulation for the protection of the environment by the
Canadian Federal Government and the Provincial Government, where the acreage is
located. Shannon must submit exploration and, if warranted, development plans to
the Department of the Environment for the Province of Prince Edward Island for
approval prior to the execution of such plans. Compliance with environmental
regulation may be expected to result in Cdn.$50,000, of estimated expenses once
the exploration program is implemented. Environmental protection expenses are
expected to include the cost of site preparation such as road construction,
fencing and earthen berms or retaining walls to contain potential overflows or
spillage of oil or drilling fluids. If production is begun, the temporary
measures must be made permanent, if production is not warranted, the temporary
measures must be removed and the land restored to its prior condition.

Shannon believes it is presently in compliance with all applicable environmental
laws, rules or regulations; however, future legislation may have an adverse
impact on Shannon's present and contemplated business operations.

The foregoing is a brief summary of the regulations and legislation to which
Shannon is subject to by virtue of its operations and activities. Shannon cannot
predict what impact any future environmental laws, rules or regulations would
have on business operations. But given that Shannon operates in a highly
regulated industry and historically such operations are of a high profile from
the standpoint of environmental groups, studies and advocates, the impact could
be substantial.



                                       11
<PAGE>

Research And Development
------------------------

As of June 30, 2004, Shannon had not spent any money on research and development
in the Natural Gas Exploration Program.


Employees
---------

As of September 24, 2004, LSI has fifteen full time employees. Shannon has one
full time employee, its President.


Item 2. Description of Property.
        ------------------------

Shannon holds a 20% working interest (the "2004 Working Interest") in Oil and
Natural Gas Permits no.s 04-01 and 04-04 in Prince Edward Island, Canada. The
portion of the 2004 Working Interest gives Shannon the right to receive 20% of
any income derived from the property covered in the permits. In exchange for the
right to receive income, Shannon has an obligation to pay 20% respectively of
the of exploration, development and production costs of the property.

Prince Edward Island, where the 2004 Working Interest is located, lies in the
southwestern part of a large, mainly non- marine, Carboniferous to Permian area
called the Maritimes Basin. The basin fill consists of fluvial, alluvial,
lacustrine and minor marine strata. Seismic and borehole data suggest Prince
Edward Island is underlain by coal measures strata, as estimated by the
Geological Survey of Canada. The offshore extension of the coal measures basin
strata containing up to 20 to 25 coal seams, ranging in thickness between 0.6 to
3 meters (2 to 10 feet) with a net coal thickness from 15 to 40 meters (48 to
131 feet). The coal rank is bituminous, and calculated theoretical gas capacity
values for eastern Canadian coals range form 14.4 to 17.08 cubic meters per gram
of coal. Structural features associated with major northeast trending faults
systems and salt deposits may have created favorable permeability conditions for
enhanced natural gas and coalbed methane gas recovery. Source rock studies
indicate that the early Carboniferous rocks are oil prone with more than 2%
total oil capacity and greater than 5 milligrams per gram of rock. Conversely,
the upper Carboniferous rocks are mainly gas prone. In addition, excess coal gas
expelled during coalification may have charged nearby reservoirs. Porosities up
to 25% and favorable permeabilities have been reported from the lower
Carboniferous rocks, whereas porosities up to 15% have been reported for the
upper Carboniferous rocks. The Prince Edward Island property is not currently
producing oil or gas and has no proven reserves.



                                       12
<PAGE>



Undeveloped Acreage
-------------------

As of June 30, 2004, Shannon, directly or indirectly, held undeveloped acreage
in the Prior Working Interests as follows:

                              June 30, 2004     June 30, 2003
                              -------------     -------------
Undeveloped Acres:

        Gross                    642,136            642,136

        Net                       55,363             55,363


As of September 24, 2004, Shannon directly or indirectly held undeveloped
acreage in the 2004 Working Interest as follows:

Undeveloped Acres:

        Gross:                  308,000

        Net:                     61,600

The 2004 Working Interest acreage was part of the Prior Working Interests
acreage and are covered by the same exploration program.


Drilling Activities
-------------------

As of September 24, 2004, all available data relevant to the permits has been
assembled and analyzed. 1200 kilometers of 2D seismic data has been acquired,
assessed and analyzed, along with well logs and core samples. Based on seismic
data, core samples and well log analysis, several shallow depth (less than 2000
meters in depth) conventional natural gas targets have been identified. A 126
kilometer 2D seismic acquisition program was completed to supplement the 1200
kilometer existing seismic data in order to provide information relevant to
finalizing the selection of locations for planned exploratory wells.

The focus of the exploration program is on conventional natural gas
accumulations at depths of less than 2000 meters. An initial program of up to
five wells was initiated. Exploratory drilling began in February 2003. The first
exploratory well, Irishtown #2, of the multi-well exploration program reached
total depth of 1620 meters. It has been determined by Shannon and its Joint
Venture Partners that although gas was evident in several zones, they were not
deemed to be commercial and the well has been abandoned. The second exploratory
well Seaview #1, situated on a separate structure, was drilled in June 2003 to a
total depth of 1610 meters and has been cased as a potential gas well. To date
five potential zones have been perforated but commercial quantities of natural
gas have not been encountered. Testing of two additional zones was carried out
with similar results. It appears that mechanical failure or errors in the
perforation process may have occurred and the well has been suspended pending
further investigation and study, with a view to successfully completing the
well.



                                       13
<PAGE>

Shannon's Principal Offices
---------------------------

Shannon's offices are located at 2000, 715 5th Avenue, S.W., Calgary, Alberta
T2P 2X6. The offices are rented from Rally Energy Corp., on a month-to-month
basis to Shannon. Blair Coady, Shannon's President, is a director of Rally
Energy Corp.


Logical Sequence Incorporated Offices
-------------------------------------

LSI's offices are located at 192 Joseph Zatzman Drive, Suite 14, Dartmouth, Nova
Scotia B3B 1N4. The offices are approximately 2000 square feet and are leased
from CREIT Property Management, an unaffiliated third party on a lease of 60
months for $1700 per month.


Item 3. Legal Proceedings.
        ------------------

There is no action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge of
Shannon, threatened, against or affecting Shannon, or any of its properties,
business affairs or business prospects.


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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 2004.










                                       14

<PAGE>



                                     Part II

Item 5. Market For Common Equity And Related Stockholder Matters.
        ---------------------------------------------------------

Shannon's common stock is listed for sale on the National Association of
Securities Dealers OTC Electronic Bulletin Board and began trading in January
2003. Prior to January 2003 there was no established market for Shannon's common
stock.

The following table summarizes trading in Shannon's common stock, as provided by
quotations published by the OTC Bulletin Board for the periods as indicated. The
quotations reflect inter-dealer prices without retail mark-up, markdown or
commission, and may not represent actual transactions.

            Quarter Ended            High Bid      Low Bid
            ------------------       --------      -------
            June 30, 2004             $0.94         $0.35
            March 31, 2004            $0.96         $0.40
            December 31, 2003         $0.71         $0.20
            September 30, 2003        $0.42         $0.20
            June 30, 2003             $0.30         $0.10
            March 31, 2003            $0.30         $0.10

As of September 24, 2004 there were 20,845,000 shares of common stock
outstanding and there were seventy-five record holders of Shannon's common
stock.

Shannon has not declared a dividend during the fiscal year ended June 30, 2004
and does not anticipate declaring a dividend in its current fiscal year.









                                       15
<PAGE>



Equity Compensation Plan Information
------------------------------------

Shannon has a Stock Option Plan, the "Shannon International Resources, Inc,
Amended 1999 Stock Option Plan" (the "Plan"). The Plan provides that the Board
shall exercise its discretion in awarding options under the Plan, not to exceed
2,000,000 shares. The per share option price for the stock subject to each
option shall be as the Board may determine. All options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the options although the Board may vote to terminate the Plan. In May
2004, the Board of Directors resolved to submit a 5,000,000 share Officers and
Directors Stock Option Plan for approval by Shannon's stockholders at the next
annual general meeting of stockholders.

Shannon also has a Consultants and Advisors Stock Option Plan which reserves up
to 3,000,000 shares of common stock for issuance to employees, consultants and
advisors of Shannon other than executive officers and directors. The per share
option price for the stock subject to each option shall be as the Board may
determine. All options must be granted within ten years from the effective date
of the Plan. There is no express termination date for the options although the
Board may vote to terminate the Plan.

<TABLE>
<CAPTION>


             Plan category                Number of securities to       Weighted average        Number of securities
                                          be issued upon exercise      exercise price of      remaining available for
                                          of outstanding options,     outstanding options,        future issuance
                                            warrants and rights       warrants and rights
--------------------------------------    -----------------------   -----------------------   -----------------------
<S>                                              <C>                       <C>                         <C>
Equity compensation plans approved by            1,875,000                 $0.49                       125,000
security holders

Equity compensation plans not approved           1,150,000                 $0.29                     1,430,000
by security holders

Total                                            3,025,000                 $0.41                     1,555,000
</TABLE>







                                       16

<PAGE>



Item 6. Management's Discussion And Analysis Or Plan Of Operation.
        ----------------------------------------------------------

Overview
--------

Except for the historical information contained herein, the following discussion
contains forward-looking statements that are subject to risks and uncertainties.
Actual results may differ substantially from those referred to herein due to a
number of factors, including but not limited to risks described in the section
entitled Competition and elsewhere in this Form 10KSB. The following discussion
and analysis should be read in conjunction with the audited financial statements
of Shannon.

Shannon's financial statements for the fiscal year ended June 30, 2004 reflect
the acquisition of 51% of the common stock of Logical Sequence Incorporated as
of June 30, 2004 and include pro forma financial statements showing the effect
of the acquisition. The separate, audited financial statements of Logical
Sequence Incorporated have also been included in this report and are discussed
below. The Logical Sequence Incorporated financial statements are presented in
the Canadian dollar, its functional currency. When consolidated with Shannon's
financial statements the June 30, 2004 exchange rate of $0.7364 US per
$1.00Cdn., is used.


     Logical Sequence Incorporated
     -----------------------------

In October 2003, Shannon entered into an agreement to acquire fifty-one percent
of the equity ownership of Logical Sequence Incorporated, a privately held
Canadian corporation. The acquisition closed and became effective on June 30,
2004.

A wholly owned Canadian subsidiary corporation, Shannon Investments Ltd., was
created which issued 5,100,000 shares of exchange-able stock to the shareholders
of Logical Sequence Incorporated at closing. These shares are exchangeable into
our common stock at the election of the holder at any time over the next five
years on a share for share basis. Shannon has agreed to provide Logical Sequence
Incorporated, up to $760,000 U.S. for software development over the period
ending October 31, 2004 of which $321,000 Cdn has been provided as of September
22, 2004. Shannon also have an option to acquire the remaining forty-nine
percent of the Logical Sequence Incorporated, common stock for $2.00 US per
share on or before October 20, 2005.

Logical Sequence Incorporated is the developer of comprehensive and integrated
software applications for the automotive industry. Logical Sequence had an
exclusive distribution agreement with Electronic Data Systems Inc., to market,
distribute and support the Total Information Management or TIM software which
LSI terminated in April 2004.



                                       17
<PAGE>


     Natural Gas Exploration Program
     -------------------------------

Prior to July 23, 2004, Shannon held a 25% working interest in Oil and Natural
Gas Permit No. 9606 covering 116,279 acres of Prince Edward Island, Canada.
Shannon also held a further five percent working interest in six additional Oil
and Natural Gas permits in Prince Edward Island, Canada (the "Prior Working
Interests").

On July 23, 2004, the Prior Interests permits expired. Rally Energy, Corp., the
Operator under the Joint Operating Agreements for the Prior Working Interests
acquired new permits for approximately 308,000 acres of approximately 640,000
acres covered by the Prior Working Interests, including the acreage where the
first two exploratory natural gas wells were drilled.

On September 23, 2004, Shannon entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits, the
"2004 Working Interest". Shannon has also agreed to enter into a new Joint
Venture Operating Agreement with the holders of the balance of the Working
Interests. Shannon acquired the 2004 Working Interest in consideration of a
promissory note in the principal amount of $168,561.74 Cdn., payable to Rally
Energy Corp., due on or before December 31, 2004 bearing interest at the prime
rate quoted by Toronto Dominion Bank as of September 30, 2004. Shannon also gave
Rally Energy Corp., a promissory note payable to Rally Energy Corp., in the
principal amount of $71,145 payable upon thirty days written notice for the
outstanding costs attributed to Shannon and CMB Energy Corp., from the Prior
Working Interests.

Shannon anticipated that the Joint Venture Operating Agreement will require a
division of costs and expenses for the area covered by the 2004 Working
Interest. Rally Energy Corp., is anticipated to be the Operator with management
responsibility for the operations on the property. Shannon anticipates entering
into the new Joint Venture Operating Agreement during the second fiscal quarter.
See "Item 1. Description of Business."

Shannon intends to follow the full cost method of accounting for oil and gas
properties. Shannon is deemed to be in the planning and exploration stage. Under
the full cost method of accounting for oil and gas properties, all costs
associated with acquisition, exploration and development of oil and gas
reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, are amortized on the unit-of-production method
using estimates of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the
projects can be determined or until impairment occurs. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized. In addition, the
capitalized costs are subject to a "ceiling test," which basically limits such
costs to the aggregate of the "estimated present value," discounted at a ten
percent interest rate of future net revenues from proved reserves, based on
current economic and operating conditions, plus the lower of cost or fair market
value of unproved properties.



                                       18
<PAGE>


Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves or oil and gas, in which case the gain or loss is recognized in income.

Abandonment of properties is accounted for as adjustments of capitalized costs
with no loss recognized.


Plan Of Operation
-----------------

Logical Sequence Incorporated
-----------------------------

LSI has completed initial development of its new product Lynxphere. As the
product completes its pilot/beta test phase over the coming quarter, a
marketing/distribution plan will be developed. Emphasis will be placed on
securing major partners, distributors, and OEM's as the primary strategic avenue
of pursuit in this plan. LSI intends to add three to six persons for training
and implementation of the new product as well as sales and marketing.
Approximately $300,000 to $1,000,000 is estimated as required capital to
implement LSI`s marketing plans over the next twelve months.

As a result of the termination of LSI's licensing agreement with Electronic Data
Systems (EDS) of Plano, Texas in April 2004, LSI has engaged legal counsel to
determine what its obligations to EDS are and what claims for damages it has
against EDS. It is the Shannon's intention to seek a negotiated settlement with
EDS though as of September 24, 2004, no such negotiations have occurred.

LSI also anticipates negotiating a payment schedule of its approximately
$427,516 ($580,548 cdn.), debt with GE of Canada which is currently due and
payable during the second fiscal quarter.

Shannon's plan of operations for LSI is to raise additional capital as required
through private placements or public offerings of its equity securities and use
the capital to pay for LSI's sales and marketing expenses and make payments on
its outstanding debt. Shannon has not established any limitations on the amount
or price for Shannon's securities. Shannon does not, however, intend to sell
such securities as would result in a change in voting control of Shannon.


