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, 2006

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

                      COMMISSION FILE NUMBER: 000 - 30254.

                           SHANNON INTERNATIONAL 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 100, 238A Brownlow Avenue, Dartmouth, Nova Scotia B3B 2B4
          ------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code:(902) 4871 7225
                                                          --------------

      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]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 [ ] Yes [X] No

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

As of November 14, 2006, 30,575,950 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
(30,464,070 shares) as of November 14, 2006: $1,218,563 (See Item 5)

          Documents incorporated by reference:   None.

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




<PAGE>

                                     Part I.

Item 1. Development of Business

Shannon International Inc., hereafter Shannon has grown from its origins in
natural resources exploration into the information technology sector.


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 acquired working interests in oil and natural gas
exploration permits covering approximately 640,000 acres of Prince Edward
Island, Canada.

On July 23, 2004, the permits expired. Rally Energy Corp., the Operator under
the joint operating agreement covering the expired permits acquired new permits
for approximately 376,000 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, Shannon entered into a letter of agreement with Rally
Energy Corp., whereby it acquired a 20% working interest in the new permits,
referred to as 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
2004 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. 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 from the prior working interests.

On February 23, 2005 Shannon executed and closed an Asset Purchase Agreement
with Rally Energy Corp. Under the terms of the Asset Purchase Agreement, Shannon
purchased all of Rally's working interests in approximately 376,000 gross acres
of PNG permits, as well as Rally's interest in all seismic, geomagnetic surveys
and well bore information.

The consideration paid to Rally is as follows:

     o    2,500,000 common shares of Shannon,
     o    500,000 common share purchase warrants exercisable at US$0.85 per
          share for one year from the date of issue,
     o    retention by Rally of a 2% gross overriding royalty (GORR) on the
          interests being conveyed.

The amount of consideration was determined by negotiation between the parties
based upon the value of the oil and gas permits as recorded in the financial
statements of Shannon and Rally and the historical and estimated market value of
Shannon's common stock.

Shannon also paid the approximately $245,000 in promissory notes due to Rally
from the September 2004 acquisition of its 20% working interest in the Prince
Edward Island oil and gas permits. Shannon obtained a demand note from the Bank
of Montreal accruing interest, paid monthly at 4.5% per annum as the source of
the funds.

This purchase gave Shannon a 92% working interest in a large contiguous block of
permits to consolidate with its current working interests.


On May 10, 2005, Shannon acquired the remaining 8% working interest from
Conquistador Trust for 750,000 shares of Shannon's common stock and 750,000
common stock purchase warrants, each entitling the holder to acquire an
additional share of Shannon common stock at $0.40 per shares at any time prior
to May 10, 2007.



                                       2
<PAGE>

Settlement with Quadrangle Holdings, Ltd.
-----------------------------------------

In February 2006, Blair Coady, the former President and Chairman of Shannon
resigned. On March 22, 2006 Shannon entered into a Settlement Agreement with
Quadrangle Holdings Ltd., a shareholder of Shannon with whom Shannon had a
dispute over the liquidation of collateral given to secure payment of the
exercise of warrants in May 2004. Under the terms of the Agreement, Shannon
designated and issued 100 shares of a Series A Preferred Stock to Quadrangle,
the rights and preferences of which are summarized below. The principal terms of
the settlement as follows:

     1.   All obligations of Quadrangle with respect to the promissory note
          given to Shannon for the exercise of the May 2004 warrant are released
          without any further obligation of Quadrangle.

     2.   The 400,000 common shares of Shannon issued to Quadrangle pursuant to
          the exercise of the May 2004 warrant were credited to the shares
          issued pursuant to the settlement and the May 2004 warrant shall have
          expired pursuant to its terms.

     3.   Quadrangle received 568,750 additional common shares and a further
          warrant to acquire 968,750 common shares at a price of $0.08 US. The
          warrant expires on March 31, 2007.

     4.   Upon the redemption of the Series A Preferred Stock issued to
          Quadrangle or the conversion in whole or in part into Shannon common
          stock, Quadrangle shall be deemed to have released Shannon and its
          current officers and directors from any and all liability with respect
          to Quadrangle's claim. Such release shall not apply to any claims
          against Blair Coady, Shannon's previous President and Chief Executive
          Officer or any other parties.

     5.   The parties acknowledged that a General Security Agreement over
          Shannon's assets was filed by Mr. Coady without Shannon board approval
          with the Province of Alberta on or about November 23, 2005 for the
          benefit of Shear Wind Inc., (formerly EW Power, Inc.), an Alberta
          corporation of which Mr. Coady is believed to be a control person.
          Shannon agreed to take any and all steps necessary to dispute the
          validity and obtain the release thereof in favor of the security
          interest to Quadrangle referenced in Certificate of Designation of
          Series A Preferred Stock.

The following is a summary of the principal rights and preferences of the
preferred stock:

     1.   An Initial Stated Value of $77,500 Cdn., per share ($775,000 cdn.,
          total). The Initial Stated Value per share is subject to adjustment at
          Redemption equal to one percent (1%) of 373,000 times the highest
          thirty day average closing price per common share of Rally Energy
          Corp., an Alberta corporation traded on the TSX Exchange under the
          symbol RAL.V between May 1, 2004 and the date of Redemption.

     2.   A quarterly dividend of 12.5% per annum of the Initial or Adjusted
          State Value. In the event, the Corporation fails to pay any quarterly
          dividend when due, the dividend amount accrued increases to and shall
          remain at 15.5% per annum.

     3.   A liquidation preference over the common stock.

     4.   A Mandatory Redemption on or before December 31, 2006 at the Initial
          or Adjusted Stated Value. Shannon may redeem before said date on
          ninety days notice. The redemption carries a security interest on all
          the assets of Shannon second only to and subject to the validity of
          the General Security Agreement on file in the Province of Alberta,
          Canada on or about November 24, 2005 which Shannon agreed to contest.
          By agreement dated November 14, 2006, the mandatory redemption has
          been extended to July 1, 2007.


                                       3
<PAGE>
     5.   The holder of the Series A Preferred Stock as a class is entitled to
          elect a majority of the number of directors authorized by the
          Corporation's by-laws as in effect from time to time and voting as a
          class on all other matters submitted to the vote of stockholders of
          Shannon.

     6.   The Series A Preferred Stock carries a contingent right to convert
          into common stock of Shannon at the lesser of $0.08 per share or
          ninety percent of the 20 trading day average closing price for the
          period ending the trading day prior to the date of conversion per
          common share for each dollar of the Initial or Adjusted Stated Value
          per Series A Preferred Stock share surrendered. The right to convert
          is contingent upon a sixty-one day prior notice of activation of the
          conversion rights given prior to the date of Mandatory Redemption. The
          activation of the conversion rights to acquire over five percent of
          Shannon's common stock will trigger an obligation by the holder to
          file certain ownership reports with the U.S. Securities and Exchange
          Commission.


Shear Wind, Inc. Settlement Agreement
-------------------------------------

On April 7, 2006 Shannon entered into an agreement with Shear Wind Inc. Shear
Wind Inc., is an Alberta corporation, formerly known as EW Power, Inc. Blair
Coady, the registrant's former president was president of Shear Wind, Inc. EW
Power Inc., had pledged a certificate of deposit as a guarantee of Shannon's
demand loan from the Bank of Montreal in the approximate amount of $250,000
Cdn., which Shannon defaulted on March 15, 2006 causing the Bank of Montreal to
seize the EW Power certificate of deposit. Without Board of Director knowledge
or approval, Mr. Coady executed a General Security Agreement in November 2005 in
favor of Shear Wind Inc., over all of the assets of the registrant. Shannon had
advised Shear Wind Inc., it considered the General Security Agreement to be
invalid.

The principal terms of the Shear Wind Agreement are as follows:

     1.   Shannon acknowledged it is indebted to Shear Wind Inc., in the amount
          of $250,000 Cdn.

     2.   Shear Wind Inc., withdrew its Notice of Intent to enforcement the
          General Security Agreement.

     3.   The parties released each other from any other claims.

     4.   In consideration of the Agreement, Shannon agreed to adopt the General
          Security Agreement as valid and Shear Wind agreed not to appoint a
          receiver to enforce the GSA unless Shannon breaches the agreement.

     5.   Shear Wind shall be paid the first $250,000 Cdn., from the proceeds of
          any sale of Shannon's Prince Edward Island petroleum and natural gas
          assets.

In November 2006, Maxim Resources Inc., and Quadrangle Holdings, Ltd., purchased
$250,000 Cdn., principal amount, 10% annual interest secured convertible
debentures of Shannon maturing at March 31, 2007. The proceeds of the debentures
are held in trust and are to be paid directly to Shear Wind upon Shear Wind
entering into an agreement with Shannon to terminate its security interest and
their liability's payment in full. The debentures are secured with the assets of
Shannon which had been secured by the Shear Wind liability. The debentures also
give the holders the right to convert their principal and accrued interest into
common stock at $0.025 per share. As additional consideration for purchasing the
debentures, the holders received 3,400,000 common stock purchase warrants
exercisable at $0.03 per share until December 31, 2007.


Maxim Resources Settlement Agreement
------------------------------------

On September 22, 2006 Shannon entered into agreement with Maxim Resources, Inc.,
of Vancouver, British Columbia to sell Maxim Resources Inc., a 50% working
interest in all the rights, title and interest in the registrant's Prince Edward
Island Oil and Gas Permits Numbered 02-01, 04-01 and 04-04 and certain seismic
data. Maxim paid $320,000 to the registrant by payment of $50,000 and the
conversion of an accrued loan due to Maxim Resources Inc., from the registrant
with a current balance of $270,000. In the event the permits and seismic data is
subsequently sold, Maxim Resources Inc., will be paid up to $320,000 for its
interest after repayment of existing liens against the assets. $50,000 of
repayment to Maxim Resources, Inc., has been guaranteed by Quadrangle Holdings,
Ltd. Quadrangle Holdings, Ltd., holds Series A Preferred Stock of the Registrant
and is an affiliate of the registrant.



                                       4
<PAGE>

Entry into this agreement allowed the registrant to renew its Prince Edward
Island permits for another year. The registrant and Maxim has not made any
decisions or entered into any other agreements to date as to the sale or
development of the permits.


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.

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 provided
Logical Sequence Incorporated, $341,000 Cdn. for software development. Shannon
also had 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.


