Bontan
Corporation Inc.
 
 Consolidated
Financial Statements
 
 For
the Years Ended March 31, 2009, 2008 and 2007
 
 (Canadian
Dollars)
 
 
 
    IndexReport
      of Independent Registered Public Accounting Firm
              2Consolidated Balance Sheets
              3Consolidated Statements of
    Operations
              4Consolidated Statements of Cash Flows
              5Consolidated Statement of Shareholders’
      Equity
                
                Consolidated Statement of Comprehensive Loss and
      Accumulated Other Comprehensive Loss
              6-7
                
                8Notes to Consolidated Financial
    Statements
              9-28
 
 
 
 
 
 
 -
1 -
  Schwartz
Levitsky Feldman llp
 CHARTERED
ACCOUNTANTS
  LICENSED
PUBLIC ACCOUNTANTS
  TORONTO.
MONTREAL
 
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Shareholders of
 Bontan
Corporation Inc.
 
 
 We have
audited the consolidated balance sheets of Bontan Corporation Inc. as at March
31, 2009 and 2008 and the consolidated statements of operations, shareholders'
equity, comprehensive loss and accumulated other comprehensive loss and cash
flows for each of the years in the three year period ended March 31, 2009. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
 We
conducted our audits in accordance with Canadian generally accepted auditing
standards and with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
 
 In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 2009 and 2008
and the results of its operations and its cash flows for the years ended March
31, 2009, 2008 and 2007, in accordance with Canadian generally accepted
accounting principles which differ in certain respects from generally accepted
accounting principles in the United States (refer to note 17).
  
  
  “SCHWARTZ
LEVITSKY FELDMAN LLP”
 
 
 Toronto,
Ontario, Canada  Chartered Accountants
 June 11,
2009  Licensed Public Accountants
  
  
 1167 Caledonia Road
 Toronto, Ontario M6A 2X1
 Tel:  416 785
5353
 Fax:  416 785
5663
 
 -
2 -
 Bontan
Corporation Inc.
 Consolidated Balance Sheets
 (Canadian
Dollars)
 
 As
      at March 31
              
              Note
              
              
              2009
              
              
              2008AssetsCurrentCash
              
              
              
              
              $
              352,958
              
              
              $
              1,259,062Short
      term investments
              
              3,13(x)
      & (xi) & 15 (b)
              
              
              
              1,091,563
              
              
              
              3,633,760Prepaid
      consulting services
              
              
              5
              
              
              
              20,484
              
              
              
              285,896Other
      receivables
              
              13(xii)
      &(xiii), 12(b)
              
              
              
              118,508
              
              
              
              54,198$
              1,583,513
              
              
              $
              5,232,916Office
      equipment and furniture
              
              
              4
              
              
              $
              9,434
              
              
              $
              6,206$
              1,592,947
              
              
              $
              5,239,122Liabilities
      and shareholders' equityCurrent
      liabilitiesAccounts
      payable
              
              5(a),13(viii)
              
              
              $
              96,544
              
              
              $
              30,339Audit
      and consulting fees accrued
              
              
              
              
              
              
              55,474
              
              
              
              28,685Total
      current liabilities
              
              
              
              
              
              $
              152,018
              
              
              $
              59,024Shareholders'
      EquityCapital
      stock
              
              
              6
              
              
              $
              32,854,075
              
              
              $
              32,901,488Warrants
              
              
              8
              
              
              
              2,192,927
              
              
              
              2,153,857Contributed
      surplus
              
              
              
              
              
              
              4,154,266
              
              
              
              4,077,427Accumulated
      other comprehensive loss
              
              
              
              
              
              
              (4,425,018)
              
              
              
              (1,306,768)Deficit
              
              
              
              
              
              
              (33,335,321)
              
              
              
              (32,645,906)(37,760,339)
              
              
              
              (33,952,674)Total
      shareholders' equity
              
              
              
              
              
              $
              1,440,929
              
              
              $
              5,180,098$
              1,592,947
              
              
              $
              5,239,122Commitments
      and Contingent Liabilities (Note 12)Related
      Party Transactions (Note 13)
   The
accompanying notes are an integral part of these consolidated financial
statements.
 
 
 Approved by the
Board  ”Kam
Shah”
Director  ”Dean
Bradley”Director
 (signed)                                                (signed)
 
 -
3 -
  Bontan
Corporation Inc.
 Consolidated Statements of Operations
 (Canadian
Dollars)
 
 For
      the years ended March 31,
                
                Note
                
                
                2009
                
                
                2008
                
                
                2007IncomeGain
      on disposal of short term investments
                
                
                
                
                $
                45,036
                
                
                $
                248,455
                
                
                $
                650,508Interest
                
                13(ix)
                
                
                
                7,901
                
                
                
                73,300
                
                
                
                93,27852,937
                
                
                
                321,755
                
                
                
                743,786ExpensesConsulting
      fees
                
                10,12(b)
      & (c), 13 (v) & (Vii)
                
                
                
                444,784
                
                
                
                396,465
                
                
                
                418,434Travel,meals
      and promotions
                
                
                
                
                
                66,896
                
                
                
                120,008
                
                
                
                108,266Payroll
                
                
                
                
                
                35,266
                
                
                
                -
                
                
                
                -Shareholders
      information
                
                
                12
                (a),13(i)
                
                
                144,757
                
                
                
                133,502
                
                
                
                149,105Exchange
      (gain)loss
                
                
                
                
                
                
                (119,789)
                
                
                
                141,841
                
                
                
                111,659Professional
      fees
                
                
                
                
                
                
                27,844
                
                
                
                34,601
                
                
                
                53,084Office
      and general
                
                
                
                
                
                
                42,641
                
                
                
                40,349
                
                
                
                30,630Bank
      charges and interest
                
                
                
                
                
                
                2,362
                
                
                
                1,625
                
                
                
                13,885Communication
                
                13(ii)
                
                
                
                11,498
                
                
                
                11,905
                
                
                
                7,984Rent
                
                13(ii)
                
                
                
                18,143
                
                
                
                8,915
                
                
                
                5,666Transfer
      agents fees
                
                
                
                
                
                
                4,940
                
                
                
                4,343
                
                
                
                4,974Write
      off of short term investment
                
                
                
                
                
                
                63,010
                
                
                
                -
                
                
                
                -Write
      off of interest in gas exploration  project
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                4,142742,352
                
                
                
                893,554
                
                
                
                907,829Net
      loss for year
                
                
                
                
                
                
                (689,415)
                
                
                
                (571,799)
                
                
                
                (164,043)Basic
      and diluted loss per share informationNet
      Loss per share
                
                
                9
                
                
                $
                (0.02)
                
                
                $
                (0.02)
                
                
                $
                (0.01)
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  -
4 -
  Bontan
Corporation Inc.
 Consolidated Statements of Cash Flows
 (Canadian
Dollars)
 
 For
      the years ended March 31,
                
                Note
                
                
                2009
                
                
                2008
                
                
                2007Cash
      flows from operating activitiesNet
      loss for year
                
                
                
                
                
                (689,415)
                
                
                
                (571,799)
                
                
                
                (164,043)Write
      off of interest in gas exploration project
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                4,142Write
      off of a short term investment
                
                
                
                
                
                63,010Amortization
      of office equipment and furniture
                
                
                
                
                
                2,027
                
                
                
                817
                
                
                
                -Gain
      on disposal of short term investments
                
                
                
                
                
                (45,036)
                
                
                
                (248,455)
                
                
                
                (650,508)Consulting
      fees settled for common shares
                
                
                10
                
                
                
                277,856
                
                
                
                314,248
                
                
                
                367,973Net
      change in working capital componentsOther
      receivables
                
                
                
                
                
                
                (64,310)
                
                
                
                11,955
                
                
                
                29,649Accounts
      payable
                
                
                
                
                
                
                66,205
                
                
                
                11,287
                
                
                
                (15,166)Audit
      and consulting fees accrued
                
                
                
                
                
                
                26,789
                
                
                
                (715)
                
                
                
                (101,370)(362,874)
                
                
                
                (482,662)
                
                
                
                (529,323)Investing
      activitiesPurchase
      of short term Investments
                
                
                
                
                
                
                (2,412,123)
                
                
                
                (3,366,685)
                
                
                
                (6,366,652)Net
      proceeds from sale of short term investments
                
                
                
                
                
                
                1,818,097
                
                
                
                1,990,303
                
                
                
