U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                                   (Mark One)


     [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
                     For the fiscal year ended July 31, 2003


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

               For the transition period from ________ to ________

                        Commission File Number: 000-29475

                    MALAHAT ENERGY CORPORATION AND SUBSIDIARY
                          (Now Known as PHC Holdings)
                 (Name of small business issuer in its charter)


                       Nevada                             88-0491630
         (State  or  other  jurisdiction               (I.R.S.  Employer
       of  incorporation  or  organization)            Identification  No.)


 2633 Lincoln Boulevard, Suite 117, Santa Monica, California          90405-4656
     (Address of principal executive offices)                         (Zip code)


                   (Issuer's telephone number): (310) 452-3206

Securities  registered  pursuant  to  Section  12(b)  of  the Exchange Act: NONE

Securities  registered  under  Section  12(g)  of  the  Exchange  Act:

                    COMMON STOCK, PAR VALUE $0.001 PER SHARE
                                (Title of Class)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d)  of  the Securities Exchange Act during the past 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.

Yes  [  ]  No  [X]

Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B  is  not  contained  in  this  form,  and  no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information  statements  incorporated  b  y  reference  in Part III of this Form
10-KSB  or  any  amendment  to  this  Form  10-KSB.  [  ]

The  registrant  did  not report any revenues for the fiscal year ended July 31,
2003.

Aggregate  market  value  of the voting stock held by non-affiliates on:
June 30, 2005            $546,794
Shares  outstanding  of  the Registrant's only class of common stock on:
June 30, 2005          32,708,600

Transitional  Small  Business  Disclosure  Format  (Check  One):  Yes:   ; No: x

DOCUMENTS  INCORPORATED  BY  REFERENCE.  None.

<PAGE>

                                TABLE OF CONTENTS

PART  I

     Item  1.  Description  of  Business                                       1
     Item  2.  Description  of  Property                                       2
     Item  3.  Legal  Proceedings                                              3
     Item  4.  Submission  of  Matters  to  a  Vote  of Security Holders       3

PART  II
     Item  5.  Market  for  Common  Equity  and  Related  Shareholder Matters  3
     Item  6.  Management's  Discussion  and Analysis or Plan of Operation     5
     Item  7.  Financial  Statements                                           8
Item  8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  20
          And Financial  Disclosure
     Item  8A.Controls  and  Procedures                                       21
     Item  8B.     Other  Information                                         22

PART  III
     Item  9.  Directors,  Executive  Officers,  Promoters  and Control       21
     Persons; Compliance With  Section  16  (a)  of  the  Exchange  Act
     Item  10.  Executive  Compensation                                       22
Item  11.  Security  Ownership  of  Certain Beneficial Owners and Management  23
           And Related  Stockholder  Matter
     Item  12.  Certain  Relationships  and  Related  Transactions            24
     Item  13.  Exhibits                                                      25
     Item  14.  Principal  Accountant  Fees  and  Services                    25

                                     PART 1

ITEM  1.  DESCRIPTION  OF  BUSINESS.

Organization and Nature  of  Business

Malahat  Energy Corporation ("Malahat" or the "Company") is a Nevada corporation
that  was  formed  on July 26, 1994. The Company operated as a development stage
enterprise  and  was  engaged  in  the development of BioFuel systems to convert
organic  waste  material  into  an  economical,  synthesized fuel gas for energy
consumption.  The  Company  completed  a  reverse  merger with a publicly traded
"Shell"  company  (See  Below)  in  May  2001 and traded on the Over the Counter
Bulletin  Board  under  the  symbol  "MAHT".

On  August  30,  2004,  the  Company's  board  of  directors  approved a plan of
reorganization  pursuant  to  which the Company transferred substantially all of
its  assets  and  substantially all of its liabilities except for liabilities of
approximately  $70,000  to  its wholly owned subsidiary, MSC. In connection with
the  plan  of reorganization all of MSC outstanding stock was distributed to the
Company's  existing  stockholder.

                                        1
On  August  30,  2004  and  in  connection  with  a  stock  purchase  agreement,
shareholders  owning  10,581,875  shares  which represented 66% of the Company's
outstanding  stock  agreed  to sell their shares to new investors for $85,000 in
cash.  In  connection  with foregoing, the officers and directors of the Company
resigned  on  August  30,  2004 and representatives of the new investors assumed
those  positions.

On  December  22,  2004, the Company changed its name to PHC and on December 23,
2004,  the  Company  elected to become a BDC under the Investment Company Act of
1940,  as  amended (the "1940 Act"). The Company now trades on the "pink sheets"
under  the  name  PHC  Holdings  and  under  the  symbol  "PHCD."

Subsequent  to  the  name  change  and electing to be a BDC, the Company will be
continuously seeking operating private profitable entities in which to invest in
and  offer  management  skills.  A  business  development company is defined and
regulated  by  the  Investment  Company  Act  of  1940  ("1940 Act"). A business
development  company  must  be organized in the United States for the purpose of
investing  in  or  lending  to primarily private companies and making managerial
assistance  available  to  them.  A business development company may use capital
provided  by  public shareholders and from other sources to invest in long-term,
private  investments  in  businesses.  A  business  development company provides
shareholders  the  ability  to  retain the liquidity of a publicly traded stock,
while  sharing  in  the  possible  benefits,  if  any, of investing in primarily
privately  owned  companies.

Reverse  Merger

Effective  May  4,  2001,  Sarenghetti  Enterprises  ("SARG")  entered  into  a
reorganization  and  stock  exchange  agreement  (the  "Agreement") with Malahat
Systems Corporation ("MSC").  Pursuant to the terms of the Agreement, all of the
6,765,929  outstanding common shares of MSC were exchanged for shares of SARG on
a  1  to 1 basis or 6,765,929 shares of common stock of SARG.  Immediately after
the  reorganization SARG had a total of 6,765,929 shares issued and outstanding.
As  a  result,  MSC  is  a  wholly-owned  subsidiary  of  SARG.

On May 4, 2001, Granada Mineral Products, Inc. ("BMP") entered into an agreement
and  plan  of  reorganization  and  merger  (the  "plan" or "merger") with SARG.
Immediately  prior  to  the  merger,  GMP  had 100,000,000 shares authorized and
5,425,000  shares  issued and outstanding. Effective May 9, 2001 and pursuant to
the  merger,  all  of  the  6,765,929  outstanding  common  shares  of SARG were
exchanged  for  shares  of GMP on a 1 to 1.49 basis or into 10,075,000 shares of
common  stock of GMP for a total of 15,500,000 shares of common stock issued and
outstanding.

Immediately  after  the merger, the officer and director of GMP resigned and the
management  of  SARG  controlled such positions; therefore effecting a change of
control.  As  a  result  the  Company accounted for the transaction as a reverse
merger  whereby  SARG  was  considered  the  accounting  acquirer as it retained
control  of GMP after the merger. The Company simultaneously changed its name to
Malahat  Energy Corporation and changed its fiscal year end from December 31, to
July  31.  The  results  of GMP previously filed in prior years are not included
herein.  The related financial statements are the results of operations of SARG.

Since  GMP's  continuing  operations  were insignificant, pro forma consolidated
statements  of  operations  are  not  presented  here.

Research  and  Development

Research and development costs are charged to operations as incurred. The amount
of  research  and  development costs is reduced by any applicable refundable tax
credits  relating  to  government grants.  For the years ended July 31, 2003 and
2002,  the  Company  incurred research and development costs in the amount of $0
and  $54,497,  respectively  and  $480,961 from inception through July 31, 2003.

Employees

At  July  31, 2003, the Company had 2 Employees and had no employees at June 30,
2005.

ITEM  2.  DESCRIPTION  OF  PROPERTY.

The  Company's  principal operating offices were located in approximately 10,800
square  feet  of  space  in  Delta, British Columbia, Canada.  It occupied these
premises under a sublease on a month-to-month basis.  The monthly rental on this
space  was  $1,400  per  month.

Currently,  the  Company's  offices are located at 2633 Lincoln Boulevard, Suite
117,  Santa  Monica, California 90405.  It occupies these premises under a lease
on  a  month-to-month  basis.  The  monthly  rental  on this space is $50.00 per
month.

The  Company  considers  its  facilities  to  be  sufficient  for  current  and
anticipated  near-term  operations.  Within  the next twelve months, the Company
believes that it may need to lease an additional 1,000 square feet of additional
office  space  to  accommodate  anticipated  long-term  expansion  plans  upon
investment  in  private  entities.
                                        2

ITEM  3.  LEGAL  PROCEEDINGS

Currently,  the  Company  is  not  a  party  to  any  pending legal proceedings.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

No matters were submitted to a vote of security holders during of the year ended
July  31,  2003.

ITEM  5.  MARKET  FOR  COMMON  EQUITY  AND RELATED SHAREHOLDER MATTERS AND SMALL
BUSINESS  ISSUES  PURCHASES  OF  EQUITY  SECURITIES

The  Company's  common stock is quoted on the National Association of Securities
Dealers,  Inc. PINK SHEETS under the symbol "PHCD" and is not listed for trading
on  any  exchange.  The  PINK  SHEETS,  which  is separate and distinct from the
NASDAQ  Stock  Market,  is  a  quotation  service for subscribing members and is
regulated by the Securities and Exchange Commission and the National Association
of  Securities  Dealers,  Inc.,  or  NASDAQ, PINK SHEETS, and OTC Bulletin Board
securities  are  traded  by  a  community of market makers that enter quotes and
trade  reports  through  a  closed  computer  network.

The  Company's  common  stock began trading on the OTC Bulletin Board on May 30,
2001  under  the  symbol  "MAHT".  Prior to this date, the predecessor pre-merge
public  entity Granada Mineral Products Inc. traded under the symbol "GDMN". Set
forth below are the high and low closing bid and asking prices for the Company's
common  stock by quarter, from January 2, 2002 through June 30, 2005. The common
stock began to trade on the PINK SHEETS in January 2004. Commencing December 24,
2004,  the  stock  began  trading under the symbol "PHCD". The quotations listed
below  reflect  interdealer  prices,  without  retail  mark-up,  mark-down  or
commission,  and  may  not  represent  transactions.

<TABLE>
<CAPTION>


                     CLOSING BID                  CLOSING ASK
<S><C>             <C>          <C>             <C>          <C>

2002               HIGH         LOW             HIGH         LOW
----               ----         ---             ----         ---
      JAN. 2
      THRU         .70          .35             .80          .40
      MAR. 28

      APR. 1
      THRU         .62          .06             .66          .08
      JUNE. 28

      JULY. 1
      THRU         .14          .045            .16          .06
      SEPT. 30

      OCT. 1
      THRU         .055         .022            .08          .03
      DEC. 31

2003
----

      JAN. 2
      THRU         .04          .021            .07          .03
      MAR. 31

      APR. 1
      THRU         .07          .01             .078         .014
      JUNE 30

      JULY 1
      THRU         .06          .035            .07          .05
      SEPT. 30

      OCT. 1
      THRU         .045         .03             .09          .04
      DEC. 31

</TABLE>

<TABLE>
<CAPTION>

                                        3

                     CLOSING BID                  CLOSING ASK
<S><C>             <C>          <C>             <C>          <C>

2004               HIGH         LOW             HIGH         LOW
----               ----         ---             ----         ---

      JAN. 2
      THRU         .06          .03              .10         .05
      MAR. 31

      APR. 1
      THRU         .055         .03              .065        .035
      JUNE 30

      JULY 1
      THRU         .025         .02              .04         .025
      SEPT. 30

      OCT. 1
      THRU         .03          .02              .05         .03
      DEC. 31


2005
----

      JAN. 3
      THRU         .60          .03              .69         .05
      MAR. 31

      APR. 1
      THRU         .10          .0225            .135        .03
      JUNE 30
</TABLE>

Number  of  Shareholders

As  of  July  31,  2003,  the  Company had 16,006,875 shares of its common stock
outstanding,  held  of  record  by  approximately 1,000 shareholders. Within the
holders of record of its common stock are depositories, such as Cede & Co., that
hold  shares  of  stock for brokerage firms which, in turn, hold shares of stock
for  beneficial  owners.

As  of  June 30, 2005, the Company had 32,708,600 number of shares of its common
stock  outstanding, held of record by approximately 124 shareholders. Within the
holders of record of its common stock are depositories, such as Cede & Co., that
hold  shares  of  stock for brokerage firms which, in turn, hold shares of stock
for  beneficial  owners.

Dividend  Policy

The  Company  has  never declared or paid any cash dividends on its common stock
and do not expect to declare or pay any cash dividend in the foreseeable future.
It  currently  intends  to  retain  all  future  earnings,  if  any, to fund the
development and growth of the Company.  Any future payment of dividends, if any,
will  be  at  the  discretion of the board of directors and will depend upon its
future  earnings,  capital  requirements,  financial condition, general business
conditions  and  other  factors  deemed  relevant  by  its  board  of directors.

