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, 2001

| |   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
                 (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.)


 700 - 101 Convention Centre Drive, Las Vegas, NV             89109
    (Address of principal executive offices)                (Zip Code)


                           (Issuer's telephone number):  1-866-404-3311

    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 [X] No [ ]

         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 by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

         The registrant did not report any revenues, apart for interest
income, for the fiscal year ended July 31, 2001.

         The aggregate market value of the voting stock held by non-affiliates
on July 31, 2001 was $ 18,079,950.72. The number of shares outstanding of the
Registrant's only class of common stock was 15,500,000 on July 31, 2001.

         DOCUMENTS INCORPORATED BY REFERENCE.  None.



                    TABLE OF CONTENTS


PART I

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

PART II

Item 5.       Market for Common Equity and Related Shareholder Matters
Item 6.       Management's Discussion and Analysis or Plan of Operation
Item 7.       Financial Statements
Item 8.       Changes in and Disagreements With Accountants on Accounting
                 and Financial Disclosure

PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act
Item 10.      Executive Compensation
Item 11.      Security Ownership of Certain Beneficial Owners and Management
Item 12.      Certain Relationships and Related Transactions
Item 13.      Exhibits and Reports on Form 8-K


This Annual Report on Form 10-KSB contains express or implied forward-looking
statements.  Additional written or oral forward-looking statements may be made
by the Company from time to time in filings with the Securities and Exchange
Commission ("SEC"), in its press releases, periodic conference calls or
otherwise.  The words "believes," "expects," "anticipates," "intends,"
"forecasts," "projects," "plans," "estimates" and similar expressions identify
forward-looking statements.  Such statements reflect the Company's current
views with respect to future events and financial performance or operations
and speak only as of the date the statements are made.  Such forward-looking
statements involve risks and uncertainties and readers are cautioned not to
place undue reliance on forward-looking statements.  The Company's actual
results may differ materially from such statements.  Factors that cause or
contribute to such differences include, but are not limited to, the Company's
limited operating history, unpredictability of operating results, intense
competition in various aspects of its business, the risks of rapid growth, the
Company's dependence on key personnel, uncertainty of product/service
acceptance, changes in laws and regulations, changes in economic conditions
and an inability to obtain financing, as well as those discussed elsewhere in
this Form 10-KSB.  Although the Company believes that the assumptions
underlying its forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in such forward-looking statements will be
realized.  The inclusion of such forward-looking information should not be
regarded as a representation by the Company or any other person that the
future events, plans or expectations contemplated by the Company will be
achieved.  The Company undertakes no obligation to publicly update, review or
revise any forward-looking statements to reflect any change in the Company's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statements is based.


PART I


ITEM 1.    DESCRIPTION OF BUSINESS.


Overview

Malahat Energy Corporation ("Malahat" or the "Company") is a Nevada
corporation that was formed on July 13, 1994 under the name Granada Mineral
Products, Inc.  On May 9, 2001, it acquired, through a merger, Sarenghetti
Enterprises, a private Nevada corporation ("SARG") formed on March 27, 2001,
that had previously acquired all the assets, liabilities and properties of
Malahat Systems Corporation, a producer of thermal and electrical energy using
biomass waste as fuel.  Upon the effectiveness of the merger, it changed its
name to Malahat Energy Corporation and also changed its fiscal year end from
December 31 to July 31.

The merger involved an exchange by the former stockholders of SARG of all of
the outstanding shares of SARG for newly issued shares of its company,
representing a majority ownership interest in its company.  Because the merger
resulted in a change in control of its company, the merger was accounted for
as a reverse acquisition, and historical financial information of SARG is used
as the historical financial information of the Company.  Prior to the merger,
it had no significant operations and had never commenced any operational
activities.  Upon the consummation of the merger, it acquired and assumed the
properties, intellectual property rights, operations, assets, liabilities and
obligations of SARG.

The Company's principal executive offices are located at 700 - 101 Convention
Centre Drive, Las Vegas, NV 89109.  The telephone number of the Company is
1-866-404-3311.

The Company main operations office is located in Delta, British Columbia.


Description of Business

Malahat has developed a proprietary BioFuel System that the Company believes
can deliver a reliable, price competitive on-site power source for energy
intensive commercial and industrial operations.  The BioFuel System produces a
green, renewable fuel called SynGas, from biomass wastes, such as wood
residues; sugar cane residuals rice husks or other organic waste materials.

The Company's BioFuel System produces a clean, efficient replacement for
fossil fuels, such as diesel used in electrical generators and natural gas
used in heating boilers.