                5,479,390Purchase
      of office equipment and furniture
                
                
                
                
                
                
                (5,256)
                
                
                
                (7,023)
                
                
                
                -Investment
      in interest in gas properties
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                (4,142)(599,282)
                
                
                
                (1,383,405)
                
                
                
                (891,404)Financing
      activitiesCommon
      shares issued net of issuance costs
                
                
                
                
                
                
                56,052
                
                
                
                110,201
                
                
                
                1,172,81356,052
                
                
                
                110,201
                
                
                
                1,172,813Decrease
      in cash during year
                
                
                
                
                
                
                (906,104)
                
                
                
                (1,755,866)
                
                
                
                (247,914)Cash
      at beginning of year
                
                
                
                
                
                
                1,259,062
                
                
                
                3,014,928
                
                
                
                3,262,842Cash
      at end of year
                
                
                
                
                
                
                352,958
                
                
                
                1,259,062
                
                
                
                3,014,928Supplemental
      disclosuresNon-cash
      operating activitiesConsulting
      fees settled for common shares and
                
                
                10
                
                
                
                277,856
                
                
                
                314,248options
      and expensed during the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                367,973Consulting
      fees prepaid in shares
                
                
                5
                
                
                
                20,484
                
                
                
                285,896
                
                
                
                276,146298,340
                
                
                
                600,144
                
                
                
                644,119
   The accompanying notes are an
integral part of these consolidated financial statements.
 
 -
5 -
 
 Bontan
Corporation Inc.
 Consolidated Statement of Shareholders’
Equity
 (Canadian
Dollars)
 For
the Years Ended March 31, 2009, 2008 and 2007
 
 Number
      of Shares
                
                
                Share
                  Capital
                
                
                Warrants
                
                
                Contributed
      surplus
                
                
                Accumulated
      Deficit
                
                
                Accumulated
      other comprehensive loss
                
                
                Shareholders'
      EquityBalance
      March 31, 2006
                
                
                22,757,703
                
                
                $
                32,175,000
                
                
                $
                951,299
                
                
                $
                4,069,549
                
                
                $
                (31,910,064
                )
                
                $
                -
                
                
                $
                5,285,784Issued
      under private placement
                
                
                4,500,000
                
                
                
                1,303,126
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,303,126Warrants issued under private
      placement
                
                
                
                (1,263,914)
                
                
                
                1,263,914
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Finder
      fee
                
                
                
                
                
                
                (130,313)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (130,313)Shares
      cancelled
                
                
                (20,000)
                
                
                
                (5,980)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5,980)Issued
      under 2003 Consultant stock compensation plans
                
                
                42,500
                
                
                
                22,406
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                22,406Issued
      under 2007 Consultant stock compensation plans
                
                
                1,150,000
                
                
                
                313,486
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                313,486Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (164,043
                )
                
                
                
                
                
                
                (164,043)Balance,
      March 31, 2007
                
                
                28,430,203
                
                
                $
                32,413,811
                
                
                $
                2,215,213
                
                
                $
                4,069,549
                
                
                $
                (32,074,107
                )
                
                $
                -
                
                
                $
                6,624,466Warrants
      excercised
                
                
                315,540
                
                
                
                122,446
                
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                122,446Value
      of warrants transferred to capital stock upon exercise
                
                
                
                61,356
                
                
                
                (61,356)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Finder
      fee
                
                
                
                
                
                
                (12,245)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (12,245)Issued
      under 2007 Consultant stock compensation plan
                
                
                1,350,000
                
                
                
                316,120
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                316,120Options
      granted
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,878
                
                
                
                
                
                
                
                
                
                
                
                7,878Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (571,799)
                
                
                
                
                
                
                
                (571,799)Unrealised
      loss on short term investments, net of tax, considered available for sale,
      cumulative to march 31, 2008 on adoption of new Accounting
      Policy
                
                
                
                (1,306,768)
                
                
                
                (1,306,768)Balance,
      March 31, 2008
                
                
                30,095,743
                
                
                $
                32,901,488
                
                
                $
                2,153,857
                
                
                $
                4,077,427
                
                
                $
                (32,645,906)
                
                
                $
                (1,306,768)
                
                
                $
                5,180,098
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 -
6 -
  Bontan
Corporation Inc.
 Consolidated
Statement of Shareholders’ Equity - Continued
 (Canadian
Dollars)
 For
the Years Ended March 31, 2009, 2008 and 2007
 
 Number
      of Shares
                
                
                Capital
      Stock
                
                
                Warrants
                
                
                Contributed
      surplus
                
                
                Accumulated
      Deficit
                
                
                Accumulated
      other comprehensive loss
                
                
                Shareholders'
      EquityBalance
      March 31, 2008
                
                
                30,095,743
                
                
                $
                32,901,488
                
                
                $
                2,153,857
                
                
                $
                4,077,427
                
                
                $
                (32,645,906)
                
                
                $
                (1,306,768)
                
                
                $
                5,180,098Issued
      under private placement
                
                
                1,000,000
                
                
                
                62,280
                
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                62,280Finder
      fee
                
                
                
                
                
                
                (6,228)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (6,228)Value
      of warrants issued under private placement transferred to contributed
      surplus
                
                
                
                (39,070)
                
                
                
                39,070
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Shares
      cancelled
                
                
                (275,000)
                
                
                
                (64,395)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (64,395)Options
      revaluation upon changes in the terms
                
                
                
                
                
                
                
                
                
                
                
                76,839
                
                
                
                
                
                
                
                
                
                
                
                76,839Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (689,415
                )
                
                
                
                
                
                
                (689,415)Unrealised
      loss on short term investments,net of tax considered available for
      sale
                
                
                
                
                
                
                
                
                
                
                
                (3,118,250)
                
                
                
                (3,118,250)Balance,
      March 31, 2009
                
                
                30,820,743
                
                
                $
                32,854,075
                
                
                $
                2,192,927
                
                
                $
                4,154,266
                
                
                $
                (33,335,321)
                
                
                $
                (4,425,018)
                
                
                $
                1,440,929
   The
accompanying notes are an integral part of these consolidated financial
statements
 
 -
7 -
  Bontan
Corporation Inc.
 Consolidated
Statement of Comprehensive Loss and Accumulated Other Comprehensive
Loss
 (Canadian
Dollars)
  For
      the years ended March 31,
                
                Note
                
                
                2009
                
                
                2008
                
                
                2007Net
      loss for year
                
                
                
                
                $
                (689,415)
                
                
                $
                (571,799)
                
                
                $
                (164,043)Other
      comprehensive lossUnrealised
      loss for year on short term investments,net of tax considered available
      for sale
                
                
                3
                
                
                
                (3,118,250)
                
                
                
                (2,266,470)
                
                
                
                -Comprehensive
      loss
                
                
                
                
                
                
                (3,807,665)
                
                
                
                (2,838,269)
                
                
                
                (164,043)Accumulated
      other comprehensive income(loss)Beginning
      of year
                
                
                
                
                
                
                (1,306,768)
                
                
                
                -
                
                
                
                -Adjustment
      on adoption of new Accounting Policy
                
                
                3
                
                
                
                -
                
                
                
                959,702
                
                
                
                -(1,306,768)
                
                
                
                959,702
                
                
                
                -Other
      comprehensive loss for year
                
                
                
                
                
                
                (3,118,250)
                
                
                
                (2,266,470)
                
                
                
                -Accumulated
      other comprehensive loss, end of year
                
                
                $
                (4,425,018)
                
                
                $
                (1,306,768)
                
                
                $
                -
 
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
   -
8 -
  Bontan
Corporation Inc.
 Notes to Consolidated Financial Statements
 (Canadian
Dollars)
 March 31,
2009 and 2008
 
 1.      NATURE
OF OPERATIONS
 
 Bontan
Corporation Inc. (“the Company”) is a diversified natural resource company that
invests in major oil and gas exploration and exploitation projects in countries
around the globe through its subsidiary by acquiring joint venture, indirect
participation interest and working interest in those projects. The company
focuses on projects where the other project partners have proven experience in
oil and gas exploration, development and distribution.
 
 The
Company currently does not have any active project participation and has now
expanded its search for participation in suitable projects in all
sectors.
 
 2.      SIGNIFICANT
ACCOUNTING POLICIES
 
 Basis
of Presentation
 These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada, which do not materially
differ from accounting principles generally accepted in the United States (U.S.
GAAP) except as described in Note 17 “Differences from United States
Generally Accepted Accounting Principles”.
 
