----

| Index                                                                                                                                           |                                                                                                  |
|-------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|
|                                                                                                                                            |                                                                                                  |
| Report of Independent Registered Public Accounting Firm - Comments by auditors for US readers on Canada-US reporting difference                 |               1-2                    |
|                                                                                                                                            |                                                                                                  |
| Consolidated Balance Sheets                                                                                                                     | 3                                                                                                     |
|                                                                                                                                            |                                                                                                  |
| Consolidated Statements of Operations                                                                                                           | 4                                                                                                     |
|                                                                                                                                            |                                                                                                  |
| Consolidated Statements of Cash Flows                                                                                                           | 5                                                                                                     |
|                                                                                                                                            |                                                                                                  |
| Consolidated Statement of Shareholders’ Equity Consolidated Statement of Comprehensive Loss and Accumulated Other Comprehensive Loss |                6-7 8  |
| Notes to Consolidated Financial Statements                                                                                                      |               9-37              |

----

----

----

| As at March 31                                      |   | Note                            |   |   | 2010   |      |         | 2009   |   |
|-----------------------------------------------------|--------|---------------------------------|--------|--------|--------|-----------|--------------|--------|--------|
|                                                |   |                            |   |   |   |      |         |   |   |
| Assets                                              |   |                            |   |   |   |      |         |   |   |
| Current                                             |   |                            |   |   |   |      |         |   |   |
|     Cash                        |   |                            |   |   | $      | 2,350,526 |         |   | $      | 352,958 |   |
|     Short term investments      |   | 5,19(ix) & (x) & 21 (b) |   |   |   | 1,359,431 |         |   |   | 1,091,563 |   |
|     Prepaid consulting services |   |                            | 6      |   |   |      | 50,792       |   |   |   | 20,484 |   |
|     Other receivables           |   | 19(xi) &(xii)               |   |   |   | 129,869   |         |   |   | 118,508 |   |
|                                                |   |                            |   |   |   |      |         |   |   |   |   |   |
|                                                |   |                            |   |   |   |      | 3,890,618    |   |   |   | 1,583,513 |   |
| Office equipment and furniture                      |   |                            | 7      |   |   | $         | 8,802        |   |   | $ | 9,434 |   |
| Oil & gas properties and related expenditure    |   | 8,19(iv)                        |   |   | $      | 6,520,367 |         |   | $      | - |   |
|                                                |   |                            |   |   |   | $         | 10,419,787   |   |   | $ | 1,592,947 |   |
| Liabilities and shareholders' equity                |   |                            |   |   |   |      |         |   |   |   |   |   |
| Current liabilities                                 |   |                            |   |   |   |      |         |   |   |   |   |   |
|     Accounts payable            |   | 19(viii)                        |   |   | $      | 1,410,327 |         |   | $      | 96,544 |   |
|     Accruals                    |   |                            | 9      |   |   |      | 1,043,583    |   |   |   | 55,474 |   |
|     Short term loans            |   |                            | 10     |   |   |      | 1,065,578    |   |   |   | - |   |
|                                                |   |                            |   |   |   |      |         |   |   |   |   |   |
| Total current liabilities                           |   |                            |   |   |   |      | 3,519,488    |   |   |   | 152,018 |   |
| Shareholders' Equity                                |   |                            |   |   |   |      |         |   |   |   |   |   |
| Capital stock                                       |   |                            | 11     |   |   | $         | 35,298,257   |   |   | $ | 32,854,075 |   |
| Warrants                                            |   |                            | 13     |   |   |      | 7,343,886    |   |   |   | 2,192,927 |   |
| Contributed surplus                                 |   |                            |   |   |   |      | 4,573,748    |   |   |   | 4,154,266 |   |
| Accumulated other comprehensive loss                |   |                            |   |   |   |      | (2,696,213)  |   |   |   | (4,425,018) |   |
| Deficit                                             |   |                            |   |   |   |      | (37,262,565) |   |   |   | (33,335,321) |   |
|                                                |   |                            |   |   |   |      | (39,958,778) |   |   |   | (37,760,339) |   |
| Total shareholders' equity                          |   |                            |   |   |   |      | 7,257,113    |   |   |   | 1,440,929 |   |
| Non-controlling interests                           |   |                            |   |   |   |      | (356,814)    |   |   |   | - |   |
| Total equity                                        |   |                            |   |   |   |      | 6,900,299    |   |   |   | 1,440,929 |   |
|                                                |   |                            |   |   |   | $         | 10,419,787   |   |   | $ | 1,592,947 |   |
|                                                |   |                            |   |   |   |      |         |   |   |   |   |   |
| Going concern (note 2)                              |   |                            |   |   |   |      |         |   |   |   |   |   |
| Commitments and Contingent Liabilities (Note 18)    |   |                            |   |   |   |      |         |   |   |   |   |   |
| Related Party Transactions (Note 19)                |   |                            |   |   |   |      |         |   |   |   |   |   |
| Subsequent events (note 25)                         |   |                            |   |   |   |      |         |   |   |   |   |   |

----

|                                                       |   | Note                                             |        |    | 2010   |      |        | 2009     |   |    | 2008      |      |
|------------------------------------------------------------|--------|--------------------------------------------------|-------------|---------|--------|-----------|-------------|----------|--------|---------|-----------|-----------|
| Income                                                     |   |                                             |        |    |   |      |        |     |   |    |      |      |
|     Interest                           |   |                                             |        |    |   | -         |        |     |   | 7,901   |      |      |   | 73,300 |   |
|                                                       |   |                                             |        |    |   |      |        |     |   |    |      |      |   |   |   |
|                                                       |   |                                             |        |    |   | -         |        |     |   | 7,901   |      |      |   | 73,300 |   |
| Expenses                                                   |   |                                             |        |    |   |      |        |     |   |    |      |      |   |   |   |
|     Consulting fees                    |   | 15,18(b),( c) & (f), 19 (v) & (Vii) |        |    |   | 1,191,675 |        |     |   | 444,784 |      |      |   | 396,465 |   |
|     Professional fees                  |   |                                             |        |    |   | 992,989   |        |     |   | 27,844  |      |      |   | 34,601 |   |
| Loss(gain) on disposal of short term investments           |   |                                             |        | 852,806 |   |      |        | (45,036) |   |    |      | (248,455) |   |
|     Bank charges,interest and fees     |   |                                             | 16          |    |   |      | 691,062     |     |   |    | 2,362     |      |   |   | 1,625 |   |
|     Write off of short term investment |   |                                             | 5(b)        |    |   |      | 250,780     |     |   |    | 63,010    |      |   |   | - |   |
|     Office and general                 |   |                                             |        |    |   |      | 73,740      |     |   |    | 42,641    |      |   |   | 40,349 |   |
|     Shareholders information           |   |                                             | 18(a),19(i) |    |   |      | 158,509     |     |   |    | 144,757   |      |   |   | 133,502 |   |
|     Travel,meals and promotions        |   |                                             |        |    |   |      | 86,939      |     |   |    | 66,896    |      |   |   | 120,008 |   |
|     Payroll                            |   |                                             |        |    |   |      | 44,944      |     |   |    | 35,266    |      |   |   | - |   |
|     Communication                      |   | 19(ii)                                           |        |    |   | 27,782    |        |     |   | 11,498  |      |      |   | 11,905 |   |
|     Rent                               |   | 19(ii)                                           |        |    |   | 22,765    |        |     |   | 18,143  |      |      |   | 8,915 |   |
|     Transfer agents fees               |   |                                             |        |    |   |      | 10,802      |     |   |    | 4,940     |      |   |   | 4,343 |   |
|    Exchange (gain) Loss                     |   |                                             |        |    |   | $         | (120,735)   |     |   | $       | (119,789) |      |   | $ | 141,841 |   |
|                                                       |   |                                             |        |    |   |      | 4,284,058   |     |   |    | 697,316   |      |   |   | 645,099 |   |
|                                                       |   |                                             |        |    |   |      | (4,284,058) |     |   |    | (689,415) |      |   |   | (571,799) |   |
| Non-controlling interests                                  |   |                                             |        |    |   |      | 356,814     |     |   |    | -         |      |   |   | - |   |
| Net loss for year                                          |   |                                             |        |    |   | $         | (3,927,244) |     |   | $       | (689,415) |      |   | $ | (571,799) |   |
| Basic and diluted loss per share information               |   |                                             |        |    |   |      |        |     |   |    |      |      |   |   |   |   |
|     Net loss per share                 |   |                                             | 14          |    |   | $         | (0.09)      |     |   | $       | (0.02)    |      |   | $ | (0.02) |   |
|                                                       |   |                                             |        |    |   |      |        |     |   |    |      |      |   |   |   |   |

