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UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

OR

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

OR

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

For the transition period from ____________ to ____________

Commission file number **000-49760**

OR

[X] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D)
  OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: March
26, 2007

MEGAWEST ENERGY CORP.(Exact name of Registrant as specified in its charter)

Not Applicable(Translation of
Registrant's Name into English)

British Columbia, Canada(Jurisdiction of
incorporation or organization)

Suite 1000, 815  8thAvenue S.W.
Calgary, Alberta, Canada T2P 3P2(Address of principal
executive offices)

Securities registered or to be registered pursuant to Section
12(b) of the Act:

Not ApplicableTitle of Class

Not ApplicableName of Each Exchange on Which
Registered

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

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- 2 -

Common Shares Without Par Value(Title of
Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:

Not Applicable Title of Class

Indicate the number of outstanding shares of each of the
Registrant's classes of capital or common shares as of the close of the
period covered by the annual report.

There were 66,311,050 common shares, without par value, issued
and outstanding as of March 26, 2007.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. [  
] YES [X] NO

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

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

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

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

Large accelerated filer [ 
 ]                 
Accelerated filer [ 
 ]               
 Non-accelerated filer [X]

Indicate by check mark which financial statement item the
registrant has elected to follow. [X] Item 17 [   ] Item 18

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

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. [   ] YES [   ] NO

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PART I

This annual report contains forward-looking statements as that
term is defined in Section 27A of the United States Securities Act of
1933 and Section 21E of the United States Securities Exchange Act of
1934. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may", "should", "expects", "plans", "anticipates",
"believes", "estimates", "predicts", "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled "Risk Factors", that may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

As used in this annual report, the terms "we", "us", "our" and
"company" mean MegaWest Energy Corp., unless otherwise indicated and all
references to "common shares" refer to common shares in our capital stock.

Unless otherwise indicated, all dollar amounts referred to
herein are in Canadian dollars.

ITEM
1.           Identity of
Directors, Senior Management and Advisers

Not applicable.

ITEM
2.           Offer Statistics
and Expected Timetable

Not applicable.

ITEM
3.           Key
Information

*A.*          *Selected Financial Data*

The following financial data summarizes selected financial data
for our company prepared in accordance with Canadian generally accepted
accounting principles for the five fiscal years ended April 30, 2006. Additional
information is presented to show the differences which would result from the
application of United States generally accepted accounting principles to our
financial information. The information presented below for the five year period
ended April 30, 2006 is derived from our audited financial statements which were
examined by our independent auditor. The information set forth below should be
read in conjunction with our audited financial statements and related notes
included in this annual report and with the information appearing under the
heading "Item 5 - Operating and Financial Review and Prospects" below. The data
is presented in Canadian dollars.

Selected Financial Data(Stated in
Canadian Dollars - Calculated in accordance with Canadian GAAP)

Fiscal Year Ended April 30 (Audited)

CANADIAN GAAP
      2006
      2005
      2004
      2003
      2002Net Sales or Operating Revenues
    -
    -
    -
    -
    -Income (Loss) from Operations
    ($104,601)
    ($57,292)
    ($83,836)
    ($56,638)
    ($44,133)


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CANADIAN GAAP
      2006
      2005
      2004
      2003
      2002Net Income (Loss)
    ($222,945)
    ($61,031)
    ($143,489)
    ($45,773)
    ($34,310)Net Income (Loss) from Operations per Common Share
    ($0.02)
    ($0.01)
    ($0.05)
    ($0.03)
    ($0.03)Net Income (Loss) per Common Share
    ($0.04)
    ($0.01)
    ($0.08)
    ($0.02)
    ($0.03)Total Assets
    $31,440
    $137,113
    $176,549
    $313,924
    $351,009Net Assets (Deficit)
    ($129,422)
    $93,523
    $150,054
    $293,543
    $339,316Capital Stock (excluding long term debt and redeemable
      preferred shares)
    $376,092
    $376,092
    $371,592
    $371,592
    $371,592Number of Common Shares (adjusted to reflect changes in
      capital)
    6,337,500
    6,337,500
    1,837,500
    1,837,500
    1,837,500Dividends per Common Share
    -
    -
    -
    -
    -Weighted average Number Shares
    6,337,500
    5,018,322
    1,837,500
    1,837,500
    1,363,542Working Capital
    ($139,422)
    ($30,087)
    $150,054
    $256,095
    $339,316Long-Term Debt
    -
    -
    -
    -
    -Shareholders Equity
    ($129,422)
    $93,523
    $150,054
    $293,543
    $339,316


| | Notes:
| | ------
| | (1)   
| | (2)   

Reconciliation to United States Generally Accepted
Accounting Principles

There are no material differences between Canadian generally
accepted accounting principles and United States generally accepted accounting
principles on the balance sheets and statements of operations and cash flows of
our company.

Disclosure of Exchange Rate History

On March 23, 2007, the exchange rate in effect for Canadian
dollars exchanged for United States dollars, expressed in terms of Canadian
dollars, and based on the noon buying rates in New York City, for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York was $1.16.

For the past five fiscal years ended April 30, 2006 and for the
period between May 1, 2006 and February 28, 2007, the following exchange rates
were in effect for Canadian dollars exchanged for United States dollars,
expressed in terms of Canadian dollars and based upon the exchange rate as
determined above:

Month/Year End
      Average
      Low/HighFebruary 28, 2007
    $1.1707
    $1.1683/$1.1735January 31, 2007
    $1.1759
    $1.1732/$1.1789December 31, 2006
    $1.1530
    $1.1494/$1.1548November 30, 2006
    $1.1362
    $1.1337/$1.1386October 31, 2006
    $1.1286
    $1.1260/$1.1317


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Month/Year End
      Average
      Low/HighSeptember 30, 2006
    $1.1162
    $1.1131/$1.1191April 30, 2006
    $1.1872
    N/AApril 30, 2005
    $1.2701
    N/AApril 30, 2004
    $1.3434
    N/AApril 30, 2003
    $1.5396
    N/AApril 30, 2002
    $1.5673
    N/A


*B.*         
*Capitalization and Indebtedness*

Not applicable.

*C.*         
  *Reasons for the Offer and Use of Proceeds*

Not applicable.

*D.*         
  *Risk Factors*

Much of the information included in this annual report includes
or is based upon estimates, projections or other "forward looking statements".
Such forward looking statements include any projections or estimates made by our
company and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.

Such estimates, projections or other forward looking statements
involve various risks and uncertainties as outlined below. We caution the reader
that important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other forward
looking statements.

The common shares of our company are considered speculative
during the period of time that we are seeking to identify a new business
opportunity. You should carefully consider the following risks and uncertainties
in addition to other information in this annual report in evaluating our company
and our business before purchasing shares of our company's common share. Our
business, operating and financial condition could be harmed due to any of the
following risks.

Risks Relating to our Financial Condition

We have yet to attain profitable operations and because we
will need additional financing to fund our exploration activities, there is
substantial doubt about our ability to continue as a going concern.

Our company has a limited operating history and as of the date
of this annual report is considered in the exploration stage. Our prospects must
be considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies seeking to acquire or establish new business
opportunities. To date, we have identified a number of business opportunities in
the oil and gas industry and have completed the acquisition of one of these, but
there can be no assurances that we will complete our identified prospects or be
able to identify, secure and complete acquisitions of suitable additional
prospects of merit in the future.

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The success of our company is also significantly dependent on a
successful drilling, completion and production program. Our companys operations
will be subject to all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the absence of a significant
operating history. No assurance can be given that we may be able to operate on a
profitable basis. We are in the exploration stage and potential investors should
be aware of the difficulties normally encountered by enterprises in the
exploration stage. There can be no assurance that our business plan will prove
successful, and no assurance that we may be able to operate profitably, if at
all.

We cannot be sure that we will be successful in addressing
these risks and uncertainties and our failure to do so could have a material
adverse effect on our financial condition. In addition, our operating results
are dependent to a large degree upon factors outside our control. There are no
assurances that we will be successful in addressing these risks, and the failure
to address such risks may adversely affect our business.

It is unlikely that we will generate any revenues while we seek
to complete our drilling, completion and production program and seek additional
suitable business opportunities. Our short and long-term prospects depend upon
the success of our drilling, completion and production program and our ability
to select and secure suitable business opportunities. In order for our company
to generate revenues, we will incur substantial expenses in the location,
acquisition and development of commercially viable reserves of oil and gas. Even
with the Chetopa project in Kansas (as detailed in Item 4.A - "History and
Development of MegaWest Energy Corp." below), our projects are in the
exploration stage only and are without known reserves of oil and gas.
Accordingly, we have not generated any revenues nor have we realized a profit
from our operations to date and there is little likelihood that we will generate
any revenues or realize any profits in the short term. Any profitability in the
future from our business will be dependent upon locating and developing economic
reserves of oil and gas, which itself is subject to numerous risk factors as set
forth herein. Since we have not generated any revenues, we may have to raise
additional monies through the sale of our equity securities or debt in order to
continue our business operations.

We therefore expect to incur significant losses for the foreseeable
  future. We recognize that if we are unable to generate significant revenues
  from our business activities, our entire business may fail. There is no history
  upon which to base any assumption as to the likelihood that we will be successful
  in acquiring a suitable business opportunity or complete a business combination,
  and we can provide no assurance to investors that we will generate any operating
  revenues or achieve profitable operations.

Due to the losses incurred since inception and not having
generated any revenues to date nor currently generating any revenues, there is
substantial doubt about our ability to continue as a going concern.

There can be no assurance that, if required, any such financing
will be available upon terms and conditions acceptable to us, if at all. Our
inability to obtain additional financing in a sufficient amount when needed and
upon terms and conditions acceptable to us could have a materially adverse
effect upon our company. Although we believe that we have funds sufficient to
meet our immediate needs, we expect to require further funds to finance the
development of our company. There can be no assurance that such funds will be
available or available on terms satisfactory to us. If additional funds are
raised by issuing equity securities, further dilution to existing or future
shareholders is likely to result. If adequate funds are not available on
acceptable terms when needed, we may be required to delay, scale back or
eliminate the development of our company. Inadequate funding could also impair
our ability to compete in the marketplace, which may result in the dissolution
of our company.

We have not generated any revenues and our ability to
generate revenues is uncertain.

In the past, we have incurred substantial net losses. For the
  year ended April 30, 2006, we incurred net losses of $222,945, and for the year
  ended April 30, 2005, we incurred net losses of $61,031. We also have an accumulated
  deficit of $505,514 as at April 30, 2006. These losses are related to our former
  business (described below in Item 4.A  "History and Development of MegaWest
  Energy Corp." below) which we are no longer pursuing. At this time, our ability
  to generate any revenues is uncertain. Although we believe that we have sufficient
  funds to finance our operating costs for the next twelve months, we may require
  additional funds to finance the acquisition of suitable additional business
  opportunities or to complete business combinations. We do not expect to generate
  any

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significant revenues for the foreseeable future. Accordingly,
we may require additional funds, either from equity or debt financing, to
maintain our daily operations in the future and to locate, acquire and develop
suitable business opportunities or to complete business combinations.Obtaining additional financing is subject to a number of factors, including
investor acceptance of any business we may acquire or combine with in the future
and general investor sentiment. Financing, therefore, may not be available on
acceptable terms, if at all. The most likely source of future funds presently
available to us is through the sale of equity capital. Any sale of share
capital, however, will result in the dilution of existing shareholders. If we
are unable to raise additional funds when required, we may be forced to delay
our plan of operation and our entire business may fail.

Risks Relating to our Business

We have no binding agreements for additional business
combinations or other transaction and there can be no assurance that we will be
able to successfully identify and evaluate suitable additional business
opportunities.

As at the date of this annual report, we have no binding
arrangements, agreements or understandings with respect to acquiring additional
oil and gas prospects, although we have entered into non-binding letters of
intent with: (a) Deerfield Energy LLC in respect of the purchase of all the
issued and outstanding membership units of Deerfield Energy LLC; (b) Trinity
Sands Energy LLC in respect of the purchase of all the issued and outstanding
membership units of Trinity Sands Energy LLC; and (c) Kentucky Reserves, LLC in
respect of the purchase of all of the issued and outstanding membership units of
Kentucky Reserves, LLC (as detailed in Item 4.A - "History and Development of
MegaWest Energy Corp." below). The success of our company following an entry
into any business opportunity will depend to a great extent on the operations,
financial condition and management of any identified business opportunity. While
management intends to seek business opportunities and/or business combinations,
there is no assurance that we will successfully locate business opportunities.
In the event that we complete the current business combination opportunities or
otherwise acquire business opportunities, the success of our operations may be
dependent upon management of the successor firm or venture partner firm,
together with a number of other factors beyond our control.

Our ability to locate additional business opportunities and
to develop and realize the potential of our projects is dependent on us being
able to raise significant amounts of additional financing. All or a portion of
our interest in our projects may be lost if we are unable to obtain significant
additional financing, as we are required to make significant expenditures on the
exploration and development of our projects.

Our ability to locate and enter into additional business
opportunities, including, but not limited to, the continued exploration and, if
warranted, development of our projects will be dependent upon our ability to
raise significant additional financing. If we are unable to obtain such
financing, a portion of our interest in our projects may be lost or our projects
may be lost entirely and revert back to the current owners or landowners.

Additionally, our decision as to whether our projects contain
commercial oil and gas deposits and should be brought into production will
require substantial funds and depend upon the results of exploration programs
and feasibility studies and the recommendations of duly qualified engineers,
geologists, or both. This decision will involve consideration and evaluation of
several significant factors, including, but not limited to: (a) costs of
bringing a project into production, including exploration and development work,
preparation of production feasibility studies, and construction of production
facilities; (b) availability and costs of financing; (c) ongoing costs of
production; (d) market prices for the oil and gas to be produced; (e)
environmental compliance regulations and restraints; and (f) political climate,
governmental regulation and control.

While we have approximately $35,489,317 in cash on hand, we
have no material cash flow from operations. We are therefore dependent for
future funds on our ability to sell our common shares, primarily on a private
placement basis. During the course of the twelve month period ending April 30,
2007, we anticipate that we will incur approximately US$10,053,500 in expenses
related to business combination costs, operating costs and costs associated with
the continued pursuit of identifying suitable business opportunities. Although
we have funds to cover the costs associated with our identified prospects and
the estimated operating costs thereof during the next twelve months, we have not
generated any revenues to date (and may not in the future), so we may be
required to

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raise additional funding through private placements of our
equity securities and/or debt financing after the next twelve month period. In
addition, we may identify additional business opportunities which may require
additional funding. There can be no assurance that we will be able to obtain
financing on that basis in light of factors such as the market demand for our
securities, the state of financial markets generally and other relevant factors.

If adequate funds are not available on acceptable terms when
needed, we may be required to delay, scale back or eliminate the development of
our operations and any business opportunity that we acquire and we may not be
able to realize any potential of our projects. Inadequate funding could also
impair our ability to compete in the marketplace, and our entire business may
fail.

We may be subject to Canadian and United States tax
consequences if we acquire a business opportunity or combination.

Canadian and United States tax consequences may be a major
consideration in any business acquisition or combination that we elect to
undertake. Typically, these transactions may be structured in such a manner so
as to result in a tax-free transaction pursuant to various Canadian and United
States tax provisions. We intend to structure any business combination so as to
minimize the tax consequences to both our company and the target entity.
However, there can be no assurance that a business combination will meet the
statutory requirements for a tax-free reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of common shares or
assets. A non-qualifying reorganization could result in the imposition of taxes,
which may have an adverse effect on both parties to the transaction. Compliance
with these laws and regulations has not had a material effect on our operations
or financial condition to date.

Our accounts are subject to currency fluctuations which may
periodically affect our financial position and results.

We maintain our accounts in Canadian currency and make certain
payments in the currency of the United States and are therefore subject to
currency fluctuations and such fluctuations may periodically affect our
financial position and results. We do not currently engage in currency hedging
activities.

Risks Relating to Oil and Gas Operations

Competition in the oil and gas industry is highly
competitive and there is no assurance that we will be successful in acquiring
further leases.

The oil and gas industry is intensely competitive. We compete
with numerous individuals and companies, including many major oil and gas
companies, which have substantially greater technical, financial and operational
resources and staffs for suitable business opportunities, desirable oil and gas
properties for drilling operations, drilling equipment and funds. There can be
no assurance that the necessary funds can be raised or that any projected work
will be completed.

As our Chetopa project and other identified prospects are in
the exploration stagethere can be no assurance that we
will establish commercial discoveries on our Chetopa project and other
identified prospects.

Exploration for economic reserves of oil and gas is subject to
a number of risk factors. Few of the prospects that are explored are ultimately
developed into producing oil and/or gas wells. Our Chetopa prospect in Kansas
and our other identified prospects are in the exploration stage only and are
without proven reserves of oil and gas. There can be no assurance that we will
establish commercial discoveries on any of our projects.

The potential profitability of oil and gas ventures depends
upon factors beyond the control of our company.

The potential profitability of oil and gas projects is
dependent upon many factors beyond our control. For instance, world prices and
markets for oil and gas are unpredictable, highly volatile, potentially subject
to governmental fixing, pegging, controls, or any combination of these and other
factors, and respond to changes in domestic,

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- 9 -

international, political, social, and economic environments.
Additionally, due to world-wide economic uncertainty, the availability and cost
of funds for production and other expenses have become increasingly difficult,
if not impossible, to project. These changes and events may materially affect
our financial performance.

Adverse weather conditions can also hinder drilling operations.
A productive well may become uneconomic in the event water or other deleterious
substances are encountered which impair or prevent the production of oil and/or
gas from the well. In addition, production from any well may be unmarketable if
it is impregnated with water or other deleterious substances. The marketability
of oil and gas which may be acquired or discovered will be affected by numerous
factors beyond our control. These factors include the proximity and capacity of
oil and gas pipelines and processing equipment, market fluctuations of prices,
taxes, royalties, land tenure, allowable production and environmental
protection. The extent of these factors cannot be accurately predicted but the
combination of these factors may result in our company not receiving an adequate
return on invested capital.

Oil and gas operations are subject to comprehensive
regulation which may cause substantial delays or require capital outlays in
excess of those anticipated causing an adverse effect on our company. Further,
exploration and production activities are subject to certain environmental
regulations which may prevent or delay the commencement or continuance of our
operations.

Oil and gas operations in the United States and Canada are
subject to federal, state and provincial laws and regulations relating to the
protection of the environment, including, but not limited to, laws regulating
removal of natural resources from the ground and the discharge of materials into
the environment. Oil and gas operations in United States and Canada are also
subject to federal, state and provincial laws and regulations which seek to
maintain health and safety standards by regulating the design and use of
drilling methods and equipment. Various permits from government bodies are
required for drilling operations to be conducted; no assurance can be given that
such permits will be received. No assurance can be given that environmental
standards imposed by federal, state and provincial authorities will not be
changed or that any such changes would not have material adverse effects on our
activities. Moreover, compliance with such laws may cause substantial delays or
require capital outlays in excess of those anticipated, thus causing an adverse
effect on us. Additionally, we may be subject to liability for pollution or
other environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. Our current and anticipated
exploration and drilling activities are subject to the aforementioned
environment regulations. When and if we establish reserves or enter into
production we will become subject to additional regulations which do not
currently pertain to us or affect our current operations.

Specifically, we are subject to legislation regarding emissions
into the environment, water discharges and storage and disposition of hazardous
wastes. In addition, legislation has been enacted which requires well and
facility sites to be abandoned and reclaimed to the satisfaction of federal,
state and provincial authorities. However, such laws and regulations are
frequently changed and we are unable to predict the ultimate cost of compliance.
Generally, environmental requirements do not appear to affect us any differently
or to any greater or lesser extent than other companies in the industry.

Based upon our review of the environmental regulations that we
are currently subject to, we believe that our operations comply, in all material
respects, with all applicable environmental regulations.

Exploratory drilling involves many risks and we may become
liable for pollution or other liabilities which may have an adverse effect on
our financial position.

Drilling operations generally involve a high degree of risk.
Hazards such as unusual or unexpected geological formations, power outages,
labour disruptions, blow-outs, sour gas leakage, fire, inability to obtain
suitable or adequate machinery, equipment or labour, and other risks are
involved. We may become subject to liability for pollution or hazards against
which we cannot adequately insure or which we may elect not to insure. Incurring
any such liability may have a material adverse effect on our financial position
and operations.

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- 10 -

We have oil and gas leases in respect of the real property
associated with our projects, but the real property may be subject to prior
unregistered agreements, or transfers which have not been recorded or detected
through title searches.

We have oil and gas leases with respect to the real property
associated with our projects and we believe our interests are valid. However,
these leases do not guarantee title against all possible claims. The real
property may be subject to prior unregistered agreements, or transfers which
have not been recorded or detected through title research. If the oil and gas
leases to the real property associated with our projects are challenged, we may
have to expend funds defending any such claims and may ultimately lose some or
all of any revenues generated from the projects if we lose our interest in such
leases.

Risks Relating to our Common Stock

Our common stock is illiquid and shareholders may be unable
to sell their shares.

Our common shares are currently quoted on the Over-the-Counter
Bulletin Board (OTC Bulletin Board) and are thinly traded. In the past, our
trading price has fluctuated widely, depending on many factors that may have
little to do with our operations or business prospects. There is currently a
limited market for our common shares and we can provide no assurance to
investors that a market will develop. If a market for our common shares does not
develop, our shareholders may not be able to re-sell the shares of our common
shares that they have purchased and they may lose all of their investment.
Public announcements regarding our company, changes in government regulations,
conditions in our market segment and changes in earnings estimates by analysts
may cause the price of our common shares to fluctuate substantially. In
addition, the OTC Bulletin Board is not an exchange and, because trading of
securities on the OTC Bulletin Board is often more sporadic than the trading of
securities listed on an exchange of the NASDAQ Stock Market, Inc., you may have
difficulty reselling any of the shares you purchase from our selling
shareholders.

Securities class-action litigation has often been instituted
  following periods of volatility in the market price of a company's securities.
  Such litigation, if instituted against our company, could result in substantial
  costs for our company and a diversion of management's attention and resources.

If we complete further business opportunities or
combinations, we may be required to issue a substantial number of common shares
which would dilute the shareholdings of our current shareholders and result in a
change of control of our company.

Our primary plan of operation is based upon the acquisition of
business opportunities or business combinations with private companies. The
likely result of such transactions would result in our company issuing common
shares to shareholders of such private companies. Issuing previously authorized
and unissued common shares in the capital of our company will reduce the
percentage of common shares owned by existing shareholders and may result in a
change in the control of our company and our management. Currently, we have
entered into letters of intent to acquire additional non-conventional, heavy oil
prospects. If we close on these acquisitions, we may issue an additional
19,500,000 common shares and vest up to 9,000,000 warrants (issued to a private
company controlled by a director of our company) exercisable for 9,000,000
common shares. A further 10,500,000 warrants, of which 10,000,000 warrants
(issued to a private company controlled by an officer and director of our
company) exercisable for 10,000,000 common shares may be vested upon acceptance
of future projects.

Shareholders' interests in our company will be diluted and
investors may suffer dilution in their net book value per share if we issue
additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of an unlimited
number of common shares without par value and 100,000,000 preference shares
without par value. In the event that we are required to issue additional shares
or enter into private placements to raise financing through the sale of equity
securities, the interests of existing shareholders in our company will be
diluted and existing shareholders may suffer dilution in their net book value
per share

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- 11 -

depending on the price at which such securities are sold. If we
do issue additional shares, it will cause a reduction in the proportionate
ownership and voting power of all existing shareholders.