Larnaca -LSI Preferred Stock Agreement
--------------------------------------

On September 26, 2006, Shannon and its 50% owned subsidiary, Logical Sequence
Incorporated entered into an agreement with Larnaca Limited, a Turks and Caicos
corporation and Max Wandinger of Calgary, Alberta whereby Larnaca Limited and
Mr. Wandinger waived any and all rights to 50,000 shares of Logical Sequence
Incorporated preferred stock purported to have been issued in 2002 and
compromise of outstanding legal and consulting fees owed by the registrant to
Mr. Wandinger in consideration of payment to Mr. Wandinger of $28,000 and a
release of any and all claims the registrant and Logical Sequence Incorporated
had or may have had against Larnaca Limited and Mr. Wandinger.

Since the acquisition of 51% of LSI by Shannon in June 2004, Shannon reserved a
liability as a result of redeemable preferred stock of LSI, reported by LSI as
outstanding. This amount reserved for the quarter ended March 31, 2006 was
$4,439,363. The preferred shares are 50,000 preferred shares purportedly issued
by LSI in August 2002 in connection with LSI's acquisition of its predecessor
software. The preferred stock had been reported to accrue a 4% dividend which
only becomes payable if LSI has a minimum of $1,000,000 Cdn., after tax profit.
The preferred shares were to be redeemable by LSI at their $100 per share par
value at any time prior to September 1, 2012 when redemption was to be
mandatory. In February 2006, the LSI board of directors resolved to cancel the
previously reported outstanding preferred stock on the basis that the preferred
stock had not been validly created and issued and was therefore null and void.

As a result of this agreement, Shannon has noted the elimination of the
liability from its as a subsequent event in this annual report on Form 10ksb and
will removed the same from its balance sheet as of September 30, 2006.


                                       5

<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 developed to operate 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 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 pure 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.

Products 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:

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.



                                       6
<PAGE>

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.

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 a solution on a monthly basis. Implementation consists of
configuring the ASP server for the client's specific needs, followed by
training.



                                       7
<PAGE>
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;

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.


                                       8
<PAGE>
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.

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 predecessor
under 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.


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 Count(1)         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 upgrading(3)        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


Status of New Products
----------------------
LSI's next generation software suite, LynXphere, is now under development and is
slated for trial testing in 2006. The new suite will consist 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.


                                       9
<PAGE>
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 two large competitors, ADP and Reynolds & Reynolds. 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 $1,700,000 Cdn, has been spent on research and development by LSI
during the past three 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 sixteen full time employees.


Natural Gas Exploration Program
-------------------------------
Shannon currently holds a 50% working interest in petroleum and natural gas
exploration and development permits covering 376,000 acres of Prince Edward
Island, Nova Scotia. On September 22, 2006 Shannon entered into agreement with
Maxim Resources, Inc., of Vancouver, British Columbia to sell Maxim Resources
Inc., a 50% working interest in all the rights, title and interest in Prince
Edward Island Oil and Gas Permits Numbered 02-01, 04-01 and 04-04 and certain
seismic data. Maxim paid $320,000 to the registrant by payment of $50,000 and
the conversion of an accrued loan due to Maxim Resources Inc., from the
registrant with a current balance of $270,000. In the event the permits and
seismic data is subsequently sold, Maxim Resources Inc., will be paid up to
$320,000 for its interest after repayment of existing liens against the assets.
$50,000 of repayment to Maxim Resources, Inc., has been guaranteed by Quadrangle
Holdings, Ltd. Quadrangle Holdings, Ltd., holds Series A Preferred Stock of the
Registrant and is an affiliate of Shannon.

Entry into this agreement allowed Shannon to renew its Prince Edward Island
permits for another year. The registrant and Maxim has not made any decisions or
entered into any other agreements to date as to the sale or development of the
permits.

Shannon's Plan of Operation in natural gas exploration on Prince Edward Island
is that it intends to pursue the sale of these assets in whole or in part. If
sold in part, Shannon anticipates it would sell a percentage of the 2004 working
interest and enter into a joint operating agreement with such other working
interest partners to proportionally fund the exploration program. Shannon does
not expect that it would become the operator responsible for the conduct of an
exploration program.


                                       10
<PAGE>
Shannon through joint operating agreements on the prior working interests had
engaged in planning and exploration activities. Shannon was not the operator of
the prior working interest joint operating agreements and, therefore, was not be
required to own any equipment. If Shannon retains any proportion of the 2004
working interest, it anticipates entering into a new joint operating agreement
to provide the necessary equipment and personnel to carry out the exploration of
the covered acreage.

Through the joint operating agreements on the prior working interests an
exploratory drilling program was established and commenced. This program was
expected to provide for the drilling of up to five exploration or test wells,
two of which were drilled 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 30, 2004, all available data relevant to the permits had 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 was 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 a new joint operating agreement is entered into, 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
anticipates it will be responsible for a percentage of such expenditures
equivalent to its retained ownership percentage.

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
ongoing lease payments.

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 any further 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 is presently one hundred percent.


                                       11
<PAGE>
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.


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 June 30, 2006 and the date of this report, 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.


Research And Development
------------------------
As of June 30, 2006, Shannon had not spent any money on research and development
in the Natural Gas Exploration Program.


                                       12
<PAGE>

Employees
---------
As of June 30, 2006, LSI has fifteen full time employees. Shannon has two full
time employees, its President J. William Clements and Secretary Dennis
Brovarone. Shannon employs additional professionals, consultants and advisors as
required.


Item 2. Description of Property.

Shannon holds a 50% 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 50% 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 50% 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.


Undeveloped Acreage
-------------------
As of June 30, 2006, Shannon, directly or indirectly, held undeveloped acreage
in the 2004 working interest and the prior working interests as follows:

                             June 30, 2005    June 30, 2004
                             -------------    -------------
Undeveloped Acres:

        Gross                    376,000         642,136

        Net                      376,000          55,363


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 June 30, 2006, 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 and 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.


                                       13
<PAGE>
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.

Shannon's Principal Offices
---------------------------
Shannon's offices are located at Suite 100, 238A Brownlow Ave., Dartmouth, Nova
Scotia. The offices are rented from Logical Sequence Incorporated, on a
month-to-month basis to Shannon. J. William Clements, Shannon's President, is a
director of Logical Sequence Incorporated.


Logical Sequence Incorporated Offices
-------------------------------------
LSI's offices are located at suite 100, 238A Brownlow Ave., Dartmouth, Nova
Scotia. 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 except with respect to the agreement with
Shear Wind, Inc.


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, 2006.






                                       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, 2006            $0.09          $0.02
            March 31, 2006           $0.10          $0.06
            December 31, 2005        $0.14          $0.06
            September 30, 2005       $0.26          $0.08
            June 30, 2005            $0.26          $0.11
            March 31, 2005           $0.30          $0.22
            December 31, 2004        $0.45          $0.31
            September 30, 2004       $0.54          $0.32
            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



As of November 14, 2006 there were 30,575,950 shares of common stock outstanding
and there were 100 record holders of Shannon's common stock.

Shannon has not declared a dividend during the fiscal year ended June 30, 2006
and does not anticipate declaring a dividend in its current fiscal year.


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 March
2005, the stockholders approved a 5,000,000 share Officers and Directors Stock
Option Plan. The Plan provides that the Board shall exercise its discretion in
awarding options under the Plan, not to exceed 5,000,000 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.

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. 582,200 shares were issued as grants
pursuant to this plan.


                                       15
<PAGE>

<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 security holders                    5,778,000                  $0.09                      962,000


Equity compensation plans                       2,550,000                  $0.14                       67,800
not approved  by security holders
                                               ----------                 ------                   ----------
Total                                           8,328,000                  $0.11                    1,029,800
                                               ==========                 ======                   ==========
</TABLE>



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. The
following discussion and analysis should be read in conjunction with the audited
financial statements of Shannon.

Shannon has the following areas of operations and investments as summarized
below.


     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 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 Shannon
common stock at the election of the holder at any time over the next five years
on a share for share basis. Shannon agreed to provide Logical Sequence
Incorporated, up to $760,000 U.S. for software development over the period
ending October 31, 2004 of which $341,000 Cdn., was provided. Shannon also had
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 has extended Shannon's commitment to provide
approximatley $660,000 Cdn. on a monthly basis beginnig November 2006 through
December 2007.

Logical Sequence Incorporated is the developer of comprehensive and integrated
software applications for the automotive industry.


     Natural Gas Exploration Program

Shannon currently holds a 50% working interest in petroleum and natural gas
exploration and development permits covering 376,000 acres of Prince Edward
Island, Nova Scotia.

Shannon follows 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.


                                       16
<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 will complete its pilot testing during the current fiscal year, 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.

To further ensure a successful launch of Lynxsphere, LSI has bolstered its
development team with another senior software developer. The new team member
brings an abundance of experience in the ASP.NET development environment and
will contribute greatly to the success of the Lynxphere project. Other
development resources will be added as required.

In addition, LSI is currently interviewing potential candidates to complement
its call center team. LSI is looking for those candidates who, among other
things, possess strengths in system training and implementation.

LSI has launched an awareness campaign throughout its Canadian customer base.
Information is being distributed both in written form and through personal
visits to prepare customers for the Lynxphere upgrade. 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 Shannon's intention to seek a negotiated settlement with EDS
although as of November 2006, no such negotiations have occurred.

In October 2006, LSI entered into an agreement with GE of Canada which stated
that the previously recorded $494,739, debt was null and void. LSI had
previously recorded the amount as due and payable.

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 in natural gas exploration on Prince Edward Island
is that it intends to seek out joint venture partners for a further exploration
program or consider the sale of these assets if an acceptable offer is received.
As of November 14, 2006, Shannon has no agreements with respect to either a
joint venture partner or a sale of the assets. If sold in part, Shannon
anticipates it would sell a percentage of the 50% of the 2004 working interest
it presently holds and enter into a joint operating agreement with such other
working interest partners to proportionally fund the exploration program.
Shannon does not expect that it would become the operator responsible for the
conduct of an exploration program.


                                       17
<PAGE>
Shannon through joint operating agreements on the prior working interests had
engaged in planning and exploration activities. Shannon was not the operator of
the prior joint operating agreements and, therefore, was not be required to own
any equipment. If Shannon retains any proportion of 50% of the 2004 working
interest it presently holds, it anticipates entering into a new joint operating
agreement wherein the new partner would be the operator and would provide the
necessary equipment and personnel to carry out the exploration of the covered
acreage.

Through the joint operating agreements on the prior working interests an
exploratory drilling program was established and commenced. This program was
expected to provide for the drilling of up to five exploration or test wells,
two of which were drilled 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 30, 2004, all available data relevant to the permits had 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 was 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 a new joint operating agreement is entered into, 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
anticipates it will be responsible for a percentage of such expenditures
equivalent to its retained ownership percentage.