Penny  Stock

Until  the  Company's  shares  qualify  for  inclusion in the NASDAQ system, the
public  trading,  if  any,  of  the  Company's Common Stock will be on the "PINK
SHEETS" or on the OTC Bulletin Board.  As a result, an investor may find it more
difficult  to  dispose  of, or to obtain accurate quotations as to the price, of
the  Common  Stock  offered.  The  Company's  Common  Stock  is  subject  to the
provisions  of  Section  15(g)  and  Rule 15g9 of the Securities Exchange Act of
1934,  as amended (the "Exchange Act"), commonly referred to as the "penny stock
rule."  Section  15(g) sets forth certain requirements for transactions in penny
stocks,  and Rule 15g-9(d) (1) incorporates the definition of "penny stock" that
is  found  in Rule 3a51-1 of the Exchange Act.  The SEC generally defines "penny
stock"  to  be  an  equity  security that has a market price less than $5.00 per
share, subject to certain exceptions. If the Company's Common Stock is deemed to
be  a  penny  stock,  trading  in the shares will be subject to additional sales
practice  requirements  on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors.  "Accredited investors" are
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or  $300,000  together  with  their  spouse.  For  transactions covered by these
rules,  broker-dealers  must  make  a  special suitability determination for the
purchase  of  such security and must have the purchaser's written consent to the
transaction  prior to the purchase.  Additionally, for any transaction involving
a penny stock, unless exempt, the rules require the delivery, prior to the first
transaction, of a risk disclosure document, prepared by the SEC, relating to the
penny  stock market.  A broker-dealer also must disclose the commissions payable
to  both  the  broker-dealer  and  the  registered  representative,  and current
quotations  for  the  securities.  Finally,  monthly  statements  must  be  sent
disclosing  recent price information for the penny stocks held in an account and
information  on  the  limited market in penny stocks.  Consequently, these rules
may  restrict the ability of broker-dealers to trade and/or maintain a market in
the  Company's  Common  Stock  and  may  affect  the  ability  of  the Company's
shareholders  to  sell  their  shares.
                                        4

Recent  Sales  of  Unregistered  Securities

There  were no issuances of securities without registration under the Securities
Act  of  1933,  as  amended,  during  the year ended July 31, 2003 that were not
previously  disclosed  in  one  of  our  periodic  reports  during  the  year.

ITEM  6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS OR PLAN OF
OPERATIONS

Forward-Looking  Statements

Historical  results  and  trends  should not be taken as an indication of future
operations.  Management's  statements  contained  in  this  report  that are not
historical  facts  are  forward-looking statements within the meaning of Section
27A  of  the  Securities  Act  and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Actual results may differ materially from
those  included  in  the  forward-looking  statements.  The Company intends such
forward-looking  statements  to  be  covered  by  the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act  of  1995,  and  is  including this statement for purposes of complying with
those  safe-harbor  provisions.  Forward-looking  statements, which are based on
certain  assumptions  and  describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe," "expect,"
"anticipate,"  "estimate,"  "project,"  "prospects," or similar expressions. The
Company's  ability  to  predict  results or the actual effect of future plans or
strategies  is inherently uncertain. Factors which could have a material adverse
affect  on  the operations and future prospects of the Company on a consolidated
basis  include, but are not limited to: changes in economic conditions generally
in  the  United  States  of America and the other countries in which the Company
operates,  legislative/regulatory  changes, the political climate in the foreign
countries  in  which the Company operates, the availability of capital, interest
rates,  competition,  and  generally accepted accounting principles. These risks
and  uncertainties should be considered in evaluating forward-looking statements
and  undue reliance should not be placed on such statements. Further information
concerning the Company and its business; including additional factors that could
materially  affect  the  Company's financial results, are included herein and in
the  Company's  other  filings  with  the  Securities  and  Exchange Commission.

The  following  discussion  and  analysis should be read in conjunction with the
financial  statements  and  notes  to financial statements included elsewhere in
this  report  on Form 10-KSB. This report and the financial statements and notes
to  financial  statements  contain  forward-looking  statements, which generally
include  the plans and objectives of management for future operations, including
plans  and  objectives  relating  to future economic performance and our current
beliefs  regarding  revenues  we might earn if we are successful in implementing
our  business  strategies.  The  Company does not undertake to update, revise or
correct  any  forward-looking  statements.

The  information  contained  in this report is not a complete description of the
Company's  former  business  or  the  risks associated with an investment in our
common stock.  Before deciding to buy or maintain a position in its common stock
you should carefully review and consider the various disclosures we made in this
report,  and  in other reports filed with the Securities and Exchange Commission
that  discuss  the  Company business in greater detail and that disclose various
risks,  uncertainties  and  other  factors  that may affect business, results of
operations  or  financial  condition.

RESULTS  OF  OPERATIONS

For  the  year  ended  July  31,  2003,  the Company expended $0 on research and
development.  For  the  year  ended  July 31, 2003, the Company showed a gain of
$398,063  attributable to forgiveness of accrued liabilities related to salaries
that  was owed to three of its shareholders. No such gain was recorded in fiscal
year  ended  July  31,  2002.

For  the  year ended July 31, 2003, the Company expended $290,146 on general and
administrative  expenses  as  compared  to  $511,356 for the year ended July 31,
2002.  The primary reasons for this decline in spending was a reduction in wages
and  salaries  paid  of approximately $150,000 and a reduction on office expense
spending  of  approximately $70,000. The Company's operating income for the year
ended  July  31,  2003  was  $50,211 compared to a loss of $565,853 for the year
ended  July 31, 2002. This decrease is attributable to the above noted decreases
in  general  and  administrative  spending  and  the  gain  attributable  to the
forgiveness  of  debt.  The  income per common share for the year ended July 31,
2003 was $0.00; as compared to a loss of $0.04 for the year ended July 31, 2002.

LIQUIDITY  AND  CAPITAL  RESOURCES

Capital  Resources

As  of  July  31,  2003,  the  Company  had cash of $2,390 and a working capital
deficiency  of  approximately  $280,000.  Included  in  this  working  capital
deficiency  are  consultants  expenses  in the amount of approximately $250,000.

                                        5

Cash  Flows  from  Operating  Activities

Net  cash  provided by operating activities for the year ended July 31, 2003 was
$5,845  as  compared  to $170,280 used in operations for the year ended July 31,
2002.

The  primary contributor to this increase was the gain on forgiveness of accrued
liabilities  offset  by  the  decrease  in  accounts  payable.

Cash  Flows  Used  in  Investing  Activities

Net  cash  used  in investing activities decreased by $62,128 for the year ended
July  31,  2003  as  compared  to  the  same period last year.  This decrease is
attributable  to  an  equivalent  decrease  in  spending  on  the Biofuel system
manufacturing  costs  and  no  current  year  purchases  of  fixed  assets

Cash  Flows  from  Financing  Activities

Net  cash  provided  by financing activities increased by $9,000 for the current
year,  attributable  to  proceeds  for  subscribed  stock.

The  Company has been in the development stage since it began operations on July
26,  1994,  and  has  not generated any revenues from operations and there is no
assurance  of any future revenues. The Company discontinued all operations as of
May 2003. The Company will require substantial additional funding for continuing
BDC  administration  obtaining regulatory approval and for the commercialization
of  its  product.  There  can  be  no assurance that the Company will be able to
obtain  sufficient  additional  funds  when  needed,  or  that  such  funds,  if
available, will be obtainable on terms satisfactory to the Company. In addition,
the Company's ability to continue as a going concern must be considered in light
of  the  problems,  expense  and  complications, the cessation of all operations
frequently  encountered by entrance into established markets and the competitive
environment  in  which  the  Company  operates.

The  Company  may  seek  to  raise  additional funds to meet its working capital
requirements  through  the  additional sales of debt and equity securities.  The
Company's  management  is  pursuing  financing for its operations and expansion,
including  manufacturers'  financing, bank leasing and bond or equity financing.
Failure  to  secure  such  financing  or  to raise additional equity capital may
result  in  the  Company depleting its available funds and not being able to pay
its  obligations.

These  circumstances,  among others, raise substantial doubt about the Company's
ability to continue as a going concern.  The accompanying consolidated financial
statements do not include any adjustments to reflect the possible future effects
on  the  recoverability  and  classification  of  assets  or  the  amounts  and
classification of liabilities that may result from the possible inability of the
Company  to  continue  as  a  going  concern.

Capital  Expenditures

No  capital  expenditures  are  planned  for  the  next  12  months.

Critical  Accounting  Policies

Property  and  Equipment

Property  and  equipment  are  stated at cost, less accumulated depreciation and
amortization.  Deprecation  is  provided using the straight-line method over the
estimated  useful  lives  of  the  related  assets.  Maintenance and repairs are
expensed  as  incurred,  and  betterments  are  capitalized.  Upon  the  sale or
retirement of depreciable assets, the accounts are relieved of the related costs
and  accumulated  depreciation,  and  any  resulting gain or loss is included in
operations.

Long-Lived  Assets

SFAS  No.  144,  "Accounting  for  the  Impairment  of Long-Lived Assets and for
Long-Lived  Assets  to  be  Disposed  of."  SFAS  No.  144  addresses  financial
accounting  and  reporting  for the impairment or disposal of long-lived assets.
SFAS  144  requires  that  long-lived assets be reviewed for impairment whenever
events  or  changes in circumstances indicate that their carrying amount may not
be  recoverable.  If  the  cost  basis of a long-lived asset is greater than the
projected future undiscounted net cash flows from such asset, an impairment loss
is  recognized.  Impairment  losses are calculated as the difference between the
cost  basis  of  an  asset  and  its  estimated  fair  value.

Research  and  Development

Research and development costs are charged to operations as incurred. The amount
of  research  and  development costs is reduced by any applicable refundable tax
credits  relating  to  government  grants.

Income  Taxes

                                        6
The Company follows SFAS No. 109 ("SFAS 109"), "Accounting for Income Taxes" for
recording  the  provision  for income taxes. Deferred tax assets and liabilities
are  computed  based  upon  the  difference  between  the consolidated financial
statement  and  income  tax  basis  of  assets and liabilities using the enacted
marginal  tax rate applicable when the related asset or liability is expected to
be  realized  or  settled. Deferred income tax expenses or benefits are based on
the  changes  in  the  asset  or  liability  each  period. If available evidence
suggests  that  it  is  more  likely  than  not  that some portion or all of the
deferred  tax  assets will not be realized, a valuation allowance is required to
reduce  the deferred tax assets to the amount that is more likely than not to be
realized.  Future  changes  in  such  valuation  allowance  are  included in the
provision  for  deferred  income  taxes  in  the  period  of  change.

Subsequent  Events

10.  SUBSEQUENT  EVENTS

On  August  30,  2004,  the  Company's  board  of  directors  approved a plan of
reorganization  pursuant  to  which the Company transferred substantially all of
its  assets  and  substantially all of its liabilities except for liabilities of
approximately  $70,000  to  its wholly owned subsidiary, MSC. In connection with
the  plan  of reorganization all of MSC outstanding stock was distributed to the
Company's  existing  stockholder.

On  August  30,  2004  and  in  connection  with  a  stock  purchase  agreement,
shareholders  owning  10,581,875  shares  which represented 66% of the Company's
outstanding  stock  agreed  to sell their shares to new investors for $85,000 in
cash.  In  connection  with foregoing, the officers and directors of the Company
resigned  on  August  30,  2004 and representatives of the new investors assumed
those  positions.

On  December  22,  2004, the Company changed its name to PHC and on December 23,
2004,  the  Company  elected to become a BDC under the Investment Company Act of
1940,  as  amended  (the  "1940  Act").

Recently  Issued  Accounting  Pronouncements

In  July  2001,  the  FASB  issued  SFAS  No.  141  ("SFAS  141"),  "Business
Combinations," which is effective for business combinations initiated after June
30,  2001.  SFAS 141 eliminates the pooling of interest method of accounting for
business  combinations  and  requires  that  all business combinations occurring
after  July 1, 2001 are accounted for under the purchase method. The adoption of
SFAS  141  did not have a material impact on the Company's financial statements.

In  July  2001,  the  FASB issued SFAS No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after December
15,  2001.  Early adoption is permitted for entities with fiscal years beginning
after  March 15, 2001, provided that the first interim financial statements have
not  been  previously  issued. SFAS 142 addresses how intangible assets that are
acquired individually or with a group of other assets should be accounted for in
the  financial  statements  upon  their  acquisition  and  after  they have been
initially  recognized  in  the  financial  statements.  SFAS  142  requires that
goodwill  and  intangible  assets  that  have  indefinite  useful  lives  not be
amortized  but rather be tested at least annually for impairment, and intangible
assets  that have finite useful lives be amortized over their useful lives. SFAS
142  provides  specific guidance for testing goodwill and intangible assets that
will  not  be  amortized  for  impairment.  In  addition,  SFAS  142 expands the
disclosure  requirements about goodwill and other intangible assets in the years
subsequent  to  their  acquisition.  Impairment  losses  for  goodwill  and
indefinite-life  intangible  assets that arise due to the initial application of
SFAS  142 are to be reported as resulting from a change in accounting principle.
However,  goodwill  and  intangible  assets acquired after June 30, 2001 will be
subject  immediately to the provisions of SFAS 142. The adoption of SFAS 142 did
not  have  a  material  impact  on  the  Company's  financial  statements.

In  June  2001, the FASB issued SFAS No. 143 ("SFAS 143"), "Accounting for Asset
Retirement  Obligations."  SFAS  143  establishes  standards associated with the
retirement  of  tangible  long-lived  assets and the associated asset retirement
costs.  This  statement  is effective for financial statements issued for fiscal
years  beginning  after  June  15, 2002. The adoption of SFAS 143 did not have a
material  effect  on  its  financial  statements.