Natural Gas Exploration Program
-------------------------------

Shannon's Plan of Operation is to continue its participation in natural gas
exploration on Prince Edward Island while expanding its focus to include
investments in companies engaged in information technology businesses.

Shannon through Joint Operating Agreements has engaged in planning and
exploration activities on the Prior Working Interests and the 2004 Working
Interest. Shannon is not the operator of the Joint Operating Agreements and,
therefore, will not be required to own any equipment. Shannon and its joint
operating partners anticipate entering into the Joint Operating Agreements
described above to provide the necessary equipment and personnel to carry out
the exploration of the joint lands. Shannon may not be able to satisfy its cash
requirements for the next twelve months and will have to raise additional funds
to participate in drilling activities of the 2004 Working Interest.


                                       19
<PAGE>

Through the Joint Operating Agreements on the Prior Working Interests an
exploratory drilling program was established and commenced. Though no assurances
can be given, this program is expected to provide for the drilling of up to five
exploration or test wells, two of which have been drilled as previously
mentioned, to determine whether there are sufficient reserves of natural gas to
then develop a program to establish production. Management believes that
sufficient reserves would be such reserves that the sale of natural gas from the
area at the current market prices would repay the cost of exploration and
development of the area within a reasonable time, as well as provide profitable
production for a period of time consistent with industry standards. Exploratory
data determining the size and pressures of reserves and other drilling factors
affecting production cost must first be obtained and then analyzed before a
final determination may be made that there are "sufficient" reserves to justify
production.

As of September 24, 2004, all available data relevant to the permits has been
assembled and analyzed. 1200 kilometers of 2D seismic data has been acquired,
assessed and analyzed, along with well logs and core samples. Based on seismic
data, core samples and well log analysis, several shallow depth (less than 2000
meters in depth) conventional natural gas targets have been identified. A 126
kilometer 2D seismic acquisition program was completed to supplement the 1200
kilometer existing seismic data, in order to provide information relevant to
finalizing the selection of locations for planned exploratory wells.

The focus of the exploration program is on conventional natural gas
accumulations at depths of less than 2000 meters. An initial program of up to
five wells was initiated. Exploratory drilling began in February 2003. The first
exploratory well, Irishtown #2, of the multi-well exploration program reached
total depth of 1620 meters. It has been determined by Shannon and its Joint
Venture Partners that although gas was evident in several zones, they were not
deemed to be commercial and the well has been abandoned. The second exploratory
well Seaview #1, situated on a separate structure, was drilled in June 2003 to a
total depth of 1610 meters and has been cased as a potential gas well. To date
five potential zones have been perforated but commercial quantities of natural
gas have not been encountered. Testing of an additional two zones was completed
with similar results. However upon investigation it appears that mechanical
failure or errors in the perforation process may have occurred and the well has
been suspended pending further investigation and study, with a view to
successfully completing the well.

Until the new Joint Venture Operating Agreement is signed, Management will not
know what the general and administrative expenses, capital and operating
expenditures related to the implementation of this program will be. However
Shannon will be responsible for twenty percent of such expenditures.


                                       20
<PAGE>

In the event Shannon is unable to pay its obligations under its 2004 Working
Interest, its 2004 Working Interest can be proportionally reduced in favor of
whatever joint operating partner or other party pays the delinquent amount. Each
joint operating partner must approve the expenditures and provide funding in
order to remain a joint operating partner. The approval for expenditures sets
forth the specific costs for development of the program , site preparation and
drilling for the specific sites for exploratory wells and that these costs will
vary due to different conditions such as drilling depth and whether drilling is
to be through relatively soft sedimentary layers or dense rock layers.

Shannon's plan of operations for the Natural Gas Exploration Program is that
Shannon will form a new Nevada corporation, Shannon Resources, Inc. to which
Shannon will transfer its Prince Edward Island natural gas exploration and
development working interest in exchange for all of the outstanding common stock
of Shannon Resources, Inc. Blair Coady, Gregory Isenor and Aubrey Palmeter, a
former director of Shannon are anticipated to become officers and or directors
of Shannon Resources Inc. Shannon Resources Inc., will file a registration
statement with the U.S. Securities and Exchange Commission to become a reporting
issuer. Upon the effectiveness of the registration statement, the Company will
declare a dividend of its shares of the Shannon Resources, Inc., common stock,
which will be distributed to the Company's shareholders as the dividend record
date. Thereafter Shannon Resources, Inc., will operate as an independent company
and is expected to seek a listing of the common stock on the National
Association of Securities Dealers Inc., Over the Counter Bulletin Board Market.


Year Ended June 30, 2004
------------------------

Results of Operations - Logical Sequence Incorporated
-----------------------------------------------------

For the fiscal year ended June 30, 2004, Logical Sequence Incorporated (LSI) had
a net loss of $662,399 cdn. LSI had revenues of $1,201,518 cdn., with cost of
goods sold of $301,885 cdn., and a gross profit of $899,633 cdn. Revenues are
from existing customers using the legacy software. Expenses were $1,515,781
cdn., of which $1,143,432 cdn., was salaries and wages. LSI also recorded
$301,631 cdn., as interest on LSI's redeemable preferred stock.

Results Of Operations - Shannon International Resources Inc.
------------------------------------------------------------

During the year ended June 30, 2004, Shannon recorded a net loss of $900,446 as
compared to a loss of $215,311 for the year ended June 30, 2003. The loss is
$0.05 per common share. Shannon has not yet generated any revenues from its
Natural Gas Exploration Program. The $895,515 in total expenses consisted of
consulting fees in the amount of $638,189 which include Shannon's executive
compensation and fees paid to third parties assisting Shannon with the
acquisition of LSI and other business development projects, professional fees in
the amount of $74,778 and administrative expenses in the amount of $181,851.
Professional fees increased by over $20,000 primarily for professional services
incurred in the acquisition of LSI and increases in the cost of accounting and
securities law compliance as a result of the Sarbanes Oxley Act of 2002.
Administration costs increased from $34,078 in 2003 to $181,851 as a result of
executive salaries and costs incurred in the acquisition of LSI. Shannon
recorded a gain on sale of investments in the amount of $42,025.



                                       21
<PAGE>

As of June 30, 2004, Shannon had total liabilities of $4,541,604 consisting of
$563,692 in accounts payable and accrued liabilities, $107,640 due to related
parties. The accounts payable include $636,628 cdn., ($468,813 U.S.)which is
LSI's management's estimate of what is potentially owed to Electronic Data
Systems as a result of the termination of LSI's contract with them. The $107,640
due to related parties is $194,657 Cdn., due to LSI shareholders and a former
officer and director. The $427,516 in promissory notes represents LSI's $580,548
cdn., debt to GE of Canada.

A $3,439,269 liability has been reserved as a result of outstanding redeemable
preferred stock of LSI. The preferred shares are 50,000 preferred shares issued
by LSI in August 2002 in connection with LSI's acquisition of its predecessor
software. The preferred stock accrues a 4% dividend which only becomes payable
if LSI has a minimum of $1,000,000 cdn., after tax profit. The preferred shares
are redeemable by LSI at their $100 per share par value at any time prior to
September 1, 2012 when redemption is mandatory.

Shannon has also recorded a liability of $2,028,599 for the minority interest in
LSI. Total liabilities were $73,685 as of June 30, 2003.

In addition to the liabilities outstanding as of June 30, 2004, Shannon acquired
its 2004 Working Interest in consideration of a promissory note in the principal
amount of $168,561.74, cdn., payable to Rally Energy Corp., due on or before
December 31, 2004. Shannon also gave Rally Energy Corp., a promissory note
payable to Rally Energy Corp., in the principal amount of $71,145cdn.,payable
upon thirty days written notice for the outstanding costs attributed to Shannon
and CMB Energy Corp., from the Prior Working Interests.

Shannon's current assets at June 30, 2004, consisted of $76,784 in cash and
investments in marketable securities of $134,048 which decreased from $414,854
in the year ended June 30, 2003. As of June 30, 2004, Shannon had an investment
in unevaluated oil and gas properties of $664,770 which increased from $311,557
for the year ended June 30, 2003 despite a write down of $202,398 for the
abandoned Irishtown No. 2 well in 2003. Total assets as of June 30, 2004 were
$9,697,399 compared to $744,281 as of June 30, 2003. The increase is due
primarily to $8,532,779 of intangible asset for Shannon's acquisition of LSI.


Liquidity and Capital Resources
-------------------------------

At present, Shannon is not producing revenues and its main source of funds has
been the sale of Shannon's equity securities. Shannon had $76,784 in cash and
$134,048 in marketable securities as of June 30, 2004.

Shannon's immediate cash requirements are approximately $1,500,000. This amount
includes a minimum of $300,000 to fund LSI sales and marketing; approximately
$300,000 due to GE of Canada; approximately $300,000 due to Rally Energy Corp.,
and over $360,000 of other payables. In addition to this Shannon would deposit
approximately $300,000 in trust for Electronic Data Systems Inc., pending
resolutions of LSI's claims against EDS.



                                       22
<PAGE>

Shannon intends to raise the required capital through debt financing and or the
sale of its securities. However, no assurances can be given that Shannon will be
successful in its efforts.






                                       23

<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.




                              FINANCIAL STATEMENTS



                   For the years ended June 30, 2004 and 2003

                                      With

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




<PAGE>




                                 C O N T E N T S



                                                                      Page
                                                                    ---------

Report of Independent Registered Public Accounting Firm                F-2

Financial Statements

       Consolidated Balance Sheets                                     F-3

       Consolidated Statements of Operations                           F-4

       Consolidated Statement of Stockholders' Equity               F-5 - F-6

       Consolidated Statements of Cash Flows                        F-7 - F-8

Notes to Financial Statements                                       F10 - F26











<PAGE>



             Report of Independent Registered Public Accounting Firm


The Board of Directors
Shannon International Resources, Inc.



We have audited the accompanying consolidated balance sheets of Shannon
International Resources, Inc. as of June 30, 2004 and 2003, and the related
statements of operations, stockholders' equity and cash flows for the years
ended June 30, 2004 and 2003. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about 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 presentations. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Shannon
International Resources, Inc. and the results of its operations and its cash
flows for the years ended June 30, 2004 and 2003, in conformity with generally
accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2, the Company
has no operating revenues and has suffered operating losses since inception,
that raise substantial doubts about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.



MILLER AND McCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
October 19, 2004




                                      F-2
<PAGE>


<TABLE>
<CAPTION>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                           Consolidated Balance Sheets

                                     ASSETS
                                     ------

                                                            June 30, 2004   June 30, 2003
                                                                              Restated -
                                                                               Note 2)
                                                            -----------   ----------------
<S>                                                         <C>             <C>
Current Assets:
   Cash                                                     $    76,784     $    16,048
   Accounts receivable                                           35,365              --
   Income tax credit receivable                                 188,062              --
   Prepaid expense                                               20,413             526
   Investments in marketable securities                         134,048         414,854
                                                            -----------     -----------
         Total current assets                                   454,672         431,428

Furniture  and fixtures  less  accumulated  depreciation
     of $542 and $48 on June 30, 2004, and 2003                  45,178           1,296
Unevaluated oil and gas properties (Full cost method)           664,770         311,557
Intangible assets                                             8,532,779              --
                                                            -----------     -----------
         Total assets                                       $ 9,697,399     $   744,281
                                                            ===========     ===========


                       LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities:
   Accounts payable                                         $   563,692     $    58,639
   Due to related parties                                       107,640           5,019
   Promissory note                                              427,516              --
                                                            -----------     -----------
         Total current liabilities                            1,098,848          63,658

Asset retirement obligations                                      3,487          10,027
Obligation for mandatory redemption of preferred shares       3,439,269              --
                                                            -----------     -----------

         Total liabilities                                    4,541,604          73,685

Minority Interest                                             2,028,599              --

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Common stock - 200,000,000 shares of $.001 par value
     authorized; 20,745,000 and 16,147,024 shares issued
     and outstanding at June 30, 2004 and 2003                   20,745          16,147
   Convertible subsidiary shares issued                       2,111,400              --
   Additional paid-in capital                                 2,147,035         787,110
   Common stock warrants                                        268,000         125,779
   Accumulated deficit                                       (1,246,688)       (346,222)
   Accumulated other comprehensive income                       (13,296)         87,782
   Less subscription receivable                                (160,000)             --
                                                            -----------     -----------
         Total stockholders' equity                           3,127,196         670,596
                                                            -----------     -----------
Total liabilities and stockholders' equity                  $ 9,697,399     $   744,281
                                                            ===========     ===========
</TABLE>



         The accompanying notes are an integral part of these statements


                                      F-3
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                      Consolidated Statements of Operations


                                              For the year     For the year
                                                  ended           ended
                                              June 30, 2004    June 30, 2003
                                             --------------   ---------------
Expenses
     Administrative costs                    $    181,951     $     34,078
     Consulting                                   638,189            1,358
     Professional fees                             74,778           54,041
     Accretion expense                                197               --
     Write down of oil & gas
       properties                                      --          202,398
                                             ------------     ------------
         Total expenses                           895,115          291,875
                                             ------------     ------------

(Loss) from operations                           (895,115)        (291,875)

Other Income and Expenses:
     Interest expense                              (1,361)          (4,113)
     Miscellaneous income                           1,252               --
     Gain on sale of investments                   42,025           33,410
                                             ------------     ------------

Net (loss) before income tax                     (853,199)        (262,578)

Provision for income tax                          (47,267)          47,267
                                             ------------     ------------

Net (loss)                                   $   (900,466)    $   (215,311)
                                             ============     ============

Net (loss) per share                         $       (.05)    $          *

Weighted number of shares
outstanding                                    18,446,012       14,542,079

*  Less than $.01


Other comprehensive income:
     Net (loss)                              $   (900,446)    $   (215,311)
     Unrealized gain on marketable
      securities                                 (101,078)          66,315
                                             ------------     ------------
Total other comprehensive income             $ (1,043,549)    $   (148,996)
                                             ============     ============


         The accompanying notes are an integral part of these statements

                                      F-4


<PAGE>
<TABLE>
<CAPTION>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                 Consolidated Statement of Stockholders' Equity



                                     Common Stock
                         -----------------------------------                          Accumulated
                                                  Additional   Common                    Other
                                                   Paid-in      Stock     Accumulated Comprehensive
                           Shares     Par Value    Capital    Warrants      Deficit      Income      Total
                         ----------  ----------  ----------  ----------   ----------   ----------  ----------

<S>                      <C>         <C>         <C>         <C>          <C>          <C>         <C>
Balance,
June 30, 2002            14,050,000  $   14,050  $  349,750  $   94,740   $ (130,911)  $   21,467  $  349,096

Warrants exercised,
March 2003                1,075,000  $    1,075     264,848     (50,923)          --           --     215,000

Common stock issued
June 2003                 1,022,024       1,022     172,512      81,962           --           --     255,496

Net loss for the year
ended June 30, 2003              --          --          --          --     (215,311)          --    (215,311)

Unrealized gain on
marketable securities            --          --          --          --           --       66,315      66,315
                         ----------  ----------  ----------  ----------   ----------   ----------  ----------
Balance,
June 30, 2003            16,147,024  $   16,147  $  787,110  $  125,779   $ (346,222)  $   87,782  $  670,596
                         ----------  ----------  ----------  ----------   ----------   ----------  ----------

Common stock sold         2,832,900       2,833     530,629     238,038                               771,500
Common stock issued for
services June 2004        1,165,076       1,165     368,711                                           369,876
Warrants exercised,
December, 2003              600,000         600     204,797     (80,422)                              124,975
Expired warrants
December, 2003                                       15,395     (15,395)                                   --
Options expensed
June 2004                                           240,393                                           240,393
</TABLE>



         The accompanying notes are an integral part of these statements

                                      F-5



<PAGE>
<TABLE>
<CAPTION>

                      SHANNON INTERNATIONAL RESOURCES, INC.