 Principles
of Consolidation
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Bontan Oil & Gas Corporation. All inter-company
balances and transactions have been eliminated on consolidation.
 
 The
following paragraphs describe the significant accounting policies.
 
 Effective
April 1, 2008, the Company adopted two new accounting standards issued by The
Canadian Institute of Chartered Accountants ("CICA") on financial instruments
comprising handbook sections 3862 "Financial Instruments – Disclosures" and 3863
"Financial Instruments – Presentation", which apply to interim and annual
financial statements. These sections revise and enhance the current disclosure
requirements but do not change the existing presentation requirements for
financial instruments. The new disclosures provide additional information on the
nature and extent of risks arising from financial instruments to which the
Company is exposed and how it manages those risks. This disclosure is provided
in note 15. The Company also adopted CICA handbook section 1535 "Capital
Disclosures", which requires the Company to disclose qualitative and
quantitative information relating to its objectives, policies and processes for
managing its capital. This
disclosure is provided in note 16.
 
 The CICA
accounting standards board amended section 1400, “General Standards of Financial
Statement Presentation” to include requirements for management to assess and
disclose an entity’s ability to continue as a going concern. This section
applies to interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2008. The adoption of this amendment did not
have an impact on the consolidated financial statements.
 
 Oil
and Gas Properties Interest
 Interests
held in oil and gas properties are recorded on the basis of successful efforts
method of accounting for oil and gas exploration and development activities
under which direct acquisition costs of development properties, geological and
geophysical costs associated with these properties and costs of development and
exploratory wells that result in additions to proven reserves are capitalized.
When the carrying value of a property exceeds its net recoverable amount that
may be estimated by quantifiable evidence of an economic geological resource or
reserve, joint venture expenditure commitments or the Company’s assessment of
its ability to sell the property for an amount exceeding the deferred costs,
provision is made for the impairment in value.
 
 -
9 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 2.      SIGNIFICANT
ACCOUNTING POLICIES - (Continued)
 
 Revenue
Recognition
 
 Revenues
associated with the sales of natural gas, crude oil and natural gas liquids
(“NGLs”) together with costs including production and mineral taxes, royalty to
landowner and transportation and selling costs are recognized on receipt of a
statement of account from the operators of the projects where the Company holds
equity interest and collection is reasonably assured.
 
 Short-term
Investments and other financial instruments
 
 Short-term
investments are investments that are either highly liquid or are to be disposed
of within a one year period. All short term investments are considered available
for sale type of investments.
 All
financial instruments are measured at fair value on initial recognition of the
instrument. Measurement in subsequent periods depends on whether the financial
instrument has been classified as “held-for-trading”, “available-for-sale”,
“held-to-maturity”, “loans and receivables”, or “other financial liabilities” as
defined by the applicable accounting standards.
 
 Cash is
designated as “held-for-trading” and is measured at carrying value, which
approximates fair value.
 
 Short
term investments which consist mostly of marketable securities are designated as
“available-for-sale” and measured at fair value with unrealized gains and losses
recorded in other comprehensive income until the security is sold or if an
unrealized loss is considered other than temporary, the unrealized loss is
expensed. Unrealized gains and losses represent the net difference between the
total average costs of short term assets on hand and their fair value based on
quoted market prices for the marketable securities.
 
 Other
receivable are designated as “loans and receivable” and are carried at amortized
cost. Accounts payable and accrued liabilities are designated as ‘other
financial liabilities” and are carried at amortized cost.
 
 Foreign
Currency Translation
 
 The
functional currency of the Company is the Canadian dollar. Monetary assets and
liabilities are translated at exchange rates in effect at the balance sheet
date.  Non-monetary assets are translated at exchange rates in effect
when they were acquired. Revenue and expenses are translated at the approximate
average rate of exchange for the year, except that amortization is translated at
the rates used to translate related assets.
 
 
 
 The
Company’s only subsidiary, Bontan Oil & Gas Corporation uses US Dollar as a
functional currency. However, the subsidiary is not self sustaining but is
integrated to Bontan Corporation Inc. Hence translation gains and losses of this
subsidiary are charged to the consolidated statement of operations.
 
 Office
      equipment and furniture and
amortization
 
 Office
equipment and furniture are amortised over their useful lives as
follows:
 
 Office
furniture                                                  
20%– declining balance basis
 Computers                                               33% – declining balance
basis
 Software                                                 
 20% - declining balance basis
  -
10 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 2.      SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Comprehensive
Income
 
 Comprehensive
income and accumulated other comprehensive income include net unrealised gains
and losses on short term investments net of applicable taxes, held as available
for sale. Accumulated other comprehensive income is included on the consolidated
balance sheet as a separate component of shareholders’ equity.
 
 Income
Taxes
 
 The
Company follows the liability method of accounting for income
taxes.  Under this method, future income tax assets and liabilities
are determined based on temporary differences between financial reporting and
tax bases of assets and liabilities, as well as for the benefit of losses
available to be carried forward to future years for tax
purposes.  Future income tax assets and liabilities are measured using
substantively enacted tax rates and laws that will be in effect when the
differences are expected to reverse.  Future income tax assets are
recognized in the financial statements if realization is considered more likely
than not. A valuation allowance against future tax assets is provided to the
extent that the realization of these future tax assets is not more likely than
not.
 
 Stock-Based
Compensation Plan
 
 The
Company follows a fair value based method of accounting for all Stock-based
Compensation and Other Stock-based Payments to employees and
non-employees.  The fair value of all share purchase options is
expensed over their vesting period with a corresponding increase to contributed
surplus. Upon exercise of share purchase options, the consideration paid by the
option holder, together with the amount previously recognized in contributed
surplus, is recorded as an increase to share capital. The Company uses the
Black-Scholes option valuation model to calculate the fair value of share
purchase options at the date of grant.
 
 The
quoted market price of the Company’s shares on the date of issuance under any
stock compensation plan is considered as fair value of the shares
issued.
 
 Warrants
 
 When the
Company issues Units under a private Placement comprising common shares and
warrants, the Company follows relative fair value method of accounting for
warrants attached to and issued with common shares of the Company. Under this
method, the fair value of warrants issued is estimated using a Black-Scholes
option price model. The fair value is then related to the total of net proceeds
on issuance of Common shares and the fair value of the warrants issued
therewith. The resultant relative fair value is allocated to warrants from the
net proceeds and the balance of the net proceeds is allocated to the Common
shares issued.
 
 Accounting
Changes
 
 The
Company follows CICA Section 1506, “Accounting changes” which require that (i)
voluntary changes in accounting policies can be made if, and only if, the
changes result in more reliable and relevant information (ii) changes in
accounting policies are accompanied by disclosure of prior period amounts and
justification for the changes, and (iii) for changes in estimates, the nature
and amount of the change should be disclosed. The Company has not made any
voluntary change in accounting policies during the fiscal years 2009 and
2008.
 
 -
11 -
 
 Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
  2.      SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Loss
per Share
 
 Basic
loss per share is calculated by dividing net loss (the numerator) by the
weighted average number of common shares outstanding (the denominator) during
the period.  Diluted loss per share reflects the dilution that would
occur if outstanding stock options and share purchase warrants were exercised or
converted into common shares using the treasury stock method and are calculated
by dividing net loss applicable to common shares by the sum of the weighted
average number of common shares outstanding and all additional common shares
that would have been outstanding if potentially dilutive common shares had been
issued.
 
 The
inclusion of the Company’s stock options and share purchase warrants in the
computation of diluted loss per share would have an anti-dilutive effect on loss
per share and are therefore excluded from the
computation.  Consequently, there is no difference between basic loss
per share and diluted loss per share.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period.  Actual results could differ from those
estimates.  Some of the key areas where estimates and assumptions are
normally used include valuation of stocks, warrants and options, ascertaining
useful lives of office equipment and furniture and impairment of short term
investments.
 
 Recent
accounting pronouncements
 
 International
Financial Reporting Standards (“IFRS”)
 
 In
January 2006, the CICA’s Accounting Standards Board ("AcSB") formally adopted
the strategy of replacing Canadian GAAP with IFRS for Canadian enterprises with
public accountability. The current conversion timetable calls for financial
reporting under IFRS for accounting periods commencing on or after January 1,
2011. On February 13, 2008 the AcSB confirmed that the use of IFRS will be
required in 2011 for publicly accountable profit-oriented enterprises. For these
entities,  IFRS will be required for interim and annual financial
statements relating to fiscal years beginning on or after January 1, 2011. The
Company is currently assessing the impact of IFRS on its consolidated financial
statements.
 
