----

----

| Index                                                                                                                                                    |                                                                   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
|                                                                                                                                                     |                                                                   |
| Report of Independent Registered Public Accounting Firm                                                                                                  |         1                      |
|                                                                                                                                                     |                                                                   |
| Consolidated Balance Sheets                                                                                                                              | 2                                                                      |
|                                                                                                                                                     |                                                                   |
| Consolidated Statements of Operations                                                                                                                    | 3                                                                      |
|                                                                                                                                                     |                                                                   |
| Consolidated Statements of Cash Flows                                                                                                                    | 4                                                                      |
|                                                                                                                                                     |                                                                   |
| Consolidated Statement of Shareholders’ Equity Consolidated Statement of Comprehensive Loss and Accumulated Other Comprehensive income (loss) | 5-6 7                                                        |
| Notes to Consolidated Financial Statements                                                                                                               |        8-33     |

----

----

| As at March 31                                      |   |          |                 | Notes            | 2011                | 2010               |
|-----------------------------------------------------|--------|---------------|----------------------|------------------|---------------------|--------------------|
|                                                |   |          |                 |             |                |               |   |
| Assets                                              |   |          |                 |             |                |               |   |
| Current                                             |   |          |                 |             |                |               |   |
|     Cash                        |   |          |                 |             |                |  $348,464     |  $2,350,526 |
|     Short term investments      |   |          | 5,19(ix) & 22(b) |  1,900,400  |  1,359,431     |
|     Prepaid consulting services |   |          | 6                    |  7,171      |  50,792        |
|     Other receivables           |   |          |                 | 19(x) &(xi)  |  114,069       |  129,869      |
|                                                |   |          |                 |             |                |               |   |
|                                                |   |          |                 |             |                |  2,370,104    |  3,890,618 |
| Office equipment and furniture                      |   |          | 7                    |  $8,956     |  $8,802        |
| Investment in Oil & gas properties              |   |          | 8,19(iv)             |  $6,972,740 |  $6,520,367    |
|                                                |   |          |                 |             |                |  $9,351,800   |  $10,419,787 |
| Liabilities and Shareholders' equity                |   |          |                 |             |
| Current liabilities                                 |   |          |                 |             |                |               |
|     Accounts payable            |   |          |                 | 19(vii)          |  $505,055      |  $1,410,327   |
|     Accruals                    |   |          |                 | 9                |  158,522       |  1,043,583    |
|     Short term loans            |   |          |                 | 10               |    - |  1,065,578    |
|                                                |   |          |                 |             |                |               |   |
| Total current liabilities                           |   |          |                 |  663,577    |  3,519,488     |
| Shareholders' Equity                                |   |          |                 |             |                |               |
| Capital stock                                       |   |          |                 | 11               |  $36,078,140   |  $35,298,257  |
| Warrants                                            |   |          |                 |             | 13                  |  8,677,551    |  7,343,886 |
| Contributed surplus                                 |   |          |                 |             |  4,755,077     |  4,573,748    |
| Accumulated other comprehensive income( loss)       |   |  168,347 |  (2,696,213)    |
| Deficit                                             |   |          |                 |             |                |  (40,990,892) |  (37,262,565) |
|                                                |   |          |                 |             |                |  (40,822,545) |  (39,958,778) |
| Total Shareholders' equity                          |   |          |                 |  8,688,223  |  7,257,113     |
| Non-controlling interests                           |   |          |                 |  -          |  (356,814)     |
| Total equity                                        |   |          |                 |             |  8,688,223     |  6,900,299    |
|                                                |   |          |                 |             |                |  $9,351,800   |  $10,419,787 |
|                                                |   |          |                 |             |                |               |   |
| Going concern (note 2)                              |   |          |                 |             |                |
| Commitments and Contingent Liabilities (Note 18)    |   |          |                 |
| Related Party Transactions (Note 19)                |   |          |                 |             |