Principal shareholders, officers and directors have
substantial control regarding share ownership. This concentration could lead to
conflicts of interest and difficulties in the "public" investors effecting
corporate changes, and could adversely affect our companys share prices.

Our senior management, directors and greater-than-five-percent
shareholders (and their affiliates), acting together, hold approximately 29.5%
of the shares of our company, on a diluted basis, and have the ability to
control substantially all matters submitted to our companys shareholders for
approval (including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our companys assets) and
to control our companys management and affairs. Accordingly, this concentration
of ownership may have the effect of delaying, deferring or preventing a change
in control of our company, impeding a merger, consolidation, takeover or other
business combination involving our company or discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain control of our
company, which in turn could materially adversely affect the market price of our
companys shares.

Employee, director and consultant stock options and warrants
could lead to greater concentration of share ownership among insiders and could
lead to dilution of share ownership which could lead to depressed share prices.

Because the success of our company is highly dependent upon our
respective employees, our company has granted to some or all of our key
employees, directors and consultants options to purchase common shares as
non-cash incentives. To the extent that significant numbers of such options may
be granted and exercised, the interests of the other shareholders of our company
may be diluted causing possible loss of investment value.

We have never declared or paid cash dividends on our common
shares and do not anticipate doing so in the foreseeable future.

There can be no assurance that our board of directors will ever
declare cash dividends, which action is exclusively within our discretion.
Shareholders cannot expect to receive a dividend on our common shares in the
foreseeable future, if at all.

Trading of our shares may be restricted by the SEC's "Penny
Stock" regulations which may limit a shareholder's ability to buy and sell our
shares.

The U.S. Securities and Exchange Commission has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors." The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the share that is subject to these

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- 12 -

penny stock rules. Consequently, these penny stock rules may
affect the ability of broker-dealers to trade our securities. We believe that
the penny stock rules discourage investor interest in and limit the
marketability of, our common shares.

The National Association of Securities Dealers, or NASD, has
adopted sales practice requirements which may limit a shareholder's ability to
buy and sell our shares.

In addition to the "penny stock" rules described above, the
NASD has adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that
speculative low priced securities will not be suitable for at least some
customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common shares, which may limit your
ability to buy and sell our shares and have an adverse effect on the market for
our shares.

Risks Relating to Our Management

Our articles contain provisions indemnifying our officers
and directors against all costs, charges and expenses incurred by them.

Our articles contain provisions that state, subject to
applicable law, we shall indemnify every director or officer of our company,
subject to the limitations of the Corporations Act (British Columbia),
against all losses or liabilities that our companys director or officer may
sustain or incur in the execution of their duties. Our companys articles
further state that no director or officer shall be liable for any loss, damage
or misfortune that may happen to, or be incurred by our company in the execution
of their duties if they acted honestly and in good faith with a view to the best
interests of our company. Such limitations on liability may reduce the
likelihood of litigation against our companys officers and directors and may
discourage or deter our shareholders from suing our companys officers and
directors based upon breaches of their duties to our company, though such an
action, if successful, might otherwise benefit our company and our shareholders.

As a majority of our directors and officers are residents of
other countries other than the United States, investors may find it difficult to
enforce, within the United States, any judgments obtained against our company or
our directors and officers.

We do not currently maintain a permanent place of business
within the United States. In addition, a majority of our directors and officers
are nationals and/or residents of countries other than the United States, and
all or a substantial portion of such persons' assets are located outside the
United States. As a result, it may be difficult for investors to enforce within
the United States any judgments obtained against our company or our officers or
directors, including judgments predicated upon the civil liability provisions of
the securities laws of the United States or any state thereof.

Key management employees may fail to properly carry out
their duties or may leave which could negatively impact corporate operations
and/or share pricing.

Our company's financial condition and the success of our oil
and gas operations is dependent on our ability to hire and retain highly skilled
and qualified personnel, including George T. Stapleton, II, R. William Thornton
and George Orr. We face competition for qualified personnel from numerous
industry sources, and there can be no assurance that we will be able to attract
and retain qualified personnel on acceptable terms. The loss of service of any
of our key personnel could have a material adverse effect on our operations or
financial condition. We do not have key-man insurance on any of our employees
and with the exception of R. William Thornton, we do not have written employment
agreements with any of our key personnel.

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- 13 -

ITEM
4.           Information on
MegaWest Energy Corp.

*A.*          *History and Development of MegaWest Energy Corp.*

Our company was incorporated in the Province of British
Columbia under the Company Act (British Columbia) on February 8, 2000
under the name "Brockton Capital Corp.". On March 29, 2004, the Business
Corporations Act (British Columbia) came into effect, replacing the
Company Act. As required by the Business Corporations Act, our
company was "transitioned" under the Business Corporations Act, effective
June 30, 2005. At a special general meeting of shareholders of our company on
February 19, 2007, our shareholders authorized our directors to remove the
pre-existing company provisions applicable to our company pursuant to the
Business Corporations Act and to adopt new articles for our company. The
shareholders also approved a special resolution changing the name of our company
to "MegaWest Energy Corp." The change of name was effected as of February 27,
2007.

Our company is currently a reporting issuer under the
securities laws of the Provinces of British Columbia and Alberta.

Our corporate offices are located at Suite 1000, 815 
8th Avenue S.W., Calgary Alberta, Canada T2P 3P2. Our telephone
number is (403) 984-6342 and our facsimile number is (403) 984-6343.

Our company's authorized capital shares consist of an unlimited
number of common shares without par value and 100,000,000 preferred shares
without par value. As at the year ended April 30, 2006, there were 6,337,500
common shares issued and outstanding. As of March 26, 2007, there were
66,311,050 common shares issued and outstanding.

Our companys initial public offering was completed on July 5,
2001, raising $262,500 from the sale of 1,750,000 common shares.

Our company's common shares began trading on the TSX Venture
Exchange (formerly the Canadian Venture Stock Exchange) in Toronto, Ontario,
Canada, on August 27, 2001. Our company was a capital pool company pursuant to
the policies of the TSX Venture Exchange, whereby the principal business of our
company was to identify and evaluate opportunities for the acquisition of an
interest in assets or businesses, a "qualifying transaction".

On September 4, 2002, we signed a letter of intent to acquire
all of the common shares of Cyberhand Technologies Inc., a company engaged in
the business of designing, manufacturing and marketing ergonomically designed
peripheral computer hardware products. On August 28, 2003, we entered into the
share purchase agreement whereby we agreed to acquire all of the issued and
outstanding shares of Cyberhand Technologies Inc. During the fiscal year ended
April 30, 2004, we advanced $109,280 plus accrued interest to Cyberhand
Technologies Inc. pursuant to notes payable to fund activities pending the
proposed acquisition. The completion of the acquisition was subject to due
diligence, shareholder approval, a proposed financing, and regulatory approval.

Effective June 16, 2004, we voluntarily de-listed our common
shares from the TSX Venture Exchange. We took this action despite receiving
conditional approval from the TSX Venture Exchange to complete our qualifying
transaction to acquire Cyberhand Technologies Inc. The reason for our voluntary
de-listing was our belief that we would not have been able to satisfy all of the
conditions set by the TSX Venture Exchange in a timely manner which would have
put us at risk of defaulting on our agreement with Cyberhand Technologies Inc.
However, we felt we needed to seek alternatives to maintaining our TSX Venture
Exchange listing and obtained a listing on the OTC Bulletin Board in the United
States, effective March 28, 2005.

Pursuant to a July 2004 distributor agreement, we acquired the
non-exclusive right to market, sell and distribute in Canada the full line of
computer products designed, manufactured and marketed by Cyberhand Technologies
Inc. in consideration for the assignment of $123,610, being the balance owed on
the promissory notes from Cyberhand Technologies Inc. Pursuant to the
distributor agreement, we agreed to purchase a minimum of 15,000 units on or
before July 5, 2007. Upon completion of this minimum order, we further agreed to
purchase 50,000 units per month

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- 14 -

or forfeit our rights under the distributor agreement. As
required by the distributor agreement, we also purchased the initial order of
200 units. As a result of the change in our business, the rights under the
distributor agreement have been written down to $Nil in our books, as we do not
intend to pursue this line of business in the future.

In July 2004, we completed a private placement of 4,500,000
common shares at $0.001 per share, including 1,250,000 shares purchased by
directors and officers.

On October 20, 2006, the shareholders of our company approved a
subdivision of its issued and outstanding common shares on an up to 3 to 1
basis. This subdivision is subject to the discretion of the directors and is
currently not proposed to be implemented.

Due to the inability to generate revenues from our existing
line of business, namely the distribution of the Cyberhand Technologies Inc.
products, management considered alternative business opportunities, namely
non-conventional oil and gas resource exploration and development.

As such, subsequent to the fiscal year ended April 30, 2006, we
completed three private placements to provide us with working capital to
evaluate and pursue non-conventional oil and gas opportunities in the United
States and Canada and to establish an operations base in Calgary, Alberta. The
first of the private placements, an offering of 23,500,000 common shares of our
company at US$0.10 per common shares for aggregate proceeds of US$2,350,000 was
completed during December 2006. During January and February 2007, we completed a
further private placement of 8,425,000 units, at a price of US$0.50 per unit,
for aggregate proceeds of US$4,212,500, each of which units consists of one
common share and one-half of one common share purchase warrant (each whole
warrant entitling the holder to purchase an additional common share at an
exercise price of US$1.00 for a period of one year). During March 2007, our
company completed an additional private placement of 27,448,550 units, at a
price of US$1.00 per unit, for aggregate proceeds of US$27,448,550, each of
which units consists of one common share and one-half of one common share
purchase warrant (with each whole warrant entitling the holder to purchase an
additional common share at an exercise price of US$1.30 for a period of one
year). In conjunction with the March 1, 2007 private placement, we have issued
867,659 warrants (each of which entitles the holder to purchase one common share
at US$1.30 for a period of one year) to finders, and we expect to issue,
approximately, an additional 385,341 finders warrants (each of which entitles
the holder to purchase one common share at US$1.30 for a period of one year). We
have also settled $167,500 of accounts payable through the issuance of 600,000
common shares.

In December 2006, we took our first significant steps to become
a non-conventional oil and gas company with an initial focus on heavy oil when
we entered into several non-binding letters of intent with several companies
involved in the business of the exploration and development of oil and gas
reserves.

Pursuant to our goal of becoming a non-conventional oil and gas
company, on December 20, 2006 we granted 19,500,000 warrants to three persons
(including a private company controlled by R. William Thornton, a director and
the Chief Operating Officer of our company and a private company controlled by
Dr. Gail Bloomer, a director of our company) that entitle such persons to
purchase common shares of our company at a price of US$0.10 per share upon the
occurrence of certain conditions. The conditions include that the warrants vest
if the holder thereof brings a project of merit (i.e. a project with a potential
economic value in the amount of at least US$1.00 multiplied by the total number
of warrants issued to the holder) to the directors of our company by December
21, 2007.

On December 20, 2006, we entered into a non-binding letter of
intent with Deerfield Energy LLC in respect of our acquisition of all of the
assets of Deerfield Energy LLC, which include: (a) the Deerfield prospect in
Vernon county, Missouri; covering 7,620 acres with the opportunity for us to
acquire an additional 10,000 acres, with us acquiring a 100% work interest
subject to a 20% royalty; and (b) the acquisition of all of the assets of
Deerfield Energy Kansas Corp. (a wholly owned subsidiary of Deerfield Energy
LLC), which assets include the Chetopa prospect in Chetopa, Kansas, which is
ready for production, with us acquiring a 100% interest subject to a 12.5%
royalty and a 25% net profits interest subject to a maximum net profits interest
amount of US$750,000 after recovery of costs. The letter of intent provides that
the purchase price for the assets will be paid as follows:

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- 15 -

US$800,000 will be paid in cash and the remainder will be paid
by the issuance of 5,000,000 common shares in our capital.

In conjunction with the letter of intent, we agreed to
immediately assume the repayment of a US$500,000 loan made by Agosto Corporation
Ltd. to Deerfield Energy LLC. In exchange for the assumption of the Agosto
Corporation Ltd. loan, we issued a one-year convertible promissory note to
Agosto Corporation Ltd. in the amount of US$500,000 with simple interest
accruing at a rate of 6% per annum. Agosto Corporation Ltd. has the option to
convert the principal of the note plus accrued interest into common shares of
our company at a conversion rate of US$0.25 per share.

On December 20, 2006, we entered into a non-binding letter of
intent with Trinity Sands Energy LLC and its unit holders in respect of our
purchase of all of the issued and outstanding membership units of Trinity Sands
Energy LLC, a company engaged in the business of the exploration and development
of oil and gas reserves and whose assets include the Trinity Sands prospect in
Texas which covers approximately 25,296 acres with an opportunity for us to
acquire an additional 5,000 acres with us acquiring a 66.67% working interest
subject to a maximum 20% royalty. In consideration for the shares of Trinity
Sands Energy LLC, we have agreed to pay US$1,150,000, of which US$200,000 is
payable in cash and 9,500,000 common shares in our capital. The closing date is
to occur as soon as reasonably possible after the receipt of all necessary
regulatory and shareholder approvals, but in any event no later than March 31,
2007. The closing of this transaction has been extended to April 15, 2007.

In conjunction with the letter of intent, we agreed to
immediately assume the repayment of a US$1,200,000 loan made by Agosto
Corporation Ltd. to Trinity Sands Energy LLC. In the event that the letter of
intent is terminated and the parties do not enter into the definitive agreement,
Trinity Sands Energy LLC shall be obligated to make payment to our company of
US$1,200,000 plus simple interest accruing at a rate of 6% per annum payable
over a 24-month period beginning six months from the date of termination of the
letter of intent. In exchange for the assumption of Agosto Corporation Ltd.
loan, we issued a one-year convertible promissory note to Agosto Corporation
Ltd. in the amount of US$1,200,000 with simple interest accruing at a rate of 6%
per annum. Agosto Corporation Ltd. has the option to convert the principal of
the note plus accrued interest into common shares of our company at a conversion
rate of US$0.25 per share. In addition, Trinity Sands Energy LLC issued a
promissory note in the amount of $1,650,000 to us in respect of the acquisition
of 7,500,000 common shares of Energy Finders, Inc., a U.S. company that owns the
minority working interest of the Trinity Sands prospect.

On January 2, 2007, we entered into a non-binding letter of
intent with Kentucky Reserves, LLC and its unit holders in respect of our
purchase of all of the issued and outstanding membership units of Kentucky
Reserves, LLC, a company engaged in the business of the exploration and
development of oil and gas reserves and which assets include oil, gas and
mineral leases located in the Edmonson, Warren and Butler counties in Kentucky
covering approximately 25,500 net mineral acres for the purchase price of
US$3,000,000 and 5,000,000 common shares. The closing date is to occur as soon
as reasonably possible after the closing of an equity financing of
US$20,000,000, but in any event no later than April 2, 2007. Pursuant to the
terms of the letter of intent, we will acquire a 62.5% working interest in the
shallow rights for the consideration noted above plus a 37.5% interest in the
deep rights for US$1,000.

Additional terms of the Kentucky Reserves, LLC letter of
intent, include that we: (a) will be responsible for 62.5% of the administration
costs (including delay rentals) within the area covered by the leases; and (b)
have agreed to undertake a US$15,000,000 work program within the area covered by
the leases, which work program must be completed within 30 months of the
execution of a purchase agreement for the purpose of determining the most
effective way of extracting heavy oil/bitumen from the leases. The work program
will consist of such field testing and evaluation as the drilling, logging and
coring of wells, formation and fluid testing, the construction of heavy oil
production pilot projects such as steam, water flooding, solvent injection,
electro-thermal heating, or the like. Should we be unable to expand the work
program commitment within the 30-month period, we will be subject to a 37.5%
penalty on the unexpanded amount of the work program commitment.

On March 26, 2007, we entered into an asset purchase agreement
with Deerfield Energy Kansas Corp. in respect of the purchase of all of the
assets of Deerfield Energy Kansas Corp. by our wholly-owned subsidiary, MegaWest

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- 16 -

Energy (USA) Corp. The purchased assets include certain items
of equipment and fixed assets (as detailed in Item 4.D  "Property, Plants and
Equipment" below) and interests in two oil and gas leases in respect of 392
acres of real property. The purchase price for the assets was paid by 250,000
common shares in our capital, to be issued, and our release of Deerfield Energy
LLC (the parent of Deerfield Energy Kansas Corp.) of its obligations to us in
respect of a promissory note in the amount of US$500,000 granted by Deerfield
Energy LLC to Agosto Corporation Ltd. in the amount of US$500,000, which Agosto
Corporation Ltd. assigned to us pursuant to our assumption of the repayment of
the US$500,000 loan made by Deerfield Energy LLC to Agosto Corporation Ltd.
pursuant to the terms of our letter of intent with Deerfield Energy LLC, dated
December 20, 2006.

*B.****Business Overview*

We are a publicly held Canadian oil and gas company (OTC BB:
MGWSF) which has taken its first significant steps to becoming a
non-conventional oil and gas company, with an initial focus on North American
heavy oil, with the acquisition of the Chetopa project (as detailed in Item 4.A
 "History and Development of MegaWest Energy Corp." below). We have never had
any oil and gas operations and do not currently own any oil and gas leases with
proven reserves. However, we have agreements in principle to acquire interests
in oil and gas leases in respect of approximately 60,000 acres in three prospect
areas  Kentucky Reserves (Kentucky), Trinity Sands (Texas) and Deerfield
(Missouri), none of which have proven reserves. We are also actively assessing
additional heavy oil prospects.

Our operational and head office is in Calgary, Alberta, which
is considered to be the centre of the Canadian oil industry. In Calgary we have
access to a vast array of technical experts in the recovery of heavy oil. Our
company also has senior personnel based in Houston, Texas. We have built a team
with expertise in various methods of primary and thermal heavy oil recovery,
including Cyclic Steam Stimulation (CSS), Steam Assisted Gravity Drainage
(SAGD), steam drive, in situ combustion, ET-DSP (a form of
electro-thermal heating) and solvent processes.

Our company intends to acquire large blocks of oil and gas
rights known to contain substantial deposits of heavy oil. Through delineation
drilling and the completion of pilot production tests, we plan to establish
proven and producing reserves on these development projects using thermal
recovery technologies developed in Canada. The underpinning for our strategy is
the convergence of the increased necessity for North American security of energy
supplies, current world oil prices.

CHETOPA PROJECT

On March 26, 2007, we acquired (through a wholly-owned
subsidiary, MegaWest Energy (USA) Corp.) all of the assets associated with the
Chetopa heavy oil prospect near Chetopa, Kansas. The acquired assets include
various items of drilling and pouring equipment and various fixed assets,
including a steam generator, oil wells and buried oil production lines (as
detailed in Item 4.D  "Property, Plants and Equipment") and interests in two
oil and gas leases in respect of 392 acres of real property.

The original project developers ran out of funds in June 2005
prior to full start-up of the field. At that time 20 steam injector and 33
producer wells had been drilled, completed, equipped and tied in for a total of
15 acres ready for production. A tank battery and two transfer stations are in
place. A refurbished Struthers steam generator, modified to burn used motor oil,
is also installed on site.

The Chetopa project was originally visited with by Deerfield
Energy LLC to acquire the surface equipment and steam generator at a significant
discount for use in the potential Deerfield project in Missouri. As a result of
further investigation into the project, an agreement was negotiated with Central
Production Company, the original developers of the project, that would allow
Deerfield Energy LLC to take over the project by settling outstanding vendor
invoices not exceeding US$250,000 and funding the start-up of production
operations. After payout, Central Production Company will also receive a 25% net
revenue interest in the prospect after recovery of costs, up to a maximum amount
of US$750,000.

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- 17 -

We believe that production can commence within three months.
The drilling of additional steam injection patterns can be funded from our
existing cash reserves or cash generated from successful production of the
initial production. We have purchased all of the surface equipment at a
significant discount for future use. The Chetopa project provides a potential
means for achieving early initial production at minimal expense while finalizing
the demonstration project on the Deerfield (Missouri) prospect.

In subsequent years a new 15-acre parcel could be drilled and
readied for steaming operations while the 15 acres steamed the previous year
could be switched to a hot waterflood. Apart from the expense of drilling and
completing ten new well patterns each year, all required surface equipment is
already in place. Pumping equipment can be relocated each year, beginning in
year No. 3. Following year No. 1, a decision will be made regarding whether to
revise well pattern spacing by incorporating radially drilled laterals into the
injector and producer well designs, thereby opening up more of the formation and
improving steam injection and oil production characteristics.

Produced oil will be trucked and sold to the Coffeyville
refinery located 20 miles west of Chetopa. It is expected that crude oil
production can be sold for 85-90% of West Texas Intermediate crude oil pricing.

TECHNOLOGY SUMMARY

Heavy Oil

North Americas heavy oil and bitumen deposits are estimated to
contain more than 3 trillion barrels of resource, rivalling Saudi Arabia. Crude
oil is considered "heavy" if its API gravity is lower than 20 degrees and its
viscosity is higher than 1,000 centipoise. Natural bitumens are even poorer raw
materials, with API gravities lower than 10 degrees and viscosities greater than
10,000 centipoise. Heavy oil and bitumen are highly viscous requiring heat or
dilution to enable significant production and recovery of reserves.

Numerous large oil sands projects, both mining and in
situ have been announced and are being actively pursued to exploit this
resource. The well-established North American heavy oil deposits offer
world-class exploitation opportunities. We believe that the need for North
American energy self-sufficiency combined with the encouraging outlook for heavy
oil demand, strong prices, and easy access to refineries make this an ideal time
for the re-optimization of non-conventional heavy oil supplies.

Similar to other maturing resources, primary heavy oil
production in the Canadian heavy oil industry has peaked and is on decline.
Encouraged by favourable economic terms and long term leases, thermal recovery
is rapidly increasing and now exceeds 240,000 barrels of oil per day (bopd).
There are 21 approved Steam Assisted Gravity Drainage (SAGD)projects, six approved Cyclic Steam Stimulation (CSS) projects and one
approved in situ combustion project in the Province of Alberta.
Projections on the future phased developments of these projects indicate that
thermal production could reach 1,500,000 bopd by 2013 if investment proceeds as
planned. There is a significant and well-established commercial enhanced
recovery technology industry in Canada.

Large unconventional energy resources that are difficult to
produce using todays standard recovery methods are the focus of our company.
These resources represent the key to easing energy supply concerns in the near
term and the future. We are building a team to evaluate and exploit its projects
using the best proven or emerging technologies.

In SituResource Recovery

Although most heavy oil or bitumen in North America is
currently produced by open pit mining, about 80% of the oil sands are buried too
deep below the surface for this process to be applied. This oil must be
recovered by in situ techniques, which heat or dilute the heavy oil,
thereby lowering its viscosity and allowing it to migrate towards producing
wells, where it is brought to the surface. A technical review of MegaWests
prospects will identify the most suitable technology for each resource and may
include proven technologies such as Cyclic Steam Stimulation (CSS), Steam
Assisted Gravity Drainage (SAGD), Steam Drive, in situ Combustion
and CO2 injection or such

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emerging technologies as ET-DSP (a form of electro-thermal
heating) or N-Solv (a novel solvent based technology).

We will be exploring synergistic technologies to improve
capital efficiency, increase energy efficiency, reduce energy costs, reduce the
requirement for water, and increase the profitability of in situ
processes. Production from in situ processes may well replace mining as
the main source of heavy oil production from tar sands, contributing
significantly to energy self-sufficiency in North America.

*C.*         
*Organizational Structure*

As of the date of this annual report, we have one subsidiary,
MegaWest Energy (USA) Corp., a corporation incorporated pursuant to the laws of
the State of Nevada.