The BioFuel System can be used to generate thermal or electrical energy.  The
Company's BioFuel System breaks down the complex structures of various biomass
feed stocks by the action of heat.  This process called pyrolysis, results in
the division of the large molecules and their reformation into a green,
renewable SynGas.  The company's BioFuel System can therefore produce high-
value energy such as electricity without the need for expensive steam
generation or steam turbine systems.  This SynGas can be used as a replacement
fuel in reciprocating combustion engines, used for the production of
electricity, or as a replacement for natural gas in boiler applications and
gas fired dry kilns.

The Company's technology is an environmentally friendly energy solution in the
rapidly expanding alternate energy field, having completed the research and
development phase on the M500 BioFuel System and is launching its first
commercial model.  The Company has identified the greenhouse industry, waste
disposal and developing countries as the three areas where the Company
believes its BioFuel System will receive wide acceptance.  The Company also
believes that it has developed an efficient business model using an equipment
lease agreement targeted directly at the greenhouse industry.

In addition to commercialization of its operations, the Company's future
development plans include designing and building larger scale BioFuel Systems
which will produce more electricity or heat energy, and the adaptation of the
BioFuel System to other biomass feed stocks such as municipal solid waste,
waste paper, waste plastics and crude oils.

The Company believes its BioFuel System will benefit the agricultural and
forestry sectors. Firstly, it will provide the industry with an efficient
method of disposing of its wood wastes in compliance with government
guidelines.  Secondly, it will provide a method of disposal at a relatively
low capital cost when compared to other technologies. Thirdly, it will provide
them with low cost energy.


The Technology

The Company developed the M500 BioFuel System through several years of
prototype testing.  The M500 is capable of processing about six tons (metric)
of waste wood per day.  It is fed by an automated material handling system
capable of sizing the incoming feedstock.  It has a computerized control
system that can be operated in a manual or fully automatic mode.  In the
automatic mode, a programmable logic control monitors the temperature
throughout the system and continuously adjusts the fuel rate and air mix, and
can be monitored from remote locations.  The M500 produces sufficient fuel to
produce up to 240 KWHs of electrical energy per hour.

The Company's BioFuel System requires organic waste, heat, water and air to
produce BioFuel through a conversion process known as pyrolysis.

Pyrolysis is the thermal degradation of material in the absence of oxygen.

Malahat's patent pending system employs computer-controlled sensors to
regulate the elements with extreme precision, producing a high quality
BioFuel.

The Company's BioFuel System breaks down the complex structures of various
biomass feed stocks by the action of heat.  This results in the division of
large molecules and their reformation into a green, renewable SynGas.
Compared with other available gasification technology, the company's Biofuel
System achieves a greater breakdown making the gas suitable for use in a
reciprocating combustion engine.  The result is that the BioFuel System can
produce high-value energy such as electricity without the need for expensive
steam generation or steam turbine systems.  Also, the gas can be utilized as
an economical, green replacement for natural gas in greenhouse operations and
gas fired dry kilns.

The Company has achieved a design breakthrough in a BioFuel System unit that
is simple and easy to operate.  As a result, the Company believes its BioFuel
Systems are competitive with conventional energy systems in a wide range of
situations.

The Company has research and development plans for an M3000 System as well as
a turbine system.  The M3000 System will have essentially the same material
handling and control system as the M500 however it will be capable of
processing up to 36 tons (metric) of wood waste per day and producing up to
1.5 MWH of electricity per hour.  Customers who have a requirement to process
more wood waste can implement multiple units connected together.  All models
can be installed in a multiple unit system.  In order to develop the
technology for a steam turbine system, while not vastly different than
supplying fuel to reciprocating engines, it will require changes to the
control systems.  Such development will be driven by the growing interest in
small turbine engines due to their efficiency over reciprocating engines.

Environmental Considerations

The BioFuel System produces a clean, permanent BioFuel, which consumes wood
chips, and other organic wastes that usually become landfill.  Millions of
tons of wood waste become landfill each year in North America.  Malahat's
BioFuel System can use these mountains of wood waste and can convert them into
a renewable energy resource.

Reducing landfills decreases the amount of methane gas and CO2 emitted into
the atmosphere.

The use of the SynGas from the BioFuel System also reduces the level of
greenhouse gas emissions due to the absence of sulphur-containing compounds.
There are no atmospheric emissions from the BioFuel System as the gas is fed
directly into boilers or into the intake manifold of a reciprocating engine.

Burning fossil fuels release large amounts of carbon dioxide into the
atmosphere.  The company's technology is a CO2 neutral power solution.
BioFuel combustion does not add more carbon dioxide to the atmosphere than
would occur through the natural decomposition of the organic waste.

Malahat may earn valuable carbon credits in the developing carbon credit
trading market.

Fossil fuels, such as diesel, generate sulphur dioxide, nitrous oxide and
other hazardous toxics.  The company's syngas burns clean.  It can replace
diesel and natural gas in some industrial applications.

