UNITED
      STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
20-F











REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934





OR





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





For
the fiscal year ended March 31, 2008





OR





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





OR





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





Date of
event requiring this shell company report______________





For the transition period from
______________ to __________________





Commission
      file number: 0-30314





Bontan
      Corporation Inc.


(Exact
      name of Registrant as specified in its
charter)





Inapplicable


(Translation of Registrant’s name into
English)





Province
of Ontario, Canada


(Jurisdiction of incorporation or
organization)





47
Avenue Road, Suite 200, Toronto, Ontario, Canada, M5R 2G3


(Address of principal executive
offices)











Kam
Shah, 416.929.1806,kam@bontancorporation.com, Fax: 416.929.6612


47
Avenue Road, Suite 200, Toronto, Ontario, Canada M5R 2G3





(Name,telephone,e-mail
and/or facsimile number and Address of Company Contact Person)





Securities
registered or to be registered pursuant to Section 12(b) of the
Act:  None





Securities
registered or to be registered pursuant to Section 12(g) of the
Act.





Common
shares without par value


(Title of
Class)





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





Indicate
the number of outstanding shares of each of the Issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report





Common
shares without par value – 30,095,743 as at March 31, 2008





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act     Yes      
 No X__





If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.  Yes   No X





Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such report) and (2) has been subject to such filing requirements for
the past 90 days. Yes X     No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):





Large
accelerated filer_____ Accelerated filer_____ Non-accelerated
filer  X





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S.
GAAP International Financial Reporting   Other   
X


Standards
as issued by the International Accounting
Standards Board








If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow Item
17:XItem 18





If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 
X





TABLE
OF CONTENTS








Page No.Forward-looking
      statements
            1Foreign
      Private Issuer Status and Reporting currency
            2Part IItem
      1.
            Identity
      of Directors, Senior Management and Advisors
            2Item
      2.
            Offer
      Statistics and Expected Timetable
            2Item
      3.
            Key
      Information
            2Item
      4.
            Information
      on the Company
            10Item
      5.
            Operating
      and Financial Review and Prospects
            13Item
      6.
            Directors,
      Senior Management and Employees
            24Item
      7.
            Major
      Shareholders and Related Party Transactions
            31Item
      8.
            Financial
      Information
            33Item
      9.
            The
      Offer and Listing
            34Item
      10.
            Additional
      Information
            36Item
      11.
            Quantitative
      and Qualitative Disclosures about Market Risk
            47Item
      12.
            Description
      of Securities Other than Equity Securities
            48Part IIItem
      13.
            Defaults,
      Dividend Arrearages and Delinquencies
            48Item
      14.
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
            48Item
      15.
            Controls
      and Procedures
            48Item
      16.
            Audit
      Committee, Code of Ethics, and Principal Accountant’s Fees and
      Services
            50Part IIIItem
      17.
            Financial
      Statements
            51Item
      18.
            Financial
      Statements
            51Item
      19.
            Exhibits
            52










FORWARD
LOOKING STATEMENTS








This
annual report includes "for ward-looking
statements." All statements, other than statements of historical facts, included
in this annual report that address activities, events or developments, which we
expect or anticipate, will or may occur in the future are forward-looking
statements.





The words
"believe", "intend", "expect", "anticipate", "project", "estimate", "predict"
and similar expressions are also intended to identify forward-looking
statements.





These
forward-looking statements address, among others, such issues as:





- Future
earnings and cash flow, - future plans and capital expenditures, - expansion and
other development trends of the resource sector.





-
Expansion and growth of our business and operations, and





- Our
prospective operational and financial information.





These
statements are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe are
appropriate in particular circumstances. However, whether actual results and
developments will meet our expectations and predictions depends on a number of
risks and uncertainties, which could cause actual results to differ materially
from our expectations, including the risks set forth in "Item 3-Key
Information-Risk Factors" and the following:





-
            Fluctuations
      in prices of our products and
services,


-
            Potential
      acquisitions and other business
opportunities,


-
            General
      economic, market and business conditions,
and


-
            Other
      risks and factors beyond our
control.





Consequently,
all of the forward-looking statements made in this annual report are qualified
by these cautionary statements. We cannot assure you that the actual results or
developments anticipated by us will be realized or, even if substantially
realized, that they will have the expected effect on us or our business or
operations.




Unless
the context indicates otherwise, the terms "Bontan Corporation Inc." the
"Company”,"Bontan", “we”, “us”, “our” are used interchangeably in this Annual
Report and mean Bontan Corporation Inc. and its subsidiaries.


1


FOREIGN PRIVATE ISSUER
STATUS AND REPORTING CURRENCY








Foreign
Private Issuer Status:





Bontan
Corporation Inc. is a Canadian corporation incorporated under the laws of the
Province of Ontario. Approximately 87% of its common stock is held by non-United
States citizens and residents and our business is administered principally
outside the United States; As a result, we believe that we qualify as a "foreign
private issuer" for continuing to report regarding the registration of our
common stock using this Form 20-F annual report format.





Currency





The
financial information presented in this Annual Report is expressed in Canadian
dollars ("CDN $") and the financial data in this Annual Report is presented in
accordance with accounting principles generally accepted in Canada ("Can.
GAAP"). Such financial data conforms in all material respects with accounting
principles generally accepted in the United States ("U.S. GAAP") except as
disclosed in Note 16 of the Notes to Consolidated Financial Statements contained
herein.





All dollar amounts set forth in this
report are in Canadian dollars, except where otherwise
indicated.





PART I








ITEM 1 – IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISORS





Not
applicable.





ITEM 2 – OFFER STATISTICS
AND EXPECTED TIMETABLE





Not
applicable.





ITEM 3 – KEY
INFORMATION





(A)
SELECTED FINANCIAL DATA





This
Report includes consolidated financial statements of the Company for the years
ended March 31, 2008, 2007 and 2006. These financial statements were prepared in
accordance with accounting principles generally accepted in Canada. Reference is
made to Financial Statement Notes for a discussion of the material differences
between Canadian GAAP and U.S. GAAP, and their effect on the Company's financial
statements.





The
following is a selected financial data for the Company for each of the last five
fiscal years 2004 through 2008 on a consolidated basis. The data is extracted
from the audited financial statements of the Company for each of the said
years.





2





SUMMARY
OF FINANCIAL INFORMATION IN THE COMPANY FINANCIAL STATEMENTS (Canadian
$)








Operating
data – Fiscal year ended March 31





2008
            2007
            2006
            2005
            2004(Restated)
            (Restated)Revenue
            321,755
            $743,786
            $1,857,647
            $418,861
            $251Loss
      from continuing operations
            $(571,799)
            $(164,043)
            ($4,784,933)
            ($4,876,898)
            ($1,360,958)Loss
      from discontinued operations
            $-
            $-
            $-
            ($179,678)
            $-Net
      Loss
            $(571,799)
            $(164,043)
            ($4,784,933)
            ($5,056,576)
            ($1,360,958)Net
      loss per share (1)
            ($0.02)
            ($0.01)
            ($0.31)
            ($0.43)
            ($0.26)Working
      capital (Deficit)
            $5,173,892
            $6,624,466
            $5,285,784
            $4,734,269
            ($311,005)Total
      assets
            $5,239,122
            $6,672,918
            $5,450,772
            $5,075,158
            $3,085,584Capital
      stock
            $32,901,488
            $32,413,811
            $32,175,000
            $28,280,890
            $24,287,903Warrants
            $2,153,857
            $2,215,213
            $951,299
            $-
            $-Contributed
      surplus
            $4,077,427
            $4,069,549
            $4,069,549
            $3,795,078
            $-Accumulated
      other comprehensive loss
            ($1,306,768)Shareholders'
      equity
            $5,180,098
            $6,624,466
            $5,285,784
            $4,950,837
            $2,219,348Weighted
      average number of shares outstanding ( 2  )
            28,840,653
            27,472,703
            15,655,023
            11,700,303
            5,221,071





1. The
effect of potential share issuances pursuant to the exercise of options and
warrants would be anti-dilutive and, therefore, basic and diluted losses per
share are the same.





2.
Weighted average number of shares for a year was calculated by dividing the
total number of shares outstanding at the end of each of the months by
twelve.








Selected
Financial Data (U.S. GAAP) – Fiscal year ended March 31





2008
            2007
            2006
            2005
            2004Loss
      for year
            ($571,799)
            ($52,384)
            ($4,590,175)
            ($5,238,898)
            ($1,407,665)Comprehensive
      Loss
            ($2,838,269)
            $795,658
            ($4,038,005)
            ($5,273,144)
            ($1,360,958)Loss
      per share -Basic and diluted
            ($0.02)
            $0.00
            ($0.29)
            ($0.45)
            ($0.26)Total
      assets
            $5,239,122
            $7,632,619
            $6,197,700
            $4,858,590
            $3,085,584Shareholders'
      equity
            $5,180,098
            $7,584,167
            $4,734,269
            $4,734,269
            $2,219,348








The
Company has not declared or paid any dividends in any of its last five financial
years.





3





Exchange
Rates





In this
Annual Report on Form 20-F, unless otherwise specified, all monetary amounts are
expressed in Canadian dollars.  The exchange rates used herein were
obtained from Bank of Canada; however, they cannot be guaranteed.





On June
30, 2008, the exchange rate, based on the noon buying rates, for the conversion
of Canadian dollars into United States dollars (the “Noon Rate of Exchange”) was
CDN $1.02=US$1





The
following table sets out the high and low exchange rates in US dollar for one
Canadian dollar for each of the last six months





2008
            June
            May
            April
            March
            February
            JanuaryHigh
      for period
            $1.00
            $1.02
            $1.00
            $1.02
            $1.03
            $1.02Low
      for period
            $0.97
            $0.98
            $0.97
            $0.97
            $0.98
            $0.96





The
following table sets out the average exchange rates for the five most recent
financial years calculated by using the average of the Noon Rate of Exchange on
the last day of each month during the period.








Year
      Ended March 312008
            2007
            2006
            2005
            2004Average
      for the year
            1.03
            1.14
            1.19
            1.28
            1.35








(B)  CAPITALIZATION
AND INDEBTEDNESS





Not
applicable





(C)  REASONS
FOR THE OFFER AND USE OF PROCEEDS





Not
applicable





(D)  RISK
FACTORS





The
following is a brief discussion of those distinctive or special characteristics
of the Company’s operations and industry that may have a material impact on, or
constitute risk factors in respect of, the Company’s future financial
performance.





We 
have  a  history  of  operating  losses  and 
may  not  achieve  or  sustain profitability in the
future.





We have
incurred significant operating losses during recent fiscal years. We have not
yet had any revenue from the exploration activities nor have we ever found that
development activity is warranted on any of our properties.  As of March
31, 2008, we had an accumulated deficit of approximately $33
million.  We currently have no interest in any oil or gas property or
any natural resource project.




4


We expect
to continue to incur losses until it is determined that properties or projects
in which we may acquire interests in the future can be sufficiently developed
for commercialization. Even if it is determined that such properties or projects
should be developed for commercialization, there is no certainty that we will
produce revenue, operate profitably or provide a return on investment in the
future. We cannot assure you that we will be able to achieve or sustain
profitable operations in the future.





We
are in the process of seeking opportunities in oil and gas and any other sectors
and currently do not own any interests or properties.





Currently,
we do not own any interest in any oil or gas project or any other
project.  We are assessing various opportunities, none of which may
meet our eligibility requirements. Consequently, we may not own any interest for
an indeterminate amount of time.  As a result, we will use our cash
resources to pay for expenses and costs we incur in our efforts to identify
appropriate opportunities as well as for our standard operating
costs.





Our operations are subject to
substantial exploration and development risks.





The
Company anticipates participating in oil and gas resource properties in the hope
of locating reserves.  The Company's property interests, when acquired
will most likely be in the exploration stage only. Accordingly, there is little
likelihood that the Company will realize any profits in the short to medium
term. Any profitability in the future from the Company's business will be
dependent upon locating reserves, which itself is subject to numerous risk
factors.





The
business of exploring for and producing oil and gas involves a substantial risk
of investment loss which, even a combination of experience, knowledge and
careful evaluation may not be able to overcome.  The principal resources
necessary for the exploration and production of crude oil and natural gas are
leasehold prospects under which crude oil and natural gas reserves may be
discovered, drilling rigs and related equipment to explore for such reserves and
knowledgeable personnel to conduct all phases of crude oil and natural gas
operations, all of which requires a substantial investment.





Drilling
oil and gas wells involves the risk that the wells will be unproductive or that,
although productive, the wells do not produce oil and/or gas in economic
quantities. Other hazards, such as unusual or unexpected geological formations,
pressures, fires, blowouts, loss of circulation of drilling fluids or other
conditions may substantially delay or prevent completion of any well. Adverse
weather conditions can also hinder drilling operations.





A
productive well may become uneconomic in the event water or other deleterious
substances are encountered, which impair or prevent the production of oil and/or
gas from the well.  In addition, production from any well may be
unmarketable if it is impregnated with water or other deleterious substances.
 As with any petroleum property, there can be no assurance that oil and gas
will be produced from the properties in which the Company had and may in future
have interests.




In
addition, the marketability of oil and gas, which may be acquired or discovered,
will be affected by numerous factors beyond the control of the Company.
 These factors include the proximity and capacity of oil and gas pipelines
and processing equipment, market fluctuations of prices, taxes, royalties, land
tenure, allowable production and environmental protection.





The
extent of these factors cannot be accurately predicted, but the combination of
these factors may result in the Company not receiving an adequate return on
invested capital. There is no assurance that our anticipated exploration and
development activities in future resource properties will ultimately yield oil
or gas in commercial quantities.  Drilling for oil and gas may be
unprofitable. Dry holes and wells that are productive but do not produce
sufficient net revenues after drilling, operating and other costs are
unprofitable.  We cannot assure you that we will be able to achieve
profitable operations in the future.





5


In
determining the purchase price for our future interests, we will rely on both
internal and external assessments relating to estimates of exploration,
production and possible reserves that may prove to be materially
inaccurate.





The price
we are willing to pay for an interest in an oil and gas project is based on a
combination of projected exploration and production costs and on the estimates
of potential reserves. Actual costs and reserve could vary materially from these
estimates. Consequently, the interests we acquire may be less unproductive than
expected, or not productive at all, which could adversely affect us or cause us
to lose our entire invest, or both.  Initial assessments of an
interest will be based on a report by engineers or firms of engineers and these
initial assessments may differ significantly from our subsequent
assessments.





Our interests are
subject to uninsurable risks.





Our
industry also experiences numerous operating risks. These operating risks
include the risk of fire, explosions, blow-outs, pipe failure, abnormally
pressured formations and environmental hazards. Environmental hazards include
oil spills, natural gas leaks, ruptures or discharges of toxic gases. Such
events could result in substantial damage to oil and gas wells, producing
facilities and other property and personal injury.  Although management
believes the operator of any properties in which the Company and its
subsidiaries may acquire interests, will acquire and maintain appropriate
insurance coverage in accordance with standard industry practice, the Company
and its subsidiaries may suffer losses from uninsurable hazards or from hazards
which the operator has chosen not to insure against because of high premium
costs or other reasons.  If any of these industry operating risks
occur, the Company and its subsidiaries may face liability.  The
payment of any such liabilities may have a material, adverse effect on the
Company's financial position.  We cannot assure you that insurance
held by the operator of any of our properties will be adequate to cover losses
or liabilities.





Environmental
and other regulatory requirements may delay production and development of our
resource interests.




The
current or future operations of the Company, including development activities
and commencement of production on its properties, require permits from various
governmental authorities and such operations will be subject to laws and
regulations governing prospecting, development, mining, production, exports,
taxes, labour standards, occupational health, waste disposal, toxic substances,
land use, environmental protection, safety and other matters. Companies engaged
in the development and operation of natural resource properties and related
facilities generally experience increased costs, and delays in production and
other schedules as a result of the need to comply with applicable laws,
regulations and permits.





There can
be no assurance that approvals and permits required to commence production on
its properties will be obtained.  Additional permits and studies, which may
include environmental impact studies conducted before permits can be obtained,
may be necessary prior to operation of the properties in which the Company
acquires interests and there can be no assurance that the operator of these
interests or the Company will be able to obtain or maintain all necessary
permits that may be required to commence construction, development or operation
of oil and gas extraction facilities at these properties on terms which enable
operations to be conducted at economically justifiable costs.




Failure
to comply with applicable laws, regulations, and permitting requirements may
result in enforcement actions against the operator of any of our resource
properties or us, including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include corrective measures
requiring capital expenditures, installation of additional equipment, or
remedial actions.




6




Conducting business in foreign
countries subjects us to special risks, which we have no control over.