In  July  2001,  FASB  issued  SFAS  No.  144, "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived Assets to be Disposed of." SFAS No. 144
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived  assets.  SFAS  144  requires  that long-lived assets be reviewed for
impairment  whenever  events  or  changes  in  circumstances indicate that their
carrying  amount may not be recoverable. If the cost basis of a long-lived asset
is  greater  than  the  projected  future  undiscounted net cash flows from such
asset, an impairment loss is recognized. Impairment losses are calculated as the
difference  between the cost basis of an asset and its estimated fair value. The
adoption of SFAS 144 did not have a material impact on its financial statements.

                                        7

In August 2002, the FASB issued SFAS No. 146 ("SFAS 146"). SFAS 146, "Accounting
for  Costs  Associated  with Exit or Disposal Activities," is effective for such
activities  initiated  after  December 31, 2002. Activities of this type include
restructurings (such as relocation of a business and fundamental reorganizations
of  a  business  itself),  which  may  give  rise  to  costs  such  as  contract
cancellation  provisions,  employee  relocation, and one-time termination costs.
SFAS  146  prohibits  liability recognition based solely on management's intent,
and  requires that liabilities be measured at estimated fair value. The adoption
of SFAS 146 did not have a material impact on the Company's financial statement.

In  December  2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires  that  the  compensation  costs  relating  to  share-based  payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements. That cost will be measured based on the estimated fair
value  of  the  equity  or liability instruments issued. SFAS No. 123-R covers a
wide  range  of  share-based  compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  SFAS  No.  123-R  replaces  SFAS No. 123, and
supersedes APB Opinion No. 25. Small Business Issuers are required to apply SFAS
No.  123-R  in the first interim reporting period that begins after December 15,
2005.  The  adoption  of  SFAS  No.  123-R did not have a material impact on the
Company's  financial  statements.

In  December  2004,  the  FASB  issued  SFAS No. 153 ("SFAS 153"), "Exchanges of
Nonmonetary  Assets,  an  Amendment  of  APB  Opinion  No.  29,  Accounting  for
Nonmonetary  Transactions."  The  amendments  made  by SFAS 153 are based on the
principle  that  exchanges  of  nonmonetary  assets should be measured using the
estimated  fair  value  of  the assets exchanged. SFAS 153 eliminates the narrow
exception  for  nonmonetary exchanges of similar productive assets, and replaces
it with a broader exception for exchanges of nonmonetary assets that do not have
commercial  substance.  A nonmonetary exchange has "commercial substance" if the
future cash flows of the entity are expected to change significantly as a result
of the transaction. This pronouncement is effective for nonmonetary exchanges in
fiscal  periods  beginning  after  June  15,  2005.

In  May  2005,  the  FASB  issued  SFAS  No.  154, "Accounting Changes and Error
Corrections,"  which  replaces APB Opinion No. 20 and FASB Statement No. 3. This
pronouncement  applies  to  all  voluntary  changes in accounting principle, and
revises the requirements for accounting for and reporting a change in accounting
principle.  SFAS  No.  154  requires retrospective application to prior periods'
financial statements of a voluntary change in accounting principle, unless it is
impracticable  to  do  so. This pronouncement also requires that a change in the
method of depreciation, amortization, or depletion for long-lived, non-financial
assets be accounted for as a change in accounting estimate that is effected by a
change  in  accounting  principle.  SFAS  No. 154 retains many provisions of APB
Opinion  20  without  change,  including  those related to reporting a change in
accounting  estimate,  a  change  in  the reporting entity, and correction of an
error. The pronouncement also carries forward the provisions of SFAS No. 3 which
govern  reporting  accounting  changes in interim financial statements. SFAS No.
154 is effective for accounting changes and corrections of errors made in fiscal
years  beginning  after  December  15,  2005.  The Statement does not change the
transition provisions of any existing accounting pronouncements, including those
that  are  in  a  transition  phase  as  of  the effective date of SFAS No. 154.

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues Task Force), the AICPA, and the SEC did not or are not believed
by  management  to  have  a  material  impact on the Company's present or future
consolidated  financial  statements.

ITEM  7.  FINANCIAL  STATEMENTS

INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


  Report  of  Independent Registered Accounting Firm - Squar, Milner, Reehl &  8
  Williamson,  LLP

  Report of Independent Registered Accounting Firm - Stark Winter Schenkein &  9
  Co.,  LLP

  Consolidated  Balance  Sheet                                                10

     Consolidated  Statements  of  Operations                                 11
     and  Other Comprehensive  Income (Loss)

     Consolidated  Statements  of  Stockholders'  Deficit                     11

     Consolidated  Statements  of  Cash  Flows                                12

     Notes  to  Consolidated  Financial  Statements                           12


   REPORT  OF  INDEPENDENT  REGISTERED  ACCOUNTING  FIRM

To  the  Board  of  Directors  and  Stockholders
Malahat  Energy  Corporation  and  Subsidiary


                                        8
We  have  audited  the accompanying consolidated balance sheet of Malahat Energy
Corporation  and  Subsidiary (the "Company"), a development stage company, as of
July  31,  2003,  and  the  related  consolidated  statements  of operations and
comprehensive  income (loss), stockholders' deficit and cash flows for the years
ended  July  31,  2003  and  2002  and  for the period July 26, 1994 (inception)
through  July 31, 2003. 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.  The financial statements for the
period  July  26,  1994 (inception) through July 31, 2001, were audited by other
auditors  whose  report dated November 12, 2001 expressed an unqualified opinion
on  those  statements.  The  financial  statements  for the period July 26, 1994
(inception) through July 31, 2001 includes accumulated losses of $1,657,105. Our
opinion  on  the statements of operations, stockholders' deficit, and cash flows
for  the  period  July 26, 1994 (inception) through July 31, 2003, insofar as it
relates  to amounts for periods through July 31, 2001, is based on the report of
other  auditors.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits  to  obtain  reasonable  assurance  about  whether the
consolidated  financial  statements  are free of material misstatement. An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  consolidated  financial statements. An audit also includes
assessing  the  accounting  principles  used  and  significant  estimates  by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

In  our  opinion,  based  on  our  audits  and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Malahat Energy Corporation and Subsidiary
as  of July 31, 2003, and the consolidated results of their operations and their
cash  flows  for  the years ended July 31, 2003 and 2002 and the period July 26,
1994 (inception) through July 31, 2003, in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As shown in the accompanying
consolidated  financial  statements, the Company is a development stage company,
which  has  experienced significant losses since inception with no revenues from
its  principal operations.  Additionally, the Company has suffered negative cash
flow  from  operations.  As  discussed  in  Note 1 to the consolidated financial
statements,  a  significant  amount  of  additional capital will be necessary to
advance the development of the Company's products to the point at which they may
become  commercially  viable.  These conditions, among others, raise substantial
doubt  about the Company's ability to continue as a going concern.  Management's
plans  regarding  these  matters are also described in Note 1.  The accompanying
consolidated financial statements do not include any adjustments relating to the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of  liabilities  that  might  result  the  Company  be unable to
continue  as  a  going  concern.

/s/Squar, Milner, Reehl & Williamson, LLP
-----------------------------------------
Squar, Milner, Reehl & Williamson, LLP
June  15,  2005
Newport  Beach,  California

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Shareholders  and  Board  of  Directors
Malahat  Energy  Corporation
 (A  Development  Stage  Company)

We have audited the consolidated statements of operations, stockholders' equity,
and  cash  flows of Malahat Energy Corporation (a development stage company) for
the  years  ended  July  31,  2000  and  2001,  and for the period July 26, 1994
(inception)  through  July  31,  2001.  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. The financial
statements  for the period July 26, 1994 (inception) through July 31, 1999, were
audited  by other auditors whose reports expressed unqualified opinions on those
financial  statements.  The  financial  statements  for the period July 26, 1994
(inception)  through  July 31, 1999 include net loss of $667,867. Our opinion on
the statements of operations, stockholders' equity (deficit), and cash flows for
the  period  from July 26, 1994 (inception) through July 31, 2001, insofar as it
relates to amounts for periods through July 31, 1999, is based on the reports of
other  auditors.

We  conducted our audits in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we  plan and perform the audits to obtain reasonable assurance about 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 by management, as well as evaluating
the overall financial statement presentation. We believe that our audits and the
reports  of  other  auditors  provide  a  reasonable  basis  for  our  opinion.

                                        9

In  our  opinion,  based  on  our  audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the  results  of operations and cash flows for the years ended July 31, 2000 and
2001  and  the  period  July  26,  1994  (inception)  through  July 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  discussed  in Note 1 to the
financial  statements,  the  Company  has  suffered  significant  losses  from
operations.  This factor raises substantial doubt about the Company's ability to
continue  as  a  going  concern. Management's plans in regard to this matter are
also  discussed  in  Note  1.  The  financial  statements  do  not  include  any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.

/s/ Stark  Winter  Schenkein  &  Co.,  LLP
Denver,  Colorado
November  12,  2001

<TABLE>
<CAPTION>

                                          MALAHAT ENERGY CORPORATION
                                          --------------------------
                                                AND SUBSIDIARY
                              (Formerly Known As Granada Mineral Products, Inc.)
                                         (A Development Stage Company)
                                          CONSOLIDATED BALANCE SHEET
                                                 July 31, 2003



ASSETS
<S>                                                                                                      <C>

Current Assets
 Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    2,390
 Recoverable tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,280
                                                                                                         ------------
                                                                                                               3,670

Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       20,446
                                                                                                         ------------
                                                                                                         $    24,116
                                                                                                         ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
 Accounts payable and accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  248,435
 Due to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       35,841
                                                                                                         ------------
                                                                                                             284,276
                                                                                                         ------------

Commitments and Contingencies

Stockholders' Deficit
Common stock, $0.001 par value; 100,000,000 shares authorized; 16,006,875 shares issued and outstanding       16,007
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    1,915,466
Common stock subscribed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        8,800
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (27,686)
Deficit accumulated during development stage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (2,172,747)
                                                                                                          -----------
                                                                                                            (260,160)
                                                                                                         ------------
                                                                                                          $    24,116
                                                                                                         ============

</TABLE>
                                       10
<TABLE>
<CAPTION>

                                          MALAHAT ENERGY CORPORATION
                                          --------------------------
                                                AND SUBSIDIARY
                              (Formerly Known As Granada Mineral Products, Inc.)
                                         (A Development Stage Company)
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                     AND OTHER COMPREHENSIVE INCOME (LOSS)

                      For The Years Eended July 31, 2003 and 2002 and The Period From
                                July 26, 1994 (Inception) Through July 31, 2003


<S>                                           <C>           <C>           <C>
                                                                          July 26, 1994
                                                                        (Inception) Through
                                                     2003          2002   July 31, 2003


REVENUE . . . . . . . . . . . . . . . .  . .  $         -   $         -   $         -
                                                  -------       -------     ---------

OPERATING EXPENSES
 General and administrative . . . . . . . . . . . 290,146       511,356     1,802,757
Research and development. . . . . . . . . . . . .       -        54,497       480,961
Loss on asset impairment. . . . . . . . . . . . .  55,946             -        55,946
                                                  -------       -------     ---------
                                                  346,092       565,853     2,339,664
                                                  -------       -------     ---------

OTHER INCOME (EXPENSE)
Interest income . . . . . . . . . . . . . . . . .   1,803             -         8,062
Gain on forgiveness of accrued liabilities        398,063             -       398,063
 Interest expense                                  (3,563)            -      (239,208)
                                                   -------      -------     ---------
                                                  396,303             -       166,917
                                                  -------       -------     ---------

NET INCOME (LOSS) . . . . . . . . . . . . . . . .  50,211      (565,853)   (2,172,747)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS. . . . . (21,133)      (10,167)      (27,686)
                                                  -------       -------     ---------

OTHER COMPREHENSIVE INCOME (LOSS) . . . . . . $    29,078   $  (576,020)   (2,200,433)
                                                  =======      ========    ==========
BASIC AND DILUTED NET LOSS ATTRIBUTABLE       $      0.00   $     (0.04)
TO SHAREHOLDERS PER COMMON SHARE.
                                                  =======      ========


BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING            15,741,634    15,500,000
                                               ==========    ==========

</TABLE>

<TABLE>
<CAPTION>

                                          MALAHAT ENERGY CORPORATION
                                          --------------------------
                                                AND SUBSIDIARY
                              (FORMERLY KNOWN AS GRANADA MINERAL PRODUCTS, INC.)
                                         (A DEVELOPMENT STAGE COMPANY)
                               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                       FOR THE PERIOD FROM JULY 26, 1994 (INCEPTION) THROUGH JULY 31, 2003



<S>                         <C>                <C>      <C>              <C>        <C>           <C>                <C>
                                                                         Common     Accumulated   Other Deficit
                                    Common Stock        Additional       Stock      Comprehensive Accumulated During
                               Shares          Amount   Paid-in Capital  Subscribed Income (Loss) Development Stage     Total
                               ------------  ---------- ---------------  ---------- ------------ ------------------ -   -----