----

| For the years ended March 31,                                            |   | Note   |   |       | 2010   |        |        | 2009   |   |      | 2008        |   |
|--------------------------------------------------------------------------|--------|--------|--------|------------|--------|-------------|-------------|--------|--------|-----------|-------------|--------|
| Cash flows from operating activities                                     |   |   |   |       |   |        |        |   |   |      |        |   |
|    Net loss for year                                      |   |   |   |       |   | (3,927,244) |        |   |   | (689,415) |        |   |   | (571,799) |   |
|    Write off of a short term investment                   |   |   |   |       |   | 250,780     |        |   |   | 63,010    |        |   |   | - |   |
|    Non-controlling interest                               |   |   |   |       |   | (356,814)   |        |   |   | -         |        |   |   | - |   |
|    Amortization of office equipment and furniture         |   |   |   |       |   | 2,303       |        |   |   | 2,027     |        |   |   | 817 |   |
|    Loss(Gain) on disposal of short term investments       |   |   |   |       |   | 852,806     |        |   |   | (45,036)  |        |   |   | (248,455) |   |
|    Consulting fees settled for common shares              |   |   | 15     |       |   |        | 524,589     |   |   |      | 277,856     |   |   |   | 314,248 |   |
| Net change in working capital components                                 |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
|    Other receivables                                      |   |   |   |       |   |        | (11,361)    |   |   |      | (64,310)    |   |   |   | 11,955 |   |
|    Accounts payable                                       |   |   |   |       |   |        | 1,313,783   |   |   |      | 66,205      |   |   |   | 11,287 |   |
|    Accruals                                               |   |   |   |       |   |        | 988,109     |   |   |      | 26,789      |   |   |   | (715) |   |
|                                                                     |   |   |   |       |   |        | (363,049)   |   |   |      | (362,874)   |   |   |   | (482,662) |   |
| Cash flow from investing activities                                      |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
|    Purchase of short term Investments                     |   |   |   |       |   |        | (53,103)    |   |   |      | (2,412,123) |   |   |   | (3,366,685) |   |
|    Net proceeds from sale of short term investments       |   |   |   |       |   |        | 410,454     |   |   |      | 1,818,097   |   |   |   | 1,990,303 |   |
|    Purchase of office equipment and furniture             |   |   |   |       |   |        | (1,671)     |   |   |      | (5,256)     |   |   |   | (7,023) |   |
|    Acquisition of oil & gas properties                |   |   |   |       |   |        | (4,692,189) |   |   |      | -           |   |   |   | - |   |
|                                                                     |   |   |   |       |   |        | (4,336,509) |   |   |      | (599,282)   |   |   |   | (1,383,405) |   |
| Cash flow from financing activities                                      |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
|    Short term loans                                       |   |   |   |       |   |        | 1,239,531   |   |   |      | -           |   |   |   | - |   |
|    Common shares issued net of issuance costs             |   |   |   |       |   |        | 5,457,595   |   |   |      | 56,052      |   |   |   | 110,201 |   |
|                                                                     |   |   |   |       |   |        | 6,697,126   |   |   |      | 56,052      |   |   |   | 110,201 |   |
| Increase(Decrease) in cash during year                                   |   |   |   |       |   |        | 1,997,568   |   |   |      | (906,104)   |   |   |   | (1,755,866 | ) |
| Cash at beginning of year                                                |   |   |   |       |   |        | 352,958     |   |   |      | 1,259,062   |   |   |   | 3,014,928 |   |
| Cash at end of year                                                      |   |   |   |       |   |        | 2,350,526   |   |   |      | 352,958     |   |   |   | 1,259,062 |   |
| Supplemental disclosures                                                 |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
| Non-cash operating activities                                            |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
|    Consulting fees settled for common shares and          |   |   | 15     |       |   |        | (524,589)   |   |   |      | (277,856)   |   |   |   |   |   |
|       options and expensed during the year |   |   |   |       |   |        |        |   |   |      |        |   |   |   | (314,248) |   |
|    Consulting fees prepaid in shares                      |   |   | 6      |       |   |        | (50,792)    |   |   |      | (20,484)    |   |   |   | (285,896) |   |
|                                                                     |   |   |   |       |   |        | (575,381)   |   |   |      | (298,340)   |   |   |   | (600,144) |   |
| Non-cashinvesting activities                                             |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
| Value of warrants issued as part of Acquisition costs                    |   |   |   | -2,002,131 |   |        |        | -      |   |      |        | -      |   |
| Non-cash financing activities                                            |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |
|    Shares cancelled                                       |   |   |   |       |   |        | -81,957     |   |   |      | -64,395     |   |   |   | - |   |
|                                                                     |   |   |   |       |   |        |        |   |   |      |        |   |   |   |   |   |