 Goodwill
and Intangible Assets
 
 In
February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
replacing Section 3062, Goodwill and Other Intangible Assets, and Section 3450,
Research and Development Costs. The new section will be applicable to financial
statements relating to fiscal years beginning on or after October 1, 2008.
Accordingly, the Company will adopt the new standards for its fiscal year
beginning April 1, 2009. Section 3064 establishes standards for the recognition,
measurement, presentation and disclosure of goodwill subsequent to its initial
recognition and of intangible assets by profit-oriented enterprises. Standards
concerning goodwill are unchanged from the standards included in the previous
Section 3062. This standard is not expected to have a material impact on the
Company’s financial statements..
  -
12 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 2.      SIGNIFICANT
ACCOUNTING POLICIES (Continued)
 
 Business
      combinations
 
 In
January 2009, the CICA issued the new handbook Section 1582, Business
Combinations, effective for fiscal years beginning on or after January 1, 2011.
Earlier adoption of Section 1582 is permitted. This pronouncement further aligns
Canadian GAAP with US GAAP and IFRS and changes the accounting for business
combinations in a number of areas. It establishes principles and requirements
governing how an acquiring company recognizes and measures in its financial
statements identifiable assets acquired, liabilities assumed, any
non-controlling interest in the acquiree, and goodwill acquired. The section
also establishes disclosure requirements that will enable users of the acquiring
company’s financial statements to evaluate the nature and financial effects of
its business combinations. Although the Company is considering the impact of
adopting this pronouncement on the consolidated financial statements, it will be
limited to any future acquisitions beginning in fiscal 2012.
 
 Consolidated
financial statements and non-controlling interests
 
 In
January 2009, the CICA issued the new handbook Section 1601, Consolidated
Financial Statements, and Section 1602, Non-controlling Interests, effective for
fiscal years beginning on or after January 1, 2011. Earlier adoption of these
recommendations is permitted. These pronouncements further align Canadian GAAP
with US GAAP and IFRS. Sections 1601 and 1602 change the accounting and
reporting for ownership interest in subsidiaries held by parties other than the
parent. Non-controlling interests are to be presented in the consolidated
statement of financial position within the entity but separate from the parent’s
equity. The amount of consolidated net income attributable to the parent and to
the non-controlling interest is to be clearly identified and presented on the
face of the consolidated statement of income. In addition, these pronouncements
establish standards for a change in a parent’s ownership interest in a
subsidiary and the valuation of retained non-controlling equity investments when
a subsidiary is deconsolidated. They also establish reporting requirements for
providing sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the non-controlling owners. The
Company is currently considering the impact of adopting these pronouncements on
its consolidated financial statements in fiscal 2012 in connection with the
conversion to IFRS.
 
 Credit
risk and the fair value of financial assets and financial
liabilities
 
 In
January 2009, the CICA issued the Emerging Issues Committee (EIC) Abstract EIC –
173, “Credit Risk and the Fair Value of Financial Assets and Financial
Liabilities”, effective for interim and annual financial statements ending on or
after January 20, 2009. Earlier adoption of this abstract is permitted. EIC –
173 provides further information on the determination of the fair value of
financial assets and financial liabilities under Section 3855, “Financial
Instruments – Recognition and Measurement”. It states that an entity’s own
credit and the credit risk of the counterparty should be taken into account in
determining the fair value of financial assets and financial liabilities,
including derivative instruments. EIC – 173 should be applied retroactively,
without restatement of prior periods, to all financial assets and liabilities
measured at fair value. The Company will adopt this abstract during the first
quarter of the 2010 fiscal year. This standard is not expected to have a
material impact on the Company’s financial statements.
 
 
 -
13 -
 
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 
 3.
              SHORT
      TERM INVESTMENTS
 
 March
      31, 2009
                
                
                
                
                
                March
      31, 2008Carrying
      average costs
                
                
                fair
      market value
                
                
                Carrying
      average costs
                
                
                fair
      market valueMarketable
      securities
                
                
                5,253,570
                
                
                
                1,091,563
                
                
                
                4,637,738
                
                
                
                3,330,970Non-marketable
      securities
                
                
                326,020
                
                
                
                -
                
                
                
                302,790
                
                
                
                302,790$
                5,579,590
                
                
                $
                1,091,563
                
                
                $
                4,940,528
                
                
                $
                3,633,760Unrealised
      (loss) gain before tax
                
                
                
                
                
                $
                (4,488,027)
                
                
                
                
                
                
                $
                (1,306,768)Movements
      in unrealised (loss)gainAt
      beginning of year
                
                
                
                
                
                
                (1,306,768)
                
                
                
                
                
                
                
                959,702Loss
      during year
                
                
                
                
                
                
                (3,118,250)
                
                
                
                
                
                
                
                (2,266,470)At
      end of year
                
                
                
                
                
                $
                (4,425,018)
                
                
                
                
                
                
                $
                (1,306,768)
 a.                Marketable
securities
 
 Marketable
securities are designated as “available-for-sale”.
 
 Marketable
securities are stated at fair value based on quoted market prices on the balance
sheet as at March 31, 2009. An unrealised loss of $ 2,855,240 for the year and
accumulated unrealised loss of $1,306,768 at the beginning of year was included
in the consolidated statement of comprehensive loss and accumulated other
comprehensive loss.
 
 As at
March 31, 2009, the Company held warrants in certain marketable securities which
are exercisable at its option to convert into equal number of common shares of
the said securities. The total exercise price of these warrants was $138,189 (As
at March 31, 2008:$ 414,176) and the market value of the underlying securities
was $34,509 as at that date (As at March 31, 2008: $377,322). These warrants and
the underlying unrealised gains and losses have not been accounted for in the
financial statements since the Company has not yet determined if it would
exercise these warrants when they become exercisable. The warrants expire
between November 2009 and April 2012.
 
 b.                Non-marketable
securities
 
 The
Company held shares in three private corporations as at March 31, 2009, which
are designated as “Available for sale”. The carrying cost of these investments
was $326,020.Based
on the management review of the affairs of the above investee companies and
discussions with their management, it was concluded that there was no other than
temporary impairment in the carrying costs of these investments as at March 31,
2009 except one investment of $63,010. The factors considered in our impairment
review included length of time the security was held, extent to which the fair
value was below cost, current financial conditions of the investee companies,
near term prospects of the investee companies and our ability and intent to hold
the investment for a period of time sufficient to allow for any anticipated
recovery.
 
 The
Company however believed that as at March 31, 2009, the value of these
investments was seriously affected due partly to the overall adverse market
conditions and has therefore valued them at zero value. An unrealised loss of $
263,010 was included in the consolidated statement of comprehensive loss and
accumulated other comprehensive loss.
 
 As
regards the investment of $63,010, management was unable to get any update on
the affairs of the private corporation which was inactive. Management therefore
concluded that there was a permanent impairment in the value of this investment
and accordingly $63,010 was fully written off.
  -
14 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 
 4.
              OFFICE
      EQUIPMENT AND FURNITURE
 
 Cost
                
                
                accumulated
      amortisation
                
                
                Net
      book value
                
                
                Net
      book valueAs
      at March 31,
                
                2009
                
                
                
                
                
                
                
                
                2008Office
      furniture
                
                
                4,725
                
                
                
                1,323
                
                
                
                3,402
                
                
                
                4,252Computer
                
                
                2,298
                
                
                
                996
                
                
                
                1,302
                
                
                
                1,954Software
                
                
                5,256
                
                
                
                526
                
                
                
                4,730
                
                
                
                -$
                12,279
                
                
                $
                2,845
                
                
                $
                9,434
                
                
                $
                6,206
 
 Amortization
of office equipment and furniture amounted to $ 2,027 (2008: $817)
 
 5.      PREPAID
CONSULTING SERVICES
 
 Prepaid
consulting services relates to the fair value of shares and options issued under
the Company’s Consultants’ Stock Compensation and Stock  Option Plans
to consultants for services that will be performed during the period subsequent
to the balance sheet date. Changes during the year were as follows:
 
  Balance
      at April 1, 2008
                
                
                Deferred
      during the year (b)
                
                
                Canceled
      during the year (a)
                