                                                  Convertible                                          Accumulated
                                                  Subsidiary    Additional                                Other
                                                    Shares       Paid-in   Common Stock  Accumulated   Comprehensive
                           Shares     Par Value     Issued       Capital     Warrants      Deficit        Income        Total
                        -----------  -----------  -----------   ----------  -----------  -----------   -----------   -----------
<S>                      <C>          <C>           <C>          <C>         <C>         <C>           <C>             <C>
Convertible subsidiary
shares issued                    --           --    2,111,400           --           --           --            --     2,111,400
Net loss for the year
ended June 30, 2004              --           --           --           --           --     (900,466)           --      (900,466)
Unrealized (loss) on
marketable securities            --           --           --           --           --           --      (101,078)     (101,078)
                        -----------  -----------  -----------  -----------  -----------  -----------   -----------   -----------
Totals                   20,745,000       20,745    2,111,400    2,147,035      268,000   (1,246,688)      (13,296)    3,287,196
                                     -----------  -----------  -----------  -----------  -----------   -----------   -----------
Less subscription
receivable                       --           --           --           --           --           --            --      (160,000)
Balance
June 30, 2004            20,745,000  $    20,745  $ 2,111,400  $ 2,147,035      268,000  $(1,246,688)  $   (13,296)  $ 3,127,196
                        ===========  ===========  ===========  ===========  ===========  ===========   ===========   ===========

</TABLE>


         The accompanying notes are an integral part of these statements

                                      F-6


<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                      Consolidated Statements of Cash Flows



                                                      Year Ended    Year ended
                                                     June 30, 2004 June 30, 2003
                                                     ------------- -------------
Operating Activities:
     Net (loss)                                       $  (900,466)  $  (215,311)
     Adjustments to reconcile net loss to cash
       used for operating activities:
     Adjustments for non-cash items:
       Gain (loss) on sale of investments                 (42,025)      (33,410)
       Depreciation expense                                   542            48
       Deferred income tax benefit                         47,267       (47,267)
       Stock and options issued for services              610,269            --
       Write down PNG properties                               --       202,398
     Changes in operating assets and liabilities:
       Accounts payable and advances                       51,092        35,252
       Prepaid expense                                    (15,824)         (526)
                                                      -----------   -----------
       Total adjustments                                  651,321       156,495
                                                      -----------   -----------
       Net cash (used by)
        operating activities                             (249,145)      (58,816)

Investing activities
     Investment in oil and gas properties                (304,166)     (262,473)
     Acquisition of furniture and fixtures                 (1,715)       (1,344)
     Cash advanced to LSI before acquisition             (241,277)           --
     Purchases of marketable securities                   (29,882)     (212,941)
     Sales of marketable securities                       101,836        72,296
                                                      -----------   -----------
       Net cash (used by) investing activities           (475,204)     (404,462)

Financing activities
     Issuance of common stock and warrants                731,456       461,746
                                                      -----------   -----------
       Net cash provided by financing activities          731,456       461,746

                                                      -----------   -----------
Net change in cash and cash equivalents                     7,107        (1,532)
Cash at beginning of period                                16,048        17,580
Cash from purchase of LSI                                  53,629            --
                                                      -----------   -----------
Cash at end of period                                 $    76,784   $    16,048
                                                      ===========   ===========

Supplemental disclosure of cash flow information:
 Cash paid during the period for:
       Interest                                       $       449   $       718
       Income taxes                                   $        --   $        --

Supplemental schedule of noncash investing
  and financing activities:
     Issuance of stock for subscription receivable    $   160,000   $        --



         The accompanying notes are an integral part of these statements

                                      F-7

<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.





     Unrealized loss                                      148,345            --
     Stock issued LSI                                   2,111,400            --
     Exchange of marketable securities for
       oil & gas properties at fair value                 102,532            --






         The accompanying notes are an integral part of these statements

                                      F-8






<PAGE>



                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 1 - Summary of Significant Accounting Policies

This summary of significant accounting policies of Shannon International
Resources, Inc. is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles in
the United States of America and have been consistently applied in the
preparation of the financial statements. The financial statements are stated in
United States of America dollars.

Organization and Description of Business
----------------------------------------

The Company was incorporated in the State of Nevada on February 17, 1999. The
Company incorporated a wholly owned subsidiary, Shannon Investments Ltd. on
August 15, 2003. A 51% interest in Logical Sequence Incorporated "LSI" was
acquired on June 30, 2004 by Shannon Investments Ltd.

The Company's primary business activity is investments in oil & gas and
technology.

To date, the Company has invested in the acquisition, development and production
of natural gas and coalbed methane properties. Currently, the Company has an
interest in non-producing properties in the province of Prince Edward Island,
Canada.

The Company's subsidiary, Logical Sequence Incorporated, is a developer of
comprehensive and integrated software applications for the automotive industry.

The Company has also made an investment in EnerVision Incorporated
("EnerVision") and its subsidiary Helical Systems Inc. ("Helical") of Dartmouth,
Nova Scotia, whereby Shannon will participate in the development and
commercialization of the Helical Software Platform for Very Large Data Base
(VLDB) management.

Revenue Recognition
-------------------

Revenues are recognized in accordance with SEC Staff Accounting Bulletin (SAB)
No. 101, "Revenue Recognition in Financial Statements". Under SAB 101, product
revenues (or service revenues) are recognized when persuasive evidence of an
arrangement exists, delivery has occurred (or the service has been performed),
the sales price is fixed and determinable and collectibility is reasonably
assured.

The Company's operating subsidiary, LSI, obtains revenues from licensing the
right to use its software to end users, the sale of maintenance agreements, and
other consulting and software-related services. The Company generally has
separate agreements with customers regarding these services that determine the
terms and conditions of each type of service. Revenues from product user license
fees are recognized in accordance with Statement of Position (SOP) No. 97-2,
Software Revenue Recognition and SOP 98-9 Modification of SOP 97-2, Software
Revenue Recognition, With Respect to Certain Transactions.





                                      F-9
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004




Property, Plant and Equipment
-----------------------------

Property, plant and equipment assets are recorded at cost. Depreciation is
provided annually at rates calculated to write-off the assets over their useful
lives.

Start-up Costs
--------------

The Company has adopted Statement of Position No. 98-5 (SOP 98-5"), "Reporting
the costs of start-up Activities." SOP 98-5 requires that all non-governmental
entities expense the costs as those costs are incurred.

Foreign Currency
----------------

The Company records foreign currency transactions in accordance with Statement
of Financial Accounting Standards (SFAS) No. 52.

The functional currency of the Company is the United States Dollar. The Company
does not hedge foreign currency transactions. The Company maintains Canadian
Dollar bank accounts for settlement of Canadian Dollar transactions. At June 30,
2004, cash shown on the financial statements includes CAD$102,574 (US$76,763) in
Canadian Dollar bank accounts.

The functional currency of the Company's operating subsidiary, LSI, is the
Canadian Dollar. LSI translates amounts into United States dollars using the
current rate method. Under this method, assets and liabilities are translated to
United States dollars at current exchange rates; revenues and expenses are
translated at the average exchange rate during the period, and equity account
are translated at the historical rate. Related translation adjustments are
reported as other comprehensive income, a component of stockholders' equity.

Use of Estimates
----------------

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from those estimates.

Earnings (Loss) Per Share
-------------------------

Earnings (loss) per share of common stock is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is not shown for periods in which
the Company incurs a loss because it would be anti-dilutive.



                                      F-10
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Estimated Fair Value of Financial Instruments
---------------------------------------------

The carrying value of accounts receivable, accounts payable, shareholder
advances and other financial instruments reflected in the financial statement
approximates fair value due to the short-term maturity of the instruments.

The fair value of promissory notes and the obligation for mandatory redemption
of preferred shares cannot be estimated because of the unique nature of these
financial instruments.

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the Company and its'
subsidiaries. All inter-company accounts have been eliminated in the
consolidation. Minority interest is recorded for subsidiaries that are less than
100% owned.

Comprehensive Income
--------------------

The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income". SFAS 130 requires that the components and
total amounts of comprehensive income be displayed in the financial statements
beginning in 1998. Comprehensive income includes net income and all changes in
equity during a period that arises from non-owner sources, such as foreign
currency items and unrealized gains and losses on certain investments in equity
securities. The Company's components of comprehensive income include net income
and unrealized gains from marketable securities.

Income Taxes
------------

The Company records deferred taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
statement requires recognition of deferred tax assets and liabilities for
temporary differences between the tax basis of assets and liabilities and the
amounts at which they are carried in the financial statements, based upon the
enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.

Valuation of Long-Lived Assets
------------------------------

The Company periodically analyzes its long-lived assets for potential
impairment, assessing the appropriateness of lives and recoverability of
unamortized balances through measurement of undiscounted operation cash flows on
a basis consistent with accounting principles generally accepted in the United
States of America.




                                      F-11
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Accounting for Oil and Gas Operations
-------------------------------------

The Company has adopted the full cost method of accounting for oil and gas
properties. Accordingly, all costs associated with acquisition, exploration, and
development of oil and gas reserves, including directly related overhead costs,
are capitalized.

All capitalized costs of oil and gas properties, including the estimated future
costs to develop proved reserves, is included in cost centers and are amortized
on the unit-of-production method using estimates of proved reserves. Investments
in unproved properties and major development projects are not amortized until
proved reserves associated with the projects can be determined. All costs
incurred in acquiring mineral rights, in drilling, and in exploration
activities, including all carrying costs of nonproductive properties in the cost
center, are included as a cost of reserves in that cost center.

In addition, the capitalized costs are subject to a "ceiling test," which limits
such costs to the aggregate of the estimated present value, discounted at a
10-percent interest rate of future net revenues from proved reserves, based on
current economic and operating conditions, plus the lower of cost or fair market
value of unproved properties.

Sales of proved and unproved properties are accounted for as adjustments of
capitalized costs with no gain or loss recognized, unless such adjustments would
significantly alter the relationship between capitalized costs and proved
reserves of oil and gas, in which case the gain or loss is recognized in income.
Abandonment of properties is accounted for as adjustments of capitalized costs
with no loss recognized.

Substantially all of the Company's exploration and development activities
related to oil and gas are conducted jointly with others and accordingly the
consolidated financial statements reflect only the Company's proportionate
ownership interest in such activities.

Software Development Costs
--------------------------

The Company considers development costs for software to be sold or otherwise
marketed that occur before technological feasibility is established to be
research and development costs and are expensed as incurred. After technological
feasibility is established, material software development costs are capitalized
and amortized over the estimated product life. We have defined technological
feasibility as the establishment of a working model, which typically occurs when
company places a product into beta testing. To date, the period between
achieving technological feasibility and the general availability of such
software has been short and software development costs qualifying for
capitalization have been insignificant. Accordingly, we have not capitalized any
software development costs.






                                      F-12
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Other
-----

The Company's fiscal year end is June 30.

The Company paid no dividends during the periods presented.

Certain comparative figures have been reclassified to conform to the current
year presentation.

All of the Company's assets are located in Canada.

The company has no cash equivalents.

Note 2 - Basis of Presentation - Going Concern

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplates continuation of the Company as a going concern. However, the
Company has insufficient working capital and has suffered operating losses since
inception. This fact raises substantial doubt about the Company's ability to
continue as a going concern. Management plans to obtain additional working
capital to further develop the Company's properties or locate a business
combination candidate.

Note 3 - Restatement of Previously Issued Financial Statements

The Company's 2003 financial statements have been restated for the correction of
an error.

The Company evaluated one of the natural gas wells that had been drilled on its
property and determined the well had no commercial value and the costs of the
well were written off. Unpaid costs associated with abandoning the well were
accrued as Asset Retirement Obligations. The company reduced it investment in
oil & gas properties by $263,928, increased the asset retirement obligations by
$10,027, and reduced net income by $202,398.

During 2002 the Company entered into an agreement that allowed the buyer to
participate in the Company's oil & gas projects by paying for a portion of
project expenses, and the buyer advanced funds to the Company to be used for
this purpose. The Company previously recorded the unspent portion of the advance
as a liability. However, since there was no agreement for refund if the funds
were unused, the Company has reclassified $18,072 previously included in
accounts payable and $53,485 previously shown as drilling participation payable
as a reduction in the Company's investment in oil and gas properties. There was
no effect on net income.




                                      F-13
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 4 - Exploration Stage Company (Prior Period)

In prior reporting periods, the Company reported its results as an exploration
stage company. As a result of the acquisition of Logical Sequence Incorporated,
the company now has operating revenues and is no longer an exploration stage
enterprise.

Note 5 - Acquisition of Logical Sequence Incorporated

In October 2003, the Company entered into an agreement to acquire fifty-one
percent of the equity ownership of Logical Sequence Incorporated, a privately
held Canadian corporation. The acquisition closed and became effective on June
30, 2004.

A wholly owned Canadian subsidiary corporation, Shannon Investments Ltd., was
created which issued 5,100,000 shares of non-voting common stock to the
shareholders of Logical Sequence Incorporated at closing. These shares are
exchangeable into common stock of the Company at election of the holder at any
time over the next five years on a share for share basis. The Company also has
an option to acquire the remaining forty-nine percent of the Logical Sequence
Incorporated common stock for $2.00 US per share on or before October 20, 2005.

The Company has agreed to provide Logical Sequence Incorporated up to $760,000
U.S. for software development over the period ending October 31, 2004, of which
$321,000 CDN has been provided through September 22, 2004.

The purpose of the acquisition was for the Company's entry into the information
technology sector.