----

|                                                                                                                                                         |   | Number of Shares |       |        | ShareCapital |   |       | Warrants    |   |   | Contributed surplus |        |   | Accumulated Deficit |      |   | Accumulated other comprehensive loss |   |         | Shareholders' Equity |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|-------------|--------------|--------|------------|-------------|--------|--------|---------------------|-------------|--------|---------------------|-----------|--------|--------------------------------------|--------|--------------|----------------------|--------|
| Balance, March 31, 2007                                                                                                                                      |   |             | 28,430,203 |        |         | $      | 32,413,811 |        |   | $      | 2,215,213           |        |   | $                   | 4,069,549 |   |                                 | $      | (32,074,107) |                 |   | $ | - |   |   | $ | 6,624,466 |   |
| Warrants excercised                                                                                                                                          |   |             | 315,540    |        |         |   | 122,446    |        |   |   |                |        |   |                | -         |   |                                 |   |         |                 |   |   |   |   |   |   | 122,446 |   |
| Value of warrants transferred to capital stock upon exercise                                                                                                 |   |             |       | 61,356      |         |   |       | (61,356)    |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   | - |   |
| Finder fee                                                                                                                                                   |   |             |       |        |         |   | (12,245)   |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   | (12,245) |   |
| Issued under 2007 Consultant stock compensation plan                                                                                                         |   |             | 1,350,000  |        |         |   | 316,120    |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   | 316,120 |   |
| Options granted                                                                                                                                              |   |             |       |        |         |   |       |        |   |   |                |        |   |                | 7,878     |   |                                 |   |         |                 |   |   |   |   |   |   | 7,878 |   |
| Net loss                                                                                                                                                     |   |             |       |        |         |   |       |        |   |   |                |        |   |                |      |   |                                 |   | (571,799     | )                    |   |   |   |   |   |   | (571,799) |   |
| Unrealised loss on short term investments, net of tax, considered available for sale, cumulative to March 31, 2008 on adoption of new Accounting Policy |   |             |       | (1,306,768) |         |   |       | (1,306,768) |   |
| Balance, March 31, 2008                                                                                                                                      |   |             | 30,095,743 |        |         | $      | 32,901,488 |        |   | $      | 2,153,857           |        |   | $                   | 4,077,427 |   |                                 | $      | (32,645,906) |                 |   | $ | (1,306,768) |   |   | $ | 5,180,098 |   |
| Issued under private placement                                                                                                                               |   |             | 1,000,000  |        |         |   | 62,280     |        |   |   |                |        |   |                | -         |   |                                 |   |         |                 |   |   |   |   |   |   | 62,280 |   |
| Finder fee                                                                                                                                                   |   |             |       |        |         |   | (6,228)    |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   | (6,228) |   |
| Value of warrants issued under private placement transferred to contributed surplus                                                                          |   |             |       | (39,070)    |         |   |       | 39,070      |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   | - |   |
| Shares cancelled                                                                                                                                             |   |             | (275,000)  |        |         |   | (64,395)   |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   | (64,395) |   |
| Options revaluation upon changes in the terms                                                                                                           |   |             |       |        |         |   |       |        |   |   |                | 76,839      |   |                |      |   |                                 |   |         |                 |   |   |   | 76,839 |   |
| Net loss                                                                                                                                                     |   |             |       |        |         |   |       |        |   |   |                |        |   |                |      |   |                                 |   | (689,415)    |                 |   |   |   |   |   |   | (689,415) |   |
| Unrealised loss on short term investments,net of tax considered available for sale                                                                      |   |             |       |        |         |   |       | (3,118,250) |   |   |                | (3,118,250) |   |
|                                                                                                                                                         |   |             |       |        |         |   |       |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   |   |   |
| Balance, March 31, 2009                                                                                                                                      |   |             | 30,820,743 |        |         | $      | 32,854,075 |        |   | $      | 2,192,927           |        |   | $                   | 4,154,266 |   |                                 | $      | (33,335,321) |                 |   | $ | (4,425,018) |   |   | $ | 1,440,929 |   |
|                                                                                                                                                         |   |             |       |        |         |   |       |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   |   |   |
|                                                                                                                                                         |   |             |       |        |         |   |       |        |   |   |                |        |   |                |      |   |                                 |   |         |                 |   |   |   |   |   |   |   |   |

----

|                                                                                    |   | Number of Shares |       |        | Capital Stock |   |       | Warrants  |   |   | Contributed surplus |      |   | Accumulated Deficit |      |      | Accumulated other comprehensive loss |   |         | Shareholders' Equity |   |
|-----------------------------------------------------------------------------------------|--------|------------------|------------|-------------|---------------|--------|------------|-----------|--------|--------|---------------------|-----------|--------|---------------------|-----------|-----------|--------------------------------------|--------|--------------|----------------------|--------|
| Balance March 31, 2009                                                                  |   |             | 30,820,743 |        |          | $      | 32,854,075 |      |   | $      | 2,192,927           |      |   | $                   | 4,154,266 |      |                                 | $      | (33,335,321) |                 |   | $ | (4,425,018) |   |   | $ | 1,440,929 |   |
| Issued under private placement                                                          |   |             | 34,050,000 |        |          |   | 5,726,794  |      |   |   |                |      |   |                | -         |      |                                 |   |         |                 |   |   |   |   |   |   | 5,726,794 |   |
| Finder fee                                                                              |   |             |       |        |          |   | (572,679)  |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   | (572,679 | ) |
| Value of warrants issued under private placement                                   |   |             |       | (2,859,141) |          |   |       | 2,859,141 |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   | - |   |
| Value of warrants issued as finders fee                                                 |   |             |       | (289,687)   |          |   |       | 289,687   |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   | - |   |
| Subscriptions received                                                                  |   |             |       |        |          |   | 303,480    |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   | 303,480 |   |
| Shares cancelled                                                                        |   |             | (350,000)  |        |          |   | (81,957)   |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   | (81,957) |   |
| Issued under 2009 Consultant Stock Option Plan                                          |   |             | 708,333    |        |          |   | 217,372    |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   | 217,372 |   |
| Value of warrants issued to induce short term loans                                |   |             |       | 278,325     |          |   |       |      |   |   |                |      |   |                |      |      |                                 |   |         | 278,325              |   |
| Value of warrants issued as part of acquisition of oil & gas properties             |   |             |       | 1,723,806   |          |   |       |      |   |   |                |      |   |                |      |      |                                 |   |         | 1,723,806            |   |
| Options revaluation upon changes in the terms                                           |   |             |       |        |          |   |       |      |   |   |                | 419,482   |   |                |      |      |                                 |   |         |                 |   |   |   | 419,482 |   |
| Net loss                                                                                |   |             |       |        |          |   |       |      |   |   |                |      |   |                |      |      |                                 |   | (3,927,244   | )                    |   |   |   |   |   |   | (3,927,244) |   |
| Unrealised gain on short term investments,net of tax considered available for sale |   |             |       |        |          |   |       |      |   |   |                | 1,728,805 |   |                |      | 1,728,805 |                                 |
|                                                                                    |   |             |       |        |          |   |       |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   |   |   |
| Balance, March 31, 2010                                                                 |   |             | 65,229,076 |        |          | $      | 35,298,257 |      |   | $      | 7,343,886           |      |   | $                   | 4,573,748 |      |                                 | $      | (37,262,565) |                 |   | $ | (2,696,213) |   |   | $ | 7,257,113 |   |
|                                                                                    |   |             |       |        |          |   |       |      |   |   |                |      |   |                |      |      |                                 |   |         |                 |   |   |   |   |   |   |   |   |

----

| For the years ended March 31,                                        |   | Note   |   |   | 2010   |        |        | 2009   |   |      | 2008        |    |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|-------------|-------------|--------|--------|-----------|-------------|---------|
| Other comprehensive gain ( loss)                                     |   |   |   |   |   |        |        |   |   |      |        |    |
| Net loss for year                                                    |   |   |   |   | $      | (3,927,244) |        |   | $      | (689,415) |        |    | $ | (571,799) |   |
| Unrealized gain (loss) for year on short term investments,net of tax |   |   | 5      |   |   |        | 1,728,805   |   |   |      | (3,118,250) |    |   |   | (2,266,470) |   |
| Comprehensive loss                                                   |   |   |   |   |   |        | (2,198,439) |   |   |      | (3,807,665) |    |   |   | (2,838,269) |   |
|                                                                 |   |   |   |   |   |        |        |   |   |      |        |    |   |   |   |   |
| Accumulated other comprehensive income(loss)                         |   |   |   |   |   |        |        |   |   |      |        |    |   |   |   |   |
| Beginning of year                                                    |   |   |   |   |   |        | (4,425,018) |   |   |      | (1,306,768) |    |   |   | - |   |
| Adjustment on adoption of new Accounting Policy                      |   |   |   | -      |   |        |        | -      |   |      |        | 959,702 |   |
|                                                                 |   |   |   |   |   |        | (4,425,018) |   |   |      | (1,306,768) |    |   |   | 959,702 |   |
| Other comprehensive gain (loss) for year                             |   |   |   |   |   |        | 1,728,805   |   |   |      | (3,118,250) |    |   |   | (2,266,470) |   |
| Accumulated other comprehensive loss, end of year                    |   |   |   |   |   | $           | (2,696,213) |   |   | $         | (4,425,018) |    |   | $ | (1,306,768) |   |
|                                                                 |   |   |   |   |   |        |        |   |   |      |        |    |   |   |   |   |

----

----

| a.   | Israel Oil & Gas Corporation, a wholly owned subsidiary, which changed its name on January 18, 2010 from Bontan Oil & Gas Corporation. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Israel Petroleum Company, Limited, a Cayman Island limited company incorporated on November 12, 2009, in which  Israel Oil & Gas Corporation owns a  76.79% equity interest  (“IPC Cayman”) |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Office Equipment and Furniture |
|--------|--------------------------------|