                
                Expensed
      during the year
                
                
                Balance
      at March 31, 2009Options
                
                $
                7,878
                
                
                $
                76,839
                
                
                $
                -
                
                
                $
                (84,717
                )
                
                $
                -Stocks
                
                
                278,018
                
                
                
                -
                
                
                
                (64,395
                )
                
                
                (193,139
                )
                
                
                20,484$
                285,896
                
                
                $
                76,839
                
                
                $
                (64,395
                )
                
                $
                (277,856
                )
                
                $
                20,484Balance
      at April 1, 2007
                
                
                Deferred
      during the year
                
                
                Canceled
      during the year
                
                
                Expensed
      during the year
                
                
                Balance
      at March 31, 2008Options
                
                $
                -
                
                
                $
                7,878
                
                
                $
                -
                
                
                $
                -
                
                
                $
                7,878Stocks
                
                
                276,146
                
                
                
                316,120
                
                
                
                -
                
                
                
                (314,248
                )
                
                
                278,018$
                276,146
                
                
                $
                323,998
                
                
                $
                -
                
                
                $
                (314,248
                )
                
                $
                285,896
  (a)  Two of
the Consultants who were issued shares in lieu of cash for their services
requested the management that they would like to cancel the shares issued to
them and instead receive cash payments from the Company owing to the fact that
the Company’s share price remained depressed and lacked any substantial
movements through the year and as a result they were unable to sell any shares
and earn any compensation for their services.
 
 -
15 -
 
 Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 5.      PREPAID
CONSULTING SERVICES  - (continued)
 
 On
December 12, 2008, the Board of Directors of the Company accepted their request
and approved the following:
 
 a.
              Mr.
      Terence Robinson to be paid a cash compensation of $60,000 for the six
      months ended December 31, 2008 in return for 275,000  shares
      previously issued under Consultant Compensation Plan for
      cancellation.
 
 b.
              Mr.
      John Robinson to be paid $ 82,000 in four instalments - $20,489 on
      December 16, 2008, $20,489 on December 31, 2008, $20,489 on March 31, 2009
      and the balance $20,533 on June 30, 2009 in return for 350,000 shares
      previously issued under Consultant Compensation Plan for
      cancellation.
 
 Mr.
      Terence Robinson returned 275,000 shares for cancellation. These were
      cancelled and the cost of these shares of $64,395 was reversed to capital
      stock. A liability has been included in payable for $60,000 which became
      payable to him upon return of the
shares.
 
 Mr.
      John Robinson has not yet returned the shares for cancellation and hence
      cash liability and related shares cancellation has not yet been accounted
      for by the Company.
 
 (b)
              During
      the year, terms of all outstanding options were revised as explained in
      Note 7(b)(i). These options were therefore re-valued and an additional
      cost of $76,839 was expensed.
 
 6.      CAPITAL
STOCK
 
 (a)         Authorized  -                              Unlimited
number of common shares
 
 (b)         Issued
 As
      at March 31
                
                2009
                
                
                
                
                
                2008Common
                
                
                
                
                
                CommonShares
                
                
                Amount
                
                
                Shares
                
                
                AmountBeginning
      of year
                
                
                30,095,743
                
                
                $
                32,901,488
                
                
                
                28,430,203
                
                
                $
                32,413,811Canceled
      ( note 5 (a))
                
                
                (275,000)
                
                
                $
                (64,395)Issued
      under private placement (a)
                
                
                1,000,000
                
                
                $
                62,280Finder's
      fee  (a)
                
                
                
                
                
                $
                (6,228)Value
      assigned to warrants issued under private placement transferred to
      contributed surplus (note 8)
                
                
                $
                (39,070)Warrants
      exercised
                
                
                -
                
                
                
                -
                
                
                
                315,540
                
                
                
                122,446Costs
      relating to warrants excercised
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                (12,245)Value
      of warrants transferred to capital stoock upon exercise
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                61,356Issued
      under 2007 Consultant Stock Compensation Plan
                
                
                -
                
                
                
                -
                
                
                
                1,350,000
                
                
                
                316,12030,820,743
                
                
                $
                32,854,075
                
                
                
                30,095,743
                
                
                $
                32,901,488
 
 -
16 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 6.      CAPITAL
STOCK – (continued)
 
 (a)
              On
      December 12, 2008, The Board of Directors of the Company approved a
      private placement to raise equity funds up to US$500,000. The private
      placement consists of Units up to maximum of ten million, to be issued at
      US0.05 per Unit. Each Unit would comprise one common share of the Company
      and one full warrant convertible into one common share of the Company at
      an exercise price of US$0.10 each within two years of the issuance of
      warrant.
 
 The board
also approved a finder’s fee at 10% of the proceeds from the issuance of units
and warrants attached thereto payable to Current Capital Corp., a related party
(note 13).
 
 As
at March 31, 2009, the Company received one subscription for one million units.
The board has agreed to waive any closing date and to continue to accept more
subscriptions within the approved maximum limit.
 
 
 7.      STOCK
OPTION PLANS
 
 The
following is a summary of all Stock Option Plans as at March 31,
2009:
 
 Plan
                Date
      of registration *
                
                #
      of OptionsRegistered
                
                
                issued
                
                
                Expired
                
                
                Exercised
                
                
                Outstanding1999
      Stock option Plan
                April
      30, 2003
                
                
                3,000,000
                
                
                
                3,000,000
                
                
                
                (70,000)
                
                
                
                (1,200,000)
                
                
                
                1,730,0002003
      Stock Option Plan
                July
      22, 2004
                
                
                2,500,000
                
                
                
                2,500,000
                
                
                
                (155,000)
                
                
                
                (400,000)
                
                
                
                1,945,000The
      Robinson Plan
                December
      5, 2005
                
                
                1,100,000
                
                
                
                1,100,000
                
                
                
                -
                
                
                
                -
                
                
                
                1,100,0002005
      Stock Option Plan
                December
      5, 2005
                
                
                1,000,000
                
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                
                50,0007,600,000
                
                
                
                6,650,000
                
                
                
                (225,000)
                
                
                
                (1,600,000)
                
                
                
                4,825,000
 *   Registered
      with the Securities and Exchange Commission of the United States of
      America (SEC) as required under the Securities Act of
  1933.
 
 All
options were fully vested on the dates of their grant.
 
 (b)
              
              Movements
      in stock options during year are as
follows:
  March
      31, 2009
                
                
                March
      31, 2008#
      of Options
                
                
                Weighted
      average exercise price in US $
                
                
                #
      of Options
                
                
                Weighted
      average exercise price in US $Issued
      and outstanding at beginning of year
                
                
                4,825,000
                
                
                $
                0.46
                
                
                
                4,795,000
                
                
                $
                0.46Issued
      during year
                
                
                -
                
                
                
                
                
                
                
                50,000
                
                
                $
                0.35Expired
      during year (i)
                
                
                -
                
                
                
                
                
                
                
                -20,000
                
                
                $
                0.75Issued
      and outstanding at end of year
                
                
                4,825,000
                
                
                
                0.15
                (i)
                
                
                4,825,000
                
                
                $
                0.46
   -
17 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 7.      STOCK
OPTION PLANS – (continued)
 
 (i)  On
December 12, 2008, the Board of Directors of the Company approved extension of
expiry dates of all outstanding options by one year from the date of their
expiry and revision of the exercise price to US$0.15 for all options. The market
price of the Company’s common shares on December 12, 2008 was
US$0.05.
  Fair
      value of these options was re-estimated on December 12, 2208 to reflect
      the modifications made in the terms. The re-estimation was done using a
      Black-Scholes option price model with the following
      assumptions:
 
 Risk
      free interest rate1%
 Expected
      dividendnil
 Expected
      volatility (based on previous 88 weeks average market
      price)161.75%
 Expected
      life614 days
 Exercise
      priceUS$0.15
 Market
      priceUS$0.05
 
 The
      value based on the above model came to $76,839, which was expensed (see
      note 5(b)).
 
 Option
price models used for calculating fair value of options require input of highly
subjective assumptions including the expected price volatility. Changes in the
subjective input assumptions can materially affect the fair value estimate, and
therefore the models do not necessarily provide a reliable measure of the fair
value of the Company’s options.
 