Company’s
current business strategy may involve participation in overseas projects in the
resource sector.  Consequently, the Company will be subject to certain
risks associated with foreign ownership, including currency fluctuations,
inflation, political instability and political risk. Oil, gas and other resource
exploration and production activities in foreign countries may be affected in
varying degrees by political stability and government regulations relating to
the resource industry. Any changes in regulations or shifts in political
conditions are beyond the control of the Company and may adversely affect its
business. Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price controls, export
controls, restriction of earnings, taxation laws, expropriation of property,
environmental legislation, water use and workplace safety.





Our
short term investments
are susceptible to market fluctuations and other
risks.





We have
approximately $4.9 million in cash ($1.3 million) and marketable securities
($3.6 million fair value) as of March 31, 2008. Our marketable securities are
primarily securities of publicly held Canadian corporations.  The
value of these securities is subject to market fluctuations as well as the
specific risks of each particular issuer.  Although we believe we have
diversified our portfolio, we may lose some of our original investment in the
event that an investment does not perform as anticipated.





Further,
approximately $1.1 million or 31% of our investments are invested in one
Canadian marketable security. While the market value of this security at March
31, 2008 was less by approximately $800,000 than its average cost of $1.9
million, it rose to $2 million on June 30, 2008, the date of this report,
there is no guarantee that the market price would continue to be higher than our
cost. In the event, we are unable to or do not sell these securities on time and
their market price gets adversely affected for whatever reasons, we may lose
significant sum of money. We are minimising this risk by having all our
investments monitored on a daily basis by consultants with substantial
experience and knowledge of the investment market.





We
will need to raise additional funds in the future, which may not be available to
us.





The
Company is currently without a source of revenue from operations and upon the
investment of its current cash and liquidity, resources will most likely be
required to issue additional securities to finance its operations and the
development of its projects.  We may not be able to obtain additional
financing on acceptable terms or at all. Failure to obtain additional financing
on a timely basis could cause the Company to sell or forfeit its interest in its
properties and reduce or terminate its operations on such properties or
discontinue operations entirely.





There
is a substantial risk of dilution through possible equity financings and stock
options.





Any
equity or debt financings, if available at all, may cause dilution to our
then-existing shareholders. If additional funds are raised through the issuance
of equity securities, the net tangible book value per share of our common shares
would decrease and the percentage ownership of then current shareholders would
be diluted.





Additionally,
the Company may in the future grant to some or all of its own and its
subsidiaries' directors, officers, insiders and key consultants options to
purchase the Company's common shares as non-cash incentives to those people.
Such options may be granted at exercise prices equal to market prices at time
when the public market is depressed or below fair market value.  To
the extent that significant numbers of such options may be granted and
exercised, the interests of the then existing shareholders of the Company may be
subject to additional dilution.





7




We
are dependent upon our key managerial consultants, the loss of which would
negatively affect our business.





Our
performance depends on a small number of key managerial consultants. In
particular, we believe our success is highly dependent upon the services of our
Chief Executive Officer and Chief Financial Officer, Mr. Kam Shah, as well
as Mr. Terence Robinson both of whom are consultants and who have been
significantly involved in locating and negotiating our resource investments.
Loss of either of their services could negatively affect our
business.





Our
officers and directors reside outside of the United States and there is a risk
that civil liabilities and judgments may be unenforceable.




The
Company and its officers and all but one of its directors are residents of
countries other than the United States, and most of the Company's assets are
located outside the United States.  As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or enforce in the United States against such persons judgments obtained
in United States courts, including judgments predicated upon the civil liability
provisions of United States federal securities laws or state securities
laws.




Risk
Factors Relating to Our Common Shares





Our
share price has been volatile in the past and may decline in the
future.




In recent
years, the securities markets in Canada and the United States have experienced a
high level of price and volume volatility, and the market prices of securities
of many companies, particularly small mineral exploration companies like the
Company, have experienced wide fluctuations which have not necessarily been
related to the operating performance, underlying asset values or prospects of
such companies.  Our shares may continue to experience significant
market price and volume fluctuations in the future in response to factors, which
are beyond our control.





Shares eligible
for future sale may depress our stock
price.





At March
31, 2008, we had approximately 30 million shares of common stock outstanding. We
also have approximately 12.8 million and 4.8 million shares of commons stock
issuable under presently exercisable warrants and options, respectively, All
such shares are registered pursuant to an effective registration statement under
the Act and are eligible for resale in the public market.  Sales of
shares of common stock pursuant to an effective registration statement or under
Rule 144 or another exemption under the Act could have a material adverse
effect on the price of our common stock and could impair our ability to raise
additional capital through the sale of equity securities.





We
do not intend to pay dividends.




All of
the Company's available funds will be invested to finance the growth of the
Company's business and therefore investors cannot expect and should not
anticipate receiving a dividend on the Company's common shares in the
foreseeable future.





Our common stock is subject to penny
stock rules.




The
capital stock of the Company would be classified as “penny stock” as defined in
Reg. § 240.3a51-1 promulgated under the Securities Exchange Act of 1934 (the
“1934 Act”).  In response to perceived abuse in the penny stock market
generally, the 1934 Act was amended in 1990 to add new requirements in
connection with penny stocks.  In connection with effecting any transaction
in a penny stock,


8


a broker
or dealer must give the customer a written risk disclosure document that (a)
describes the nature and level of risk in the market for penny stocks in both
public offerings and secondary trading, (b) describes the broker’s or dealer’s
duties to the customer and the rights and remedies available to such customer
with respect to violations of such duties, (c) describes the dealer market,
including “bid” and “ask” prices for penny stock and the significance of the
spread between the bid and ask prices, (d) contains a toll-free telephone number
for inquiries on disciplinary histories of brokers and dealers, and (e) define
significant terms used in the disclosure document or the conduct of trading in
penny stocks.  In addition, the broker-dealer must provide to a penny stock
customer a written monthly account statement that discloses the identity and
number of shares of each penny stock held in the customer’s account, and the
estimated market value of such shares.  The extensive disclosure and other
broker-dealer compliance related to penny stocks may result in reducing the
level of trading activity in the secondary market for such stocks, thus limiting
the ability of the holder to sell such stock.





Your
rights and responsibilities as a shareholder will be governed by Canadian law
and differ in some respects from the rights and responsibilities of shareholders
under U.S. law.





We are
incorporated under Ontario Canada law. The rights and responsibilities of
holders of our shares are governed by our memorandum of association, our
articles of association and by Canadian law. These rights and responsibilities
may differ in some respects from the rights and responsibilities of shareholders
in typical U.S. corporations.





Changing
regulation of corporate governance and public disclosure can cause additional
expenses and failure to comply may adversely affect our reputation and the value
of our securities.





Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
new and changing provisions of Canadian securities laws, are creating
uncertainty because of the lack of specificity and varying interpretations of
the rules. As a result, the application of the rules may evolve over time as new
guidance is provided by regulatory and governing bodies, which could result in
continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. We are
committed to maintaining high standards of corporate governance and public
disclosure. As a result, our efforts to comply with evolving laws, regulations
and standards have resulted in, and are likely to continue to result in,
increased general and administrative expenses and a diversion of management time
and attention from revenue-generating activities to compliance activities. Any
failure to comply with applicable laws may materially adversely affect our
reputation and the value of our securities.





If
we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002, our
reputation and the value of our securities may be adversely
affected.





Beginning
with our annual report for the year ending March 31, 2008, Section 404 of the
Sarbanes-Oxley Act of 2002 will require us to include an internal control report
of management with our annual report on Form 20-F, which is to include
management’s assessment of the effectiveness of our internal control over
financial reporting as of the end of the fiscal year. Effective fiscal year
2010, that report will also be required to include a statement that our
independent auditors have issued an attestation report on management’s
assessment of our internal control over financial reporting. In order to achieve
compliance with Section 404 within the prescribed period, management had already
completed its initial assessment of  the adequacy of our internal
control over financial reporting, validated through testing that controls were
functioning as documented, remediated any control weaknesses that were
identified, and implemented  a continuous reporting and improvement
process for internal control over financial reporting. Any failure to obtain the
attestation report on management’s assessment from our independent auditors, may
materially adversely affect our reputation and the value of our
securities.





9




If
we lose our status as a foreign private issuer, our compliance costs will
increase.





We are a
"foreign private issuer" as defined under the Exchange Act. As a result, our
proxy solicitations are not subject to the disclosure and procedural
requirements of Regulation 14A under the Exchange Act and transactions in our
equity securities by our officers and directors are exempt from Section 16 of
the Exchange Act. In addition, we are not required under the Exchange Act to
file periodic reports and financial statements as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act.   If
we lose our status as a foreign private issuer by our election or otherwise, we
will be subject to additional reporting obligations under the Exchange Act which
could increase our cost of operations.







ITEM 4 – INFORMATION ON THE
COMPANY





(A)  HISTORY
AND DEVELOPMENT OF THE COMPANY





We are a
Canadian corporation incorporated under the laws of the Province of Ontario.
 Since April 2003, we have been a diversified natural resource company that
invests in exploration, development and exploitation projects worldwide through
our wholly-owned subsidiaries by acquiring joint venture, indirect and direct
participation interests and working interests in those projects. During the
fiscal year 2006, we sold our indirect participation interest in an oil
exploration project and wrote off our working interest in a gas project owing to
a dry test well. We currently do not own any interests in any oil or gas project
or any natural resource project.  We are currently seeking business
opportunities all sectors including Resource, Healthcare and High technology. We
have approximately $4.9 million in cash ($1.3 million) and marketable securities
($3.6 million) as of March 31, 2008.





We were
originally incorporated under the Business Corporation Act (Ontario) in 1973
under the name Kamlo Gold Mines Limited and went through multiple name changes
and five major changes in our business activities including a marine propulsion
business, a snack food business, and an emerging technology investments
business. Details of these changes are provided in our Registration Statement on
Form 20-F dated June 12, 2000 and a summary is provided in our Annual Report on
Form 20-F dated August 29, 2006.  On April 21, 2003, we changed our name to
"Bontan Corporation Inc." when we adopted our business strategy to focus on the
natural resource sector. During the fiscal 2008, we reviewed several oil and gas
exploration and development projects but were unable to successfully participate
as some projects were found too expensive while others did not meet our
technical due diligence. We therefore began looking into business opportunities
in other sectors, especially health and pharmaceutical and internet and high
technology. We intend to aggressively seek opportunities in these sectors and
become operational again in fiscal 2009.




The
Company’s registered office is situated at 47 Avenue Road, Suite 200,Toronto,
Ontario, Canada M5R 2G3. The Company is a reporting issuer in the provinces of
Ontario. The Company’s shares have been listed on the Over the Counter Bulletin
Board (“OTCBB”) under the symbol “BNTNF” in the United States.




The
following is a summary of our key past events:





a.
            The
      Company was incorporated under the name “Kamlo Gold Mines Limited and
      remained an inactive shell from the date of incorporation to
      1985.





b.
            Between
      1986 and 1982, the Company was involved in the development of a new
      technology for the marine propulsion business. During this period, the
      Company went through three name
changes.





10


c.
            Between
      1993 and 1996, the Company was involved in the distribution and
      manufacture of a snack food. During this period, the Company went through
      two more name changes.





d.
            The
      Company remained an inactive shell since the closure of snack food
      business in November 1996 until December 1998 when it changed its name to
      Dealcheck.com Inc. and agreed on a new business strategy. This strategy
      focused on investing in new and emerging technology oriented projects and
      businesses.





e.
            In
      1999, the company successfully raised $3.2 million, which were invested in
      various projects and companies over the next two years as per the new
      business strategy of the company. Unfortunately, IT sector performed
      poorly since 2001 and new and emerging technology-based businesses
      suffered significant losses, financial problems and bankruptcies. These
      factors adversely affected the company’s investments and its
      profitability. The company had to write off all its investments by the end
      of the fiscal 2003.





f.
            In
      April 2003, the Company changed its business focus to resource industry
      based on the recommendations of its shareholders in the last shareholders’
      meeting. At that time, the Company commenced and successfully completed a
      private placement of approximately 8.9 million common shares, raising
      approximately US$3.1 million. These funds were primarily invested in
      projects involving oil and gas exploration and diamond mining projects in
      Brazil between April 2003 and September
2005,





g.
            Diamond
      mining operations discontinued in December 2004. The company sold its
      interest in an oil exploration project in Papua New Guinea in July 2005
      for US$3.2 million. The Company’s cost of this project was approximately
      US$1.6 million. Further, in October 2004, the company acquired working
      interest in gas exploration project in Louisiana, USA.  Between
      March 2005 and September 2005, the company invested approximately $3.9
      million as its share of exploration costs. The exploration however proved
      a dry well and was therefore abandoned and the costs incurred were fully
      written off in December 2005.








(B)  BUSINESS
OVERVIEW





Our long
term business plan is focused on participating in a business activity in any
sector which can provide opportunities to increase the value of our shareholders
equity. While our thrust is still aimed towards oil and gas sector, we have now
begun reviewing business proposals in alternative energy sector, healthcare and
pharmaceutical sector and Internet and high technology sector. In our views all
these sectors provide business opportunities which will meet our mandate of
enhancing shareholders’ equity in a long run.





Through
our wholly-owned subsidiaries, we will continue to seek highly visible
opportunities in countries around the globe that offer exciting and attractive
propositions. We will seek to minimize risk by bringing in either joint venture,
carried or working interest partners, depending on the size and scale of the
project.





It is our
current belief that oil and gas exploration is a high priority all over the
world and especially in North America. Higher price levels for both these
natural resources which have occurred over the past twelve months encourage new
drilling activities.  Our past experience with our two oil and gas
projects enables us to more efficiently select and evaluate potential
exploration projects in the oil and gas sector than in the other resource
sectors.  During the past several months, we have received without
solicitation opportunities to participate in oil and gas exploration projects as
a result of our past involvement in similar projects.





Therefore,
our current business model, based on our experience with resource projects
handled over the recent past and our assumptions set forth above, envisions the
following key features:




11


a.
            We will focus only
      on oil and gas exploration projects;b.
            Preference
      will be given to projects that have proven but undeveloped reserves rather
      than probable or potential
reserves;




c.
            We
      will invest our resources in projects which involves multiple well
      exploration potentials;





d.
            Preference
      will be given to explorations involving shallow wells (up to 7,500 ft.)
      rather than deep wells (over 15,000
ft.);





e.
            Preference
      will be given to projects with other experienced partners who are involved
      in the project;





f.           We
will attempt to allocate our cash or liquidity resources to more than one
project.





However,
if the Company is unable to find any suitable projects in oil and gas within a
reasonable time, it may seek opportunities in other sectors as explained
earlier.





Meanwhile,
our short term strategy is to have the surplus cash invested mostly in
marketable securities to achieve higher returns than would be possible if these
funds were to remain in a bank account.








(C)
ORGANIZATIONAL STRUCTURE








As at
March 31, 2008, the Company had only one subsidiary, Bontan Oil and Gas
Corporation, which was incorporated on February 20, 2004 as an Ontario
corporation, wholly owned by the Company.





The
following subsidiaries were dissolved during the fiscal 2007 in order to reduce
the administrative work in maintaining theory records and filing obligations.
However, the formal certificate of dissolution for these subsidiaries were
issued during the fiscal 2008 as indicated against their names





Foodquest
      Inc.
                  June 27,
      2007Bontan Gold
      Corporation
                  June 15,
      2007Bontan Trading
      Corporation
                  June 27, 2007Bontan Mineral
      Corporation
                  June 27,
      20071388755
      Ontario Inc.
                  June 27,
      2007Bontan Diamond
      Corporation
                  June 27,
      2007


All the
dissolved subsidiaries were inactive and had no assets or external
liabilities.








(D)
PROPERTY PLANTS AND EQUIPMENT





The
administrative head office of the Company is located in subleased premises at 47
Avenue Road, Suite 200, Toronto, Ontario, Canada. There is no long-term lease
commitment.





The
Sub-leased area is approximately 950 sq .ft.








See
Operating and Financial Review and Prospects – Item 5 for further
details.








12


ITEM 4A – UNRESOLVED STAFF
COMMENTS





None.







ITEM 5 – OPERATING AND
FINANCIAL REVIEW AND PROSPECTS





(A)  OPERATING
RESULTS





The
following discussion should be read in conjunction with the Audited Financial
Statements of the Company and notes thereto contained elsewhere in this
report.





Results
of operations








Year
      ended March 31
            2008
            2007
            2006in
      000' CDN $
            in
      000' CDN $
            in
      000' CDN $Income
            322
            744
            1,858Expenses
            (894)
            (908)
            (6,643)Net
      loss for year
            (572)
            (164)
            (4,785)Deficit
      at end of year
            (32,645)
            (32,074)
            (31,910)





Overview





The
following were key events in fiscal 2008:





1.
            The
      management received and evaluated twenty two business proposals during the
      fiscal 2008. Eight in Oil and Gas sector, four in health and
      pharmaceutical sector, five in Internet and high technology sector, four
      in alternative energy sector and one was in banking sector. Unfortunately,
      none of these projects met with our acceptance criteria. they were either
      not supported by technically experienced partners or were too expensive to
      be profitable for the Company or highly speculative in nature with
      relatively longer potential payback
period.