----

----

----

----

| 5. | SHORT TERM INVESTMENTS |
|----|------------------------|

|                               |   | March 31, 2010         |      |   |              |   |        | March 31, 2009         |   |   |              |   |
|------------------------------------|--------|------------------------|-----------|--------|-------------------|--------|-------------|------------------------|--------|--------|-------------------|--------|
|                               |   | Carrying average costs |      |   | fair market value |   |        | Carrying average costs |   |   | fair market value |   |
| Marketable securities              |   |                   | 4,007,574 |   |              |   | 1,359,431   |                   |   |   | 5,253,570         |   |   |   | 1,091,563 |   |
| Non-marketable securities          |   |                   |      |   |              |   | -           |                   |   |   | 263,011           |   |   |   | - |   |
|                               |   | $                      | 4,007,574 |   |              | $      | 1,359,431   |                   |   | $      | 5,516,581         |   |   | $ | 1,091,563 |   |
|                               |   |                   |      |   |              |   |        |                   |   |   |              |   |   |   |   |   |
| Movements in unrealised (loss)gain |   |                   |      |   |              |   |        |                   |   |   |              |   |   |
| At beginning of year               |   |                   |      |   |              |   | (4,425,018) |                   |   |   |              |   |   |   | (1,306,768) |   |
| Gain(Loss) during year             |   |                   |      |   |              |   | 1,728,805   |                   |   |   |              |   |   |   | (3,118,250) |   |
| At end of year                     |   |                   |      |   |              | $      | (2,696,213) |                   |   |   |              |   |   | $ | (4,425,018) |   |

----

| 5. | SHORT TERM INVESTMENTS - Continued |
|----|------------------------------------|

|        |   | Balance at April 1, 2009 |    |   | Deferred during the year |   |    | Canceled during the year (b) |   |   | Expensed during the year |   |   | Balance at March 31, 2010 |      |
|-------------|--------|--------------------------|---------|--------|--------------------------|--------|---------|------------------------------|--------|--------|--------------------------|--------|--------|---------------------------|-----------|
| Options (a) |   | $                        | -       |   |                     | $      | 419,482 |                         |   | $      | -                        |   |   | $                         | (419,482) |   |   | $ | - |   |
| Stocks      |   |                     | 20,484  |   |                     |   | 217,372 |                         |   |   | (81,957)                 |   |   |                      | (105,107) |   |   |   | 50,792 |   |
|        |   | $                        | 20,484  |   |                     | $      | 636,854 |                         |   | $      | (81,957)                 |   |   | $                         | (524,589) |   |   | $ | 50,792 |   |
|        |   |                     |    |   |                     |   |    |                         |   |   |                     |   |   |                      |      |   |   |   |   |   |
|        |   | Balance at April 1, 2008 |    |   | Deferred during the year |   |    | Canceled during the year     |   |   | Expensed during the year |   |   | Balance at March 31, 2009 |      |
| Options     |   | $                        | 7,878   |   |                     | $      | 76,839  |                         |   | $      | -                        |   |   | $                         | (84,717)  |   |   | $ | - |   |
| Stocks      |   |                     | 278,018 |   |                     |   | -       |                         |   |   | (64,395)                 |   |   |                      | (193,139) |   |   |   | 20,484 |   |
|        |   | $                        | 285,896 |   |                     | $      | 76,839  |                         |   | $      | (64,395)                 |   |   | $                         | (277,856) |   |   | $ | 20,484 |   |
|        |   |                     |    |   |                     |   |    |                         |   |   |                     |   |   |                      |      |   |   |   |   |   |

| (a)   | During the year, terms of all outstanding options were revised as explained in Note12 (b)(ii). These options were therefore re-valued and an additional cost of $419,482 was expensed. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | One of the consultants, Mr. John Robinson, who was issued 350,000 common shares as compensation in prior years valued at $81,957, returned the shares for cancelation (note 11(b)) in exchange for a cash fee of $82,000 as agreed by the directors in December 2008. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7. | OFFICE EQUIPMENT AND FURNITURE |
|----|--------------------------------|

|             |   | Cost   |   |   | Accumulated amortisation |   |   | Net book value |   |   | Net book value |   |
|------------------|--------|--------|--------|--------|--------------------------|--------|--------|----------------|--------|--------|----------------|--------|
| As at March 31,  |   | 2010   |   |   |                     |   |   |           |   |   | 2009           |   |
| Office furniture |   |   | 4,725  |   |                     |   | 2,003  |           |   |   | 2,722          |   |   |   | 3,402 |   |
| Computer         |   |   | 3,432  |   |                     |   | 1,619  |           |   |   | 1,813          |   |   |   | 1,302 |   |
| Software         |   |   | 5,793  |   |                     |   | 1,526  |           |   |   | 4,267          |   |   |   | 4,730 |   |
|             |   |   |   |   |                     |   |   |           |   |   |           |   |   |   |   |   |
|             |   | $      | 13,950 |   |                     | $      | 5,148  |           |   | $      | 8,802          |   |   | $ | 9,434 |   |

----

| Cost of acquisition                                                                                        |                                                                 |
|------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
| Cash paid to vendor                                                                                        |  $         899,725 |
| Finder's  fee to Howard Cooper, sole director of IPC Cayman                                      | 532,013                                                              |
| Cost of preliminary seismic data                                                                           | 2,144,596                                                            |
| Interest  paid by cash and warrants on funds borrowed for acquisition (13(iv)                    | 147,282                                                              |
| Value of warrants issued to entity controlled by Howard Cooper and other non related entity (note 13(iii)) | 1,723,806                                                            |
|                                                                                                       |  $       5,447,422           |
| Related expenditure                                                                                        |                                                                 |
| Consulting fees                                                                                            |  $         552,515 |
| Legal fees                                                                                                 | 408,470                                                              |
| Other direct costs                                                                                         | 111,960                                                              |
|                                                                                                       | 1,072,945                                                            |
|                                                                                                       |  $       6,520,367           |
|                                                                                                       |                                                                 |

----

| 9. | ACCRUALS |
|----|----------|

| As at March 31,                                          |   | 2010   |      |   | 2009   |   |
|----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Audit fee and  other accruals                  |   |   | 62,606    |   |   |   | 55,474 |   |
| Finders fee due to Current Capital Corp, a related party |   |   | 127,712   |   |   |   | - |   |
| Financing fee                                            |   |   | 406,240   |   |   |   | - |   |
| Interest on short term loans                             |   |   | 40,784    |   |   |   | - |   |
| Subscription refundable                                  |   |   | 406,241   |   |   |   | - |   |
|                                                     |   | $      | 1,043,583 |   |   | $      | 55,474 |   |
|                                                     |   |   |      |   |   |   |   |   |

| As at March 31,                                                           |   |   |   |   | 2010   |   |      | 2009   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|
| Current Capital Corp., a related party                                    |   |   | a      |   |   |   | 208,672   |   |   |   | - |   |
| Due to a Company controlled by  the sole director of IPC Cayman |   |   | b      |   |   |   | 122,371   |   |   |   | - |   |
| Other                                                                     |   |   | c      |   |   |   | 734,535   |   |   |   | - |   |
|                                                                      |   |   |   |   |   | $      | 1,065,578 |   |   | $ | - |   |

| a.   | There are two loans totalling to US $ 250,000. The loans carry interest at the rate of 10% per annum and are repayable in full within one year, between November 2010 and January 2011 with accumulated interest. Interest of US$ 6,986 accrued up to March 31, 2010 is included in accruals. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Funds advanced are repayable on demand and carry interest at 5% per annum. |
|----------------|----------------------------------------------------------------------------|