Results of Operations - Logical Sequence Incorporated
-----------------------------------------------------
Year Ended June 30, 2006
------------------------

For the fiscal year ended June 30, 2006, Logical Sequence Incorporated (LSI) had
a net loss of $97,170 Cdn. LSI had revenues of $1,108,380 Cdn, with cost of
goods sold of $14,780 Cdn, and a gross profit of $1,093,600 Cdn. Revenues are
from existing customers using the legacy software. Expenses were $1,190,770 Cdn,
of which $997,633 Cdn, was salaries and wages.


                                       18
<PAGE>

Results Of Operations - Shannon International Inc.
--------------------------------------------------
Year Ended June 30, 2006
------------------------

During the year ended June 30, 2006, Shannon recorded a net loss of $764,349 as
compared to a loss of $10,059,557 for the year ended June 30, 2005. This is a
decrease in the loss of approximately $9,300,000 which is primarily due the
restatement of Shannon's 2005 financial statements to record a full impairment
of $9,143,180 of intangible assets resulting from the full impairment of
intangible assets acquired from LSI. Please see Notes 3 and 8 to the financial
statements. Administrative costs remained essentially the same as in 2005.
Salaries and wages paid through LSI increased approximately $3,000 and were
approximately $839,000. Professional and consulting fees decreased from
approximately 207,000 and $442,000 respectively in 2005 to approximately
$130,000 and 84,000 in 2006 reflecting current management's policy of
eliminating third party consultants and the termination of the former Chairman,
CEO, CFO's employment agreement. The loss is $0.07 per common share. Shannon has
not yet generated any revenues from its Natural Gas Exploration Program. Total
expenses were $1,729,518 in 2006.

As of June 30, 2006, Shannon had total liabilities of approximatley $7,500,000
consisting of Current liabilities of $955,763 in accounts payable and accrued
liabilities, $141,849 due to related parties and $1,001,275 in promissory notes.
Liabilities increased approximately $1,400,000 from 2005 due to a $119,000
increase in promissory notes, a $250,000 increase in accounts payables and an
approximate $663,000 increase in Obligation for mandatory redemption of LSI
preferred stock.

Promissory Notes liabilities included $216,178 due to Shear Wind, Inc. On April
7, 2006 Shannon entered into a settlement and cooperation agreement with Shear
Wind, Inc. (formerly known as EW Power Inc.) arising out of the actions of Mr.
Blair Coady and others associated with him in both companies. Mr. Coady,
Shannon's former president, was also at the relevant times president of Shear
Wind, Inc. until March, 2006. In connection with activities of Mr. Coady and
others associated with him, Shear Wind, Inc. pledged a certificate of deposit as
a guarantee for the demand loan taken by Shannon from a Canadian Chartered Bank
in the approximate amount of $250,000CDN.

In November 2006, Maxim Resources Inc., and Quadrangle Holdings, Ltd., purchased
$250,000 Cdn., principal amount, 10% annual interest secured convertible
debentures of Shannon maturing at March 31, 2007. The proceeds of the debentures
are held in trust and to be paid directly to Shear Wind upon Shear Wind entering
into an agreement with Shannon to terminate its security interest and their
liability's payment in full. The debentures are secured with the assets of
Shannon which had been secured by the Shear Wind liability. The debentures also
give the holders the right to convert their principal and accrued interest into
common stock at $0.025 per share. As additional consideration for purchasing the
debentures, the holders received 3,400,000 common stock purchase warrants
exercisable at $0.03 per share until December 31, 2007. Please see Notes 12 and
24 to the financial statements.

On September 26, 2006, Shannon and its 50% owned subsidiary, Logical Sequence
Incorporated entered into an agreement with Larnaca Limited, a Turks and Caicos
corporation and Max Wandinger of Calgary, Alberta whereby Larnaca Limited and
Mr. Wandinger waived any and all rights to 50,000 shares of Logical Sequence
Incorporated preferred stock purported to have been issued in 2002 and
compromise of outstanding legal and consulting fees owed by the registrant to
Mr. Wandinger in consideration of payment to Mr. Wandinger of $28,000 and a
release of any and all claims the registrant and Logical Sequence Incorporated
had or may have had against Larnaca Limited and Mr. Wandinger. Please see Note
24 to the financial statements.

Shannon also has a liability of $670,599 for its outstanding preferred stock
issued to Quadrangle Holdings, Ltd. Please see Development of the Business
Settlement with Quadrangle Holdings, Ltd. page 3 and Notes 13 and 15 to the
financial statements.

The accounts payable include $633,146 Cdn, 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 approximately $139,271 Cdn due to
related parties is due to LSI shareholders and a former officer and director.
This amount decreased from approximately $142,000 Cdn in 2005 due to settlement
of debt.


                                       19
<PAGE>
The approximately $1,000,000 in promissory notes includes LSI's $550,000
principal balance owed to GE of Canada which was eliminated in October 2006 by
the agreement of GE of Canada, that the amount was not owed. This liability will
be removed from the balance sheet during the quarter ended December 31, 2006.
Please see Note 24 to the financial statements.

Shannon had previously recorded a liability for the minority interest in LSI.
This amount was reduced to zero due to the impairment of intangible assets
acquired from LSI. Please see Notes 3 and 8 to the financial statements.

Shannon's current assets at June 30, 2006, consisted of $101,970 in cash and
$7,189 in marketable securities. The decrease in market value of the securities
is due to Shannon having its liquidated marketable securities in order to pay
expenses.

As of June 30, 2006, Shannon had an investment in unevaluated oil and gas
properties of $585,520 which decreased from $1,816,255 for the year ended June
30, 2005. The decrease is due to the sale of a fifty percent working interest to
Maxim Resources Inc., in the 2004 working interests and permits and a
Management's determination that the value of the oil and gas properties has been
impaired in the amount of $1,264,214 based upon an inability to sell the
properties. Please see Notes 7 and 24 to the financial statements.

Total assets as of June 30, 2006 were $806,508 compared to $2,203,593 as of June
30, 2005. The decrease is due primarily to a decrease in the value of
unevaluated oil and gas properties due the sale of 50% of the 2004 working
interests and permits and Management's impairment of these assets and the 2005
impairment of intangible assets acquired from LSI.


Liquidity and Capital Resources - Logical Sequence Incorporated
---------------------------------------------------------------

Shannon's Logical Sequence Incorporated subsidiary is producing revenue which
was $935,169 for the fiscal year ended June 30, 2006. This is Shannon's only
internal source of liquidity which is insufficient to meet Shannon's expenses
and liabilities. Shannon is not producing revenues from its natural gas
exploration program. Shannon is dependent upon the sale of its equity securities
to meet its operating expenses and liabilities. Shannon had $101,970 in cash as
of June 30, 2006.

Shannon's cash requirements are approximately $2,000,000. This amount includes a
minimum of $300,000 to fund LSI sales and marketing; approximately $1,700,000 of
current liabilities which include the potential liability to EDS.

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.






                                       20
<PAGE>




Item 7.   Financial Statements





                           SHANNON INTERNATIONAL INC.


                              FINANCIAL STATEMENTS



                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                      WITH

            REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS










<PAGE>



                           SHANNON INTERNATIONAL INC.






                                 C O N T E N T S

                                                                         Page
                                                                       ---------

Reports of Independent Registered Public Accounting Firms              F-2 - F-3

Financial Statements

       Consolidated Balance Sheets                                        F-4

       Consolidated Statements of Operations                              F-5

       Consolidated Statement of Stockholders' Equity (Deficit)        F-6 - F-7

       Consolidated Statements of Cash Flows                           F-9 - F-8

Notes to Consolidated Financial Statements                            F-9 - F-30








                                      F-1

<PAGE>

          Report of Independent Registered Public Accounting Firm


The Board of Directors
Shannon International Inc.


We have audited the accompanying consolidated balance sheet of Shannon
International Inc. as of June 30, 2006, and the related statements of
operations, stockholders' (deficit) and cash flows for the year ended June 30,
2006. 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. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. 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 audit provides 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 year ended June 30, 2006, 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 working capital and stockholders' deficits and has incurred operating losses
since inception, which raises substantial doubt about its ability to continue as
a going concern. Management's plan in regard to this matter is also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ SCHUMACHER & ASSOCIATES, INC.
---------------------------------
SCHUMACHER & ASSOCIATES, INC.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211

November 16, 2006






                                      F-2

<PAGE>

           Report of Independent Registered Public Accounting Firm

The Board of Directors
Shannon International Inc.



We have audited the accompanying consolidated balance sheets of Shannon
International Inc. as of June 30, 2005, and 2004 (not separately included
herein) the related statements of operations, stockholders' equity and cash
flows for the years ended June 30, 2005 and 2004 (not separately included
herein). 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 Inc. at June 30, 2005, and the results of its operations and its
cash flows for the year ended June 30, 2005, 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 insufficient working capital and has incurred operating losses since
inception, which raises substantial doubt about its ability to continue as a
going concern. Management's plan in regard to this matter is also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


/s/ Miller and McCollom
-----------------------

MILLER AND McCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
October 20, 2005 (except for Note 8 which is November 16, 2006)








                                      F-3


<PAGE>
<TABLE>
<CAPTION>


                           SHANNON INTERNATIONAL INC.
                          Consolidated Balance Sheets

                                     ASSETS
                                     ------

                                                                   June 30, 2006   June 30, 2005
                                                                                    (Restated)
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Current Assets:
   Cash                                                            $    101,970    $     45,339
   Accounts receivable and advances                                      37,903          32,442
   Income tax credit receivable                                              --         172,726
   Prepaid expense                                                        1,086           2,686
   Investments in marketable securities                                   7,189          96,758
                                                                   ------------    ------------
         Total current assets                                           148,148         349,951
Furniture and fixtures less accumulated  depreciation of
     99,923 and $63,468 on June 30, 2006 and 2005                        72,840          37,386
Unevaluated oil and gas properties (Full cost method)                   585,520       1,816,255
                                                                   ------------    ------------
         Total assets                                              $    806,508    $  2,203,593
                                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
   Accounts payable, other accrued expenses                        $    955,763    $    705,149
   Due to related parties                                               141,849         143,991
   Dividends payable on preferred stock                                  30,031              --
   Obligation for mandatory redemption of preferred shares              670,599              --
   Promissory notes                                                   1,001,275         882,742
   Reserve for collateral replacement                                        --         327,175
                                                                   ------------    ------------
         Total current liabilities                                    2,799,517       2,059,057

Asset retirement obligations                                             28,314          26,235
Obligation for mandatory redemption of preferred shares               4,697,037       4,034,324
                                                                   ------------    ------------

         Total liabilities                                            7,524,868       6,119,616

COMMITMENTS AND CONTINGENCIES
   (Notes 2,12,13,16,18,19,22, 24)

STOCKHOLDERS' EQUITY (DEFICIT)


   Common stock - 200,000,000 shares of $.001 par value
     authorized; 30,575,950, and 29,907,200 shares issued
     and outstanding at June 30, 2006 and 2005                           30,576          29,907
   Additional paid-in capital                                         5,513,931       5,362,931
   Common stock warrants                                                414,756         371,319
   Accumulated deficit                                              (12,664,000)     (9,822,906)
   Accumulated other comprehensive income                               (13,623)        142,726
                                                                   ------------    ------------
         Total stockholders' equity (deficit)                        (6,718,360)     (3,916,023)
                                                                   ------------    ------------
Total liabilities and stockholders' equity (deficit)               $    806,508    $  2,203,593
                                                                   ============    ============
</TABLE>

  The accompanying notes are an integral part of these financial statements

                                      F-4



<PAGE>




                           SHANNON INTERNATIONAL INC.