2.
            The
      Company carried out a formal evaluation of design and operation of its
      internal controls over financial reporting based on the framework and
      criteria established in internal control-Integrated Framework issued by
      the Committee of Sponsoring Organisations of the Treadway Commission. The
      evaluation resulted in a formal development of an internal control manual
      which was updated as at March 31, 2008 and will be followed to ensure
      adequate controls on the financial reporting by the Company and also to
      ensure compliance with the relevant statutory requirements
      in  Canada  and the
USA.





3.
            During
      the fiscal year 2008,  the Company developed a supplementary
      plan to the existing 2007 Consultant Stock Compensation Plan to add one
      million common shares of the Company to the existing Plan. The
      supplemental plan was registered with the Securities and Exchange
      Commission on December 12, 2007.





4.
            The
      surplus funds meanwhile were continued to be invested in marketable
      securities. Approximately $2 million were realised from the sales and $3.4
      million were invested during the fiscal year
  2008.





13


5.
            Two
      new accounting standards issued by the Canadian Institute of Chartered
      Accountants were adopted by the Company as at April 1, 2007 on a
      prospective basis. These are more fully explained in note 2 to the
      consolidated financial statements for the fiscal year 2008 included in
      this report.





6.
            The
      Company corrected an error in valuation of warrants and share capital
      retroactively as more fully explained in note 9(a) (ii) to the
      consolidated financial statements for the fiscal year 2008 included in
      this report.





The
following were the key events in fiscal 2007:





1.
            The
      Company completed its private placement on April 16, 2006 and raised an
      additional $1.3 million between April 1, 2006 and the closing date. In
      this connection, the Company paid finder’s fee at 10% in cash and 10%
      (1,040,000) in warrants to Current Capital Corp., a related
      party.





2.
            The
      Company initiated preparation of a prospectus and registration statement
      in Form F-3 for submission to US Securities and Exchange Commission in
      respect of shares issued and issuable under warrants issued under a
      private placement completed in April 2006. The prospectus became effective
      on November 30, 2006.





3.
            The
      directors of the Company approved a new plan – 2007 Consultants Stock
      Compensation Plan covering 1.5 million common shares of the company for
      issuance to consultants in settlement of their fees for services to be
      rendered during 2007. The Plan was formally filed with a registration
      statement Form S-8 with US Securities and Exchange Commission and became
      effective on January 16, 2007.





4.
            The
      Company received several exploration participation proposals during the
      year, of which it carried out a detailed due diligence on three oil
      project proposals but eventually decided against participating in any of
      them due to unsatisfactory results of the due
  diligence.





5.
            The
      surplus funds continued to be gainfully invested in short term marketable
      securities. The cash and marketable securities at fair market value of at
      March 31, 2007 were $7.3 million compared to $5.8 million as at March 31,
      2006. During the fiscal 2007, the company earned approximately 27% return
      on its short term investments of an average of approximately $2.6
      million.





The
following were the key events in fiscal 2006:





1.
            The
      Company sold its indirect participation interest in oil project in Papua
      New Guinea on July 5, 2005 for a gross amount of US$3.2 million and made a
      net profit of US$1.6 million before adjustment of non cash selling
      costs.





2.
            The
      Company invested a further $3.7 million in the Louisiana Gas exploration
      project in which the Company acquired 49% working interest in fiscal 2005.
      The well under exploration was drilled to the targeted depth and found to
      be a dry well. As a result, the Company wrote off its investment in this
      project.





3.
            The
      Company raised approximately $3.9 million through exercise of warrants and
      options by the existing shareholders and a new private
      placement.





4.
            The
      Company invested approximately $1.7 million in short-term investments from
      its surplus funds while searching for a right project to participate into.
      These investments proved to be profitable and gained approximately $1.4
      million in realized and unrealized gains by March 31,
  2006.





5.
            The
      Company issued stocks and options to various consultants under the five
      plans, including three created in fiscal 2006, registered under the US
      Securities Act, Stocks and options valued at approximately $2 million were
      expensed and $0.3 million were
deferred.




14




Income





Income
comprised the following:





Fiscal
      year ended March 31
            2008
            2007
            2006Realised
      gain on disposal of short term investments
            248,455
            650,508
            618,707Interest
            73,300
            93,278
            31,109Gain
      on sale of interest in oil exploration project
            -
            -
            1,207,831$   321,755
            $   743,786
            $
      1,857,647





Gains
on disposal of short term investments





As
explained earlier in this report, the management chose to invest surplus funds
into marketable securities on a short term basis while it seeks business
opportunities.





During
the fiscal year 2008, the Company sold investments of approximately $ 2 million,
earning an average of 12% return.





During
the fiscal year 2007, the Company disposed of investments worth approximately
$5.5 million, earning an average return of 12% and





During
the fiscal year 2006, the Company disposed of investments worth $3.2 million and
earned an average return of approximately 19%.





Interest
Income





Interest
was earned on cash funds held at the brokerage firms before they are being
invested in marketable securities.





Significantly
higher interest income in fiscal 2007 was mainly due to higher cash balances
being held. Average cash during the fiscal 2007 was approximately $3.2 million
compared to $2.1 million in fiscal 2008 and $1 million in fiscal
2006.





Gain
on sale of Interest in oil exploration project – Fiscal 2006 only


Computation
      of net gain on sale of IPI interestUS$
            
            CDN$Carrying
      value of the IPI interest
            1,589,943
            
            1,897,279Sale
      proceeds
            3,200,000
            
            3,818,560Less:  fee
      paid to Brokerage firm in cash
            (32,000)
            
            (38,186)Restricted
      common shares issued to the Brokerage firm
            (16,000)
            
            (19,485)Valuation
      of options granted to Mr. Robinson
            (566,940)
            
            (655,779)Net
      proceeds on sale
            2,585,060
            
            3,105,110Capital
      gain on sale
            995,117
            
            1,207,831




15




On July
5, 2005, the Company sold its 0.75% Indirect Participation Interest in an oil
exploration project in Papua New Guinea (IPI Interest) for a sum of US$3.2
million to an independent institutional investor under an IPI purchase agreement
dated July 5, 2005.  The Company received the funds on July 7,
2005.  Under the agreement, the Company will no longer be responsible
for any future cash calls and other obligations of the Project.





In this
connection, the Company paid cash fee of US$32,000 plus 16,000 restricted common
shares of the Company valued at US$16,000 to an independent US brokerage firm,
which introduced the buyer.





In
addition, the Company also granted, on December 5, 2005, 1.1 million options to
acquire equal number of common shares of the Company to Mr. Terence Robinson
exercisable at US$0.50 per option, for successfully bringing in and negotiating
the deal.  The value of the option granted of $655,779 based on
Black-Scholes option price model was charged against the proceeds of the sale of
IPI interest.








Expenses





The
overall analysis of the expenses is as follows:





Year
      ended March 31
            2008
            2007
            2006Operating
      expenses
            $       437,465
            $       424,055
            $       584,377Consulting
      fee settled for common shares
            314,248
            367,973
            1,984,938Exchange
      loss
            141,841
            111,659
            194,758Write
      off of interest in gas exploration project
            -
            4,142
            3,878,507$       893,554
            $       907,829
            $    6,642,580








Operating
Expenses





Travel,
promotion and consulting -





Year
      ended March 31
            2008
            2007
            2006Travel,
      meals and entertainment
            $  120,008
            $  101,075
            $  144,461Consulting
            82,217
            50,461
            49,286Promotion
            -
            7,191
            82,007$  202,225
            $  158,727
            $  275,754%
      of operating expenses
            46%
            37%
            47%








Travel, meals and
entertainment





These
expenses are primarily incurred by the key consultant, Mr. Terence Robinson in
traveling to the USA and Europe and also in maintaining his net work which has
been successfully used in raising funds, in attracting qualified consultants
with minimum cash outlay and in securing suitable projects for the
Company.





16




Travel,
meals and entertainment costs during fiscal 2008 included trips to USA, Europe
and Middle East by Mr. Robinson. These visits resulted in some of the business
proposals that were sent to us. They also helped introduce our Company to new
investors in Middle East and Europe.





Consulting
costs





Consulting
fee in fiscal 2007 mainly consisted of fees paid to administrative assistant.
Both Mr. Shah, the CEO and CFO and Mr. Robinson, the key consultant accepted
shares in lieu of their fees to minimize the cash outlay of the
Company.





Consulting
fees for fiscal 2008 included $30,000 paid to Mr. Shah as a onetime fee for
services provided in connection with design and evaluation of internal controls
and development of a manual.








Promotion
costs





There
were no new promotional activities during the fiscal years 2007 and
2008.  Costs incurred in fiscal year 2007 related to costs of
entertaining prospective and existing investors and business
prospects.





During
the fiscal 2006, several promotional programs were undertaken to promote the
Company’s working interest in gas exploration project and overall awareness of
the company’s affairs among the investing public. These programs included
presentation to Financial analysts and money manager society in New York at the
cost of approximately US$11,000, signing a booth for a two day Value rich expo
in New York City at a cost of approximately 9,000, hiring two independent
analyst firms to produce reports on the Company at a cost of approximately
US$26,000 and enrolment to IR awareness and lead generation programs of
independent firms.








Other
operating costs -





Year
      ended March 31,
            2008
            2007
            2006Shareholder
      information
            133,502
            149,105
            176,982Professional
      fees
            34,601
            53,084
            71,588Other
            67,137
            63,139
            60,053$
      235,240
            $
      265,328
            $
      308,623%
      of operating costs
            54%
            63%
            53%





Shareholder
information





Shareholder
information costs comprise investor and media relations fee, costs of holding
annual general meeting of the shareholders and various regulatory filing
fees.





Major
cost consists of media relation and investor relation services provided by
Current Capital Corp. under contracts dated July 1, 2004, which are being
renewed automatically unless canceled in writing by a 30-day notice for a total
monthly fee of US$10,000. Current Capital Corp. is a shareholder Corporation
where the Chief Executive and Financial Officer of the Company provide
accounting services.





The fee
charged for fiscal 2008 was $124,230 and for 2007 was $136,249.  The
difference was due to significant changes in the exchange rates between Canadian
and US dollars. The fee for fiscal 2006 was $163,391 which included agreed fee
of $143,391 and an additional fee of $20,000 for special work during various
promotional efforts detailed under “promotion costs” above.




17




Professional
fee





Professional
fees primarily consist of audit and legal fees.





For
fiscal year 2008, audit fee was $25,000 and legal fees were $9,601. The legal
fee was mainly relating to registration of supplementary stock compensation
plan. And other legal advise.





Fiscal
2007 professional fees consisted of audit fee of $ 25,700 for fiscal 2007 and
$6,000 for fiscal 2006 not accrued in that fiscal year and legal fee of $21,384.
Legal fees related to filing of the 2007 Consultant Stock Compensation Plan,
Registration statement for the shares issued and issuable under the 2006 private
placement and other legal matters.





Fiscal
2006 fees included audit fee of $28,000 and approximately $35,000 for the legal
fees. Increased legal fees were due to filing of registration statements for
various stock compensation and option Plans and prospectus for warrants and
shares issued under private placement.








Other
operating costs





These
costs include rent, telephone, Internet, transfer agents fees and other general
and administration costs.





Effective
January 1, 2008, the Company increased its rental space from around 300 sq.ft.
to  960 sq.ft. as a result, the rental cost has also
increased  from approximately $ 500 to $1,800. The other overheads
have remained consistent on a year to year basis.








Consulting
fees settled for common shares





2008
            2007
            2006Stock
      compensation
            314,248
            367,973
            839,786Options
      granted and expensed
            -
            -
            1,145,152$  314,248
            $  367,973
            $1,984,938Prepaid
      consulting services
            $
      285,896
            $
      276,146
            $
      314,208


Stock                                                                                $
278,018                                   $
276,146                                $
314,208





Options                                                                               7,878                                           --




Stock
based compensation is made up of the Company’s common shares and options to
acquire the Company’s common shares being issued to various consultants and
directors of the Company for services provided. The Company used this method of
payment mainly to conserve its cash flow for business investments purposes. This
method also allows the Company to avail the services of consultants with
specialized skills and knowledge in the business activities of the Company
without having to deplete its limited cash flow.





During
fiscal year 2008, the company registered a supplementary Plan to the existing
2007 Consultant Stock Compensation Plan. An additional one million common shares
were registered under this Plan with Securities and Exchange Commission. In
addition, the Company had 350,000 common shares unissued from the existing Plan.
The total of 1,350,000 common shares was issued to three consultants in lieu of
their fees for services to be provided as follows:




18





#
            Name
            Period
      of service
            #
      of shares to be issued
            Date
      of issuance of stock (a)
            Market
      price (US$)
            Fee
      in US$
            CDN$
      at
            Brief
      description of services to be performed
            Comments$1.01811
            John
      Robinson (a)
            Year
      ending June 30, 2009
            350,000
            28-Mar-08
            $0.23
            $80,500
            $81,957
            Searching
      and evaluating new  project proposals, assisting Kam Shah in
      such evaluation and assisting Terence in managing our short term
      investment portfolios
            Consultant
      - per Contract extension letter dated August 15, 20052
            Terence
      Robinson(b )
            Year
      ending December 31, 2008
            550,000
            28-Mar-08
            $0.23
            $126,500
            $128,790
            business
      development and managing our short term investment
    portfolios
            Currently
      under a consultaing contract dated April 1, 2003 valid up to March 31,
      2009.3
            Kam
      Shah ( c)
            Year
      ending December 31, 2008
            450,000
            28-Mar-08
            $0.23
            $103,500
            $105,373
            act
      as CEO/CFO
            Currently
      under a consultaing contract dated April 1, 2005 valid up to March 31,
      2010.1,350,000
            
            
            $310,500
            $316,120a.  John
      has been providing consulting services for the last few years. These
      services mainly included review of oil and gas proposals that are received
      and short listing them for further review and analysis by CEO. In
      addition, John also does constant research on companies acquiring oil and
      gas interest and major oil and gas plays under consideration. the research
      has always proved useful in negotiating proper terms on any proposals and
      saved the company from over paying. During the past year and is now
      extending his research to proposals and projects in other sectors also.
      John also played an important role in managing our short term investments
      of around $6 million. Watching this investment portfolio will be more
      critical due to highly fluctuating market conditions.Owing
      to the above, we have extended John's contract for another year to June
      30, 2009 and negotiated settlement of his fee for this period by issuance
      of the recommended number of shares.
              
              b.   Terence
      provides two main services to the company. Owing to his extensive network,
      he is constantly in touch with some of our key shareholders and potential
      investors to ensure that whenever the company needs additional funding, it
      can be easily raised through private placement. We had two such successful
      placements during the past five years. The second important service is
      business development through his network. The company receives lucrative
      proposals for acquiring interest in oil and gas projects from contacts
      known to Terence. Once we finalize such a project, he also helps secure
      best pricing. For the past few months, terence was involved in deciding on
      the marketable securities in which the company's surplus funds got
      invested on a short term basis. Our funds grew by over 100% owing to his
      selection of the marketable securities and decisions to buy and sell at
      the right time. He will continue to provide these services during the year
      2006 and has agreed to accept the proposed number of common shares in lieu
      of his fees for such services.C.  Kam
      Shah's role and responsibilities have grown significantly due to more
      complex regulatory changes. Compliance with SOX 404 inter control
      certification and documentation, which to other companies have cost in
      thousands and millions of dollars, have been compiled and implemented
      entirely by him without any outside help. He is also heavily involved in
      reviewing several proposals from different sectors requiring lot more
      research and attention. he has agreed to accept $10,000 per month in cash
      from January to May 2008. in addition to the shares as
    above.




19


On March
28, 2008, the Company  issued 25,000 options to each of the two
members of the audit committee for their services during the fiscal 2009. These
options were valid for five years and exercisable to convert into equal number
of common shares of the Company at an exercise price of US$0.35 per option. The
options were valued at $ 7,878.




During
the fiscal 2007, the Company only registered one Plan and issued common shares
to three existing consultants as explained below. No new consultants were hired
due to lack of any active projects.





On
January 16, 2007, the Company registered 2007 Consultant Stock Compensation Plan
with the US Securities and Exchange Commission. The Company registered 1.7
million common shares under this Plan. On February 8, 2007, the company issued
1,150,000 common shares under this Plan to three existing consultants, who are
all related parties, for a value of $313,486 based on the market price of the
Company’s common shares on the date of their issuance..