 (c)                Details
of weighted average remaining life of the options granted and outstanding are as
follows:
 
 Exercise
      price in US$
                
                
                Number
                
                
                Weighted
      average remaining contractual life (years)
                
                
                Exercise
      price in US$
                
                
                Number
                
                
                Weighted
      average remaining contractual life (years)0.15
                
                
                
                4,825,000
                
                
                
                1.78
                
                
                
                0.35
                
                
                
                1,680,000
                
                
                
                1.670.50
                
                
                
                3,015,000
                
                
                
                1.850.75
                
                
                
                125,000
                
                
                
                1.381.00
                
                
                
                5,000
                
                
                
                1.380.15
                
                
                
                4,825,000
                
                
                
                1.78
                
                
                
                0.46
                
                
                
                4,825,000
                
                
                
                1.78
 
 All
options were fully vested immediately as at March 31, 2009 and 2008. The options
can be exercised at any time after vesting within the exercise period in
accordance with the applicable option agreement. The exercise price was more
than the market price on the date of the grants for 1,995,000 options (2008:
1,995,000) and less than the market price for the balance of 2,830,000 (2008:
2,830,000) options. Upon expiry or termination of the contracts, vested options
must be exercised within 30 days for consultants and 90 days for
directors.
  -
18 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 8.
              WARRANTS
 
 (a)                Movement
in warrants during the year are as follows:
 2009
                
                
                
                
                
                
                
                
                2008#
      of warrants
                
                
                Weighted
      average exercise price in US$
                
                
                Fair
      value
                
                
                #
      of warrants
                
                
                Weighted
      average exercise price
                
                
                Fair
      valueIssued
      and outstanding, beginning of year (ii)
                
                
                12,846,420
                
                
                
                0.44
                
                
                
                2,153,857
                
                
                
                13,161,960
                
                
                
                0.44
                
                
                
                2,215,213Issued
      during year (i)
                
                
                1,000,000
                
                
                
                0.10
                
                
                
                39,070
                
                
                
                -
                
                
                
                
                
                
                
                -Exercised
      during year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (315,540)
                
                
                
                
                
                
                
                (61,356)Issued
      and outstanding, end of year
                
                
                13,846,420
                
                
                $
                0
      .24
                
                
                $
                2,192,927
                
                
                
                12,846,420
                
                
                $
                0.44
                
                
                $
                2,153,857
 
 (i)
              The
      company issued 1 million warrants under a 2009 private placement relating
      to Units subscribed during the current year as explained in Note 6(a).
      These warrants are convertible into equal number of common shares at an
      exercise price of US$0.10 per warrant and expire within two years of their
      issue.
 
 The
      fair value of these warrants has been estimated using a Black-Scholes
      option price model with the following
  assumptions:
 
 Risk
      free interest rate
              1%
 Expected
      dividend
              nil
 Expected
      volatility
              104%
 Expected
      life
              730
      days
 Market
      price
              US$0.14
 
 The
      fair value of the warrants as per the Black-Scholes option price model
      amounted to $113,523. Using the relative fair value method, an amount of
      $39,070 (70%) has been accounted for as reduction in value of shares and
      increase in value of warrants.
 
 Option
      price models used for calculating fair value of warrants require input of
      highly subjective assumptions including the expected price volatility.
      Changes in the subjective input assumptions can materially affect the fair
      value estimate, and therefore the models do not necessarily provide a
      reliable measure of the fair value of the Company’s
    warrants.
 
 (ii)
              During
      the fiscal year 2009, the Board of Directors of the Company approved
      changes in the terms of the warrants issued and outstanding as
      follows:
 
 i.
              On
      December 12, 2008, exercise price of 11,124,460 warrants issued as part of
      2006 private placement and still outstanding was reduced from US$0.35 to
      US$0.25 and their expiry date extended by six months from the existing
      expiry dates. The market price of the Company’s common shares on December
      12, 2008 was US$0.05.
 ii.
              On
      March 30, 2009, exercise price of 1,721,960 warrants issued as part of
      2003 private placement and still outstanding was reduced from US$ 1 to
      US$0.25 and their expiry date extended by six months from the existing
      expiry date. The market price of the Company’s common shares on March 30,
      2009 was US$0.08.
 The fair
value of these warrants was not recalculated due to these changes.
   -
19 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 8.
              WARRANTS –
      (continued)
 
 (b)
              Details
      of weighted average remaining life of the options granted and outstanding
      are as follows:
 
 2009
                
                
                
                
                
                
                
                
                2008Warrants
      outstanding & excercisable
                
                
                Warrants
      outstanding & excercisableExercise
      price in US$
                
                
                Number
                
                
                Weighted
      average remaining contractual life (years)
                
                
                Exercise
      price in US$
                
                
                Number
                
                
                Weighted
      average remaining contractual life (years)0.25
                
                
                
                12,846,420
                
                
                
                0.29
                
                
                
                1.00
                
                
                
                1,721,960
                
                
                
                1.000.10
                
                
                
                1,000,000
                
                
                
                1.88
                
                
                
                0.35
                
                
                
                11,124,460
                
                
                
                0.770.46
                
                
                
                13,846,420
                
                
                
                0.40
                
                
                
                0.46
                
                
                
                12,846,420
                
                
                
                0.80
 
 
 9.      LOSS
PER SHARE
 
 Loss per
share is calculated on the weighted average number of common shares outstanding
during the year, which were 30,170,743 shares for the year ended March 31,
2009 (2008 – 28,840,653, 2007 – 27,472,703).
 
 The
Company had approximately 13.8 million warrants and 4.8 million options, which
were not exercised as at March 31, 2009. Inclusion of these warrants and options
in the computation of diluted loss per share would have an anti-dilutive effect
on loss per share and are therefore excluded from the computation. Consequently,
there is no difference between loss per share and diluted loss per
share.
 
 10.
              CONSULTING
      FEE
 For
      the year ended March 31
                
                2009
                
                
                2008
                
                
                2007Fees
      settled in stocks and options (Note 5)
                
                
                277,856
                
                
                
                314,248
                
                
                
                367,973Fees
      settled for cash
                
                
                166,928
                
                
                
                82,217
                
                
                
                50,461$
                444,784
                
                
                $
                396,465
                
                
                $
                418,434
  
 -
20 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 11.
              INCOME
      TAXES
 
 Income
tax expense differs from the amount that would be computed by applying the
Federal and Provincial statutory income tax rates to income before income taxes.
The reasons for the differences are as follows:
 
 2009
                  
                  
                  2008
                  
                  
                  2007Income
      tax recovery based on combined corporate income tax rate of 33% (2008:
      33.50% and 2007: 36.12%)
                  
                  $
                  (227,507
                  )
                  
                  $
                  (191,553
                  )
                  
                  $
                  (59,237
                  )Increase(Decrease)
      in taxes resulting from:Investments
      in Subsidiary (BDC) written off on disolution
                  
                  
                  -
                  
                  
                  
                  (50,280
                  )
                  
                  
                  -Non-deductible
      stock based compensation
                  
                  
                  91,692
                  
                  
                  
                  105,273
                  
                  
                  
                  132,912Non-deductible
      meals & entertainment expenses
                  
                  
                  8,882
                  
                  
                  
                  11,199
                  
                  
                  
                  7,503Not-taxable
      portion of gain on sale of short term investments
                  
                  
                  (7,431
                  )
                  
                  
                  (41,616
                  )
                  
                  
                  (117,482
                  )Write
      off of a short term investment
                  
                  
                  10,397Income
      tax recovery
                  
                  
                  (123,967
                  )
                  
                  
                  (166,977
                  )
                  
                  
                  (36,304
                  )Benefit
      of tax losses not recognised
                  
                  
                  123,967
                  
                  
                  
                  166,977
                  
                  
                  
                  36,304Provision
      for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
 
 The
components of the future income tax asset and the country of origin at March 31,
2009 and 2008 are as follows (applying the combined Canadian federal and
provincial statutory income tax rate of 29% (2008: 33.50%) and the US income tax
rate of 34.00% for both the years):
  Canada
                  
                  
                  
                  
                  
                  US2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008in
      '000 $Future
      income tax assets:Non-capital
      losses carried forward
                  
                  $
                  2,199
                  
                  
                  $
                  2,697
                  
                  
                  $
                  1,498
                  
                  
                  $
                  1,498Capital
      losses carried forward
                  
                  
                  560
                  
                  
                  
                  647
                  
                  
                  
                  -
                  
                  
                  
                  -Unrealised
      losses on short term investments
                  
                  
                  642
                  
                  
                  
                  438Future
      tax assets
                  
                  
                  3,401
                  
                  
                  
                  3,782
                  
                  
                  
                  1,498
                  
                  
                  
                  1,498Valuation
      allowance
                  
                  
                  (3,401
                  )
                  
                  
                  (3,782
                  )
                  
                  
                  (1,498
                  )
                  
                  
                  (1,498
                  )Future
      income taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
 The
Company has approximately $7.6 million (2008: $8 million) in Canadian
non-capital losses, $1.9 million (2008: $1.9 million) in capital losses and US$
4.4 million (2008: US$4.4 million) in US non-capital losses available to claim
against future taxable income. The benefits arising from these losses has not
been included in the financial statements as management has determined that it
is not more likely than not that the losses will be utilized.
 