                      Consolidated Statements of Operations


                                                   For the year     For the year
                                                      ended            ended
                                                  June 30, 2006    June 30, 2005
                                                                     (Restated)
                                                  ------------     ------------

Sales                                              $    965,169    $    908,450

Expenses
     Administrative costs                               229,770         229,852
     Salaries and wages                                 839,053         836,051
     Consulting                                          84,217         442,483
     Lease impairment                                        --         107,679
     Impairment of intangible asset                          --       9,143,180
     Settlement - collateral replacement                432,137              --
     Professional fees                                  129,526         206,856
     Currency exchange                                   12,736           1,388
     Accretion expense                                    2,079             518
                                                   ------------    ------------
         Total expenses                               1,729,518      10,968,007
                                                   ------------    ------------

(Loss) from operations                                 (764,349)    (10,059,557)

Other Income and Expenses:
     Interest expense                                  (184,377)       (286,212)
     Interest income                                         --           1,293
     Write down oil & gas properties                 (1,264,214)             --
     (Loss) gain on sale of investments                 (58,113)         41,007
                                                   ------------    ------------
Net (loss) before minority interest                  (2,271,053)    (10,303,469)

Minority interest (income) loss in
     subsidiary's earnings                                   --      (4,660,574)
                                                   ------------    ------------

Net (loss) before extraordinary item                 (2,271,053)     (5,642,895)

Extraordinary Item:
Provision for collateral replacement
(Note 15)                                                    --        (301,348)
                                                   ------------    ------------
Net (loss)                                           (2,271,053)     (5,944,243)

Dividends attributable to preferred
stock                                                    30,031              --
                                                   ------------    ------------
Net loss allocable to common shares                $ (2,301,084)   $ (5,944,243)
                                                   ============    ============

Net (loss) before extraordinary item, minority
interest and dividend  attributable to preferred
stock                                                (2,271,053)    (10,303,469)

Net (loss) per share extraordinary before item     $      (0.08)   $      (0.41)

Net (loss) allocable to common stock excluding       (2,301,084)    (10,303,469)
minority interest

Net (loss) per share allocable to common stock     $      (0.08)   $      (0.41)

Weighted average number of shares
     outstanding                                     30,151,431      25,351,367

Other comprehensive income:
     Net (loss) before minority interest           $ (2,271,053)   $ (5,944,243)
     Currency translation adjustment                   (168,729)        171,793
     Unrealized gain (loss) on marketable
       securities                                        12,380          72,011
                                                   ------------    ------------
Total other comprehensive income                   $ (2,427,402)   $ (5,631,399)
                                                   ============    ============





    The accompanying notes are an integral part of these financial statements

                                      F-5




<PAGE>
<TABLE>
<CAPTION>



                           SHANNON INTERNATIONAL INC.

                  Consolidated Statement of Stockholders' Equity


                                                      Convertible                                      Accumulated
                                                      Subsidiary    Additional  Common                    Other
                                                        Shares       Paid-in    Stock     Accumulated Comprehensive
                                  Shares    Par Value   Issued       Capital    Warrants    Deficit      Income         Total
                                ----------  --------- ------------  ----------  --------  -----------   ---------    -----------
<S>                            <C>         <C>        <C>          <C>         <C>       <C>           <C>          <C>
Balance June 30, 2004           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)
                                                                                                                       3,127,196
Convertible subsidiary
shares exchanged                 5,100,000  $   5,100  $(2,111,400) $2,106,300                                       $        --
Common stock issued for
services                           312,200        712                  167,558                                           168,270
Common stock exchanged for
oil and gas properties           3,250,000      3,250                  895,431   111,319                               1,010,000

Warrants exercised,
December 31, 2004                  100,000        100                   47,900    (8,000)                                 40,000

Imputed interest promissory
note contributed by
shareholder                                                             (1,293)                                          (1,293)

Net loss for the year ended
June 30, 2005 (Restated)                                                                   (5,944,243)                (5,944,243)

Currency translation
(Restated)                                                                                                171,793        171,793
</TABLE>



    The accompanying notes are an integral part of these financial statements

                                      F-6

<PAGE>
<TABLE>
<CAPTION>

                           SHANNON INTERNATIONAL INC.

            Consolidated Statement of Stockholders' Equity, continued




                                                      Convertible                                      Accumulated
                                                      Subsidiary    Additional  Common                    Other
                                                        Shares       Paid-in    Stock     Accumulated Comprehensive
                                  Shares    Par Value   Issued       Capital    Warrants    Deficit      Income         Total
                                ----------  --------- ------------  ----------  --------  -----------   ---------    -----------
<S>                             <C>         <C>                     <C>         <C>       <C>           <C>          <C>
Minority interest (Restated)                                                               (2,631,975)                (2,631,975)
Unrealized gain on
marketable securities and
currency translation                                                                                      (15,771)       (15,771)
                                ----------  --------- ------------  ----------  --------  -----------   ---------    -----------

Balance June 30, 2005           29,907,200  $  29,907           --  $5,362,931  $371,319  $(9,822,906)  $ 142,726    $(3,916,023)

Currency translation on
intangible asset impairment                                                                                             (540,010)

Adjusted June 30, 2005
balance                         29,907,200     29,907           --  $5,362,931  $$371,319 $(10,362,916) $ 142,726    $(4,456,033)


Common stock sold                  100,000        100               $    9,900  $         $             $            $    10,000

Settlement of collateral
replacement                        568,750        569                   44,931    43,437                                  88,937

Beneficial conversion of
preferred stock                                                         96,169                                            96,169

Net loss for the year ended
June 30, 2006                                                                              (2,301,084)                (2,301,084)

Currency translation                                                                                     (168,729)      (168,729)

Unrealized loss on
marketable securities                                                                                      12,380         12,380
                                ----------  ---------  -----------  ----------  --------  ------------  ---------    -----------
Balance June 30, 2006           30,575,950  $  30,576  $        --  $5,513,931  $414,756  $(12,664,000) $ (13,623)   $(6,718,360)
                                ==========  =========  ===========  ==========  ========  ============  =========    ===========
</TABLE>


    The accompanying notes are an integral part of these financial statements

                                      F-7

<PAGE>


                           SHANNON INTERNATIONAL INC.

                      Consolidated Statements of Cash Flows



                                                     Year ended     Year ended
                                                       June 30,    June 30, 2005
                                                        2006        (Restated)
                                                     -----------    -----------
Operating activities:
     Net (loss)                                      $(2,271,053)   $(5,944,243)
     Adjustments to reconcile net loss to cash
       used for operating activities:
     Adjustments for non-cash items:
       Loss (Gain) on sale of investments                 58,113        (41,007)
       Depreciation expense                               30,483         24,694
       Minority interest in subsidiary earnings         (177,493)    (4,660,574)
       Software impairment                                    --      9,143,180
       Interest added to notes payable                    96,169        298,380
       Non cash interest income                               --         (1,293)
       Deferred income tax benefit                       189,473         34,519
       Currency exchange                                  12,399          1,388
       Lease impairment                                       --        107,679
       Provision for collateral replacement              432,137        301,348
       Write down oil & gas properties                 1,264,214             --
       Stock and options issued for services                  --        168,270
     Changes in operating assets and liabilities:
       Accounts receivable                               (22,403)        24,529
       Accounts payable and advances                     181,865        (94,180)
       Prepaid expense                                     7,456         12,281
                                                     -----------    -----------
       Total adjustments                               2,271,053      5,319,214
                                                     -----------    -----------
       Net cash (used by)
          operating activities                          (198,640)      (625,029)

Investing activities
     Investment in oil and gas properties                (33,480)            --
     Acquisition of furniture and fixtures               (62,514)       (12,612)
     Purchases of marketable securities                       --        (85,227)
     Sales of marketable securities                       44,172         15,281
                                                     -----------    -----------
       Net cash (used by) investing activities           (51,822)       (82,558)

Financing activities
     Proceeds from notes payable                         559,323        670,459
     Repayment of notes payable                         (203,467)      (197,164)
     Repayment of shareholder advances                   (59,144)            --
     Sale of collateral                                       --        185,827
     Issuance of common stock and warrants                10,000         40,000
                                                     -----------    -----------
       Net cash provided by financing
            activities                                   306,712        699,122
                                                     -----------    -----------
Net change in cash and cash equivalents                   56,250         (8,465)
Foreign currency translation adjustment                      381        (22,980)
Cash at beginning of period                               45,339         76,784
                                                     -----------    -----------
Cash at end of period                                $   101,970    $    45,339
                                                     ===========    ===========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
       Interest                                      $        --    $    58,724
       Income taxes                                           --             --

Supplemental schedule of noncash investing and
  financing activities:
     Exchange of marketable securities for payment
       of note payable                                        --         91,354
     Exchange of marketable securities for
       oil and gas properties at fair value                   --        102,532





    The accompanying notes are an integral part of these financial statements


                                      F-8

<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


Note 1 - Summary of Significant Accounting Policies

This summary of significant accounting policies of Shannon International 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 and 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.

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". Revenues from
product user license has been recognized as the amount of a license sale
transaction to Electronic Date Systems corporation (EDS) that may be required to
be refunded to EDS. See Note Subsequent Events.



                                      F-9

<PAGE>

                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006

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.

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.