During
fiscal 2006, the board of directors of the Company approved and created three
new Plans, which were all registered with Securities and Exchange Commission of
the United States of America as required under the Securities Act of
1933:





1.
            2005
      Consultant Stock Compensation Plan covering one million common shares,
      which were issued to five consultants including directors and key
      consultants of the company for their services and valued at $327,827.
      $60,398 was expensed in fiscal 2006 and the balance was
      deferred.


2.
            The
      Robinson Plan covering 1.1 million options exercisable at an option price
      of US$0.50 per option to convert into equal number of common shares within
      five years to December 5, 2010. These options were granted to Mr. Terence
      Robinson, a key consultant for services rendered in connection with the
      sale of IPI interest in oil exploration project. These options were valued
      at $655,779 and were off set against the net gain from the sale as
      explained earlier in this report.3.
            2995
      Stock Option Plan covering one million options.  Nove of the options
      were granted to anyone as at March 31,
2006




Exchange
Loss




The
      Company’s reporting unit of currency is the Canadian dollar. At the year
      end, all transactions in US dollar and other currencies are translated
      using either average rate for the year or the rates on the dates of
      transactions depending upon the nature of the transactions. All assets and
      liabilities in non- Canadian currencies are translated at either the
      closing rate or rates on the dates of the underlying transactions again
      depending upon the nature of these
balances.




20


Canadian
      dollar has steadily strengthened against US dollar for the last three
      years – US$1 was equal to CDN$ 1.19 on an average during the fiscal year
      2006, CDN$1.14 during the fiscal year 2007 and CDN$ 1.03 during the fiscal
      year 2008. The Company held cash and short term investments in US dollar
      and all its treasury transactions were also in US dollars. Most of its
      expenses and liabilities were in Canadian dollars. This situation resulted
      in the Company having to book an exchange loss for each of these fiscal
      years  on year end translation of its US dollar balances as per
      its stated accounting policy.




As
      at march 31, 2008, the Company had  net monetary assets of
      approximately $1.1 million in US dollar and issued common shares for
      $110,201 during the year.  The US dollar depreciated by around
      10% compared to Canadian dollar during this period resulting in a year end
      translation loss of $141,841.




As
      at March 31, 2007, the Company had net monetary assets of approximately
      $1.2 million in US dollar. and issued common shares for $1.2 million
      during the fiscal year. US Dollar depreciated by over 6% against Canadian
      dollar during the year resulting in a translation loss of
      $111,659.




As
      at March 31, 2006, the Company had net monetary assets of approximately $3
      million in US dollar. and issued common shares for $3.9 million during the
      fiscal year. US Dollar depreciated by over 7% against Canadian dollar
      during the year resulting in a translation loss of
    $194,758.


Write
off of interest in gas exploration project –fiscal years 2006 and
2007




On
October 15, 2004, the Company entered into an exploration agreement with a
private investors group in the United States under which it acquired 49% gross
working interest in a gas exploration project in the State of Louisiana, USA
(the project).





By
September 20, 2005, the Company paid approximately US$3.5 million – CDN$ 4.3
million towards seismic survey, land leases and exploration costs of the first
exploration test well, Placide Richard No.1, under the project.





The
drilling began on August 21, 2005 and the targeted depth of 15,378’ was reached
on October 19, 2005.





On
October 21, 2005, the Company was informed by the project operators that based
on electric log analysis and wireline formation tests results, the well could
not be completed as a well capable of commercial production and therefore the
well should be plugged and abandoned and all leases be allowed to
expire.





Consequently,
as at September 30, 2005, the management decided to write off the carrying value
of the interest in the gas project in full. Subsequently in December 2005, when
final account was rendered, the Company received a refund of US$318,563, which
reduced the amount actually written off at the end of the fiscal
2006.





During
the fiscal 2007, the company received a final charge of $4,142 (US$ 3,638)
relating to closure of the drilled well. No further charges are now expected in
respect of this project.




(
B)                      Liquidity
and Capital Resources





Working
      Capital





As at
March 31, 2008, the Company had a net working capital of approximately $5.2
million compared to a working capital of $6.6 million as at March 31,
2007.




94% of
the working capital - approximately $4.9 million - at March 31, 2008 was in the
form of cash and short term investments compared to 95%  - $6.3
million at March 31, 2007.




21




Short
term investments as at march 31, 2008 were stated at their fair value, which
resulted in recognition  of net unrealised loss of approximately $1.3
million. This is further explained under Investment cash flow
below.




Cash on
hand as at March 31, 2008 was $1.3 million compared to $3 million as at March
31, 2007.




In our
opinion the working capital is sufficient not only to cover our overheads but
also to enable us to exploit business opportunities promptly.





Operating cash
      flow





During
the fiscal 2007, operating activities required net cash outflow of $482,662
which was off set by the net realised on disposal of short term investments of
$248,455 and balance from the available cash on hand.





In fiscal
2007, the Company’s operating activities required net cash flow of $529,323
which was met from the net proceeds from the sale of short term investments of
$650,508.





The
Company’s strategy of putting surplus funds into marketable securities on a
short term basis enabled the Company to meet all or most of its operating needs
from the gains realised on disposal of these investments and thus leave most of
its surplus principal fund for acquiring business opportunities.





Further,
continuing decisions of the key consultants including the management to accept
common shares of the Company instead of cash as compensation for their services
also helped keep the operating needs low and more funds availability for
business needs.





Investing cash
      flows





During
the fiscal 2008, Company invested approximately $3.4 million in short term
marketable securities while realised approximately $2 million from the disposal
of such securities, which were partly used for the working capital as explained
above and remaining reinvested. Net additional investments were funded from the
available cash on hand.





As a
result of the above, the Company had short term investments at a carrying cost
of approximately $4.9 million as of March 31, 2008 –approximately 94% was held
in Canadian currency and the balance $342,000 or 6% was held in US currency.
Approximately 94% of investments were in 32 public companies while 6% was
invested in three private companies.





The fair
value of the above investments as at March 31, 2008, based primarily on the
quoted prices of the shares on that date, came to $3.6 million giving rise to an
unrealised loss of approximately $1.3 million. Company recognized this loss and
reduced the value of its short term investment to reflect the fair value on the
balance sheet as at March 31, 2008. The management however believes that this
loss was temporary and would be reversed shortly.





During
the fiscal 2007, the Company invested $6.4 million in short term marketable
securities and realised $5.5 million from the sale of the short term marketable
securities. These proceeds were partly used to cover  operating cash
flow deficit and balance reinvested.





There
were three key investment activities during the fiscal 2006 that resulted in
significant cash flows.





·
            Sale
      of IPI interest in oil exploration project , as explained earlier in this
      report, generated a net cash flow of around $ 4 million – (US$ 3.2
      million)





·
            Approximately
      $3.7 million was spent on the gas exploration project in Louisiana during
      the fiscal year 2006.





·
            A
      net sum of $1.7 million was invested in short term marketable securities
      through various brokerage firms, while generating $618,707 from the sale
      of short term marketable securities. The proceeds were used for the
      operational needs as explained
above.





Overall
investment activities in fiscal 2006 consisted of investment of $4.3 million and
sales of $3.2 million, requiring a net cash outlay of $1.1 million, which was
primarily met from the equity funds raised under financing cash
flows.





Financing cash
      flows








During
the fiscal 2008, the Company received $110,000 net of the finder’s fee from
exercise of warrants by an existing shareholder. These funds were primarily used
to meet the operating cash flow deficit.





During
the fiscal 2007, the Company raised an additional $1.2 million net of the
finders’ fee from private placement which commenced in late fiscal 2006 and
completed in April 2006.





The
company generated approximately $4 million through financing activities during
the fiscal 2006. The key financing activities in fiscal 2006 were as
follows:





·
            $2.2
      million from exercise of warrants attached to the Units issued under the
      2003 private placement.





·
            Approximately
      $300,000 from exercise of options granted under various option plans
      discussed earlier in this report.





22


·
            Approximately
      $1.7 million from a new private placement, which commenced on February 24,
      2006 and completed on April 16,
2006.





The
Company paid finder’s fee of $397,944 in connection with funds raised through
warrant exercise and private placements during the fiscal 2006.




(C)           RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES




The
Company has not spent any funds on research and development during the fiscal
years 2008, 2007 and 2006.




(D)           TREND
INFORMATION




Our
business strategy is exploration of oil and gas, while we have also extended our
business plan to projects in other sectors like alternative energy, health and
pharmaceutical and internet and high technology so the prices and demands of
products and services in these sectors have a direct impact on our prospects for
success and our ability to raise capital. The recent trend in all these sectors
has been positive and has remained steady at relatively high historical prices.
Management believes that the current trend will continue for the foreseeable
future. History has shown, however, that there can be no such
assurances.




There are
no other trends, commitments, events or uncertainties presently known to
management that are reasonably expected to have a material effect on the
Company’s business, financial condition or results of operation other than
uncertainty as to the speculative nature of the business (Refer to the heading
entitled “Risk Factors”).




23


(E)           OFF-BALANCE
SHEET ARRANGEMENTS




At March
31, 2008, 2007 and 2006, the Company did not have any off balance sheet
arrangements, including any relationships with unconsolidated entities or
financial partnership to enhance perceived liquidity.




(F)           CONTRACTUAL
OBLIGATIONS




Not
applicable.




(G)           SAFE
HARBOUR






Not
applicable.











ITEM 6 – DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES





(A)  DIRECTORS
AND SENIOR MANAGEMENT





The
following table sets forth all current directors and executive officers of the
Company, with each position and office held by them in the Company, and the
period of service as such:





Name
      and Position With the Company
            Other
      principal directorships
            Principal
      business activities outside the CompanyKam
      Shah
              Director
      and Chairman
              Chief
      Executive Officer and Chief Financial Officer
            Director
      – Argen Energy Corp.
            Provides
      accounting services to Current Capital Corp. and a part time practice as
      chartered accountant.Terence
      Robinson
              Key
      Consultant
            None
            President
      of TR Network Inc. – an independent organisation providing business and
      financial services.Dean
      Bradley –Independent Director, Chair of the Audit
Committee
            Director
      of Quasar Aviation Corporation and Quasar-Lite, Inc.
            Chief
      Executive Officer of Quasar Aviation Corporation and Quasar-Lite,
      Inc.Brett
      D. Rees – Independent Director, member of the Audit
    Committee
            Director
      of five Canadian private corporations.
            Independent
      broker in life and other insurance products and personal and estate
      financial planning.








Kam Shah joined the Company as
a Chief Financial Officer and was appointed to the Board on January 3, 1999. He
worked with Pricewaterhouse Coopers LLP and Ernst & Young. He is a US
Certified Public Accountant and a Canadian Chartered Accountant.  He
has over fifteen years of international experience in corporate financial
analysis, mergers & acquisitions. Mr. Shah is responsible for the financial
and statutory matters of the Company and effective May 17, 2004, following
resignation of the Chairman, Mr. Terence Robinson, has also assumed the
responsibilities of the chairman of the Board and Chief Executive Officer of the
Company.





24


Mr. Shah
is also a consultant providing accounting and tax services to Current Capital
Corp., (CCC) a private Ontario corporation, having its head office in Toronto.
CCC provides investors’ and media relations services to public companies
including Bontan Corporation.





Terence Robinson was Chairman
of the Board and Chief Executive Officer of the Company since October 1, 1991.
He resigned from the Board on May 17, 2004 but continues with the Company as a
key consultant. He advises the board in the matters of shareholders relations,
fund raising campaigns, introduction and evaluation of investment opportunities
and overall operating strategies for the Company. He has over 25 years of
experience as merchant banker and venture capitalist and has successfully
secured financing for a number of start-up and small cap companies and currently
runs his own consulting firm in the name of TR Network Inc.





Dean Bradleyis a
non-executive independent director based in Florida. He was first appointed
director of the Company on November 20, 2000. He assists the Company from time
to time in introducing new businesses and liaising with businesses in the USA in
which the Company has equity interest. Mr. Bradley had been CEO of many
corporations including real estate, mining, manufacturing, and import/export and
financial services corporations and is currently involved in two ventures as
explained above. Mr. Bradley is currently the chairman of the audit committee of
the Company.





Brett Rees was appointed as
independent director and a member of the audit committee effective December 8,
2006. Mr. Rees is a Chartered life underwriter, financial consultant and
financial planner and a licensed mutual funds manager. He has over twenty years
of experience in various insurance products, estate planning, pension planning
for individual and corporation and in group benefit assessments. He is currently
an officer/director in five Canadian private corporations including Resolution
Oil & Gas Ltd., Resolution Mining Ltd and Platinum Equity
Funding.





Management
Team





The
Company‘s current management team consists only of Mr. Kam Shah whose background
details are given above.





Mr.
Terence Robinson is a key consultant who basically acts in an advisory role with
no specific authority to bind the Company except in case of short term
investments where he is authorised to buy and sell marketable securities on
behalf of the Company and also advises as to when to buy or sell.. He is however
not authorised to withdraw or deposit any cash from and into our accounts with
the brokerage firms.





Mr. John
Robinson is another consultant who provides advisory services, primarily in
assisting in the research and evaluation of projects and in short term
investment activities with no specific authority to bind the Company except in
case of short term investments where he is authorised to buy and sell marketable
securities on behalf of the Company. He is however not authorised to withdraw or
deposit any cash from and into our accounts with the brokerage firms. Mr. John
Robinson is a brother of Mr. Terence Robinson and is the sole shareholder of
Current Capital Corp, which provides investor and media relations services to
the Company and is a shareholder.





Mr.
Shah’s consulting agreement expired on March 31, 2005. A new agreement was
signed on April 1, 2005, which is effective for five years to March 31, 2010.
Copy of the new agreement was included in the Exhibits attached to fiscal 2005
annual report.





Mr.
Terence Robinson’s consulting agreement was signed on April 1, 2003 and is valid
up to march 31, 2009.





Mr. John
Robinson’s consulting agreement is renewed on an annual basis.




25




Family
Relationships




There are
no family relationships the directors and key management. A key consultant, Mr..
Terence Robinson is a brother of another consultant, Mr. John Robinson who is
part of the management team as explained above.




Other
Relationships




There are
no arrangements or understandings between any major shareholder, customer,
supplier or others, pursuantto which any
of the above-named persons were selected as directors or members of senior
management.




(B)  COMPENSATION





The
compensation payable to directors and officers of the Company and its subsidiary
is summarized below:





1.           General





The
Company does not compensate directors for acting solely as directors. Except as
described below, the Company does not have any arrangements pursuant to which
directors are remunerated by the Company or its subsidiary for their services in
their capacity as directors, other than options to purchase shares of the
Company which may be granted to the Company’s directors from time to time and
the reimbursement of direct expenses.





The
Company does not have any pension plans.




26


2.           Statement
of Executive Compensation




The
following table and accompanying notes set forth all compensation paid by the
Company to its directors, senior management and key consultants for the fiscal
years ended March 31, 2008, 2007 and 2006




ANNUAL
      COMPENSATION
            LONG-TERM
      COMPENSATIONAwards
            PayoutsName
      and principal position
            Year
            Fee
            Bonus
            Other
      annual compensation (4)
            Securities
      under options/SARs Granted (1)
            Shares
      or units subject to resale restrictions
            LTIP
      (2) payouts
            all
      other compensation($)
            ($)
            ($)
            (#)
            ($)
            ($)Kam Shah - CEO and CFO
      (3)
            2008
            127,899CEO
      and CFO
            2007
            95,409CEO
      and CFO
            2006
            86,112Terence Robinson-
      Consultant (4)
            2008
            134,423Consultant
            2007
            136,298Consultant
            2006
            143,520
            
            
            1,100,000  (5)/
      nilDean Bradley - an
      independent director
            2008
            3,871
            
            
            25000
      (6)an
      independent director
            2007
            -an
      independent director (6)
            2006
            5,980Brett Rees - an
      independent director (7)
            2008
            -
            
            
            25000
      (7)an
      independent director
            2007
            -2006
            not
      applicableDamian Lee- an
      independent director (8)
            2008
            not
      applicable20072006
            5,980John
      Robinson - Consultant (9)
            2008
            81,926Consultant
            2007
            81,779Consultant
            2006
            273,357
            
            
            807,500/
      nil




27


Notes:




1.
            “SAR”
      means stock appreciation rights.


2.
            “LTIP”
      means long term incentive plan.


3.
            Mr.
      Shah received 450,000 common shares valued at $105,373 and a cash fee of
      $30,000 during the fiscal year 2008, 350,000 common shares during the
      fiscal 2007 valued at $95,409, 288,000 common shares during the fiscal
      2006 valued at $86,112 as fee for his services as CEO/CFO during these
      years.