The value assigned to the Shannon Investments Ltd. exchangeable stock,
$2,111,400 ($0.41 per share), is based upon market price of the Company's common
stock that may be exchanged at the effective date. The Company allocated the
purchase price to the assets of the acquired company based on the fair value of
the assets acquired, less the liabilities acquired, with the excess assigned to
the intangible asset representing the intellectual property of LSI's software
products. Following is a condensed balance sheet showing the fair values of the
assets acquired and the liabilities assumed as of the date of acquisition, and
reconciliation to the purchase price.

Current assets                                                         $281,118
Property and equipment                                                   42,709
Intangible assets (see note 9)                                        8,532,779
Current liabilities                                                     846,593
Long-term debt                                                        3,870,014
                                                             -------------------
Net assets acquired                                                   4,139,999
                                                             ===================
51% ownership                                                         2,111,400
                                                             -------------------
Purchase price                                                       $2,111,400
                                                             ===================







                                      F-14
<PAGE>




                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



The following pro forma information is based on the assumption that the
acquisition took place as of July 1, 2003.

                                        Shannon         LSI             Total
Net sales                                   --       1,201,518       1,201,518
Net income from operations            (898,728)       (662,399)     (1,561,127)
Net income                            (898,728)       (662,399)     (1,561,127)
Basic Earnings per share:                 (.05)           (.07)           (.06)

As the effective date of the acquisition, June 30, 2004, was the last day of the
Company's fiscal year, none of the results of LSI's operations are included in
those of the Company.

Note 6 - Accounts Receivable


                                                          2004              2003

   Current accounts receivable                           $245,488             --
   less allowance for doubtful accounts                   (22,062)            --
                                                      --------------------------
                                                         $223,426             --
                                                      ==========================

The Company considers accounts over 90 days old to be past due. The company
periodically reviews its accounts receivable to determine uncollectible amounts.

Note 7 - Marketable Securities (including related party)

In accordance with the Statement of Financial Accounting Standards no. 115 (SFAS
115), marketable securities are recorded in the accompanying balance sheet at
their market value. The Company has investments in marketable securities as
follows:
<TABLE>
<CAPTION>

                         Fair Value                       Year Ended      Year Ended
                                                         June 30, 2004   June 30, 2003
-------------------------------------------------------  -------------   --------------
<S>                                                      <C>             <C>
Classified as available for sale:
     Securities with net unrealized gains                $     152,293   $     414,854
     Securities with net unrealized losses                     (18,245)             --
                                                         -------------   -------------
Total                                                    $     134,048   $     414,854
                                                         =============   =============


Unrealized gains included in comprehensive income:
-------------------------------------------------------
     Balance at beginning of year:                       $      87,782   $      21,467
       Realized during year                                     42,025         (12,142)
       Unrealized gains (losses) added to comprehensive
         income during year                                   (143,103)        114,166


                                      F-15
<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004




       Less deferred tax on unrealized gains                        --         (35,709)
                                                         -------------   -------------
     Balance at end of year                              $     (13,296)  $      87,782
                                                         =============   =============

Additional information:
     Proceeds from sales of marketable securities        $     101,824   $      73,829
     Exchange of marketable securities for
       oil & gas properties (at fair value)                    102,532              --
     Gains realized during the year                      $      42,025   $      33,410

</TABLE>

Cost of securities sold is computed using the first-in first-out method.

At June 30, 2004, $70 included in marketable securities represents 154 shares of
a company that is a related party because the Company's president is an officer
and director.

Note 8 - Property and Equipment

Components of property and equipment consist of:
<TABLE>
<CAPTION>

                                                                                                     Depreciation
                                                                                                         Rate
                                                      Accumulated               Net                       and
                                    Cost              Depreciation             Amount                   Method
                              -----------------     -----------------     -----------------     ------------------------
<S>                           <C>                   <C>                   <C>                                    <C>
June 30, 2004:
   Furniture and Fixtures     $        33,195       $        10,845       $        22,350          Straight Line 3yr
   Computer equipment                  46,755                23,926                22,829           30% diminishing
                              -----------------     -----------------     -----------------
                              $        79,950       $        34,771       $        45,179
                              =================     =================     =================
June 30, 2003:
   Furniture and Fixtures               1,344                    48                 1,296
                              -----------------     -----------------     -----------------
                              $         1,344       $            48       $         1,296          Straight Line 3yr
                              =================     =================     =================
</TABLE>


Depreciation has been provided in amounts sufficient to recover asset costs over
their estimated useful lives. All components of property and equipment are being
depreciated or amortized.

Note 9 - Oil and Gas Properties

By letter agreement dated February 18, 1999, the Company acquired a 25% interest
in 116,279 acres of non-producing oil and gas properties in the province of
Prince Edward Island, Canada. This interest was acquired by the issuance of
2,000,000 common shares at an agreed value of $0.015 per share ($30,000) and
paid fees related to the acquisition of $15,000.


                                      F-16
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



During the fiscal year ending June 30, 2002, the Company acquired an additional
5% working interest in properties in the general location of its earlier
properties at a cost of $164,334. The properties were acquired from the same
company as its previous acquisition.

On July 23, 2004, the permits related to the Company's working interest expired
and on September 23, 2004, the Company acquired a new 20% working interest in
new permits. See Note 25.

As of June 30, 2004, the Company's oil and gas properties consisted entirely of
unproved properties, and therefore are not being amortized. The Company expects
to amortize the costs of these properties when sufficient evidence exists to
determine proved reserves, if any. Since the Company has no proved reserves, no
reserve information has been reported to any government agency. As of June 30,
2004 the undeveloped acreage for the properties was 642,136 gross and 55,363
net. On July 23, 2004, the permits for the above acreage expired and on
September 23, 2004, a new 20% working interest was acquired for 308,000 gross
acres on reconfigured permits no. 04-01 and 04-04 with 61,600 net acres. See
Note 25 - Subsequent Events.

As of the date of this report, the property has 1 abandoned well and 1 well in
progress. The joint operating partners are committed to maintain leases on the
property, for which the Company's portion is CAD$158,011.

The Company had entered into a drilling participation agreement for the
properties. Under the agreement, the participator earned one percent (1%)
working interest in certain wells up to a maximum of five percent (5%) for each
CAD$60,000 (US$43,380). The participator had contributed CAD$180,000
(US$114,643) and earned a three percent (3%) working interest. On December 23,
2003, the Company repurchased the three percent (3%) working interest in
exchange for marketable securities valued at $102,532 based upon the quoted
market price.

Components of the Company's unevaluated oil and gas properties are:

Acquisition Costs                                  $       209,334
Development Costs                                          479,305
                                                   ---------------
         Total                                     $       688,639
                                                   ===============


Note 10 - Intangible Assets

Effective June 30, 2004 the Company acquired intangible assets identified as
intellectual property and composed of exclusive rights, future rights and
derivative products associated with the comprehensive and integrated software
applications for the automotive industry as part of its acquisition of Logical
Sequence Incorporated. In connection with the acquisition the intangible assets
were valued at $8,532,779. Because the assets have no determinable life, the
asset value is not subject to amortization, but is subject to periodic
impairment tests.


                                      F-17
<PAGE>

                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 11 - Asset Retirement Obligations

Effective January 1, 2003, the Company adopted SFAS No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"). SFAS 143 applies to obligations
associated with the retirement of tangible long-lived assets that result from
the acquisition, construction and development of the assets. SFAS 143 requires
that we record the fair value of a liability for an asset retirement obligation
in the period in which it is incurred and a corresponding increase in the
carrying amount of the related long-lived asset.

Balance July 1, 2002                                               --
         Additional obligations incurred                      $10,027
                                                           -----------
Balance June 30, 2003                                          10,027
         Obligations paid                                      (6,737)
         Accretion expense                                        197
                                                           ------------
Balance June 30, 2004                                          $3,487
                                                           ============


Note 12 - Promissory note - GE of Canada

The Company's subsidiary, Logical Sequence Incorporated, has a note payable to
Commercial Finance Canada Inc. secured by a general security agreement
constituting a first lien on all assets of the Company's LSI subsidiary. The
promissory note bears interest at 5% compounded monthly. Subsequent to fiscal
year end the $550,000 principal balance plus accrued interest of $30,548
represented by the promissory note with GE became due and payable and the loan
is currently in default. Management has commenced negotiations to have the
payment obligation deferred over time.


Note 13 - Due to Related Parties

As at September 30, the Company owed related parties (companies owned by a
shareholder and former management of LSI) the following amounts:


                                                        2004         2003

   Accounts payable to related parties                $138,942     $173,940
   Accrued interest                                     13,153           --
                                                     ----------------------
                                                      $152,095     $173,940
                                                     ======================



                                      F-18
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 14 - Obligation for Mandatory Redemption of Preferred Shares

The Company's subsidiary, LSI, has issued 50,000 shares of preferred stock that
has a mandatory redemption feature. The obligation for the mandatory redemption
of preferred shares is recorded as a liability on the books at the present value
of $4,449,981 at September 30, 2003. The accretion of the preferred stock in the
amount of $220,400 was recorded on the books as interest expense, bringing the
obligation balance to $4,670,381 at June 30, 2004.

The preferred shares are redeemable by the Company at any time by paying the
holder the par value, 5,000,000 ($100 per share), plus any accrued dividends.
The redemption of the preferred shares becomes mandatory September 1, 2012.
Dividends are payable at 4% annually in arrears, will accrue if not paid and are
only required to be paid if profits after tax are a minimum of $1,000,000 Cdn.

Note 15 - Stockholders' Equity

During the year ended June 30, 2004, the Company issued 4,597,976 shares of
common stock in a private placement for $1,266,351 (weighted average $.28 per
share).

The Company also received $256,632 from the exercise of warrants for 4,273,741
shares (weighted average $.06 per share).

On May 10, 2004, 400,000 shares of stock were issued for a promissory note in
the amount of $160,000 due October 8, 2004 with interest rate of 5%. The Company
agreed to extend the note with no date due with an interest rate of 18%. 500,000
shares of Rally Energy stock (a publicly traded company) are held by the Company
as security. The note is shown on the balance sheet as an offset to
stockholders' equity (subscription receivable).

Warrants outstanding at June 30, 2004 consist of:

   Number Outstanding           Exercise Price            Expiration Date
        (Shares)
-------------------------    ----------------------    ----------------------
       3,350,000                      .40                   12/31/2004


Note 16 - Subscription Receivable

The Company received a promissory note due October 8, 2004, in the amount of
$160,000 for 400,000 shares of the Company's stock. 500,000 shares of Rally
Energy's stock was given as security.

                                      F-19
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 17 - Commitments

LSI has entered into a lease obligation for office space that will expire in
2008.

Minimum annual lease payments over the next five years are as follows:


                       2004                     $    15,040
                       2005                          15,040
                       2006                          15,040
                       2007                          15,040
                       2008                          13,787

Note 18 - Segments

The company's operations are classified into two principal reportable segments
that provide different products or services. Separate management of each segment
is required because each business unit is subject to different marketing,
production, and technology strategies.

Segment information is as follows:

Segment                         Oil & Gas          Technology          Total
Revenue                              --                  --               --
Interest expense                  1,361                  --            1,361
Depreciation                        287                  --              287
Net income (loss)              (898,728)                 --         (898,728)
Total Assets                    841,048           8,856,606        9,697,654
Expenditures for
long lived assets               710,539                 --           710,539

Oil and Gas has no revenues. Technology derives its revenues from licensing the
right to use its software to end users, the sale of maintenance agreements, and
other consulting and software-related services. There are no inter-segment
transactions.

Note 19 - Related Party Transactions

The operator conducting certain exploratory and development activities for
properties in which the Company participates is a related party because the
Company's president is a director of the operator. During the fiscal year ended
June 30, 2004, the Company incurred costs of $353,213 with the operator.


                                      F-20
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



Note 20 - Amount Due - Electronic Data Systems Inc.

The Company's subsidiary, Logical Sequence Incorporated, was party to a license
sales agreement with Electronic Data Systems Inc. (EDS), whereby EDS was to
market certain of LSI's products on a revenue-sharing basis. The agreement was
terminated on August 16, 2004 under conditions contained within the EDS Purchase
and Sale Agreement.

The agreement includes a requirement for the Company to pay EDS 60% of license
revenues collected, and includes certain other provisions for payments.
Management contends that the failure of EDS to perform its obligations under the
agreement is a breach of the agreement, and the amount due to EDS under the
agreement is uncertain. The Company is currently negotiating a final agreement
with EDS. The Company has accrued $296,000 ($400,000CAD), included in the
balance sheet as accounts payable, which is Management's estimate of the net
amount due to EDS. This estimate may change as further information is available.
The maximum amount which may be due under the contract, before any offsets, is
$468,813.

Note 21 - Stock-based compensation

The Company's stock option plan, the "Shannon International Resources, Inc.
Amended 1999 Stock Option Plan" ("Plan") became effective June 1, 1999. Under
the terms of the plan, the Board of Directors is authorized to grant options for
up to 2,000,000 shares of common stock. The Board has discretion as to the
determination of exercise prices and terms of the options. All options must be
granted within ten years from the effective date of the Plan. There is no
express termination date for the options although the Board may vote to
terminate the Plan. In May 2004, the board of Directors resolved to submit a
5,000,000 share Officers and Directors Stock Option Plan for approval by the
Company's stockholders at the next annual general meeting of stockholders.

Shannon also has a Consultants and Advisors Stock Option Plan which reserves up
to 3,000,000 shares of common stock for issuance to employees, consultants and
advisors of Shannon other than executive officers and directors. The per share
option price for the stock subject to each option shall be as the Board may
determine. All options must be granted within ten years from the effective date
of the Plan. There is no express termination date for the options although the
Board may vote to terminate the Plan.

The following is a table of outstanding options and changes during 2004 and
2003:



                                      F-21
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004

<TABLE>
<CAPTION>


                                                                           Weighted
                                                                 Non-       Average
                                                Employee       Employee    Exercise
                                                 Options       Options      Price
                                               ---------      ---------   ---------
<S>                                              <C>          <C>               <C>
Options Outstanding, June 30, 2003               450,000             --         .10
       Options granted:
           Employees                             325,000             --         .25
           Non-employees                              --             --          --
       Options expired                                --             --          --
       Options exercised                              --             --          --
                                               ---------      ---------   ---------

Options Outstanding, June 30, 2003               775,000             --        . 16
       Options granted:
           Employees                           1,400,000             --         .60
           Non-employees                              --        850,000         .34
       Options expired                                --             --          --
       Options exercised                              --             --          --
                                               ---------      ---------   ---------

Options Outstanding, June 30, 2004             2,175,000        850,000         .42
                                               ---------      ---------   ---------
</TABLE>


Outstanding options vest as follows:
<TABLE>
<CAPTION>


                               Range of Exercise                      Weighted
                                    Prices                            Average
                             ----------------------      Number       Exercise
                               High         Low         of Shares      Price
       Vested at June 30,     ---------   ----------   -----------    ---------
<S>          <C>               <C>          <C>           <C>             <C>
       2002 and earlier        .10          .10           450,000     $   .10
             2003              .25          .25           325,000         .25
             2004              .85          .10         2,250,000        ..50
                                                       -----------
                                                        3,025,000
                                                       ===========
</TABLE>

Options granted during 2004 and 2003 consist of:
<TABLE>
<CAPTION>

                                                       Weighted Average
  Year and Exercise price relative to fair value         Fair Value at       Weighted Average
               of underlying stock                       Grant Date           Exercise Price
--------------------------------------------------    ------------------    -----------------
<S>                                                          <C>                   <C>
Year ending June 30, 2003:
   Exercise price less than fair value                       .25                   .25
Year ending June 30, 2004
   Exercise price less than fair value                       .43                   .60
   Exercise price equal to fair value                        .25                   .25
   Exercise price greater than fair value                    .65                   .53
</TABLE>


                                      F-22

<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004



In January 2003, the Board extended the expiration date for 350,000 options that
would expire in 2004 to February of 2006, and 100,000 options from 2005 to 2007.
In June 2004, the Board extended the expiration date for 150,000 options nine
months.