*D.*         
*Property, Plants and Equipment*

We currently rent office space located at Suite 1000, 815 8th
Avenue S.W., Calgary, Alberta, Canada, T2P 3P2 for the sum of $11,500 per month.
We are planning to lease long-term office space outside of the core of downtown
Calgary, Alberta, which will provide adequate space for our foreseeable future
needs.

Our material real property assets are two oil and gas leases
related to the Chetopa project, which is located two miles from Chetopa, Kansas.

Our material tangible fixed assets are located at the Chetopa
project and include:

|- | Steel building housing steam generator; becomes property
      of land owner, but is available for the life of the steamflood operation;                                                                                                         
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                  
|- | 33 producing oil wells cased to approximately 100 feet,
      4-1⁄2" and 5" casing cemented with high temperature cement(consolidated),
      25-30 feet open hole completion;                                                                     
|  |                                                                                                                                                                                                                                                  
|- | 20 steam injection wells cased to approximately 100 feet,
      4-1⁄2" and 5" casing cemented with high temperature cement(consolidated),
      10-15 feet open hole completion. One well from each pair cored including
      geological analysis;
|  |                                                                                                                                                                                                                                                  
|- | 10,760 feet of buried 1" oil production lines including
      trenching; includes bleeder lines from injection wells;                                                                                                                            
|  |                                                                                                                                                                                                                                                  
|- | 600 feet of buried 3" lines from test and transfer
      stations to gunbarrel; and                                                                                                                                                              
|  |                                                                                                                                                                                                                                                  
|- | Approximately 7,000 feet of buried electric lines to
      producers.                                                                                                                                                                            

Our material equipment is located at the Chetopa project and
includes:

|- | 1 Drilling Rig, Upgraded;                
|- | -----------------------------------------
|  |                                          
|- | 34 Pump Jacks;                           
|  |                                          
|- | 1 Pulling Unit, (w/new engine);          
|  |                                          
|- | 1 Ditch Witch;                           
|  |                                          
|- | 3 Triplex Pumps (w/new valves);          
|  |                                          
|- | 1 Air Compressor;                        
|  |                                          
|- | 35 Electric Motors;                      
|  |                                          
|- | 3 Large Electric Motors (20-25
      hp);
|  |                                          
|- | 1 Fiberglas 200-bbl Tank;                
|  |                                          
|- | 33 Downhole Pumps, Anchors;              

---

- 19 -

|- | 4 Fuel Tank Battery - 200 bbl;                       
|- | -----------------------------------------------------
|  |                                                      
|- | 1 Walkway and Stairs;                                
|  |                                                      
|- | 1 Power Threader;                                    
|  |                                                      
|- | 2-3/ 8"
      Tubing, 3,100 feet;                    
|  |                                                      
|- | 1" Tubing, 3,960 feet unburied;                      
|  |                                                      
|- | 20 High Pressure Wellheads;                          
|  |                                                      
|- | 33 Production Wellheads;                             
|  |                                                      
|- | Miscellaneous Valves, wellheads;                     
|  |                                                      
|- | Test/Transfer Valves Sleeves;                        
|  |                                                      
|- | 30 Electric Boxes @ Wells, etc.;                     
|  |                                                      
|- | 1 Water Well Downhole Pump;                          
|  |                                                      
|- | 1 Water Well Electric Box and
      Sensors;         
|  |                                                      
|- | Water Well, 350 feet pdt Tubing;                     
|  |                                                      
|- | Water Well Wellhead,Valves;                          
|  |                                                      
|- | 2 Centrifugal Pumps;                                 
|  |                                                      
|- | 1 Used Lease Truck;                                  
|  |                                                      
|- | 1 Main Electric Breaker Box;                         
|  |                                                      
|- | 1 Free Water Knockout;                               
|  |                                                      
|- | 1 Heater Treater;                                    
|  |                                                      
|- | 4 400-bbl Stock Tanks;                               
|  |                                                      
|- | 1 Walkway and High Stairs;                           
|  |                                                      
|- | 1 200-bbl Steel Water Tank;                          
|  |                                                      
|- | 1 100-bbl SWD Tank; and                              
|  |                                                      
|- | 1 Struthers Steam Generator and
      Water Softener.

ITEM
4A.         Unresolved Staff
Comments

Not Applicable.

ITEM
5.           Operating and
Financial Review and Prospects

The information in this section is presented in accordance with
Canadian generally accepted accounting principles, and has not been reconciled
to United States generally accepted accounting principles. The following
discussion of our financial condition and results of operations for the five
year fiscal period ending April 30, 2006, should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
annual reportin accordance with Item 8  "Financial Information" below.

Overview

We are a British Columbia company incorporated on February 8,
2000. We are an exploration stage company engaged in the exploration and
development of non-conventional oil and gas reserves in the United States and

---

- 20 -

Canada. We were previously intending to enter the consumer
electronics market by acquiring a company that designed, manufactured and
distributed computer hardware products to complete a "qualifying transaction"
pursuant to the requirements of the TSX Venture Exchange and subsequent to that
attempted to acquire the rights to distribute such products. However, due to our
inability to complete the acquisition within a timely manner and then our
inability to generate revenues from our distribution agreement we have been
unable to realize any revenues since our date of incorporation.

Critical Accounting Estimates

Our management is required to make judgments, estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. On a regular basis, we
evaluate our estimates and assumptions. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The significant accounting
policies that are most critical to aid in fully understanding and evaluating
reported financial results include: timing of revenue recognition and the
expensing of distribution costs.

The following critical accounting policies affect our more
significant estimates and assumptions used in preparing our consolidated
financial statements

Stock-Based Compensation and Change in Accounting Policy

Effective for fiscal years commencing on or after January 1,
2004, Canadian generally accepted accounting principles require the fair value
of all share purchase options granted for year-ends commencing on or after
January 1, 2002 to be 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.
Previously only share purchase options granted to non-employees followed this
method and options granted to employees were not expensed. Our company has
adopted the new policy on a retroactive basis, however, no share purchase
options granted after May 1, 2002 have vested and accordingly there have been no
changes to the financial statements as a result of this change.

Our company uses the Black-Scholes option valuation model to
calculate the fair value of share purchase options at the date of grant. Option
pricing models require the input of highly subjective assumptions, including the
expected price volatility. Changes in these assumptions can materially affect
the fair value estimate and, therefore, the existing do not necessarily provide
a reliable single measure of the fair value of our companys share purchase
options. The fair value of all share purchase options granted 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.

Going Concern

Our financial statements have been prepared on a going concern
basis. Its ability to continue as a going concern is dependent upon the ability
of our company to generate profitable operations in the future and/or to obtain
the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. The outcome of these
matters cannot be predicted with any certainty at this time and raise
substantial doubt that our company will be able to continue as a going concern.
These financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should our
company be unable to continue as a going concern. Our company anticipates that
additional funding will be in the form of equity financing from the sale of
common shares. Our company may also seek to obtain short-term loans from the
directors of our company. There are no current arrangements in place for equity
funding or short-term loans.

---

- 21 -

Loss Per Share

Basic loss per share is computed by dividing the loss for the
year by the weighted average number of common shares outstanding during the
year. Diluted loss per share reflect the potential dilution that could occur if
potentially dilutive securities were exercised or converted to common stock. The
dilutive effect of options and warrants and their equivalent is computed by
application of the treasury stock method and the effect of convertible
securities by the "if converted" method. Fully diluted amounts are not presented
when the effect of the computations are anti-dilutive due to the losses
incurred. Accordingly, there is no difference in the amounts presented for basic
and diluted loss per share.

Income Taxes

We follow the liability method of accounting for income taxes.
Under this method, current income taxes are recognized for the estimated income
taxes payable for the current year. Future income tax assets and liabilities are
determined based on differences between tax and accounting basis of assets and
liabilities. The future tax assets or liabilities are calculated using the tax
rates for the periods in which the differences are expected to be settled.
Future tax assets are recognized to the extent that they are considered more
likely than not to be realized.

Rights

Intangible assets with indefinite lives are not amortized but
are subject to an annual impairment test. Other intangible assets are amortized
over their estimated useful lives and are also tested for impairment annually.
Impairment write-downs will be charged to operations.

*A.*         
*Operating Results*

Our company did not generate any revenues for the five year
fiscal period ended April 30, 2006. Our lack of revenues is due to our focus
initially to complete our corporate organization and listing of our common
shares on an exchange and then to focus on identifying and acquiring a suitable
business opportunity. Our management does not believe that we will be able to
generate revenues until our company locates, acquires and develops a suitable
business, the initial steps to which we have taken with the purchase of the
assets of Deerfield Energy Kansas Corp.

We reported a net loss of $222,945 for the fiscal year ended
April 30, 2006, compared with a net loss of $61,031 for the fiscal year ended
April 30, 2005, for aggregate net loss for five year period ended April 30, 2006
of $507,548. The material expenses that resulted in the net losses were
administrative expenses related to: (a) the attempted acquisition of Cyberhand
Technologies Inc.; (b) the distribution agreement with Cyberhand Technologies
Inc; and (c) attempts to locate new business opportunities for our company.

Administrative expenses totalled $104,601 for the fiscal year
ended April 30, 2006 compared with $57,292 for the fiscal period ended April 30,
2005. The increase was substantially caused by the payment of $61,200 in fees to
Carob Management for consulting services related to new business opportunities
for our company and other administration duties.

Administrative expenses for the fiscal year ended April 30,
2004 totalled $83,836 compared with $56,638 for fiscal period ended April 30,
2003. Increased corporate activity related to the attempted consummation of the
Cyberhand Technologies Inc. acquisition and increased U.S. regulatory costs
related to our listing on the OTC Bulletin Board were the primary causes for the
higher costs.

During the fiscal year ended April 30, 2004, we advanced
$109,280 plus accrued interest to Cyberhand Technologies Inc. pursuant to notes
payable to fund activities pending the proposed acquisition. The balance owing
on these notes and interest accrued thereon in the amount of $123,610 was
assigned to Cyberhand Technologies Inc. in exchange for distribution rights
pursuant to a July 5, 2004 distributor agreement, whereby we acquired the
non-exclusive right to distribute peripheral computer hardware products
designed, manufactured and marketed by

---

- 22 -

Cyberhand Technologies Inc. Pursuant to the distributor
agreement, we agreed to purchase a minimum of 15,000 units on or before July 5,
2007, and upon completion of this minimum order, to purchase 50,000 units per
month or forfeit its rights under the distributor agreement. As required by the
distributor agreement, we purchased as initial stocking order of 200 units at a
cost of $10,735, which was written down to its net realizable value of $4,735
for the fiscal year ended April 30, 2005 and to $1.00 for the fiscal year ended
at April 30, 2006. During the fiscal year ended April 30, 2006, we wrote down
the distribution right granted under the distributor agreement to $10,000 to
recognize the possible impairment of the asset primarily due to the lack of
sales of the Cyberhand Technologies Inc. products.

We recorded interest income of $Nil, $2,261 and $11,513 for the
fiscal years ended April 30, 2006, 2005 and 2004, respectively.

Subsequent to the fiscal year ended April 30, 2006, we
completed three private placements in the aggregate amount of US$34,011,050. The
proceeds of which will be used to provide us with working capital to evaluate
pursue new business opportunities, namely non-conventional oil and gas
opportunities in the United States, and to establish an operations base in
Calgary, Alberta.

*B.*         
*Liquidity and Capital Resources*

We have no operations that generate cash flow. Our financial
success depends on our management's ability to find and develop viable business
opportunities, including, but not limited to oil and gas reserves. This process
can take many years and is largely based on factors that are beyond our control.

In order to finance our acquisition and development activities
and corporate overhead, we are dependent on investor sentiment remaining
positive towards the oil and gas exploration business generally, and towards our
company in particular, so that funds can be raised through the sale of our
securities. Many factors can influence investor sentiment, including a positive
climate for oil and gas exploration, a company's track record and the calibre
and experience of a company's management. There is no certainty that equity
financing will be available at the times and in the amounts required for our
activities.

Cash and Financial Conditions

We had a working capital deficiency of $139,422 as at April 30,
2006 compared to a working capital deficiency of $30,087 as at April 30, 2005.
Cash used in operating activities for the fiscal year ended April 30, 2006,
totalled $31,724 including a $222,945 net loss for the fiscal year. Significant
adjustments included: write-down of inventory of $4,734, write-down of rights of
$113,610, and $72,877 in net changes in non-cash working capital items related
to operations. Cash used in investing activities was $nil for the fiscal year
ended April 30, 2006.

We had working capital deficiency of $30,087 as at April 30,
2005. Cash used by operating activities totalled $49,193 including the $61,031
net loss for the year ended April 30, 2005. Significant adjustments included:
interest accrual on notes receivables $1,946, write-down of inventory of $6,000,
and $7,784 in net changes in non-cash working capital items related to
operations. Cash used in investing activities was $nil for the year ended April
30, 2005.

As of the date of this annual report, we have cash available of
approximately $35,489,317 from private offerings since December 18, 2006 and
therefore have enough working capital available to complete our current proposed
acquisitions and work plan through to April 30, 2008. Additional capital may be
required thereafter or should that work plan be amended by future business
acquisitions.

---

- 23 -

Investing Activities

For the fiscal years ended April 30, 2006, 2005 and 2004,
respectively, we recorded interest income of $nil, $2,261 and $11,513. The
source of this income was a promissory noted granted by Cyberhand Technologies
Inc. pursuant to a proposed acquisition of Cyberhand Technologies Inc. by us.

Subsequent to the fiscal year ended April 30, 2006, on March
26, 2007, we completed (through our subsidiary, MegaWest Energy (USA) Corp.) the
purchase of the assets of Deerfield Energy Kansas Corp. The purchase price for
the assets was paid by 250,000 common shares in our capital, to be issued, and
our release of Deerfield Energy LLC (the parent of Deerfield Energy Kansas
Corp.) of its obligations in respect of a promissory note in the amount of
US$500,000.

Financing Activities

We completed our initial public offering on July 5, 2001, and
raised $262,500 from the sale of 1,750,000 common shares.

In July 2004, we completed a private placement of 4,500,000
common shares at $0.001 per share, including 1,250,000 shares purchased by
directors and officers.

As at April 30, 2004, there were 2,250,000 common shares held
in escrow, whose release was subject to the policies of the TSX Venture
Exchange. On July 29, 2004, as a result of the voluntary delisting from the TSX
Venture Exchange, the 2,250,000 escrowed common shares were cancelled and
returned to the treasury.

In the fiscal year ended April 30, 2006, we borrowed $40,000
from shareholders of our company and issued $40,000 in short term, unsecured
notes bearing interest at 10% in respect thereof.

On October 20, 2006, our shareholders approved a subdivision of
its issued and outstanding common shares on an up to 3 to 1 basis. This
subdivision is subject to the discretion of the directors and is currently not
proposed to be implemented.

As such, subsequent to the fiscal year ended April 30, 2006, we
completed three private placements to provide us with working capital to
evaluate and pursue non-conventional oil and gas opportunities in the United
States and Canada and to establish an operations base in Calgary, Alberta. The
first of the private placements, an offering of 23,500,000 common shares of our
company at US$0.10 per common shares for aggregate proceeds of US$2,350,000 was
completed during December 2006. During January and February 2007, we completed a
further private placement of 8,425,000 units, at a price of US$0.50 per unit,
for aggregate proceeds of US$4,212,500, each of which units consists of one
common share and one-half of one common share purchase warrant (with each whole
warrant entitling the holder to purchase an additional common share at an
exercise price of US$1.00 for a period of one year). During March 2007, our
company completed an additional private placement of 27,448,550 units, at a
price of US$1.00 per unit, for aggregate proceeds of US$27,448,550, each of
which units consists of one common share and one-half of one common share
purchase warrant (with each whole warrant entitling the holder to purchase an
additional common share at an exercise price of US$1.30 for a period of one
year). In conjunction with the March 2007 private placement, we have issued
867,659 warrants (each of which entitles the holder to purchase one common share
at US$1.30 for a period of one year) to finders, and we expect to issue,
approximately, an additional 385,341 finders warrants (each of which entitles
the holder to purchase one common share at US$1.30 for a period of one year).

We have also settled $167,500 of accounts payable through the
issuance of 600,00 common shares. Pursuant a form of debt settlement and
subscription agreement dated December 21, 2006, entered into with each of
Karkrash Holdings Ltd., Carob Management Ltd., Brian Hanson, Roy Brown and
Amisano Hanson, Chartered Accountants, we issued in aggregate 600,000 common
shares to the said subscribers at a ratio of four common shares for each

---

- 24 -

$1.00 of our indebtedness to the subscribers in full and
complete satisfaction of such indebtedness for a total debt settlement in the
amount of $167,500.

As at April 30, 2006, we had 6,337,500 common shares issues and
outstanding. As of March 26, 2007, there were 66,311,050 common shares issued
and outstanding.

*C.*         
*Research and Development, Patents and Licenses, etc.*

We do not currently, and did not previously, have research and
development policies in place. Over the past three fiscal years, no funds were
expended by our company on research and development activities.

*D.*         
*Trend Information*

We do not currently know of any trends that would be material
to our operations.

*E.*          *Off-Balance Sheet Arrangements*

We do not have any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.

*F.*         
*Contractual Obligations*

Other than as disclosed below or elsewhere in this annual
report, we do not have any contractual obligations.

Pursuant to an executive employment agreement made effective as
of December 15, 2006 with R. William Thornton, whereby we have agreed to employ
Mr. Thornton as our Chief Operating Officer as of January 1, 2007. Pursuant to
the agreement, Mr. Thornton will receive an annual salary of $250,000. We will
reimburse Mr. Thornton for all reasonable travelling and other expenses actually
and properly incurred by him in connection with his duties under the employment
agreement. In addition, Mr. Thornton will be entitled to the use of a laptop,
cell phone and Blackberry and coverage under Directors and Officers Liability
Insurance and Errors and Omission Insurances (with a minimum cover of at least
$2,000,000 per occurrence), all at our companys expense. Finally, Mr. Thornton
is entitled to five weeks paid annual vacation. The employment agreement is of
an indefinite period, but may be terminated by Mr. Thornton or our company upon
certain events. The employment agreement may be terminated by Mr. Thornton for
any reason upon 30 days written notice and by reason of constructive dismissal.
The employment agreement may be terminated by our company for just cause and for
any reason whatsoever, provided such termination is approved beforehand by the
board of directors. If Mr. Thorntons employment is terminated for just cause or
by Mr. Thornton without constructive dismissal, we will pay to Mr. Thornton the
amount of his unpaid annual salary to and including the date of termination, any
declared but unpaid bonus and all outstanding vacation pay and expense
reimbursements. If Mr. Thorntons employment is terminated by our company
without just cause or by Mr. Thornton for constructive dismissal, then in
addition to the foregoing amounts, Mr. Thornton will receive a severance payment
in the amount of one years annual salary and the sum of $10,000 less applicable
withholdings and deductions, in respect of the lost benefits and notwithstanding
any provisions of our companys stock plan, all common share options held by Mr.
Thornton will automatically vest. Additionally, in the event of a change of
control of our company, we and/or Mr. Thornton may terminate Mr. Thorntons
employment with our company, on which event, we will pay to Mr. Thornton the
termination payments set forth above.

On December 20, 2006, we entered into a non-binding letter of
intent with Deerfield Energy LLC in respect of our acquisition of all of the
assets of Deerfield Energy LLC. In conjunction with the letter of intent, we
agreed to immediately assume the repayment of a US$500,000 loan made by Agosto
Corporation Ltd. to Deerfield Energy LLC.

---

- 25 -

On December 20, 2006, we entered into a non-binding letter of
  intent with Trinity Sands Energy LLC and its unit holders in respect of our
  purchase of all of the issued and outstanding membership units of Trinity Sands
  Energy LLC. In conjunction with the letter of intent, we agreed to immediately
  assume the repayment of a US$1,200,000 loan made by Agosto Corporation Ltd.
  to Deerfield Energy LLC.

On March 26, 2007, we entered into an asset purchase agreement
with Deerfield Energy Kansas Corp. in respect of the purchase of all of the
assets of Deerfield Energy Kansas Corp. by our wholly-owned subsidiary, MegaWest
Energy (USA) Corp. Pursuant to the agreement, Central Production Company will
also receive a 25% net revenue interest in the prospect after recovery of costs,
up to a maximum amount of US$750,000.

ITEM
6.           Directors, Senior
Management and Employees

*A.*          *Directors and Senior Management*

The following table sets forth the names and business
experience of each of our directors and officers, as of the date hereof:

Name and Age
      Present Position with our Company
      Date of Commencement of Office with our CompanyBrad Kitchen(1)(44)
    Director
    February 19, 2003George T. Stapleton, II(1)(53)
    President and Chief Executive Officer
    December 21, 2006Director
    December 21, 2006George Orr(1)(45)
    Chief Financial Officer, Secretary and
      Treasurer
    December 21, 2006Director
    December 21, 2006R. William Thornton (51)
    Director
    December 21, 2006Chief Operating Officer
    January 1, 2007Brian J. Evans (56)
    Director
    February 19, 2007Dr. Gail Bloomer (72)
    Director
    February 19, 2007


| | Note:
| | -----
| | (1)  

Brad Kitchen

Mr. Kitchen is a corporate finance consultant. Since 1996, he
has been the founder and President of PBK Financial Engineering Inc., a private
corporate finance consulting company. After graduating from McGill University
with an MBA, Mr. Kitchen became a financial product oriented investment banker
where he was employed in Toronto, Ontario over an eleven-year period as a
Vice-President and director at CIBC World Markets (formerly CIBC Wood Gundy
Securities Inc.) and TD Securities Inc. From January 2000 to January 2001, he
was Vice-President, Corporate Finance at Pacific Opportunities Company Ltd., a
small merchant bank and financial services company. From December 1998 to
December 1999, he was a partner of Kitchen & Fuller Holdings Inc., a holding
company for commercial real estate. From May 1998 to November 1998, he was Chief
Financial Officer of Protocol Holdings Inc., a real estate investment company.
Since April 2005, he has been a director of Cyberhand Technologies International
Inc. Since October 2005, Mr. Kitchen has been President and director of
Grenville Gold Corporation, a mining company listed on the TSX Venture Exchange;
and President of Universal Energy Corporation, an oil and gas company also
listed on the TSX Venture Exchange.

---

- 26 -

George T. Stapleton, II

Mr. Stapleton received his civil engineering degree from
Georgia Institute of Technology in 1975 and has 32 years of international
experience in the offshore oil construction and service industry, project
development, oil and gas exploration and production and energy infrastructure
related projects. Mr. Stapleton is currently the President and Chief Executive
Officer of our company. He has been the Chief Operating Officer and a Director
of Deerfield Energy LLC since 2005 and the President and a director of Trinity
Sands Energy LLC since 2006. He was formerly the President and remains a
director since 2004 of E-T Energy Ltd., a private Canadian company testing an
electrothermal approach to the production of bitumen from the Athabasca tar
sands. From 2000 to 2002 he was responsible for the development of simulation
based training packages for the energy and industrial sectors for Simulis, LLC.
He was President - Products & Services for NEOppg Ltd. from 1998 to 2000
where he was responsible for the development of the services side of companys
business plan, focusing on a proprietary multilateral system, heavy oil
production systems and artificial lift products. Prior to that he was
Vice-President, Operations for Asian Tiger Energy Company, an independent oil
company developing oil and gas projects, primarily in Southeast Asia. Before
Asian Tiger, Mr. Stapleton spent 19 years overseas with J. Ray McDermott in the
Arabian Gulf, North Sea and Asia as Field Engineer, Operations Engineer, Project
Manager, Fabrication Division Manager at Batam Island, Indonesia and finally as
Division Manager  Business Development and Project Management where he oversaw
project management of all turnkey projects for Southeast Asia and was
responsible for business development activities throughout the region.