----

|                                                                     |                                                       |          | Notes              | 2011               | 2010              | 2009            |
|--------------------------------------------------------------------------|------------------------------------------------------------|---------------|--------------------|--------------------|-------------------|-----------------|
| Income                                                                   |                                                       |          |               |               |              |            |
|     Interest                                         |                                                       |          |               |  -            |  -           |  7,901     |
|                                                                     |                                                       |          |               |               |              |            |
|                                                                     |                                                       |          |               |  -            |  -           |  7,901     |
| Expenses                                                                 |                                                       |          |               |               |              |
|     Consulting fees                                  | 15,18(b),(c), (d) & (f), 19  (v) & (vii) |  778,899 |  1,191,675    |  444,784      |
|     Professional fees                                |                                                       |          |  1,221,720    |  992,989      |  27,844      |
|     Loss(gain) on disposal of short term investments |  948,189                                              |  852,806 |  (45,036)     |
|     Bank charges,interest and fees                   | 16                                                         |  4,096   |  691,062      |  2,362        |
|     Write down/off of short term investment          | 5                                                          |  386,672 |  250,780      |  63,010       |
|     Office and general                               |                                                       |          |  46,697       |  73,740       |  42,641      |
|     Shareholders information                         | 18(a),19(i)                                                |  148,610 |  158,509      |  144,757      |
|     Travel,meals and promotions                      |                                                       |  131,976 |  86,939       |  66,896       |
|     Payroll                                          |                                                       |          |               |  39,738       |  44,944      |  35,266    |
|     Communication                                    |                                                       | 19(ii)        |  15,090       |  27,782       |  11,498      |
|     Rent                                             |                                                       |          | 19(ii)             |  26,117       |  22,765      |  18,143    |
|     Transfer agents fees                             |                                                       |  11,146  |  10,802       |  4,940        |
|    Exchange (gain) Loss                                   |                                                       |  $20,688 |  $(120,735)   |  $(119,789)   |
|                                                                     |                                                       |          |               |  3,779,638    |  4,284,058   |  697,316   |
|                                                                     |                                                       |          |               |  (3,779,638)  |  (4,284,058) |  (689,415) |
| Non-controlling interests                                                |                                                       |  51,311  |  356,814      |  -            |
| Net loss for year                                                        |                                                       |          |  $(3,728,327) |  $(3,927,244) |  $(689,415)  |
| Basic and diluted loss per share information                             |                                                       |          |               |
|     Net loss per share                               |                                                       | 14            |  $(0.05)      |  $(0.09)      |  $(0.02)     |

----

| For the years ended March 31,                                            | Notes           | 2011              | 2010              | 2009              |
|--------------------------------------------------------------------------|-----------------|-------------------|-------------------|-------------------|
| Cash flows from operating activities                                     |            |              |              |              |
|    Net loss for year                                      |            |  (3,728,327) |  (3,927,244) |  (689,415)   |
|    Write off of a short term investment                   |            |  386,672     |  250,780     |  63,010      |
|    Non-controlling interest                               |            |  (51,311)    |  (356,814)   |  -           |
|    Amortization of office equipment and furniture         |            |  2,433       |  2,303       |  2,027       |
|    Loss(Gain) on disposal of short term investments       |            |  948,189     |  852,806     |  (45,036)    |
|    Consulting fees settled for stock/options              | 15              |  273,043     |  524,589     |  277,856     |
| Net change in working capital components                                 |            |              |              |              |
|    Other receivables                                      |            |  (50,209)    |  (11,361)    |  (64,310)    |
|    Accounts payable                                       |            |  146,946     |  1,313,783   |  66,205      |
|    Accruals                                               |            |  (478,006)   |  988,109     |  26,789      |
|                                                                     |            |  (2,550,570) |  (363,049)   |  (362,874)   |
| Cash flow from investing activities                                      |            |              |              |              |
|    Purchase of short term Investments                     |            |  (5,528)     |  (53,103)    |  (2,412,123) |
|    Net proceeds from sale of short term investments       |            |  946,188     |  410,454     |  1,818,097   |
|    Purchase of office equipment and furniture             |            |  (2,587)     |  (1,671)     |  (5,256)     |
|    Acquisition of oil & gas properties                |            |  (307,906)   |  (4,692,189) |  -           |
|                                                                     |            |  630,167     |  (4,336,509) |  (599,282)   |
| Cash flow from financing activities                                      |            |              |              |              |
|    Short term loans                                       |            |  (1,117,161) |  1,239,531   |  -           |
|    Funds advanced to subsidiary                           |            |  (1,029,953) |  -           |  -           |
|    Common shares issued net of issuance costs             |            |  2,065,455   |  5,457,595   |  56,052      |
|                                                                     |            |  (81,659)    |  6,697,126   |  56,052      |
| Increase(Decrease) in cash during year                                   |            |  (2,002,062) |  1,997,568   |  (906,104)   |
| Cash at beginning of year                                                |            |  2,350,526   |  352,958     |  1,259,062   |
| Cash at end of year                                                      |            |  348,464     |  2,350,526   |  352,958     |
| Supplemental disclosures                                                 |            |              |              |              |
| Non-cash operating activities                                            |            |              |              |              |
|    Consulting fees settled for common shares and          | 15              |  (273,043)   |  (524,589)   |  (277,856)   |
|       options and expensed during the year |
|    Consulting fees prepaid in shares                      | 6               |  (7,171)     |  (50,792)    |  (20,484)    |
|                                                                     |            |  (280,214)   |  (575,381)   |  (298,340)   |
| Non-cash investing activities                                            |            |              |              |              |
|    Value of warrants issued as part of Acquisition costs  |  (173,953) |  (2,002,131) |  -           |
| Non-cash financing activities                                            |            |              |              |              |
|   Value of warrants exercised                                  |            | 21,694            |              |              |
|    Shares cancelled                                       |            |  -           |  (81,957)    |  (64,395)    |
|                                                                     |            | 21,694            |  (81,957)    |  (64,395)    |