Inception - July 26, 1994 .$        -   $           -   $            -   $        - $           - $           - $           -
Shares issued to founders
for cash at $0.00001 per
share.                      2,919,009             142                -            -             -             -           142
Net loss. . . . . . . . . .         -               -                -            -             -       (87,983)      (87,983)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 1995 . . 2,919,009             142                -            -                     (87,983)      (87,841)
Capital contribution. . . .         -               - .         12,811            -             -             -        12,811
Shares issued for services
And conversion of loans at
$0.17 per share             1,886,838           1,887          227,709            -             -             -       229,596
Shares redeemed . . . . . .(1,184,561)         (1,185)         (26,318)           -             -             -       (27,503)
Reclass paid in capital . .         -           2,777           (2,777)           -             -             -             -
Net loss. . . . . . . . . .         -               -                -            -             -      (122,049)     (122,049)
                            -------------------------------------------------------------------------------------------------
BALANCE - July 31, 1996 . . 3,621,286           3,621          211,425            -             -      (210,032)        5,014
Shares issued for services  1,588,841           1,589          185,772            -             -             -       187,361
at $0.17 per share
Net loss. . . . . . . . . .                                                                            (213,522)     (213,522)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 1997 . . 5,210,127           5,210          397,197            -             -      (423,554)      (21,147)
Shares issued for services   .618,995             619           72,293            -             -             -        72,912
at $0.17 per share
Shares issued for cash at   . 383,110             383           51,760            -             -             -        52,143
$0.17 per share
Net loss. . . . . . . . . .         -               -                -            -             -      (121,961)     (121,961)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 1998 . . 6,212,232           6,212          521,250            -             -      (545,515)      (18,053)
Shares issued for services  . .72,071              72            7,947            -             -             -         8,019
at $0.17 per share
Net loss. . . . . . . . . .         -               -                -            -             -      (122,352)     (122,352)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 1999 . . 6,284,303           6,284          529,197            -             -      (667,867)     (132,386)
Capital contribution. . . .         -               -            3,399            -             -             -         3,399
Shares issued for services  . 719,046             719           81,324            -             -             -        82,043
at $0.17 per share
Shares issued for interest     74,454              74           25,415            -             -             -        25,489
at $0.51 per share
Foreign currency translation        -               -                -            -        (1,715)                     (1,715)
adjustment
Net loss. . . . . . . . . .         -               -                -            -             -      (162,234)     (162,234)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 2000     7,077,803           7,077          639,335            -        (1,715)     (830,101)     (185,404)
Shares issued for           1,034,910           1,035          253,060            -             -             -       254,095
Conversion of debt
at $0.24 per share
Discount on conversion of           -               -          207,000            -             -             -       207,000
debt to common stock
Shares issued for services    992,453             993          326,336            -             -             -       327,329
and interest at $0.44 per
share
Shares issued for cash at     969,834             970          277,167            -             -             -       278,137
$0.44 per share
Shares issued pursuant to   5,425,000           5,425           (7,125)           -             -             -        (1,700)
recapitalization
Shares issued for cash at     100,000             100          199,900            -             -             -       200,000
$2.00 per share
Shares  retired              (100,000)           (100)             100            -             -             -             -
Foreign currency                    -               -                -            -         5,329                       5,329
translation adjustment
Net  loss                           -               -                -            -             -      (827,004)     (827,004)
                           ---------------------------------------------------------------------------------------------------
BALANCE - July 31, 2001    15,500,000          15,500        1,895,773            -         3,614    (1,657,105)      257,782
Common  stock  subscribed           -               -                -       10,000             -             -        10,000
Foreign currency                    -               -                -            -       (10,167)            -       (10,167)
Translation adjustment
Net  loss                           -               -                -            -             -      (565,853)     (565,853)
                            --------------------------------------------------------------------------------------------------
BALANCE - July 31, 2002    15,500,000          15,500        1,895,773       10,000        (6,553)   (2,222,958)     (308,238)
Common  stock  subscribed           -               -                -       19,000             -             -        19,000
Shares issued for             506,875             507           19,693      (20,200)            -             -             -
subscribed stock
Currency  translation               -               -                -            -       (21,133)            -       (21,133)
adjustment
Net  income                         -               -                -            -             -        50,211        50,211
                           --------------------------------------------------------------------------------------------------
BALANCE - July 31, 2003    16,006,875        $ 16,007        $ 1,915,466     $ 8,800    $ (27,686) $ (2,172,747)   $ (260,160)
                           ==================================================================================================
</TABLE>
                                                           11
<TABLE>
<CAPTION>


                                         MALAHAT ENERGY CORPORATION
                                          --------------------------
                                                AND SUBSIDIARY
                              (FORMERLY KNOWN AS GRANADA MINERAL PRODUCTS, INC.)
                                         (A DEVELOPMENT STAGE COMPANY)
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED JULY 31, 2003 AND 2002 AND THE PERIOD FROM
                                JULY 26, 1994 (INCEPTION) THROUGH JULY 31, 2003

<S>                                                                   <C>         <C>         <C>
                                                                                              July 26, 1994 (Inception)
                                                                       2003         2002       Through  July 31, 2003
                                                                      ---------   ----------- --------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . .$  50,211   $ (565,853) $ (2,172,747)
Adjustments to reconcile net loss to net cash
provided by (used) in operating activities:
   Non-cash capital contribution . . . . . . . . . . . . . . . . . . .        -            -        16,210
   Issuance of common shares for non-  cash items. . . . . . . . . . .        -            -     1,139,749
   Gain on forgiveness of accrued liabilities. . . . . . . . . . . . . (398,063)           -      (398,063)
   Loss on asset impairment . . . . . . . . . . . . . . . . . . . . . .  55,946            -        55,946
   Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . .    2,820        4,513         9,458
   Changes in operating assets and liabilities:
   Recoverable tax credits. . . . . . . . . . . . . . . . . . . . . . .  67,643      (11,694)       (1,280)
   Accounts payable and accrued liabilities . . . . . . . . . . . . . . 198,693      402,834       646,497
   Due to related party . . . . . . . . . . . . . . . . . . . . . . . . .28,595          (80)       28,515
                                                                     ----------   -----------      --------
Net cash provided by (used) in operating activities. . . . . . . . . .    5,845     (170,280)     (675,715)
                                                                     ----------   -----------      --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment. . . . . . . . . . . . . . . . . .        -      (10,158)      (29,904)
Biofuel system manufacturing costs . . . . . . . . . . . . . . . . . .   (1,988)     (53,958)      (55,946)
                                                                     ----------   -----------      --------
Net cash used in investing activities. . . . . . . . . . . . . . . . .   (1,988)     (64,116)      (85,850)
                                                                     ----------   -----------      --------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares for cash . . . . . . . . . . . . . . . . . .        -            -       530,422
Shares redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . .        -            -       (27,503)
Proceeds for subscribed stock. . . . . . . . . . . . . . . . . . . . .   19,000       10,000        29,000
Proceeds from shareholder loans. . . . . . . . . . . . . . . . . . . .        -            -         7,911
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . .        -            -       264,788
                                                                     ----------   -----------      --------
Net cash provided by financing activities. . . . . . . . . . . . . . .   19,000       10,000       804,618
                                                                     ----------   -----------      --------

FOREIGN CURRENCY TRANSLATION ADJUSTMENT. . . . . . . . . . . . . . . .  (21,133)     (10,167)      (27,686)
                                                                     ----------   -----------      --------
NET (DECREASE) INCREASE IN CASH. . . . . . . . . . . . . . . . . . . .    1,724     (234,563)        2,390

CASH - beginning of year . . . . . . . . . . . . . . . . . . . . . . .      666      235,229             -
                                                                     ----------   -----------      --------

CASH - end of year . . . . . . . . . . . . . . . . . . . . . . . . . .$   2,390   $      666         2,390
                                                                     =========    ==========       =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . .$       -   $        -      $      -
                                                                      =========    ==========       =======
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . .$       -   $        -      $      -
                                                                      =========    ==========       =======
NON CASH FINANCING AND
 INVESTING ACTIVITIES

Conversion of notes payable to common stock                                   -            -        254,095
                                                                      =========    ==========       =======
</TABLE>

                           MALAHAT ENERGY CORPORATION
                           --------------------------
                                 AND SUBSIDIARY
               (Formerly Known As Granada Mineral Products, Inc.)
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  July 31, 2003

1.  ORGANIZATION

Nature  of  Business

Malahat  Energy Corporation ("Malahat" or the "Company") is a Nevada corporation
that  was  formed  on  July  26,  1994. The Company operated a development stage
enterprise  and  was  engaged  in  the development of BioFuel systems to convert
organic  waste  material  into  an  economical,  synthesized fuel gas for energy
consumption.  The  Company  completed  a  reverse  merger with a publicly traded
"Shell"  company  (See  Below)  in  May  2001 and traded on the Over the Counter
Bulletin  Board  under  the  symbol  "MAHT".

On  December  22,  2004,  the  Company changed its name to "PHC Holdings" and on
December  23,  2004,  elected to become a "Business Development Company" ("BDC")
under the Investment Company Act of 1940, as amended (the "1940 Act").  See Note
10  for  additional  information.

Reorganization  of  Sarenghetti  Enterprise

Effective  May  4,  2001,  Sarenghetti  Enterprises  ("SARG")  entered  into  a
reorganization  and  stock  exchange  agreement  (the  "Agreement") with Malahat
Systems  Corporation ("MSC"). Pursuant to the terms of the Agreement, all of the
6,765,929  outstanding common shares of MSC were exchanged for shares of SARG on
a  one-for-one  basis  or  6,765,929 shares of common stock of SARG. Immediately
after  the  reorganization  SARG  had  a  total  of  6,765,929 shares issued and
outstanding.  As  a result, MSC is a wholly owned subsidiary of SARG. Subsequent
to  May  4,  2001,  the  Company  completed  a  reverse  merger  (See  Below).

Reverse  Merger

On May 4, 2001, Granada Mineral Products, Inc. ("GMP") entered into an agreement
and  plan  of  reorganization  and  merger  (the  "plan" or "merger") with SARG.
Immediately  prior  to  the  merger,  GMP  had 100,000,000 shares authorized and
5,425,000  shares  issued and outstanding. Effective May 9, 2001 and pursuant to
the  merger,  all  of  the  6,765,929  outstanding  common  shares  of SARG were
exchanged  for  shares  of GMP on a 1 to 1.49 basis or into 10,075,000 shares of
common  stock of GMP for a total of 15,500,000 shares of common stock issued and
outstanding.

                                       12

Immediately  after  the merger, the officer and director of GMP resigned and the
management  of  SARG  controlled such positions; therefore effecting a change of
control.  As  a  result  the  Company accounted for the transaction as a reverse
merger  whereby  SARG  was  considered  the  accounting  acquirer as it retained
control  of GMP after the merger. The Company simultaneously changed its name to
Malahat  Energy  Corporation  and changed itsfiscal year end from December 31 to
July  31.  The  results  of  GMP  previously  filed  in  prior
years  are not included herein. The related financial statements are the results
of  operations  of  SARG.

Since  GMP's  continuing  operations  were insignificant, pro forma consolidated
statements  of  operations  are  not  presented  here.

Development  Stage  and  Going  Concern

The  Company has been in the development stage since it began operations on July
26,  1994,  and has not generated any revenues from its principal operations and
there  is no assurance of any future revenues.  As of July 31, 2003, the Company
had  accumulated  deficit  of  approximately  $2,173,000  and  a working capital
deficit  of  approximately  $281,000.

The  Company will require substantial additional funding for continuing research
and  development,  obtaining  regulatory  approvals  and  commercializing of its
proposed  products.  There  can be no assurance that the Company will be able to
obtain  sufficient  additional  funds  when  needed,  or  that  such  funds,  if
available, will be obtainable on terms satisfactory to the Company. In addition,
the Company's ability to continue as a going concern must be considered in light
of  the  problems,  expenses and challenges frequently encountered upon entrance
into  established  markets  and the competitive environment in which the Company
operates.

Management  plans  to  obtain  revenues  from  product  sales,  but  there is no
commitment  by  any  person  to  purchase  any  of the proposed products. In the
absence  of  significant  sales  and  profits,  the  Company  may  seek to raise
additional funds to meet its working capital requirements through the additional
issuances  of  debt  and equity securities. The Company's management is pursuing
further  contributions  and  grants  from  government  agencies  and is pursuing
financing  for its operations and expansion, including manufacturers' financing,
bank  leasing  and bond or equity financing. Failure to secure such financing or
to  raise  additional  equity  capital  may  result in the Company depleting its
available  funds  and  not  being  able  to  pay  for  its  obligations.

These  circumstances,  among others, raise substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial statements do
not  include  any  adjustments  to  reflect  the  possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities  that  may  result  from  the  possible  inability of the Company to
continue  as  a  going  concern.

2.  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

The  summary  of  significant accounting policies presented below is designed to
assist  in  understanding  the Company's consolidated financial statements. Such
consolidated financial statements and accompanying notes are the representations
of Company's management, who is responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally accepted in
the  United  States  of America ("GAAP") in all material respects, and have been
consistently  applied  in  preparing  the  accompanying  consolidated  financial
statements.

Principles  of  Consolidation

The  accompanying  consolidated financial statements include the accounts of the
Company  and  its  wholly owned foreign subsidiary. All significant intercompany
transactions  and  balances  have  been  eliminated  in  consolidation.