Competition

The Company's BioFuel System provides an attractive option for situations
requiring the production of both thermal energy and electric power.  The
Company's product produces an extremely clean synthetic fuel that requires
virtually no filtering (tars and impurities are eliminated).  The fuel is
suitable for use in either reciprocating engines to generate power or in
boilers for the production of thermal energy.  Most importantly, the
manufacturing and engineering costs associated with deploying the system are
comparatively low as too are the operating costs of the System.

Through the company's discussions with Natural Resources Canada, input from a
Danish gasifier manufacturer focused on producing thermal energy, and
observations made during a major renewable energy conference in New Delhi, the
Company has concluded that most competitors produce gasifiers for contexts
within thermal applications involving boilers to heat water, or power
generation using steam and gas turbine engines (the high capital cost of these
is a significant disadvantage for small applications).  In India, gasifiers
have been coupled with low cost and low quality reciprocating engines.
However, these gasifiers produce a "dirty" fuel that requires extensive
filtering and is unsuitable for engines manufactured and utilized in highly
industrialized countries.

There are many advanced thermal conversion technologies (including
gasification) being developed for biomass and biomass wastes.  However, at
this stage very few are fully commercial or even commercially available.  In
general most of these technologies, particularly those for large-scale
applications, are at a point of transition from R&D to commercialization.  In
order for advanced thermal technologies to achieve market acceptance, vendors
will need to offer proven, reliable and fully integrated waste disposal or
biomass conversion solutions that take full advantage of the technology.

In the Company's analysis the market for gasification systems was segmented
according to fuel type and scale of facility.  The Company's target market
segments for its current technology are located in specific markets for very
small and small systems using biomass as the fuel source.

The Company has identified several companies worldwide that have developed and
commercialized, to one degree or another, very small and small-scale
gasification systems to serve many of the target market segments of interest
to Malahat.  In addition, the Company has identified several other emerging
companies with small-scale gasification technologies in the demonstrator and
pilot stages.  Each of these companies can potentially be a competitor in the
company's niche markets in the future, the more advanced competitors are
detailed below, although they are not known to be presently competing for the
Company's target customer base.

BG Systems is located in Baltimore MD and classed as fully commercial because
the system it is producing and marketing was developed by Ankur Scientific
Energy in India.  Since 1989, Ankur has completed over 400 installations in
India, most producing electricity for water pumping.  About 25% of these
plants produce heat and power for industrial clients using modules ranging in
size from 40KW to 500 kW.  The Company believes that the Indian units are
quite primitive in terms of fuel feed and automation.  However, BG has
redesigned and automated the gasifier for use in industrialized countries.

Primenergy, a subsidiary of PRM Energy of Hotsprings AK, is the most well-
established and successful competitor. Primenergy concentrates on the
provision of gasifiers to the food and agricultural industries for use in
drying and energy production applications.  It has 5 installations in the
U.S., 1 in Italy, 1 in Costa Rica, and 8 in Malaysia.  It specializes in fuels
like rice hulls that can cause slagging problems.  Primenergy can supply
capacities ranging from 800KW to 5MW.  Their largest installation uses three
KC-18 units to produce a total of 15MW of power.

Waterwide, based in New Zealand, put it first units into service in the early
1980's specifically for foodstuff drying.  Waterwide claims that its 'close
coupled gasifier' is the only heater (including gas, oil and other fueled
types) that can 'directly fire' many foodstuffs without causing contamination
or off flavoring.  Waterwide also supplies gasifiers for use in lumber kiln,
sludge drying and MSW-to-energy applications. In recent years, Waterwide has
made technological advances that broaden the range and quality of feedstock
its units can process, generate higher efficiencies and provide a smokeless
operation.

In 1993, Analog Volund developed a full-scale up-draft gasification system
that supplies district heat to a community of 560 homes in Denmark.  The gas
is burned in a low NOx gas burner built into a 4 MW hot water boiler. The heat
efficiency is 105% (net calorific value) based on wood chips with 50% moisture
content.  Early in 2000, the plant was upgraded to a CHP plant. Two gas
engines were installed with a total electric output of 1.3 MW (soon to be
raised to 1.5 MW). The thermal output from the engines is 2.1 MW and an
additional 2 MW of heat can be produced from the gas boiler.  This company has
only one unit in operation.