----

|                                                                                | Number of Shares | Capital stock     | Warrants         | Contributed surplus | Accumulated Deficit | Accumulated other comprehensive income( loss) | Shareholders' Equity |
|-------------------------------------------------------------------------------------|------------------|-------------------|------------------|---------------------|---------------------|-----------------------------------------------|----------------------|
| Balance, March 31, 2008                                                             | 30,095,743       |  $32,901,488 |  $2,153,857 |  $4,077,427    |  $(32,645,906) |  $(1,306,768)                            |  $5,180,098     |
| Issued under private placement                                                      | 1,000,000        |  62,280      |             |  -             |                |                                          |  62,280         |
| Finder fee                                                                          |             |  (6,228)     |             |                |                |                                          |  (6,228)        |
| Value of warrants issued under private placement transferred to contributed surplus |             |  (39,070)    |  39,070     |                |                |                                          |  -              |
| Shares cancelled                                                                    |  (275,000)  |  (64,395)    |             |                |                |                                          |  (64,395)       |
| Options revaluation upon changes in the terms                                       |             |              |             |  76,839        |                |                                          |  76,839         |
| Net loss                                                                            |             |              |             |                |  (689,415)     |                                          |  (689,415)      |
| Unrealised loss on short term investments,net of tax considered available for sale  |             |              |             |                |                |  (3,118,250)                             |  (3,118,250)    |
| Balance, March 31, 2009                                                             | 30,820,743       |  $32,854,075 |  $2,192,927 |  $4,154,266    |  $(33,335,321) |  $(4,425,018)                            |  $1,440,929     |
| Issued under private placement                                                      | 34,050,000       |  5,726,794   |             |  -             |                |                                          |  5,726,794      |
| Finder fee                                                                          |             |  (572,679)   |             |                |                |                                          |  (572,679)      |
| Value of warrants issued under private placement                                    |             |  (2,859,141) |  2,859,141  |                |                |                                          |  -              |
| Value of warrants issued as finders fee                                             |             |  (289,687)   |  289,687    |                |                |                                          |  -              |
| Subscriptions received                                                              |             |  303,480     |             |                |                |                                          |  303,480        |
| Shares cancelled                                                                    |  (350,000)  |  (81,957)    |             |                |                |                                          |  (81,957)       |
| Issued under 2009 Consultant Stock Option Plan                                      |  708,333    |  217,372     |             |                |                |                                          |  217,372        |
| Value of warrants issued to induce short term loans                                 |             |              |  278,325    |                |                |                                          |  278,325        |
| Value of warrants issued as part of acquisition of oil & gas properties         |             |              |  1,723,806  |                |                |                                          |  1,723,806      |
| Options revaluation upon changes in the terms                                       |             |              |             |  419,482       |                |                                          |  419,482        |
| Net loss                                                                            |             |              |             |                |  (3,927,244)   |                                          |  (3,927,244)    |
| Unrealised gain on short term investments,net of tax considered available for sale  |             |              |             |                |                |  1,728,805                               |  1,728,805      |
| Balance, March 31, 2010                                                             | 65,229,076       |  $35,298,257 |  $7,343,886 |  $4,573,748    |  $(37,262,565) |  $(2,696,213)                            |  $7,257,113     |