Risks  and  Uncertainties

The  Company  has a limited operating history. The Company has not yet generated
any revenue from its business operations. As a new operating entity, the Company
faces  risks and uncertainties relating to its ability to successfully implement
its strategy. Among other things, these risks include the ability to develop and
sustain  revenue growth; managing expanding operations; competition; attracting,
retaining  and  motivating  qualified  personnel; maintaining and developing new
strategic relationships; and the ability to anticipate and adapt to the changing
energy  market  and  any  changes in government regulations. The Company and its
subsidiary  have  no experience in obtaining regulatory clearance of these types
of  products.  Therefore,  the  Company may be subject to the risks of delays in
obtaining  or  failing  to  obtain regulatory clearance and other uncertainties,
including  financial,  operational,  technological,  regulatory  and other risks
associated  with an emerging business, including the potential risks of business
failure.

                                       13

Concentrations

The  Company maintains its cash in uninsured accounts and not in bank depository
accounts  insured  by  the  Federal  Deposit  Insurance  Corporation (FDIC). The
Company  has  not  experienced  any  losses  in  these  uninsured  accounts.

The  Company's  research  and  development activities and most of its assets are
located  in  Canada.  The Company's operations are subject to various political,
economic,  and  other  risks and uncertainties inherent in such foreign country.

Use  of  Estimates

The  Company  prepares  its consolidated financial statements in conformity with
GAAP,  which  requires  management to make estimates and assumptions that affect
the  reported amounts of assets and liabilities, disclosure of contingent assets
and  liabilities  at  the date of the consolidated financial statements, and the
reported  amounts  of  revenues  and  expenses  during  the  reporting  period.
Significant estimates made by management include, among others, realizability of
long-lived assets and estimates for the deferred income tax valuation allowance.
Actual  results  could  differ  from  those  estimates.

Grants

The  Company periodically receives grants from the Canadian government which are
used  to  fund  research  and  development  activities  and  the  acquisition of
equipment.  Proceeds  from  these  grants  are  offset  against  research  and
development  expenses  in the accompanying consolidated statements of operations
and  other  comprehensive  loss  when  the related expenses are incurred. Grants
related  to  the acquisition of tangible property are recorded as a reduction of
the  properties' historical cost. The Company received no grants during the year
ended  July  31,  2003 and approximately $185,000 during the year ended July 31,
2002,  which  the  Company  has  recorded  under  the "Research and development"
caption  in  the  consolidated statements of operations and comprehensive income
(loss).

There  is no guaranteed commitment from the Canadian government for such grants,
and  there can be no assurance that such grants will be available to the Company
in  the  future.

Fair  Values  of  Financial  Instruments

Statement  of Financial Accounting Standards ("SFAS") No. 107 "Disclosures About
Fair  Value  of  Financial  Instruments"  requires  disclosure  of  fair  value
information  about financial instruments when it is practicable to estimate that
value.  Management believes that the carrying amounts of the Company's financial
instruments,  consisting  primarily  of  cash,  accounts receivable and accounts
payable and accrued expenses, approximate their fair value at July 31, 2003, due
to  their  short-term  nature.  The fair value of related party transactions are
not  determinable  as  these  transaction  were  not consummated at arms length.
Foreign  Currency  Translation

Assets  and liabilities of the Company's Canadian operations are translated into
U.S.  dollars  at  period-end  exchange  rates.  Net  exchange  gains  or losses
resulting  from such translation are excluded from net earnings but are included
in  other  comprehensive  loss  and  accumulated  in  a  separate  component  of
stockholders'  deficit.  Such  amount  was $27,686 at July 31, 2003.  Income and
expense  are  translated  at weighted average exchange rates for the period. For
the  years  ended  July  31,  2003 and 2002, the Company had no foreign exchange
transaction  gains  or  losses.

Property  and  Equipment

Property  and  equipment  are  stated at cost, less accumulated depreciation and
amortization.  Deprecation  is  provided using the straight-line method over the
estimated  useful  lives  of  the  related  assets.  Maintenance and repairs are
expensed  as  incurred,  and  betterments  are  capitalized.  Upon  the  sale or
retirement of depreciable assets, the accounts are relieved of the related costs
and  accumulated  depreciation,  and  any  resulting gain or loss is included in
operations.

Long-Lived  Assets

SFAS  No.  144,  "Accounting  for  the  Impairment  of Long-Lived Assets and for
Long-Lived  Assets  to  be  Disposed  of."  SFAS  No.  144  addresses  financial
accounting  and  reporting  for the impairment or disposal of long-lived assets.
SFAS  144  requires  that  long-lived assets be reviewed for impairment whenever
events  or  changes in circumstances indicate that their carrying amount may not
be  recoverable.  If  the  cost  basis of a long-lived asset is greater than the
projected future undiscounted net cash flows from such asset, an impairment loss
is  recognized.  Impairment  losses are calculated as the difference between the
cost  basis  of  an asset and its estimated fair value. As of July 31, 2003, the
Company  failed  to  commercialize the BioFuel System and was placed in storage.
Under these circumstances, management of the Company believes that an impairment
loss  on  the  BioFuel System of $55,946 was incurred. See Note 3 for additional
information.

                                       14

Revenue  Recognition

The  Company  intends  to  recognize  revenue  from  product  sales,  net of any
discounts,  when  products  are  shipped and title passes to customers. Revenues
from  services are recognized at the time the related service is performed. From
inception  through  July  31,  2003,  the  Company  had  generated  no revenues.

In December 1999, the Securities and Exchange Commission issued Bulletin No. 101
("SAB  101").  SAB  101,  which was subsequently superseded by SAB 104, provides
guidance  on  applying  accounting  principles  generally accepted in the United
States  of  America  to  revenue  recognition  in  financial  statements.

Research  and  Development

Research and development costs are charged to operations as incurred. The amount
of  research  and  development costs is reduced by any applicable refundable tax
credits  relating  to  government  grants.

Advertising

The  Company  expenses  the  cost  of  advertising  under  the  "General  and
administrative"  caption  of  the  consolidated  statements  of  operations  and
comprehensive loss when incurred. The Company had no advertising expenses in the
years  ended  July  31,  2003  and  2002.

Income  Taxes

The Company follows SFAS No. 109 ("SFAS 109"), "Accounting for Income Taxes" for
recording  the  provision  for income taxes. Deferred tax assets and liabilities
are  computed  based  upon  the  difference  between  the consolidated financial
statement  and  income  tax  basis  of  assets and liabilities using the enacted
marginal  tax rate applicable when the related asset or liability is expected to
be  realized  or  settled. Deferred income tax expenses or benefits are based on
the  changes  in  the  asset  or  liability  each  period. If available evidence
suggests  that  it  is  more  likely  than  not  that some portion or all of the
deferred  tax  assets will not be realized, a valuation allowance is required to
reduce  the deferred tax assets to the amount that is more likely than not to be
realized.  Future  changes  in  such  valuation  allowance  are  included in the
provision  for  income  taxes  in  the  period  of  change.

Stock-Based  Compensation

The  Company  accounts  for  stock-based compensation issued to employees  using
the  intrinsic value based method as prescribed by Accounting  Principles  Board
Opinion  No. 25 ("APB 25"), "Accounting for Stock Issued  to  Employees."  Under
the  intrinsic  value  based  method, compensation is the excess, if any, of the
fair  value  of the stock at the grant date or other measurement date  over  the
amount  an  employee  must  pay  to  acquire the stock. Compensation, if any, is
recognized  over  the  applicable  service  period, which is usually the vesting
period.

The  Financial  Accounting  Standards  Board ("FASB") issued SFAS No. 123 ("SFAS
123"),  "Accounting  for  Stock-Based  Compensation."  This  standard,  if fully
adopted,  changes the method of accounting for employee stock-based compensation
plans to the fair value based method. For stock options and warrants, fair value
is  determined  using  an option pricing model that takes into account the stock
price  at the grant date, the exercise price, the expected life of the option or
warrant  and  the  annual  rate of quarterly dividends. Compensation expense, if
any,  is  recognized  over  the  applicable service period, which is usually the
vesting  period.

The  adoption  of  the  accounting  methodology  of SFAS 123 is optional and the
Company  has  elected to continue accounting for stock-based compensation issued
to  employees  using  APB  25; however, pro forma disclosures, as if the Company
adopted  the  cost  recognition  requirements under SFAS 123, are required to be
presented.

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB 25."
FIN  44  clarifies  the application of APB 25 for (a) the definition of employee
for purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies  as a noncompensatory plan, (c) the accounting consequence for various
modifications  to the terms of a previously fixed stock option or award, and (d)
the  accounting  for  an  exchange  of  stock  compensation awards in a business
combination.

SFAS  No.  148,  "  Accounting  for  Stock-Based  Compensation  - Transition and
Disclosure,  an  amendment  of SFAS No. 123," was issued in December 2002 and is
effective for fiscal years ending after December 15, 2002. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method  of  accounting  for stock-based employee compensation. In addition, SFAS
No.  148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosure  in  both annual and interim financial statements about the method of
accounting  for  stock-based  employee compensation and the effect of the method
used  on  reported  results.  No  options  were  granted  as  of  July 31, 2003.

                                       15

Basic  and  Diluted  Loss  per  Common  Share

The Company follows SFAS No. 128 ("SFAS 128"), "Earnings Per Share."  Under SFAS
128, basic earnings per share is computed by dividing income available to common
shareholders  by  the  weighted-average  number  of  common shares assumed to be
outstanding  during  the  period  of  computation. Diluted earnings per share is
computed  similar  to  basic  earnings  per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common  shares  were  dilutive  (there were zero and 86,450 additional potential
common  shares as of July 31, 2003 and 2002, respectively).  Pro forma per share
data  has  been  computed  using  the  weighted  average number of common shares
outstanding  during  the  periods.  Because the Company has incurred net losses,
basic  and  diluted  loss  per share are the same as additional potential common
shares  would  be  anti-dilutive  (See  Note  9).

Comprehensive  Income  (Loss)

The Company adopted SFAS No. 130 ("SFAS 130"), "Reporting Comprehensive Income."
SFAS 130 establishes standards for reporting and display of comprehensive income
(loss) and its components in a full set of general-purpose financial statements.
Total  comprehensive  income  (loss)  represents the net change in stockholders'
equity  during  a  period from sources other than transactions with stockholders
and  as  such,  includes  net earnings. For the Company, the components of other
comprehensive  income  (loss) are the changes in the cumulative foreign currency
translation adjustments and are recorded as components of stockholders' deficit.

Segments  of  an  Enterprise  and  Related  Information

The Company adopted SFAS No. 131 ("SFAS 131"), "Disclosures about Segments of an
Enterprise  and Related Information." SFAS 131 establishes standards for the way
public  companies  report  information about segments of their business in their
annual  financial  statements  and  requires  them  to  report  selected segment
information  in their quarterly reports issued to shareholders. It also requires
entity-wide  disclosures about the products and services an entity provides, the
material  countries  in which it holds assets and reports revenues and its major
customers.  The Company has had no revenues since its inception.  See Note 4 for
information  on  long-lived  assets  located  in  Canada.

Recently  Issued  Accounting  Pronouncements

In  July  2001,  the  FASB  issued  SFAS  No.  141  ("SFAS  141"),  "Business
Combinations," which is effective for business combinations initiated after June
30,  2001.  SFAS 141 eliminates the pooling of interest method of accounting for
business  combinations  and  requires  that  all business combinations occurring
after  July 1, 2001 are accounted for under the purchase method. The adoption of
SFAS  141  did not have a material impact on the Company's financial statements.

In  July  2001,  the  FASB issued SFAS No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after December
15,  2001.  Early adoption is permitted for entities with fiscal years beginning
after  March 15, 2001, provided that the first interim financial statements have
not  been  previously  issued. SFAS 142 addresses how intangible assets that are
acquired individually or with a group of other assets should be accounted for in
the  financial  statements  upon  their  acquisition  and  after  they have been
initially  recognized  in  the  financial  statements.  SFAS  142  requires that
goodwill  and  intangible  assets  that  have  indefinite  useful  lives  not be
amortized  but rather be tested at least annually for impairment, and intangible
assets  that have finite useful lives be amortized over their useful lives. SFAS
142  provides  specific guidance for testing goodwill and intangible assets that
will  not  be  amortized  for  impairment.  In  addition,  SFAS  142 expands the
disclosure  requirements about goodwill and other intangible assets in the years
subsequent  to  their  acquisition.  Impairment  losses  for  goodwill  and
indefinite-life  intangible  assets that arise due to the initial application of
SFAS  142 are to be reported as resulting from a change in accounting principle.
However,  goodwill  and  intangible  assets acquired after June 30, 2001 will be
subject  immediately to the provisions of SFAS 142. The adoption of SFAS 142 did
not  have  a  material  effect  on  its  financial  statements.

In  June  2001, the FASB issued SFAS No. 143 ("SFAS 143"), "Accounting for Asset
Retirement  Obligations."  SFAS  143  establishes  standards associated with the
retirement  of  tangible  long-lived  assets and the associated asset retirement
costs.  This  statement  is effective for financial statements issued for fiscal
years  beginning  after  June  15, 2002. The adoption of SFAS 143 did not have a
material  effect  on  its  financial  statements.

                                       16

In  July  2001,  FASB  issued  SFAS  No.  144, "Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived Assets to be Disposed of." SFAS No. 144
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived  assets.  SFAS  144  requires  that long-lived assets be reviewed for
impairment  whenever  events  or  changes  in  circumstances indicate that their
carrying  amount may not be recoverable. If the cost basis of a long-lived asset
is  greater  than  the  projected  future  undiscounted net cash flows from such
asset, an impairment loss is recognized. Impairment losses are calculated as the
difference  between the cost basis of an asset and its estimated fair value. The
adoption of SFAS 144 did not have a material impact on its financial statements.