| c.   | The amount of US$850,000 was borrowed on November 12, 2009. The loan carries interest at 10% per annum. The loan together with the accumulated interest is repayable on or before November 12, 2010. Interest of US$32,370 accrued up to March 31, 2010 is included in the accrual. The Promissory Note covering this loan is secured by the pledge of 1,125 shares of Israel Petroleum Company, Limited. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  (a) | Authorized |
|--------|-----------|------------|

| As at March 31,                                                                  |   | 2010   |       |      |   |   |        | 2009   |   |   |       |   |
|----------------------------------------------------------------------------------|--------|--------|------------|-----------|--------|--------|-------------|--------|--------|--------|------------|--------|
|                                                                             |   | Common |       |      |   |   |        | Common |   |   |       |   |
|                                                                             |   | Shares |       |      | Amount |   |        | Shares |   |   | Amount     |   |
| Beginning of period                                                              |   |   | 30,820,743 |      |   | $      | 32,854,075  |   |   |   | 30,095,743 |   |   | $ | 32,901,488 |   |
| Canceled (note 6(b))                                                             |   |   | (350,000)  |      |   |   | (81,957)    |   |   |   | (275,000)  |   |   |   | (64,395) |   |
| Issued under 2009 Consultant Stock Compensation Plan (i)                         |   |   | 708,333    |      |   |   | 217,372     |   |   |   |       |   |   |   |   |   |
| Issued under private placements (ii.1 and .2)                                    |   |   | 34,050,000 |      |   |   | 5,726,794   |   |   |   | 1,000,000  |   |   |   | 62,280 |   |
| Finder's fee (ii.1 and .2)                                                       |   |   | -          |      |   |   | (572,679)   |   |   |   |       |   |   |   | (6,228) |   |
| Value assigned to warrants issued under private placements (note 13(a) ( i))(ii) |   |   | -          |      |   |   | (2,859,141) |   |   |   | -          |   |   |   | (39,070) |   |
| Value assigned to warrants issued as finders fee under private placements        |   |   |       | (289,687) |   |   |        |   |   |   |       |   |   |
| Subscriptions received (ii.2)                                                    |   |   |       |      |   |   | 303,480     |   |   |   |       |   |   |   |   |   |
|                                                                             |   |   | 65,229,076 |      |   | $      | 35,298,257  |   |   |   | 30,820,743 |   |   | $ | 32,854,075 |   |
|                                                                             |   |   |       |      |   |   |        |   |   |   |       |   |   |   |   |   |

| (i)   | On April 7, 2009, the Company registered a 2009 Consultant Stock Compensation Plan with the Securities and Exchange Commission in a registration statement under the US Securities Act of 1933. Three million common shares of the Company were registered under the Plan. During the year ended March 31, 2010, 708,333 common shares were issued to four consultants out of this plan in settlement of their fees. These shares were valued at the market price of the common shares prevailing on the date of issue. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii).1 | On December 12, 2008, the Board of Directors of the Company approved a private placement to raise equity funds up to US$500,000. The private placement consisted of Units up to maximum of ten million, to be issued at US$ 0.05 per Unit. Each Unit would comprise one common share of the Company and one full warrant convertible into one common share of the Company at an exercise price of US$0.10 each within two years of the issuance of the warrants. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Board also approved a finder’s fee of 10% of the proceeds raised from the issuance of Units and warrants attached thereto and 10% of the warrants issued in warrants under the same terms, payable to Current Capital Corp., a related party. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | The subscription closed on October 15, 2009. A total of eleven qualified subscribers subscribed for ten million Units for gross proceeds of US$ 500,000. (Note 13(a)(i)). Of these, one million Units were issued in fiscal 2009. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 11. | CAPITAL STOCK -     (b) | Issued – continued.......... |
|-----|--------------------------------------------------|------------------------------------|

| (ii).2 | On November 20, 2009, the Board of Directors of the Company approved a private placement to raise equity funds up to US$5,500,000, raised subsequent to US$7.9 million. The private placement consists of Units up to a maximum of 27.5 million, raised subsequently to 39.5 million, to be issued at US$ 0.20 per Unit. Each Unit would comprise one common share of the Company and one full warrant convertible into one common share of the Company at an exercise price of US$0.35 each within five years of the issuance of the warrants, subject to an early recall if the market price of the Company’s common shares exceeds US$1 for a period of 20 consecutive trading days. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Board also approved a finder’s fee of 10% of the proceeds raised from the issuance of Units and warrants attached thereto and 10% of the warrants issued in warrants under the same terms, payable to Current Capital Corp., a related party, net of any fees payable to anyone else. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During the year ended March 31, 2010, the Company received thirty seven subscriptions who subscribed a total of 26,550,000 million Units for gross proceeds of approximately US$5.3 million, of which thirty five subscriptions for 25,050,000 Units were accepted and underlying shares and warrants were issued on or before March 31, 2010. The balance of the two subscriptions for US$300,000 (CDN$ 303,480) were accepted but the underlying securities were not issued until after March 31, 2010 pending receipt of the required documentations. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The subscription was closed on April 30, 2010. The Company issued additional 12.7 million Units since April1, 2010 till the closing date of April 15, 2010 and raised approximately US$2.5 million. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | The following is a summary of all Stock Option Plans as at March 31, 2010 and 2009: |
|-----------------|-------------------------------------------------------------------------------------|

| Plan                   | Date of registration * |   | # of Options |      |   |   |   |      |    |   |   |      |   |   |        |       |
|------------------------|------------------------|--------|--------------|-----------|--------|--------|--------|-----------|---------|--------|--------|-----------|--------|--------|-------------|------------|
|                   |                   |   | Registered   |      |   | Issued |   |      | Expired |   |   | Exercised |   |   | Outstanding |       |
| 1999 Stock option Plan | April 30, 2003         |   |         | 3,000,000 |   |   |   | 3,000,000 |    |   |   | -70,000   |   |   |        | -1,200,000 |   |   |   | 1,730,000 |   |
| 2003 Stock Option Plan | July 22, 2004          |   |         | 2,500,000 |   |   |   | 2,500,000 |    |   |   | -155,000  |   |   |        | -400,000   |   |   |   | 1,945,000 |   |
| The Robinson Plan      | December 5, 2005       |   |         | 1,100,000 |   |   |   | 1,100,000 |    |   |   | -         |   |   |        | -          |   |   |   | 1,100,000 |   |
| 2005 Stock Option Plan | December 5, 2005       |   |         | 1,000,000 |   |   |   | 50,000    |    |   |   | -         |   |   |        | -          |   |   |   | 50,000 |   |
|                   |                   |   |         | 7,600,000 |   |   |   | 6,650,000 |    |   |   | -225,000  |   |   |        | -1,600,000 |   |   |   | 4,825,000 |   |

|   | *   Registered with the Securities and Exchange Commission of the United States of America (SEC) as required under the Securities Act of 1933. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Movements in stock options during year are as follows: |
|-----------------|--------------------------------------------------------|

| (i)   | There were no movements during the years ended March 31, 2010 and 2009. |
|-----------------|-------------------------------------------------------------------------|

----

|   |   |
|--------|--------|

| (ii)   | On January 29, 2010, the Board of Directors of the Company approved extension of the expiry dates of all outstanding options to March 31, 2014. Fair value of these options was re-estimated on that date to reflect the modification made in the terms. The re-estimation was done using a Black-Scholes option price model with the following assumptions: |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Risk free interest rate1% |
|--------|---------------------------|

|   | Expected dividendnil |
|--------|----------------------|

|   | Expected volatility (based on previous 217 weeks average market price)185.52% |
|--------|-------------------------------------------------------------------------------|

|   | Expected life1522 days |
|--------|------------------------|

|   | Exercise priceUS$0.15 |
|--------|-----------------------|

|   | Market price at January 29, 2010US$0.34 |
|--------|-----------------------------------------|

| (c) | Details of weighted average remaining life of the options granted and outstanding are as follows: |
|-----|---------------------------------------------------------------------------------------------------|