----

|                                                                                 | Number of Shares | Capital Stock     | Warrants         | Contributed surplus | Accumulated Deficit | Accumulated other comprehensive loss | Shareholders' Equity |
|--------------------------------------------------------------------------------------|------------------|-------------------|------------------|---------------------|---------------------|--------------------------------------|----------------------|
| Balance March 31, 2010                                                               | 65,229,076       |  $35,298,257 |  $7,343,886 |  $4,573,748    |  $(37,262,565) |  $(2,696,213)                   |  $7,257,113     |
| subscription received in fiscal 2010 reversed on issuance of shares                  |             | -303,480          |             |                |                |                                 |  (303,480)      |
| Issued under private placement                                                       | 12,700,000       | 2,564,925         |             |                |                |                                 |  2,564,925      |
| Finder fee                                                                           |             | -256,493          |             |                |                |                                 |  (256,493)      |
| Value of warrants issued under private placement                                     |             | -1,232,145        | 1,232,145        |                |                |                                 |  -              |
| Value of warrants issued as finders fee                                              |             | -123,214          | 123,214          |                |                |                                 |  -              |
| Issued under 2009 Consultant stock compensation plan                                 | 135,000          | 48,093            |             |                |                |                                 |  48,093         |
| Issued on exercise of warrants                                                       | 600,000          | 60,503            |             |                |                |                                 |  60,503         |
| Value of warrants exercised                                                          |             | 21,694            | -21,694          |                |                |                                 |  -              |
| Unrealised gain on short term investments ,net of tax, considered available for sale |             |              |             |                |                | 2,864,560                            | 2,864,560            |
| Value of options issued                                                              |             |              |             |  181,329       |                |                                 | 181,329              |
| Net Loss                                                                             |             |              |             |                |  (3,728,327)   |                                 | -3,728,327           |
|                                                                                 |             |              |             |                |                |                                 |                 |
| Balance, March 31, 2011                                                              | 78,664,076       |  $36,078,140 |  $8,677,551 |  $4,755,077    |  $(40,990,892) |  $168,347                       |  $8,688,223     |

----

| For the years ended March 31,                                                   | Note   | 2011               | 2010               | 2009               |
|---------------------------------------------------------------------------------|--------|--------------------|--------------------|--------------------|
| Other comprehensive gain ( loss)                                                |   |               |               |               |
| Net loss for year                                                               |   |  $(3,728,327) |  $(3,927,244) |  $(689,415)   |
| Unrealized gain (loss) for year on short term investments,net of tax            | 5      |  3,251,232    |  1,728,805    |  (3,118,250)  |
| Other than temporary losses on short term investments transferred to net income |   |  (386,672)    |               |               |
| Comprehensive loss                                                              |   |  (863,767)    |  (2,198,439)  |  (3,807,665)  |
|                                                                            |   |               |               |               |
| Accumulated other comprehensive income(loss)                                    |   |               |               |               |
| Beginning of year                                                               |   |  (2,696,213)  |  (4,425,018)  |  (1,306,768)  |
| Other comprehensive gain (loss) for year net                                    |   |  2,864,560    |  1,728,805    |  (3,118,250)  |
| Accumulated other comprehensive income( loss), end of year                      |   |  $168,347     |  $(2,696,213) |  $(4,425,018) |

----

----

| a.   | Israel Oil & Gas Corporation, a wholly owned subsidiary |
|----------------|-------------------------------------------------------------|

| b.   | 1843343 Ontario Inc., a wholly owned subsidiary incorporated in Ontario on January 31, 2011 and has no activity since its inception. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Level 1 – fair values are based on quoted prices in active markets for identical assets or liabilities; |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – fair values are based on inputs other than quoted prices that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – applies to assets and liabilities for inputs that are not based on observable market data, which are unobservable inputs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