George Orr

Mr. Orr is a chartered accountant and has several years
experience dealing with public company reporting and administrative
requirements. Mr. Orr is currently the director and Chief Financial Officer of
Valcent Products Inc. a company listed on the OTC Bulletin Board that is engaged
in the business of the design, development and marketing of innovative products
intended for the mass consumer appeal.

R. William Thornton

Mr. Thornton received his Chemical Engineering degree from the
University of Alberta in 1977 and Masters of Engineering (reservoir) 1989 from
the University of Calgary. He also completed the University of Calgary Executive
Development Program in 1988. He has held senior management and executive
positions over the last 30 years in all aspects of oil and gas development and
in particular enhanced recovery of heavy oil. He was General Manger  Petroleum
Engineering with Western OilSands, Vice-President, Engineering with Petrovera
Resources and Director of Primary Heavy Oil with Gulf Canada. Prior to these
positions he worked for 17 years with Murphy Oil on their various enhanced
recovery projects and technology development. During this time, Mr. Thornton
spent 3 years working in Murphys El Dorado, Arkansas and New Orleans, Louisiana
offices overseeing engineering and operations on a large portion of Murphys
onshore U.S. production. Mr. Thornton also has international experience, having
worked in drilling operations in interior Peru and as part of a team negotiating
a production sharing agreement in northern Iraq.

Brian J. Evans

Mr. Evans is a director of several public companies, including
CCS Income Trust, an income trust listed on the TSX that provides energy and
environmental waste management services and Tusk Energy Corporation, a company
listed on the TSX that is a exploration-focused oil and gas producer with
operation in western Canada. Since August 2006 Mr. Evans has served as the
Executive Director of the Werklund Group, a private investment group effective
August 2006 and prior to that was a partner and associate counsel with Miller
Thompson LLP, a national law firm.

Dr. Gail Bloomer

Dr. Bloomer received his doctoral degree in Geology from
Harvard University in Geology and has developed his expertise in exploration and
development while working for international companies including Gulf Oil and
Kerr McGee.

---

- 27 -

Family Relationships

There are no family relationships between any of the directors
or executive officers of our company.

There are no arrangements or understandings between any of the
directors and/or executive officers and any other person pursuant to which that
director and/or executive officer was selected.

*B.*         
*Compensation*

None of our directors or officers was paid or earned
compensation (including benefits in kind) for performing their respective duties
during the fiscal year ended April 30, 2006.

Compensation of Directors

No cash compensation was paid to any of our directors for
services as a director during the fiscal year ended April 30, 2006. We have no
formal arrangement pursuant to which directors are compensated by us for their
services in their capacity as directors, except for the granting from time to
time of incentive stock options. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our board. Our board may award special remuneration to
any director undertaking any special services on our behalf other than services
ordinarily required of a director. No director received and/or accrued any
compensation for their services as a director, including committee participation
and/or special assignments for the fiscal year ended April 30, 2006. No options
were granted to directors or officers during the fiscal year ended April 30,
2006.

Subsequent to the fiscal year ended April 30, 2006, each of
George T. Stapleton, II, R. William Thornton and George Orr, the directors
appointed on December 21, 2006, were awarded shares options under either of our
companys Canadian or U.S. stock option plans, as applicable (depending on their
place of residency, see Item 6.E - "Share Ownership" below for a description of
the stock option plans.). On December 21, 2006, each of Messrs. Stapleton,
Thornton and Orr received 500,000 options with an exercise price of US$0.10 per
common share, which are exercisable for a period of five years. On December 21,
2006, Brad Kitchen, an existing director, was awarded 250,000 options under our
Canadian stock option plan with an exercise price of US$0.10 per common share,
which are exercisable for a period of five years and on February 20, 2007 was
awarded an additional 250,000 options at US$1.00. On January 5, 2007, Gail
Bloomer, as an advisor, was awarded 500,000 options with an exercise price of
US$0.50 per common share. On March 7, 2007, Brian Evans was awarded 500,000
options with an exercise price of US$1.00 per common share.

Furthermore, subsequent to the fiscal year ended April 30,
2006: (a) 1,000,000 options (exercisable for common shares at US$0.50 per share
for a period of four years) were issued to R. William Thornton on January 5,
2007 in his capacity as Chief Operating Officer; and (b) each of George T.
Stapleton, II and George Orr were issued 1,000,000 options (exercisable for
common shares at US$0.50 per share for a period of four years) on January 5,
2007 in their capacities as President and Chief Executive Officer and Chief
Financial Officer, Secretary and Treasurer, respectively.

Furthermore, subsequent to the fiscal year ended April 30,
2006, on December 21, 2006: (a) 10,000,000 assignable warrants (exercisable for
common shares at US$0.10 per share) were issued to Endurance Energy Consulting
Ltd., a private company controlled by R. William Thornton, which warrants vest
if R. William Thornton brings a project of merit (i.e. a project with a
potential economic value of at least US$10,000,000) to the directors of our
company within one year of the award of the warrants; and (b) 9,000,000 warrants
(exercisable for common shares at US$0.10 per share) were issued to Gladrock
Energy LLC, a private company controlled by Dr. Gail Bloomer, which warrants
vest if Dr. Gail Bloomer brings a project of merit (i.e. a project with a
potential economic value of at least US$9,000,000) to the directors of our
company within one year of the award of the warrants. Gladrock Energy LLC has
been credited with identifying the Kentucky Reserves prospect and should that
transaction close, the 9,000,000 warrants issued to Gladrock Energy LLC will
vest.

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- 28 -

Furthermore, subsequent to the fiscal year ended April 30,
2006, George T. Stapleton, II, and a related, private company controlled by
George T. Stapleton, II, as shareholders of Deerfield Energy LLC, will receive
39,650 common shares in the capital of our company which will be issued to
Deerfield Energy Kansas Corp. in respect of the acquisition of the assets of
Deerfield Energy Kansas Corp. by MegaWest Energy Kansas Corp. Deerfield Energy
Kansas Corp. is a wholly-owned subsidiary of Deerfield Energy LLC.

We do not have in place any pension or actuarial plan to
provide pension, retirement or similar benefits. As of the date of this annual
report, other than as set out below, we have no compensatory plan or arrangement
with respect to any officer that results or will result in the payment of
compensation in any form from the resignation, retirement or any other
termination of employment of such officer's employment with our company, from a
change in control of our company or a change in such officer's responsibilities
following a change in control.

We entered into an executive employment agreement made
effective as of December 15, 2006 with R. William Thornton, whereby we have
agreed to employ Mr. Thornton as our Chief Operating Officer as of January 1,
2007. Pursuant to the agreement, Mr. Thornton will receive an annual salary of
$250,000 and will be eligible to participate in the corporate executive level
bonus programs as promulgated by the board of directors from time to time. Upon
execution of the agreement, we paid Mr. Thornton a signing bonus in the amount
of US$250,000. Upon the execution of the employment agreement, we also issued to
Mr. Thornton 1,000,000 common share options with an exercise price of US$0.50
per common share under the terms and conditions of our companys Canadian stock
option plan. We also issued to Mr. Thornton, in his position as a director of
our company, 500,000 common share options with an exercise price of US$0.10 per
common share under the terms and conditions of our companys Canadian stock
option plan. During the term of the employment agreement, Mr. Thornton is
eligible for additional common share options. We will reimburse Mr. Thornton for
all reasonable travelling and other expenses actually and properly incurred by
him in connection with his duties under the employment agreement. In addition,
Mr. Thornton will be entitled to the use of a laptop, cell phone and Blackberry
and coverage under Directors and Officers Liability Insurance and Errors and
Omission Insurances (with a minimum cover of at least $2,000,000 per
occurrence), all at our companys expense. Finally, Mr. Thornton is entitled to
five weeks paid annual vacation.

The employment agreement is of an indefinite period, but may be
terminated by Mr. Thornton or our company upon certain events. The employment
agreement may be terminated by Mr. Thornton for any reason upon 30 days written
notice and by reason of constructive dismissal. The employment agreement may be
terminated by our company for just cause and for any reason whatsoever, provided
such termination is approved beforehand by the board of directors. If Mr.
Thorntons employment is terminated for just cause or by Mr. Thornton without
constructive dismissal, we will pay to Mr. Thornton the amount of his unpaid
annual salary to and including the date of termination, any declared but unpaid
bonus and all outstanding vacation pay and expense reimbursements. If Mr.
Thorntons employment is terminated by our company without just cause or by Mr.
Thornton for constructive dismissal, then in addition to the foregoing amounts,
Mr. Thornton will receive a severance payment in the amount of one years annual
salary and the sum of $10,000 less applicable withholdings and deductions, in
respect of the lost benefits and notwithstanding any provisions of our companys
stock plan, all common share options held by Mr. Thornton will automatically
vest.

Additionally, in the event of a change of control of our
company, we and/or Mr. Thornton may terminate Mr. Thorntons employment with our
company, on which event, we will pay to Mr. Thornton the termination payments
set forth above.

*C.*         
*Board Practices*

Our directors are re-elected and our officers are re-appointed
at the annual general meeting of our shareholders. The last annual general
meeting was held on October 20, 2006. Messrs. Orr, Stapleton and Thornton were
appointed as directors and officers of our company on December 21, 2006 upon the
resignations of Terry Amisano and Kevin Hanson. Dr. Gail Bloomer and Brian J.
Evans were appointed as directors of our company at our special general meeting
held on February 19, 2007. Each of our current directors and officers will
continue to hold his respective office until his successor is elected or
appointed, unless his office is earlier vacated under any of the relevant
provisions of our articles or of the Business Corporations Act(British
Columbia).

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- 29 -

Other than an executive employment agreement entered into with
R. William Thornton, there are no service contracts between our company and any
of its directors, officers or employees providing for benefits upon termination
of employment.

The members of our companys audit committee are George T.
Stapleton, II, George Orr and Brad Kitchen. George T. Stapleton, II is our
President and Chief Executive Officer and George Orr is our Chief Financial
Officer, Secretary and Treasurer and are therefore not considered to be
independent members of the audit committee. Brad Kitchen is considered to be an
independent member.

We do not have an executive committee of our board of directors
nor do we have a compensation committee.

*D.*         
*Employees*

During the fiscal years ended April 30, 2006, 2005 and 2004, we
did not have any employees other than our President/Chief Executive Officer and
our Chief Financial Officer.

Subsequent to our fiscal year ended April 30, 2006, we have
hired additional employees and as of the date hereof have 14 employees, which
includes our President/Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Vice-President, Exploration, Vice-President, Corporate
Services and Vice-President, Land.

*E.*         
*Share Ownership*

Our authorized share structure consists of an unlimited number
of common shares without par value and 100,000,000 preferred shares without par
value.

As of March 26 2007, we had the following securities issued and
outstanding: (a) 66,311,050 common shares; (b) 44,311,434 warrants to purchase
up to 44,311,434 common shares; (c) 9,738,000 stock options to purchase up to
9,738,000 common shares at prices from US$0.10 to US$1.00, with expiry dates
from January 5, 2011 through to March 7, 2012 and with various vesting
requirements; and (d) convertible promissory notes in the aggregate amount of
US$1,700,000 with an interest rate of 6% per annum, which together with interest
maybe converted into common shares at US$0.25 per share. In addition, we are
committed to issuing 250,000 common shares pursuant to the Chetopa project
acquisition and we may issue up to an additional 20,000,000 common shares
pursuant to letters of intent in respect of the Deerfield, Trinity Sands and
Kentucky Reserves prospects and a verbal agreement with an individual in respect
of the provision of investment banking services to our company.

The 44,311,434 outstanding warrants include: (a) 19,500,000
warrants granted to three persons (including, a private company controlled by R.
William Thornton, a director and the Chief Operating Officer of our company and
a private company controlled by Dr. Gail Bloomer, a director of our company)
that entitle such persons to purchase common shares of our company at a price of
US$0.10 per share if the holder thereof brings a project of merit (i.e. a
project with a potential economic value in the amount of at least US$1.00
multiplied by the total number of warrants issued to the holder) to the
directors of our company by December 21, 2007; (b) 6,000,000 warrants granted to
various contractors for services provided to our company (each of which warrants
entitle the holder to purchase one common share at US$0.50 until January 5,
2009); and (c) warrants issued in respect of our January 5, 2007 and March 1,
2007 private placements. We expect to issue an additional 392,341 warrants to
finders of the March 1, 2007 private placement (each of which warrants will
entitle the holder to purchase one common share at US$1.30 for a period of one
year), in addition to the 867,659 warrants already issued in respect thereof.

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- 30 -

Of the above securities, our directors and officers owned the
following common shares as of March 26,2007:

NameOffice Held
      Common Shares
      Options Exercisable for Common Shares(2)NumberBeneficiallyOwned
      Percentageof
        Class
      NumberBeneficiallyOwned(Unexercised)
      ExercisePrice
      ExpiryDateGeorge T. Stapleton, II 
        President and Chief 
        Executive Officer 
        Director
      731,991(1)
      1.1%
      1,000,000
      US$0.50
      January 5, 2011500,000
      US$0.10
      December 21, 2011George Orr 
        Chief Financial 
        Officer, Secretary, 
        Treasurer and Director
      -
      -
      1,000,000
      US$0.50
      January 5, 2011500,000
      US$0.10
      December 21, 2011R. William Thornton 
        Chief Operating 
        Officer and Director
      2,600,000
      3.9%
      1,000,000
      US$0.50
      January 5, 2011500,000
      US$0.10
      December 21, 201110,000,000(3)
      US$0.10Brad Kitchen 
        Director
      140,465
      0.2%
      250,000
      US$1.00
      February 20, 2011250,000
      US$0.10
      December 21, 2011Brian J. Evans 
        Director
      10,000
      0.02%
      500,000
      US$1.00
      March 7, 2012Dr. Gail Bloomer 
        Director
      -
      -
      500,000
      US$0.50
      January 5, 20129,000,000 (4)
      US$0.10


Notes:(1) Does not include
39,650 common shares to be issued in respect of the Chetopa project acquisition.
(2) Includes vested and unvested options under our company's Canadian stock
option plan dated August 24, 2004, as amended and restated February 19, 2007,
and our company's U.S. stock option plan dated January 5, 2007. (3) These
are 10,000,000 assignable warrants exercisable for Common Shares at US$0.10 per
share if R. William Thornton brings a project of merit (i.e. a project with a
potential economic value of at least US$10,000,000) to the directors of our
company within one year of the award of the warrants which were issued to
Endurance Energy Consulting Ltd., a private company controlled by R. William
Thornton. (4) These are 9,000,000 warrants exercisable for Common Shares at
US$0.10 per share if Dr. Gail Bloomer brings a project of merit (i.e. a project
with a potential economic value of at least US$9,000,000) to the directors of
our company within one year of the award of the warrants which were issued to
Gladrock Energy LLC, a private company controlled by Dr. Gail Bloomer.

We adopted a formal written stock option plan for Canadian
resident directors, senior officers, employees and consultants on August 24,
2004. The purpose of the plan is to provide us with a share-related mechanism to
attract, retain and motivate qualified directors, officers, consultants and
employees, to reward those persons from time to tome for their contributions
toward the long-term goals of our company, and to enable and encourage such
directors, officers, consultants and employees to acquire common shares as
long-term investments. The plan provides that options granted under the plan
vest in the manner determined by the administrator appointed under the plan on
the date of the granted. The price at which an option may be exercised is
determined by the board of directors at the time of the grant. The plan also
provides that we may not grant options to any person or that person's associates
that

---

- 31 -

will in aggregate, when exercised, exceed in any 12 month
period five percent of the issued and outstanding common shares of our company.

As of February 19, 2007, the plan was amended and restated as
follows: (a) to provide that the total number of common shares that may be
issued upon the exercise of options issued under the plan plus the total number
of common shares that may be issued upon the exercise of options issued under a
stock option plan, dated January 5, 2007, for U.S. based employees cannot exceed
20% of the total number of common shares issued and outstanding from time to
time; (b) to set out the circumstances under which the number and class of
shares issuable upon the exercise of an option will be adjusted; (c) to allow
for the immediate vesting of all unexpired and unvested options in the event of
a change of control of our company and for the acceleration of the vesting of
options at the discretion of the administrator appointed under the plan; (d) to
set out how the exercise price of an option may be paid and specifically to
provide for a (cashless) net exercise option; (e) to provide that our company's
obligation to issue shares upon the exercise of an option is dependant upon
certain factors, including the compliance of the shares with any applicable
laws; (f) to provide an option holder is responsible for the payment of any
withholding taxes in respect of the exercise of an option; (g) to set out the
discretion of our board of directors in respect of various matters concerning
the interpretation of the plan and the granting and exercise of options and,
specifically, the discretion to extend the expiry date of the options and to
determine the price per share at which an option may be exercised; and (h) to
correct minor typographical and grammatical errors and inconsistencies in the
text of the plan.

As of January 5, 2007, our board of directors adopted a
supplementary stock option plan for U.S. resident directors, senior officers,
employees and consultants. The material terms of the plan are: (a) the number of
common shares reserved for issuance under the plan is 20% of the issued and
outstanding common shares from time to time less the number of options granted
under our Canadian stock option plan; (b) the plan is to be administered by our
board of directors, except that the board of directors may, in its discretion,
establish a committee composed of two or more members of the board or two or
more other persons to administer the plan; (c) incentive stock options (options
which qualify under Section 422 of the Internal Revenue Code of 1986 (US)
may be granted to any individual who, at the time the option is granted, is
resident in the U.S. and who is an employee of our company or any related
corporation.; (d) non-qualified stock options (options that do not qualify under
Section 422 of the Internal Revenue Code of 1986) may be granted to
employees and to such other persons who are not employees as the plan
administrator shall select, subject to any applicable laws; (f) the plan
provides that, generally, the number of shares subject to each option, the
exercise price, the expiry time, the extent to which such option is exercisable
and other terms and conditions relating to such options will be determined by
the board of directors of our company or any committee to which such authority
is delegated by the board from time to time; (g) the term of the options granted
under the plan will not exceed ten years from the date of grant, provided that
the term of the options will be reduced upon the death of an option holder or if
an option holder ceases to be employed by or hold office with our company; (h)
the vesting of options granted under the plan will be in 25% increments,
beginning one year from the date of the grant, provided that the plan allows for
the immediate vesting of all unexpired and unvested options in the event of a
change of control of our company and for the acceleration of the vesting of
options at the discretion of the administrator appointed under the plan; (i) the
exercise price of the options will be determined by the plan administrator in
compliance with applicable laws, including the rules of an applicable stock
exchange or national market system; and (j) the plan will terminate when all of
the options, available for grant thereunder, have been granted or when the plan
is otherwise terminated by our company (provided that any options outstanding
when the plan is terminated will remain in effect until they are exercised or
expire).

ITEM
7.           Major
Shareholders and Related Party Transactions

*A.*         
*Major Shareholders*

As of March 26, 2007, there were 66,311,050 common shares of
our company issued and outstanding. The following table sets forth persons known
to us to be the beneficial owner of more than five (5%) of our common shares as
of March 23, 2007:

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- 32 -

Name
      Amount Owned
      Percent of ClassCushing MLP Opportunity Fund I LP
    5,000,000
    7.5%Gundyco I/T/F Pinetree Resource Partnership
    4,150,000
    6.2%


The voting rights of our major shareholders do not differ from
the voting rights of holders of our company's shares who are not major
shareholders.

As of March 26, 2007, Pacific Corporate Trust Company, our
registrar and transfer agent, reported that of our company's 66,311,050 issued
and outstanding common shares, 44,045,733 common shares were registered to
Canadian residents (369 shareholders), 11,708,333 common shares were registered
to residents of the United States (46 shareholders) and 10,456,484 common shares
were registered to residents of countries other than Canada or the United States
(20 shareholders).

To the best of our knowledge, we are not directly or indirectly
owned or controlled by another corporation, by any foreign government or by any
other natural or legal person.

There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company.

*B.*         
  *Related Party Transactions*

Other than as disclosed below or elsewhere in this annual
report, to the best of our knowledge, there have been no material transactions
or loans from the commencement of our 2003 fiscal year to the date of this
annual report between our company and: (a) enterprises that directly or
indirectly through one or more intermediaries, control or are controlled by, or
are under common control with, our company; (b) associates; (c) individuals
owning, directly or indirectly, an interest in the voting power of our company
that gives them significant influence over our company, and close members of any
such individual's family; (d) key management personnel of our company, including
directors and senior management of our company and close members of such
individuals' families; and (e) enterprises in which a substantial interest in
the voting power is owned, directly or indirectly, by any person described in
(c) or (d) or over which such a person is able to exercise significant
influence.

|1. | During the year ended April 30, 2006 our executive
      offices were located in facilities shared with Amisano Hanson, Chartered
      Accountants. At that time, Terry Amisano and Kevin Hanson, former
      directors and officers of our company, were principles of Amisano Hanson,
      Chartered Accountants. We paid and/or accrued $9,000, $9,000, and $9,000
      in office rental to Amisano Hanson, Chartered Accountants during the years
      ended April 30, 2006, 2005 and 2004, respectively. We also paid and/or
      accrued $6,000, $6,000, and $6,000 for equipment rental Amisano Hanson,
      Chartered Accountants during the years ended April 30, 2006, 2005 and
      2004; we also paid and/or accrued $3,000, $3,000, and $3,000 for office
      supplies Amisano Hanson, Chartered Accountants during the year ended April
      30, 2006, 2005 and 2004. During the six months ended October 31, 2006, we
      incurred from Amisano Hanson, Chartered Accountants $3,000 in equipment
      rentals, $1,500 in office supplies and $4,500 in rent.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | We paid accounting fees of $8,797, $5,926, and $16,109 to
      Amisano Hanson, Chartered Accounts during the years ended April 30, 2006,
      2005 and 2004, respectively. For the six months ended October 31, 2006, we
      incurred accounting fees of $6,500 to Amisano Hanson, Chartered
      Accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | At April 30, 2006, accounts payable and accrued
      liabilities included $34,078 owing to the Amisano Hanson, Chartered
      Accountants. For the six months ended October 31, 2006, accounts payable
      and accrued liabilities included $48,545 owing to the Amisano Hanson,
      Chartered Accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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- 33 -

|4.  | Carob Management was paid and/or accrued $5,000 per month
      during the year ended April 30, 2006 for consulting services related to
      new business opportunities for our company and other administration
      duties. Carob Management is a private company controlled by Gregory
      Burnett, a former director of our company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5.  | We received $40,000 in loans from shareholders of our
      company, including $9,500 from one each of former director (Terry Amisano)
      and one current director (Brad Kitchen) of our company and $7,000 from
      Karkrash Holdings Ltd., a company controlled by a Kevin Hanson, a former
      director of our company. These loans were paid on December 21,
  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|6.  | Effective as of December 15, 2006, we entered into an
      executive employment agreement with R. William Thornton, whereby we have
      agreed to employ Mr. Thornton as our Chief Operating Officer as January 1,
      2007. Pursuant to the agreement, Mr. Thornton will receive an annual
      salary of $250,000. Upon execution of the agreement we paid Mr. Thornton a
      signing bonus in the amount of US$250,000 and issued to Mr. Thornton
      1,000,000 common share options with an exercise price of US$0.50 per
      common share under the terms and conditions of our companys Canadian
      stock option plan.                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|7.  | On December 20, 2006, we issued 10,000,000 assignable
      warrants (exercisable for common shares at US$0.10 per share) to Endurance
      Energy Consulting Ltd., a private company controlled by that R. William
      Thornton (a director and the Chief Operating Officer of our company),
      which warrants vest if R. William Thornton brings a project of merit (i.e.
      a project with a potential economic value of at least US$10,000,000) to
      the directors of our company within one year of the award of the
      warrants.                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|8.  | On December 20, 2006, we issued 9,000,000 warrants
      (exercisable for common shares at US$0.10 per share) to Gladrock Energy
      LLC, a private company that is controlled by Dr. Gail Bloomer, which
      warrants vest if Dr. Gail Bloomer brings a project of merit (i.e. a
      project with a potential economic value of at least US$9,000,000) to the
      directors of our company within one year of the award of the warrants.
      Gladrock Energy LLC has been credited with identifying the Kentucky
      Reserves prospect and should that transaction close, the 9,000,000
      warrants issued to Gladrock Energy LLC will vest.                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|9.  | On January 5, 2007, we issued 1,000,000 options
      (exercisable for common shares at US$0.50 per share for a period of four
      years) to R. William Thornton on January 5, 2007 in his capacity as Chief
      Operating Officer and 1,000,000 options (exercisable for common shares at
      US$0.50 per share for a period of four years to each of George T.
      Stapleton, II and George Orr were issued in their capacities as President
      and Chief Executive Officer and Chief Financial Officer, Secretary and
      Treasurer, respectively.                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10. | On March 26, 2007, we entered into an asset purchase
      agreement with Deerfield Energy Kansas Corp. in respect of the purchase of
      all of the assets of Deerfield Energy Kansas Corp. (which assets relate to
      the Chetopa project). Deerfield Energy Kansas Corp. is a wholly-owned
      subsidiary of Deerfield Energy LLC. George T. Stapleton, II (a director
      and the President and Chief Executive Officer of our company) is the
      beneficial owner (through his own holdings and that of a related, private
      company) of 15.86% of the issued and outstanding shares of Deerfield
      Energy LLC. As such, he will receive 39,650 of the common shares in our
      capital issued to Deerfield Energy Kansas Corp. in partial consideration
      of the purchase price in respect of the asset
purchase.