 
 -
21 -
 
 
 Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 11.
              INCOME
      TAXES -  continued
 
 The
non-capital losses expire as follows:
  Canadian in
CDN$                                                       US
in US$
 In
000’$                                                                in
000’$
 
 2010                                                   232
 2014                                               1,337
 2015                                               1,319                                           2025                      $           1,050
 2026                                               3,373                                           2026                                 
 3,300
 2027                                                  271                                           2027                                     
  25
 2028                                                  675
 2029                                                  374
 
 $
7,581                                                                           $           4,375
 
 12.           COMMITMENTS  AND
CONTINGENT LIABILITIES
 
 (a)
              The
      Company entered into media relations and investor relations contracts with
      Current Capital Corp., a shareholder corporation, effective July 1, 2004
      initially for a period of one year and renewed automatically unless
      cancelled in writing by a 30-day notice for a total monthly fee of
      US$10,000.
 
 (b)
              The
      Company entered into a consulting contract with Mr. Kam Shah, the Chief
      Executive Officer and Chief Financial Officer on April 1, 2005 for a
      five-year term up to March 31, 2010. Between June 1, 2008 and December 31,
      2008, Mr. Shah was allowed to draw $10,000 per month in arrears until
      market price of the Company’s common shares reaches $0.50 provided that
      such drawings will be considered as fee advances to be repaid when the
      market price of the common shares of the Company stays at $0.50 or above
      for a consecutive period of three months. Total sum of $70,000 thus
      withdrawn by Mr. Shah until December 31, 2008 has been included in other
      receivable. For the period of six months from January 1, 2009 to June 30,
      2009, Mr. Shah has been approved a cash fee of $10,000 per month plus
      taxes. Fee for the second half of the calendar year 2009 has not yet been
      determined. Further, the contract provides for a lump sum compensation of
      US$250,000 for early termination of the contract without cause. The
      contract also provides for entitlement to stock compensation and stock
      options under appropriate plans as may be decided by the board of
      directors from time to time.
 
 (c)
              The
      Company entered into a consulting contract with Mr. Terence Robinson, a
      key consultant and a former Chief Executive Officer, on April 1, 2003 for
      a six-year term up to March 31, 2009. The contract provided for a monthly
      fee of $10,000 inclusive of taxes plus reimbursement of expenses and a
      lump sum compensation of $250,000 for early termination of the contract
      without cause.  Mr. Robinson accepted 550,000 common shares
      issued under 2007 Consultant Stock Compensation Plan in lieu of his fees
      for the year ended December 31, 2008. However, he was allowed to return
      half of the issued shares -275,000 - for cancellation and instead was to
      be paid a cash fee of $60,000 ( see also Note 5), which has been included
      in accounts payable. From January 1, 2009 to March 31, 2009, a fee of
      $10,000 per month has been accrued as payable to Mr. Robinson and is
      included in accrued liabilities. The Company is still reviewing the
      matters concerning settlement of amounts due to Mr. Robinson until March
      31, 2009 and terms of the renewal of his contract. The Company however
      concluded that the consulting contract should be
  renewed.
 
  -
22 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 12.           COMMITMENTS
AND CONTINGENT LIABILITIES - continued
 
 (d)
              The
      Company has a consulting contract with Mr. John Robinson. Mr. John
      Robinson is sole owner of Current Capital Corp., a firm with which the
      Company has an ongoing contract for media and investor relations, and a
      brother of Mr. Terence Robinson who is a key consultant to the Company and
      a former Chief Executive Officer of the Company.  On March 28,
      2008, the Company renewed the consulting contract with Mr. John Robinson
      for another year to June 30, 2009.  The consulting fee was
      agreed to be US$82,000 which was pre-paid by issuance of 350,000 common
      shares under 2007 Consultant Stock Compensation Plan.  Mr.
      Robinson provides services that include assisting the management in
      evaluating new projects and monitoring short term investment opportunities
      that the Company may participate in from time to time. The Company allowed
      Mr. Robinson to return the shares issued for cancellation and to be paid
      instead cash of $82,000 in four instalments. Mr. Robinson has not yet
      returned the shares for cancellation. (see also note
  5)
 
 (e)The Company has
      agreed to payment of a finder’s fee to Current Capital Corp., a related
      party, at the rate of 10% of the proceeds from exercise of any of the
      outstanding warrants and from the further subscriptions received under the
      2009 private placement and related warrants (note 6(a)). The likely fee if
      all the remaining warrants and units are exercised will be approximately
      $580,000.
 
 13.           RELATED
PARTY TRANSACTIONS
 
 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, unless they have been disclosed elsewhere in the financial
statements.
 
 (i)
              Included
      in shareholders information expense is $133,785 (2008 – $124,231; 2007 –
      $136,249) 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 $37,800 for rent, telephone and other office
      expenses (2008: $27,300 and 2007:
$21,900).
 
 (iii)
              Finders
      fees of $6,228 (2008: $12,245, 2007: $740,043) 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 $19,205 (2008 - $15,771; 2007 - $10,279) were reimbursed to
      directors of the corporation and $68,009 (2008 - $118,774, 2007: $85,862)
      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 –
      Nil  (2008 : 450,000 valued at $105,373, 2007: 350,000 valued at
      $95,409,). Shares issued to (returned by) a key consultant and a former
      chief executive officer of the Company under the Consultant stock
      compensation plan (275,000) valued at $ (64,395) (2008: 550,000 valued at
      $ 128,790, 2007: 500,000 valued at
$136,298).
 
 (vi)
              Options
      issued to directors under Stock option plans – nil (2008: 50,000 valued at
      $7,878, 2007:  nil).
 
 (vii)
              Cash
      fee paid to directors for services of $60,000 (2008:$33,871 and 2007: $
      nil). Cash fee paid to a key consultant and a former chief executive
      officer of the Company of $90,000 (2008 and 2007: $ nil). These fees are
      included under travel, promotion and consulting
  expenses.
  
 -
23 -
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 13.           RELATED
PARTY TRANSACTIONS – continued
 
 (viii)
              Accounts
      payable includes $15,482 (2008: $9,384, 2007: $3,471) due to CCC, $1,875
      (2008: $757, 2007: $1,431) due to a director and $67,212 (2008: $6,577,
      2007: $ 7,099) due to a key consultant and a former chief executive
      officer of the Company.
 (ix)
              Interest
      income includes $ nil (2008: $ nil & 2007: $1,398) representing
      interest received from the Chief Executive
  officer.
 
 (x)
              Included
      in short term investments is an investment of $200,000 (2008: $200,000,
      2007: $ nil) in a private corporation controlled by a brother of the key
      consultant. The investment was stated at market value which was considered
      nil as at March 31, 2009 ($200,000 as at March 31,
  2008)
 
 (xi)
              Included
      in short term investments

                  is
      an investment of $1,837,956 carrying cost and $361,877 fair value (2008:
      1,929,049 carrying cost and $1,140,120 fair value, 2007: $1,604,493
      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 issued and outstanding common shares of the
      said Corporation.
 
 (xii)
              Included
      in other receivable is an advance of $70,000 (2008 and 2007: $nil) made to
      Chief Executive Officer. The advance is repayable upon happening of
      certain events as explained in note 12 (b) and carries no
      interest.
 
 (xiii)
              Included
      in other receivable is an advance of $5,814 made to a director (2008:
      $2,470 and 2007: $ nil), advance is against future fee and carries no
      interest.
 
 
 14.           SEGMENTED
INFORMATION
 
 As at
March 31, 2009, 2008 and 2007, the Company had only one major business
segment-
 
 Energy sector:This segment
includes the Company’s acquisition of interests in joint ventures and projects
relating to exploration and commercial drilling of oil and gas and related
products.
 