Brightstar of Houston, TX is now owned by Energy Developments Ltd (EDL) of
Australia.  EDL is an independent power producer with 282MW of power
generation facilities in the U.K., Australia, the U.S. and Taiwan.  EDL has
developed an integrated materials recovery and energy production system that
uses the Brightstar gasifier for the thermal conversion step.  The Brightstar
unit utilizes a two-stage pyrolysis/steam reforming process to produce a gas
with a high proportion of H2 and CO having a calorific value of 11.2 to 14.9
MJ/Nm3.  The syngas is virtually free of particulates.  Tar and char are
collected and removed for disposal as a dry residue.  The gasifier design is
modular and allows feed rates from 1 to 20 tonnes per hour.  Brightstar's
original target markets included wood panel plants, and pulp and paper mills.
The system is now being integrated into EDL's MSW processing installations in
Australia, the U.K. and Europe.  The first commercial MSW plant in the U.K.,
commissioned in 2000, has a capacity of 50,000 tpa and produces just over 5MW.
Current plans are to expand this plant to three times that size.  With the
financial backing of EDL and its own excellent technology, Brightstar may be
formidable competition.

The Company has not encountered competition from these companies in its
negotiations with potential customers in its target markets.  The Company has
identified that its customers are keen to reduce their existing energy costs,
predominantly natural gas.  The Company through its negotiations with its
potential customers has not become aware of direct competition from companies
developing gasification or biomass conversion technologies and has no reason
to believe that these technologies will provide substantial competition in the
future that will prohibit the Company from executing its business plan.

Proprietary Rights

The Company's success and ability to compete are dependent, in part, upon its
ability to develop and maintain the proprietary aspects of its technology and
operate without infringing on the proprietary rights of others.  The Company
has a US and a Canadian patent application pending.  The Canadian patent was
filed on October 20, 2000; the US patent was filed on October 18, 2001.  There
can be no assurance that the Company will be successful in having a patent
issued in the United States or in Canada.

In addition, the Company relies on a combination of copyright and trade secret
laws, confidentiality procedures and contractual provisions to protect its
intellectual property and proprietary rights.

The Company requires employee and third-party non-disclosure and
confidentiality agreements.  It seek to protect its technology, process,
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection.  It cannot be certain
that others will not develop technologies that are similar or superior to its
technology or design around the copyrights and trade secrets it owns.  Despite
these precautions, it may be possible for unauthorized parties to copy
portions of the Company's products, reverse engineer, or obtain and use
information that is regarded as proprietary.

Employees

The Company is in the process of building its staff.  As of July 31, 2001,
there were  five full-time employees and three part-time employees, of whom 2
were employed in sales and marketing, 4 in engineering, development and
operations, and 2 in management and finance.  None of its employees are
represented by a union.  The Company has not experienced any work stoppages
and consider its relations with its employees to be good.  It intends to
increase the number of employees over the next 12 months to approximately 16
to support its business plan and growth.  The Company believes that these
resources will be necessary to execute the business initiatives scheduled for
the following months.

Risk Factors

There are a number of uncertainties and risk factors that may bear on the
ability of the Company to achieve its business goals and reduce the
possibility of successfully fulfilling its plans. The risks and uncertainties
described below are not the only ones facing the Company. If any of the
following risks actually occur, its business, financial condition or results
of operations could be materially adversely affected.  In that case, the
trading price of the common stock could decline, and you may lose all or part
of your investment in its common stock.

The Company has a limited operating history.  The Company has not yet
generated significant 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.  Some of these include:

- ability to develop and sustain revenue growth;
- managing expanding operations;
- competition;
- attracting, retaining and motivating qualified personnel;
- maintaining and developing new, strategic relationships; and
- ability to anticipate and adapt to the changing energy market and any
   changes in government regulation.

The Company has incurred losses and expects losses may continue.  The company
has incurred operating losses since its inception and expect to continue to
incur losses in the foreseeable future.  As July 31, 2001, it had an
accumulated deficit of $1,657,105. To date, the Company has not produced any
revenue; operations have been funded through government grants and private
equity.  The Company needs to generate significant revenue to achieve
profitability and cannot be assured that it will realize sufficient revenue to
achieve profitability.  The Company also expects to incur significant research
and development, product development, sales and marketing and administrative
expenses and, as a result, expects to continue to incur losses for the
foreseeable future.

The Company may not be able to obtain sufficient funds to grow its business
and any financing may be on terms adverse to the interests of the Company's
shareholders.  The Company may need financing to continue to grow its
business.  If financing is not available when required or is not available on
acceptable terms, the Company may be unable to fund its expansion,
successfully promote its business, take advantage of business opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on the Company's ongoing business.  If the Company is able to raise
funds, and it does so by issuing equity securities, holders of the Common
Stock may experience significant dilution of their ownership interest and
holders of these securities may have rights senior to those of the current
holders of the Common Stock.  If the Company obtains financing by issuing debt
securities, the terms of these securities could restrict or prevent the
Company from paying dividends and could limit its flexibility in making
business decisions.  Because the Company expects to generate losses for the
foreseeable future, it does not expect that income from its operations will be
sufficient to meet its capital needs.  The Company expects to raise funds in
the future in order to fund its anticipated growth, more aggressive marketing
programs or the acquisition of complementary businesses, technologies and
services.  Obtaining financing will be subject to a number of factors
including: market and economic conditions; the Company's financial condition
and operating performance; and investor sentiment.  These factors may make the
timing, amount, terms and conditions of additional financing unattractive for
the Company.