ITEM
8.           Financial
Information

Our financial statements are stated in Canadian dollars and are
prepared in accordance with Canadian generally accepted accounting principles.

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- 34 -

Financial Statements filed as part of this Annual Report

|- | Report of Independent Registered Public Accounting Firm
      dated August 25, 2006, together with Comments by Auditor for U.S. Readers
      in Canada  U.S. Reporting Conflict
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                  
|- | Balance Sheets at April 30, 2006 and 2005                                                                                                                                        
|  |                                                                                                                                                                                  
|- | Statements of Operations for the years ended April 30,
      2006, 2005 and 2004 and for the period February 8, 2000 (Date of
      Incorporation) to April 30, 2006             
|  |                                                                                                                                                                                  
|- | Statements of Cash Flows for the years ended April 30,
      2006, 2005 and 2004 and for the period February 8, 2000 (Date of
      Incorporation) to April 30, 2006             
|  |                                                                                                                                                                                  
|- | Statement of Shareholder's Equity (Deficiency) for the
      period February 8, 2000 (Date of Incorporation) to April 30, 2006                                                   
|  |                                                                                                                                                                                  
|- | Notes to Financial Statements April 30, 2006                                                                                                                                     
|  |                                                                                                                                                                                  
|- | Interim Balance Sheets for October 31, 2006 and April 30,
      2006                                                                                                             
|  |                                                                                                                                                                                  
|- | Interim Statement of Operations for the three and six
      months ended October 31, 2006 and 2005                                                                               
|  |                                                                                                                                                                                  
|- | Interim Statements of Cash Flows for the three and six
      months ended October 31, 2006 and 2005                                                                              
|  |                                                                                                                                                                                  
|- | Statement of Shareholder's Equity (Deficiency) for the
      period February 8, 2000 (Date of Incorporation) to October 31, 2006                                                 
|  |                                                                                                                                                                                  
|- | Notes to Financial Statements October 31, 2006                                                                                                                                   

The audited financial statements for the fiscal years ended
April 30, 2006, 2005 and 2004 and the interim financial statements for the six
month period ended October 31, 2006 can be found under Item 18 - "Financial
Statements".

Significant Changes

Other than as disclosed below or elsewhere in this annual
report, no significant change has occurred in our company's financial statements
since the fiscal year ended April 30, 2006.

Subsequent to the fiscal year ended April 30, 2006, we
completed three private placements for aggregate proceeds in the amount of
US$34,011,050 to provide us with working capital to evaluate and pursue
non-conventional oil and gas opportunities in the United States and to establish
an operations base in Calgary, Alberta and have completed the acquisition of
fixed assets, equipment and rights in respect of an oil and gas lease in respect
of the Chetopa project (see Item 4.A  "History and Development of MegaWest
Energy Corp.").

Legal Proceedings

There are no pending legal proceedings to which we are a party
or of which any of our property is the subject. There are no legal proceedings
to which any director, officer or affiliate of our company or any associate of
any such director, officer or affiliate of our company is a party or has a
material interest adverse to us.

Dividend Distributions

Holders of our common shares are entitled to receive such
dividends as may be declared from time to time by our board, in its discretion,
out of funds legally available for that purpose. We intend to retain future
earnings, if any,

---

- 35 -

for use in the operation and expansion of our business and do
not intend to pay any cash dividends in the foreseeable future.

ITEM
9.           The Offer and
Listing

*A.*         
*Price History*

Our common shares began trading on the TSX Venture Exchange
(formerly the Canadian Venture Stock Exchange) in Toronto, Ontario, Canada, on
August 27, 2001. The trading symbol was BKC. The CUSIP number is #111718-10-2.
The shares were halted on September 4, 2002, as a result of the letter of intent
with Cyberhand Technologies Inc in respect of the acquisition of all of its
issued and outstanding shares. At the time that the shares were halted the
shares of our company were trading at $0.30 per share. Trading of the shares
resumed on May 1, 2003 and were halted on August 28, 2003 as a result of our
company not having completed our qualifying transaction within 24 months from
our original listing on the TSX Venture Exchange. The shares last traded at
$0.30 per share on August 14, 2003. Effective June 16, 2004, we voluntarily
de-listed our common shares from the TSX Venture Exchange. We took this action
despite receiving conditional approval from the TSX Venture Exchange to complete
our qualifying transaction to acquire Cyberhand Technologies Inc. The reason for
our voluntary de-listing was our belief that we would not have been able to
satisfy all of the conditions set by the TSX Venture Exchange in a timely manner
which would have put us at risk of defaulting on our agreement with Cyberhand
Technologies Inc. However, we felt we needed to seek alternatives to maintaining
our TSX Venture Exchange listing and on March 28, 2005, our common shares were
listed for trading on the OTC Bulletin Board under the symbol "BCKOF". The first
trades of our common shares on the OTC Bulletin Board were reported in May 2005.
Effective as of March 6, 2007, our symbol on the OCT Bulletin Board was changed
to "MGWSF" to reflect our change in corporate name to "MegaWest Energy Corp.".

The annual high and low market prices for our common shares for
the five most recent full fiscal years were as follows:

Year Ended
      TSX Venture Exchange
      OTC Bulletin BoardHigh
      Low
      High
      LowApril 30, 2002
      $0.40
      $0.20
      N/A
      N/AApril 30, 2003
      $0.50
      $0.25
      N/A
      N/AApril 30, 2004
      $0.65
      $0.25
      N/A
      N/AApril 30, 2005
      N/A
      N/A
      No trades
      No tradesApril 30, 2006
      N/A
      N/A
      US$0.80
      US$0.40


The high and low market prices for our common shares for each
full financial quarter for the two most recent full fiscal years on the OTC
Bulletin Board were as follows:

Quarter Ended
      OTC Bulletin BoardHigh
      LowOctober 31, 2006
      US$0.61
      US$0.52July 31, 2006
      US$0.60
      US$0.50April 30, 2006
      US$0.80
      US$0.40January 1, 2006
      US$0.51
      US$0.40October 31, 2005
      US$0.40
      US$0.35


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- 36 -

Quarter Ended
      OTC Bulletin BoardHigh
      LowJuly 31, 2005
      US$1.01
      US$0.30April 30, 2005
      No trades
      No tradesJanuary 1, 2005
      No trades
      No trades


The high and low market prices of our common shares for each of
the most recent six months, from September, 2006 through February, 2007, on the
OTC Bulletin Board were as follows:

Month Ended
      OTC Bulletin BoardHigh
      LowSeptember 30, 2006
      US$0.61
      US$0.61October 31, 2006
      US$0.61
      US$0.52November 30, 2006
      US$0.75
      US$0.50December 31, 2006
      US$1.50
      US$0.61January 31, 2007
      US$1.90
      US$1.10February 28, 2007
      US$1.80
      US$2.20


*B.*         
*Plan of Distribution*

Not applicable.

*C.*         
*Markets*

Since March 28, 2005, our common shares have been quoted
exclusively on the OTC Bulletin Board.

*D.*         
*Selling Shareholders*

Not applicable.

*E.*         
*Dilution*

Not applicable.

*F.*         
*Expenses of the Issue*

Not applicable.

ITEM
10.           Additional
Information

*A.*         
*Share Capital*

Not applicable.

---

- 37 -

*B.*         
*Memorandum and Articles of Association*

We are incorporated under the laws of the Province of British
Columbia, Canada and have been assigned incorporation number BC0600967.

On March 29, 2004, the Business Corporations Act
(British Columbia) came into effect, replacing the Company Ac(British
Columbia). The new act impacts British Columbia companies by modernizing and
streamlining company law in British Columbia. As required by the Business
Corporations Act, our company was "transitioned" under the Business
Corporations Act, effective June 30, 2005. In order to take advantage of the
provisions under the Business Corporations Act, our company sought and
obtained shareholder approval at our shareholders meeting on February 19, 2006
for the removal of our pre-existing company provisions in our former articles
and the adoption of new articles under the Business Corporations Act.

Our articles do not contain a description of our objects and
purposes.

Our articles do not restrict a director's power to vote on a
proposal, arrangement or contract in which the director is materially
interested, vote compensation to themselves or any other members of their body
in the absence of an independent quorum or exercise borrowing powers. Our
articles do not restrict the directors' power, in the absence of an independent
quorum, to vote compensation to themselves or any members of their body. Our
articles do not provide for borrowing powers exercisable by directors. Our
articles do not set out a mandatory retirement age for our directors and our
directors are not required to own securities of our company in order to serve as
directors.

Our authorized capital consists of an unlimited number of
common shares without par value and 100,000,000 preference shares without par
value. Our preference shares may be issued in one or more series and our
directors may fix the number of shares which is to comprise each series and the
designation, rights, privileges, restrictions and conditions attaching to each
series.

Holders of our common shares are entitled to vote at all
meetings of shareholders, except meetings at which only holders of a specified
class of shares are entitled to vote, receive any dividend declared by our
company's board of directors and, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares, receive the
remaining property of our company upon dissolution.

At each annual general meeting of our company, all of our
directors retire and the shareholders elect a new board of directors. Each
director holds office until our next annual general meeting, or until his office
is earlier vacated in accordance with our articles or with the provisions of the
Business Corporations Act. A director appointed or elected to fill a
vacancy on our board also holds office until our next annual general
meeting.

Our articles provide that our annual meetings of shareholders
must be held at such time in each calendar year and not more than 15 months
after the last annual general meeting and at such place as our board of
directors may from time to time determine.

Under our articles, and subject to the special rights and
restrictions attached to the shares of any class or series of shares, the quorum
for the transaction of business at a meeting of our shareholders is two persons
who are, or who represent by proxy, shareholders who, in the aggregate, hold at
least 5% of the issued shares entitled to be voted at the meeting.

Our articles state that our directors, the president, the
secretary, and any lawyer or auditor of our company are entitled to attend any
meeting of our shareholders.

Except as provided in the Investment Canada Act, there
are no limitations specific to the rights of non-Canadians to hold or vote our
common shares under the laws of Canada or British Columbia, or in our charter
documents.

---

- 38 -

There are no provisions in our articles that would have the
effect of delaying, deferring or preventing a change in control of our company,
and that would operate only with respect to a merger, acquisition or corporate
restructuring involving our company.

Our articles do not contain any provisions governing the
ownership threshold above which shareholder ownership must be disclosed.
Securities legislation in Canada, however, requires that we disclose in our
annual general meeting proxy statement, holders who beneficially own more than
10% of our issued and outstanding shares, and United States Federal securities
laws require the disclosure in our annual report on Form 20-F of holders who own
more than 5% of our issued and outstanding shares.

*C.*         
*Material Contracts*

Other than as disclosed below or elsewhere in this annual
report, we did not enter into any material contracts during the past two years.

Effective as of December 15, 2006, we entered into an executive
employment agreement with R. William Thornton, whereby we have agreed to employ
Mr. Thornton as our Chief Operating Officer as January 1, 2007. Pursuant to the
agreement, Mr. Thornton will receive an annual salary of $250,000. Upon
execution of the agreement we paid Mr. Thornton a signing bonus in the amount of
US$250,000 and issued to Mr. Thornton 1,000,000 common share options with an
exercise price of US$0.50 per common share under the terms and conditions of our
companys Canadian stock option plan. The employment agreement is of an
indefinite period, but may be terminated by Mr. Thornton or our company upon
certain events. If Mr. Thorntons employment is terminated for just cause or by
Mr. Thornton without constructive dismissal, we will pay to Mr. Thornton the
amount of his unpaid annual salary to and including the date of termination, any
declared but unpaid bonus and all outstanding vacation pay and expense
reimbursements. If Mr. Thorntons employment is terminated by our company
without just cause or by Mr. Thornton for constructive dismissal, then in
addition to the foregoing amounts, Mr. Thornton will receive a severance payment
in the amount of one years annual salary and the sum of $10,000 less applicable
withholdings and deductions, in respect of the lost benefits and notwithstanding
any provisions of our companys stock plan, all common share options held by Mr.
Thornton will automatically vest.

In respect of a private placement that was completed December
18, 2006, we entered into a form of private placement subscription agreement
with various accredited investors whereby we issued 23,500,000 common shares of
our company at US$0.10 per common shares for aggregate proceeds of US$2,350,000.

Pursuant to a form of warrant issuance agreement dated December
20, 2006, we granted 19,500,000 warrants to three persons that entitle such
persons to purchase common shares of our company at a price of US$0.10 per share
upon the occurrence of certain conditions. The conditions include that the
warrants are exercisable if the holder thereof brings a project of merit (i.e. a
project with a potential economic value in the amount of at least US$1.00
multiplied by the total number of warrants issued to the holder) to the
directors of our company by December 21, 2007.

Pursuant to a letter of intent dated December 20, 2006 entered
into with Trinity Sands Energy LLC and its shareholders in respect of our
purchase of all of the issued and outstanding shares of Trinity Sands Energy
LLC, we entered into an Assumption and Loan Conversion Agreement with Agosto
Corporation Ltd. dated December 20, 2006, as amended, pursuant to which we
assumed the repayment of a US$1,200,000 loan made by Agosto Corporation Ltd. to
Trinity Sands Energy LLC. In exchange for the assumption of Agosto Corporation
Ltd. loan, we issued a convertible promissory note to Agosto Corporation Ltd. in
the amount of US$1,200,000 with simple interest accruing at a rate of 6% per
annum. Agosto Corporation Ltd. has the option to convert the principal of the
note plus accrued interest in common shares of our company at a conversion rate
of US$0.25 per share. In addition, Trinity Sands Energy LLC issued a promissory
note in the amount of US$1,650,000 to us in respect of the acquisition of
7,500,000 common shares of Energy Finders, Inc., a US company that owns the
minority working interest of the Trinity Sands prospect.

---

- 39 -

Pursuant to a letter of intent dated December 20, 2006 entered
into with Deerfield Energy LLC in respect of our acquisition of all of the
assets of Deerfield Energy LLC, we entered into an Assumption and Loan
Conversion Agreement with Agosto Corporation Ltd. dated December 20, 2006, as
amended, pursuant to which we assumed the repayment of a US$500,000 loan made by
Agosto Corporation Ltd. to Deerfield Energy LLC. In exchange for the assumption
of Agosto Corporation Ltd. loan, we issued a convertible promissory note to
Agosto Corporation Ltd. in the amount of US$500,000 with simple interest
accruing at a rate of 6% per annum. Agosto Corporation Ltd. has the option to
convert the principal of the note plus accrued interest in common shares of our
company at a conversion rate of US$0.25 per share.

Pursuant a form of debt settlement and subscription agreement
dated December 21, 2006, entered into with each of Karkrash Holdings Ltd., Carob
Management Ltd., Brian Hanson, Roy Brown and Amisano Hanson, Chartered
Accountants, we issued 600,000 common shares to the said subscribers in
settlement of $167,500 of debt.

In respect of a private placement that was completed on January
5, 2007, we entered into a form of private placement subscription agreement with
various accredited investors whereby we issued 8,425,000 units, at a price of
US$0.50 per unit, for aggregate proceeds of US$4,212,500, each of which units
consists of one common share and one-half of one common share purchase warrant,
with each whole warrant entitling the holder to purchase an additional common
share at an exercise price of US$1.00 for a period of one year.

In respect of a private placement that was completed on March
1, 2007, we entered into a form of private placement subscription agreement with
various accredited investors whereby we issued 27,448,550 units, at a price of
US$1.00 per unit, for aggregate proceeds of US$27,448,550, each of which units
consists of one common share and one-half of one common share purchase warrant,
with each whole warrant entitling the holder to purchase an additional common
share at an exercise price of US$1.30 for a period of one year. Pursuant to this
private placement, we have agreed to pay finders fees of: (a) up to 7% of the
total proceeds in cash; and (b) up to 7% of the total proceeds in warrants with
the same terms as the warrants issued pursuant to the private placement.

On March 26, 2007, we entered into an asset purchase agreement
with Deerfield Energy Kansas Corp. in respect of the purchase of all of the
assets of Deerfield Energy Kansas Corp. by our wholly-owned subsidiary, MegaWest
Energy (USA) Corp. The assets included certain items of equipment and fixed
assets (as detailed in Item 4.D  "Property, Plants and Equipment" below) and
interests in two oil and gas leases in respect of 392 acres of real property.
The purchase price for the assets was paid by 250,000 common shares in our
capital, to be issued, and our release of Deerfield Energy LLC (the parent of
Deerfield Energy Kansas Corp.) of its obligations to us in respect of a
promissory note granted by Deerfield Energy LLC to Agosto Corporation Ltd. in
the amount of US$500,000, which Agosto Corporation Ltd. assigned to us pursuant
to our assumption of the repayment of the US$500,000 loan made by Deerfield
Energy LLC to Agosto Corporation Ltd. pursuant to the terms of our letter of
intent with Deerfield Energy LLC, dated December 20, 2006.

We have also reached a verbal agreement with an individual to
provide investment banking services to our company whereby our company has
agreed to issue the individual up to 750,000 common shares.

*D.*         
*Exchange Controls*

There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See Item 10.E -
"Taxation" below.

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- 40 -

*E.*          *Taxation*

Certain Canadian Federal Income Tax Consequences

We consider that the following general summary fairly describes
the principal Canadian federal income tax consequences applicable to a holder of
our common shares who is a resident of the United States, who is not, will not
be and will not be deemed to be a resident of Canada for purposes of the
Income Tax Act (Canada) and any applicable tax treaty and who does not
use or hold, and is not deemed to use or hold, his common shares in the capital
of our company in connection with carrying on a business in Canada (a
"non-resident holder").

This summary is based upon the current provisions of the
Income Tax Act (Canada), the regulations thereunder (the "Regulations"),
the current publicly announced administrative and assessing policies of the
Canada Customs and Revenue Agency and the Treaty. This summary also takes into
account the amendments to the Income Tax Act (Canada) and the Regulations
publicly announced by the Minister of Finance (Canada) prior to the date hereof
(the "Tax Proposals") and assumes that all such Tax Proposals will be enacted in
their present form. However, no assurances can be given that the Tax Proposals
will be enacted in the form proposed, or at all. This summary is not exhaustive
of all possible Canadian federal income tax consequences applicable to a holder
of our common shares and, except for the foregoing, this summary does not take
into account or anticipate any changes in law, whether by legislative,
administrative or judicial decision or action, nor does it take into account
provincial, territorial or foreign income tax legislation or considerations,
which may differ from the Canadian federal income tax consequences described
herein.

This summary is of a general nature only and is not intended
to be, and should not be construed to be, legal, business or tax advice to any
particular holder or prospective holder of our common shares, and no opinion or
representation with respect to the tax consequences to any holder or prospective
holder of our common shares is made. Accordingly, holders and prospective
holders of our common shares should consult their own tax advisors with respect
to the income tax consequences of purchasing, owning and disposing of our common
shares in their particular circumstances.

Dividends

We have not declared any dividends on our common shares for the
last five years and do not anticipate that we will do so in the foreseeable
future. The present policy of our company is to retain future earnings for use
in our operations and the expansion of our business.

Notwithstanding the aforementioned, we are unaware of any
dividend restrictions; have no specific procedure for the setting of the date of
dividend entitlement; but might expect to set a record date for share ownership
to determine entitlement; have no specific procedures for non-resident holders
to claim dividends, but might expect to mail their dividends in the same manner
as resident holders. We have not nominated any financial institutions to be the
potential paying agents for dividends in the United States.

Capital Gains

A non-resident holder is not subject to tax under the Income
Tax Act (Canada) in respect of a capital gain realized upon the disposition
of a common share of our company unless such share represents "taxable Canadian
property", as defined in the Income Tax Act (Canada), to the holder
thereof. Our common shares generally will be considered taxable Canadian
property to a non-resident holder if:

|- | the non-resident holder;                                                                                  
|- | ----------------------------------------------------------------------------------------------------------
|  |                                                                                                           
|- | persons with whom the
      non-resident holder did not deal at arm's length; or                          
|  |                                                                                                           
|- | the non-resident holder and
      persons with whom such non-resident holder did not deal at arm's length,

---

- 41 -

owned, or had an interest in an option in respect of, not less
than 25% of the issued shares of any class of our capital shares at any time
during the 60 month period immediately preceding the disposition of such shares.
In the case of a non-resident holder to whom shares of our company represent
taxable Canadian property and who is resident in the United States, no Canadian
taxes will generally be payable on a capital gain realized on such shares by
reason of the Treaty unless the value of such shares is derived principally from
real property situated in Canada.

Certain United States Federal Income Tax Consequences

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

The following discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time. No assurance can
be given that the IRS will agree with such statements and conclusions, or will
not take, or a court will not adopt, a position contrary to any position taken
herein.

The following discussion is for general information only and
is not intended to be, nor should it be construed to be, legal, business or tax
advice to any holder or prospective holder of our common shares, and no opinion
or representation with respect to the United States Federal income tax
consequences to any such holder or prospective holder is made. Accordingly,
holders and prospective holders of common shares should consult their own tax
advisors with respect to Federal, state, local, and foreign tax consequences of
purchasing, owning and disposing of our common shares.

U.S. Holders

As used herein, a "U.S. Holder" includes a holder of less than
10% of our common shares who is a citizen or resident of the United States, a
corporation created or organized in or under the laws of the United States or of
any political subdivision thereof, any entity which is taxable as a corporation
for U.S. tax purposes and any other person or entity whose ownership of our
common shares is effectively connected with the conduct of a trade or business
in the United States. A U.S. Holder does not include persons subject to special
provisions of Federal income tax law, such as tax-exempt organizations,
qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals or foreign corporations whose ownership of our
common shares is not effectively connected with the conduct of a trade or
business in the United States and shareholders who acquired their shares through
the exercise of employee stock options or otherwise as compensation.