In August 2002, the FASB issued SFAS No. 146 ("SFAS 146"). SFAS 146, "Accounting
for  Costs  Associated  with Exit or Disposal Activities," is effective for such
activities  initiated  after  December 31, 2002. Activities of this type include
restructurings (such as relocation of a business and fundamental reorganizations
of  a  business  itself),  which  may  give  rise  to  costs  such  as  contract
cancellation  provisions,  employee  relocation, and one-time termination costs.
SFAS  146  prohibits  liability recognition based solely on management's intent,
and  requires that liabilities be measured at estimated fair value. The adoption
of  SFAS  146  does not have a material impact on the Company's future financial
statements.

In  December  2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires  that  the  compensation  costs  relating  to  share-based  payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements. That cost will be measured based on the estimated fair
value  of  the  equity  or liability instruments issued. SFAS No. 123-R covers a
wide  range  of  share-based  compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  SFAS  No.  123-R  replaces  SFAS No. 123, and
supersedes APB Opinion No. 25. Small Business Issuers are required to apply SFAS
No.  123-R  in the first interim reporting period that begins after December 15,
2005.  The  adoption  of  SFAS  No.  123-R did not have a material impact on its
financial  statements.

In  December  2004,  the  FASB  issued  SFAS No. 153 ("SFAS 153"), "Exchanges of
Nonmonetary  Assets,  an  Amendment  of  APB  Opinion  No.  29,  Accounting  for
Nonmonetary  Transactions."  The  amendments  made  by SFAS 153 are based on the
principle  that  exchanges  of  nonmonetary  assets should be measured using the
estimated  fair  value  of  the assets exchanged. SFAS 153 eliminates the narrow
exception  for  nonmonetary exchanges of similar productive assets, and replaces
it with a broader exception for exchanges of nonmonetary assets that do not have
commercial  substance.  A nonmonetary exchange has "commercial substance" if the
future cash flows of the entity are expected to change significantly as a result
of the transaction. This pronouncement is effective for nonmonetary exchanges in
fiscal  periods  beginning after June 15, 2005. The adoption of SFAS No. 153 did
not  have  a  material  impact  on  the  Company's  financial  statements.

In  May  2005,  the  FASB  issued  SFAS  No.  154, "Accounting Changes and Error
Corrections,"  which  replaces APB Opinion No. 20 and FASB Statement No. 3. This
pronouncement  applies  to  all  voluntary  changes in accounting principle, and
revises the requirements for accounting for and reporting a change in accounting
principle.  SFAS  No.  154  requires retrospective application to prior periods'
financial statements of a voluntary change in accounting principle, unless it is
impracticable  to  do  so. This pronouncement also requires that a change in the
method of depreciation, amortization, or depletion for long-lived, non-financial
assets be accounted for as a change in accounting estimate that is effected by a
change  in  accounting  principle.  SFAS  No. 154 retains many provisions of APB
Opinion  20  without  change,  including  those related to reporting a change in
accounting  estimate,  a  change  in  the reporting entity, and correction of an
error. The pronouncement also carries forward the provisions of SFAS No. 3 which
govern  reporting  accounting  changes in interim financial statements. SFAS No.
154 is effective for accounting changes and corrections of errors made in fiscal
years  beginning  after  December  15,  2005.  The Statement does not change the
transition provisions of any existing accounting pronouncements, including those
that  are  in  a  transition phase as of the effective date of SFAS No. 154. The
adoption  of  SFAS  No.  154  did  not  have  a material impact on the Company's
financial  statements.

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues Task Force), the AICPA, and the SEC did not or are not believed
by  management  to  have  a  material  impact on the Company's present or future
consolidated  financial  statements.

Reclassifications

Certain  reclassifications  have  been  made  to  the  July  31,  2002 financial
statements  presentation  to  correspond  to  the  current  year  presentation.

3.  BIOFUEL  SYSTEM

In August 2001, the Company entered into an agreement with a customer to supply,
install and operate the M500 BioFuel system.  The system is capable of producing
clean  renewable  green  gas from organic waste, heat, water and air. The system
was  placed  at  the  customer's  site and was operating for a month, but it was
returned  to the Company's facility in October 2002 because it could not work on
a  stand-alone  basis.  The  Company  has incurred and capitalized approximately
$55,000  in  relation  to  manufacturing  the M500.  Because the Company has not
earned  any revenue from the above transaction, the M500 can not be used or sold
at  its  existing  condition.  As  a  result of the Company's inability to raise
additional  funds to commercialize the product, management has decided to impair
the  asset  in  the  accompanying  2003  consolidated  financial  statements.

                                       17

4.  PROPERTY  AND  EQUIPMENT

Property  and  equipment,  all  located  in  Vancouver,  Canada  consists of the
following  at  July  31,  2003:

Computer  hardware  and  software     $    2,773
Equipment                                 27,131
                                          ------
                                          29,904
Accumulated  depreciation                 (9,458)
                                          ------
                                       $  20,446
                                          ======

5.  ACCOUNTS  PAYABLE  AND  ACCRUED  LIABILITIES

Accounts  payable  and  accrued liabilities consist of the following at July 31,
2003:

Trade  accounts  payable            $    227,018
Accrued consulting and professional fees  21,417
                                          ------
                                    $    248,435
                                         =======

During fiscal year ended July 31, 2003, three shareholders forgave salaries owed
to them totaling approximately $398,063 which is included as gain on forgiveness
of  accrued liabilities in the accompanying consolidated statement of operations
and  comprehensive  income  (loss).

6.  DUE  TO  A  RELATED  PARTY

The  amount  due to a related party was advanced to the Company from an officer.
The  advance  is  due  on  demand,  is  unsecured  and has no set interest rate.

7.  EQUITY  TRANSACTIONS

Common  Stock

On  June  30,  2002,  the  Company received $10,000 from an investor for 100,000
shares  at  $0.10  per  share. Because the shares were not issued as of July 31,
2002, the contribution was accounted for and reported as common stock subscribed
in the accompanying consolidated statements of stockholders deficit. The Company
granted  this  investor  a  warrant  to  purchase up to 100,000 of the Company's
common  stock  (see  below)  at  graduated exercise prices ranging from $0.20 to
$0.30  per  share. The warrant vested on the date of grant and was not exercised
during  fiscal  year  ended  July  31,  2003.

During  fiscal  year  ended  July  31,  2003,  the Company received $19,000 from
various  investors for 436,375 subscribed shares at graduated issuance prices of
between  $0.10  and $.20 per share. Contribution from such shares not yet issued
was  accounted  for  and reported as common stock subscribed in the accompanying
consolidated  statements  of  stockholders  deficit.  In  addition,  the Company
issued  506,875  shares  for  subscribed  stock  amounting  to  $20,200.


Warrants

From  time  to  time, the Company issues warrants pursuant to various consulting
and  service  agreements.

In  June  2002,  the  Company  granted  an  investor a warrant to purchase up to
100,000  shares  of  the  Company's restricted shares at exercise prices ranging
from  $0.20  to  $0.30 per share (see above). The warrants vested on the date of
grant and are exercisable through December 31, 2003. As the warrants were issued
in  connection  with  fund  raising  activities, no expense is to be recognized.

The  following  represents  a summary of warrants outstanding for the year ended
July  31,  2003:
                                                                Weighted Average
                                             Warrants             Exercise Price

Warrants outstanding -July 31, 2002           100,000          $            0.25
Warrants  granted                                   -                          -
Warrants  expired/forfeited                         -                          -
Warrants  exercised                                 -                          -
                                              -------                 ----------
Warrants  outstanding  -  July  31,  2003     100,000          $            0.25
                                              -------                 ----------
Warrants  exercisable                         100,000
                                              =======

                                       18

All  warrants have an exercise price ranging from $0.20 to $0.30 per share, with
a  weighted  average  exercise  price  of $0.25 and a weighted average remaining
contractual  life  of 0.4 years.  All warrants are exercisable at July 31, 2003.


8.  INCOME  TAX  PROVISION

There  is  no  material income tax expense recorded for the years ended July 31,
2003  and  2002,  due  to  the  Company's  net  losses.

Income  tax expense for the years ended July 31, 2003 and 2002 differed from the
amounts  computed by applying the U.S. federal income tax rate of 34 percent for
the  following  reasons:

                                               2003          2002
                                               ====          ====

Income  tax  benefit  at  U.S.  federal    $  20,000    $  (192,000)
statutory rates
Miscellaneous  tax  benefits                       -        (37,000)
Change  in  valuation  allowance             (20,000)       229,000
                                           ---------     ----------
                                           $       -    $         -
                                           =========     ==========
The  Company  provides  deferred  income taxes for temporary differences between
assets  and  liabilities  recognized  for  financial  reporting  and  income tax
purposes.  The  tax  effects of temporary differences at July 31 are as follows:

                                                2003      2002
                                                ====      ====
Deferred  tax  assets:
   Net operating loss carry forwards       $  872,000   $  655,000
   Accrued wages                                    -      237,000
   Tax credits                                480,000      480,000
                                           -----------  -----------
        Total deferred tax assets           1,352,000    1,372,000
        Less valuation allowance           (1,352,000)  (1,372,000)
                                           -----------  -----------
        Net deferred tax assets            $        -   $        -
                                           ===========  ===========
As  of  July  31,  2003,  the  Company  had  tax  net  operating  loss  ("NOL")
carryforwards  of  approximately $2.2 million.  For federal income tax purposes,
the  NOLs  expire  at  varying  dates  ending  in  2023.  For foreign income tax
purposes,  the  NOLs have no expiration date.  The Company also has research and
development  credit carryforwards of approximately $480,000 which expire through
2023.

Due  to  the "change in ownership" provisions of the Tax Reform Act of 1986, the
Company's  net  operating  loss  carryforwards  may  be  subject  to  an  annual
limitation  on  the utilization of these carryforwards against taxable income in
future  periods  if  a  cumulative  change  in ownership of more than 50% occurs
within  any  three-year  period.

In  assessing  the  realizability  of  the  net  deferred tax assets, management
considers  whether  it  is more likely than not that some or all of the deferred
tax  assets  will  not  be  realized.  The  ultimate realization of deferred tax
assets  depends  upon  either the generation of future taxable income during the
periods  in which those temporary differences become deductible or the carryback
of  losses  to recover income taxes previously paid during the carryback period.
As  of  July  31,  2003,  the  Company  had  provided  a  valuation allowance of
$1,352,000  to  reduce the deferred tax assets.  The net change in the valuation
allowance  for  fiscal  year  2003  was  a  decrease  of  $20,000.

On  October 22, 2004, the American Jobs Creation Act of 2004 ("AJCA") was signed
into law. The AJCA provides several incentives for US multinational corporations
and  US manufacturers. Subject to certain limitations, the incentives include an
85%  dividend  received  deduction for certain dividends from controlled foreign
corporations  that  repatriate  accumulated  income  abroad, and a deduction for
domestic  qualified  production  activities  taxable  income.  The  US  Treasury
Department  is  expected  to  issue  additional  guidance  with regards to these
provisions.  In  December  2004,  the  FASB  issued  FSP  109-2, "Accounting and
Disclosure  Guidance for the Foreign Repatriation Provision within  the American
Jobs  Creation Act of 2004." FSP 109-2 states that an enterprise is allowed time
beyond the financial reporting period of enactment to evaluate the effect of the
Act  on  its  plan  for reinvestment or repatriation of foreign earnings for the
purposes  of  applying FASB Statement No. 109.We are in the process of analyzing
whether  to  take  advantage  of this opportunity or the potential impact on our
income  tax  provision,  if  any.

9.  INCOME  (LOSS)  PER  SHARE

The  following  is  a  reconciliation  of the numerators and denominators of the
basic  and  diluted  loss  per share computations for the periods ended July 31:


                                       19

                                                    2003          2002
                                                    ====          ====

Numerator for basic and diluted
income (loss) per share:
   Net  income  (loss) charged to common       $  50,211    $  (565,853)
   stockholders

Denominator for basic and diluted loss
per share:
   Weighted  average  number  of  shares      15,741,634      15,500,000
                                              ----------      ----------
Basic  and  diluted  loss  per  share          $    0.00    $      (0.04)
                                              ==========      ==========

10.  SUBSEQUENT  EVENTS

On  August  30,  2004,  the  Company's  board  of  directors  approved a plan of
reorganization  pursuant  to  which the Company transferred substantially all of
its  assets  and  substantially all of its liabilities except for liabilities of
approximately  $70,000  to  its wholly owned subsidiary, MSC. In connection with
the  plan  of reorganization all of MSC outstanding stock was distributed to the
Company's  existing  stockholder.

On  August  30,  2004  and  in  connection  with  a  stock  purchase  agreement,
shareholders  owning  10,581,875  shares  which represented 66% of the Company's
outstanding  stock  agreed  to sell their shares to new investors for $85,000 in
cash.  In  connection  with foregoing, the officers and directors of the Company
resigned  on  August  30,  2004 and representatives of the new investors assumed
those  positions.

On  December  22,  2004, the Company changed its name to PHC and on December 23,
2004,  the  Company  elected to become a BDC under the Investment Company Act of
1940,  as  amended  (the  "1940  Act").