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 accounts
are translated at the historical rate. Related translation adjustments are
reported as other comprehensive income, a component of stockholders' equity.

Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk are principally cash and cash equivalents and accounts receivable.
At June 30, 2006, cash shown on the financial statements includes CAD$112,901
(US$101,970) in Canadian Dollar bank accounts. The Company places its cash and
cash equivalents in highly rated institutions but does not have any governmental
deposit insurance. Concentration of credit risk with respect to receivables is
limited to certain customers to which the Company makes sales.

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.


                                      F-10
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


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.

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,
currency translation adjustment in the amount of $(30,310) and unrealized gains
in the amount of $16,687 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.



                                      F-11
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


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.

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.

Prior to the Company acquisition of 100% of the working interests in the PEI
properties, 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 INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006

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 working capital and stockholders deficits 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 through a Private Placement Offering (See Note 24). These funds
will be used for payable obligations, including the Company's obligation to a
note payable holder. In addition, the Company has extended until July 1, 2007,
the mandatory redemption of preferred shares as per the Settlement Agreement
with Quadrangle Holdings Limited. The Company is resuming its efforts to sell
its oil and gas assets as an additional source of working capital.

Note 3 - 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 had an
option to acquire the remaining forty-nine percent of the Logical Sequence
Incorporated that expired October 20, 2005.



                                      F-13
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



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

Note 4 - Accounts Receivable

                                                    2006               2005
                                                -------------------------------
Current accounts receivable and advances          $37,903            $32,442
                                                ===============================

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

Note 5 - 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, 2006  June 30, 2005
--------------------------------------------------   -------------   ------------
<S>                                                  <C>             <C>
Classified as available for sale:
     Securities with net unrealized gains            $          70   $       --
     Securities with net unrealized losses                   7,119       96,758
                                                     -------------   -----------
Total                                                $       7,189   $   96,758
                                                     =============   ===========


Unrealized gains included in comprehensive income:
     Balance at beginning of year:                  $      (29,961) $   (13,296)
       Realized during year                                 13,274       41,007
       Unrealized gains (losses) added to
       comprehensive income during year                         --      (57,672)
                                                     -------------   -----------
     Balance at end of year                          $     (16,687)  $  (29,961)
                                                     =============   ===========

Additional information:
     Proceeds from sales of marketable securities    $      44,172   $   93,000
     Payment of note payable with marketable
        securities                                              --       91,354
     Gains realized during the year                            791       41,007

</TABLE>




                                      F-14
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006




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

At June 30, 2005, $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 6 - Property and Equipment

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

                                                                              Depreciation
                                                                                  Rate
                                               Accumulated        Net              and
                                     Cost      Depreciation      Amount          Method
  June 30, 2006                ------------    ------------    ----------    ------------------
<S>                            <C>             <C>             <C>                         <C>
   Furniture and fixtures      $     86,319    $     30,416    $   55,903    Straight Line 3 yr
   Computer equipment                77,313          66,305        11,008    30% diminishing
   Computer software                  5,498           3,650         1,848
   Leasehold improvements             3,631              91         3,540
                               ------------    ------------    ---------
                               $    172,761    $    100,462    $   72,299

  June 30, 2005:
   Furniture and Fixtures      $     37,839    $     23,458    $   14,381     Straight Line 3 yr
   Computer equipment                63,015          40,100        23,005      30% diminishing
                               ------------    ------------    ---------
                               $    100,854    $     63,468    $   37,386
</TABLE>


During the quarter ending September 2006 and 2005, the Company paid the fees and
rental for the permits held to Prince Edward Island Energy Corporation. The fees
and rental in the amount of $33,480 and $31,217 was capitalized since there was
no active exploration at the time that the fees were paid

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 7 - 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.

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.


                                      F-16
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



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. The lease costs of the permits not renewed have been determined to be
impaired and have been expensed. 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 working interest in consideration of
promissory note in the amount of $132,736 USD payable to the former operator due
on or before December 31, 2004. Shannon also gave the former operator, a
promissory note in the amount of $56,025 payable upon thirty days written notice
for the outstanding costs.

The Company acquired an additional 72% interest in the Prince Edward Island oil
and gas permits, on February 23, 2005. As described in Note 14, the Company
exchanged stock and warrants valued at $875,000 USD. The value of shares issued
was based on fair market value on the date issued. The seller granted a gross
overriding royalty of 2% on the interests being conveyed to a third party. The
registration of the shares and the warrants was waived by the Company's former
president and CEO who was also a director of the company who holds the stock and
warrants.

On May 2, 2005 a Canadian Trust (the `Trust") agreed to assign an undivided 8%
working interest in PEI to the Company. As described in Note 14, the Company
exchanged stock and warrants valued at $135,000 USD. The value of the shares
issued was based on fair market value on the date issued.

As of June 30, 2006 and 2005, 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, 2006 and 2005 the undeveloped acreage for the properties
was approximately 376,000 acres.

As of the date of this report, the property has one abandoned well and one
suspended well.

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

          Acquisition Costs                      $ 1,260,598
          Development Costs                          589,136
                                                 -----------
                   Total                           1,816,255
          Less impairments                        (1,264,214)
                                                 -----------
                                                 $   585,520
                                                 ===========


                                      F-16
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



On September 22, 2006, the Company sold a 50% working interest for $320,000 CDN
($280,000 USD). Since this is the only true market data available to the
Company, it is management's determination that an impairment of $1,264,214 USD
is required at June 30, 2006. (See Note 24)

Note 8 - Restatement of Financial Statements
         -----------------------------------

In accordance with SFAS 154, the Company has corrected an error made effective
as of June 30, 2005. The financial statements, as originally prepared, did not
reflect the abandonment of existing software development in accordance with the
decision made in April 2005 by the management of Logical Sequence Inc.

The effect of the adjustment was to reduce total assets in the Consolidated
Balance Sheet from $11,635,008 to $2,203,593, or a reduction of assets of
$9,430,416. Accordingly, the Company increased its deficit from $2,527,909 to
$9,822,906, an increase of $7,294,997. Accumulated other comprehensive income
was decreased by $572,688.

Loss from operations increased from $881,857 to $10,059,557. Total net loss
increased from $1,281,221 to $10,303,469 or from $0.05 per share loss to $0.41
per share loss.

In addition, the impairment adjustment caused the minority interest in the
Company to become a negative amount and was thereby reduced to zero.


Note 9 - 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 the Company records 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 June 30, 2004                                $ 3,487
                 Additional obligations incurred              22,230
                 Accretion expense                               518
                                                             -------
        Balance June 30, 2005                                $26,235
                 Additional obligations incurred                  --
                 Accretion expense                             2,079
                                                             -------
        Balance June 30, 2006                                $28,314
                                                             =======



                                      F-17
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



Note 10 - 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. During the year ended
June 30, 2005 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 concluded negotiations to have the payment
obligation cancelled. (See Note 24.)


Note 11 - Due to Related Parties
          ----------------------

As at June 30, 2006 and 2005, the Company owed related parties (companies owned
by a shareholder and former management of LSI) the following amounts:


                                               2006            2005
                                             --------        --------
   Accounts payable to related parties       $141,849        $135,882
   Accrued interest                             8,510           8,109
                                             ------------------------
                                             $150,359        $143,991
                                             ========================

Note 12 - Promissory Notes
          ----------------

The Company entered into a promissory note with a Canadian corporation in the
amount of $220,000 CDN ($180,328 USD) on January 6, 2005, with an interest rate
of 10% per annum calculated and payable semiannually. Subsequent to June 30,
2006, the note has been settled.
(See Note 24)

A note payable was entered into on March 15, 2005 with a Canadian chartered bank
in the amount of $250,000 CDN ($201,613 USD) is a demand loan - non-revolving,
interest only for a maximum of one year. If the loan is not in default the
interest rate is prime rate payable monthly. Prime rate means the floating
annual rate of interest established from time to time by the Bank of Montreal as
the reference rate it will use to determine rates of interest on Canadian dollar
loans to customers in Canada. On March 17, 2006 the note payable was repaid.

The Company borrowed $357,777 CDN ($288,519 USD) during February 2005 from a
Canadian company, which was repaid with marketable securities valued at $91,932
USD and cash of $196,587 USD.


                                      F-18
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


On April 7, 2006 the Company entered into a settlement and cooperation agreement
with Shear Wind, Inc. arising from Shear Wind, Inc. having pledged a certificate
of deposit as guarantee for the demand loan of the Company from a Canadian
chartered bank in the amount of $250,000 CDN. During the third quarter, the
Canadian chartered bank took the pledged security of Shear Wind, Inc. in full
satisfaction of the loan.

Under the settlement agreement the Company is indebted to Shear Wind, Inc. in
the net amount of $250,000 CDN without any interest accruing. The Company also
gave Shear Wind, Inc., a General Security Agreement as valid effective only on
and after April 7, 2006 for the net amount of $250,000 CDN. Shear Wind, Inc.
agreed to assist the Company with the sale of its natural gas and petroleum
assets. From the proceeds of sale of the natural assets, Shear Wind, Inc. shall
be paid the first $250,000 CDN received. In addition, a bonus may be paid to
Shear Wind, Inc. depending on the sale price achieved. Subsequent to June 30,
2006, the Shear Wind, Inc. obligation has been settled. (See Note 24)

Note 13 - Obligations for Mandatory Redemption of Preferred Shares
          --------------------------------------------------------

The Company's subsidiary, LSI, 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
$4,697,037 USD at June 30, 2006. Subsequent to June 30, 2006, the Preferred
shares obligation was cancelled as described in Note 24. The obligation is shown
in the accompanying Consolidated Balance Sheet as a non-current liability in
accordance with its original due date of September 1, 2012.

At June 30, 2006, the Company had a current obligation for certain redeemable
preferred shares, that became effective March 22, 2006. As settlement of a
previously disclosed $327,175 liability to a shareholder over the liquidation of
collateral given to secure the payment of the exercise of warrants in May 2004,
the Company designated and issued 100 shares of a Series A Preferred Stock to
the shareholder on March 22, 2006 with a stated capital of $6,668. The stated
capital is subject to adjustment based upon highest thirty-day average closing
price per common share of Rally Energy Corp., an Alberta corporation traded on
the TSX Exchange under the symbol RAL.V between May 1, 2004 and the date of
redemption. As a result of the adjustment feature, the value of liability for
redemption must be based on the Black Scholes Option Pricing Model resulting in
a liability as of March 31, 2006 of $670,599. The Preferred Stock carries a
dividend of 12.5% per annum due and payable quarterly with a mandatory
redemption on or before December 31, 2006 at the initial or adjusted stated
value. An extension for the mandatory redemption was granted to July 1, 2007.
The Company has accrued $30,031 for dividends payable as of June 30, 2006. The
Preferred Stock and accrued dividend may also be converted into the Company's
common stock at the lesser of $0.08 per share or ninety percent of the 20
trading day average closing price for the period ending the trading day prior to
the date of conversion per common share for each dollar of the Initial or
Adjusted Stated Value per Series A Preferred Stock share surrendered. The
Preferred Stock is also entitled to elect a majority of the Company' directors
and vote as a class on any matter submitted to the shareholders. The shareholder
was also issued 568,750 additional common shares valued at $.08 per share, and a
further warrant to acquire 968,750 common shares at a price of $0.08 per share
as part of the settlement. A loss on the settlement of $432,137 is shown in the
accompanying Consolidated Statement of Operations.