4.
            Mr.
      Terence Robinson received 550,000 common shares valued at $128,790 during
      the fiscal year 2008, 500,000 common shares in fiscal 2007 valued at
      $136,298, 480,000 common shares in fiscal 2006 valued at $143,520 as fee
      for his services during these
years.


5.
            Mr.
      Terence Robinson was issued 1.1 million options in fiscal 2006 for his
      services in connection with sale of the Company’s interest in oil
      exploration project in Papua New Guinea. These options are valid for two
      years from the date of their issuance and are convertible into equal
      number of common shares of the company at a conversion price of US$0.50
      per option. The options are issued under “The Robinson
    Plan”.


6.
            Mr.
      Dean Bradley received a cash fee of $3,871 and 25,000 options during the
      fiscal year 2008. The options are valid for five years and are convertible
      into equal number of common shares of the Company at an exercise price of
      $0.35 per share. He received fee in the form of 20,000 common shares
      valued at $5,980 in fiscal 2006. However, he returned the common shares
      for cancellation and instead accepted a cash payment of $5,522 in fiscal
      2006. These fees were for his services as a chair of the audit
      committee.


7.
            Mr.
      Brett Rees was issued 25,000 options during the fiscal year 2008 for his
      services as a member of the audit committee. The options are valid for
      five years and are convertible into equal number of common shares of the
      Company at an exercise price of $0.35 per
share.


8.
            Mr.
      Damian Lee received fee in the form of 20,000 common shares valued at
      $5,980 in fiscal 2006. Mr. Lee received no compensation in fiscal 2007 and
      resigned from the board on December 8,
2006.


9.
            Mr.
      John Robinson received 350,000 common shares valued at $81,957 during the
      fiscal year 2008,  300,000 common shares in fiscal year 2007
      valued at $ 81,779, 299,048 common shares in fiscal 2006 valued at
      $273,357 for his services during these
years.




Long
Term Incentive Plan (LTIP) Awards




The
Company does not have a LTIP, pursuant to which cash or non-cash compensation
intended to serve as an incentive for performance (whereby performance is
measured by reference to financial performance or the price of the Company’s
securities) was paid or distributed to the Named Executive Officers during the
most recently completed financial year.




Defined
Benefit or Actuarial Plan Disclosure




There is
no pension plan or retirement benefit plan that has been instituted by the
Company and none are proposed at this time.




Indebtedness
of Directors, Executive Officers and Senior Officers




There is
no outstanding indebtedness to the Company by any of its directors, officers and
consultants.




28


Directors’
and Officers’ Liability Insurance




The
Company has purchased, at its expense, directors and officers liability
insurance policy to provide insurance against possible liabilities incurred by
them in their capacity as directors and officers of the Company.




(C)  BOARD
PRACTICES





Directors
may be appointed at any time in accordance with the by-laws of the Company and
then re-elected annually by the shareholders of the Company. Directors receive
no compensation for serving as such, other than stock option and reimbursement
of direct expenses. Officers are elected annually by the Board of Directors of
the Company and serve at the discretion of the Board of Directors.





The
Company has not set aside or accrued any amount for retirement or similar
benefits to the directors.




Mandate
of the Board




The Board
has adopted a mandate, in which it has explicitly assumed responsibility for the
stewardship of Bontan Corporation Inc. In carrying out its mandate the Board
holds at least four meetings annually.  The frequency of meetings, as well
as the nature of the matters dealt with, will vary from year to year depending
on the state of our business and the opportunities or risks, which we face from
time to time. The Board held a total of 6 meetings during our financial year
ended March 31, 2008.  To assist in the discharge of its responsibilities,
the Board has designated one standing committee: an Audit Committee, as more
particularly discussed below.




Audit
Committee




The
members of the audit committee consisted of Dean Bradley and Mr. Brett Rees,
both are our independent directors.. The audit committee is charged with
overseeing the Company's accounting and financial reporting policies, practices
and internal controls. The committee reviews significant financial and
accounting issues and the services performed by and the reports of our
independent auditors and makes recommendations to our Board of Directors with
respect to these and related matters.





The
Company’s Audit Committee’s charter was detailed in the annual report for fiscal
2005. The Charter became effective on August 2, 2005.




Audit
Committee charter assists the Board in fulfilling its responsibilities for our
accounting and financial reporting practices by:




·
            reviewing
      the quarterly and annual consolidated financial statements and management
      discussion and analyses;


·
            meeting
      at least annually with our external
auditor;




·
            reviewing
      the adequacy of the system of internal controls in consultation with the
      chief executive and financial
officer;




·
            reviewing
      any relevant accounting and financial matters including reviewing our
      public disclosure of information extracted or derived from our financial
      statements;




·
            establishing
      procedures for the receipt, retention and treatment of complaints received
      by us regarding accounting, internal controls or auditing matters and the
      confidential, anonymous submission by employees of concerns regarding
      questionable accounting or auditing
matters;




·
            pre-approving
      all non-audit services and recommending the appointment of external
      auditors; and




·
            reviewing
      and approving our hiring policies regarding personnel of our present and
      former external auditor




29




A copy of
the Audit Committee Charter can be requested by calling (416)
929-1806.







Compensation
Committee





The
Company does not currently have a Compensation Committee. The directors
determined that, in light of the Company’s size and resources, setting up such a
committee would be too expensive and would not serve any useful purpose for the
Company at this time. The Company has, however, set up an Independent Review
Committee of the Board to review and approve all non-arms' length contracts.
This Committee has the same composition as the Audit Committee, and is currently
comprised of the two independent directors - Dean Bradley and Brett Rees. This
committee approves fees and major expenses of Mr. Shah and Mr. Terence
Robinson.





(D)  EMPLOYEES





The
Company presently has one employee who serves as assistant to the chief
executive and financial officer. It uses the services of consultants from time
to time.





(E)  SHARE
OWNERSHIP





The
Company usually creates two Plans, Consultants Stock Compensation Plan and Stock
Option Plan.





All
options under 1999 Plan, 2003 plan and The Robinson Plan and 50,000 options
under 2005 Plan were issued and as at May 23, 2008, the date of this report,
4,795,000 options were outstanding. 950,000 options have not yet been issued
under the 2005 Plan.





All
shares reserved under the 2001, 2003, 2005 and 2007 Compensation Plans were
issued before March 31, 2008.





The
objective of these Plans is to provide for and encourage ownership of common
shares of the Company by its directors, officers, consultants and employees and
those of any subsidiary companies so that such persons may increase their stake
in the Company and benefit from increases in the value of the common shares. The
Plans are designed to be competitive with the benefit programs of other
companies in the natural resource industry. It is the view of management that
the Plans are a significant incentive for the directors, officers, consultants
and employees to continue and to increase their efforts in promoting the
Company’s operations to the mutual benefit of both the Company and such
individuals and also allow the Company to avail of the services of experienced
persons with minimum cash outlay.





30


The
following table sets forth the share ownership of those persons listed in
subsection 6.B above and includes details of all options or warrants to purchase
of the Company held by such persons at March 31, 2008:






Name
            #
      of Common shares held at March 31, 2008
            #
      of stock options
            Exercise
      price - in US$
            Expiry
      date(s)Kam
      Shah
            1,061,929
            100,000
            $0.50
            11-May-09125,000
            $0.50
            18-Aug-09125,000
            $0.75
            18-Aug-09Terence
      Robinson
            550,000`
            1,690,000
            $0.50
            18-Aug-091,100,000
            $0.50
            5-Dec-10Dean
      Bradley
            -
            25,000
            $0.35
            28-Mar-1315,000
            $0.35
            11-May-095,000
            $1.00
            18-Aug-09Brett
      Rees
            -
            25,000
            $0.35
            28-Mar-13John
      Robinson *
            2,362,500
            1,615,000
            $0.35
            28-Oct-09*  Includes
      1,712,500 held in the name of Current Capital Corp., which is fully owned
      by Mr. John Robinson








ITEM 7 – MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS





(A)  MAJOR
SHAREHOLDERS





The
Company's securities are recorded on the books of its transfer agent in
registered form. The majority of such shares are, however, registered in the
name of intermediaries such as brokerage houses and clearing-houses on behalf of
their respective clients. The Company does not have knowledge of all the
beneficial owners thereof.





As at
June 30, 2008, Intermediaries like CDS & Co, Toronto, Canada and Cede &
Co of New York, USA held approx. 76% of the issued and outstanding common shares
of the company on behalf of several beneficial shareholders whose individual
holdings details were not available. The following are the known shareholders
holding more than 5% of the common shares of the company as at June 30,
2008.




Name of Shareholder
            No. of Shares
            % of Issued SharesCurrent
      Capital Corp.*
            2,362,500
            7.80.
      %Pinetree
      Resource Partnership
            3,112,000
            10.34
      %





*includes
shares held by Mr. John Robinson, the sole owner of Current Capital
Corp.





At June
30, 2008, the Company had 30,095,743 shares of common stock outstanding, which,
as per the details provided by the Transfer Agents, were held by 89 record
holders excluding the beneficial shareholders held through the intermediaries,
52 of which, holding an aggregate of 3,888,551 shares (12.92%) of common stock,
were in the United States.




The
Company is a publicly owned Canadian corporation, the shares of which are owned
by Canadian residents, US residents, and residents of other countries. The
Company is not owned or controlled directly or indirectly by another corporation
or any foreign government. There are no arrangements, known to the Company, the
operation of which may at a subsequent date result in a change of control of the
Company.




31





(B)
RELATED PARTY TRANSACTIONS





Given
below is background information on some of the key related parties and
transactions with them:





1.
            Current
      Capital Corp. (CCC).  CCC is a related party in following ways
      –





a.
            Director/President
      of CCC, Mr. John Robinson is a consultant with
  Bontan


b.
            CCC
      provides media and investor relation services to Bontan under a consulting
      contract.


c.
            Chief
      Executive and Financial Officer of Bontan is providing services to CCC as
      CFO.


d.
            CCC
      and John Robinson hold significant shares in
  Bontan.





Bontan
shares premises with CCC for which CCC charges on a quarterly basis for the
rent, phone and utilities based on the actual costs and area occupied. Charges
from CCC reflect actual costs and do not include any mark ups.





Another
charge from CCC relates to the investor relations and media relation services
provided under a contract. The charge is a fixed sum of US$10,000 per month plus
taxes.





CCC is
also entitled to a finder’s fee at the rate of 10% of the gross money raised for
the Company through issuance of shares and warrants under private
placements.





2.
            Mr.
      Kam Shah is a director of the Company and also provides services as chief
      executive and financial officer under a five-year contract. The
      compensation is decided by the board on an annual basis and is usually
      given in the form of shares and
options.





3.
            Mr.
      Terence Robinson used to be providing services as chief executive officer
      until May 2004 and was also a director until that date. Currently, Mr.
      Robinson is providing services as a key consultant under a five-year
      contract. His services include sourcing of new business opportunities on
      behalf of the company using his extensive network of business contacts and
      short term investments buy or sell decisions and advise on behalf of the
      Company. His remuneration is paid mostly in shares on an annual
      basis.




Transactions
with related parties are incurred in the normal course of business and are
measured at the exchange amount. Related party transactions and balances have
been listed below:







(i)
            Included
      in shareholders information expense is $124,231 (2007 – $136,249; 2006 –
      $143,391) to Current Capital Corp, (CCC) for media relation’s services.
      CCC is a shareholder corporation and a director of the Company provides
      accounting services as a
consultant.





(ii)
            CCC
      charged approximately $8,175 for rent, telephone and other office expenses
      (2007: $5,666 and 2006: $8,200).





(iii)
            Finders
      fees of $12,245 (2007: $740,043, 2006: $397,944) was charged by CCC in
      connection with the private placement. (The fee for 2007 included a cash
      fee of $130,313 and 1,040,000 warrants valued at $609,730 using the
      Black-Scholes option price model).





(iv)
            Business
      expenses of $15,771 (2006 - $10,279; 2006 - $15,805) were reimbursed to
      directors of the corporation and $118,774 (2006 - $85,862, 2006: $143,987)
      to a key consultant and a former chief executive officer of the
      Company.





(v)
            Shares
      issued to a director under the Consultant’s stock compensation plan –
      450,000 valued at $105,373 (2007 : 350,000 valued at $95,409, 2006:
      328,000 valued at $98,072,). Shares issued to a key consultant and a
      former chief executive officer of the Company under the Consultant stock
      compensation plan –550,000 valued at $ 128,790 (2007: 500,000 valued at $
      136,298, 2006: 480,000 valued at
$143,500).





32


(vi)
            Options
      issued to directors under Stock option plans – 2008: 50,000 valued at
      $7,878 (2007: nil, 2006:  nil). Options issued to a key
      consultant and a former chief executive officer of the Company under Stock
      option plans:  nil (2007: nil, 2006: 1,100,000 valued at
      $655,779 ).





(vii)
            Cash
      fee paid to directors for services of $33,871 (2007 and 2006: $ nil). Fees
      prepaid to a director $2,470 (2007 and 2006: $ nil). These fees are
      included under travel, promotion and consulting
  expenses.





(viii)
            Accounts
      payable includes $9,384 (2007: $3,471, 2006: $7,145) due to CCC, $757
      (2006: $1,431, 2006: $1,758) due to a director and $6,577 (2006: $7,099,
      2006: $ 3,562) due to a key consultant and a former chief executive
      officer of the Company.





(ix)
            Interest
      income includes $ nil (2007: 1,398 & 2006: $nil) representing interest
      received from the Chief Executive
officer.





(x)
            Included
      in short term investments is an investment of $200,000 (2007 & 2006:
      $nil) in a private corporation controlled by a brother of the key
      consultant.





(xi)
            Included
      in short term investments is an investment of $1,929,049 carrying cost and
      $1,140,120 fair value (2007: $1,601,493 carrying cost and $2,710,760 fair
      value) in a public corporation controlled by a key shareholder of the
      Company. This investment represents common shares acquired in open market
      or through private placements and represents less than 1% of the said
      Corporation.




Indebtedness
to Company of Directors, Executive Officers and Senior Officers






None of
the directors, consultants, executive officers and senior officers of the
Company or any of its subsidiaries, proposed nominees for election or associates
of such persons is or has been indebted to the Company in excess of $25,000 at
any time for any reason whatsoever, including the purchase of securities of the
Company or any of its subsidiaries.






Mr. Shah,
the CEO and CFO of the Company borrowed $25,000 on December 6, 2005, repayable
within six months and carrying interest at 5.5% per annum. The loan was fully
paid with interest on December 12, 2006.




(C)
INTERESTS OF EXPERTS AND COUNSEL





Not
applicable.








ITEM 8 – FINANCIAL
INFORMATION





(A)
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION




Information
regarding our financial statements is contained under the caption "Item 17.
Financial Statements" below.




Legal
Proceedings




There are
no material legal proceedings in progress or to the knowledge of the Company,
pending or threatened to which the Company is a party or to which any of its
properties is subject.




33




Dividend
Policy




Since its
incorporation, the Company has not declared or paid, and has no present
intention to declare or to pay in the foreseeable future, any cash dividends
with respect to its Common Shares. Earnings will be retained to finance further
growth and development of the business of the Company. However, if the Board of
Directors declares dividends, all Common Shares will participate equally in the
dividends, and, in the event of liquidation, in the net assets, of the
Company.




(B)  SIGNIFICANT
CHANGES




There
were no corporate changes and other significant events that occurred subsequent
to March 31, 2008 up to the date of this report, May 26, 2008.




ITEM 9 - THE OFFER AND
LISTING




(A)  OFFER
AND LISTING DETAILS




The
following tables set forth the reported high and low sale prices for the common
shares of the Company as quoted on OTCBB.




The
following table outlines the annual high and low market prices for the five most
recent fiscal years:




Fiscal year ended March 31
            High
              In US$
            Low
              In US$2008
            0.47
            0.172007
            0.75
            0.222006
            1.51
            0.202005
            2.15
            0.332004
            2.47
            0.21




The
following table outlines the high and low market prices for each fiscal
financial quarter for the two most recent fiscal periods and any subsequent
period:




Fiscal Quarter ended
            High
            LowIn US$
            In US$June
      2008
            0.27
            0.18March
      2008
            0.32
            0.17December
      2007
            0.36
            0.17September
      2007
            0.43
            0.21June
      30, 2007
            0.47
            0.25March
      2007
            0.30
            0.23December
      2006
            0.38
            0.25September
      2006
            0.60
            0.25June
      30, 2006
            0.75
            .48




34


The
following table outlines the high and low market prices for each of the most
recent six months:




Month
            High
            LowIn US$
            In US$June
      2008
            0.27
            0.18May
      2008
            0.25
            0.20April
      2008
            0.27
            0.20March
      2008
            0.32
            0.22February
      2008
            0.30
            0.20January
      2008
            0.28
            0.17




(B)  PLAN
OF DISTRIBUTION




Not
applicable.