ITEM  8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE

None

ITEM  8A.  CONTROLS  AND  PROCEDURES

Evaluation  of  Controls  and  Procedures

The  Company's  board of directors and management, including the Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures,
as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date (the
"Evaluation  Date"),  within 90 days prior to filing the Company's July 31, 2003
Form  10-KSB.  Based  upon that evaluation, the Company's board of directors and
management, including the CEO and CFO, concluded that, as of July 31, 2003, the
Company's  disclosure  controls  and  procedures  were  effective  in  alerting
management  on  a  timely  basis  to  material Company information that would be
required  to  be  included  in  our  periodic  filings  with  the  SEC.

Based on their most recent evaluation as of the Evaluation Date, the CEO and the
CFO  have  also  concluded  that  the  other  controls  and procedures, that are
designed  to  ensure  that  information required to be disclosed in our periodic
filings  with  the  SEC,  have not been adequate, resulting in a pattern of late
filings  which  the  board  of  directors and management have now taken specific
steps  to  correct.

Changes  in  Internal  Control

There  were  no significant changes made in the Company's internal controls over
financial  reporting,  during the year ended July 31, 2003, that have materially
affected,  or  are  reasonably  likely  to  materially  affect,  these  internal
controls.  Thus,  no corrective actions, with regard to significant deficiencies
or  material  weaknesses,  were  necessary.

Limitations  on  the  Effectiveness  of  Internal  Controls

Our  management  does  not expect that our disclosure controls and procedures or
our internal control over financial reporting will necessarily prevent all fraud
and material error. An internal control system, no matter how well conceived and
operated,  can  provide  only  reasonable,  not  absolute,  assurance  that  the
objectives  of  the  control  system  are  met. Further, the design of a control
system  must  reflect  the  fact  that  there  are resource constraints, and the
benefits  of controls must be considered relative to their costs. Because of the
inherent  limitations  in  all  control  systems,  no evaluation of controls can
provide  absolute  assurance  that all control issues and instances of fraud, if
any,  within  the Company have been detected. These inherent limitations include
the  realities  that  judgments  in  decision-making  can  be  faulty,  and that
breakdowns  can occur because of simple error or mistake. Additionally, controls
can  be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any  system of controls also is based in part upon certain assumptions about the
likelihood  of  future events, and there can e no assurance that any design will
succeed  in  achieving  its  stated goals under all potential future conditions.
Over  time,  control  may become inadequate because of changes in conditions, or
the  degree  of  compliance  with  the  policies  or procedures may deteriorate.

                                       20

ITEM  8B.  OTHER  INFORMATION

None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH  SECTION  16(a)  OF  THE  EXCHANGE  ACT

Directors  and  Executive  Officers

The  following  table  sets  forth  certain information concerning its executive
officers  and  directors  as  of  July  31,  2003:

          Name                    Age          Position  /  Office  Held
----------------------            ---          -------------------------

     Bruce  Ramsay                 51          Chief Financial  Officer,
                                               Secretary,and  Director

     Jake  Neufeld                 53          President,  Chief  Operating
                                               Officer and  Director

     David  Wiles                  70          Director

     Robert  Janzen                54          Director

Bruce  Ramsay has served as Chief Financial Officer and Secretary of the Company
since  May 2001.  From October 2000 through May 2001, Mr. Ramsay served as Chief
Financial  Officer  of Malahat Systems Corporation, the entity that was acquired
by  SARG  and  whose  assets were later acquired by the Company.  Prior thereto,
from  1995  through  September  2000,  Mr.  Ramsay was the President of Triple F
Ventures  Ltd., a private venture capital fund focused on Canadian companies and
for which he still serves as a director.  Mr. Ramsay also serves on the board of
directors of HTS Hi-Tech Systems, Ltd., computer systems and consulting company,
455812  B.C.  Ltd.,  a  holding  company,  and  Hobbs  Miller  Maat  Inc.,  a
bio-remediation  company.

Jake  Neufeld  has  served  as Chief Operating Officer for the Company since May
2001  and  President  since August 2002.  Mr. Neufeld is a founding principal of
the Company and filled the role of President during the research and development
stage  of  the  Company.  Mr.  Neufeld was President of J. Neufeld Developments,
Ltd.,  from  1974  and J. Neufeld Construction, Inc., from 1979.  Drawing on his
considerable  construction  and  mechanical  engineering background, Mr. Neufeld
will  focus  on  commercial  implementation  of the Company's technology and the
production  and  sales  operations  of  the  Company.

Dr.  David  Wiles  was  Director General (1975 to 1990) of the National Research
Council  of  Canada,  Chemistry Division.  Dr. Wiles formerly served as Chairman
and then President of the Chemical Institute of Canada and served as a member of
the Committee on Macromolecular Chemistry of the U.S. National Research Council,
among  many  other  such  positions.  Since  1990,  Dr.  Wiles has served as the
principal  of  Plastichem  Consulting,  a  limited partnership which consults to
various  chemical  companies  worldwide  on polymers and provides expert witness
testimony  for science and technology matters.  Since 1995, Dr. Wiles has served
as  a  director of MLB Industries, Inc., a company whose shares trade on the TSC
Venture  Exchange  under  the  symbol  "MLB".

Robert  Janzen  is  a corporate lawyer practicing in Arthur, Ontario, Canada and
was  formerly  Chairman of one of the Registrant's predecessor private corporate
entities,  Malahat  Systems  Corporation  from  December  1995 through May 2001.

Effective  June  30,  2004, the Company's board of directors consisting of Bruce
Ramsay  and  Robert  Janzen  resigned  as officers and directors of the Company.
Prior  to  the  effectiveness of such resignations, Malahat's board of directors
appointed  Pearl  Asencio  and  Sonia  Farrell  as  directors  and  officers  of
Registrant.  Ms. Farrell is the President and a Director of the Company with Ms.
Asencio  as  the  Vice  President  and  Secretary.

The  following  table  sets  forth  certain information concerning its executive
officers  and  directors  as  of  July  31,  2003:

          Name                    Age          Position  /  Office  Held
----------------------            ---          -------------------------
     Sonia  Farrell                34          President  and  Director

     Pearl  Asencio                55          CFO,  Secretary  and  Director

                                       21

Sonia Farrell has been the executive assistant for over six years to a prominent
actor who has had leading roles in film, TV and on Broadway.  Prior to that, she
was  an  executive  assistant  for six years to the CEO of an investment banking
firm  which  specialized  in  small-cap  companies.

Pearl  Asencio  recently  retired  after  six  years  as  the  special executive
administrator  for  the  managing partner of a financial consulting firm.  Prior
thereto,  she  was  an officer and director of a publicly traded technology firm
and  was  in  charge  of  all  administrative  operations.

Directors are generally elected at the annual meeting of its shareholders.  Each
director  holds  office  until his successor is elected and qualified and, thus,
generally  hold  one-year  terms.

Executive  officers  are chosen by, and serve at the discretion of, its board of
directors,  absent  any  employment  agreement,  of which none currently exists.

Family  Relationships

There  are  no  family  relationships  between or among the directors, executive
officers,  or  persons nominated or chosen by the Company to become directors or
executive  officers.

Involvement  in  Legal  Proceedings

To  the best of the Company's knowledge, during the past five years, none of the
following  occurred  with  respect to a present for former director or executive
officer  of  the  Company:  (1)  Any bankruptcy petition filed by or against any
business  or which such person was a general partner or executive officer either
at  the  time  of the bankruptcy or within two years prior to that time; (2) Any
conviction  in  a  criminal  proceeding  or  being subject to a pending criminal
proceeding  (excluding  traffic  violations and other minor offenses); (3) Being
subject  to  any order, judgment or decree, not subsequently reversed, suspended
or  vacated,  of  any  court  of  any  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in  any  type of business, securities or banking activities; and (4) Being found
by  a  court  of  competent  jurisdiction  (in  a  civil  action) the SEC or the
Commodity  Futures  Trading  Commission  to  have  violated  a  federal or state
securities  or  commodities  law,  and  the  judgment  has  not been reversed or
vacated.

Section  16(A)  Beneficial  Ownership  Report  Compliance

Section 16(a) of the Exchange Act requires its executive officers and directors,
and  persons  who  beneficially  own  more than 10% of a registered class of its
equity  securities,  to  file  with  the  Securities  Exchange  Commission,  or
Commission,  initial reports of ownership and reports of changes in ownership of
common  stock  and  its  other  equity securities.  Such officers, directors and
shareholders are required by Commission regulations to furnish it with copies of
all  reports  so  filed.

Based  solely upon review of the copies of such reports furnished to the Company
during, and with respect to, the fiscal year ended July 31, 2003, or any written
representations  received by the Company from a director, officer, or beneficial
owner  of more than 10% of its common stock that no other reports were required,
the  Company believes that, for the fiscal year ended July 30, 2003, all Section
16(a)  filing  requirements  applicable  to  its  reporting  persons  were  met.

Code  of  Ethics  Disclosure

As  of  July  31,  2003,  we have not adopted a Code of Ethics for our principal
executive,  financial,  and  accounting  officers  or persons performing similar
functions,  as  required  for  listed  issuers  by  sections  406 and 407 of the
Sarbanes-Oxley Act of 2002. As of June 30, 2005, the Company did not have a Code
of  Ethics.

Audit  Committee  Financial  Expert

During  the  fiscal  year ended July 31, 2003, the Company did not have an audit
committee  or  a  "Committee  Financial  Expert".


ITEM  10.  EXECUTIVE  COMPENSATION

The  Company paid the following compensation to the named executive officers for
the  fiscal  year  ended  July  31,  2003:

                                       22

<TABLE>
<CAPTION>
<S>                <C>      <C>             <C>           <C>                  <C>       <C>       <C>
                                       SUMMARY COMPENSATION TABLE
                             Annual Compensation                    Long Term Compensation
                                                                           Restricted
                                                      Other Annual            Stock    Options/ All Other
                             Salary        Bonus      Compensation (4)       Awarded     SARs  Compensation
Name                Year       $             $             $                    $         #         $

    Jake Neufeld    2003      -0-           -0-           -0-                  -0-       -0-       -0-
                              -0-           -0-           -0-                  -0-       -0-       -0-
    Bruce Ramsay    2003      -0-           -0-           -0-                  -0-       -0-       -0-

</TABLE>

None  of the above named executive officers had employment agreements during the
fiscal  year  ended  July 31, 2003 or received any compensation in the form of a
bonus,  stock  awards, stock options, stock appreciation rights, stock dividends
or award under any long-term incentive plan.  Each of these individuals resigned
effective  June  30,  2004.

Stock  Option  Plan

On  August  1, 2002, the Company's Board approved the Malahat Energy Corporation
Stock  Option  Plan (the "Plan"), effective upon approval by the shareholders of
the  Company  by July 31, 2003.  Shareholders of the Company did not approve the
Plan  and  the  Plan was abandoned. No options were ever granted by the Company.

No retirement, pension, profit sharing, or similar programs have been adopted by
the  Company  for  the  benefits  of  its  employees.

Directors  are not compensated for any services they may provide as directors on
the  Company's  board  of  directors.

The  Articles  of  Incorporation  provide  for  a limitation on the liability of
officers  and  directors  of the Company, specifically "A director or officer of
the  Corporation  shall  have  no  personal  liability to the Corporation or its
stockholders  for damages for breach of fiduciary duty as a director or officer,
except  for  damages  for  breach  of  fiduciary duty resulting from (a) acts or
omissions which involve intentional misconduct, fraud, or a knowing violation of
law,  or  (b)  the  payments  of dividends in violation of section 78.300 of the
Nevada  Revised Statutes as it may from time to time be amended or any successor
provision  thereto."

ITEM  11.  SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTER

The following table sets forth information regarding the beneficial ownership of
its  common  stock  as  of  June  30,  2005  by:

o each person known by it to own beneficially more than 5%, in the aggregate, of
the  outstanding  shares  of  its  common  stock;

o  each  of  its  directors;

o  its  named  executive  officers  in the Summary Compensation Table above; and

o  all  of  its  directors  and  executive  officers  as  a  group.

The  following  calculations of the percent of outstanding shares are based on -
32,708,600  shares  of  its  common  stock issued and outstanding as of June 30,
2005.  Beneficial  ownership  is  determined in accordance with the rules of the
Securities  and Exchange Commission, and generally includes voting or investment
power  with  respect to securities.  Except as indicated in the footnotes to the
table,  the  Company  believes  each  shareholder  possesses  sole  voting  and
investment power with respect to all of the shares of common stock owned by that
shareholder,  subject to community property laws where applicable.  In computing
the  number  of  shares  beneficially  owned by a shareholder and the percentage
ownership  of  that  shareholder,  shares  of common stock subject to options or
warrants  held  by that person that are currently exercisable or are exercisable
within  sixty  days  after  the date of the table are deemed outstanding.  Those
shares,  however,  are  not  deemed outstanding for the purpose of computing the
percentage  ownership  of any other person or group.  Except as described below,
beneficial ownership and, accordingly, percent of class ownership, is calculated
pursuant  to  Securities  and  Exchange  Commission  Rule  13d-3.