Distributions

The gross amount of a distribution paid to a U.S. Holder will
generally be taxable as dividend income to the U.S. Holder for U.S. federal
income tax purpose to the extent paid out of our current or accumulated earnings
and profits, as determined under U.S. federal income tax principles.
Distributions which are taxable dividends and which meet certain requirements
will be "unqualified dividend income" and taxed to U.S. Holders at a maximum
U.S. federal rate of 15%. Distributions in excess of our current and accumulated
earnings and profits will be treated first as a tax-free return of capital to
the extent the U.S. Holder's tax basis in the common shares and, to the extent
in excess of such tax basis, will be treated as a gain from a sale or exchange
of such shares.

---

- 42 -

Capital Gains

In general, upon a sale, exchange or other disposition of
common shares, a U.S. Holder will generally recognize a capital gain or loss for
U.S. federal income tax purposes in an amount equal to the difference between
the amount realized on the sale or other distribution and the U.S. Holder's
adjusted tax basis in such shares. Such gain or loss will be U.S. source gain or
loss and will be treated as a long-term capital gain or loss if the U.S.
Holder's holding period of the shares exceeds one year. If the U.S. Holder is an
individual, any capital gain will generally be subject to U.S. federal income
tax at preferential rates if specified minimum holding periods are met. The
deductibility of capital losses is subject to significant limitations.

Foreign Tax Credit

A U.S. Holder who pays (or has had withheld from distributions)
Canadian income tax with respect to the ownership of our common shares may be
entitled, at the option of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. Generally, it will be more
advantageous to claim a credit because a credit reduces United States Federal
income taxes on a dollar-for-dollar basis, while a deduction merely reduces the
taxpayer's income subject to tax. This election is made on a year-by-year basis
and generally applies to all foreign income taxes paid by (or withheld from) the
U.S. Holder during that year. There are significant and complex limitations
which apply to the tax credit, among which is an ownership period requirement
and the general limitation that the credit cannot exceed the proportionate share
of the U.S. Holder's United States income tax liability that the U.S. Holder's
foreign source income bears to his or its worldwide taxable income. In
determining the application of this limitation, the various items of income and
deduction must be classified into foreign and domestic sources. Complex rules
govern this classification process. There are further limitations on the foreign
tax credit for certain types of income such as "passive income", "high
withholding tax interest", "financial services income", "shipping income", and
certain other classifications of income. The availability of the foreign tax
credit and the application of these complex limitations on the tax credit are
fact specific and holders and prospective holders of our common shares should
consult their own tax advisors regarding their individual circumstances.

*F.*         
*Dividends and Paying Agents*

Not applicable.

*G.*         
*Statements by Experts*

Not applicable.

*H.*         
*Documents on Display*

Documents concerning our company referred to in this annual
report may be viewed by appointment during normal business hours at our
registered and records office at Suite 800 - 885 West Georgia Street, Vancouver,
British Columbia, Canada, V6C 3H1.

*I.*         
*Subsidiary Information*

As at the date of this annual report, we have one subsidiary,
MegaWest Energy (USA) Corp., a company incorporated pursuant to the laws of the
State of Nevada.

ITEM
11.           Quantitative and
Qualitative Disclosures About Market Risk

Not applicable.

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- 43 -

ITEM
12.           Description of
Securities Other Than Equity Securities

Not applicable.

PART II

ITEM
13.           Defaults,
Dividend Arrearages and Delinquencies

Not applicable.

ITEM
14.           Material
Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

ITEM
15.           Controls and
Procedures

As required by Rule 13a-15 under the Securities Exchange
Act of 1934, as of the end of the period covered by this annual
report, being April 30, 2006, we have carried out an evaluation of the
effectiveness of the design and operation of our company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of our company's management, including our company's chief
executive officer and our company's chief financial officer. Based upon that
evaluation, our company's chief executive officer and our company's chief
financial officer concluded that our company's disclosure controls and
procedures are effective as at the end of the period covered by this report.
There have been no significant changes in our internal controls over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.

Disclosure controls and procedures and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time period specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to
management including our chief executive officer and chief financial officer as
appropriate, to allow timely decisions regarding required disclosure.

ITEM
16.           Reserved

ITEM
16A.        Audit Committee Financial
Expert

Our board has determined that we do not have a member of our
audit committee that qualifies as an "audit committee financial expert" as
defined in Item 401(e) of Regulation S-B. We believe that the members of our
board of directors, who are the same members of our audit committee, are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting.

Our board of directors has determined that Brad Kitchen
qualifies as an "independent" member of our audit committee as that term is
defined in Rule 4350(d) of the Marketplace Rules of the National Association of
Securities Dealers (NASD). The two remaining members of our audit committee are
not "independent" as defined in Rule 4350(d) of the Marketplace Rules of the
NASD. We believe that having an audit committee financial expert and an audit
committee that consists entirely of independent directors would be overly costly
and burdensome and is not warranted in our circumstances given the early stages
of our development and the fact that we have not generated revenues to date.

---

- 44 -

ITEM 16B.        Code of
Ethics

We have not adopted a written "code of ethics" that meets the
new United States' Sarbanes-Oxley standards. Our Board of Directors believes
that existing Canadian standards and procedures is adequate for our purposes. We
have not seen any need to adopt a written code of ethics on the basis that our
corporate culture effectively deters wrongdoing and promotes honest and ethical
conduct, full, fair and accurate, timely, and understandable disclosure in
reports and documents, the compliance with applicable governmental laws, rules
and regulations, the prompt internal reporting.

ITEM 16C.       
Principal Accountant Fees and Services

Audit Fees

Our board appointed Morgan and Company, Chartered Accountants,
as independent auditors to audit our financial statements for the fiscal years
ended April 30, 2006 and 2005. The aggregate of fees billed by Morgan and
Company, Chartered Accountants, for professional services rendered for the audit
of our annual financial statements included in this Annual Report for the fiscal
years ended 2006 and 2005 were $4,200 and $4,400, respectively.

Audit Related Fees

For the fiscal years ended April 30, 2006 and 2005, the
aggregate fees billed for assurance and related services by Morgan and Company,
Chartered Accountants, relating to our quarterly financial statements which are
not reported under the caption "Audit Fees" above, were $Nil and $Nil,
respectively.

Tax Fees

For the fiscal years ended April 30, 2006 and 2005, the
aggregate fees billed for tax compliance, tax advice and tax planning by Morgan
and Company, Chartered Accountants, was $Nil and $Nil, respectively.

All Other Fees

For the fiscal year ended April 30, 2006, the aggregate fees
billed by Morgan and Company, Chartered Accountants, for other non-audit
professional services, other than those services listed above, totalled
$Nil.

Pre-Approval Policies and Procedures

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Morgan and Company, Chartered
Accountants, is engaged by us to render any auditing or permitted non-audit
related service, the engagement be:

|- | approved by our audit committee;
      or                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                     
|- | entered into pursuant to pre-approval policies and
      procedures established by the audit committee, provided the policies and
      procedures are detailed as to the particular service, the audit committee
      is informed of each service, and such policies and procedures do not
      include delegation of the audit committee's responsibilities to
      management.

The audit committee pre-approves all services provided by our
independent auditors. The pre-approval process has been implemented in response
to the new rules. Therefore, the audit committee does not have records of what
percentage of the above fees were pre-approved. However, all of the above
services and fees were reviewed and approved by the audit committee either
before or after the respective services were rendered.

---

- 45 -

The audit committee has considered the nature and amount of the
fees billed by Amisano Hanson, Chartered Accountants, and believes that the
provision of the services for activities unrelated to the audit is compatible
with maintaining the independence of Morgan and Company, Chartered Accountants.

ITEM 16D.       
Exemption from the Listing Standards for Audit Committees

Not Applicable.

ITEM 16E.       
Purchases of Equity Securities the Company and Affiliated Purchasers

Not Applicable.

PART III

ITEM
17.           Financial
Statements

Refer to Item 18  "Financial Statements" below.

ITEM
18.           Financial
Statements

Financial Statements Filed as Part of this Annual Report:

|- | Report of Independent Registered Public Accounting Firm
      dated August 25, 2006, together with Comments by Auditor for U.S. Readers
      in Canada  U.S. Reporting Conflict
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                  
|- | Balance Sheets at April 30, 2006 and 2005                                                                                                                                        
|  |                                                                                                                                                                                  
|- | Statements of Operations for the years ended April 30,
      2006, 2005 and 2004 and for the period February 8, 2000 (Date of
      Incorporation) to April 30, 2006             
|  |                                                                                                                                                                                  
|- | Statements of Cash Flows for the years ended April 30,
      2006, 2005 and 2004 and for the period February 8, 2000 (Date of
      Incorporation) to April 30, 2006             
|  |                                                                                                                                                                                  
|- | Statement of Shareholder's Equity (Deficiency) for the
      period February 8, 2000 (Date of Incorporation) to April 30, 2006                                                   
|  |                                                                                                                                                                                  
|- | Notes to Financial Statements April 30, 2006                                                                                                                                     
|  |                                                                                                                                                                                  
|- | Interim Balance Sheets for October 31, 2006 and April 30,
      2006                                                                                                             
|  |                                                                                                                                                                                  
|- | Interim Statement of Operations for the three and six
      months ended October 31, 2006 and 2005                                                                               
|  |                                                                                                                                                                                  
|- | Interim Statements of Cash Flows for the three and six
      months ended October 31, 2006 and 2005                                                                              
|  |                                                                                                                                                                                  
|- | Statement of Shareholder's Equity (Deficiency) for the
      period February 8, 2000 (Date of Incorporation) to October 31, 2006                                                 
|  |                                                                                                                                                                                  
|- | Notes to Financial Statements October 31, 2006                                                                                                                                   

---

- 46 -



BROCKTON CAPITAL CORP.

(A Development Stage Company)

REPORT AND FINANCIAL STATEMENTS

April 30, 2006 and 2005

(Stated in Canadian Dollars)

---

- 47 -



AUDITORS REPORT

To the Shareholders, Brockton Capital Corp. (A
Development Stage Company)

We have audited the balance sheets of Brockton Capital Corp. (A
Development Stage Company) as at April 30, 2006 and 2005 and the statements of
operations and cash flows for each of the years in the three year period ended
April 30, 2006 and for the period February 8, 2000 (Date of Incorporation) to
April 30, 2006 and the statement of shareholders equity (deficiency) for the
period February 8, 2000 (Date of Incorporation) to April 30, 2006. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 financial statements present fairly, in
all material respects, the financial position of the Company as at April 30,
2006 and 2005 and the results of its operations and its cash flows for each of
the years in the three year period ended April 30, 2006 and for the period
February 8, 2000 (Date of Incorporation) to April 30, 2006, in accordance with
Canadian generally accepted accounting principles.

|Vancouver, Canada | Morgan & Company   
|----------------- | ---------------------
|August 25, 2006   | Chartered Accountants

COMMENTS BY AUDITOR FOR US. READERS ON CANADA-U.S.
REPORTING DIFFERENCE

In the United States, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph) when
the financial statements are affected by conditions and events that cast
substantial doubt on the Companys ability to continue as a going concern, such
as those described in Note 1 to the financial statements. Our report to the
shareholders, dated August 25, 2006, is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors report when these are adequately disclosed in the
financial statements or a reference to such a change in accounting principles in
the auditors report when the change is property accounted for and adequately
disclosed in the financial statements.

|Vancouver, Canada | Morgan & Company   
|----------------- | ---------------------
|August 25, 2006   | Chartered Accountants

|Tel: (604) 687-5841 |                                     | P.O. Box 10007 Pacific Centre
|------------------- | ----------------------------------- | -----------------------------
|Fax: (604) 687-0075 | Sute 1488 - 700 West Georgia Street
|www.morgan-cas.com  | Vancouver, B.C. V7Y 1A1            

---

- 48 -

BROCKTON CAPITAL CORP. (A Development Stage Company)
BALANCE SHEETS

April 30, 2006 and 2005 (Stated in Canadian Dollars)

|                                                        |   | 2006     |   |   | 2005     |  
|------------------------------------------------------- | - | -------- | - | - | -------- | -
|                                                        |   |          |   |   |          |  
|ASSETS                                                  |  
|Current                                                 |   |          |   |   |          |  
|Cash and cash
      equivalents                         | $ | 14,141   |   | $ | 5,865    |  
|GST receivable                                          |   | 7,298    |   |   | 2,903    |  
|Inventory  Notes 2 and
      3                         |   | 1        |   |   | 4,735    |  
|                                                        |   |          |   |   |          |  
|                                                        |   | 21,440   |   |   | 13,503   |  
|                                                        |   |          |   |   |          |  
|Rights  Notes 3 and 8                                  |   | 10,000   |   |   | 123,610  |  
|                                                        |   |          |   |   |          |  
|                                                        | $ | 31,440   |   | $ | 137,113  |  
|                                                        |   |          |   |   |          |  
|LIABILITIES                                             |  
|                                                        |  
|Current                                                 |   |          |   |   |          |  
|Accounts payable and accrued
      liabilities  Note 6 | $ | 120,862  |   | $ | 43,590   |  
|Notes payable  Note 4                                  |   | 40,000   |   |   | -        |  
|                                                        |   |          |   |   |          |  
|                                                        |   | 160,862  |   |   | 43,590   |  
|                                                        |   |          |   |   |          |  
|SHAREHOLDERS EQUITY
      (DEFICIENCY)                 |  
|                                                        |  
|Share Capital  Notes 5 and 6                           |   | 207,342  |   |   | 207,342  |  
|Contributed surplus  Note 8                            |   | 168,750  |   |   | 168,750  |  
|Deficit accumulated during the development
      stage  |   | (505,514 | ) |   | (282,569 | )
|                                                        |   |          |   |   |          |  
|                                                        |   | (129,422 | ) |   | 93,523   |  
|                                                        |   |          |   |   |          |  
|                                                        | $ | 31,440   |   | $ | 137,113  |  
|Nature and Continuance of Operations  Note 1           |   |          |   |   |          |  
|Commitments  Notes 3, 4 and 5                          |   |          |   |   |          |  
|Subsequent Event  Note 3                               |   |          |   |   |          |  

APPROVED BY THE DIRECTORS:

|Terry
      Amisano | Director | Kevin Hanson | Director
|--------------------- | -------- | -------------- | --------
|Terry Amisano         |          | Kevin Hanson   |         

SEE ACCOMPANYING NOTES

---

- 49 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
STATEMENTS OF OPERATIONS for the years ended April 30, 2006, 2005 and
2004 and for the period from February 8, 2000 (Date of Incorporation) to
April 30, 2006 (Stated in Canadian Dollars)

|                                                      |   |                       |   |   |           |   |   |           |   |   | February 8, 2000  |  
|----------------------------------------------------- | - | --------------------- | - | - | --------- | - | - | --------- | - | - | ----------------- | -
|                                                      |   |                       |   |   |           |   |   |           |   |   | (Date of          |  
|                                                      |   |                       |   |   |           |   |   |           |   |   | Incorporation) to |  
|                                                      |   | Years ended April 30, |   |   | April 30, |  
|                                                      |   | 2006                  |   |   | 2005      |   |   | 2004      |   |   | 2006              |  
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Administrative Expenses                               |   |                       |   |   |           |   |   |           |   |   |                   |  
|Accounting, audit and legal 
      Note 6            | $ | 14,599                |   | $ | 24,406    |   | $ | 37,820    |   | $ | 120,953           |  
|Consulting fees                                       |   | 61,200                |   |   | 2,383     |   |   | 1,826     |   |   | 74,069            |  
|Equipment rental  Note 6                             |   | 6,000                 |   |   | 6,000     |   |   | 6,000     |   |   | 28,000            |  
|Filing fees                                           |   | 7,525                 |   |   | 5,357     |   |   | 3,188     |   |   | 19,911            |  
|General and administrative                            |   | -                     |   |   | 169       |   |   | 2,974     |   |   | 3,899             |  
|Interest and bank
      charges                       |   | 2,056                 |   |   | 768       |   |   | 422       |   |   | 4,110             |  
|Investor relations                                    |   | -                     |   |   | 625       |   |   | 6,339     |   |   | 6,964             |  
|Marketing                                             |   | -                     |   |   | -         |   |   | -         |   |   | 1,170             |  
|Office rent  Note 6                                  |   | 9,000                 |   |   | 9,000     |   |   | 9,000     |   |   | 42,000            |  
|Office supplies
       Note 6                        |   | 3,284                 |   |   | 3,000     |   |   | 3,000     |   |   | 14,462            |  
|Promotion                                             |   | 541                   |   |   | 1,481     |   |   | 1,677     |   |   | 4,708             |  
|Transfer agent fees                                   |   | 396                   |   |   | 4,103     |   |   | 9,861     |   |   | 23,228            |  
|Travel                                                |   | -                     |   |   | -         |   |   | 1,729     |   |   | 8,171             |  
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Loss before other items                               |   | (104,601              | ) |   | (57,292   | ) |   | (83,836   | ) |   | (351,645          | )
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Other items:                                          |   |                       |   |   |           |   |   |           |   |   |                   |  
|Other income                                          |   | -                     |   |   | -         |   |   | 961       |   |   | 961               |  
|Interest income                                       |   | -                     |   |   | 2,261     |   |   | 11,513    |   |   | 41,641            |  
|Write-off of deferred
      investment expenses       |   | -                     |   |   | -         |   |   | (72,127   | ) |   | (72,127           | )
|Write-down of inventory to net realizable
      value |   | (4,734                | ) |   | (6,000    | ) |   | -         |   |   | (10,734           | )
|Write-down of rights
       Note 3                   |   | (113,610              | ) |   | -         |   |   | -         |   |   | (113,610          | )
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Net loss for the year                                 | $ | (222,945              | ) | $ | (61,031   | ) | $ | (143,489  | ) | $ | (505,514          | )
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Basic and diluted loss per share                      | $ | (0.04                 | ) | $ | (0.01     | ) | $ | (0.08     | ) |   |                   |  
|                                                      |   |                       |   |   |           |   |   |           |   |   |                   |  
|Weighted average number of shares outstanding         |   | 6,337,500             |   |   | 5,018,322 |   |   | 1,837,500 |   |   |                   |  

SEE ACCOMPANYING NOTES

---

- 50 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
STATEMENTS OF CASH FLOWS for the years ended April 30, 2006, 2005 and
2004 and for the period from February 8, 2000 (Date of Incorporation) to
April 30, 2006 (Stated in Canadian Dollars)

|                                                               |   |                       |   |   |           |   |   |          |   |   | February 8,    |  
|-------------------------------------------------------------- | - | --------------------- | - | - | --------- | - | - | -------- | - | - | -------------- | -
|                                                               |   |                       |   |   |           |   |   |          |   |   | 2000(Date of   |  
|                                                               |   |                       |   |   |           |   |   |          |   |   | Incorporation) |  
|                                                               |   |                       |   |   |           |   |   |          |   |   | to             |  
|                                                               |   | Years ended April 30, |   |   | April 30, |  
|                                                               |   | 2006                  |   |   | 2005      |   |   | 2004     |   |   | 2006           |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Operating Activities                                           |   |                       |   |   |           |   |   |          |   |   |                |  
|Net loss for the period                                        | $ | (222,945              | ) | $ | (61,031   | ) | $ | (143,489 | ) | $ | (505,514       | )
|Add (deduct) items not involving cash:                         |   |                       |   |   |           |   |   |          |   |   |                |  
|Interest
      accrual on notes receivable                     |   | -                     |   |   | (1,946    | ) |   | -        |   |   | (1,946         | )
|Write-off of deferred investment
      expenses                |   | -                     |   |   | -         |   |   | 72,127   |   |   | 72,127         |  
|Write-down
      of inventory to net realizable value          |   | 4,734                 |   |   | 6,000     |   |   | -        |   |   | 10,734         |  
|Write-down of rights                                           |   | 113,610               |   |   | -         |   |   | -        |   |   | 113,610        |  
|Changes in non-cash working capital items related
      to     |   |                       |   |   |           |   |   |          |   |   |                |  
|operations:                                                    |   |                       |   |   |           |   |   |          |   |   |                |  
|GST and interest
      receivable                              |   | (4,395                | ) |   | 1,424     |   |   | 3,050    |   |   | (7,298         | )
|Inventory                                                      |   | -                     |   |   | (10,735   | ) |   | -        |   |   | (10,735        | )
|Prepaid expenses                                               |   | -                     |   |   | -         |   |   | 9,700    |   |   | -              |  
|Accounts payable and accrued
      liabilities                 |   | 77,272                |   |   | 17,095    |   |   | 6,114    |   |   | 120,862        |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Cash used in operating activities                              |   | (31,724               | ) |   | (49,193   | ) |   | (52,498  | ) |   | (208,160       | )
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Investing Activities                                           |   |                       |   |   |           |   |   |          |   |   |                |  
|Notes and
      accrued interest receivable                    |   | -                     |   |   | -         |   |   | (49,414  | ) |   | (121,664       | )
|Deferred investment expenses                                   |   | -                     |   |   | -         |   |   | (34,679  | ) |   | (72,127        | )
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Cash used in investing activities                              |   | -                     |   |   | -         |   |   | (84,093  | ) |   | (193,791       | )
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Financing Activities                                           |   |                       |   |   |           |   |   |          |   |   |                |  
|Proceeds
      from shares issued                              |   | -                     |   |   | 4,500     |   |   | -        |   |   | 448,875        |  
|Share issue costs                                              |   | -                     |   |   | -         |   |   | -        |   |   | (72,783        | )
|Notes payable                                                  |   | 40,000                |   |   | -         |   |   | -        |   |   | 40,000         |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Cash provided by financing activities                          |   | 40,000                |   |   | 4,500     |   |   | -        |   |   | 416,092        |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Increase in cash and cash equivalents during
      the period  |   | 8,276                 |   |   | (44,693   | ) |   | (136,591 | ) |   | 14,141         |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Cash and cash equivalents at the beginning
      of the period |   | 5,865                 |   |   | 50,558    |   |   | 187,149  |   |   | -              |  
|                                                               |   |                       |   |   |           |   |   |          |   |   |                |  
|Cash and cash equivalents at the end of the
      period       | $ | 14,141                |   | $ | 5,865     |   | $ | 50,558   |   | $ | 14,141         |  

/contd

SEE ACCOMPANYING NOTES

---

- 51 -

| | BROCKTON CAPITAL CORP.                                                                   | Continued
| | ---------------------------------------------------------------------------------------- | ---------
| | (A Development Stage Company)                                                            |          
| | STATEMENTS OF CASH FLOWS                                                                 |          
| | for the years ended April 30,
      2006, 2005 and 2004                                  |          
| | and for the period from
      February 8, 2000 (Date of Incorporation) to April 30, 2006 |          
| | (Stated in Canadian
      Dollars)                                                       |          

|                                                  |   |                       |  |   |           |  |   |        |  |   | February 8, 2000  | 
|------------------------------------------------- | - | --------------------- |  | - | --------- |  | - | ------ |  | - | ----------------- | 
|                                                  |   |                       |  |   |           |  |   |        |  |   | (Date of          | 
|                                                  |   |                       |  |   |           |  |   |        |  |   | Incorporation) to | 
|                                                  |   | Years ended April 30, |  |   | April 30, | 
|                                                  |   | 2006                  |  |   | 2005      |  |   | 2004   |  |   | 2006              | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|Cash and cash equivalents consist of:             |   |                       |  |   |           |  |   |        |  |   |                   | 
|Cash                                              | $ | 14,141                |  | $ | 5,865     |  | $ | 10,558 |  | $ | 14,141            | 
|Term deposits                                     |   | -                     |  |   | -         |  |   | 40,000 |  |   | -                 | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|                                                  | $ | 14,141                |  | $ | 5,865     |  | $ | 50,558 |  | $ | 14,141            | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|Supplemental disclosure of cash flow information: |   |                       |  |   |           |  |   |        |  |   |                   | 
|Cash paid for:                                    |   |                       |  |   |           |  |   |        |  |   |                   | 
|Interest                                          | $ | -                     |  | $ | -         |  | $ | -      |  | $ | -                 | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|Income
      taxes                                | $ | -                     |  | $ | -         |  | $ | -      |  | $ | -                 | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|                                                  |   |                       |  |   |           |  |   |        |  |   |                   | 
|Non-cash Transactions  Note 8                    |   |                       |  |   |           |  |   |        |  |   |                   | 