The Company cannot be certain that its technology and products will achieve
market acceptance or whether it will be able to achieve significant revenue.
The company is therefore very limited in its ability to predict future
revenue.  The combination of the company's limited operating experience, the
uncertain market acceptance for its products, and other factors that are
beyond its control make it difficult for the company to accurately forecast
its revenue on a quarterly and annual basis.

The Company's business includes research and development, engineering,
modification and introduction of the M500 unit and new products and may
include entry into new business segments.  Such initial entry into any new
segment has no historical proven data or prior business records.

Company's Products

The Company may not be able to successfully introduce new or enhanced products
and services.  The failure of any new or enhanced products and services to
achieve market acceptance and generate revenue could result in a material
adverse effect on the Company's revenues.  The Company expects to introduce
enhanced products and services in order to generate additional revenues,
attract and retain more employers and respond to competition.  Any new or
enhanced product or service introduced that is not favorably received could
damage the Company's reputation and the perception of its service mark and
brand.

The Company has a limited product line and is dependent on the successful
commercialization of its M500 Biofuel System.  It may also be necessary to
develop in a timely manner new and enhanced products that achieve market
acceptance.  The company has only one principle product that has passed
significant testing and trials and is ready for installation at customer
sites.  In order to experience future revenue targets the successful
implementation and customer acceptance of its M500 BioFuel System is
essential.  Even if the Company is able to develop and commercially introduce
new technology, products or enhancements, they may not achieve market
acceptance.

Improvements may also be made to the existing alternatives to the company's
products that could render the company's technology less desirable or
obsolete.

Customers may defer orders in anticipation of new products from the Company or
other providers of alternate energy systems.

The timing of orders from its customers and the possibility that these
customers may change their order requirements with little or no advance notice
to the company.

Potential customers of the company's technology may have invested substantial
resources in their existing power systems and, as a result, may be reluctant
or slow to adopt a new approach.  Moreover, the company's technology is an
alternative to existing fossil fuel sources of energy and may never be
accepted by the company's customers or may be made obsolete by other advances
in energy technology.

Alternative energy as a new, viable source of energy

There is uncertainty regarding the ongoing need for on site power generation
as well as the uncertainty regarding the adoption of the Company's current and
future products, including its recently introduced M500 BioFuel System which
it expects to be commercially introduced by the end of 2001; and the rate of
growth of the markets for its products.

The Company's business is dependent on a market for on-site biomass power
technology, and if this market does not expand as it anticipates, or if
alternatives to its products are successful, its business will suffer.  The
market for biomass power technology is rapidly evolving and it is difficult to
predict its potential size or future growth rate.

Biomass Feedstock Supply

The Company's technology and business model depend on the availability of
sufficient biomass feedstock.  The Company's research suggests that the
availability of feedstock and the logistics of transportation of sufficient
feedstock to customers' premises at an acceptable cost can be achieved for the
present and foreseeable future.  However, any major increase in the costs of
supplying feedstock can adversely affect the viability of the Company's
business model.  As biomass to energy technology becomes more established and
the Company's competitors prove to be successful in commercializing their
technology there is a risk that biomass feedstock such as wood chips could
become commoditized increasing the costs of supply and delivery thereby
affecting the profitability of the Company's operations.

Technology and Intellectual Property

The M500 BioFuel System is the Company's proprietary technology, and the
Company is dependent on its intellectual property for the success of its
business.  Without control over its intellectual property the Company may be
unable to compete, if its technology and secrets fall into the hands of
competitors.  The Company has filed for patent protection in both the United
States and Canada.

The Company intends to use all efforts to maintain the integrity of its
intellectual property, however, unauthorized parties may attempt to copy or
otherwise obtain and use its technology.  Monitoring unauthorized use of M500
BioFuel System may be difficult, especially as the system is placed on
customers' premises, and it cannot be certain that the steps it has taken will
prevent unauthorized use of its technology.  The Company may also be unable to
defend its intellectual property rights in foreign countries where applicable
laws may not protect its proprietary rights as fully as in the United States.
In addition, the measures the Company undertake may not be sufficient to
adequately protect its proprietary technology and may not preclude competitors
from independently developing products with functionality or features similar
to those of the company's technology.