----

| 13. | WARRANTS |
|-----|----------|

| March 31,                                             |             | 2010                        |                            |                                       | 2009                              |                                                            |                                                                                       |
|-------------------------------------------------------|------------------|-----------------------------|---------------------------------|--------------------------------------------|-----------------------------------|-----------------------------------------------------------------|--------------------------------------------------------------------------------------------|
|                                                  | Note             | # of warrants               | Weighted average exercise price | Fair value                                 | # of warrants                     | Weighted average exercise price                                 | Fair value                                                                                 |
| Issued and outstanding, beginning of period           |  13,846,420 | 0.24                        |   2,192,927           |   12,846,420                     | 0.44                              |          2,153,857 |
| Issued under 2008-9 Private Placement                 | i                |    9,000,000 | 0.10                            |     339,560            |     1,000,000 | 0.10                                                            |               39,070 |
| Issued as finders fee under 2008-9 private placement  | i                |    1,000,000 | 0.10                            |       37,729 |                              |                                                            |                                                                                       |
| Issued under 2009-10 Private Placement                | ii               |  25,050,000            | 0.35                            |   2,519,581                      |                              |                                                            |                                                                                       |
| Issued as finders fee under 2009-10 private placement | ii               |    2,505,000 | 0.35                            |      251,958      |                              |                                                            |                                                                                       |
| Issued in connection with acquisition of licences     | iii              |    7,000,000 | 0.35                            |   1,723,806                      |                              |                                                            |                                                                                       |
| Issued as inducement for loans                        | iv               |    1,300,000 | 0.35                            |     278,325            |                              |                                                            |                                                                                       |
| Issued and outstanding, end of year                   |  59,701,420 | 0.28                        |  7,343,886                 |   13,846,420                     | 0.24                              |          2,192,927 |

|   |  (i) | The company issued nine million warrants under a 2008-9 private placement relating to Units subscribed and finder’s fee during the year ended March 31, 2010 as explained in Note 11(b)(ii)). These warrants are convertible into equal number of common shares at an exercise price of US$0.10 per warrant and expire within two years of their issue. |
|--------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The fair value of these warrants has been estimated using a Black-Scholes option price model with the following assumptions: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rate | 1% |
|-------------------------|----|

| Expected dividend | nil |
|-------------------|-----|

| Expected volatility | 184.59% |
|---------------------|---------|

| Expected life | 730 days |
|---------------|----------|

| Market price | US$0.35 |
|--------------|---------|

|   | The fair value of the warrants as per the Black-Scholes option price model amounted to $3,169,023. Using the relative fair value method, an amount of $339,560 for warrants issued to private placees and $37,729 for warrants issued as finder’s fee (total 87%) has been accounted for as reduction in value of common shares and increase in the value of warrants. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 13. | WARRANTS – (continued) |
|-----|------------------------------|

| (ii)   | The company issued 25,050,000 warrants under a 2009-10 private placement relating to Units subscribed plus 2,505,000 as a finder’s fee during the year ended March 31, 2010 as explained in Note 11(b)(iii). These warrants are convertible into equal number of common shares at an exercise price of US$0.35 per warrant and expire within five years of their issue. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The fair value of these warrants has been estimated using a Black-Scholes option price model with the following assumptions: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rate | 1% |
|-------------------------|----|

| Expected dividend | nil |
|-------------------|-----|

| Expected volatility | 140.04% |
|---------------------|---------|

| Expected life | 1,826 days |
|---------------|------------|

| Market price | US$0.33 |
|--------------|---------|

|     |  The fair value of the warrants as per the Black-Scholes option price model amounted to $7,288,984. Using the relative fair value method, an amount of $2,519,581 for warrants issued to private placees and $251,958 for warrants issued as finder’s fee (total 59%) has been accounted for as reduction in the value of common shares and increase in the value of warrants. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | The Company issued 7 million warrants to two entities under a Contribution and Assignment Agreement dated November 14, 2009.  5 Million of these warrants were issued to International Three Crown Petroleum LLC, which holds the remaining 23.21% equity in IPC Cayman. The warrants are convertible into equal number of common shares of the Company at an initial exercise price of US$0.35 within five years of their issuance. The holders of these warrants are entitled to a cashless exercise under which number of common shares to be issued will be based on number of common shares for which warrants are exercised times the difference between the market price of common share and the exercise price divided by the market price. Shares resulting from this formula will be issued against the exercised warrants without any cash consideration. |
|-------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The fair value of these warrants has been estimated using a Black-Scholes option price model with the following assumptions: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rate | 1% |
|-------------------------|----|

| Expected dividend | nil |
|-------------------|-----|

| Expected volatility | 142.96% |
|---------------------|---------|

| Expected life | 1,826 days |
|---------------|------------|

| Market price | US$0.28 |
|--------------|---------|

----

| 13. | WARRANTS  (a) – (continued) |
|-----|---------------------------------------------|

| (iv)   | The Company issued 1,300,000 warrants as an inducement to two lenders to lend money to the Company under promissory notes. One of the lenders is Current Capital Corp, a related party, which received 300,000 warrants. These warrants are convertible into equal number of common shares at an exercise price of US$0.35 within five years. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The fair value of these warrants has been estimated using a Black-Scholes option price model with the following assumptions: |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rate | 1% |
|-------------------------|----|

| Expected dividend | nil |
|-------------------|-----|

| Expected volatility | 142.96% |
|---------------------|---------|

| Expected life | 1,826 days |
|---------------|------------|

| Market price | US$0.35 |
|--------------|---------|

|   | The fair value of the warrants as per the Black-Scholes option price model amounted to US$406,026. Using the relative fair value method, an amount of  $278,325 (US$274,050) for warrants issued has been accounted for as additional effective interest cost  with corresponding debit of $104,372 included in oil & gas properties and related expenditure. (note 8) and balance of $173,953 adjusted against short term loans.(note 10) |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Details of weighted average remaining life of the warrants granted and outstanding are as follows: |
|--------|-----|----------------------------------------------------------------------------------------------------|

|                  | 2010                                    |                                                |                  | 2009       |                                                |
|-----------------------|-----------------------------------------|-----------------------------------------------------|-----------------------|------------|-----------------------------------------------------|
|                  | Warrants outstanding & excercisable | Warrants outstanding & excercisable             |
| Exercise price in US$ | Number                                  | Weighted average remaining contractual life (years) | Exercise price in US$ | Number     | Weighted average remaining contractual life (years) |
| 0.35                  | 35,855,000                              | 4.75                                                |                  |       |                                                |
| 0.25                  | 12,846,420                              | 4.00                                                | 0.25                  | 12,846,420 | 0.29                                                |
| 0.10                  | 11,000,000                              | 3.91                                                | 0.10                  | 1,000,000  | 1.88                                                |
| 0.24                  | 59,701,420                              | 4.47                                                | 0.46                  | 13,846,420 | 0.40                                                |