----

----

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

| (a)   | In August 2010, 950,000 options were issued to eight consultants and were fully vested and expensed as at March 31, 2011. See Note 12 (b) for further details. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | During the year, 135,000 shares were issued to three consultants under 2009 Consultant Stock Compensation Plan. See note 11(i) for further details. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

| (i)   | Under a new agreement entered on March 25, 2010 between the Company, IPC Cayman and three other joint venture partners (“new agreement”), the company was entitled to increase its working interest from 10% to 11% by paying an additional US$ 240,000. This amount was paid during the fiscal year 2011. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii)   | In fiscal year 2010, the Company issued warrants to induce short term loans borrowed to finance the cost of acquisition. Value of these warrants of $ 173,953 which related to the period after March 31, 2010 was adjusted against the short term loans as at March 31, 2010. Upon settlement of these loans during the year, the value of warrants was transferred to the cost of acquisition. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | The operator of the project acquired 5% working interest for US$1.2 million proportionately from the consortium partners. The company’s share amounted to US$135,936, which was received by IPC Cayman but was not refunded to the Company. As a  result of current litigation and de-consolidation of IPC Cayman, management decided not to account for this receivable. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)   | On May 18, 2010, IPC Cayman agreed to establish a limited partnership in Israel  (IPC Israel) and register IPC Cayman’s interest  in the two licenses in the name of IPC Israel. IPC Israel is owned by IPC Cayman as a limited partner and its general partner is International Three Crown Petroleum LLC (ITC). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | On October 13, 2010, IPC Cayman and IPC Israel signed a Partnership Subscription and Contribution Agreement with Ofer Investments Ltd., an Israeli company, (“Ofer”). Under this agreement, Ofer agreed to contribute up to US$ 28 million towards the IPC Israel’s share of the cost of drilling of the initial two exploratory wells under the Sara and Myra licenses and related exploration costs in exchange for a 50% limited partnership interest in IPC Israel and certain voting and management rights related to IPC Israel. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | On October 6, 2010, the partners of the Israel Project signed a new joint operating agreement with Geoglobal Resources (India) Inc., as operator. The new agreement provides for early termination and replacement of the operator subject to certain compensation. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | On October 25, 2010, IPC Cayman announced that it signed an agreement to acquire a publicly listed Israeli company, Shaldieli,Ltd in a reverse takeover  by placing its ownership interests in the Israel project in to Shaldieli , Ltd  in exchange for 90% ownership of Shaldieli, Ltd. The Company as a majority shareholder of IPC Cayman has not agreed to this deal. The matter is currently under dispute and litigation between the Company and IPC Cayman management.(Note 14) |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

----

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

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

| (i)   | On April 7, 2009, the Company registered a 2009 Consultant Stock Compensation Plan with the Securities and Exchange Commission in a registration statement under the US Securities Act of 1933. Three million common shares of the Company were registered under the Plan. During the year ended March 31, 2011, 135,000 common shares were issued to three consultants out of this plan in settlement of their fees. These shares were valued at the market price of the common shares prevailing on the date of issue. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

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

|   | The subscription closed on April 30, 2010. The Company issued an additional 12.7 million Units since April 1, 2010 until the closing date of April 30, 2010 and raised an approximate US$2.6 million. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | The following is a summary of all Stock Option Plans as at March 31, 2011 |
|-----------------|---------------------------------------------------------------------------|

|   | *   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: |
|-----------------|--------------------------------------------------------|

----

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

| (i)   | In August 2010, 950,000 options were allotted to eight consultants including 300,000 options valued at $57,262 to the three directors. These options are for five year term expiring on August 18, 2015 and can be exercised to acquire equal number of common shares at an exercise price of USD$0.35. These options were valued at $181,329 (US$178,236) using the Black-Scholes option pricing model with the following assumptions: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rateExpected dividendExpected volatility (based on previous 262 weeks average market price)Expected lifeExercise priceMarket price at August 18, 2010 | 1%Nil138.91%1826 daysUS$0.35US$0.22 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|

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

| March 31,                                     | 2011       | 2010      |
|-----------------------------------------------|------------|-----------|
|                                          |       |      |
| Number of options outstanding and exercisable | 5,775,000  | 4,825,000 |
| Exercise price in US$                         | 0.18       | 0.15      |
| Weighted average remaining contractual life   | 3.62 years | 4 years   |