Failure to adequately protect the Company's intellectual property rights could
permit others to appropriate its proprietary technology.  The unauthorized
reproduction or other misappropriation of the Company's proprietary technology
could enable third parties to benefit from its technology and brand without
paying the Company.  If this were to occur, the Company's revenues could be
materially adversely affected, and the value of the Company's mark and brand
could be diminished.  The steps the Company has taken to protect its
proprietary rights may not be adequate to deter misappropriation of
proprietary information.  The Company may not be able to detect unauthorized
use of its proprietary information or take appropriate steps to enforce its
intellectual property rights.  The laws of other countries in which the
Company may market its services in the future are uncertain and may afford
little or no effective protection of the Company's intellectual property.  If
the Company resorts to legal proceedings to enforce its intellectual property
rights, the proceedings could be burdensome and expensive.  The proceedings
also could involve a high degree of risk.

Defending against intellectual property infringement claims could be time
consuming and expensive, and the Company may be liable for infringing on the
intellectual property rights of others.  If the Company is not successful in
defending against these claims, the Company could be subject to significant
damages and the disruption of its business.  Successful intellectual property
infringement claims against the Company could result in monetary liability or
a material disruption in the conduct of its business.  The Company cannot be
certain that its products, services, content and brand do not or will not
infringe valid patents, copyrights or other intellectual property rights held
by third parties.  The Company expects that infringement claims in its markets
will increase in number as more participants enter the markets.  The Company
may be subject to legal proceedings and claims from time to time relating to
the intellectual property of others in the ordinary course of its business.
The Company may incur substantial expenses in defending against these third
party infringement claims, regardless of their merit.

Sales, Marketing and Distribution

The Company is dependent on certain distribution channels for marketing its
M500 BioFuel system to the greenhouse industry and therefore management of its
distribution relationships is essential to the company's future success in
delivery of its technology to this industry.  The future growth of the
company's business will depend in part on its ability to create new
relationships with partners for the commercialization of its technology in
other industries, to identify and develop additional channels for the
distribution its technology and to manage these relationships.  The company
will also look to identify and develop relationships with additional partners
that could serve as distributors for its technology.

The Company has developed a business model to compete for customers business
at a discount to their existing energy pricing arrangements.  Competition
could lead to a decrease in its prices as well as a reduction in sales, lower
margins and decreased market share.  These and other competitive pressures
could prevent it from competing successfully against current or future
competitors and could materially harm its business.

Raw Materials and Suppliers

For the most part, the Company's products are custom designed and manufactured
with certain components that can be bought "off the shelf," and are not
intended to be produced for inventory.  The Company's products are either
obtained from local sources or manufactured.  Generally, lead-time for
delivery of materials or components ordered will be delivered on time, or that
the manufacture of the component parts will be completed on time, and if that
is not the case, the manufacture of the M500 can be delayed.

Manufacturing

The Company has no experience manufacturing its M500 BioFuel system, and the
Company is dependent on outsourcing this function to third party
manufacturers.  While the Company has effectively managed this process for
individual units the company has no experience in replicating its technology
in larger quantities.  In addition, the Company has yet to sign a
manufacturing agreement and may have difficulty in procuring production of its
M500 BioFuel System at required terms.  To be financially successful, it will
have to manufacture its M500 BioFuel System in commercial quantities at
acceptable costs while also preserving the quality levels and integrity
achieved in manufacturing the M500 BioFuel System in limited number.  This may
present technological and engineering difficulties for the product
manufacturer that could adversely affect the results of the Company's
business.  There can be no assurance that it will be successful in executing a
satisfactory manufacturing agreement.

The Company may not be successful in concluding a manufacturing capability in
time to meet its M500 BioFuel System commercialization schedule or to satisfy
the requirements of its customers.

The Company has intentionally chosen to use only a limited number of
manufacturers to produce components for its technologies.  In the opinion of
management, the Company can have access to a readily available supply of raw
materials and components for all of its anticipated products from various
sources and does not anticipate any major difficulties in obtaining such raw
materials or components necessary for its business.

Competition

The Company is not aware of any market ready direct competition, however, the
Company is aware that there are other companies throughout the world
developing or attempting to develop gasification processes, pyrolysis and
conversion of energy.  Such companies may be developing products and
technologies similar in nature to the M500 BioFuel System, and the Company
competes indirectly with companies that are developing other types of energy
technologies.  The Company is aware that many of its current and potential
competitors have longer operating histories, significantly greater resources,
broader name recognition and stronger financial assets.  As a result, these
competitors may have greater credibility with its existing and potential
customers.  They also may be able to adopt more aggressive pricing policies
and devote greater resources to the development, promotion and sale of their
products than it can to the Company's, which would allow them to respond more
quickly than it to new or emerging technologies or changes in customer
requirements.

Employees

The Company has also expanded its staff and may continue to expand its staff
and facilities thereby increasing its expense levels in anticipation of future
gains in revenue.  If revenue does not develop as anticipated, the company
will incur losses.