 The
accounting policies of the segments are same as those described in Note 2. The
Company evaluates each segment’s performance based on its contribution to
consolidated net earnings. There are no inter-segmental charges or
transactions.
 
 The
Company had no business activity in the above segment.
 
 The
Company is now seeking business participation opportunities in all sectors. This
may change the future major business segments for the Company.
 
 Geographic
Information
 
 The
Company operates from one location in Canada. Its assets were located in Canada
as at March 31, 2009 and 2008.
 
 
 -
24 -
  
 Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 15.           FINANCIAL
INSTRUMENTS AND CONCENTRATION OF RISKS
 
 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 year.
 
 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 a brokerage firm. The risk is
mitigated because the financial institution is a prime Canadian bank and the
brokerage firm is well known Canadian brokerage firm with good market reputation
and all its assets are backed up by one of the major Canadian
banks.
 
 (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, 2009( 69% at March 31, 2008). Further, the Company’s holding in one Canadian
marketable security accounted for approximately 33% (2008: 31%) of the total
short term investment in marketable securities or 23% (2008: 21%) of total
assets at March 31, 2009.
 
 The
management tries to mitigate this risk by daily monitoring of all its
investments by experienced consultants and ensuring that investments are made in
companies which are financially stable with viable businesses.
 
 (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 opted for several
years 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.
 
 
 
 -
25 -
 
  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 15.           FINANCIAL
INSTRUMENTS AND CONCENTRATION OF RISKS - continued
 
 (d)
Currency risk
 
 The
operating results and financial position of the Company are reported in Canadian
dollars. Part of cash and short term investments are held in US dollars –
approximately 3% of total assets at March 31, 2009 (23% as at March 31, 2008).
The results of the Company’s operations are therefore subject to currency
transaction and translation risk.
 
 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
closing foreign exchange rates as at March 31, 2009 are as follows:
 March
31,
 2009                                  2008
 
 One US
Dollar to CDN
Dollar                                                                  
1.2602                                1.0279
 
 The
Company has not entered into any agreements or purchased any foreign currency
hedging arrangements to hedge possible currency risks at this time.
 
 16.           CAPITAL
DISCLOSURES
 
 The
Company considers the items included in Shareholders’ Equity as capital. The
Company currently has no debts or significant financial commitments. The
Company’s objectives when managing capital are to safeguard the Company’s
ability to continue as a going concern in order to pursue new business
opportunities and to maintain a flexible capital structure which optimizes the
costs of capital at an acceptable risk.
 
 The
Company manages the capital structure and makes adjustments to it in light of
changes in economic conditions and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to
issue new shares, issue new debt, acquire or dispose of assets or adjust the
amount of cash and short term investments.
 
 As at
March 31, 2009, the shareholders’ equity was approximately $ 1.4 million (March
31, 2008: $ 5.2 million). Approximately 79% or $1.1 million was held in short
term investments (March 31, 2008: $3.6 million or 69%) and the balance was held
in cash and receivable. Absence of any significant external debts ensures the
Company’s continued financial strength.
 
 The
Company is not subject to any externally imposed capital requirements and does
not presently utilize any quantitative measures to monitor its
capital.
 
 The
Company expects its current capital resources will be sufficient to carry its
business plans and operations through its current operating period.
 
 
 -
26 -
 
 Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 17.
              DIFFERENCES
      BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES
 
 These
financial statements have been prepared in accordance with generally accepted
accounting principles in Canada ("Canadian GAAP").  Material
variations in the accounting principles, practices and methods used in preparing
these consolidated financial statements from principles, practices and methods
used in the United States ("US GAAP") and in SEC Regulation S-X are described
and quantified below.
 
 There
were no significant differences between Canadian GAAP and US GAAP which had any
impact on the consolidated balance sheet and consolidated statement of cash
flows.
 
 The
impact of significant US GAAP variations on the Consolidated Statement of
Operations is as follows:
 
 Net
      Loss for year, Canadian GAAP
                
                $
                (689,415)
                
                
                $
                (571,799)
                
                
                $
                (164,043)Reclassification
      of exchange loss (gain) on year end translation of foreign currency items
      and balances (ii)
                
                
                -
                
                
                
                -
                
                
                
                111,659Loss
      for year US GAAP
                
                $
                (689,415)
                
                
                $
                (571,799)
                
                
                $
                (52,384)Reclassification
      of exchange (loss) gain on year end translation of foreign currency items
      and balances (ii)
                
                
                -
                
                
                
                -
                
                
                
                (111,659)Unrealised
      losses on "available for sale" short term investments( i)
                
                
                (3,118,250)
                
                
                
                (2,266,470)
                
                
                
                -Unrealised
      gain on short term investments      (
      i)
                
                
                -
                
                
                
                -
                
                
                
                959,701Comprehensive
      Income(loss) for year, US GAAP
                
                $
                (3,807,665)
                
                
                $
                (2,838,269)
                
                
                $
                795,658Basic
      and diluted loss per share, US GAAP
                
                $
                (0.02)
                
                
                $
                (0.02)
                
                
                $
                (0.00)
 
 The
following are brief explanations of the identified differences:
 
 (i)  Short-term
Marketable securities
 
 In Fiscal
year 2008, CICA introduced a new handbook section 3855 to recognize and measure
financial instruments including marketable securities. This revision brings the
Canadian GAAP in line with the Statement of Financial Accounting Standard
(“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity
Securities”, which requires that equity securities that have readily
determinable fair values be classified as either available-for-sale or trading
securities, and that they be reported at fair market values. For
available-for-sale securities, unrealized gains or losses are to be reported as
other comprehensive income, a separate component of shareholders’ equity, until
realized. All short term investments are classified as
“available-for-sale”.
 
 Since the
Company implemented the new Canadian standard on a prospective basis with no
restatement of prior period financials, the reconciliation is presented to
provide comparatives as per US GAAP
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  Bontan
Corporation Inc.
 Notes
to Consolidated Financial Statements
 (Canadian
Dollars)
 March
31, 2009 and 2008
 
 17.
              DIFFERENCES
      BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
      PRINCIPLES – continued
 
 (ii)                 Exchange
gains and losses on translation of foreign currency items and
balances
 
 Under
Canadian GAAP, as revised under the handbook section 1651, foreign currency
translation gains and losses are generally included in the determination of net
income unless they relate to self sustaining foreign subsidiary, in which case,
such translation gains and losses are included in the other comprehensive income
computation. For the fiscal years 2009 and 2008, all translation losses of the
Company were sustained by the entity whose functional currency is Canadian
dollar and are therefore included in the computation of income.
 
 The above
treatment under Canadian GAAP is in line with the treatment required Under FAS
52 (13) and FAS 130 of the US GAAP.
 
 Future
U.S. accounting policy changes
 
 In May
2009, The Financial Accounting Standard Board (FASB) issued a new Financial
Accounting Standard (FAS) 165, “Subsequent events” which establishes general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. This Statement is applicable to interim or annual financial
periods ending after June 15, 2009. The Company does not believe that
implementation of this Statement will have any effect on the financial
statements.
 
 In June
2009, FASB issued FAS 166, as an amendment of FAS 140 “Accounting for Transfer
of Financial Assets”. This Statement removes the concept of a qualifying
special-purpose entity from Statement 140 and removes the exception from
applying FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, to qualifying special –purpose entities. This
Statement is applicable to interim or annual financial periods beginning after
November 15, 2009. The Company does not believe that implementation of this
Statement will have any effect on the financial statements.
 
 In June
2009, FASB issued FAS 167, “Amendments to FASB Interpretation No. 46(R)”. This
Statement retains the scope of Interpretation 46(R) with the addition of
entities previously considered qualifying special-purpose entities, as the
concept of these entities was eliminated in Statement 166. This Statement is
applicable to interim or annual financial periods beginning after November 15,
2009. The Company does not believe that implementation of this Statement will
have any effect on the financial statements.
 
 
 18
              SUBSEQUENT
      EVENT
 
 On April
7, 2009, the Company registered 2009 Consultant Stock Compensation Plan with
Securities and Exchange Commission in a registration statement under the US
Securities Act of 1933. 3 million common shares of the Company were registered
under the Plan.
 
 19.
              PRIOR
      YEARS’ COMPARATIVES
 
 Certain
      prior years’ comparatives have been restated to conform to the current
      year’s presentation.








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