----

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

| March 31,                                             |   | 2011                | 2010                            |
|-------------------------------------------------------|--------|---------------------|---------------------------------|
|                                                  | Note   |  # of warrants | Weighted average exercise price | Fair value | # of warrants | Weighted average exercise price | Fair value |
| Issued and outstanding, beginning of period           |   |  59,701,420    | 0.28                            |  7,343,886 |  13,846,420 | 0.24 |  2,192,927 |
| Issued under 2008-9 Private Placement                 |   |  -             |                            |  - |  9,000,000 | 0.10 |  339,560 |
| Issued as finders fee under 2008-9 private placement  |   |  -             |                            |  - |  1,000,000 | 0.10 |  37,729 |
| Issued under 2009-10 Private Placement                | i      |  12,700,000    | 0.35                            |  1,232,145 |  25,050,000 | 0.35 |  2,519,581 |
| Issued as finders fee under 2009-10 private placement | i      |  1,270,000     | 0.35                            |  123,214 |  2,505,000 | 0.35 |  251,958 |
| Exercised                                             |   |  (600,000)     | -0.10                           |  (21,694) |  - |   |  - |
| Issued in connection with acquisition of licences     |   |  -             |                            |  - |  7,000,000 | 0.35 |  1,723,806 |
| Issued as inducement for loans                        |   |  -             |                            |  - |  1,300,000 | 0.35 |  278,325 |
| Issued and outstanding, end of year                   |   |  73,071,420    | 0.30                            |  8,677,551 |  59,701,420 | 0.28 |  7,343,886 |

| (i)   |  The company issued 12.7 million warrants under a 2009-10 private placement relating to Units subscribed plus 1.27 million as a finder’s fee during the year ended March 31, 2011 as explained in Note 11(b) (ii). These warrants are convertible into equal number of common shares at an exercise price of US$0.35 per warrant and expire within five years of their issue. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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

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

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

|   | The fair value of the warrants as per the Black-Scholes option pricing model amounted to $3,695,413 Using the relative fair value method, an amount of $1,232,145 for warrants issued to private placees and $ 123,214 for warrants issued as finder’s fee (total 59%) has been accounted for as reduction in the value of common shares and increase in the value of warrants. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

|                  | 2011                                    |                                                |                                    | 2010       |                                                |
|-----------------------|-----------------------------------------|-----------------------------------------------------|-----------------------------------------|------------|-----------------------------------------------------|
|                  | Warrants outstanding & excercisable |                                                | Warrants outstanding & excercisable |
| Exercise price in US$ | Number                                  | Weighted average remaining contractual life (years) | Exercise price in US$                   | Number     | Weighted average remaining contractual life (years) |
| 0.35                  | 49,825,000                              | 3.88                                                | 0.35                                    | 35,855,000 | 4.75                                                |
| 0.25                  | 12,846,420                              | 3.00                                                | 0.25                                    | 12,846,420 | 4.00                                                |
| 0.10                  | 10,400,000                              | 3.00                                                | 0.10                                    | 11,000,000 | 3.91                                                |
| 0.30                  | 73,071,420                              | 3.60                                                | 0.46                                    | 59,701,420 | 4.47                                                |

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

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

| For the year ended March 31                 | 2011           | 2010             | 2009           |
|---------------------------------------------|----------------|------------------|----------------|
| Fees settled in stocks and options (Note 6) | 273,043        | 524,589          | 277,856        |
| Fees settled for cash                       | 505,856        | 667,086          | 166,928        |
|                                        |  $778,899 |  $1,191,675 |  $444,784 |

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

| For the year ended March 31, |   | 2011   | 2010     | 2009   |
|------------------------------|--------|--------|----------|--------|
| Bank charges                 |   | 4,096  | 2,595    | 2,362  |
| Interest on short term loans |   | -      | 7,136    | -      |
| Financing fees               |   | -      | 681,331  | -      |
|                         |   | $4,096 | $691,062 | $2,362 |