The Company has undergone growth in the number of its employees over the past
year; however, if the company is to realize full commercialization of its M500
BioFuel System there will be significant expansion the size of its staff as
well as its physical facilities and the scope of its operations.  The Company
may experience difficulty in managing the expansion of its operations to
achieve its sales goals.  The Company's prospects and financial condition
could be harmed if it encounters difficulties in effectively managing the
budgeting, forecasting and other process control issues presented by such a
rapid expansion.

The Company's business and growth will suffer if it is unable to hire and
retain highly skilled personnel.  If the Company is unable to hire and retain
highly skilled personnel, its growth may be restricted, the quality of its
products and services reduced and its revenues may be reduced or grow at a
slower rate than expected.  The Company's future success depends, in large
part, on its ability to attract, train, motivate and retain highly skilled
employees.  Competition for highly skilled employees is intense.  The Company
may be unable to retain its skilled employees or attract, assimilate and
retain other highly skilled employees in the future.  The Company has, from
time to time, in the past, experienced, and it may experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications.

The Company may not be able to effectively manage its expanding operations.
To execute its business plan and strategy, the Company must continue to grow
significantly.  If the Company is not able to expand its operations in an
efficient manner, its expenses could grow disproportionately to revenues or
its revenues could decline or grow at a slower rate than expected, either of
which could have a material adverse effect on its business, results of
operations and financial condition. The Company expects that the number of its
employees will double in the next fiscal year and may continue to increase for
the foreseeable future. The Company's growth is expected to result in
increased responsibility for both existing and new management personnel.  Such
growth has placed, and anticipated future growth combined with the
requirements the Company faces as a public company will continue to place, a
significant strain on the Company's management, operations, systems and
resources.  The Company expects that it will need to continue to improve its
financial and managerial controls and reporting systems and procedures, and
will need to continue to expand, train and manage its workforce.  The
Company's success depends to a significant extent on the ability of its
executive officers and other members of management to operate effectively both
independently and as a group.  The Company will also need to continue to
expand and maintain close coordination among its products, services and
technology, finance and administration and sales and marketing organizations.
There can be no assurance that if the Company continues to grow, management
will be effective in attracting and retaining additional qualified personnel,
expanding its physical facilities, integrating acquired businesses, if any, or
otherwise managing growth.  There can be no assurance the Company's
information systems, procedures or controls will be adequate to support its
operations or that management will be able to achieve the rapid execution
necessary to successfully offer its products and services and implement the
business plan and strategy.  The Company's future performance may also depend
on its effective integration of acquired businesses, if any.  Any such
integration, even if successful, may take a significant period of time and
expense, and may place a significant strain on the Company's resources.  If
the Company is not able to manage existing or anticipated growth, its
business, results of operations and financial condition will be materially
adversely affected.

The loss of any of key management and technical personnel or consultants could
negatively impact the Company's business.  The Company has greatly benefitted
from the experience and dedication of its management personnel including Ben
Dulley, Jake Neufeld, Bruce Ramsay and with further assistance of engineering
and technical expertise and consultancy provided by Dr. David Wiles and Hans
Gostmann. The loss or departure of any of the Company's key employees could
materially adversely affect its ability to implement its business plan and
could lower its revenues or cause revenues to grow at a slower rate than
expected.  The Company's future success depends to a significant extent on the
continued service and coordination of the Company's management team.  In
addition, certain members of the management team have joined within the last
few months.  In addition, if one or more key employees join a competitor or
form a competing company, though the Company has non-competition arrangements
with each of its key employees, the Company may lose existing or potential
customers, which could have a material adverse effect on the Company's
business, results of operations and financial condition.  Though the Company
maintains confidentiality agreements with its employees, if the Company were
to lose a key employee, there can be no assurance that the Company would be
able to prevent the unauthorized disclosure or use of its procedures,
practices, new product development or customer lists.

Effect of Governmental and Environmental Protection Regulations and Permits

The Company may be subject to material federal, state, provincial or municipal
regulations, laws and permits for the installation and operation of its M500
units.  The Company believes that it will be able to comply in all material
aspects with all such laws and regulations to the extent that they be deemed
applicable to the Company's products with minimal resources expected to be
required by the company in so complying.

Other Risks

The Company's stock price may experience extreme price and volume
fluctuations.  The market price of the Company's Common Stock has fluctuated
in the past and is likely to continue to be volatile and subject to wide
fluctuations.  The stock market in general and the market prices of shares in
energy companies have been extremely volatile and have experienced
fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies.  The market price of the Company's
Common Stock may be subject to wide fluctuations in response to many factors,
some of which are largely beyond the Company's control.  These factors
include:

- quarterly variations in results of operations;
- adverse business developments;
- changes in financial estimates by securities analysts;
- investor perception of the Company and online recruiting and staffing
   services in general;
- announcements by competitors of new products and services; and
- general economic conditions both in the United States and in foreign
   countries.