If not previously exercised or canceled, options outstanding at June 30, 2004
will expire as follows:


                              Range of Exercise                       Weighted
                                   Prices                             Average
                            ----------------------      Number        Exercise
                              High         Low        of Shares        Price
                            ---------   ----------   -----------   -----------
     Year Ending June 30,
             2005             .25          .10          150,000         .15
             2008             .10          .10          350,000    $    .10
             2009             .25          .85        2,125,000         .60
             2010             .50          .50          400,000    $    .47
                                                     -----------
                                                      3,025,000         .43
                                                     ===========

The fair value of each option granted was computed by the Black-Scholes method
using the following weighted-average assumptions:

                                          Year Ended                Year Ended
                                         June 30, 2004             June 30, 2003
                                        ---------------
Expected Volatility:                          150%                      150%
Risk-free interest rate:                     1.01%                     1.17%
Expected Dividends:                            --                         --
Expected Term in Years:                        5

As permitted by FASB Statement No. 123, the company applies the methods of APB
25 and related interpretations in accounting for stock options issued to
employees. Accordingly, no compensation cost was recognized for grants of
employee options because all were issued with exercise prices less than or equal
to the fair value of the underlying stock at the grant date. If compensation
cost had been determined based on the estimated fair value (using methods
consistent with FASB Statement No. 123) of the options at grant date, the
Company's net income and earnings per share would have been replaced with the
following amounts:
<TABLE>
<CAPTION>

                                               Year Ended                              Year Ended
                                             June 30, 2004                            June 30, 2003
                                    As Reported          Pro forma          As Reported           Pro forma
                                  -----------------   -----------------   -----------------   ------------------
<S>                                  <C>                   <C>               <C>                     <C>
Employee option expense                  --                850,061                --                 137,051
Net (loss):                          (900,466)          (1,850,527)          (215,311)            (352,362)
Net loss per share:                    (.04)               (.08)               (.01)                (.02)
</TABLE>


                                      F-23
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004




Note 22 - Income Taxes

The Company is subject to United States and Canadian income taxes. The Company
has paid no income taxes due to its net operating losses since inception.

The Company has estimated net operating losses as follows:

Expiration year:      Amount
----------------     -------------
2019                  $      6,174
2020                        11,931
2021                        58,716
2022                        73,331
2023                       215,311
2024                       853,199
                     -------------
Total                 $  1,218,662
                     =============


A valuation allowance equal to the tax benefit of the net operating loss
carryforward has been provided due to the uncertainty of the Company's ability
to utilize the carryforwards.

The Company's income tax benefit (expense) consists of the following:
<TABLE>
<CAPTION>

                                                        Year Ended             Year Ended
                         Component:                    June 30, 2004          June 30, 2003
------------------------------------------------    -------------------    -----------------
<S>                                                 <C>        <C>          <C>
Change in tax deferred taxes on unrealized gains    $         -47,267       $        47,267
                                                    -------------------    -----------------
     Total                                          $         -47,267       $        47,267
                                                    ===================    =================
</TABLE>


The Company's deferred income tax asset (liability) consists of the following:
<TABLE>
<CAPTION>

                                                     Year Ended             Year Ended
                         Component:                 June 30, 2004         June 30, 2003
----------------------------------------------     ----------------    -----------------
<S>                                                 <C>                 <C>
Deferred taxes on unrealized gains included         $           --      $      (47,267)
  in comprehensive income
Deferred tax benefit from net operating loss
  carryforwards                                           426,532             127,912
Tax valuation allowance                             $    (426,532)      $    (127,912)
                                                   ----------------    -----------------
     Total                                          $           --      $      (47,267)
                                                   ================    =================
</TABLE>


The overall effective tax rate differs from the Company's expected statutory
rate for the year ended June 30, 2004 is as follow:



                                      F-24
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004




Tax provision based upon statutory rate                  35.0%
Change in valuation allowance                           (29.5%)
                                                      -----------
Effective tax rate                                        5.5%
                                                      ===========

The Company's operating subsidiary, LSI, has an outstanding tax credit
receivable from the Canadian and Nova Scotia governments in the amount of
$188,062 for refundable research and development tax credits.

Note 23 - Risks and Uncertainties

The Company's oil and gas properties are located in Prince Edward Island,
Canada, which is a geographic concentration of risk.

The Company transacts the majority of its business and has outstanding balances
in Canadian Dollars, which is a foreign currency risk.

The Company conducts the majority of its exploratory and development activities
with a single operator, which is a concentration of business risk.

Note 24 - Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", which amends and clarifies the
accounting guidance on certain derivative instruments and hedging activities.
SFAS 149 is generally effective for contracts entered into or modified after
June 30, 2003 and hedging relationships designated after June 30, 2003. The
adoption of this statement did not impact the Company's financial position,
results of operations, or cash flows.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
establishes standards for how an issuer of equity (including the equity shares
of any entity whose financial statements are included in the consolidated
financial statements) classifies and measures on its balance sheet certain
financial instruments with characteristics of both liabilities and equity. SFAS
150 is effective for financial instruments entered into or modified after May
31, 2003 and for existing financial instruments after July 1, 2003. The adoption
of this statement did not impact the Company's financial position, results of
operations, or cash flows.


                                      F-25
<PAGE>


                      SHANNON INTERNATIONAL RESOURCES, INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2004




In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities," and a revised interpretation of FIN 46 ("FIN 46-R") in December 2003.
FIN 46 requires certain variable interest entities ("VIEs") to be consolidated
by the primary beneficiary of the entity if the equity investors in the entity
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
FIN 46 are effective immediately for all arrangements entered into after January
31, 2003. Since January 31, 2003, the Company has not invested in any entities
it believes are variable interest entities for which the Company is the primary
beneficiary. For all arrangements entered into after January 31, 2003, the
Company was required to continue to apply FIN 46 through April 30, 2004. The
Company was required to adopt the provisions of FIN 46-R for those arrangements
on May 1, 2004. For arrangements entered into prior to February 1, 2003, the
Company was required to adopt the provisions of FIN 46-R on May 1, 2004. The
adoption of this statement did not impact the Company's financial position,
results of operations, or cash flows.

Note 25 - Subsequent Events

On July 23, 2004, the Company's Working Interests permits as of June 30, 2004
expired. Rally Energy Corp., the Operator under the Joint Operating Agreement
acquired new permits for 308,000 acres of the approximately 640,000 acres
covered by the expired permits, including the acreage where the first two
exploratory natural gas wells were drilled.

On September 23, 2004, the Company entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits. The
Company also agreed to enter into a new Joint Venture Operating Agreement with
the holders of the balance of the Working Interests. The Company acquired the
2004 Working Interest in consideration of a promissory note in the principal
amount of $168,561.74 Cdn., $124,139.61 US payable to Rally Energy Corp., due on
or before December 31, 2004 bearing interest at the prime rate quoted by Toronto
Dominion Bank as of September 30, 2004. Shannon also gave Rally Energy Corp., a
promissory note payable to Rally Energy Corp., in the principal amount of
$71,145 payable upon thirty days written notice for the outstanding costs
attributed to Shannon and CMB Energy Corp., from the Prior Working Interests.







                                      F-26

<PAGE>














________________________________________________________________________________


                                                   LOGICAL SEQUENCE INCORPORATED

________________________________________________________________________________


                                                            FINANCIAL STATEMENTS

                                                                   JUNE 30, 2004










<PAGE>



________________________________________________________________________________


                                                   LOGICAL SEQUENCE INCORPORATED

________________________________________________________________________________


                                                                   JUNE 30, 2004

                                                                        CONTENTS











                                                                            Page
                                                                            ----

Report of Independent Registered Public Accounting Firm                     F-1


FINANCIAL STATEMENTS

   Balance Sheets                                                           F-2

   Statements of Operations                                                 F-3

   Statement of Shareholders Equity                                         F-4

   Statements of Cash Flows                                                 F-5

   Notes to the Financial Statements                                        F-6







<PAGE>



             Report of Independent Registered Public Accounting Firm



Board of Directors
Logical Sequence Incorporated

     We have audited the accompanying balance sheets of Logical Sequence
Incorporated as of June 30, 2004, September 30, 2003 and 2002, and the related
statements of operations, stockholders' equity, and cash flows for year ending
June 30, 2004 and September 30, 2003, and for the period from August 16, 2002
(Date of Inception) through September 30, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about 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 presentations. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Logical Sequence
Incorporated as of June 30, 2004, September 30, 2003 and 2002, and the related
statements of operations, stockholders' equity, and cash flows for year ending
June 30, 2004, September 30, 2003, and for the period from August 16, 2002 (Date
of Inception) through September 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 4, the Company
has limited working capital and continued operating losses, which raise
substantial doubts about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
September 27, 2004




                                       F-1
<PAGE>


<TABLE>
<CAPTION>

________________________________________________________________________________________________________


                                                                           LOGICAL SEQUENCE INCORPORATED

________________________________________________________________________________________________________

                                                                                          BALANCE SHEETS
                                                                                                  (CAD$)
________________________________________________________________________________________________________


                                                                June 30,       September      September
                                                                  2004          30, 2003       30, 2002
                                                               -----------    -----------    ----------
ASSETS
<S>                                                            <C>            <C>            <C>
CURRENT ASSETS
   Cash                                                        $    72,826    $    39,582    $    16,926
   Receivables                                                      48,023         56,743             --
   Tax credit receivable                                           255,380             --             --
   Prepaid expenses and deposits                                     5,517         39,076        250,000
                                                               -----------    -----------    -----------

                                                                   381,746        135,401        266,926

PROPERTY, PLANT AND EQUIPMENT                                       57,998         71,971         85,000

INTANGIBLE ASSETS                                                  750,000        750,000             --
                                                               -----------    -----------    -----------

                                                               $ 1,189,744    $   957,372    $   351,926
                                                               ===========    ===========    ===========

LIABILITIES AND SHAREHOLDER'S (DEFICIT)

CURRENT LIABILITIES
   Accounts payable                                            $   636,628    $   666,396    $    60,529
   Sales taxes payable                                              43,580         25,717             --
   Due to Related Parties                                          146,171        152,095        173,940
   Promissory note                                                 580,548        559,168             --
                                                               -----------    -----------    -----------
                                                                 1,406,927      1,403,376        234,469
   Due to parent                                                   327,644             --             --
   Obligation for Mandatory redemption of preferred stock        4,670,381      4,449,981             --
                                                               -----------    -----------    -----------

                                                                 6,404,952      5,853,357        234,469
                                                               -----------    -----------    -----------
SHAREHOLDER'S (DEFICIT)
   Preferred stock                                                      --             --             --
   Common stock                                                    500,080        500,080        500,080
   Accumulated Deficit                                          (5,715,288)    (5,396,065)      (382,623)
                                                               -----------    -----------    -----------

                                                                (5,215,208)    (4,895,985)       117,457
                                                               -----------    -----------    -----------

                                                               $ 1,189,744    $   957,372    $   351,926
                                                               ===========    ===========    ===========
</TABLE>

               See accompanying notes to the financial statements

                                       F-2


<PAGE>
<TABLE>
<CAPTION>
_______________________________________________________________________________________________


                                                                  LOGICAL SEQUENCE INCORPORATED

_______________________________________________________________________________________________

                                                                       STATEMENTS OF OPERATIONS
                                                                                          (CAD$)
_______________________________________________________________________________________________



                                                                                 For the period
                                                                                 from inception
                                                                   For the year    (August 16,
                                                    For the Year      ending      2002) through
                                                       ending      September 30,  September 30,
                                                   June 30, 2004       2003           2002
                                                   ------------    ------------    ------------
<S>                                                <C>             <C>             <C>
REVENUE                                            $  1,201,518    $    955,788    $    161,612

COST OF SALES                                           301,885              --              --
                                                   ------------    ------------    ------------
GROSS PROFIT                                            899,633         955,788         161,612
                                                   ------------    ------------    ------------

EXPENSES
   Production costs                                     121,609          59,420           2,625
   Selling and other direct expenses                      2,437           4,071          13,979
   General and administration expenses                   81,827          47,961          25,499
   Amortization of property, plant and equipment         29,160          24,999              --
   Salaries and Wages                                 1,143,432       1,164,366         414,063
   Travel and Entertainment                              24,566          27,333           3,784
   Professional Fees                                     86,896         114,465          53,240
   Office Expenses                                       25,854          47,800          29,490
                                                   ------------    ------------    ------------
      Total                                           1,515,781       1,490,415         542,680

(LOSS) FROM OPERATIONS                                 (616,148)       (534,627)       (381,068)

   Interest expense                                    (301,631)       (280,719)         (1,555)
   Provision for income taxes                           255,380              --              --
                                                   ------------    ------------    ------------

NET (LOSS)                                         $   (662,399)   $   (815,346)   $   (382,623)
                                                   ============    ============    ============


Net loss per common share                                  (.07)           (.08)           (.04)

Weighted average shares outstanding                  10,000,000      10,000,000       9,500,000
</TABLE>



               See accompanying notes to the financial statements

                                       F-3

<PAGE>
<TABLE>
<CAPTION>

________________________________________________________________________________________


                                                           LOGICAL SEQUENCE INCORPORATED

________________________________________________________________________________________

                                                        STATEMENT OF SHAREHOLDERS EQUITY
                                                                                  (CAD$)
________________________________________________________________________________________




                                      Shares    Common stock    Deficit         Total
                                    ---------   ------------   ----------    -----------
<S>                                 <C>         <C>           <C>            <C>
Shares issued at inception
August 16, 2002                     9,000,000   $        80   $        --    $        80

Shares sold                         1,000,000       500,000            --        500,000

Net loss inception to
September 30, 2002                         --            --      (382,623)      (382,683)
                                   ----------   -----------   -----------    -----------

Balance September 30, 2002         10,000,000       500,080      (382,623)       117,457
                                   ----------   -----------   -----------    -----------

Net loss for year ended
September 30, 2003                         --            --      (815,346)      (815,346)