----

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

|                                                                                             |                                                                 | 2011             | 2010             | 2009          |
|--------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|------------------|------------------|---------------|
| Income tax recovery based on combined corporate income tax rate of 25% (2010: 25% and 2009: 29%) |  $(889,551)                                                     |  $(644,387) |  $(199,930) |
| Increase(decrease) in taxes resulting from:                                                      |                                                                 |             |             |
|                                                                                             | Non-deductible stock based compensation                              |  68,261     |  131,147    |  80,578  |
|                                                                                             | Non-deductible meals & entertainment expenses                    |  4,906      |  7,303      |  7,806   |
|                                                                                             | Not-taxable portion of loss (gain) on sale of short term investments |  118,524    |  106,601    |  (6,530) |
|                                                                                             | Finders fee -1/5th portion allowable for tax                         |  (41,465)   |  (28,640)   |          |
|                                                                                             | Write off of a short term investment                                 |  48,334     |  31,348     |  9,136   |
| Income tax recovery                                                                              |  (690,991)                                                      |  (396,628)  |  (108,940)  |
| Benefit of tax losses not recognised                                                             | 690,991                                                              | 396,628          | 108,940          |
| Provision for income taxes                                                                       |  $-                                                             |  $-         |  $-         |

|                                                          | Canada        | US            |
|---------------------------------------------------------------|---------------|---------------|
|                                                          | 2011          | 2010          | 2011 | 2010 |
|                                                          | in '000 $     |
| Future income tax assets:                                     |          |          |   |   |
|   Non-capital losses carried forward                |  $2,818  |  $2,226  |  $1,498 |  $1,498 |
|   Capital losses carried forward                    | 1,093         | 621           | - | - |
|   Unrealised (gains) loss on short term investments | (42)          | 674           |   |   |
| Future tax assets                                             | 3,869         | 3,521         | 1,498 | 1,498 |
| Valuation allowance                                           |  (3,869) |  (3,521) |  (1,498) |  (1,498) |
| Future income taxes                                           |  $-      |  $-      |  $- |  $- |

----

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

|   | Canadian in CDN$In 000’$                     |   | US in US$in 000’$                                                  |
|--------|----------------------------------------------------|--------|--------------------------------------------------------------------------|
| 2014   | 1,337                                              |   |                                                                     |
| 2015   | 1,319                                              | 2025   | $           1,050 |
| 2026   | 3,373                                              | 2026   | 3,300                                                                    |
| 2027   | 271                                                | 2027   |      25                                         |
| 2028   | 675                                                |   |                                                                     |
| 2029   | 342                                                |   |                                                                     |
| 2030   | 1,189                                              |   |                                                                     |
| 2031   | 2,764                                              |   |                                                                     |
|   |        $ 11,270 |   | $           4,375 |

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

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

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

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

----

| (e)   | The Company has agreed to the payment of a finder’s fee to Current Capital Corp., a related party, at the rate of 10% of the proceeds from the exercise of any of the outstanding warrants. The likely fee if all the remaining warrants are exercised will be approximately $ 1.8 million. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f)   | The Company is currently in litigation with the management of its subsidiary, IPC Cayman and has retained lawyers in various jurisdictions. The Company is committed to continue its legal actions until disputes surrounding its indirect working interest in the Israeli oil and gas properties are resolved satisfactorily. The final outcome and costs of these actions cannot be reasonably estimated. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | Included in shareholders information expense is $122,059 (2010: $132,213; 2009: $133,785) paid to Current Capital Corp, (“CCC”) for media relations services. CCC is a shareholder corporation and its sole director provides consulting services to the Company. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | CCC charged approximately $8,081 for rent, telephone and other office expenses (2010: $20,993 and 2009: $37,800). $nil was charged by the entity controlled by the sole director of IPC Cayman (2010: $32,058 and 2009: $ nil) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | Finders fees of $312,469 (2010: $736,755, 2009: $6,228) was charged by CCC in connection with the private placement. The fee for 2011 included approximately 1.2 million warrants valued at $123,214 (2010: 3,480,000 warrants, valued at $289,687, 2009: $ nil) using the Black-Scholes option price model. |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iv) | Business expenses of $32,278 (2010 - $23,622; 2009 - $19,205) were reimbursed to directors of the corporation and $80,575 (2010 - $82,390, 2009: $68,009) to a key consultant and a former chief executive officer of the Company. Travel and related expenses of $29,886 charged by the sole director of IPC Cayman have been included Oil & gas properties and related expenditure (2010: $88,357 and 2009: $ nil) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (v) | Shares issued to (returned by) a key consultant and a former chief executive officer of the Company under the Consultant Stock Compensation Plan: $Nil (2010: $ nil, 2009: (275,000) valued at $ (64,395)). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (vi) | Cash fees paid to directors for services of $190,000 (2010:$235,000 and 2009: $ 60,000). Cash fee paid to a key consultant and a former chief executive officer of the Company of $120,000 (2010:$120,000 and 2009: $ 90,000. Fees paid to a consultant who controls CCC $102,000 (2010: $76,543, 2009: $81,911 in shares).  These fees are included in consulting expenses. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (vii) | Accounts payable includes $39,373 (2010: $95,813, 2009: $15,482) due to CCC, $3,350 (2010: $5,852, 2009: $1,875) due to a director of the Company and $63,294 (2010: $82,741, 2009: $ 67,212) due to a key consultant and a former chief executive officer of the Company and due to a consultant who controls CCC $48,025 (2010: $62,475, 2009: $1,024) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (ix) | Included in short term investments | is an investment of $755,452 carrying cost and $610,740 fair value (2010: $1,869,381 carrying cost and $775,020 fair value, 2009 $1,837,956 carrying cost and $361,877 fair value) in a public corporation controlled by a key shareholder of the Company. This investment represents common shares acquired in the open market or through private placements and represents less than 1% of the issued and outstanding common shares of the said corporation. |
|------|------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (x) | Included in other receivables is a fee advance of $nil (2010: $ nil and 2009: $ 70,000) made to Chief Executive Officer. |
|-----------|--------------------------------------------------------------------------------------------------------------------------|