                                      F-19
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



The warrant described above expires on March 31, 2007. The value of the warrant,
included in the loss on the settlement, is based on the Black Scholes Option
Pricing Model. The variables used in the pricing model are stock price of $.08,
interest rate of 4.63 percent, volatility rate of 145.20 percent resulting in a
value in the amount of $43,437.

Note 14 - Stockholders' Equity
          --------------------

Pursuant to the acquisition of the 51% interest in LSI by Shannon Investments
Ltd., Investments issued 5,100,000 shares of non-voting common stock, which are
exchangeable for the Company's common stock. To date the Company has exchanged
1,037,350 shares of its common stock for former shareholders of LSI and has
issued the balance of 4,062,650 shares to Investments to be held in trust for
future exchanges of stock. The LSI exchangeable shares are eliminated in the
consolidation of the Company's financial statements.

During the three months ending September 30, 2004, the Company issued 100,000
shares of common stock for services, valued at $39,000 (weighted average $.39
per share) based on fair market value on the date issued.

During the three months ended December 31, 2004, an investor purchased 100,000
additional shares of the Company's common stock for $40,100 by redeeming 100,000
warrants. The Company issued 100,000 shares of common stock for services, valued
at $39,000 (weighted average $.39 per share) based on fair market value on the
date issued.

During the three months ended March 31, 2005, the Company issued 112,200 shares
of common stock for services, valued at $37,270 (weighted average of $.33 per
share). The value of shares issued was based on fair market value on the date
issued.

As described in Note 7, the Company issued 2,500,000 shares of common stock and
500,000 common share purchase warrants for the acquisition of an oil and gas
working interest. The total amount allocated is the fair market value at the
date of issuance of the common stock shares and warrants is as follows: the
combined value of the acquisition was $875,000 composed of 2,500,000 shares of
common stock allocated at $813,706 ($0.35 per share) and the warrants valued at
$61,294 (approximately $0.12 per warrant). Each warrant entitles the holder to
acquire one common share at an exercise price of $0.85 for a period of twelve
months from the date of issuance. The fair value of each warrant granted was
computed by the Black-Scholes method using the following weighted-average
assumptions: The expected volatility is 150%. The risk-free interest rate is
2.54% and the expected term is one year.


                                      F-20
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006

As described in Note 7, the Company issued 750,000 shares of common stock and
750,000 common share purchase warrants for the acquisition of an oil and gas
working interest. The total amount allocated is the fair market value at the
date of issuance of the common stock shares and warrant is as follows: the
combined value of the acquisition was $135,000 composed of stock allocated at
$84,975 (approximately $0.11 per share) and the warrants valued at $50,025
(approximately $0.07 per warrant). Each warrant entitles the holder to acquire
one common share at an exercise price of $0.40 for a period of two years from
the date of issuance. The fair value of each warrant granted was computed by the
Black-Scholes method using the following weighted-average assumptions. The
expected volatility is 150%. The risk-free interest rate is 2.84% and the
expected term is two years.

During the three months ended June 30, 2005, the Company issued 100,000 shares
of common stock for services valued at $17,000 (weighted average of $.17 per
share) and 300,000 shares of common stock for services valued at $36,000
(weighted average of $.12 pre share). The value of shares issued was based on
fair market value on the date issued.

 3,350,000 warrants were to expire on December 31, 2004. The Company extended
the exercise period of the Securities Holder's Warrants until 5:00 pm Mountain
time of the sixtieth day following the effective date of the registration
statement described in the registration rights agreement, provided that if said
sixtieth day is a weekend day or legal holiday in Canada, the exercise period is
extended until 5:00 pm Mountain time of the next business day.

Warrants outstanding at June 30, 2006 consist of:

   Number Outstanding           Exercise Price              Expiration Date
        (Shares)
-------------------------    ----------------------    -------------------------
       3,250,000                      .40                    60 days after
                                                        registration statement
                                                                 filed

On October 21, 2005, 100,000 shares of common stock were issued by exercise of
options.

Note 15 - Subscription Receivable and Reserve for Replacement Loss
          --------------------------------------------------------

In May 2004, a shareholder exercised warrants to acquire 400,000 shares of the
Company's common stock at $.40 per share. The Company accepted a promissory note
in the amount of $160,000 USD due in October 2004 that was secured by 500,000
shares of a publicly traded company. The Company liquidated 373,000 shares of
the collateral for the amount of $185,827 USD an excess of $25,827 USD of the
promissory note.


                                      F-21


<PAGE>
                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



As of June 30, 2005, the Company believed that it was liable to the shareholder
for the approximate current value of the liquidated collateral in the amount of
$487,175 USD minus the $160,000 USD of the promissory note resulting in the
approximate amount of $402,000 CDN ($327,175 USD). The company recorded an
expense in the amount of $301,348 USD that was the amount collected less the
amount of the promissory note. The obligation was settled by the issuance of
mandatory redeemable preferred stock and warrants as described in Note 13.

Note 16 - Commitments
          -----------

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

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

                    2006                    $   28,122
                    2007                        33,747
                    2008                        39,371

The Company has entered into lease obligations with an energy corporation that
will expire in 2008 and 2010. Lease obligations are based on $.10 CDN per acre.
The Company has also entered into a surface lease with an individual that shall
be reviewed and mutually agreed upon every five years. The rental amount will be
reviewed after twenty years.

Annual lease payments over the next five years are as follows:

                    2007                   $    28,122
                    2008                        33,747
                    2009                        39,371
                    2010                        39,371
                    2011                        39,371

The Company leased computer equipment during March 2006 under a three-year
capital lease. The following is the future minimum lease payments required under
the terms of the agreement of March 2006.

                    Year Ending
                     June 30,                 Amount
                       2006                $    2,739
                       2007                     2,739
                       2008                       229



                                      F-22
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


On June 30, 2006, the Company entered into employment agreements with its
Executive to act as Secretary and Chief Legal Officer and its Executive to act
as President, Chief Executive Office and Chief Financial Officer. The Company
contracts the Executives through June 30, 2007. The parties may, by mutual
agreement, extend the term of these Agreements beyond such date for additional
periods of time as set forth in any extension of the Agreements. The base
remuneration shall be reviewed annually. The Company may terminate these
agreements with or without Cause at any time upon notice to Executive but if
cancelled without cause, the Executive shall continue to be paid as current base
remuneration until the end of the employment term or six months after the
termination date which ever longer, plus additional benefits. If the contracts
are cancelled for cause, the Executives will receive no further compensation or
other benefits. The Executives may terminate these Agreements at anytime upon
six month's notice to the Company.

Note 17 - 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:
<TABLE>
<CAPTION>

Segment                       Oil and Gas      Technology       Total
                             -------------    -----------    ----------
<S>                             <C>               <C>           <C>
Revenue                              --          965,169        965,169
Interest expense                123,005           61,372        184,377
Depreciation                        755           29,728         30,483

Segment                       Oil and Gas      Technology       Total
                             -------------    -----------    ----------
Net income (loss)             (2,404,377)        133,324     (2,271,053)
Total assets                     585,520       3,116,604        806,508
Expenditures for
long lived assets                     --          62,514         62,514
</TABLE>

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 18 - Related Party Transactions
          --------------------------

During the fiscal year ended June 30, 2005, the operator conducting certain
exploratory and development activities for properties in which the Company
participates was a related party because the Company's president is a director
of the operator. No costs were incurred for the fiscal year ended June 30, 2005.


                                      F-23
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006




On February 1, 2006, the Company's Chief Executive Officer, Chief Financial
Officer and Director resigned. Under the terms of the resignation the Company
agreed to pay amounts owing to the individual as of the time of his resignation.
The individual has not cooperated as promised and is in breach to terms of his
resignation that required the payment of certain amounts upon the availability
of funds. The Company anticipates that it may not be required to make such
payment.


Note 19 - 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 was a breach of the agreement. The amount due to EDS under the
agreement is uncertain. The Company believes is has valid and substantial claims
against EDS.

The Company is not currently engaged in negotiations with EDS and EDS has not
asserted any claims. Given the uncertainties, complexity and expense of
international litigation, the Company has accrued $296,000 USD ($400,000 CDN),
as a liability. The amount is Management's estimate of the net amount due
to EDS if there had been no breach of the agreement by EDS. This estimate may
change as further information is available. The maximum amount that may be due
under the contract, before any offsets, is $468,813.

Note 20 - 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.



                                      F-24
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006




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 Company's shareholders approved the "Shannon International Resources, Inc.
2005 Directors and Officers Stock Option Plan" ("Plan") that became effective
March 11, 2005. Under the terms of the plan, the board of directors is
authorized to grant options for up to 5,000,000 shares of common stock. The
board has discretion as to the determination of eligibility of persons, exercise
prices and terms of the options, provided however that in no instance shall the
period exceed five (5) years from the date of grant of the option. All options
must be granted within ten years from the effective date of the Plan. Employee
options for 825,000 and 200,000 were issued, respectively, for the years June
30, 2005 and June 30, 2006. A total of 1,150,000 and 450,000 shares expired,
respectively, for the years ended June 30, 2005 and June 30, 2006.