----

| 13. | WARRANTS  (b) – (continued) |
|-----|---------------------------------------------|

| 15. | CONSULTING FEES |
|-----|-----------------|

| For the year ended March 31                 | 2010                                           | 2009                                                                 | 2008                                                                 |
|---------------------------------------------|------------------------------------------------|----------------------------------------------------------------------|----------------------------------------------------------------------|
| Fees settled in stocks and options (Note 6) | 524,589                                        | 277,856                                                              | 314,248                                                              |
| Fees settled for cash                       | 667,086                                        | 166,928                                                              | 82,217                                                               |
|                                        |  $     1,191,675 |  $         444,784 |  $         396,465 |
|                                        |                                           |                                                                 |                                                                 |

| 16. | BANK CHARGES, INTEREST AND FEES |
|-----|---------------------------------|

| For the year ended March 31, |   | 2010                                                                                            | 2009                                                                                        | 2008                                                                                        |
|------------------------------|--------|-------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
| Bank charges                 |   |                2,595 |         2,362                                       |         1,625                                       |
| Interest on short term loans | (i)    |                7,136 |                - |                - |
| Financing fees               | (ii)   |             681,331                 |                - |                - |
|                         |   |                                                                                            |                                                                                        |                                                                                        |
|                         |   |  $         691,062                            |  $      2,362                                            |  $      1,625                                            |
|                         |   |                                                                                            |                                                                                        |                                                                                        |

| (i)   | Interest of $7,136 was charged by the entity controlled by the sole director of IPC Cayman. |
|-----------------|---------------------------------------------------------------------------------------------|

| (ii)   | Financing fees includes $46,337 paid to the sole director of IPC Cayman and $44,706 to Current Capital Corp., a related party for arranging short term loan and $590,288 paid by IPC Cayman in connection with financing negotiations. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 17. | INCOME TAXES |
|-----|--------------|

|                                                                                                                                                      |   | 2010   |      |   | 2009   |   |      | 2008   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|          Income tax recovery based on combined corporate income tax rate of 25% (2009: 29% and 2008: 33.50%) |   | $      | (644,387) |   |   | $      | (199,930) |   |   | $ | (191,553) |   |
|          Increase(decrease) in taxes resulting from:                                                         |   |   |      |   |   |   |      |   |   |   |   |   |
| Investments in Subsidiary (BDC) written off on disolution                                                                                                 |   |   | -         |   |   |   | -         |   |   |   | (50,280) |   |
| Non-deductible stock based compensation                                                                                                                   |   |   | 131,147   |   |   |   | 80,578    |   |   |   | 105,273 |   |
| Non-deductible meals & entertainment expenses                                                                                                         |   |   | 7,303     |   |   |   | 7,806     |   |   |   | 11,199 |   |
| Not-taxable portion of loss (gain) on sale of short term investments                                                                                      |   |   | 106,601   |   |   |   | (6,530)   |   |   |   | (41,616) |   |
| Finders fee -1/5th portion allowable for tax                                                                                                              |   |   | (28,640)  |   |   |   |      |   |   |   |   |   |
| Write off of a short term investment                                                                                                                      |   |   | 31,348    |   |   |   | 9,136     |   |   |   |   |   |
| Income tax recovery                                                                                                                                       |   |   | (396,628) |   |   |   | (108,940) |   |   |   | (166,977) |   |
| Benefit of tax losses not recognised                                                                                                                      |   |   | 396,628   |   |   |   | 108,940   |   |   |   | 166,977 |   |
| Provision for income taxes                                                                                                                                |   | $      | -         |   |   | $      | -         |   |   | $ | - |   |

|                                                    |   | Canada    |    |   |   |   |    | US     |   |   |    |   |
|---------------------------------------------------------|--------|-----------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
|                                                    |   | 2010      |    |   | 2009   |   |    | 2010   |   |   | 2009    |   |
|                                                    |   | in '000 $ |    |   |   |   |    |   |   |   |    |   |
| Future income tax assets:                               |   |      |    |   |   |   |    |   |   |   |    |   |
|   Non-capital losses carried forward          |   | $         | 2,226   |   |   | $      | 2,199   |   |   | $      | 1,498   |   |   | $ | 1,498 |   |
|   Capital losses carried forward              |   |      | 621     |   |   |   | 560     |   |   |   | -       |   |   |   | - |   |
|   Unrealised losses on short term investments |   |      | 216     |   |   |   | 642     |   |   |   |    |   |   |   |   |   |
| Future tax assets                                       |   |      | 3,063   |   |   |   | 3,401   |   |   |   | 1,498   |   |   |   | 1,498 |   |
| Valuation allowance                                     |   |      | (3,063) |   |   |   | (3,401) |   |   |   | (1,498) |   |   |   | (1,498) |   |
| Future income taxes                                     |   | $         | -       |   |   | $      | -       |   |   | $      | -       |   |   | $ | - |   |

----

| 17. | INCOME TAXES - continued |
|-----|--------------------------|

----

----

| (a)   | The Company entered into media relations and investor relations contracts with Current Capital Corp., a shareholder corporation, effective July 1, 2004 initially for a period of one year and renewed automatically unless cancelled in writing by a 30-day notice, for a total monthly fee of US$10,000. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | The Company entered into a consulting contract with Mr. Kam Shah, the Chief Executive Officer and Chief Financial Officer on April 1, 2005 for a five-year term. This term was extended to another five years to March 31, 2015 by the audit committee on April 1, 2010. Mr. Shah’s monthly fee is $15,000 plus taxes. Further, the contract provides for a lump sum compensation of US$250,000 for early termination of the contract without cause. The contract also provides for entitlement to stock compensation and stock options under appropriate plans as may be decided by the board of directors from time to time. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | The Company entered into a consulting contract with Mr. Terence Robinson, a key consultant and a former Chief Executive Officer, on April 1, 2003 for a six-year term up to March 31, 2009. On august 4, 2009, this contract was renewed for another five years effective April 1, 2009. The renewed contract provides for a fixed monthly fee of $10,000 plus taxes. The Consultant will also be entitled to stock compensation and stock options under appropriate plans as may be decided by the board of directors from time to time. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | The Company has a consulting contract with Mr. John Robinson. Mr. John Robinson is the sole owner of Current Capital Corp., a firm with which the Company has an on-going contract for media and investor relations, and a brother of Mr. Terence Robinson who is a key consultant to the Company and a former Chief Executive Officer of the Company. Mr. Robinson provides services that include assisting the management in evaluating new projects and monitoring short term investment opportunities that the Company may participate in from time to time. A new Consulting Contract was signed with Mr. John Robinson on July 1, 2009 for period to March 31, 2014. The Contract provides for a fixed monthly fee of $8,500 plus taxes. The Consultant will also be entitled to stock compensation and stock options under appropriate plans as may be decided by the board of directors from time to time. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | The Company has agreed to the payment of a finder’s fee to Current Capital Corp., a related party, at the rate of 10% of the proceeds from the exercise of any of the outstanding warrants. The likely fee if all the remaining warrants are exercised will be approximately $ 1.3 million. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (f)   | The Company’s subsidiary, IPC Cayman has a consulting agreement with its manager and sole director, International Three Crown Petroleum to pay a management fee of US$20,000 per month. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (g)   | Under the terms of the Agreement governing the allocation of ownership to the two off shore drilling licenses in Israel, the Company’s subsidiary, IPC Cayman is required to provide a proof of its financial capability to contribute, when required, its share of the development costs. IPC Cayman’s share of these costs is estimated not to exceed US$ 12 million. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (h)   | Under an agreement with IPC Cayman, the Company is required to issue up to 500,000 warrants over a period to be defined under a Warrant Plan for issuance to employees and consultants of IPC Cayman other than its sole director for services to be rendered. No warrants have yet been issued. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | Included in shareholders information expense is $132,213 (2009: $133,785; 2008: $124,231) paid to Current Capital Corp, (“CCC”) for media relations services. CCC is a shareholder corporation and its sole director provides consulting services to the Company. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | CCC charged approximately $20,993 for rent, telephone and other office expenses (2009: $37,800 and 2008: $27,300). $32,058 was charged by the entity controlled by the sole director of IPC Cayman (2009 and 2008: $ nil) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | Finders fees of $736,755 (2009: $6,228, 2008: $12,245) was charged by CCC in connection with the private placement. The fee for 2010 included a cash fee of $449,583 and 3,480,000 warrants valued at $289,687 using the Black-Scholes option price model. |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv) | Business expenses of $23,622 (2009 - $19,205; 2008 - $15,771) were reimbursed to directors of the corporation and $82,390 (2009 - $68,009, 2008: $118,774) to a key consultant and a former chief executive officer of the Company. Travel and related expenses of $88,357 charged by the sole director of IPC Cayman have been included Oil & gas properties and related expenditure  (2009 and 2008: $ nil) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v) | Shares issued to a director under the Consultant’s Stock Compensation Plan – $Nil  (2009 : $Nil, 2008: 450,000 valued at $105,373,). Shares issued to (returned by) a key consultant and a former chief executive officer of the Company under the Consultant Stock Compensation Plan: $Nil (2009: (275,000) valued at $ (64,395), 2008: 550,000 valued at $128,790). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| (vi) | Options issued to directors under Stock option plans –$ nil (2009: nil, 2008:  50,000 valued at $7,878). |
|------|--------------------------------------------------------------------------------------------------------------------------|