(C)  MARKETS




The
Company’s common shares were traded on the Over the Counter Bulletin Board
(OTCBB) under the symbol “DEAL” and on Canadian Dealing Network (CDN) under the
symbol “FDQI” until January 20, 1999.





Effective
January 21, 1999. The Company’s shares were traded only on OTCBB. The symbol was
further changed to “NMBC” on August 13, 1999 and then to “DCHK” on November 3,
1999.





On May
26, 2000, the Company shares were de-listed from OTCBB and began trading on the
“Pink Sheet” pending clearance of the Registration Statement, F-20 by Securities
and Exchange Commission (SEC). The Company filed F-20 originally in December
1999 and then filed several amendments in response to the comments received from
SEC to its submissions. The SEC clearance was finally received on June 16, 2000
and the common shares of the Company began trading again on OTCBB effective
August 2, 2000.





The
company changed its name to Bontan Corporation Inc.  On April 21, 2003
and its common shares began trading, and currently trade under a new symbol
“BNTNF” on OTCBB.




(D)  SELLING
SHAREHOLDERS




Not
applicable.




(E)  DILUTION




Not
applicable.




(F)  EXPENSES
OF THE ISSUE




Not
applicable.




35




ITEM 10 – ADDITIONAL
INFORMATION




(A)  SHARE
CAPITAL




This Form
20F is being filed as an Annual Report under the Exchange Act and, as such,
there is no requirement to provide any information under this
section.






(B)  MEMORANDUM
AND ARTICLES OF ASSOCIATION






The
Memorandum and Articles of the Company are incorporated by reference to the
information in our registration statement on Form 20-F filed with the Securities
and Exchange Commission, in Washington, D.C. on June 12, 2000 to which our
Articles of Incorporation and Memorandum were filed as exhibits.






No
further changes have been made to the Company’s Articles/Bylaws.






The
Company’s articles of incorporation do not place any restrictions on the
Company’s objects and purposes.






Certain Powers of
Directors




The
Business Corporations
Act (Ontario) (the "OBCA") requires that every director who is a
party to a material contract or transaction or a proposed material contract or
transaction with a corporation, or who is a director or officer of, or has a
material interest in, any person who is a party to a material contract or
transaction or a proposed material contract or transaction with the corporation,
shall disclose in writing to the corporation or request to have entered in the
minutes of the meetings of directors the nature and extent of his or her
interest, and shall refrain from voting in respect of the material contract or
transaction or proposed material contract or transaction unless the contract or
transaction is: (a) an arrangement by way of security for money lent to or
obligations undertaken by the director for the benefit of the corporation or an
affiliate; (b) one relating primarily to his or her remuneration as a
director, officer, employee or agent of the corporation or an affiliate;
(c) one for indemnity of or insurance for directors as contemplated under
the OBCA; or (d) one with an affiliate. However, a director who is
prohibited by the OBCA from voting on a material contract or proposed material
contract may be counted in determining whether a quorum is present for the
purpose of the resolution, if the director disclosed his or her interest in
accordance with the OBCA and the contract or transaction was reasonable and fair
to the corporation at the time it was approved.




The
Company's by-laws provide that the directors shall from time to time determine
by resolution the remuneration to be paid to the directors, which shall be in
addition to the salary paid to any officer or employee of the Company who is
also a director. The directors may also by resolution award special remuneration
to any director in undertaking any special services on the Company's behalf
other than the normal work ordinarily required of a director of the Company. The
by-laws provide that confirmation of any such resolution by the Company's
shareholders is not required.




The
Company's by-laws also provide that the directors may: (a) borrow money
upon the credit of the Company; (b) issue, reissue, sell or pledge bonds,
debentures, notes or other evidences of indebtedness or guarantee of the
Company, whether secured or unsecured; (c) to the extent permitted by the
OBCA, give directly or indirectly financial assistance to any person by means of
a loan, a guarantee on behalf of the Company to secure performance of any
present or future indebtedness, liability or other obligation of any person, or
otherwise; and (d) mortgage, hypothecate, pledge or otherwise create a
security interest in all or any currently owned or subsequently acquired real or
personal, movable or immovable, tangible or intangible, property of the Company
to secure any such bonds, debentures, notes or other evidences of indebtedness
or guarantee or any other present or future indebtedness, liability or other
obligation of the Company.




36


The
directors may, by resolution, amend or repeal any by-laws that regulate the
business or affairs of the Company. The OBCA requires the directors to submit
any such amendment or repeal to the Company's shareholders at the next meeting
of shareholders, and the shareholders may confirm, reject or amend the amendment
or repeal.






Meetings of
Shareholders






The
OBCA requires the Company to call an annual shareholders' meeting not later than
15 months after holding the last preceding annual meeting and permits the
Company to call a special shareholders' meeting at any time. In addition, in
accordance with the OBCA, the holders of not less than 5% of the Company's
shares carrying the right to vote at a meeting sought to be held may requisition
our directors to call a special shareholders' meeting for the purposes stated in
the requisition. The Company is required to mail a notice of meeting and management information circular to
registered shareholders not less than 21 days and not more than
50 days prior to the date of any annual or special shareholders' meeting.
These materials also are filed with Canadian securities regulatory authorities
and the SEC. The Company's by-laws provide that a quorum of two shareholders in
person or represented by proxy holding or representing by proxy not less than
10% of the Company's issued shares carrying the right to vote at the meeting is
required to transact business at a shareholders' meeting. Shareholders, and
their duly appointed proxies and corporate representatives, as well as the
Company's auditors, are entitled to be admitted to the Company's annual and
special shareholders' meetings.




Authorized
Capital




The
Company's authorized capital consists of an unlimited number of shares of one
class designated as common shares. The Company may not create any class or
series of shares or make any modification to the provisions attaching to the
Company's common shares without the affirmative vote of two-thirds of the votes
cast by the holders of the common shares. The Company's common shares do not
have pre-emptive rights to purchase additional shares.




Disclosure of Share
Ownership




The
Securities Act
(Ontario) provides that a person or company that beneficially owns, directly or
indirectly, voting securities of an issuer or that exercises control or
direction over voting securities of an issuer or a combination of both, carrying
more than 10% of the voting rights attached to all the issuer's outstanding
voting securities (an "insider") must, within 10 days of becoming an
insider, file a report in the required form effective the date on which the
person became an insider, disclosing any direct or indirect beneficial ownership
of, or control or direction over, securities of the reporting issuer. The Securities Act (Ontario) also
provides for the filing of a report by an insider of a reporting issuer who
acquires or transfers securities of the issuer. This report must be filed within
10 days after the end of the month in which the acquisition or transfer
takes place.




The
Securities Act
(Ontario) also provides that a person or company that acquires (whether or not
by way of a take-over bid, issuer bid or offer to acquire) beneficial ownership
of voting or equity securities or securities convertible into voting or equity
securities of a reporting issuer that, together with previously held securities
brings the total holdings of such holder to 10% or more of the outstanding
securities of that class, must (a) issue and file forthwith a news release
containing the prescribed information and (b) file a report within two
business days containing the same information set out in the news release. The
acquiring person or company must also issue a press release and file a
report each time it acquires an additional 2% or more of the outstanding
securities of the same class and every time there is a "material change" to the
contents of the news release and report previously issued
and filed.




The
rules in the United States governing the ownership threshold above which
shareholder ownership must be disclosed are more stringent than those discussed
above. Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") imposes reporting requirements on persons who acquire
beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act) of more than 5% of a class of an
equity security registered under Section 12 of the Exchange Act. In
general, such persons must file, within 10 days after such acquisition, a
report of beneficial ownership with the SEC containing the information
prescribed by the regulations under Section 13 of the Exchange Act. This
information is also required to be sent to the issuer of the securities and to
each exchange where the securities are traded.




37




Restrictions on Share
Ownership by Non-Canadians






There
are no limitations under the laws of Canada or in the constitutive documents of
the Company on the right of foreigners to hold or vote securities of the
Company, except that the Investment Canada Act may
require review and approval by the Minister of Industry (Canada) of certain
acquisitions of "control" of the Company by a "non-Canadian". The threshold for
acquisitions of control is generally defined as being one-third or more of the
voting shares of the Company. "Non-Canadian" generally means an individual who
is not a Canadian citizen, or a corporation, partnership, trust or joint venture
that is ultimately controlled by non-Canadians.




(C)
MATERIAL CONTRACTS





Except
for contracts entered into in the ordinary course of its business, there were
 no material contracts to which we are or have been a party to for the two
years preceding this annual report.







(D)
EXCHANGE CONTROLS





There are
no governmental laws, decrees or regulations in Canada that restrict the export
or import of capital or that affect the remittance of dividends, interest or
other payments to non-resident holders of our securities.  However, any
such remittance to a resident of the United States may be subject to a
withholding tax pursuant to the Income Tax Act (Canada).  For further
information concerning such withholding tax, see “Taxation" below.






(E)  TAXATION




Canadian Federal Income Tax
Consequences




We
consider that the following summary fairly describes the principal Canadian
federal income tax consequences applicable to a holder of our common shares who
at all material times deals at arm’s length with our company, who holds all
common shares as capital property, who is resident in the United States, who is
not a resident of Canada and who does not use or hold, and is not deemed to use
or hold, his common shares of our company in connection with carrying on a
business in Canada (a “non-resident holder”). It is assumed that the common
shares will at all material times be listed on a stock exchange that is
prescribed for purposes of the Income Tax Act(Canada) (the “ITA”)
and regulations thereunder. Investors should be aware that the Canadian federal
income tax consequences applicable to holders of our common shares will change
if, for any reason, we cease to be listed on a prescribed stock exchange.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax consequences of them
purchasing, owing and disposing of our common shares should we cease to be
listed on a prescribed stock exchange.




This
summary is based upon the current provisions of the ITA, the regulations there
under, the Canada-United States Tax Convention as amended by the Protocols
thereto (the “Treaty”) as at the date of the registration statement and the
currently publicly announced administrative and assessing policies of the Canada
Revenue Agency (the “CRA”). This summary does not take into account Canadian
provincial income tax consequences. This description is not exhaustive of all
possible Canadian federal income tax consequences and does not take into account
or anticipate any changes in law, whether by legislative, governmental or
judicial action. This summary does, however, take into account all specific
proposals to amend the ITA and regulations there under, publicly announced by
the Government of Canada to the date hereof.




38


This
summary does not address potential tax effects relevant to our company or those
tax considerations that depend upon circumstances specific to each investor.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax consequences to them
of purchasing, owning and disposing of common shares in our
company.






Dividends




The ITA
provides that dividends and other distributions deemed to be dividends paid or
deemed to be paid by a Canadian resident corporation (such as our company) to a
non-resident of Canada shall be subject to a non-resident withholding tax equal
to 25% of the gross amount of the dividend of deemed dividend. Provisions in the
ITA relating to dividend and deemed dividend payments to and gains realized by
non-residents of Canada, who are residents of the United States, are subject to
the Treaty. The Treaty may reduce the withholding tax rate on dividends as
discussed below.




Article X
of the Treaty as amended by the US-Canada Protocol ratified on November 9, 1995
provides a 5% withholding tax on gross dividends or deemed dividends paid to a
United States corporation which beneficially owns at least 10% of the voting
stock of the company paying the dividend. In cases where dividends or deemed
dividends are paid to a United States resident (other than a corporation) or a
United States corporation which beneficially owns less than 10% of the voting
stock of a company, a withholding tax of 15% is imposed on the gross amount of
the dividend or deemed dividend paid. We would be required to withhold any such
tax from the dividend and remit the tax directly to CRA for the account of the
investor.




The
reduction in withholding tax from 25%, pursuant to the Treaty, will not be
available:




(a) if the shares in respect of which the dividends are paid formed part of
the business property or were otherwise effectively connected with a permanent
establishment or fixed base that the holder has or had in Canada within the 12
months preceding the disposition, or




(b) the holder is a U.S. LLC which is not subject to tax in the
U.S.




The
Treaty generally exempts from Canadian income tax dividends paid to a religious,
scientific, literary, educational or charitable organization or to an
organization exclusively administering a pension, retirement or employee benefit
fund or plan, if the organization is resident in the U.S. and is exempt from
income tax under the laws of the U.S.




Capital
Gains




A
non-resident holder is not subject to tax under the ITA in respect of a capital
gain realized upon the disposition of one of our shares unless the share
represents “taxable Canadian property” to the holder thereof. Our common shares
will be considered taxable Canadian property to a non-resident holder only
if-.




(a)
the non-resident holder;




(b)
persons with whom the non-resident holder did not deal at arm’s length -
or




(c) the non-resident holder and persons with whom he did not deal at arm’s
length,




owned not
less than 25% of the issued shares of any class or series of our company at any
time during the five year period preceding the disposition. In the case of a
non-resident holder to whom shares of our company represent taxable Canadian
property and who is resident in the United States, no Canadian taxes will
generally be payable on a capital gain realized on such shares by reason of the
Treaty unless:




39




(a) the value of such shares is derived principally from real property
(including resource property) situated in Canada,






(b)
the holder was resident in Canada for 120 months during any period of 20
consecutive years preceding, and at any time during the 10 years immediately
preceding, the disposition and the shares were owned by him when he ceased to be
a resident of Canada,






(c) they formed part of the business property or were otherwise effectively
connected with a permanent establishment or fixed base that the holder has or
bad in Canada within the 12 months preceding the disposition, or






(d)
the holder is a U.S. LLC which is not subject to tax in the U.S.






If
subject to Canadian tax on such a disposition, the taxpayer’s capital gain (or
capital loss) from a disposition is the amount by which the taxpayer’s proceeds
of disposition exceed (or are exceeded by) the aggregate of the taxpayer’s
adjusted cost base of the shares and reasonable expenses of disposition. For
Canadian income tax purposes, the “taxable capital gain” is equal to one-half of
the capital gain.




U.S. Federal Income Tax
Consequences






The
following is a discussion of the material United States Federal income tax
consequences, under current law, applicable to a U.S. Holder (as defined below)
of our common shares who holds such shares as capital assets. This discussion
does not address all potentially relevant Federal income tax matters and it does
not address consequences peculiar to persons subject to special provisions of
Federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local, or foreign tax consequences. (See “Canadian Federal Income Tax
Consequences” above.)






The
following discussion is based on the Internal Revenue Code of 1986, as amended
(the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”)
rulings, published administrative positions of the IRS and court decisions that
are currently applicable, any or all of which could be materially and adversely
changed, possibly on a retroactive basis, at any time. In addition, this
discussion does not consider the potential effects, both adverse and beneficial,
of any recently proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time.






The
discussion below does not address potential tax effects relevant to our company
or those tax considerations that depend upon circumstances specific to each
investor. In addition, this discussion does not address the tax consequences
that may be relevant to particular investors subject to special treatment under
certain U.S. Federal income tax laws, such as, dealers in securities, tax-exempt
entities, banks, insurance companies and non-U.S. Holders. Purchasers of the
common stock should therefore satisfy themselves as to the overall tax
consequences of their ownership of the common stock, including the State, local
and foreign tax consequences thereof (which are not reviewed herein), and should
consult their own tax advisors with respect to their particular
circumstances.






U.S.
Holders






As used
herein, a “U.S. Holder” includes a beneficial holder of common shares of our
company who is a citizen or resident of the United States, a corporation or
partnership created or organized in or under the laws of the United States or of
any political subdivision thereof, any trust if a US court is able to exercise
primary supervision over the administration of the trust and one or more US
persons have the authority to control all substantial decisions of the trust,
any entity created or organized in the United States which is taxable as a
corporation for U.S. tax purposes and




40




any other
person or entity whose ownership of common shares of our company is effectively
connected with the conduct of a trade or business in the United States. A U.S.
Holder does not include persons subject to special provisions of Federal income
tax law, such as tax-exempt organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of our common shares is not effectively connected
with the conduct of a trade or business in the United States and shareholders
who acquired their shares through the exercise of employee stock options or
otherwise as compensation.






Dividend Distribution on
Shares of our Company






U.S.
Holders receiving dividend distributions (including constructive dividends) with
respect to the common shares of our company are required to include in gross
income for United States Federal income tax purposes the gross amount of such
distributions to the extent that we have current or accumulated earnings and
profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be deducted or may be credited
against actual tax payable, subject to certain limitations and other complex
rules, against the U.S. Holder’s United States Federal taxable income. See
“Foreign Tax Credit” below. To the extent that distributions exceed our current
or accumulated earnings and profits, they will be treated first as a return of
capital to the extent of the shareholder’s basis in the common shares of our
company and thereafter as gain from the sale or exchange of the common shares of
our company. Preferential tax rates for net long term capital gains may be
applicable to a U.S. Holder which is an individual, estate or
trust.