The following is a table of outstanding options and changes during 2005 and
2006:

                                                                  Weighted
                                                        Non-       Average
                                          Employee    Employee    Exercise
                                           Options     Options      Price
                                        ------------  ---------  ---------

Options Outstanding, June 30, 2004        2,175,000    850,000        .42
       Options granted:
           Employees                        825,000         --        .38
           Non-employees
       Options expired                   (1,150,000)  (100,000)       .42
       Options exercised                         --    (50,000)       .45
                                        ------------  ---------  ---------

Options Outstanding, June 30, 2005        1,850,000    700,000        .40
       Options granted:
           Employees                        200,000          --       .07
           Non-employees                         --          --        --
       Options expired                     (450,000)         --       .74
       Options exercised                   (100,000)         --       .10
                                        ------------  ---------  ---------
Options Outstanding, June 30, 2006        1,500,000    700,000        .28
                                        ============  =========  =========



                                      F-25
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



Outstanding options vest as follows:


                          Range of                      Weighted
                       Exercise Prices                   Average
                     ------------------     Number      Exercise
Vested at June 30,    High         Low    of Shares       Price
-------------------  --------   -------  ----------    --------
 2002 and earlier     .10          .10      250,000    $    .10
       2003           .25          .25      225,000         .25
       2004           .85          .10      675,000         .50
       2005           .60          .25      325,000         .34
       2006           .60          .25      250,000         .32
                                         ----------
                                          1,725,000
                                         ==========

Options granted during 2006 and 2005 consist of:

                                              Weighted Average      Weighted
 Year and Exercise price relative              Fair Value at         Average
 to fair value of underlying stock               Grant Date       Exercise Price
------------------------------------------    ----------------    --------------
Year ending June 30, 2005
   Exercise price less than fair value
   Exercise price equal to fair value              .25                 .25
   Exercise price greater than fair value          .65                 .53
Year ending June 30, 2006

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, 2006
will expire as follows:


                         Range of Exercise                  Weighted
                              Prices                         Average
                        -------------------     Number      Exercise
                         High         Low     of Shares      Price
                        --------   --------   ---------     --------
Year Ending June 30,
        2007             .40          .07       550,000       .22
        2008             .25          .25       100,000       .25
        2009             .60          .25       850,000       .30
        2010             .40          .30       600,000       .39
        2011             .40          .07       100,000       .34
                                              ---------
                                              2,200,000       .28
                                              =========



                                      F-26
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


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, 2005  June 30, 2005
                             -------------  -------------
Expected Volatility:             150%           150%
Risk-free interest rate:         4.25%      2.78% - 2.89%
Expected Dividends:                --            --
Expected Term in Years:            5              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, 2006                   June 30, 2005
                            As Reported    Pro forma      As Reported     Pro forma
                            -----------   ------------     -----------   ------------
<S>                                         <C>                            <C>
Employee option expense          --         15,647            --           187,341
Net (loss):                 (2,271,053)   (2,286,698)     (10,424,401)  (10,611,742)
Net loss per share:            (.08)         (.07)           (.41)          (.42)
</TABLE>



Note 21 - Income Taxes
          ------------

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

The Company has estimated net operating losses as follows:

Expiration year:              Amount
----------------          --------------
2007                      $      753,830
2008                             855,023
2009                               6,174
2010                              11,931
2011                              58,716
2012                              73,331
2013                             215,311
2014                             853,199
2015                             226,856
2016                             179,526
                          --------------
Total                     $    3,233,894
                          ==============


                                      F-27
<PAGE>




                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006


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

        Component:                        Year Ended       Year Ended
                                        June 30, 2006     June 30, 2005
-----------------------------           -------------     -------------
Change in Canadian tax credit           $    (75,824)          (34,520)
                                        -------------     -------------
     Total                              $    (75,824)     $    (34,520)
                                        =============     =============


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

                                          Year Ended        Year Ended
        Component:                      June 30, 2006     June 30, 2005
-------------------------------         -------------     -------------
Deferred tax benefit from net
  operating loss carryforwards          $   1,128,365    $      769,773
Tax valuation allowance                    (1,128,365)         (769,773)
                                        -------------    --------------
     Total                              $          --    $           --
                                        ==============   ==============


The overall effective tax rate differs from the Company's expected statutory
rate for the year ended June 30, 2006 is as follow:


Tax provision based upon statutory rate                      35.0%
Valuation allowance                                         (35.0%)
                                                          -----------
Effective tax rate                                            0.0%
                                                          ===========


Note 22 - 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.



                                      F-28
<PAGE>


                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



Note 23 - Recent Accounting Pronouncements
          --------------------------------

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 gives guidance for the disclosure of the mandatory redemption
of preferred stock described in Note 13.

During 2004 and 2005, the FASB issued SFAS No. 151, "Inventory Costs - an
amendment of ARB No. 43, Chapter 4", SFAS No. 152, "Accounting for Real Estate
Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67", SFAS
No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29",
and SFAS No. 123 (revised 2004), "Share-based Payment We do not believe the
impact of adoption of these statements will be significant to our overall
results of operations or financial position.

Error Corrections - In May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB
Statement No. 3. Statement No. 154 changes the requirements for the accounting
for and reporting of a change in accounting principle and applies to all
voluntary changes in accounting principle. This statement requires retrospective
application to prior periods' financial statements of changes in accounting
principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of an accounting change. Further, SFAS No. 154
requires that the new accounting principle be applied to the balances of assets
and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and that a corresponding adjustment be
made to the opening balance of retained earnings (or other appropriate
components of shareholders' equity) for the period that is being reported in an
income statement. This statement also carries forward, without change, the
guidance in APB Opinion No. 20 for reporting the correction of an error in
previously issued financial statements and a change in accounting estimate.
Statement No. 154 is effective for account changes and corrections of errors
made in fiscal years beginning after December 15, 2005. The Company has elected
for early adoption and, accordingly, has adjusted the financial statements as of
June 30, 2005 and for the year then ended for the correction of an error as
described in Note 8. There was no change in the application of accounting
principles.

In addition various other accounting pronouncements have been issued during the
years ended June 30, 2005 and 2006, none of which are expected to have a
material effect on the financial statements of the company.


Note 24 - Subsequent Events
          -----------------

On August 11, 2006, the Company entered into a personal services agreement. The
Company granted an option up to 1,428,000 shares of the Company's common stock
designated for each person at $0.035 per share pursuant to the Company's 2005
Stock Option Plan.


                                      F-29
<PAGE>



                           SHANNON INTERNATIONAL INC.
                   Notes to Consolidated Financial Statements
                                  June 30, 2006



On September 22, 2006, an agreement was reached with a Canadian company for the
sale of 50% working interest in the Company's rights, title and interest in
Prince Edward Island Oil & Gas permits and certain seismic data for $320,000
CDN. The Canadian company delivered to the Company $50,000 CDN in addition to
the $270,000 CDN that is owed to the Canadian company by Shannon which amount is
herein to be acknowledged as finalized and settled.

Subsequent to June 30, 2006, the Company has received and has on deposit funds
available for the payment of the Shear Wind obligation (see note 12).

On September 26, 2006, a release agreement was entered into by Logical Sequence
Incorporated, Shannon International Inc., Larnaca Limited, and Max Wandinger.
Pursuant to an agreement dated August 15, 2002, by and between Larnaca and LSI,
Larnaca directed that 50,000 shares of LSI preferred stock were to be issued in
the name of Wandinger. The preferred shares were never created or issued
pursuant to the laws of the Province of Ontario. Larnaca agreed to waive any
interest in and to the August 2002 Agreement and the preferred shares in
consideration of a full release from LSI and Shannon. Wandinger agreed to waive
and disclaim any and all interest to the August 2002 Agreement and the preferred
shares in consideration of a full release from LSI and Shannon. Wandinger shall
remain subject to all has duties as a former solicitor of Shannon, Shannon
Investments, Ltd. And LSI shall be subject to the due payment of all accounts
for legal services and consulting services provided by Wandinger to Shannon and
LSI as represented by the various accounts rendered to date to a maximum amount
including taxes and disbursements of $28,000 CDN (capped amount). Upon payment
of $28,000 CDN, Wandinger shall not have any further claim and such excess above
the capped amount shall automatically be written off.

On October 23, 2006, GE Commercial Distribution Finance Canada on its own behalf
and on behalf of GE Commercial Distribution Finance Canada entered into a mutual
release with Logical Sequence Incorporated and Shannon International Inc. For
the consideration of $1.00 CDN states that amounts owing have been satisfied to
date in full. The holder of the promissory note agreed to forgive the principal
balance of $550,000 CDN, $488,455 USD, together with accrued interest of
$91,460.39 CDN, $81,226 USD. The date of the release will be the date that the
forgiveness of debt will be reflected in the financial statement of the Company.

In October 2006, the Company offered a private placement of its securities to
accredited non-US investors of up to 32,000,000 units consisting of one common
share and one half a warrant of $.025 per Unit. Each whole warrant entitles the
holder to acquire an additional share of common stock at $.03 per share until
December 31, 2007. The debentures will be convertible to common stock at $.025
per share and the purchase of a debenture entitles the holder to one half of one
warrant per $0.025 of debentures purchased. Each whole warrant entitles the
holder thereof to acquire an additional share of common stock at $.03 per share
until December 31, 2007. The convertible debentures are secured by a first
charge on the assets of the Company together with $100,000 CDN previously
extended by a natural gas partner.





                                      F-30

<PAGE>

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

Miller and McCollom, Certified Public Accountants, had been the auditor for
Shannon International Inc., for the fiscal years ended June 30, 2005, June 30,
2004 and every year since inception in 1999. On July 24, 2006, Miller and
McCollom informed the Registrant of its resignation as auditors. The audit
reports of Miller and McCollom on our financial statements as of and for the
years ended June 30, 2005, 2004, 2003 and 2002 including interim periods, did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to audit scope or accounting principles. However, the
opinions did contain an uncertainty as to Shannon International Inc.'s ability
to continue as a going concern.

In connection with the audit of the financial statements prepared for the fiscal
years ended June 30, 2005, 2004, 2003, and 2002 and to the date of resignation,
the Registrant had no disagreements with Miller & McCollom with respect to
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures of the type discussed in Item 304(a)(iv) of Regulation S-B.

For the fiscal years ended June 30, 2005, 2004, 2003, and 2002, including the
subsequent interim periods through the date of the appointment of Schumacher &
Associates, Inc., Certified Public Accountants, neither the Registrant, nor
anyone on its behalf, consulted with Schumacher & Associates, Inc., Certified
Public Accountants regarding any of the accounting or auditing concerns stated
in Item 304(a)(2) of Regulation S-B.


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.

On or about June 30, 2006, 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.