Distribution                               --            --    (4,198,096)    (4,198,096)
                                   ----------   -----------   -----------    -----------

Balance September 30, 2003         10,000,000       500,080    (5,396,065)    (4,895,985)
                                   ----------   -----------   -----------    -----------

Net loss for year ended
June 30, 2004                                                    (319,223)      (319,223)
                                   ----------   -----------   -----------    -----------

Balance June 30, 2004              10,000,000   $   500,080   $(5,715,288)   $(5,215,208)
                                   ==========   ===========   ===========    ===========
</TABLE>


               See accompanying notes to the financial statements


                                       F-4
<PAGE>
<TABLE>
<CAPTION>

____________________________________________________________________________________________________


                                                                       LOGICAL SEQUENCE INCORPORATED

____________________________________________________________________________________________________

                                                                            STATEMENTS OF CASH FLOWS
                                                                                              (CAD$)
____________________________________________________________________________________________________



                                                                                     For the period
                                                                                     from inception
                                                                     For the year   (August 16, 2002)
                                                     For the year       ending          through
                                                        ending        September 30,   September 30,
                                                    June 30, 2004        2003             2002
                                                    -------------    --------------  ---------------
<S>                                                   <C>              <C>            <C>
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
   Net loss for the period                            $ (662,399)      $ (815,346)    $  (382,623)
   Items not requiring an outlay of cash:
      Amortization of property, plant and equipment       29,160           24,999              --
      Accrued interest added to note                     251,885          251,885              --
      Tax credit receivable                             (255,380)
   Changes in operating assets
      Receivables                                        273,027          (56,743)             --
      Prepaid expenses and deposits                      145,932          210,924        (250,000)
      Due to Shareholders/Directors                     (245,156)        (133,594)         94,947
      Payables and accruals                              200,782          205,867          60,529
      Sales taxes payable                                  7,641           25,717              --
      Due to Related Parties                             (14,959)         111,750          78,993
      Deferred revenue                                        --          400,000              --
                                                      ----------       ----------     -----------
                                                        (269,467)         225,459        (398,154)
                                                      ----------       ----------     -----------

FINANCING ACTIVITIES
   Proceeds from loans and debentures                    358,192               --              --
   Debenture repayment                                        --         (190,833)             --
   Sale of capital stock                                      --               --         500,080
                                                      ----------       ----------     -----------

                                                         358,192         (190,833)        500,080
                                                      ----------       ----------     -----------

INVESTING ACTIVITIES
   Additions to property, plant and equipment            (19,414)         (11,970)        (85,000)
                                                      ----------       ----------     -----------
                                                         (19,414)         (11,970)        (85,000)
                                                      ----------       ----------     -----------

NET INCREASE (DECREASE) IN CASH                           69,311          (22,656)         16,926

CASH - beginning of year                                   3,515           16,926              --
                                                      ----------       ----------     -----------

CASH - end of year                                    $   72,826       $   39,582     $    16,926
                                                      ==========       ==========     ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Debenture issued for acquisition of asset                  --          750,000              --
SUPPLEMENTAL INFORMATION:
   Cash paid for interest                                     --               --              --
   Cash paid for income taxes                                 --               --              --

</TABLE>


               See accompanying notes to the financial statements

                                       F-5

<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004


1.   DESCRIPTION OF BUSINESS

     Logical Sequence Incorporated was incorporated on August 16, 2002 under the
     laws of the Province of Ontario. Prior to this date, effective April 1,
     2002 the Company took over specific portions of the business operation of
     Logical Sequence Incorporated (incorporated under the laws of Nova Scotia)
     and effective June 02, 2003, the Company formally purchased all of the
     tangible and intangible assets related to the business as a going concern.
     The company owns, licenses and develops automotive dealer management
     systems. The trade name of the current DOS product is TIM DMS. LSI is
     currently completing the development of an ASP version of the software that
     will enable the distribution of the WebDMS product over the Internet which
     will enhance the flexibility in reporting to the Original Equipment
     Manufactures and their dealer network as well as internal reporting


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     This summary of significant accounting policies is presented to assist in
     understanding the Company's financial statements. The financial statements
     and notes are representations of the Company's management who is
     responsible for their integrity and objectivity. These accounting policies
     conform to generally accepted accounting principles in the United States of
     America and have been consistently applied in the preparation of the
     financial statements.

     The financial statements are stated in Canadian dollars. The Company's
     fiscal year end is September. Figures shown for June 30, 2004, and the year
     then ended, are shown for use in connection with the Company's parent that
     has a June fiscal year.

     Revenue recognition

          Revenues are recognized in accordance with SEC Staff Accounting
          Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
          Under SAB 101, product revenues (or service revenues) are recognized
          when persuasive evidence of an arrangement exists, delivery has
          occurred (or service has been performed), the sales price is fixed and
          determinable and collectibility is reasonably assured.

          The company obtains revenues from licensing the right to use its
          software to end users, the sale of maintenance agreements, and other
          consulting and software-related services. The Company generally has
          separate agreements with customers regarding these services that
          determine the terms and conditions of each type of service. Revenues
          from product user license fees are recognized in accordance with
          Statement of Position (SOP) No. 97-2, Software Revenue Recognition and
          SOP 98-9 Modification of SOP 97-2, Software Revenue Recognition, With
          Respect to Certain Transactions.

     Property, Plant and Equipment


                                      F-6

<PAGE>


________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



          Property, plant and equipment assets are recorded at cost.
          Amortization is provided annually at rates calculated to write-off the
          assets over their estimated useful lives as follows:

              Furniture and Equipment            - 20% diminishing balance
              Computer equipment                 - 30% diminishing balance

     Currency

          The majority of the company's cash flows (revenues and expenses) are
          in Canadian Dollars. Accordingly, the functional currency of the
          Company is Canadian dollars.

     Income Taxes

          The Company records deferred taxes in accordance with Statement of
          Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
          Taxes." The statement requires recognition of deferred tax assets and
          liabilities for temporary differences between the tax bases of assets
          and liabilities and the amounts at which they are carried in the
          financial statements, based upon the enacted tax rates in effect for
          the year in which the differences are expected to reverse. A valuation
          allowance is established when necessary to reduce deferred tax assets
          to the amount expected to be realized.

     Use of Estimates

          The preparation of the Company's financial statements in conformity
          with generally accepted accounting principles requires management to
          make estimates and assumptions that affect the amounts reported in
          these financial statements and accompanying notes. Actual results
          could differ from those estimates.

     Valuation of Long-Lived Assets

          The Company periodically analyzes its long-lived assets for potential
          impairment, assessing the appropriateness of lives and recoverability
          of unamortized balances through measurement of undiscounted operation
          cash flows on a basis consistent with accounting principles generally
          accepted in the United States of America.

     Start-up Costs

          The Company has adopted Statement of Position No. 98-5 ("SOP 98-5"),
          "Reporting the Costs of Start-Up Activities." SOP 98-5 requires that
          all non-governmental entities expense the cost of start-up activities,
          including organizational costs as those costs are incurred.

     Software Development Costs

          The Company considers development costs for software to be sold or
          otherwise marketed that occur before technological feasibility is
          established to be research and development costs and are expensed as
          incurred. After technological feasibility is established, material
          software development costs are capitalized and amortized over the
          estimated product life. We have defined technological feasibility as
          the establishment of a working model, which typically occurs when
          company places a product into beta testing. To date, the period
          between achieving technological feasibility and the general
          availability of such software has been short and software development
          costs qualifying for capitalization have been insignificant.
          Accordingly, we have not capitalized any software development costs.


                                      F-7
<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



     Comprehensive Income

          The Company has adopted Statement of Financial Accounting Standards
          (SFAS) No. 130, "Reporting Comprehensive Income". SFAS 130 requires
          that the components and total amounts of comprehensive income be
          displayed in the financial statements, which includes net income and
          all changes in equity during a period that arises from non-owner
          sources, such as foreign currency items and unrealized gains and
          losses on certain investments in equity securities. The Company's
          components of comprehensive income consist solely of net income.

     Other

          The Company paid no dividends during the periods presented.

          The Company consists of one reportable business segment.

          All revenue reported is from external customers in Canada. All of the
          Company's assets are located in the Canada.


3.   FINANCIAL INSTRUMENTS

     Credit Risks

          The Company is exposed to credit risk on its accounts receivable. To
          reduce that risk, the Company's credit policies include setting
          customer limits, reviewing them regularly, strict collection
          procedures on overdue accounts.

          All of the Company's trade accounts receivable are due from customers
          located throughout the Canada. The Company performs credit evaluations
          of its customers and generally does not require collateral.

     Fair Values of Financial Assets and Liabilities

          The carrying values of receivables, bank indebtedness and payables
          approximate their fair value due to the relatively short period to
          maturity of the instruments.

          The fair value of promissory notes and the obligation for mandatory
          redemption of preferred shares cannot be estimated because of the
          unique nature of these financial instruments.

4.   BASIS OF PRESENTATION - GOING CONCERN

     The accompanying financial statements have been prepared in conformity with
     generally accepted accounting principles in the United States of America,
     which contemplates continuation of the Company as a going concern. However,
     the Company has insufficient working capital and continued operating
     losses. This fact raises substantial doubt about the Company's ability to
     continue as a going concern. Management plans to obtain the additional
     working capital required.


                                      F-8
<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



5.   ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>

                                                 June 30, 2004    September 30,   September 30,
                                                                      2003            2002

<S>                                              <C>              <C>             <C>
     Accounts receivable                         $      48,023    $     56,743    $         --
     less allowance for doubtful accounts                   --              --              --
                                                 -------------
                                                 $      48,023    $     56,743    $         --
                                                 =============    ============    ============
</TABLE>



     The Company considers accounts over 90 days old to be past due. The company
     periodically reviews its accounts receivable to determine uncollectible
     amounts.


6.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                            --------------------------------------------------------------------------------------
                                                                    Net June 30,  Net September   Net September 30,
                                 Cost        Amortization                  2004        30, 2003               2002
                             --------------------------------------------------------------------------------------
<S>                          <C>              <C>           <C>        <C>             <C>                <C>
   Equipment                 $  40,924        $     8,185              $ 32,739        $ 32,739           $ 23,000
   Computer equipment           56,046             16,814                39,232          39,232             62,000
                             ---------       ------------              --------        --------           --------

                             $  96,970        $    24,999     71,971                   $ 71,971           $ 85,000
                             =========        ===========     ======                   =========          =========
</TABLE>

     Depreciation has been provided in amounts sufficient to recover asset costs
     over their estimated useful lives. All components of property and equipment
     are being depreciated or amortized.


7.   DUE TO RELATED PARTIES

     The Company owed the following amounts to companies that are controlled by
     individuals who are shareholders and former managers of the Company:

<TABLE>
<CAPTION>

                                                June 30, 2004     September 30,     September 30,
                                                                      2003              2002

<S>                                             <C>               <C>               <C>
   Accounts payable to related parties          $     142,248     $    190,743      $    173,940
   Accrued interest                                     6,923           13,153                --
                                                ------------------------------------------------
                                                $     146,171     $    152,095      $     73,940
                                                =============     ============      ============
</TABLE>



                                      F-9
<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



8.   LONG TERM ASSETS


     During the year the Company acquired rights to intellectual property. These
     rights enable further development to be made to the current product. The
     rights are considered to be intangible and are not amortized.


9.   INTANGIBLE ASSETS

     On August 16, 2002 the Company acquired intangible assets identified as
     intellectual property and composed of exclusive rights, future rights and
     derivative products for $5,580,000 together with certain items of furniture
     and equipment for $85,000 from a shareholder by cash and the issuance of
     50,000 preferred shares at a par value of $100 each totaling $5,000,000.
     The preferred shares have a mandatory redemption period provision, and
     amount equivalent to the present value of the mandatory redemption is
     record as a liability (See note 11).

     No carrying value is recorded for the intangible asset because no
     verifiable historical cost to the related parties is available.
     Accordingly, an amount equivalent to the obligation for the mandatory
     redemption of the preferred shares is shown in the statement of
     Shareholders' Equity as a distribution.

     On June 02, 2003 Logical Sequence Inc. acquired from GE Commercial Finance
     Canada Inc. (CDF) rights title and interest in security interests that CDF
     had obtained from Deutsche Financial Services Canada Corporation in regard
     to the rights, title and interests in the TIM software Solutions assets
     which included intellectual property.

     In consideration for the purchase price of $750,000 LSI received the
     rights, title and interest in the security plus $1,500,000 of the
     indebtedness that CDF holds against TIM Software. The purchase price paid
     was $200,000 on execution and $550,000 to be paid 15 months after June 02,
     2003 (September 02, 2004). The balance of $550,000 is evidenced by a
     promissory note (See note 10).


10.  PROMISSORY NOTE - GE OF CANADA

     The Company, has a note payable to Commercial Finance Canada Inc. secured
     by a general security agreement constituting a first lien on all assets of
     the Company. The promissory note bears interest at 5% compounded monthly.
     Subsequent to fiscal year end, On September 02, 2004, the $550,000
     principal balance plus accrued interest of $30,548 represented by the
     promissory note with GE of Canada became due and payable. Management has
     commenced negotiations to have the payment obligation deferred over time.


11.  OBLIGATION FOR MANDITORY REDEMPTION OF PREFERRED SHARES

     The Company has issued 50,000 shares of preferred stock that has a
     mandatory redemption feature. The obligation for the mandatory redemption
     of preferred shares is recorded as a liability on the books at the present
     value of $4,449,981 at September 30, 2003. The accretion of the preferred
     stock in the amount of $220,400 was recorded on the books as interest
     expense, bringing the obligation balance to $4,670,381 at June 30, 2004.



                                      F-10
<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004


     The preferred shares are redeemable by the Company at any time by paying
     the holder the par value, 5,000,000 ($100 per share), plus any accrued
     dividends. The redemption of the preferred shares becomes mandatory
     September 1, 2012. Dividends are payable at 4% annually in arrears, will
     accrue if not paid and are only required to be paid if profits after tax
     are a minimum of $1,000,000 Cdn.


12.  CAPITAL STOCK

        Authorized
        ----------
        Unlimited      common shares without nominal or par value
          50,000       preferred shares

      Stated Capital
      --------------
        10,000,000     common shares                                 500,080
          50,000       preferred shares                                   --
                                                                   ---------
                                                                   $ 500,080


     50,000 preferred shares have been issued as part settlement of the purchase
     of certain intellectual property rights from Larnaca Limited. The value of
     the preferred shares as issued has been reflected in these financial
     statements as nil.


13.  SUBSEQUENT EVENTS

     The Company was party to a license sales agreement with Electronic Data
     Systems Inc. (EDS), whereby EDS was to market certain of THE Company's
     products on a revenue-sharing basis. The agreement was terminated on August
     16, 2004 under conditions contained within the EDS Purchase and Sale
     Agreement.