In
general, dividends paid on our common shares will not be eligible for the
dividends received deduction provided to corporations receiving dividends from
certain United States corporations.






Foreign Tax
Credit






A U.S.
Holder who pays (or who has had withheld from distributions) Canadian income tax
with respect to the ownership of our common shares may be entitled, at the
election of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. This election is made on a year-by-year basis and
generally applies to all foreign income taxes paid by (or withheld from) the
U.S. Holder during that year. There are significant and complex limitations
which apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate share of the U.S. Holder’s United States income
tax liability that the U.S. Holder’s foreign source income bears to his or its
world-wide taxable income. In determining the application of this limitation,
the various items of income and deduction must be classified into foreign and
domestic sources. Complex rules govern income such as “passive income”, “high
withholding tax interest”, “financial services income”, “shipping income” and
certain other classifications of income. A U.S. Holder who is treated as a
domestic U.S. corporation owning 10% or more of our voting stock is also
entitled to a deemed paid foreign tax credit in certain circumstances for the
underlying foreign tax of our company related to dividends received or Subpart F
income received from us. (See the discussion below of Controlled Foreign
Corporations). The availability of the foreign tax credit and the application of
the limitations on the foreign tax credit are fact specific and holders and
prospective holders of our common shares should consult their own tax advisors
regarding their individual circumstances.






Disposition of Common
Shares






If a
“U.S. Holder” is holding shares as a capital asset, a gain or loss realized on a
sale of our common shares will generally be a capital gain or loss, and will be
long-term if the shareholder has a holding period of more than one year.
However, gains realized upon sale of our common shares may, under certain
circumstances, be treated as ordinary income, if we were determined to be a
“collapsible corporation” within the meaning of Code Section 341 based on the
facts in existence on the date of the sale (See below for definition of
“collapsible corporation”). The amount of gain or loss recognized by a selling
U.S. Holder will be measured by the difference between (i) the amount realized
on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains.




41


However,
in the case of taxpayers other than corporations (U.S.)$3,000 ($1,500 for
married individuals filing separately) of capital losses are deductible against
ordinary income annually. In the case of individuals and other non-corporate
taxpayers, capital losses that are not currently deductible may be carried
forward to other years. In the case of corporations, capital losses that are not
currently deductible are carried back to each of the three years preceding the
loss year and forward to each of the five years succeeding the loss
year.






A
“collapsible corporation” is a corporation that is formed or availed principally
to manufacture, construct, produce, or purchase prescribed types or property
that the corporation holds for less than three years and that generally would
produce ordinary income on its disposition, with a view to the stockholders
selling or exchanging their stock and thus realizing gain before the corporation
realizes two thirds of the taxable income to be derived from prescribed
property. Prescribed property includes: stock in trade and inventory; property
held primarily for sale to customers in the ordinary course of business;
unrealized receivables or fees, consisting of rights to payment for noncapital
assets delivered or to be delivered, or services rendered or to be rendered to
the extent not previously included in income, but excluding receivables from
selling property that is not prescribed; and property gain on the sale of which
is subject to the capital gain/ordinary loss rule. Generally, a shareholder who
owns directly or indirectly 5 percent or less of the outstanding stock of the
corporation may treat gain on the sale of his shares as capital
gain.






Other Considerations for
U.S. Holders




In the
following circumstances, the above sections of this discussion may not describe
the United States Federal income tax consequences resulting from the holding and
disposition of common shares of the Registrant. Our management is of the opinion
that there is little, if not, any likelihood that we will be deemed a “Foreign
Personal Holding Company”, a “Foreign Investment Company” or a “Controlled
Foreign Corporation” (each as defined below) under current and anticipated
conditions.




Foreign Personal Holding
Company




If at any
time during a taxable year more than 50% of the total combined voting power or
the total value of our outstanding shares is owned, actually or constructively,
by five or fewer individuals who are citizens or residents of the United States
and 60% or more of our gross income for such year was derived from certain
passive sources (e.g., from dividends received from its subsidiaries), we would
be treated as a “foreign personal holding company.” In that event, U.S. Holders
that hold common shares in our capital would be required to include in income
for such year their allocable portion of our passive income which would have
been treated as a dividend had that passive income actually been
distributed.




Foreign Investment
Company




If 50% or
more of the combined voting power or total value of our outstanding shares are
held, actually or constructively, by citizens or residents of the United States,
United States domestic partnerships or corporations, or estates or trusts other
than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and
we are found to be engaged primarily in the business of investing, reinvesting,
or trading in securities, commodities, or any interest therein, it is possible
that we might be treated as a “foreign investment company” as defined in Section
1246 of the Code, causing all or part of any gain realized by a U.S. Holder
selling or exchanging our common shares to be treated as ordinary income rather
than capital gains.




Passive Foreign Investment
Company




A U.S.
Holder who holds stock in a foreign corporation during any year in which such
corporation qualifies as a passive foreign investment company (“PFIC”) is
subject to U.S. federal income taxation of that foreign corporation under one of
two alternative tax methods at the election of each such U.S.
Holder.




42


Section
1297 of the Code defines a PFIC as a corporation that is not formed in the
United States and, for any taxable year, either (i) 75% or more of its gross
income is “passive income,” which includes interest, dividends and certain rents
and royalties or (ii) the average percentage, by value (or, if the company is a
controlled foreign corporation or makes an election, adjusted tax basis), of its
assets that produce or are held for the production of “passive income” is 50% or
more. For taxable years of U.S. persons beginning after December 31, 1997, and
for tax years of foreign corporations ending with or within such tax years, the
Taxpayer Relief Act of 1997 provides that publicly traded corporations must
apply this test on a fair market value basis only. The Registrant
believes that it is a PFIC.




As a
PFIC, each U.S. Holder must determine under which of the alternative tax methods
it wishes to be taxed. Under one method, a U.S. Holder who elects in a timely
manner to treat the Registrant as a Qualified Electing Fund




(“QEF”),
as defined in the Code, (an “Electing U.S. Holder”) will be subject, under
Section 1293 of the Code, to current federal income tax for any taxable year in
which we qualify as a PFIC on his pro-rata share of our (i) “net capital gain”
(the excess of net long-term capital gain over net short-term capital loss),
which will be taxed as long-term capital gain to the Electing U.S. Holder and
(ii) “ordinary earnings” (the excess of earnings and profits over net capital
gain), which will be taxed as ordinary income to the Electing U.S. Holder, in
each case, for the U.S. Holder’s taxable year in which (or with which) our
taxable year ends, regardless of whether such amounts are actually distributed.
Such an election, once made shall apply to all subsequent years unless revoked
with the consent of the IRS.




A QEF
election also allows the Electing U.S. Holder to (i) generally treat any gain
realized on the disposition of his common shares (or deemed to be realized on
the pledge of his common shares) as capital gain; (ii) treat his share of our
net capital gain, if any, as long-term capital gain instead of ordinary income,
and (iii) either avoid interest charges resulting from PFIC status altogether
(see discussion of interest charge below), or make an annual election, subject
to certain limitations, to defer payment of current taxes on his share of our
annual realized net capital gain and ordinary earnings subject, however, to an
interest charge. If the Electing U.S. Holder is an individual, such an interest
charge would be not deductible.




The
procedure a U.S. Holder must comply with in making an timely QEF election will
depend on whether the year of the election is the first year in the U.S.
Holder’s holding period in which we are a PFIC. If the U.S. Holder makes a QEF
election in such first year, (sometimes referred to as a “Pedigreed QEF
Election”), then the U.S. Holder may make the QEF election by simply filing the
appropriate documents at the time the U.S. Holder files its tax return for such
first year. If, however, we qualified as a PFIC in a prior year, then the U.S.
Holder may make an “Unpedigreed QEF Election” by recognizing as an “excess
distribution” (i) under the rules of Section 1291 (discussed below), any gain
that he would otherwise recognize if the U.S. Holder sold his stock on the
qualification date (Deemed Sale Election) or (ii) if we are a controlled foreign
corporation (“CFC”), the Holder’s pro rata share of the corporation’s earnings
and profits (Deemed Dividend Election) (But see “Elimination of Overlap Between
Subpart F Rules and PFIC Provisions”). The effect of either the deemed sale
election or the deemed dividend election is to pay all prior deferred tax, to
pay interest on the tax deferral and to be treated thereafter as a Pedigreed QEF
as discussed in the prior paragraph. With respect to a situation in which a
Pedigreed QEF election is made, if we no longer qualify as a PFIC in a
subsequent year, normal Code rules and not the PFIC rules will
apply.




If a U.S.
Holder has not made a QEF Election at any time (a “Non-electing U.S. Holder”),
then special taxation rules under Section 1291 of the Code will apply to (i)
gains realized on the disposition (or deemed to be realized by reason of a
pledge) of his common shares and (ii) certain “excess distributions”, as
specially defined, by our company. An “excess distribution” is any current-year
distribution in respect of PFIC stock that represents a rateable portion of the
total distributions in respect of the stock during the year that exceed 125
percent of the average amount of distributions in respect of the stock during
the three preceding years.




A
Non-electing U.S. Holder generally would be required to pro-rate all gains
realized on the disposition of his common shares and all excess distributions
over the entire holding period for the common shares. All gains or excess
distributions allocated to prior years of the U.S. Holder (other than years
prior to our first taxable year during such U.S. Holder’s holding period and
beginning after January, 1987 for which it was a PFIC) would be taxed at the
highest tax rate for each such prior year applicable to ordinary income. The
Non-electing U.S. Holder also would be liable for interest on the deferred tax
liability for each such prior year calculated as if such liability had been due
with respect to each such prior year. A Non-electing U.S. Holder that is an
individual is not allowed a deduction for interest on the deferred tax
liability. The portions of gains and distributions that are not characterized as
“excess distributions” are subject to tax in the current year under the normal
tax rules of the Internal Revenue Code.




If we are
a PFIC for any taxable year during which a Non-electing U.S. Holder holds common
shares, then we will continue to be treated as a PFIC with respect to such
common Shares, even if it is no longer by definition a PFIC. A Non-electing U.S.
Holder may terminate this deemed PFIC status by electing to recognize gain
(which will be taxed under the rules discussed above for Non-Electing U.S.
Holders) as if such common shares had been sold on the last day of the last
taxable year for which it was a PFIC.




Under
Section 1291(f) of the Code, the Department of the Treasury has issued proposed
regulations that would treat as taxable certain transfers of PFIC stock by
Non-electing U.S. Holders that are generally not otherwise taxed, such as gifts,
exchanges pursuant to corporate reorganizations, and transfers at death. If a
U.S. Holder makes a QEF Election that is not a Pedigreed Election (i.e., it is
made after the first year during which we are a PFIC and the U.S. Holder holds
our shares) (a “Unpedigreed Election”), the QEF rules apply prospectively but do
not apply to years prior to the year in which the QEF first becomes effective.
U.S. Holders should consult their tax advisors regarding the specific
consequences of making a Non-Pedigreed QEF Election.




Certain
special, generally adverse, rules will apply with respect to the common shares
while we are a PFIC whether or not it is treated as a QEF. For example under
Section 1297(b)(6) of the Code (as in effect prior to the Taxpayer Relief Act of
1997), a U.S. Holder who uses PFIC stock as security for a loan (including a
margin loan) will, except as may be provided in regulations, be treated as
having made a taxable disposition of such stock.




The
foregoing discussion is based on currently effective provisions of the Code,
existing and proposed regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change. Any such change could
affect the validity of this discussion. In addition, the implementation of
certain aspects of the PFIC rules requires the issuance of regulations which in
many instances have not been promulgated and which may have retroactive effect.
There can be no assurance that any of these proposals will be enacted or
promulgated, and if so, the form they will take or the effect that they may have
on this discussion. Accordingly, and due to the complexity of the PFIC rules,
U.S. Holders of the Registrant are strongly urged to consult their own tax
advisors concerning the impact of these rules on their investment in our
company. For a discussion of the impact of the Taxpayer Relief Act of 1997 on a
U.S. Holder of a PFIC, see “Mark-to-Market Election For PFIC Stock Under the
Taxpayer Relief Act of 1997” and “Elimination of Overlap Between Subpart F Rules
and PFIC Provisions” below.




Mark-to-Market Election for
PFIC Stock Under the Taxpayer Relief Act of 1997




The
Taxpayer Relief Act of 1997 provides that a U.S. Holder of a PFIC may make a
mark-to-market election with respect to the stock of the PFIC if such stock is
marketable as defined below. This provision is designed to provide a current
inclusion provision for persons that are Non-Electing Holders. Under the
election, any excess of the fair market value of the PFIC stock at the close of
the tax year over the Holder’s adjusted basis in the stock is included in the
Holder’s income. The Holder may deduct any excess of the adjusted basis of the
PFIC stock over its fair market value at the close of the tax year. However,
deductions are limited to the net mark-to-market gains on the stock that the
Holder included in income in prior tax years, or so called “unreversed
inclusions.” For purposes of the election, PFIC stock is marketable if it is
regularly traded on (1) a national securities exchange that is registered with
the SEC, (2) the national market system established under Section II A of the
Securities Exchange Act of 1934, or (3) an exchange or market that the IRS
determines has rules sufficient to ensure that the market price represents
legitimate and sound fair market value.




43




A
Holder’s adjusted basis of PFIC stock is increased by the income recognized
under the mark-to-market election and decreased by the deductions allowed under
the election. If a U.S. Holder owns PFIC stock indirectly through a foreign
entity, the basis adjustments apply to the basis of the PFIC stock in the hands
of the foreign entity for the purpose of applying the PFIC rules to the tax
treatment of the U.S. owner. Similar basis adjustments are made to the basis of
the property through which the U.S. persons hold the PFIC stock.




Income
recognized under the mark-to-market election and gain on the sale of PFIC stock
with respect to which an election is made is treated as ordinary income.
Deductions allowed under the election and loss on the sale of PFIC with respect
to which an election is made, to the extent that the amount of loss does not
exceed the net mark-to-market gains previously included, are treated as ordinary
losses. The U.S. or foreign source of any income or losses is determined as if
the amount were a gain or loss from the sale of stock in the PFIC.




If PFIC
stock is owned by a CFC (discussed below), the CFC is treated as a U.S. person
that may make the mark-to-market election. Amounts includible in the CFC’s
income under the election are treated as foreign personal holding company
income, and deductions are allocable to foreign personal holding company
income.




The above
provisions apply to tax years of U.S. persons beginning after December 31, 1997,
and to tax years of foreign corporations ending with or within such tax years of
U.S. persons.




The rules
of Code Section 1291 applicable to nonqualified funds as discussed above
generally do not apply to a U.S. Holder for tax years for which a mark-to-market
election is in effect. If Code Section 1291 is applied and a mark-to-market
election was in effect for any prior tax year, the U.S. Holder’s holding period
for the PFIC stock is treated as beginning immediately after the last tax year
of the election. However, if a taxpayer makes a mark-to-market election for PFIC
stock that is a nonqualified fund after the beginning of a taxpayer’s holding
period for such stock, a co-ordination rule applies to ensure that the taxpayer
does not avoid the interest charge with respect to amounts attributable to
periods before the election.




Controlled Foreign
Corporation Status




If more
than 50% of the voting power of all classes of stock or the total value of the
stock of our company is owned, directly or indirectly, by U.S. Holders, each of
whom own after applying rules of attribution 10% or more of the total combined
voting power of all classes of stock of our company, we would be treated as a
“controlled foreign corporation” or “CFC” under Subpart F of the Code. This
classification would bring into effect many complex results including the
required inclusion by such 10% U.S. Holders in income of their pro rata shares
of “Subpart F income” (as defined by the Code) of our company and our earnings
invested in “U.S. property” (as defined by Section 956 of the Code). In
addition, under Section 1248 of the Code if we are considered a CFC at any time
during the five year period ending with the sale or exchange of its stock, gain
from the sale or exchange of common shares of our company by such a 10% U.S.
Holder of our common stock at any time during the five year period ending with
the sale or exchange is treated as ordinary dividend income to the extent of our
earnings and profits attributable to the stock sold or exchanged. Because of the
complexity of Subpart F, and because we may never be a CFC, a more detailed
review of these rules is beyond of the scope of this discussion.




Elimination of Overlap
Between Subpart F Rules and PFIC Provisions




Under the
Taxpayer Relief Act of 1997, a PFIC that is also a CFC will not be treated as a
PFIC with respect to certain 10% U.S. Holders. For the exception to apply, (i)
the corporation must be a CFC within the meaning of section 957(a) of the Code
and (ii) the U.S. Holder must be subject to the current inclusion rules of
Subpart F with respect to such corporation (i.e., the U.S. Holder is a “United
States Shareholder,” see “Controlled Foreign Corporation,” above). The exception
only applies to that portion of a U.S. Holder’s holding period beginning after
December 31, 1997. For that portion of a United States Holder before January 1,
1998, the ordinary PFIC and QEF rules continue to apply.