SEE ACCOMPANYING NOTES

---

- 52 -

BROCKTON CAPITAL CORP. (A Development Stage Company)
STATEMENT OF SHAREHOLDERS EQUITY (DEFICIENCY) for the period from
February 8, 2000 (Date of Incorporation) to April 30, 2005 (Stated in
Canadian Dollars)

RetainedEarnings(Deficit)AccumulatedCommon
        Stock
      
      
      
      
      
      During theNumber of
      
      
      
      
      
      Contributed
      
      
      DevelopmentShares
      
      
      Amount
      
      
      Surplus
      
      
      Stage
      
      
      TotalBalance, February 8, 2000
      
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -(Date of Incorporation)Net income for the period
      
      -
      
      
      -
      
      
      -
      
      
      737
      
      
      737Balance, April 30, 2000
      
      -
      
      
      -
      
      
      -
      
      
      737
      
      
      737Cash received from escrow share
      
      2,250,000
      
      
      168,750
      
      
      -
      
      
      -
      
      
      168,750issuances at $0.075 per shareNet income for the year
      
      -
      
      
      -
      
      
      -
      
      
      1,297
      
      
      1,297Balance, April 30, 2001
      
      2,250,000
      
      
      168,750
      
      
      -
      
      
      2,034
      
      
      170,784Cash received from shareissuances at $0.15 per share
      
      1,837,500
      
      
      275,625
      
      
      -
      
      
      -
      
      
      275,625Less share issue costs
      
      -
      
      
      (72,783
      )
      
      -
      
      
      -
      
      
      (72,783
      )Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (34,310
      )
      
      (34,310
      )Balance, April 30, 2002
      
      4,087,500
      
      
      371,592
      
      
      -
      
      
      (32,276
      )
      
      339,316Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (45,773
      )
      
      (45,773
      )Balance, April 30, 2003
      
      4,087,500
      
      
      371,592
      
      
      -
      
      
      (78,049
      )
      
      293,543Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (143,489
      )
      
      (143,489
      )Balance, April 30, 2004
      
      4,087,500
      
      
      371,592
      
      
      -
      
      
      (221,538
      )
      
      150,054Cancel escrow shares
      
      (2,250,000
      )
      
      (168,750
      )
      
      168,750
      
      
      -
      
      
      -Cash received from share
      
      4,500,000
      
      
      4,500
      
      
      -
      
      
      -
      
      
      4,500issuance at $0.001 per shareNet loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (61,031
      )
      
      (61,031
      )Balance, April 30, 2005
      
      6,337,500
      
      
      207,342
      
      
      168,750
      
      
      (282,569
      )
      
      93,523Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      (222,945
      )
      
      (222,945
      )Balance, April 30, 2006
      
      6,337,500
      
      $
      207,342
      
      $
      168,750
      
      $
      (505,514
      )
      $
      (129,422
      )


SEE ACCOMPANYING NOTES

---

- 53 -

BROCKTON CAPITAL CORP. (A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)

|Note 1 | Nature and Continuance of
      Operations
|------ | ------------------------------------------

The Company is in the development
stage and during the year ended April 30, 2005, entered into a distributor
agreement with Cyberhand Technologies Inc. (Cyberhand) to acquire the right to
market, sell and distribute in Canada the full product line of Cyberhand.

These financial statements have been
prepared on a going concern basis. The Company has a working capital deficiency
of $139,422, has yet to achieve profitable operations and has accumulated a
deficit of $505,514 since inception. Its ability to continue as a going concern
is dependent upon the ability of the Company to generate profitable operations
in the future and/or to obtain the necessary financing to meet its obligations
and repay its liabilities arising from normal business operations when they come
due. The outcome of these matters cannot be predicted with any certainty at this
time and raise substantial doubt that the Company will be able to continue as a
going concern. These financial statements do not include any adjustments to the
amounts and classification of assets and liabilities that may be necessary
should the Company be unable to continue as a going concern. The Company
anticipates that additional funding will be in the form of equity financing from
the sale of common shares. The Company may also seek to obtain short-term loans
from the directors of the Company. There are no current arrangements in place
for equity funding or short-term loans.

At April 30, 2004, the Companys
shares were listed on the TSX Venture Exchange (TSX) and the Company was
classified as a Capital Pool Company as defined in the TSX policy 2.4. Effective
June 16, 2004, the Company was delisted from trading on the TSX-V at the request
of the Company and effective March 28, 2005, the Companys common shares
commenced trading on the Over-The-Counter Bulletin Board in the United States of
America.

The Company was incorporated under the
Company Act of the Province of British Columbia on February 8, 2000.

|Note 2 | Significant Accounting
      Policies
|------ | -------------------------------------

The financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles (GAAP) in Canada and are stated in Canadian dollars. These
financial statements conform in all respects with GAAP in the United States of
America. Because a precise determination of many assets and liabilities is
depended on the future events, the preparation of financial statements for a
period necessarily involves the use of estimates, which have been made using
careful judgement. Actual results could differ from these estimates.

These financial statements have, in
managements opinion, been properly prepared within reasonable limits of
materiality and within the framework of significant accounting policies
summarized below:

---

- 54 -

Brockton Capital Corp.(A Development Stage Company)
Notes to the Financial Statement April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)  Page 2

|Note 2 | Significant Accounting
      Policies (contd)
|------ | -----------------------------------------------

| | a) | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Cash and cash equivalents consist of all highly liquid
      investments that are readily convertible to cash and have maturities of
      three months or less when purchased.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | b) | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Inventory is recorded at the lower of cost and net
      realizable value. Cost is determined using the first in first out method.
      Inventory consists of finished goods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | c) | Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Basic loss per share is computed by dividing the loss for
      the year by the weighted average number of shares outstanding during the
      year. Diluted loss per share reflect the potential dilution that could
      occur if potentially dilutive securities were exercised or converted to
      common stock. The dilutive effect of options and warrants and their
      equivalent is computed by application of the treasury stock method and the
      effect of convertible securities by the if converted method. Fully
      diluted amounts are not presented when the effect of the computations are
      anti-dilutive due to the losses incurred. Accordingly, there is no
      difference in the amounts presented for basic and diluted loss per
      share.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | d) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The carrying value of the Companys financial
      instruments, consisting of cash and cash equivalents and accounts payable
      and accrued liabilities approximate their fair value due to the short-term
      maturity of such instruments. Notes payable also approximate fair value.
      Unless otherwise noted, it is managements opinion that the Company is not
      exposed to significant interest, currency or credit risks arising from
      these financial instruments.                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | e) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company follows the liability method of accounting
      for income taxes. Under this method, current income taxes are recognized
      for the estimated income taxes payable for the current year. Future income
      tax assets and liabilities are determined based on differences between tax
      and accounting basis of assets and liabilities. The future tax assets or
      liabilities are calculated using the tax rates for the periods in which
      the differences are expected to be settled. Future tax assets are
      recognized to the extent that they are considered more likely than not to
      be realized.                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | f) | Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | Intangible assets with indefinite lives are not amortized
      but are subject to an annual impairment test. Other intangible assets are
      amortized over their estimated useful lives and are also tested for
      impairment annually. Impairment write-downs will be charged to
      operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

- 55 -

Brockton Capital Corp.(A Development Stage Company)
Notes to the Financial Statement April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)  Page 3

|Note 2 | Significant Accounting
      Policies (contd)
|------ | -----------------------------------------------

| | g) | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The fair value of all share purchase options granted 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. Option pricing models require the input of highly subjective
      assumptions, including the expected price volatility. Changes in these
      assumptions can materially affect the fair value estimate and, therefore,
      the existing models do not necessarily provide a reliable single measure
      of the fair value of the Companys share purchase
  options.

|Note 3 | Rights Note 8
|------ | --------------

By a distributor agreement dated July
5, 2004, the Company acquired the non-exclusive right to market, sell and
distribute in Canada the full product line of Cyberhand Technologies Inc.
(Cyberhand). Consideration paid was the assignment of the principal and
accrued interest of $123,610 due from Cyberhand on promissory notes receivable.
Under the terms of the agreement and amendment dated July 5, 2006, the Company
agreed to purchase a minimum of 15,000 units on or before July 5, 2007, and upon
completion of this minimum order, to purchase 50,000 units per month or forfeit
its rights acquired under the July 5, 2004 agreement. As required by the
agreement, the Company purchased an initial stocking order of 200 units at a
cost of $10,735, which was written down to its net realizable value of $4,735
during the year ended April 30, 2005 and to $1 during the year ended April 30,
2006. During the year ended April 30, 2006, the Company wrote down the rights to
$10,000 to recognize the possible impairment of the asset primarily due to the
lack of sales of the product.

|Note 4 | Notes Payable
|------ | -------------

The notes payable are due on demand,
bear interest at 10% per annum and are unsecured. Included in notes payable are
notes due to directors of the Company ($9,500) and a Company controlled by a
director of the Company ($7,000).

|Note 5 | Share Capital
|------ | -------------

| | a) | Authorized:                                                                                        
| | -- | ---------------------------------------------------------------------------------------------------
| |    |                                                                                                    
| |    | 100,000,000 common shares without par value 
        100,000,000 preferred shares without par value

---

- 56 -

Brockton Capital Corp.(A Development Stage Company)
Notes to the Financial Statement April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)  Page 4

|Note 5 | Share Capital (contd)
|------ | -----------------------

| | b) | Commitments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Stock-based Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The Company has granted directors and officers common
      share purchase options. Options are granted with an exercise price equal
      to the market price of the Companys stock on the date of the grant,
      however, the Company was not publicly listed at the date of the grant and
      the options were priced equal to the offering price on the Companys
      Initial Public Offering. Unless otherwise stated, share purchase options
      vest when granted. Details of share purchase options for the year ended
      April 30, 2006 and 2005 are as follows:

| |                                     |  | April 30, 2006 |  |   | April 30, 2005 | 
| | ----------------------------------- |  | -------------- |  | - | -------------- | 
| |                                     |  |                |  |   | Weighted       | 
| |                                     |  |                |  |   | Average        | 
| |                                     |  | Number of      |  |   | Exercise       | 
| |                                     |  | Shares         |  |   | Price          | 
| |                                     |  |                |  |   |                | 
| |                                     |  |                |  |   |                | 
| |                                     |  |                |  |   |                | 
| | Options outstanding and exercisable |  | 302,500        |  | $ | 0.15           | 
| | at beginning and end of year        |  |                |  |   |                | 

At April 30, 2006, directors and
officers of the Company held 302,500 common share purchase options. Each option
entitles the holder to purchase one share for each option held at $0.15 per
share. These options expire on August 28, 2006.

|Note 6 | Related Party Transactions Notes 4 and
      5
|------ | -----------------------------------------------

The Company incurred the following
expenses charged by a partnership controlled by two directors of the Company:

| |                  |   | Years ended April 30, | 
| | ---------------- | - | --------------------- | 
| |                  |   | 2006                  | 
| |                  |   |                       | 
| | Accounting fees  | $ | 8,797                 | 
| | Equipment rental |   | 6,000                 | 
| | Office rent      |   | 9,000                 | 
| | Office supplies  |   | 3,000                 | 
| |                  |   |                       | 
| |                  | $ | 26,797                | 

These charges were measured by the
exchange amount, which is the amount agreed upon by the transacting parties.

At April 30, 2006, accounts payable
and accrued liabilities includes $34,078 (2005: $17,340) to a partnership
controlled by two directors of the Company.

---

- 57 -

Brockton Capital Corp.(A Development Stage Company)
Notes to the Financial Statement April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)  Page 5

|Note 6 | Related Party Transactions Notes 4 and
      5  (contd)
|------ | ----------------------------------------------------------

During the year ended April 30, 2005,
directors and officers were issued 1,250,000 shares at $0.001 per share pursuant
to a private placement.

|Note 7 | Corporation Income Tax Losses
|------ | -----------------------------

At April 30, 2006, the Company has
accumulated eligible capital costs of $92,708 and non-capital losses totaling
$462,695, which are available to reduce taxable income in future taxation years.
The non-capital losses expire as follows:

| | 2007 | $ | 420     | 
| | ---- | - | ------- | 
| | 2008 |   | 2,748   | 
| | 2009 |   | 48,867  | 
| | 2010 |   | 60,060  | 
| | 2014 |   | 157,207 | 
| | 2015 |   | 74,847  | 
| | 2016 |   | 118,546 | 
| |      |   |         | 
| |      | $ | 462,695 | 

Significant components of the
Companys future tax assets and liabilities, after applying enacted corporate
income tax rates are as follows:

| |                                |   | 2006     |   |   | 2005     |  
| | ------------------------------ | - | -------- | - | - | -------- | -
| |                                |   |          |   |   |          |  
| | Future income tax assets       |   |          |   |   |          |  
| | Net tax losses carried forward | $ | 164,812  |   | $ | 120,452  |  
| | Marketing rights               |   | (11,007  | ) |   | (10,816  | )
| |                                |   |          |   |   |          |  
| |                                |   | 153,805  |   |   | 109,636  |  
| | Less: valuation allowance      |   | (153,805 | ) |   | (109,636 | )
| |                                |   |          |   |   |          |  
| |                                | $ | -        |   | $ | -        |  

The Company recorded a valuation
allowance against its future income tax assets based on the extent to which it
is more-likely-than-not that sufficient taxable income will not be realized
during the carry forward periods to utilize all the future tax assets.

|Note 8 | Non-cash Transactions
|------ | ---------------------

Investing and financing activities
that do not have an impact on current cash flows are excluded from the statement
of cash flows. The following transactions have been excluded:

---

- 58 -

Brockton Capital Corp.(A Development Stage Company)
Notes to the Financial Statement April 30, 2006, 2005 and 2004
(Stated in Canadian Dollars)  Page 6

|Note 8 | Non-cash Transactions
      (contd)
|------ | -------------------------------------

During the year ended April 30, 2005;

| | a) | the Company cancelled and returned to treasury 2,250,000
      common shares previously issued at $0.075 per share ($168,750). The amount
      paid for these shares has been recorded as contributed surplus.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                
| | b) | the Company acquired Rights (Note 3) in exchange for
      notes and accrued interest receivable of
$123,610.                                                                                                  

---

- 59 -







BROCKTON CAPITAL CORP.

(A Development Stage Company)

INTERIM FINANCIAL STATEMENTS

October 31, 2006

(Stated in Canadian Dollars)

(Unaudited)











|THE ACCOMPANYING FINANCIAL STATEMENTS FOR THE QUARTERS
      ENDED OCTOBER 31, 2006 AND 2005 HAVE NOT BEEN REVIEWED OR AUDITED BY THE
      CORPORATIONS AUDITORS.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 60 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
INTERIM BALANCE SHEETS October 31, 2006 and April 30, 2006 (Stated
in Canadian Dollars) (Unaudited)

|                                                        |   | October 31, |   |   | April 30, |  
|------------------------------------------------------- | - | ----------- | - | - | --------- | -
|                                                        |   | 2006        |   |   | 2006      |  
|                                                        |   |             |   |   |           |  
|**ASSETS**                                              |   |             |   |   |           |  
|                                                        |   |             |   |   |           |  
|Current                                                 |   |             |   |   |           |  
|Cash                                                    | $ | 7,813       |   | $ | 14,141    |  
|GST receivable                                          |   | 5,491       |   |   | 7,298     |  
|Inventory  Note 3                                      |   | 1           |   |   | 1         |  
|                                                        |   |             |   |   |           |  
|                                                        |   | 13,305      |   |   | 21,440    |  
|Rights  Note 3                                         |   | 10,000      |   |   | 10,000    |  
|                                                        |   |             |   |   |           |  
|                                                        | $ | 23,305      |   | $ | 31,440    |  
|                                                        |   |             |   |   |           |  
|LIABILITIES                                             |  
|Current                                                 |   |             |   |   |           |  
|Accounts payable and
      accrued liabilities  Note 6 | $ | 169,846     |   | $ | 120,862   |  
|Notes payable  Notes 4 and 6                           |   | 40,000      |   |   | 40,000    |  
|                                                        |   |             |   |   |           |  
|                                                        |   | 209,846     |   |   | 160,862   |  
|                                                        |   |             |   |   |           |  
|SHAREHOLDERS
      DEFICIENCY                          |  
|                                                        |  
|Share Capital  Notes 5 and 7                           |   | 207,342     |   |   | 207,342   |  
|Contributed surplus                                     |   | 168,750     |   |   | 168,750   |  
|Deficit accumulated during the development stage        |   | (562,633    | ) |   | (505,514  | )
|                                                        |   |             |   |   |           |  
|                                                        |   | (186,541    | ) |   | (129,422  | )
|                                                        |   |             |   |   |           |  
|                                                        | $ | 23,305      |   | $ | 31,440    |  

SEE ACCOMPANYING NOTES

---

- 61 -

BROCKTON CAPITAL CORP.(A Development Stage
Company) INTERIM STATEMENTS OF OPERATIONS for the three and six months
ended October 31, 2006 and 2005 (Stated in Canadian Dollars)
(Unaudited)

|                                                |   | Three months ended |   |   | Six months ended |  
|----------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                                |   | October 31,        |   |   | October 31,      |  
|                                                |   | 2006               |   |   | 2005             |  
|                                                |   |                    |   |   |                  |  
|General and Administrative Expenses             |   |                    |   |   |                  |  
|Accounting, audit and legal fees 
      Note 6 | $ | 7,200              |   | $ | 3,190            |  
|Consulting fees                                 |   | 15,000             |   |   | 31,200           |  
|Equipment rental  Note 6                       |   | 1,500              |   |   | 1,500            |  
|Filing fees                                     |   | 3,734              |   |   | 4,650            |  
|Interest and bank charges                       |   | 1,128              |   |   | 106              |  
|Office and supplies 
      Note 6              |   | 750                |   |   | 750              |  
|Promotion                                       |   | -                  |   |   | 260              |  
|Rent  Note 6                                   |   | 2,250              |   |   | 2,250            |  
|Transfer agent fees                             |   | 2,733              |   |   | -                |  
|                                                |   |                    |   |   |                  |  
|Loss before other item                          |   | (34,295            | ) |   | (43,906          | )
|                                                |   |                    |   |   |                  |  
|Other item                                      |   |                    |   |   |                  |  
|Interest income                                 |   | 1                  |   |   | -                |  
|                                                |   |                    |   |   |                  |  
|Net loss for the period                         | $ | (34,294            | ) | $ | (43,906          | )
|                                                |   |                    |   |   |                  |  
|Basic and diluted loss per share                | $ | (0.00              | ) | $ | (0.00            | )

SEE ACCOMPANYING NOTES

---

- 62 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS for the three and six months ended
October 31, 2006 and 2005 (Stated in Canadian Dollars)
(Unaudited)

|                                     |   | Three months ended |   |   | Six months ended |  
|------------------------------------ | - | ------------------ | - | - | ---------------- | -
|                                     |   | October 31,        |   |   | October 31,      |  
|                                     |   | 2006               |   |   | 2005             |  
|                                     |   |                    |   |   |                  |  
|Operating Activities                 |   |                    |   |   |                  |  
|Net loss for the period              | $ | (34,294            | ) | $ | (43,906          | )
|Changes in non-cash working capital  |   |                    |   |   |                  |  
|items related to operations:         |   |                    |   |   |                  |  
|GST receivable                       |   | (2,376             | ) |   | (3,788           | )
|Prepaid expenses                     |   | -                  |   |   | -                |  
|Accounts
      payable and accrued   |   |                    |   |   |                  |  
|liabilities                          |   | 27,753             |   |   | 43,377           |  
|                                     |   |                    |   |   |                  |  
|                                     |   | (8,917             | ) |   | (4,317           | )
|                                     |   |                    |   |   |                  |  
|Decrease in cash during the period   |   | (8,917             | ) |   | (4,317           | )
|                                     |   |                    |   |   |                  |  
|Cash, beginning of the period        |   | 16,730             |   |   | 5,771            |  
|                                     |   |                    |   |   |                  |  
|Cash, end of the period              | $ | 7,813              |   | $ | 1,454            |  
|                                     |   |                    |   |   |                  |  
|Supplemental disclosure of cash flow |   |                    |   |   |                  |  
|information:                         |   |                    |   |   |                  |  
|Cash paid for:                       |   |                    |   |   |                  |  
|Interest                             | $ | -                  |   | $ | -                |  
|                                     |   |                    |   |   |                  |  
|Income taxes                         | $ | -                  |   | $ | -                |  

SEE ACCOMPANYING NOTES

---

- 63 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
STATEMENT OF SHAREHOLDERS EQUITY (DEFICIENCY) for the period from
February 8, 2000 (Date of Incorporation) to October 31, 2006 (Stated in
Canadian Dollars) (Unaudited)

RetainedEarnings(Deficit)AccumulatedCommon Stock
    
    
    
    
    
    During theNumber of
    
    
    
    
    
    Contributed
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Surplus
    
    
    Stage
    
    
    TotalBalance, February 8, 2000
    
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -(Date of Incorporation)Net income for the period
    
    -
    
    
    -
    
    
    -
    
    
    737
    
    
    737Balance, April 30, 2000
    
    -
    
    
    -
    
    
    -
    
    
    737
    
    
    737Cash
      received from escrowshare issuances at $0.075per share
    
    2,250,000
    
    
    168,750
    
    
    -
    
    
    -
    
    
    168,750Net income for the year
    
    -
    
    
    -
    
    
    -
    
    
    1,297
    
    
    1,297Balance, April 30, 2001
    
    2,250,000
    
    
    168,750
    
    
    -
    
    
    2,034
    
    
    170,784Cash
      received from shareissuances at $0.15 per share
    
    1,837,500
    
    
    275,625
    
    
    -
    
    
    -
    
    
    275,625Less share
      issue costs
    
    -
    
    
    (72,783
    )
    
    -
    
    
    -
    
    
    (72,783
    )Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (34,310
    )
    
    (34,310
    )Balance, April 30, 2002
    
    4,087,500
    
    
    371,592
    
    
    -
    
    
    (32,276
    )
    
    339,316Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (45,773
    )
    
    (45,773
    )Balance, April 30, 2003
    
    4,087,500
    
    
    371,592
    
    
    -
    
    
    (78,049
    )
    
    293,543Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (143,489
    )
    
    (143,489
    )Balance, April 30, 2004
    
    4,087,500
    
    
    371,592
    
    
    -
    
    
    (221,538
    )
    
    150,054Cancel
      escrow shares
    
    (2,250,000
    )
    
    (168,750
    )
    
    168,750
    
    
    -
    
    
    -Cash received from shareissuance at
      $0.001 per share
    
    4,500,000
    
    
    4,500
    
    
    -
    
    
    -
    
    
    4,500Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (61,031
    )
    
    (61,031
    )Balance, April 30, 2005
    
    6,337,500
    
    
    207,342
    
    
    168,750
    
    
    (282,569
    )
    