     The agreement includes a requirement for the Company to pay EDS 60% of
     license revenues collected, and includes certain other provisions for
     payments. Management contends that the failure of EDS to perform its
     obligations under the agreement is a breach of the agreement, and the
     amount due to EDS under the agreement is uncertain. The Company is
     currently negotiating a final agreement with EDS. The Company has accrued
     $400,000, included in the balance sheet as accounts payable, which is
     Management's estimate of the net amount due to EDS. This estimate may
     change as further information is available. The maximum amount which may be
     due under the contract, before any offsets, is $636,628.


14.  COMMITMENTS

     Minimum annual lease payments over the next five years are as follows:


                      2004                 $ 20,424
                      2005                   20,424
                      2006                   20,424
                      2007                   20,424
                      2008                   18,722



                                      F-11
<PAGE>

________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



15.  INCOME TAXES

     The Company is subject to Canadian federal income taxes. The Company has
     had no income, and therefore has paid no income tax. The Company has a tax
     credit receivable in the amount of $255,380.

     Deferred income taxes arise from temporary timing differences in the
     recognition of income and expenses for financial reporting and tax
     purposes. The Company's deferred tax assets consist entirely of the benefit
     from net operating loss carryforwards. The Company's deferred tax assets
     are offset by a valuation allowance due to the uncertainty of the
     realization of the net operating loss carryforwards. Net operating loss
     carryforwards may be further limited by a change in company ownership and
     other provisions of the tax laws.

     The Company's deferred tax assets, valuation allowance, and change in
     valuation allowance are as follows:

<TABLE>
<CAPTION>

                                            Estimated
                                               Tax
    Year      Estimated NOL       NOL        Benefit      Valuation      Net Tax
   Ending     Carryforward      Expires     from NOL      Allowance      Benefit
<S>           <C>                 <C>      <C>           <C>            <C>
   2002       $    382,000        2009     $   111,042   $   (111,042)  $      --
   2003            790,000        2010         272,980       (272,980)         --
              ----------------- ------------ ------------- -------------- --------
   Total      $  1,172,000                 $   384,022   $   (384,022)  $      --
              ================= ============ ============= ============== ========
</TABLE>


     Taxes at the statutory rate are reconciled to the Company's actual income
     taxes as follows:

        Canadian income taxes at statutory rate                         38%
        Valuation allowance                                            (38%)
                                                                  ----------
        Actual income tax rate                                           --
                                                                  ==========


     For the interim period from September 30, 2003 through June 30, 2004, the
     Company has an estimated taxable loss of $662,000, which will be added to
     the company's net operating losses and valuation allowance.


16.  RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
     Variable Interest Entities." It requires existing unconsolidated variable
     interest entities (VIE's) to be consolidated by their primary beneficiaries
     if the entities do not effectively disperse risks among the parties
     involved. It applies immediately to VIE's created after January 31, 2003
     and to VIE's in which an enterprise holds a variable interest that was
     acquired before February 1, 2003, the Interpretation applies for periods
     beginning after June 15, 2003. In December 2003, the FASB reissued
     Interpretation No. 46 with certain modifications and clarifications for
     certain VIE's. The Company has no unconsolidated VIE's and therefore its
     financial statements are in compliance with the requirements of
     Interpretation No. 46.

                                      F-12
<PAGE>


________________________________________________________________________________

                                                   LOGICAL SEQUENCE INCORPORATED
________________________________________________________________________________

                                               NOTES TO THE FINANCIAL STATEMENTS
                                                                   June 30, 2004



     In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on
     Derivative Instruments and Hedging Activities", which amends and clarifies
     the accounting guidance on certain derivative instruments and hedging
     activities. SFAS 149 is generally effective for contracts entered into or
     modified after June 30, 2003 and hedging relationships designated after
     June 30, 2003. The adoption of this statement did not impact the Company's
     financial position, results of operations, or cash flows.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity."
     SFAS 150 establishes standards for how an issuer of equity (including the
     equity shares of any entity whose financial statements are included in the
     consolidated financial statements) classifies and measures on its balance
     sheet certain financial instruments with characteristics of both
     liabilities and equity. SFAS 150 is effective for financial instruments
     entered into or modified after May 31, 2003 and for existing financial
     instruments after July 1, 2003. The adoption of this statement did not
     impact the Company's financial position, results of operations, or cash
     flows.










                                      F-13


<PAGE>

Item 8. Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure.
-----------------------------------------------------------------------

There have been no changes in and/or disagreements with the accountants on any
accounting and financial disclosure.

Item 8a.  Controls And Procedures
          -----------------------

Shannon maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in Shannon's Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to Shannon's management, including its Chief Executive Officer /
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 13a-14(c). Shannon's disclosure controls and procedures are
designed to provide a reasonable level of assurance of reaching Shannon's
desired disclosure control objectives. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Shannon's certifying officer
has concluded that Shannon's disclosure controls and procedures are effective in
reaching that level of assurance.

Within 90 days prior to the date of this report, Shannon carried out an
evaluation, under the supervision and with the participation of Shannon's
management, including Shannon's Chief Executive Officer / Chief Financial
Officer, of the effectiveness of the design and operation of Shannon's
disclosure controls and procedures. Based on the foregoing, Shannon's Chief
Executive Officer and Chief Financial Officer concluded that Shannon's
disclosure controls and procedures were effective.

Shannon's internal controls are presently being revised and codified to ensure
compliance with the requirements of the Sarbanes Oxley Act of 2002.



                                       24

<PAGE>




                                    Part III

Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance
With Section 16(A) Of The Exchange Act.
--------------------------------------------------------------------------------

The officers and directors of Shannon are as follows:

Blair Coady                       President and Director since February 18,1999.
Greg Isenor                       Vice President and Director since October 2001
Dennis Brovarone                  Director and Secretary since February 2003
Rod Wark                          Director since December 2003
Kenneth N. Davis, Jr.             Director since January 2004
John W. Rogers                    Director since January 2004
David L. Wagner                   Director since May 2004

Blair Coady. Mr. Coady is the Founder of Shannon and has served as President and
Director since February 1999. Since June 2001 to October 2003, Mr. Coady has
served as an officer and director and from October 2003 to the present he has
served as a director of Rally Energy Corporation, a publicly held company
engaged in oil and gas exploration. Mr. Coady served as the President and
Chairman of the Board of Wolf Industries, Inc., a publicly held management
company with interests in the oil and gas industry, from August 1996 to April
1998. From October 1996 to February 2001. Mr. Coady was the President and Chief
Executive Officer of Calgary Chemical, a privately-held custom blender of
petroleum production chemicals. From 1992 to 1995 Mr. Coady served as Chairman
of the Board of Earthwhile Developments Inc., a Canadian corporation involved in
waste management, specifically solvent recycling, bioremediation and composting.

Greg Isenor. Mr. Isenor holds a Bachelor of Science degree in Geology from
Acadia University. Since June 2001 to the present Mr. Isenor has consulted to
various companies including PEGA Gas Alliance, EnCana, EOG Resources, Maritimes
& Northeast Pipelines and LXL Consulting on various land and geological
projects. From June 1999 to June 2001 Mr. Isenor worked as a Land Agent for
Maritimes & Northeast Pipelines in Nova Scotia. From December 1998 to June 1999
Mr. Isenor worked with Prince Edward Gas compiling a geological report on the
gas potential of Prince Edward Island. From September 1996 to December 1998 Mr.
Isenor was Vice President of Exploration for Kaoclay Resources Inc., a kaolin
exploration company in Nova Scotia, Canada and Georgia, USA. From March 1996 to
September 1996 he worked in Kazakstan on gold exploration projects for Central
Asia Goldfields.

Dennis Brovarone Mr. Brovarone has been practicing corporate and securities law
since 1986 and as a sole practitioner since 1990. He serves as U.S. securities
law counsel to Shannon. He is a Director of Pure Bioscience, a publicly held
California corporation since April 1996. From December 1997 to April 2001, Mr.
Brovarone served as the President and Chairman of the Board of Directors of
Ethika Corporation, a publicly held, Mississippi corporation investment holding
company with its office in Littleton, Colorado. From January 1995 to March 1998
Mr. Brovarone served as President (Chairman) of the Board of Directors of The
Community Involved Charter School, a four year old K-12 public school located in
Lakewood, Colorado, operating under an independent charter and serving
approximately 350 students in an individualized, experiential learning
environment. Prior to 1990, Mr. Brovarone served as in-house counsel to R.B.
Marich, Inc., a Denver, Colorado based brokerage firm. Mr. Brovarone lives and
works in Littleton, Colorado.


                                       25
<PAGE>

Rod Wark Mr. Wark has been a corporate executive and corporate development
consultant with over 20 years experience directing sales and marketing,
coordination of business operations, mergers and acquisitions and the legal and
financial structuring of complex transactions. He served as President and Chief
Operating Officer of Xwave of Halifax, Nova Scotia, from 1998 to 2003. Xwave is
one of the largest IT companies in Canada delivering IT services with over $425
million in revenues and 2,800 people in 15 offices in Canada, the U.S. and
Europe. From 1988 to 1998, Mr. Wark was an Associate Partner of Anderson
Consulting, a $7 billion in revenue global consulting firm with expertise in all
areas of business consulting. Prior to this, he was Regional Director of
Synerlogic Inc., a Canadian technology consulting company subsequently acquired
by Anderson Consulting.

Kenneth N. Davis Jr. Mr. Davis is a Managing Director of Bentley Associates
L.P., a full service investment banking firm serving middle market and growth
companies since 1990. Prior to joining Bentley Associates. Mr. Davis led his own
investment banking firm, Corporate Development Associates for five years. He
also managed the Merger and Acquisition Departments at Tucker Anthony and
Advest. Mr. Davis was Senior Vice President and Chief Financial Officer of
Syntex Corporation. Mr. Davis was the U.S. Assistant Secretary of Commerce
during 1969 and 1970. Prior to his appointment, he had a twenty year career with
IBM Corporation including five years as its Chief Financial Officer. Mr. Davis
holds a B.S. degree from the Massachusetts Institute of Technology and an M.B.A.
from Stanford University.

John W. Rogers. Mr. Rogers is the newly appointed President and Chief Executive
Officer of Logical Sequence Incorporated in Halifax, Nova Scotia. Prior to this
he provided IT consulting services to Maritime Life Assurance Company of
Halifax, Nova Scotia. Mr. Rogers held several delivery and management positions
in the IT industry since 1983. Mr. Rogers was employed as a senior Service
Delivery Manager with with Keane Canada Inc., Halifax, Nova Scotia during 2001
and 2002. He also served in several director and project manager position with
Sierra Systems Consultants Inc., in Halifax, Nova Scotia during 1998 to 2001.
Mr. Rogers was the president and founder of Interactive Trading Network,
Dartmouth, Nova Scotia which developed specialized digital marketing software.
Mr. Rogers held director and management positions with Dalhousie University in
Halifax, Nova Scotia from 1985 to 1997. Mr. Rogers holds a Data Processing
Technology Diploma from Nova Scotia Community College, Dartmouth, Nova Scotia
1983.

David L. Wagner. David L Wagner is President of D & A Wagner and Associates
Inc., and an executive associate of Accelerator Inc., a management company
focused on corporate leadership and business growth issues. As a former
President and Chief Executive Officer of Unisys Canada Inc, David gained
extensive international experience in sales, marketing, and delivery of products
and services to government and commercial clients. For more than twenty-five
years, David was a driving force within Unisys Canada, where he honed his
ability to lead strong teams in developing strategies and operating approaches
for business success.



                                       26
<PAGE>

While working in the United States as vice-president of marketing for Unisys'
Worldwide Public Sector, David developed a program-oriented approach to the
public sector business worldwide, involving the development of strategic plans,
investment responsibilities, and support of field operations.

David's current management practice provides strategic advisory services to
several business clients with emphasis on the Information Technology sector. He
provides practical solutions to the needs of clients facing challenges in sales
execution, account and product marketing skills development, and outsourcing
contract agreements. He has earned a solid reputation for customer service
excellence, and for ideas, which enable people, plans, and processes to make
sales productive and effective. He has developed and delivered programs for
workshops, facilitation, and implementation of industry best practices.

Born in northern Ontario and raised in Nova Scotia, David graduated from Acadia
University with bachelor's degrees in computer science and business
administration. David is a member of the board of governors at Rothesay
Netherwood School, Northumblerland Golf Club, Fredericton YMCA and Diaphonics
Inc. He resides in Fredericton, New Brunswick.

The Directors serve until their successors are elected by the shareholders.
Vacancies on the Board of Directors may be filled by appointment of the majority
of the continuing directors.

Committees: Meetings of the Board
---------------------------------

Shannon does not have a separate Compensation Committee, Audit Committee or
Nominating Committee. These functions are done by the Board of Directors meeting
as a whole. Shannon's Board of Directors held three meetings during the fiscal
year ended June 30, 2004 at which all directors were present either in person or
by telephonic conference call. Corporate actions by the Board of Directors were
unanimously also consented to in writing after telephone discussion.

Audit Committee
---------------

The board of directors has not yet established an audit committee. The functions
of the audit committee are currently performed by the entire board of directors.
Shannon is under no legal obligation to establish an audit committee and has
elected not to do so at this time so as to avoid the time and expense of
identifying independent directors willing to serve on the audit committee.
Shannon may establish an audit committee in the future if the board determines
it to be advisable or we are otherwise required to do so by applicable law, rule
or regulation.

As the board of directors does not have an audit committee, it therefore has no
"audit committee financial expert" within the meaning of Item 401(e) of
Regulation S-B. In general, an "audit committee financial expert" is an
individual member of the audit committee who:

     *    understands generally accepted accounting principles and financial
          statements,


                                       27
<PAGE>
     *    is able to assess the general application of such principles in
          connection with accounting for estimates, accruals and reserves,

     *    has experience preparing, auditing, analyzing or evaluating financial
          statements comparable to the breadth and complexity to our financial
          statements,

     *    understands internal controls over financial reporting, and

     *    understands audit committee functions.

Board of Directors Independence
-------------------------------

Only two of Shannon's directors, Rod Wark and David L. Wagner are "independent"
within the meaning of definitions established by the Securities and Exchange
Commission or any self-regulatory organization. Shannon is not currently subject
to any law, rule or regulation requiring that all or any portion of its board of
directors include "independent" directors.

Code of Ethics
--------------

Under the Sarbanes-Oxley Act of 2002 and the Securities and Exchange
Commission's related rules, Shannon is required to disclose whether it has
adopted a code of ethics that applies to Shannon's principal executive officer,
principal financial officer, principal accounting officer or controller or
persons performing similar functions. Shannon has adopted a code of ethics that
applies to its chief executive officer, chief financial officer and other
officers, legal counsel and to any person performing similar functions. Shannon
has made the code of ethics available and intends to provide disclosure of any
amendments or waivers of the code within five business days after an amendment
or waiver on its website, www.shannon-intl.com.