                                       22


<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 the Company are as follows:

J. William Clements          President and Director since March 2006.
Dennis Brovarone             Director since February 2003

J. William Clements
-------------------
Mr. Clements has been involved in Sales, Product Development, and Marketing of
automotive dealership management software for over fifteen years. His
responsibilities have included acting as liaison with domestic and import
automakers, including General Motors, Ford, Daimler Chrysler, Honda, Hyundai,
and others. Mr. Clements has had lead roles in developing strategic
relationships with, and market opportunities for manufacturers and exporters of
foodservice equipment and industrial products based in Canada, Mexico, Brazil,
Colombia, and Venezuela. And for six years, Mr. Clements worked as an
independent property management consultant to the Province of Ontario, Canada.
During the past number of years, companies Mr. Clements has had the pleasure to
work with have experienced extraordinary growth. Mr. Clements currently serves
as President and CEO of Shannon International's technology subsidiary, Logical
Sequence Incorporated in Halifax, Nova Scotia.

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. 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.

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 not less than six meetings during
the fiscal year ended June 30, 2006 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,

*    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
-------------------------------
Neither of Shannon's directors, 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.


                                       23
<PAGE>
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, 2005, 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.



Item 10.       Executive Compensation.
               -----------------------
The following table shows for the fiscal years ending June 30, 2006, 2005 and
2004, 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

                                                         Other Annual     Securities
                                                         Compensation Underlying Options       All other
  Name and Principle Position     Year       Salary ($)       ($)              (#)          Compensation ($)
------------------------------------------------------------------------------------------------------------
<S>                                <C>       <C>             <C>           <C>                 <C>
  J. William Clements              2006      $42,000 cdn                  1,600,000             0

  Blair Coady                      2005       87,300          0             225,000             0
  President/CEO                               cdn.                          Common
------------------------------------------------------------------------------------------------------------
  Blair Coady                      2004       87,300          0                0                0
  President/CEO                                cdn.
------------------------------------------------------------------------------------------------------------

</TABLE>

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




                                       24

<PAGE>



<TABLE>
<CAPTION>

Option Grants in Last Fiscal Year
---------------------------------------------------------------------------------------------------
Individual Grants
---------------------------------------------------------------------------------------------------
Name                              Number of
                                  Common Shares     % of Total Options
                                  Underlying            Granted in       Exercise Price
                                  Options               Fiscal Year                        Expiration
                                  Granted (#)       ended June 30, 2006     ($/Sh)           Date
---------------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>               <C>            <C>
J. William Clements, CEO, director    100,000               3.2%             0.07           01/19/11
                                    1,500,000              48.4%             0.05           07/01/11
---------------------------------------------------------------------------------------------------
Dennis Brovarone, Secretary
Director                            1,500,000              48.4%             0.05           07/01/11
---------------------------------------------------------------------------------------------------
</TABLE>

     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, 2006.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
Aggregate Option Exercises in Last Fiscal Year and Option Values
------------------------------------------------------------------------------------------------------------------------
                                     Value                                           Value of Unexercised In-the
                        Shares       Realized    Number of Securities Underlying     Money Options at
                        Acquired on  at FY-End   Unexercised Options at FY-End       June 30, 2005  (1)
Name                    Exercise (#) ($)         (#) Exercisable/Unexercisable       Exercisable/Unexercisable
------------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>    <C>                                <C>
J. William Clements Pres./CEO,  0           0     2,000,000 Common Shares Exercisable  $0 Exercisable
Dir.
------------------------------------------------------------------------------------------------------------------------
Dennis Brovarone                0          0      1,950,000 Common Shares Exercisable  $0 Exercisable
Secretary, Director
------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Option value based on the difference between the exercise price of
     unexercised options and the closing sale price on June 30, 2006 ($0.04 per
     share).

Employment Agreements
---------------------
J. William Clements, Shannon's president and chief executive officer and
director entered into an employment agreement with Shannon effective June 30,
2006. The employment agreement provides for base remuneration of $7,000 Cdn.,
per month. Officers are reimbursed for expenses incurred on Company business.
Dennis Brovarone, Shannon's secretary and director has an employment agreement
provides for base remuneration of $2,000 per month. Both Officers have accrued
$10,000US and $42,000Cdn., as of October 31, 2006 in unpaid salary since
entering into the employment agreements.

Directors' Compensation/ Other Arrangements
-------------------------------------------
Shannon's directors are reimbursed for actual expenses incurred in attending
Board meetings. There are no other arrangements regarding compensation to
officers and directors of Shannon.

Termination of Employment and Change of Control Arrangement
-----------------------------------------------------------
Pursuant to Mr. CLements' employment agreement, in the event of his termination
without cause or a Change in Control of Shannon, Mr. Clements is entitled to
receive his base remuneration of $7,000 Cdn., per month for six months following
the date of termination or Change in Control. Except for Mr. Clements, 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
changein the control of Shannon.


                                       25
<PAGE>
Transactions with Management
----------------------------
Shannon did not enter into any transactions with Management during the fiscal
year ended June 30, 2006.


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

The following table sets forth information 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 30,575,950 shares of common
stock outstanding as of November 14, 2006 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>
J. William Clements               President, Director          2,130,050  (1)         6.5%
Suite 100, 238A Brownlow Av
Dartmouth, Nova Scotia
------------------------------------------------------------------------------------------------
Dennis Brovarone                  Secretary, Director          1,970,000  (2)         6.0%
18 Mt. Laurel Dr.
Littleton, CO 80127
------------------------------------------------------------------------------------------------
Directors and Officers as a Group
(2 individuals)                                                4,100,050 (3)          9.5%
------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Includes exercisable options to acquire up to 2,000,000 shares.
     (2)  Includes exercisable options to acquire up to 1,950,000 shares.
     (3)  Includes exercisable options held by the officers and directors to
          acquire up to 3,950,000 shares


Changes of Control
------------------

As of June 30, 2006 and November 14, 2006, there are no arrangements known to
Shannon which may at a subsequent date result in a change of control of Shannon.


Item 12.   Certain Relationships and Related Transactions.
           -----------------------------------------------

None


                                       26

<PAGE>



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

(a) Exhibits:

3.1    Articles of Incorporation(1)
3.2    Bylaws(1)
3.3    Articles of Amendment dated March 16, 2005 (2)
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 (3)
10.8   Oil and Natural Gas Permits No. 96-04, -05, -07, -08, -09, -10. (3)
10.9   Joint Operating Agreements dated October 22, 2001 and November 14,
       2001. (3)
10.10  Participation Agreement (4)
10.11  Logical Sequence Inc. Distribution Agreement (5)
10.12  Share Purchase Agreement (5)
10.13  Share Purchase Support Agreement (5)
10.14  Voting Trust Agreement (5)
10.15  Addendum Agreement (6)
10.16  Letter of Agreement with Rally Energy Corp., for the acquisition of the
       2004 Working Interest dated September 23, 2004 and promissory notes. (7)
10.17  Asset Sale Agreement dated February 24, 2005 (8)
10.18  Registration Rights Agreement dated February 24, 2005 (8)
10.19  Conquistador Trust 8% working interest agreement dated May 10, 2005 (2)
10.20  Settlement Agreement with Quadrangle Holdings, Ltd. (9)
10.21  Agreement with Shear Wind Inc. dated April 7, 2006. CONFIDENTIAL
       TREATMENT HAS BEEN REQUESTED FOR SECTION 7 OF THIS AGREEMENT.(10)
10.22  Agreement with Maxim Resources, Inc. dated September 22, 2006 (11)
10.23  Agreement with Larnaca Limited and Max Wandinger dated September 26,
       2006 (11)
14.1   Code of Ethics (7)
16.1   Letter from Miller and McCollom dated July 25, 2006 (13)
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)

(2)  Incorporated by reference to the exhibits to Shannon's quarterly report on
     Form 10qsb for the fiscal quarter ended March 31, 2005 filed on or about
     May 14, 2005.

(3)  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

(4)  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.

(5)  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).

(6)  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).

(7)  Incorporated by reference to the exhibits to Shannon's annual report on
     Form 10-KSB for the fiscal year ended June 30, 2004 filed on October 29,
     2004. (file number 000-30254)


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(8)  Incorporated by reference to the exhibits to Shannon's current report on
     Form 8-K dated February 23, 2005. (file number 000-30254)

(9)  Incorporated by reference to the exhibit to Shannon's current report on
     Form 8-K dated March 31, 2006. (file number 000-30254)

(10) Incorporated by reference to the exhibit to Shannon's current report on
     Form 8-K dated April 14, 2006. (file number 000-30254)

(11) Incorporated by reference to the exhibit to Shannon's current report on
     Form 8-K dated October 3, 2006. (file number 000-30254)

(12) Incorporated by reference to the exhibit to Shannon's current report on
     Form 8-K dated July 27, 2006. (file number 000-30254)

     (b) One report on Form 8-K were filed during the last quarter of the period
covered by this report on April 14, 2006. Two additional reports on Form 8-K
were filed subsequent to the end of the period reported on and the filing of
this report on July 27, 2006 and October 3, 2006.


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

Schumacher & Associates, Inc., Certified Public Accountants were Shannon's
independent auditors for the fiscal year ended June 30, 2006. Miller & McCollom,
Certified Public Accountants, were Shannon's independent auditors to examine the
financial statements of Shannon for the fiscal year ending June 30, 2005. Miller
& McCollom has performed the following services and has been paid the following
fees for these fiscal years.

Audit Fees
----------
Schumacher & Associates was paid aggregate fees of $60,000 for the fiscal year
ended June 30, 2006 for professional services rendered for the audit of
Shannon's annual financial Statements. Miller & McCollom was paid aggregate fees
of $37,194 for the fiscal year ended June 30, 2005 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
-------------------
Schumacher & Associates was not paid any additional fees for the fiscal year
ended June 30, 2005 for assurance and related services reasonably related to the
performance of the audit or review of Shannon's financial statements.

Miller & McCollom was not paid any additional fees for the fiscal year ended
June 30, 2005 for assurance and related services reasonably related to the
performance of the audit or review of Shannon's financial statements.

Tax Fees
--------
Schumacher & Associates was paid no fees for the fiscal year ended June 30, 2006
for professional services rendered for tax compliance, tax advice and tax
planning.

Miller & McCollom was paid no fees for the fiscal year ended June 30, 2005 for
professional services rendered for tax compliance, tax advice and tax planning.

Other Fees
----------
Schumacher & Associates was paid no other fees for professional services during
the fiscal years ended June 30, 2006.

Miller & McCollom was paid no other fees for professional services during the
fiscal years ended June 30, 2005.





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                                   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 INC.
                                  (Registrant)


By  /s/ J. William Clements
    --------------------------
    J. William Clements, President, Chief Financial Officer
    November 16, 2006


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/ J. William Clements
    ------------------------
    J. William Clements, Director, November 16, 2006


By  /s/ Dennis Brovarone
    --------------------------
    Dennis Brovarone, Director, November 16, 2006







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