44


As a
result of this new provision, if we were ever to become a CFC, U.S. Holders who
are currently taxed on their pro rata shares of Subpart F income of a PFIC which
is also a CFC will not be subject to the PFIC provisions with respect to the
same stock if they have previously made a Pedigreed QEF Election. The PFIC
provisions will however continue to apply to U.S Holders for any periods in
which Subpart F does not apply (for example he is no longer a 10% Holder or we
are no longer a CFC) and to U.S. Holders that did not make a Pedigreed QEF
Election unless the U.S. Holder elects to recognize gain on the PFIC shares held
in our company as if those shares had been sold.




ALL PROSPECTIVE INVESTORS ARE ADVISED
TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF PURCHASING THE COMMON SHARES OF OUR COMPANY.




(F)  DIVIDEND
AND PAYING AGENTS




Not
applicable.




(G)  STATEMENT
BY EXPERTS




Not applicable.




(H)  DOCUMENTS
ON DISPLAY




The
documents concerning the Company referred to in this Annual Report may be
inspected at the Company's office at 47 Avenue Road, Suite 200, Toronto,
Ontario, Canada, M5R 2G3. The Company may be reached at (416) 929-1806.
Documents filed with the Securities and Exchange Commission ("SEC") may also be
read and copied at the SEC's public reference room at 100F Street, N. E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.





The
Company is subject to reporting requirements as a “reporting issuer” under
applicable securities legislation in Canada and as a “foreign private issuer”
under the Securities Exchange Act of 1934 (the “Exchange Act”). As a result, we
must file periodic reports and other information with the Canadian securities
regulatory authorities and the Securities and Exchange Commission.





A copy of
this Annual Information Form/Form 20-F Annual Report and certain other documents
referred to in this Annual Report and other documents filed by us may be
retrieved from the system for electronic document analysis and retrieval
(“SEDAR”) system maintained by the Canadian securities regulatory authorities at
www.sedar.ca or from the Securities and Exchange Commission electronic data
gathering, analysis and retrieval system (“EDGAR”) at www.sec.gov/edgar.




(I)  SUBSIDIARY
INFORMATION





The
documents concerning the Company’s subsidiaries referred to in this Annual
Report may be inspected at the Company's office at 47 Avenue Road, Suite 200,
Toronto, Ontario, Canada, M5R 2G3.





45


ITEM 11 – QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK




The
Company is exposed in varying degrees to a number of risks arising from
financial instruments. Management’s close involvement in the operations allows
for the identification of risks and variances from expectations. The Company
does not participate in the use of financial instruments to mitigate these risks
and has no designated hedging transactions. The Board approves and monitors the
risk management processes. The Board’s main objectives for managing risks are to
ensure liquidity, the fulfilment of obligations, the continuation of the
Company’s search for new business participation opportunities, and limited
exposure to credit and market risks while ensuring greater returns on the
surplus funds on hand. There were no changes to the objectives or the process
from the prior period.





The types
of risk exposure and the way in which such exposures are managed are as
follows:





(a)
Concentration risk:





Concentration
risks exist in cash and cash equivalents because significant balances are
maintained with one financial institution and two brokerage firms. The risk is
mitigated because the financial institution is a prime Canadian bank and the
brokerage firms are well known Canadian brokerage firms with good market
reputation.





(b)
Market price risk:





Market
risk primarily arises from the Company’s short term investments in marketable
securities which accounted for approximately 69% of total assets of the Company
as at March 31, 2008( 50% at March 31, 2007). Further, the Company’s holding in
one Canadian marketable security accounted for approximately 31% (2007: 50%) of
the total short term investment in marketable securities or 21% (2007: 24%) of
total assets at March 31, 2008.





The
management mitigates this risk by daily monitoring of all its investments by
experienced consultants.





(c)
Liquidity risk:





Liquidity
risk is the risk that the Company will not be able to meet its financial
obligations as they become due.





The
Company ensures there is sufficient capital to meet short term business
requirements. In addition, management and key consultants have opted to accept
the Company’s common shares instead of cash towards their fee to ensure greater
cash flow for other operational and business needs.





One of
management’s goals is to maintain an optimal level of liquidity through the
active management of the assets, liabilities and cash flows.





The
Company’s maintains limited cash for its operational needs while most of its
surplus cash is invested in short term marketable securities which are available
on short notice to fund the Company’s operating costs and other financial
demands.





(d) Currency
risk





The
operating results and financial position of the Company are reported in Canadian
dollars. Significant part of cash and short term investments are held in US
dollars – approximately 23% of total assets at March 31, 2008 (19% as at March
31, 2007). The results of the Company’s operations are therefore subject to
currency transaction and translation risk.





46




The
fluctuation of the US dollar in relation to the Canadian dollar will
consequently impact the loss of the Company and may also affect the value of the
Company’s assets and the amount of shareholders’ equity.





Comparative
foreign exchange rates as at March 31, 2008 are as follows:


March
31,


2008                         2007





US Dollar
to CDN
Dollar                                                                                                1.0279                       1.1680





The
Company has not entered into any agreements or purchased any foreign currency
hedging arrangements to hedge possible currency risks at this time.






ITEM 12 – DESCRIPTION OF
SECURITIES OTHER THAN EQUITY SECURITIES






Not
applicable.






PART II








ITEM 13 – DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES






None.






ITEM 14 – MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS




No
modifications or qualifications have been made in the Fiscal Year to the
instruments defining the rights of the holders of our Common Shares and no
material amount of assets securing our securities has been withdrawn or
substituted by us or anyone else (other than in the ordinary course of
business).








ITEM 15  -
CONTROLS AND PROCEDURES





a) Disclosure controls and
procedures





We have
no employees. Our Chief Executive Officer who also serves as Chief Financial
Officer (“CEO”) is primarily responsible in establishing and maintaining
controls and procedures concerning disclosure of material information and their
timely reporting in consultation and under direct supervision of the audit
committee which comprises two independent directors. We therefore do not have an
effective internal controls and procedures due to lack of segregation of duties.
However, given the size and nature of our current operations and involvement of
independent directors in the process significantly reduce the risk factors
associated with the lack of segregation of duties.





47


The CEO
has instituted a system of disclosure controls for the Company to ensure proper
and complete disclosure of material information. The limited number of
consultants and direct involvement of the CEO facilitates access to real time
information about developments in the business for drafting disclosure
documents. All documents are circulated to the board of directors and audit
committee according to the disclosure time-lines.





During
the fiscal 2008, the management carried out a comprehensive review of the
internal controls existing over the financial reporting Mitigating controls and
procedures were identified wherever possible. New procedures were implemented in
a couple of cases where it was evident that controls were not robust enough to
ensure appropriate disclosure in a timely manner. Some controls were implemented
as a secondary detection mechanism if the initial controls failed to prevent
errors from occurring.





There were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date the CEO completed his evaluation, nor were there any
significant deficiencies or material weaknesses in the Company's internal
controls requiring corrective actions other than the lack of segregation of
duties.





b) Management’s annual
report on internal control over financial reporting





MANAGEMENT
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





Management
of Bontan Corporation Inc. (The Company) is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company’s consolidated financial statements for external
reporting purposes in accordance with generally accepted accounting
principles.





The
Company’s internal control over financial reporting includes policies and
procedures that:





-
            Pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect transactions and dispositions of
  assets;




-
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of consolidated financial statements in accordance with
      generally accepted accounting principles, and that receipts and
      expenditures are being made only in accordance with authorizations of
      management and the Directors of the Company:
  and,




-
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the Company’s consolidated financial
      statements.




Due to
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements on a timely basis. Also, projections of any
evaluation of the effectiveness of internal control over financial reporting are
subject to the risks that the controls may become inadequate because of changes
in conditions or that the degree of compliance with the policies or procedures
may deteriorate.





Management
evaluated the design and operation of the Company’s internal control over
financial reporting as of March 31, 2008, based on the framework and criteria
established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission and has concluded that
such internal control over financial reporting is effective.





There is
a lack of segregation of duties since Chief executive and financial officer
handles accounting records and is also a sole signatory to bank and brokerage
accounts. However, potential risks arising from this weakness are mitigated
significantly through independent reconciliations and direct involvement in
review process by the audit committee, which comprises all independent
directors. Management


48


believes
that benefits of hiring additional staff to segregate these functions would not
justify the costs under the current nature and level of activities at the
Company.





Kam
Shah


Chief
Executive and Financial Officer





c) Attestation report of the
registered public accounting firm





Not
applicable, pursuant to temporary rules of the Securities and Exchange
Commission.








ITEM
16   (A)   AUDIT COMMITTEE FINANCIAL
EXPERTS





As at the
Company’s financial year ended March 31, 2008, the audit committee consisted of
two independent directors, one of whom, Mr. Dean Bradley would be determined as
a financial expert, as that term is defined under Section 407 of the
Sarbanes-Oxley Act of 2002. Mr. Bradley’s background is described under Item
6(A) Directors and senior management.








ITEM 16
(B)   CODE OF ETHICS





We have
adopted a Code of Ethics, which applies to all employees, consultants, officers
and directors. A copy of our current code of ethics was included in the exhibits
to the annual report for the fiscal year ended March 31, 2007 (Exhibit Item
19(b) 11).





A copy of
our Code of Ethics can be obtained  by writing to our corporate office
at 47 Avenue Road, Suite 200, Toronto, ON M5R 2G3 attention: Chief Executive
Officer.





ITEM 16  (C)
PRINCIPAL ACCOUNTANT’S FEES AND SERVICES




The
following outlines the expenditures for accounting fees for the last two fiscal
periods ended:







March
      31 2008
            
            March
      31 2007Audit
      Fees (1)
            25,000
            
            31,000Tax
      Fees (2)
            -
            
            3,620Other
      (3)
            -
            
            700





(1)  Audit
fees for the fiscal year 2008 have not yet been billed by our auditors. The
amount shown is the management’s estimate. Audit fee for fiscal 2007 included
fee for fiscal 2007 of $25,000 and the balance of $6,000 for fiscal 2006, not
provided in that year.


(2)  Tax fees
comprised $2,620 paid for the US corporation tax returns preparation for the
years 2005 and 2006 and an accrual of $1,000 for fiscal 2007 US tax returns. The
Company filed its own tax returns and the accrual was reversed in the subsequent
year.


(3)  Other fee
related to the fee charged by our external auditors for consent letter in
respect of our filing of registration document F-3 with the Securities and
Exchange Commission.





Under our
existing policies, the audit committee must approve all audit and non-audit
related services provided by the auditors.




49





ITEM 16 (D) - EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES





The
information referred to in this section is not required as to the fiscal year
ended March  31, 2008, which is the period covered by this Annual
Report on Form 20-F.








ITEM 16
(E)                                - PURCHASES OF EQUITY
SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS





The
information referred to in this section is not required as to the fiscal year
ended March 31, 2008 which is the period covered by this Annual Report on Form
20-F.




PART III




ITEM 17 - FINANCIAL
STATEMENTS





See the
Financial Statements and Exhibits listed in Item 19 hereof and filed as part of
this Annual Report. These financial statements were prepared in accordance with
Canadian GAAP and are expressed in Canadian dollars.  Such financial
statements have been reconciled to U.S. GAAP (see Note 16 therein). For a
history of exchange rates in effect for Canadian dollars as against U.S.
dollars, see Item 3(A) Exchange Rates of this Annual Report.







ITEM 18 - FINANCIAL
STATEMENTS




Not
applicable.





ITEM 19 -
EXHIBITS





(a)           Financial
Statements








Description of Document
            Page No.Cover
      Sheet
            F-1Independent
      Auditor’s Report dated May 23, 2008
            F-2Consolidated
      Balance Sheets as at March 31, 2008 and 2007
            F-3Consolidated
      Statements of Operations for the Fiscal Years Ended March 31, 2008, 2007
      and 2006
            F-4Consolidated
      Statements of Cash Flows for the Fiscal Years Ended March 31, 2008, 2007,
      and 2006
            F-5Consolidated
      Statements of Shareholders’ Equity for the Fiscal Years Ended March 31,
      2008, 2007, and 2006
            F-6Notes
      to the Financial Statements
            F-7





50




(b)           Exhibits




The
following documents are filed as part of this Annual Report on Form
20-F




1.1
            Articles
      of Incorporation of the Company - Incorporated herein by
      reference to Exhibit 1(ix) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.2
            By-Laws
      of the Company - Incorporated herein by
      reference to Exhibit 1(xi) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.3
            Certificate
      of name change from Kamlo Gold Mines Limited to NRT Research Technologies
      Inc. - Incorporated
      herein by reference to Exhibit 1(iii) to the Company’s Registration
      Statement on Form 20-F filed on June 12,
2000.





1.4
            Certificate
      of name change from NRT Research Technologies Inc. to NRT Industries Inc.
      - Incorporated herein by
      reference to Exhibit 1(iv) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.5
            Certificate
      of name change from NRT Industries Inc. to CUDA Consolidated Inc. - Incorporated herein by
      reference to Exhibit 1(v) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.6
            Certificate
      of name change from CUDA Consolidated Inc. to Foodquest Corp. - Incorporated herein by
      reference to Exhibit 1(vi) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.7
            Certificate
      of name change from Foodquest Corp. to Foodquest International Corp. -
      Incorporated herein by
      reference to Exhibit 1(vii) to the Company’s Registration Statement
      on Form 20-F filed on June 12,
2000.





1.8
            Certificate
      of name change from Foodquest International Corp. to Dealcheck.com Inc. -
      Incorporated herein by
      reference to Exhibit 1(viii) to the Company’s Registration
      Statement on Form 20-F filed on June 12,
2000.





1.9
            Certificate
      of name change from Dealcheck.com Inc. to Bontan Corporation Inc. -Incorporated herein by
      reference to Exhibit 1(viii) to the Company’s Annual Report on Form
      20-F filed on September 23, 2003.





2(a)
            Specimen
      Common Share certificate - Incorporated herein by
      reference to Exhibit 1(viii) to the Company’s Annual Report on Form
      20-F filed on September 23, 2003.





4(a)2.i
            Investor
      relations contract with Current Capital Corp. dated April 1, 2003Incorporated herein by
      referenceto Exhibit 4 (a) 2i to the Company’s Annual Report on
      Form 20-F for fiscal 2005 filed on September 28,
  2005.








4(a)2.ii
            Media
      Relation Contract with Current Capital corp. dated April 1, 2003Incorporated herein by
      referenceto Exhibit 4 (a) 2ii to the Company’s Annual Report on
      Form 20-F for fiscal 2005 filed on September 28,
  2005.




51


4(a)2.iii
            A
      letter dated April1, 2005 extending the contracts under 4(a)2.i and
      ii.Incorporated herein
      by referenceto Exhibit 4 (a) 2iii to the Company’s Annual Report
      on Form 20-F for fiscal 2005 filed on September 28,
  2005.








4(b)1
            Indirect
      Participation Interest Purchase Agreement dated July 5, 2005Incorporated herein by
      referenceto Exhibit 4 (b) 1 to the Company’s Annual Report on Form
      20-F for fiscal 2005 filed on September 28,
  2005.





4(c)1
            Consulting
      Agreement dated April 1, 2005 with Kam Shah Incorporated herein by
      referenceto Exhibit 4 (c) 1 to the Company’s Annual Report on Form
      20-F for fiscal 2005 filed on September 28,
  2005.





4(c)2
            Consulting
      Agreement dated April 1, 2003 with Terence Robinson - Incorporated herein by
      referenceto Exhibit 4 (a) to the Company’s Annual Report on Form
      20-F for fiscal 2004 filed on August 30,
2004.





4(c)3
            Letter
      dated March 28, 2008 extending the Consulting Agreement with Mr. John
      Robinson to June 30, 2009.





4(c)(iv)1
            The
      Robinson Option Plan, 2005 Stock Option Plan and 2005 Consultant Stock
      Compensation Plan -Incorporated herein by reference to Form S-8
      filed on December 5, 2005.





4(c)(iv)2
            2007
      Consultant Stock Compensation Plan – Incorporated herein by
      reference to Form S-8 filed on January 16,
  2007.





11
            Code
      of ethics of the Company incorporated herein by
      reference to Annual Report in form 20-F filed on May 29,
      2007








12.1
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Rule
      13a-14(a) under the Securities Exchange Act of 1934, as
      amended.





13.1
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.





SIGNATURES





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





DATED at
Toronto, Ontario, Canada, this 30th day of June, 2008.








BONTAN
CORPORATION INC.





Per:
 (signed) Kam Shah


Title:
 Chairman and CEO




52