| (xi) | Included in other receivable is an advance of $nil (2010: $ nil  and 2009: $5,814), made to a director |
|------|------------------------------------------------------------------------------------------------------------------|

----

----

| Location | 2011                                                                | 2010                                                    |
|----------|---------------------------------------------------------------------|---------------------------------------------------------|
|     |                                                                |                                                    |
| Canada   | $ 2,379,060                                                         | $ 3,615,914                                             |
|     |                                                                |                                                    |
| US       |            - |         217,497 |
|     |                                                                |                                                    |
| Israel   |     6,972,740                                   | 6,586,376                                               |
|     |                                                                |                                                    |
|     | $ 9,351,800                                                         | $  10,419,787                                 |

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

----

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

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

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

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

----

|                              | 2011       |
|-----------------------------------|------------|
|                              |       |
| Cash & short term investments | $148,505   |
| Accounts payable and accrual      | (433,636)  |
| Net liabilities                   | $(285,131) |

----

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

| 1. | Transfers in and out of Levels 1 and 2. A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers.                                                                                  |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2. | Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). |

| 1. | Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities.  |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2. | Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3.                             |

----

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

|   | Future accounting pronouncements - continued |
|--------|----------------------------------------------|

----

| 25. | DECONSOLIDATION OF IPC CAYMAN |
|-----|-------------------------------|

|   | IPC Cayman was incorporated on November 12, 2009 in Cayman Islands. The Company’s wholly owned subsidiary, Israeli Oil & Gas Corporation own 76.79% equity while Three Crown Petroleum LLC (“ITC”)  and another entity  both  controlled by Mr. Howard Cooper (“Cooper”) owns the remaining 23.21% equity in IPC Cayman. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The purpose of IPC Cayman was to enable Cooper to manage the Israeli assets as described in Note 8. Cooper was therefore made the sole director and manager of IPC Cayman and enjoyed wide powers under the shareholders agreement. The said agreement also provided limited circumstances under which he could be removed as sole director/manager. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company was able to consolidate IPC Cayman financials since its inception. |
|--------|--------------------------------------------------------------------------------|

|   | However, several new developments occurred during fiscal 2011: |
|--------|----------------------------------------------------------------|

| a.   | On May 18, 2010, IPC Cayman established a limited partnership in Israel  (‘IPC Israel’) and registered IPC Cayman’s interest  in the two licenses in the name of IPC Israel. Further, Cooper made ITC the general manager of IPC Israel and IPC Cayman remained as a limited partner. This was done without the Company’s knowledge or consent. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | At the same time, Cooper transferred all assets and liabilities of IPC Cayman to IPC Israel without transferring any of the protections given to the Company in the shareholders’ agreement which governed IPC Cayman. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Consequently, disputes arose between the Company and Cooper and various litigations were initiated as explained in Note 20. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------|

| d.   | Cooper also refused to provide any financial information and made excessive financial demands on the Company. |
|----------------|---------------------------------------------------------------------------------------------------------------|

----