    93,523Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    (222,945
    )
    
    (222,945
    )Balance, April 30, 2006
    
    6,337,500
    
    
    207,342
    
    
    168,750
    
    
    (505,514
    )
    
    (129,422
    )Net loss for the period
    
    -
    
    
    -
    
    
    -
    
    
    (57,119
    )
    
    (57,119
    )Balance, October 31, 2006
    
    6,337,500
    
    $
    207,342
    
    $
    168,750
    
    $
    (562,633
    )
    $
    (186,541
    )


SEE ACCOMPANYING NOTES

---

- 64 -

BROCKTON CAPITAL CORP.(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS October 31, 2006 (Stated
in Canadian Dollars) (Unaudited)

|Note 1 | Interim Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | While the information presented in the accompanying
      interim financial statements is unaudited, it includes all adjustments
      which are, in the opinion of management, necessary to present fairly the
      financial position, results of operations and cash flows for the interim
      periods presented. These interim financial statements follow the same
      accounting policies and methods of their application as the April 30, 2006
      annual financial statements. It is suggested that these interim financial
      statements be read in conjunction with the Companys April 30, 2006 annual
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Note 2 | Nature and Continuation of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company is in the development stage and during the
      year ended April 30, 2005, entered into a distributor agreement with
      Cyberhand Technologies Inc. (Cyberhand) to acquire the right to market,
      sell and distribute in Canada the full product line of Cyberhand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | These financial statements have been prepared on a going
      concern basis. The Company has a working capital deficiency of $196,541,
      has yet to achieve profitable operations and has accumulated a deficit of
      $562,633 since inception. Its ability to continue as a going concern is
      dependent upon the ability of the Company to generate profitable
      operations in the future and/or to obtain the necessary financing to meet
      its obligations and repay its liabilities arising from normal business
      operations when they come due. The outcome of these matters cannot be
      predicted with any certainty at this time and raise substantial doubt that
      the Company will be able to continue as a going concern. These financial
      statements do not include any adjustments to the amounts and
      classification of assets and liabilities that may be necessary should the
      Company be unable to continue as a going concern. The Company anticipates
      that additional funding will be in the form of equity financing from the
      sale of common shares. The Company may also seek to obtain short- term
      loans from the directors of the Company. Subsequent to October 31, 2006,
      the Company has completed a private placement for US$2,350,000 (Note 7).
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | At April 30, 2004, the Companys shares were listed on
      the TSX Venture Exchange (TSX) and the Company was classified as a
      Capital Pool Company as defined in the TSX policy 2.4. Effective June 16,
      2004, the Company was delisted from trading on the TSX-V at the request of
      the Company and effective March 28, 2005, the Companys common shares
      commenced trading on the Over-The-Counter Bulletin Board in the United
      States of America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company was incorporated under the Company Act of the
      Province of British Columbia on February 8, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

- 65 -

Brockton Capital Corp. (A Development Stage Company)
Notes to the Interim Financial Statement October 31, 2006 (Stated in
Canadian Dollars) (Unaudited)  Page 2

|Note 3 | Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | By a distributor agreement dated July 5, 2004, the
      Company acquired the non-exclusive right to market, sell and distribute in
      Canada the full product line of Cyberhand Technologies Inc. (Cyberhand).
      Consideration paid was the assignment of the principal and accrued
      interest of $123,610 due from Cyberhand on promissory notes receivable.
      During the year ended April 30, 2006, the Company wrote down the rights to
      its carrying value of $10,000. Under the terms of the agreement and
      amendment dated July 5, 2006, the Company agreed to purchase a minimum of
      15,000 units on or before July 5, 2007, and upon completion of this
      minimum order, to purchase 50,000 units per month or forfeit its rights
      acquired under the July 5, 2004 agreement. As required by the agreement,
      the Company purchased an initial stocking order of 200 units at a cost of
      $10,735, which was written down to its net realizable value of $4,735
      during the year ended April 30, 2005 and to $1 during the year ended April
      30, 2006.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Note 4 | Notes Payable Note 6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       | The notes payable are due on
      demand, bear interest at 10% per annum and are unsecured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Note 5 | Share Capital Note 7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | a) | Authorized:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Unlimited common shares without par value
        100,000,000 preferred shares without par value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | b) | Commitments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Stock-based Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The Company has granted directors and officers common
      share purchase options. Options are granted with an exercise price equal
      to the market price of the Companys stock on the date of the grant,
      however, the Company was not publicly listed at the date of the grant and
      the options were priced equal to the offering price on the Companys
      Initial Public Offering. Unless otherwise stated, share purchase options
      vest when granted. Details of stock options for the six months ended
      October 31, 2006 and 2005 are as follows:

---

- 66 -

Brockton Capital Corp. (A Development Stage Company)
Notes to the Interim Financial Statement October 31, 2006 (Stated in
Canadian Dollars)(Unaudited)  Page 3

|Note 5 | Share Capital Note 7  (contd)
|------ | --------------------------------

| | b) | Commitments:  (contd)                 
| | -- | ----------------------------------------
| |    |                                         
| |    | Stock-based Compensation Plan 
(contd)

| |                                     |  | Six months ended October 31, |  
| | ----------------------------------- |  | ---------------------------- | -
| |                                     |  | 2006                         |  
| |                                     |  |                              |  
| |                                     |  |                              |  
| |                                     |  | Number of                    |  
| |                                     |  | Shares                       |  
| |                                     |  |                              |  
| | Options outstanding and exercisable |  | 302,500                      |  
| | at beginning of period              |  |                              |  
| | Expired                             |  | (302,500                     | )
| |                                     |  |                              |  
| | Balance at end of period            |  | -                            |  

| | c) | Share Subdivision                                                                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                 
| |    | On October 20, 2006, the Company received approval from
      the shareholders of the Company to a subdivision of its issued common
      shares on an up to 3 for 1 basis. This subdivision is subject to the
      discretion of the directors of the Company.

Note 6
    Related Party TransactionsThe Company incurred the following expenses charged by a
      partnership controlled by two directors of the Company:


| |                  |   | Six months ended | 
| | ---------------- | - | ---------------- | 
| |                  |   | October 31,      | 
| |                  |   | 2006             | 
| |                  |   |                  | 
| | Accounting fees  | $ | 6,500            | 
| | Equipment rental |   | 3,000            | 
| | Office supplies  |   | 1,500            | 
| | Rent             |   | 4,500            | 
| |                  |   |                  | 
| |                  | $ | 15,500           | 

These expenditures were measured by
the exchange amount, which is the amount agreed upon by the transacting parties.

---

- 67 -

Brockton Capital Corp. (A Development Stage Company)
Notes to the Interim Financial Statement October 31, 2006 (Stated in
Canadian Dollars)(Unaudited)  Page 4

|Note 6 | Related Party Transactions (contd)                                                                                                                                                                                                                                                                                         
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                              
|       | At October 31, 2006, accounts payable and accrued
      liabilities include $48,545 (April 30, 2006: $26,732) owing to a
      partnership controlled by two directors of the Company.                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                              
|       | At October 31, 2006, notes payable included $16,500
      (April 30, 2006: $16,500) owing to directors of the Company and a company
      controlled by a director of the Company.                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                              
|Note 7 | Subsequent Event                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                              
|       | Subsequent to October 31, 2006 the Company completed a
      private placement of 23,500,000 common shares at $0.10 per common share.
      This financing has been arranged to provide the company with working
      capital to sustain its current operations and to evaluate and pursue new
      business opportunities.

---

- 68 -

ITEM
19.           Exhibits

Exhibits required by Item 601 of Regulation
S-B

|Exhibit | Description                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------
|Number  |                                                                                                            
|        |                                                                                                            
|(3)     | (i) Articles of Incorporation; and (ii) By-laws                                                            
|        |                                                                                                            
|3.1     | Certificate of Incorporation (incorporated by
      reference from our on Form 6-K, filed on March 6, 2006)
|        |                                                                                                            
|3.2     | Notice of Articles (incorporated by reference
      from our on Form 6-K, filed on March 6, 2006)          
|        |                                                                                                            
|3.3     | Transition Application (incorporated by reference
      from our on Form 6-K, filed on March 6, 2006)      
|        |                                                                                                            
|3.4     | Articles (incorporated by reference from our on
      Form 6-K, filed on March 6, 2006)                    
|        |                                                                                                            
|3.5*    | Notice of Articles                                                                                         
|        |                                                                                                            
|3.6*    | Certificate of Name Change                                                                                 
|        |                                                                                                            
|3.7*    | Articles                                                                                                   
|        |                                                                                                            
|(4)     | Instruments defining rights of security holders,
      including indentures                                
|        |                                                                                                            
|4.1     | Stock Option Plan (incorporated by reference from
      our on Form 6-K, filed on March 6, 2006)           
|        |                                                                                                            
|(10)    | Material Contracts                                                                                         
|        |                                                                                                            
|10.1*   | Employment Agreement
      dated December 15, 2006 with R. William Thornton                                
|        |                                                                                                            
|10.2*   | Form of Subscription
      Agreement entered into with the following individuals:                          

Firebird Global Master Fund II, Ltd.
      Brian Chatfield
      John S. BrockFirebird Global Master Fund, Ltd.
    Maureen Chatfield
    Timothy BrockF.T.S. Worldwide Corporation
      Reinhard Behrend
      West Peak Ventures of CanadaPinetree Resource Partnership
    Primary Ventures Corporation
    LimitedMB Picks Capital Corp.
      Monita Faris
      The MacLachlan InvestmentsTreshnish Investment, Inc.
    Dean Duke
    CorporationBob Faris
      Julie Catling
      R. William ThorntonBill Brandes
    Michael Meyers
    D.R.R. Capital Corp.Steve McGuire
      Bolder Opportunities II L.P.
      Donald C. Cameron ConsultingTarbo Resources Ltd.
    John Gordon Murphy
    Ltd.Woodburn Holdings Ltd.
      William Timmins
      Nanami Assets LimitedDave Goodman & Jane Goodman
    1091096 Ontario Inc.
    1218716 Alberta Ltd.Mike Parker
      PowerOne Capital Markets Limited
      Andrew CameronPeter K. Spencer


|10.3* | Form of Subscription
      Agreement entered into with the following individuals:                                                                      
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                        
|      | Murdock Capital Partners Corp.
        
        Murdock Opportunity Fund 
        Jay S. Kennedy 
        George T. Stapleton II 
        Michael Berry

|10.4* | Letter of Intent dated
      December 20, 2006 with Deerfield Energy LLC
|----- | ------------------------------------------------------------------------

---

- 69 -

|10.5*  | Assumption
        and Loan Conversion Agreement dated December 20, 2006 with Agosto Corporation
        and Deerfield Energy LLC                                    
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                      
|10.6*  | First
        Supplemental Agreement to Assumption and Loan Conversion Agreement dated
        December 20, 2006 with Agosto Corporation and Deerfield Energy LLC    
|       |                                                                                                                                                                      
|10.7*  | Letter
        of Intent dated December 20, 2006 with Trinity Sands Energy LLC                                                                                       
|       |                                                                                                                                                                      
|10.8*  | Assumption
        and Loan Conversion Agreement dated December 20, 2006 with Agosto Corporation
        Ltd. and Trinity Sands Energy LLC                           
|       |                                                                                                                                                                      
|10.9*  | First
        Supplemental Agreement to Assumption and Loan Conversion Agreement dated
        December 20, 2006 with Agosto Corporation and Trinity Sands Energy LLC
|       |                                                                                                                                                                      
|10.10* | Form
        of Warrant Issuance Agreement dated December 20, 2006 entered into with:                                                                                
|       |                                                                                                                                                                      
|       | Gladrock Energy
        LLC                                                                                                                                          
|       | Endurance Consulting                                                                                                                                                 
|       | 1187016 Alberta
        Ltd.                                                                                                                                         
|       |                                                                                                                                                                      
|10.11* | Form
        of Debt Settlement and Subscription Agreement dated December 21, 2006
        entered into with:                                                        
|       |                                                                                                                                                                      
|       | Karkrash Holdings Ltd.                                                                                                                                               
|       | Carob Management Ltd.,                                                                                                                                               
|       | Brian Hanson                                                                                                                                                         
|       | Roy Brown                                                                                                                                                            
|       | Amisano Hanson                                                                                                                                                       
|       |                                                                                                                                                                      
|10.12* | Form
        of Subscription Agreement entered into with the following individuals:                                                                                  

RSJN Holdings Ltd.
      Michael Geleta
      Kim GulevichBrent Rolufs
    Hector L. Demers
    633430 Alberta Ltd.Ethel Holmberg
      Robert Douglas Gerbrandt
      Darren DzikowskiDouglas R. Anthony
    Andiamo (Thunder Bay) Inc.
    Frank QuinbyTerence Schorn
      Kosta Tsoutsis
      GKM Holdings Ltd.James S. Unterschultz
    Aeron T. Evans
    John B. RossMarcel Brichon
      Pinetree Resource Partnership
      Ginette MaguireHBK Resources Ltd.
    Robert STeinborn
    Richard J. SorensenPacific West Ventures Inc.
      Tom Rupprecht
      Sandra RupprechtLaurie Anne Thornton
    Steve Palmer
    Gordon ElliottIan Downs
      Sanjay Maharaj
      Lawrence I. HammHilde Clovechok
    Craig A. Mills
    Donna G. MillsHoward P. Prumer
      Anne V. Pruner
      Brian J. EvansRayna Lynnette Elsdon
    Fairview Capital (1978) Ltd.
    Dale LoewenDean Duke
      Julie Catling
      Diane WinstanleyMyron Braun
    Kalayra B. Angelyys
    Ping Pong TothShaun Kelbert
      Suzanne Liptak
      Bill BrandesMichael and Cindy Mallett
    George Kokonis
    Tamara RossShane Koh
      Christine Sealock
      MP Pics Capital Corp.Fundarica Investments
    Channing Investments Corp.
    Richard A. BrookDr. Valerie Kuehne and John
      Gary Danylchuk
      Brian C. McIntoshKuehne
    Brock Helm
    Karen GableLarry Thompson
      624659 Alberta Ltd.
      Jerry ChrzaszczMichael Geleta
    Thomas Martin Christopher
    Donald RickardDoug Ramsey
      Garry Fizzell
      Randy L. OswaldTerrence G. Dingwell
    Mike McCaffrey
    Carole MacLeodBarry Parsons
      Hector L. Demers
      Tyler RomanchukCory Pichota
    Gianni Sgambaro
    Danny Dion


---

- 70 -

Ryan Larsh
      B.R. (Ron) Voogel
      Taras PysykMonica McGrandle
    0750412 B.C. Ltd.
    Michael McBrideGraham Dallimore
      Randall Pow
      Eat-Me Foods Ltd.Michael Laidlaw
    Dave Van Dyke
    Carrie Louise ClarkIn-Sook Leigh
      George Hatch
      James G. TaylorCamille Hodge
    Mark and Birgitta Redcliffe
    Anita DattRamona Vorberg
      Terrance Sigmund
      Faten ArdakaniChris Vorberg
    Fraser Hindson
    Sandra E. FopmaNick Reeves
      Rolf Tevely
      Shane MeyersPowerOne Capital Markets Limited
    Minaz Devji
    1091096 Ontario Inc.Mary K. Hill
      Michael McMath
      Franco TormeneArnold and Tricia Hughes
    563298 B.C. Ltd.
    Karkrash Holdings Ltd.Greg Burnett
      David Berg
      Jimmy S.H. LeeBruce Durnie
    Dossche Bart
    Cnudde DavyTiger Capital Corp.
      Firebird Global Master Fund II, Ltd.
      Manfid SAFirebird Global Master Fund, Ltd.
    F.T.S. Worldwide Corporation
    Ironshore TrustTreshnish Investment, Inc.
      Stacy Broadoway
      Marrandino Holdings Inc.Doug Casey
    Leslie Friesen, David Friesen


|10.13* | Form of Subscription
      Agreement entered into with the following individuals:
|------ | ---------------------------------------------------------------------------------
|       |                                                                                  
|       | James L. and Ann C. Donnelly                                                     
|       | John Herby                                                                       
|       | James P. Geiskoph                                                                
|       | Al OHara                                                                        
|       | Kurt R. Gainer                                                                   
|       | Murray Vernon                                                                    
|       | Kenneth John Greenlaw                                                            
|       |                                                                                  
|10.14* | Form of Subscription
      Agreement entered into with the following individuals:

Byron Cook
      Ethel Holmberg
      Frank QuinbyAgosto Velenosi
    Ping Pong Toth and Zoltan Toth
    Shaun KelbertCraig Lytle
      Ron Child
      Pentor Capital CorpBarrie Einarson
    Kenneth Jabs
    Firebird Global Master Fund II,Pinetree Resource Partnership
      0753829 BC Ltd.
      LtdR. Douglas Gerbrandt
    Cullen Kuzio
    George Kokonis633430 Alberta Ltd.
      Hazel Reid
      Brock HelmDeryl Williams
    Dossche Bart
    Kenneth SantaCnudde Martin
      Cnudde Davy
      Vanderstraeten Luc2034512 Ontario Inc.
    Iatima M da Rosa
    2034511 Ontario Inc.Julia Della Maestra
      Thomas Della Maestra
      Jeffery BerlinerAnne Fairfull
    David Pinkus
    Gary ElmanNassrin Kabiri
      Allen Koffman
      Tom JamesTony Baldassarre
    Vivien Roe-Perry
    Douglas MukleyAaron Shier
      Cindy G. White
      Rosenbloom Medicine Professional558859 BC Ltd.
    Vital Beliveau
    CorporationRadcliff Foundation
      Bateman and Company Ltd.
      International CapitalMarcel Brichon
    Aeron T. Evans
    Dianna L BullPauline Wong
      Sturgeon Holdings Corp
      Kriston SehnChang Wan Stephan Woo
    Patrick Whibley
    Brent Rolufs1004387 Alberta Ltd
      Eric Negraeff
      Donald RickardNathan Isbister
    Garry Fizzell
    Lawrence ChernoffRon Carole MacLeod
      Jack Cross Roberta Cross
      Mike McCaffreyChristian Yoingco
    Bruce Hudson
    Hector DemersLarry Krawchuck
      Rupprecht Family Trust
      DKR Saturn Event DrivenHudson Family Trust
    Joe Schaab
    Holdings Fund Ltd.Douglas Kurek
      Shelley Sorensen
      Myron BraunSukhbir Mann
    George A. Brown
    Deborah SchaabLawrence I Hamm
      6249659 Alberta Ltd.
      Andrew ThorntonLorl Anne Jensen
    Morton Elman
    Vertex One Asset Mgmt Inc.


---

- 71 -

Peter Cozzi
      Antonietta Gatto
      Gerry FeldmanFX Inc.
    Warran Manis
    Marty HersonIncorporated International Capital
      Blayne Johnson
      Les TanzerQuarry Capital Corporation
    Dr. Savvas Nicolaou Inc
    Gary DanylchukStefaniya Danylchuk
      Vivki Koh
      Yong-Jong Kim578159 BC Ltd.
    Jin-Ho Chang
    Teak-ky MinWaltraud Wilson
      Shirley Lee
      Medallion Capital Corp.Roland M. Labuan
    Denis Wilson
    Denis Cooke EnterprisesCraig A. Mills
      Edward Thornton
      Robert SteinbornPeter Holt
    Donna Mills
    Steve Mantel6287 Holdings Inc.
      Bernard Oegema
      James WagnerScott & Heather Kyllo
    Dale Johnson
    Roberto SgambaroTom Matthes
      Trevor Perepolkin
      In-Sook LeighRon McDougall & Val McDougall
    Susan Hamilton
    Dan Cuerrier & sandra CuerrierTerry T. Jarton
      Barry Reed
      Brian ChambersLloyd Michaels
    Juan-Pablo Santini
    Paloduro Inv. Inc.Fenyo Sandro
      Ron Perry
      John FlynnPowerOne Capital
    David Mills
    France CoutureShane Meyers
      Miranda Bradley
      Renita NarayanFundarica Investments
    Channing Investments
    Bolder OpportunitiesDoug Simpson
      Carley J Cole
      Harvey W. ColeJonathan Lim Keng Hock
    Setsiskas
    Lee BersteinTim Sorensen
      Alex Rothwell
      Harry PokrandtBrenda Howard
    Kevin Gould
    Michael NiningerDiane Michaels
      Suzanne Liptak
      John FromeColleen Mulligan
    Eymann Investments Corp
    Chris GrayMaureen Gustufson
      Joseph Gustafson
      Gill J VincentJoseph Pau l McDonald
    Ron Johnston
    Merlin PetersonRSJN Holdings Ltd.
      Craig Bessie
      Sunita PrasadGordon MacGregor
    Sanjay Chand Maharaj
    Ian DownsGrant Scott
      George Charles Durham
      Timothy TurykRadsport Holdings Inc
      Charles Lyall
      David AkselsonGreg Ledding
    William Gordica
    Dean ClaridgeRobert Lim
      Bill Brandis
      Sam MagidDean Mockney
    Ilja Troitscanski
    Randy JohnsonOverdrive Enterprises Ltd.
      Caulfield Trust
      KR LockettMonarch Capital Fund Ltd
    James Lockett Family Trust
    Rick ZeinotAnatoly Langer
      Asset Management Limited
      Kelly ShibataRon Rubuliak
    John McGoldrick
    Victor DarioHalf Moon Foundation
      Steve Krystofiak
      Larry ThompsonGoma Foundation
    Doug Casey
    Carmen MartinTodd Sharum
      Paul Hickey
      Dale LowenFrazer Loney
    Adam Vary
    Aly MawjiTango Corp Inc
      Gillian Branson
      Scott CalderwoodScott Wilson
    Gordon MacGregor Elliot
    Shelly ShawLarry Sostad
      Randy Chan
      Bill GriffisJim Slipp
    Bank Sal.oppenheim Jr. & Cie Zurich
    James Treliving HoldingsTrout Exploration & Mining Ltd
      
      Bradner


|10.15* | Form of Subscription
      Agreement entered into with the following individuals:
|------ | ---------------------------------------------------------------------------------

John Herby
      Hugo Liberti
      Terrence J. HankersonMurray Vernon
    John Philip Mappin
    Paul YezziKen Danylchuck
      Veron F. Ross
      Barbara YeomansMonika Campbell
    Ted & Kim Williams
    Kenneth & Stephanie AltonGerard Gloisten
      Charles B Simmons Jr.
      Ronald EisenbergKurt Gainer
    Robert Holtzclaw & Darlene .
    David SparksDavid Batchelor
      Holtzclaw
      CMS CapitalGerald Dasbach
    KJV Investment Family Limited
    Will HarrisJohn Krolick
      Partnership
      Ken GreenlawScott McNitt
    James Geiskopf
    Peter M Halloran


---

- 72 -

Gary Olsen
      Wei-Tek Tsai / Enyan Deng
      Roy Holdings LLCTradewinds Fund Ltd.
    Robert Rushing
    Al OharaWilliam Lee Buse
      Cushing MLP Opportunity
      Thomas D. Willis IILittle Wing LP


|10.16* | Asset
        Purchase Agreement dated March 26, 2007 with Deerfield Energy Kansas Corp.
        and Megawest Energy (USA) Corp.
|------ | --------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                 
|(21)   | Subsidiaries                                                                                                                    
|       |                                                                                                                                 
|21.1   | List of Subsidiaries                                                                                                            





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SIGNATURES

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

MEGAWEST ENERGY CORP.

Per: */s/ George T. Stapleton, II*

George T. Stapleton, II Chief Executive Officer, President
and Director (Principal Executive Officer)

Dated: March 30, 2007

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