Compliance with Section 16(a) of Securities Exchange Act of 1934
----------------------------------------------------------------

To our knowledge, during the fiscal year ended June 30, 2004, our current
Directors and Officers complied with all applicable Section 16(a) filing
requirements. This statement is based solely on a review of the copies of such
reports that reflect all reportable transactions furnished to us by our
Directors and Officers and their written representations that such reports
accurately reflect all reportable transactions.

Family Relationships
--------------------

There is no family relationship between any Director, executive or person
nominated or chosen by Shannon to become a Director or executive officer.



                                       28
<PAGE>


Item 10. Executive Compensation.
         -----------------------

The following table shows for the fiscal years ending June 30, 2004, 2003 and
2001, the compensation awarded or paid by Shannon to its Chief Executive Officer
and any of the executive officers of Shannon whose total salary and bonus
exceeded $100,000 during such year.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                   SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------
                                                                                  Long Term Compensation
-----------------------------------------------------------------------------------------------------------------------
                                         Annual Compensation                Awards                  Payouts
-----------------------------------------------------------------------------------------------------------------------
                                           Salary                          Securities
                                             ($)      Other Annual    Underlying Options
   Name and Principle Position     Year             Compensation ($)         (#)          All Other Compensation ($)
-----------------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>          <C>              <C>                        <C>
Blair Coady President/CEO          2004    87,300 cdn      0                   0                       0
-----------------------------------------------------------------------------------------------------------------------
Blair Coady President/CEO          2003       0            0                75,000 Common              0
-----------------------------------------------------------------------------------------------------------------------
Blair Coady President/CEO          2002       0            0               150,000 Common              0
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

No executive officer earned more than $100,000 during the current fiscal year or
the previous two fiscal years.
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------
                        Option Grants in Last Fiscal Year
--------------------------------------------------------------------------------------------------
                                Individual Grants
--------------------------------------------------------------------------------------------------
                                Number of       % of Total
                              Common Shares       Options
                                Underlying       Granted in
                             Options Granted  Fiscal Year ended   Exercise Price    Expiration
Name                               (#)          June 30, 2004        ($/Sh)            Date
--------------------------------------------------------------------------------------------------
<S>                               <C>              <C>              <C>             <C>   <C>
Rod Wark, Director                400,000          28.6%            0.50            01/02/09
--------------------------------------------------------------------------------------------------
Kenneth N. Davis Jr., Director    400,000          28.6%            0.85            01/23/09
--------------------------------------------------------------------------------------------------
John W. Rogers, Director          200,000          28.6%            0.50            02/02/09
--------------------------------------------------------------------------------------------------
David L. Wagner                   400,000          14.2%            0.60            05/18/09
--------------------------------------------------------------------------------------------------
</TABLE>





                                       29
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option/Values
The following table sets forth the number and value of the unexercised options
held by each of the Named Executive Officers and Directors at June 30, 2004.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
Aggregate Option Exercises in Last Fiscal Year and Option Values
------------------------------------------------------------------------------------------------------------------------
                                       Value                                           Value of Unexercised In-the Money
                          Shares       Realized    Number of Securities Underlying     Options at
                          Acquired on  at FY-End   Unexercised Options at FY-End       June 30, 2004  (1)
Name                      Exercise (#) ($)         (#) Exercisable/Unexercisable       Exercisable/Unexercisable
------------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>   <C>                                    <C>
Blair Coady Pres./CEO,          0          0     225,000 Common Shares Exercisable      $67,500     Exercisable
Dir.
------------------------------------------------------------------------------------------------------------------------
Greg Isenor                     0          0     150,000 Common Shares Exercisable      $45,000     Exercisable
V-P, Director
------------------------------------------------------------------------------------------------------------------------
Dennis Brovarone                0          0     100,000 Common Shares Exercisable      $20,000     Exercisable
Secretary, Director
------------------------------------------------------------------------------------------------------------------------
John W. Rogers,                 0          0     200,000 Common Shares Exercisable      $0          Exercisable
Director
------------------------------------------------------------------------------------------------------------------------
Kenneth N. Davis, Jr.           0          0     400,000 Common Shares Exercisable      $0          Exercisable
Director
------------------------------------------------------------------------------------------------------------------------
Rod Wark                        0          0     400,000 Common Shares Exercisable      $0          Exercisable
Director
------------------------------------------------------------------------------------------------------------------------
David L. Wagner,                0          0     400,000 Common Shares Exercisable      $0          Exercisable
Director
</TABLE>

     (1) Option value based on the difference between the exercise price of
     unexercised options and the closing sale price on June 30, 2004 ($0.45 per
     share).

Stock Option Plan
-----------------
Shannon has a Stock Option Plan, the "Shannon International Resources, Inc,
Amended 1999 Stock Option Plan" (the "Plan"). The Plan provides that the Board
shall exercise its discretion in awarding options under the Plan, not to exceed
2,000,000 shares. The per share option price for the stock subject to each
option shall be as the Board may determine. All options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the options although the Board may vote to terminate the Plan. Options
for a total of 1,875,000 have been granted under the plan.

In May 2004, the Board of Directors resolved to submit a 5,000,000 share
Officers and Directors Stock Option Plan for approval by Shannon's stockholders
at the next annual general meeting of stockholders.

Employment Agreements
---------------------

Blair Coady, Shannon's president and chief executive officer and director
entered into an employment agreement with Shannon effective October 2003. The
employment agreement provides for base remuneration of $9,700 Cdn., per month
plus insurance benefits and vehicle lease. Greg Isenor, Vice President and
Director does not have a employment agreement and does not presently draw a
salary. Officers are reimbursed for expenses incurred on Company business.
Dennis Brovarone, Shannon's secretary and director also serves as U.S.
securities law counsel and is compensated for his time at his regular hourly
rate of $200 per hour. John W. Rogers, a director has an employment agreement
with Logical Sequence Incorporated as it chief executive officer. The employment
agreement effective February 2004 provides for compensation of $9,000 Cdn., per
month plus employee insurance benefits. Mr. Rogers also received 50,000 shares
of Shannon's common stock as a signing bonus.



                                       30
<PAGE>


Directors' Compensation/ Other Arrangements
-------------------------------------------

Shannon's directors are reimbursed for actual expenses incurred in attending
Board meetings. Shannon entered into a three month agreement with Kenneth N.
Davis Jr., in April 2004, with respect consultation and assistance with
corporate and business development. Mr. Davis is to be compensated at $7,500 per
month and a success fee of up to $100,000 for any transaction wherein it was
mutually agreed Mr. Davis played a significant role. There are no other
arrangements regarding compensation to officers and directors of Shannon.

Termination of Employment and Change of Control Arrangement
-----------------------------------------------------------

There is no compensatory plan or arrangement in excess of $100,000 with respect
to any individual named above which results or will result from the resignation,
retirement or any other termination of employment with Shannon, or from a change
in the control of Shannon.

Transactions with Management
----------------------------

Shannon did not enter into any transactions with Management during the fiscal
year ended June 30, 2004.











                                       31
<PAGE>



Item 11. Security Ownership Of Certain Beneficial Owners And
Management.
-------------------------------------------------------------

The following table sets forth information, as of September 24, 2004, with
respect to the beneficial ownership of Shannon's common stock by each person
known by Shannon to be the beneficial owner of more than five percent of the
outstanding Common Stock and by the officer and directors of Shannon based on
20,845,000 shares of common stock outstanding as of September 24, 2004 plus the
number of shares underlying outstanding options.
<TABLE>
<CAPTION>

Name and Address of                                               Common Stock              Percentage of Shares
Beneficial Owner                  Title                           Ownership                 Outstanding
----------------------------      -------------------------       ---------------------     --------------------
<S>                              <C>                                 <C>      <C>                  <C>
Blair Coady                       President, Director                225,000  (1)                  1.1%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
Greg Isenor                       V. Pres., Director                 200,000  (2)                  1.0%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
Dennis Brovarone                  Director                           120,000  (3)                  0.6%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
John W. Rogers                    Director                           250,000  (4)                  1.2%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
Kenneth N. Davis  , Jr.           Director                           400,000  (5)                  1.9%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
Rod Wark                          Director                           400,000  (6)                  1.9%
Suite 2000, 715 5th Av. SW
Calgary, Alberta  T2P 2X6
----------------------------------------------------------------------------------------------------------------
David L. Wagner                   Director                           400,000  (8)                  1.9%
Directors and Officers as a Group
(7 individuals)                                                    1,995,000  (9)                  9.6%
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Includes exercisable options to acquire up to 225,000 shares.
(2)      Includes exercisable options to acquire up to 150,000 shares.
(3)      Includes exercisable options to acquire up to 100,000 shares.
(4)      Includes exercisable options to acquire up to 200,000 shares.
(5)      Includes exercisable options to acquire up to 400,000 shares.
(6)      Includes exercisable options to acquire up to 400,000 shares.
(7)      Includes exercisable options to acquire up to 400,000 shares.
(8)      Includes exercisable options to acquire up to 400,000 shares.
(9)      Includes exercisable options held by the officers and directors
         to acquire up to 1,475,000 shares

Changes Of Control
------------------

As of June 30, 2004 and September 22, 2004, there are no arrangements known to
Shannon which may at a subsequent date result in a change of control of Shannon.



                                       32
<PAGE>
Item 12. Certain Relationships And Related Transactions.
         -----------------------------------------------

As of September 24, 2004 Mr. Coady Shannon's President and a Director serves as
a director of Rally Energy Corp. ("Rally"). Rally is a Calgary based energy
company which holds, as of September 24, 2004 a ffty-five percent Working
Interest in the acreage covered by Shannon's 2004 Working Interest. Rally Energy
Corp., is the Operator with management responsibility for the operations on the
2004 Working Interest property.

On September 23, 2004, Shannon entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits, the
"2004 Working Interest". Shannon has also agreed to enter into a new Joint
Venture Operating Agreement with the holders of the balance of the Working
Interests. Shannon acquired the 2004 Working Interest in consideration of a
promissory note in the principal amount of $168,561.74 Cdn., payable to Rally
Energy Corp., due on or before December 31, 2004 bearing interest at the prime
rate quoted by Toronto Dominion Bank as of September 30, 2004. Shannon also gave
Rally Energy Corp., a promissory note payable to Rally Energy Corp., in the
principal amount of $71,145 payable upon thirty days written notice for the
outstanding costs attributed to Shannon and CMB Energy Corp., from the Prior
Working Interests.



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
         ---------------------------------

     (a)  Exhibits:

     3.1  Articles of Incorporation(1)
     3.2  Bylaws(1)
     4.1  1999 Stock Option Plan (1)
     10.1 Working Interest Acquisition Agreement(1)
     10.2 Purchase and Joint Venture Agreement(1)
     10.3 Oil and Natural Gas Permit No. 96-06 (1)
     10.4 Amendment to Working Interest Acquisition Agreement (1)
     10.7 Acquisition of Additional Interests Agreement (2)
     10.8 Oil and Natural Gas Permits No. 96-04, -05, -07, -08, -09, -10. (2)
     10.9 Joint Operating Agreements dated October 22, 2001 and October 23,
          2001. (2)
     10.10 Participation Agreement (3)
     10.11 Logical Sequence Inc. Distribution Agreement (4)
     10.12 Share Purchase Agreement (4)
     10.13 Share Purchase Support Agreement (4)
     10.14 Voting Trust Agreement (4)
     10.15 Addendum Agreement (5)
     10.16 Letter of Agreement with Rally Energy Corp., for the acquisition of
           the 2004 Working Interest dated September 23, 2004 and promissory
           notes.
     14.1  Code of Ethics
     31.1  Sarbanes Oxley Section 302 Certification
     31.2  Sarbanes Oxley Section 302 Certification
     32.1  Sarbanes Oxley Section 906 Certification
     32.2  Sarbanes Oxley Section 906 Certification

(1)      Incorporated by reference to the exhibits to Shannon's registration
statement in Form 10-SB(file number 000-30254)


                                       33
<PAGE>


(2)      Incorporated by reference to the exhibits to Shannon's annual report on
Form 10ksb for the fiscal year ended June 30, 2002 filed on or about September
30, 2002

(3)      Incorporated by reference to the exhibits to Shannon's quarterly report
on Form 10qsb for the fiscal quarter ended December 31, 2002 filed on or about
February 14, 2003.

(4)      Incorporated by reference to the exhibits to Shannon's quarterly report
on Form 10-QSB for the three month period ended September 30, 2003. (file number
000-30254).

(5)      Incorporated by reference to the exhibits to Shannon's amended
quarterly report on Form 10-QSB for the three month period ended September 30,
2003 filed on December 2, 2003. (file number 000-30254).


(b)      No reports on Form 8-K were filed during the last quarter of the period
covered by this report.


Item 14.  Principal Accountant Fees And Services
          --------------------------------------

Miller & McCollom, Certified Public Accountants, are Shannon's independent
auditors to examine the financial statements of Shannon for the fiscal year
ending June 30, 2004. Miller & McCollom has performed the following services and
has been paid the following fees for these fiscal years.

Audit Fees

Miller & McCollom was paid aggregate fees of $29,825 for the fiscal year ended
June 30, 2004 and $11,365 for the fiscal year ended June 30, 2003 for
professional services rendered for the audit of Shannon's annual financial
statements and for the reviews of the financial statements included in Company's
quarterly reports on Form 10QSB during these fiscal years.


Audit-Related Fees

Miller & McCollom was not paid any additional fees for the fiscal year ended
June 30, 2004 and June 30, 2003 for assurance and related services reasonably
related to the performance of the audit or review of Shannon's financial
statements.

Tax Fees

Miller & McCollom was paid no fees for the fiscal year ended June 30, 2002 and
no fees for the fiscal year ended June 30, 2004 for professional services
rendered for tax compliance, tax advice and tax planning.

Other Fees

Miller & McCollom was paid no other fees for professional services during the
fiscal years ended June 30, 2004 and June 30, 2003.




                                       34
<PAGE>




                            SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SHANNON INTERNATIONAL RESOURCES INC.
(Registrant)


By  /s/ Blair Coady
    -----------------
    Blair Coady, President, Chief Financial Officer
    October 29, 2004


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.


By:  /s/ Blair Coady
     ---------------
     BLAIR COADY, Director, October 29, 2004


By:  /s/ Greg Isenor
     ---------------
     GREG ISENOR, Director, October 29, 2004


By:  /s/ Dennis Brovarone
     --------------------
     DENNIS BROVARONE, Director, October 29, 2004


By:  /s/ John W. Rogers
     ------------------
     JOHN W. ROGERS, Director, October 29, 2004


By:  /s/ Kenneth R. Davis, Jr.
     -------------------------
     KENNETH R. DAVIS, JR., Director, October 29, 2004


By:  /s/ Rod Wark
     ------------
    ROD WARK, Director, October 29, 2004


By:  /s/ David L. Wagner
     --------------------
     DAVID L. WAGNER, Director, October 29, 2004






                                       35