| (vii) | Cash fees paid to directors for services of $235,000 (2009:$60,000 and 2008: $ 33,871). Cash fee paid to a key consultant and a former chief executive officer of the Company of $120,000 (2009:$90,000 and 2008: $ nil). Fees paid to a consultant who controls CCC $76,543 (2009: $81,911 in shares, 2008: $81,926 in shares).  These fees are included in consulting expenses. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (viii) | Accounts payable includes $95,813 (2009: $15,482, 2008: $9,384) due to CCC, $5,852 (2009: $1,875, 2008: $757) due to a director of the Company and $82,741 (2009: $67,212, 2008: $ 6,577) due to a key consultant and a former chief executive officer of the Company and due to a consultant who controls CCC $62,475 (2009: $1,024, 2008: $1,022) |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (ix) | Included in short term investments is an investment of $nil (2009 and 2008: $200,000) in a private corporation controlled by a brother of the key consultant. The investment was fully written off as at March 31, 2010 ($Nil as at March 31, 2009, $200,000 as at March 31, 2008) |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (x) |   | Included in short term investments is an investment of $1,869,381 carrying cost and $775,020 fair value (2009: $1,837,956 carrying cost and $361,877 fair value, 2008: $1,929,049 carrying cost and $1,140,120 fair value) in a public corporation controlled by a key shareholder of the Company. This investment represents common shares acquired in the open market or through private placements and represents less than 1% of the issued and outstanding common shares of the said corporation. |
|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (xi) | Included in other receivables is a fee advance of $nil (2009: $ 70,000 and 2008: $nil) made to Chief Executive Officer. The fee amount advanced in fiscal 2009 was expensed in March 2010. |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (xii) | Included in other receivable is an advance of $nil (2009: $5,814 and 2008: $ nil), made to a director |
|-------|-------------------------------------------------------------------------------------------------------|

| (I)   | The sole director of the Company’s subsidiary, IPC Cayman communicated to the Company that it is required to complete best efforts financing of $18 million and to contribute all proceeds to IPC Cayman. He has also presented the Company with an invoice for $ 2,291001 claiming it it represented estimated proceeds from the private placement financing completed by the Company on April 30, 2010. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The management disputes these claims by the sole director of the IPC Cayman and is currently engaged in negotiations with the sole director to resolve these matters. The final outcome of such negotiation and any litigation that may arise if such negotiations fail is not determinable. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In any event, the management believes that such claims have no bearing on the consolidated financial statements of the Company. |
|--------|---------------------------------------------------------------------------------------------------------------------------------|

| (II)   | IPC Cayman received communication in May 2010 from a lawyer of a non-related investor alleging that IPC Cayman made an agreement with his client in January 2010 which involved sale of a part of the working interest in the two drilling licenses.  IPC Cayman denies the fact and considers such an agreement null and void. No legal action has been taken to date. The Company and IPC Cayman are confident that they will successfully defend any such action if taken in future. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| (a) | Concentration risk: |
|-----|---------------------|

----

|   | (b) Market price risk: |
|--------|------------------------|

| (c)   | Liquidity risk: |
|-----------------|-----------------|

|   | The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned exploration commitments on its petroleum and natural gas properties or that viable options are available to fund such commitments from new equity issuances or alternative sources such as farm-out agreements. However, as an exploration company at an early stage of development and without significant internally generated cash flow, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that actual exploration expenditures may exceed those planned. The current uncertainty in global markets could have an impact on the Company’s future ability to access capital on terms that are acceptable to the Company. The Company has so far been able to raise the required financing to meet its obligations on time. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (d) | Currency risk |
|-----------|---------------|

----

----

----

| 24. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
|-----|-----------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | Adoption of New Accounting Policies |
|--------|-------------------------------------|

|   | (i) | Financial Accounting Standards Board’s Codification of US GAAP |
|--------|-----|----------------------------------------------------------------------|

----

| 24. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - Adoption of New Accounting Policies - continued |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Business combinations |
|--------|------|-----------------------|

| iii. | Non-controlling interests |
|------|---------------------------|

|   | iv. | Derivative Instruments and Hedging Activities |
|--------|-----|-----------------------------------------------|

|   | v. | Subsequent events |
|--------|----|-------------------|

----

| 24. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - continued |
|-----|----------------------------------------------------------------------------------------------------------|

|   | vi. | The Fair Value Measurement of Liabilities |
|--------|-----|-------------------------------------------|

|   |   |
|--------|--------|

|   | vii. Equity method investees |
|--------|------------------------------|

----

|   | 24. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES  - continued |
|--------|-----|----------------------------------------------------------------------------------------------------------------|

|   |  (ii) | Variable interest entities an Amendment to FASB Interpretation No.46(R) |
|--------|------------|-------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

| 25 | SUBSEQUENT EVENTS |
|----|-------------------|

|   | (i) | In a letter dated May 16, 2010, Petroleum Commissioner confirmed that the two licenses, in which the Company has indirect 11% working interest, are fully valid and approved changes in the work plan submitted by the steering committee. The Petroleum Commissioner approved deadlines for submitting various work plans between July 15, 2010 and March 31, 2011. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | On May 19, 2010, Geoglobal Resources (India) Inc. was appointed operator for the two licenses, in which the Company has indirect 11% working interest, subject to the execution of a joint operating agreement. The operator will acquire a 5% working interest in the two licenses pro rata from the Lead Investors and IPC Cayman for USD $1.2 million.  As a result of such acquisition, the Company’s indirect working interest has decreased to 10.45%. The operator also will have an option to acquire an additional 2.5% working interest in one or both licenses pro rata from the Lead Investors and IPC Cayman. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | The joint venture partners and the operator also entered into an option agreement dated as of May 19, 2010. Under this option agreement, the joint venture partners have the option to purchase up to a 12.5% ownership interest in an offshore drilling license known as the Samuel license granted to the operator and their partners. The Company’s subsidiary, IPC Cayman is now entitled to acquire 2.72% of the Samuel license, of which the Company’s share would be 2.09% and the minority shareholder of IPC Cayman will be entitled to the balance 0.63%. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | On May 20, 2010, the joint venture partners submitted an application to the Israeli Petroleum Commissioner to approve the transfer and registration of the rights in the Mira and Sarah licenses. The approval was granted on June 16, 2010. |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 26 | PRIOR YEAR’S FIGURES |
|----|----------------------------|

|   | Certain prior year’s amounts have been reclassified to conform to current presentation. |
|--------|-----------------------------------------------------------------------------------------------|

----