                                  AMOUNT  AND  NATURE  OF
NAME  AND  ADDRESS                BENEFICIAL  OWNERSHIP          PERCENT
OF  BENEFICIAL  OWNER (1)         OF COMMON STOCK                OF COMMON STOCK
-------------------------         -----------------------        ---------------
Bruce  Ramsay                     400,000  shares                Less than 1%

Jake  Neufeld                     -0-                            -

David  Wiles                      -0-                            -

Robert  Janzen                    -0-                            -

All  officers  and  directors     400,000  shares
As  a  group  (4  persons)

                                       23

(1)  c/o  PHC  Holdings
     2633  Lincoln  Blvd,  #117
     Santa  Monica,  California  90405

The  ownership  of  Common  Stock  of  the current officers and directors of the
Company  is  as  follows:
                                                 AMOUNT  AND  NATURE  OF
NAME  AND  ADDRESS                    BENEFICIAL  OWNERSHIP          PERCENT
OF  BENEFICIAL OWNER                    OF COMMON STOCK          OF COMMON STOCK
--------------------                  ---------------------      ---------------
Sonia  Farrell                              750  shares               (1)
c/o  PHC  Holdings
2633  Lincoln  Blvd.,  Suite  117
Santa  Monica,  California  90405

Pearl  Asencio                              750  shares               (1)
c/o  PHC  Holdings
2633  Lincoln  Blvd.,  Suite  117
Santa  Monica,  California  90405

All  officers  and  directors              1500  shares               (1)

As  a  group  (2  persons)
_________________________
  (1)     Less  than  1%

Securities  Authorized  for  Issuance  Under  Equity  Compensation  Plans

The  following  table  provides  information  about our compensation plans under
which  shares  of  common  stock  may be issued upon the exercise of options and
warrants  as  of  July  31,  2003.


               Number of securities to be issued upon exercise of outstanding
                          options, warrants and rights
                        Weighted-average exercise price of outstanding options,
warrants and rights          Number of securities remaining available for future
    issuance under equity compensation plans (excluding securities reflected in
                                   column (a))
              Plan Category          (a)          (b)          (c)
Equity  Compensation  plans                 -         -                     -
approved by security holders
Equity compensation plans not         100,000   $  0.25     3,000,000
approved by security holders
Total                                 100,000   $  0.25     3,000,000

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

Forgiveness  of  Debt

During fiscal year ended July 31, 2003, three shareholders forgave salaries owed
to them totaling approximately $398,063 which is included as gain on forgiveness
of  debt  in  the  accompanying  consolidated  statement  of  operations  and
comprehensive  income  (loss).

Due  To  A  Related  Party

The  amount  due to a related party was advanced to the Company from an officer.
The  advance  is  due  on  demand,  is  unsecured  and has no set interest rate.

ITEM  13.  EXHIBITS

(a)  The  following  documents  are  filed as part of this Annual Report on Form
10-KSB  at  item  7.

Financial  Statements
Report  of  Independent  Registered  Accounting  Firm  -  Squar, Milner, Reehl &
Williamson,  LLP
Report of Independent Registered Accounting Firm - Stark Winter Schenkein & Co.,
LLP
Consolidated  Balance  Sheet
Consolidated  Statements  of  Operations  and  Other Comprehensive Income (Loss)
Consolidated  Statement  of  Stockholders'  Deficit
Consolidated  Statements  of  Cash  Flows
Notes  to  Consolidated  Financial  Statements

(b)  Financial Statement Schedule Auditors Report from inception to December 31,
1999  -  N/A

(c)  Exhibits are incorporated herein by reference or are filed with this report
as  indicated  below;

EXHIBIT  INDEX:

                                       24

EXHIBITS

(a)  The  following  documents  are  filed  as  part  of  this  report:

3.1  Articles  of  Incorporation  and  Certificate  of  Amendment of Articles of
Incorporation  of  company  -  (incorporated  by  reference to the corresponding
exhibit  from  the  Company's registration statement on Form 10SB filed February
11,  2000);

3.2 By-Laws of Company - (incorporated by reference to the corresponding exhibit
from the Company's registration statement on Form 10SB filed February 11, 2000);

10.1  Equipment  Lease - (incorporated by reference to the corresponding exhibit
from the Company's registration statement on Form 10SB filed November 13, 2001);

(b)  Reports  on  Form  8-K  in  last  fiscal  quarter

                                      None

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

Audit  Fees

The  aggregate fees billed by our auditors for professional services rendered in
connection  with  a  review  of  the  unaudited condensed consolidated financial
statements included in our quarterly reports on Form 10-QSB and the audit of our
annual consolidated financial statements for the fiscal year ended July 31, 2003
were  approximately  $39,500.

There were no other services performed by our auditors during fiscal year ended
July 31, 2003.

                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  registrant  has duly caused this report to be signed on its
behalf  by  the undersigned, thereunto duly authorized on 15th day of July 2005.


                           MALAHAT ENERGY CORPORATION


                  By: /s/Bruce Ramsay
                      ---------------
                      Bruce  Ramsay
                      Chief  Financial  Officer


Power  of  Attorney

KNOW  ALL  MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Sonia Farrell, her attorneys-in-fact, with the power of
substitution,  for him in any and all capacities, to sign any amendments to this
Report  on  Form  10-KSB,  and to file the same, with exhibits thereto and other
documents  in connection therewith, with the Securities and Exchange Commission,
hereby  ratifying  and  confirming  all  that  the said attorney-in-fact, or his
substitute  or  substitutes,  may  do  or  cause  to  be  done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has  been  signed below by the following persons on behalf of the Registrant and
in  the  capacities  indicated  on  the  dates  indicated.


     Signature                    Title                    Date
----------------------      ------------------       ----------------
/s/Jake  Neufeld          President and Director               August 1, 2005
   Jake  Neufeld

/s/  Bruce  Ramsay      Chief  Financial  Officer,             August 1, 2005
     Bruce  Ramsay      Secretary  and  a  Director

/s/  David  Wiles               Director                       August 1, 2005
     David  Wiles

/s/  Robert  Janzen             Director                       August 1, 2005
     Robert  Janzen


          Certification Pursuant to 18 U.S.C. Section 1350, As Adopted

            Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

I,  Jake  Neufeld,  the  President and Chief Executive Officer of Malahat Energy
Corporation  (the  "Company"),  certify  that:

                                       25

1.
     I  have  reviewed  this  annual  report  on  Form  10-KSB  of  the Company;



2.
     Based on my knowledge, this report does not contain any untrue statement of
a  material  fact  or  omit  to  state  a  material  fact  necessary to make the
statements  made, in light of the circumstances under which such statements were
made,  not  misleading  with  respect  to  the  period  covered  by this report;



3.
     Based  on  my  knowledge,  the  financial  statements,  and other financial
information included in this report, fairly present in all material respects the
financial  condition, results of operations and cash flows of the small business
issuer  as  of,  and  for,  the  periods  presented  in  this  report;



4.
     The  small  business  issuer's  other  certifying  officer(s)  and  I  are
responsible  for establishing and maintaining disclosure controls and procedures
(as  defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e)) for the small
business  issuer  and  have:




     (a)     Designed  such  disclosure  controls and procedures, or caused such
disclosure  controls  and  procedures  to  be designed under our supervision, to
ensure  that  material  information  relating  to  the  small  business  issuer,
including  its  consolidated  subsidiaries, is made known to us by others within
those  entities,  particularly  during  the period in which this report is being
prepared;





     (b)
          Evaluated  the effectiveness of the small business issuer's disclosure
controls  and  procedures and presented in this report our conclusions about the
effectiveness  of  the  disclosure controls and procedures, as of the end of the
period  covered  by  this  report  based  on  such  evaluation;  and



     (c)
          Disclosed  in  this  report  any change in the small business issuer's
internal  control  over  financial  reporting  that  occurred  during  the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is  reasonably likely to materially affect, the small business issuer's internal
control  over  financial  reporting;  and



5.
     The  small  business  issuer's  other  certifying  officer(s)  and  I  have
disclosed,  based  on  our  most  recent  evaluation  of  internal  control over
financial  reporting,  to  the  small  business  issuer's auditors and the audit
committee  of  the  small  business  issuer's  board  of  directors  (or persons
performing  the  equivalent  functions):



     (a)
          All  significant deficiencies and material weaknesses in the design or
operation  of  internal  control  over  financial reporting which are reasonably
likely  to  adversely  affect  the  small  business  issuer's ability to record,
process,  summarize  and  report  financial  information;  and



     (b)
          Any  fraud, whether or not material, that involves management or other
employees  who  have  a significant role in the small business issuer's internal
control  over  financial  reporting.




Dated:  August  1,  2005          /S/  JAKE  NEUFELD
                                 ------------------
                                 Name:  Jake  Neufeld
                                 Title:  President and Chief Executive Officer



I,  Bruce Ramsay, the Chief Financial Officer of Malahat Energy Corporation (the
"Company"),  certify  that:



1.
     I  have  reviewed  this  annual  report  on  Form  10-KSB  of  the Company;



2.
     Based on my knowledge, this report does not contain any untrue statement of
a  material  fact  or  omit  to  state  a  material  fact  necessary to make the
statements  made, in light of the circumstances under which such statements were
made,  not  misleading  with  respect  to  the  period  covered  by this report;



3.
     Based  on  my  knowledge,  the  financial  statements,  and other financial
information included in this report, fairly present in all material respects the
financial  condition, results of operations and cash flows of the small business
issuer  as  of,  and  for,  the  periods  presented  in  this  report;



4.
     The  small  business  issuer's  other  certifying  officer(s)  and  I  are
responsible  for establishing and maintaining disclosure controls and procedures
(as  defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e)) for the small
business  issuer  and  have:




     (a)     Designed  such  disclosure  controls and procedures, or caused such
disclosure  controls  and  procedures  to  be designed under our supervision, to
ensure  that  material  information  relating  to  the  small  business  issuer,
including  its  consolidated  subsidiaries, is made known to us by others within
those  entities,  particularly  during  the period in which this report is being
prepared;





     (b)
          Evaluated  the effectiveness of the small business issuer's disclosure
controls  and  procedures and presented in this report our conclusions about the
effectiveness  of  the  disclosure controls and procedures, as of the end of the
period  covered  by  this  report  based  on  such  evaluation;  and



     (c)
          Disclosed  in  this  report  any change in the small business issuer's
internal  control  over  financial  reporting  that  occurred  during  the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is  reasonably likely to materially affect, the small business issuer's internal
control  over  financial  reporting;  and



5.
     The  small  business  issuer's  other  certifying  officer(s)  and  I  have
disclosed,  based  on  our  most  recent  evaluation  of  internal  control over
financial  reporting,  to  the  small  business  issuer's auditors and the audit
committee  of  the  small  business  issuer's  board  of  directors  (or persons
performing  the  equivalent  functions):



     (a)
          All  significant deficiencies and material weaknesses in the design or
operation  of  internal  control  over  financial reporting which are reasonably
likely  to  adversely  affect  the  small  business  issuer's ability to record,
process,  summarize  and  report  financial  information;  and



     (b)
          Any  fraud, whether or not material, that involves management or other
employees  who  have  a significant role in the small business issuer's internal
control  over  financial  reporting.




Dated:  August  1,  2005          /S/  BRUCE  RAMSAY
                                 ------------------
                                 Name:  Bruce  Ramsay
                                 Title:  Chief  Financial  Officer



                            Certification Pursuant to

                         Exchange Act Rule 15d-14(b) and

                             18 U.S.C. Section 1350


In  connection  with  the  Annual  Report  of  Malahat  Energy Corporation  (the
"Company")  on  Form 10-KSB for the period ended July 31,2003, as filed with the
Securities  and  Exchange  Commission on the date hereof (the "Report"), I, Jake
Neufeld,  President  and Chief Executive Officer of the Company, certify, to the
best  of  my  knowledge,  pursuant  to Exchange Act Rule 15d-14(b) and 18 U.S.C.
Section  1350,  as  adopted pursuant to Section 906 of the Sarbanes Oxley Act of
2002,  that:


i.The  Report  fully complies with the requirements of Section 13(a) or 15(d) of
the  Securities  Exchange  Act  of  1934;  and


ii.The  information  contained  in  the  Report fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.


A  signed  original  of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears  in  typed  form within the electronic version of this written statement
required  by  Section  906,  has been provided to Malahat Energy Corporation and
will  be  retained by Malahat Energy Corporation and furnished to the Securities
and  Exchange  Commission  or  its  staff  upon  request.




Dated:  August  1,  2005          /S/  JAKE  NEUFELD
                                 ------------------
                                 Name:  Jake  Neufeld
                                 Title: President and Chief Executive Officer


In  connection  with  the  Annual  Report  of  Malahat  Energy  Corporation (the
"Company")  on Form 10-KSB for the period ended July 31, 2003, as filed with the
Securities  and  Exchange Commission on the date hereof (the "Report"), I, Bruce
Ramsay,  Chief  Financial  Officer  of  the  Company, certify, to the best of my
knowledge,  pursuant  to Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350,
as  adopted  pursuant  to  Section  906 of the Sarbanes Oxley Act of 2002, that:


i.  The Report fully complies with the requirements of Section 13(a) or 15(d) of
the  Securities  Exchange  Act  of  1934;  and


ii  .The  information  contained  in the Report fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.


A  signed  original  of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears  in  typed  form within the electronic version of this written statement
required  by  Section  906,  has been provided to Malahat Energy Corporation and
will  be  retained by Malahat Energy Corporation and furnished to the Securities
and  Exchange  Commission  or  its  staff  upon  request.




Dated:  August  1,  2005          /S/  BRUCE  RAMSAY
                                 ------------------
                                 Name:  Bruce  Ramsay
                                 Title:  Chief  Financial Officer