Since the Company's stock price is volatile, the Company may become subject to
securities litigation, which is expensive and could result in a diversion of
resources.  Litigation brought against the Company could result in substantial
costs to the Company in defending against the lawsuit and a diversion of
management's attention.  Securities class action litigation has often been
brought against companies that experience volatility in the market price of
their securities.  Since the Company's stock price is volatile, the Company
could be subject to securities litigation and incur higher expenses than
expected, which could have a material adverse effect on its business and
results of operations.

Future sales of the Company's Common Stock may negatively affect its stock
price.  The market price of the Company's Common Stock could decline as a
result of sales of a large number of shares of Common Stock in the market or
as a result of sales by existing shareholders, or the perception that these
sales could occur.  These sales might make it more difficult for the Company
to sell equity securities in the future at a time and at a price that the
Company deems appropriate.  The certain shares of the Company's Common Stock
currently outstanding are or will become eligible for sale without
registration pursuant to Rule 144 under the Securities Act, subject to certain
conditions of Rule 144.

The Company's officers, directors and existing stockholders, whose interests
may differ from other shareholders, will have the ability to exercise
significant control over the Company.  The Company's executive officers and
directors and entities affiliated with them will, in the aggregate,
beneficially own a majority of the Company's Common Stock.  These shareholders
will be able to exercise significant influence over all matters requiring
approval by the Company's shareholders, including the election of directors
and the approval of significant corporate transactions, including a change of
control of the Company.  The interests of these shareholders may differ from
the interests of the Company's other shareholders.


ITEM 2.    DESCRIPTION OF PROPERTY

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

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

ITEM 3.    LEGAL PROCEEDINGS

         The Company is not a party to any material pending legal proceedings.

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

During the fourth quarter of the fiscal year ended July 31, 2001, the
shareholders unanimously approved the merger of the Company with an entity
called Sarenghetti Enterprises, as described in the first paragraph of Item 1
above.


PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's common stock is quoted on the National Association of Securities
Dealers, Inc. OTC Bulletin Board under the symbol "MAHT" and is not listed for
trading on any exchange.  The OTC Bulletin Board, 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 NASD. 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.  Prior to this date, the predecessor pre-merge public entity Granada
Mineral Products Inc. trades under the symbol "GDMN".  Set forth below are the
high and low closing bid prices for its common stock, from the inception of
its trading on the OTC Bulletin Board through July 31, 2001, as reported by a
member firm of the NASD that effects transactions in stocks quoted on the OTC
Bulletin Board and acts as one of the market makers for its common stock. The
quotations listed below reflect interdealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.


        FISCAL 2001                        HIGH            LOW

May 30, 2001 - July 31, 2001               $2.08           $1.36

As of July 31, 2001, the Company had 15,500,000 shares of its common stock
outstanding, held of record by approximately 112 shareholders, and the high
and low closing bid prices of its common stock on the OTC Bulletin Board were
$2.08 and $1.36, respectively.  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.

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 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 15g-9 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 any 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.

Recent Sales Of Unregistered Securities

The following is a summary of transactions by the Company during the fiscal
year ended July 31, 2001, involving issuances and sales of the Company's
securities that were not registered under the Securities Act of 1933, as
amended (the "Securities Act"):

In anticipation of a proposed merger, the Company effected a 10 for 1 forward
split on April 10, 2001,with respect to each share of its common stock, par
value $0.01 per share, issued and outstanding as of that date.

Subsequently, the Company entered into the Stock Exchange Agreement, dated May
8, 2001 (the "Stock Exchange Agreement"), with Sarenghetti Enterprises
("SARG"), that provided for the merger of SARG into the Company with the
Company as the surviving entity.  Pursuant to the terms of the Stock Exchange
Agreement, at the closing, a total of 6,765,929 common shares of SARG were
exchanged for 10,075,000 shares of Common Stock of the Company.  The Company
relied on an exemption provided for by Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"), in connection with the issuance of
the Common Stock in the conversion.  The 10,075,000 shares of Common Stock
issued in the exchange are "restricted securities" under the Securities Act
and may be sold in the public market upon the expiration of the holding
periods under Rule 144, described below, subject to the volume, manner of
sale, and other limitations of Rule 144.

On July 19, 2001, the board of directors approved a private placement of
100,000 of the Company's Common Stock $200,000 or at $2.00 per share to an
accredited investor.  Again, the shares issued were "restricted securities"
under the Securities Act and may be sold in the public market upon the
expiration of the holding periods under Rule 144, described below, subject to
the volume, manner of sale, and other limitations of Rule 144.

In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares for at least one year, including an "affiliate" (a
person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, the issuer), is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:

- 1% of the then outstanding shares of the Company's Common Stock; or
- the average weekly trading volume during the four calendar weeks preceding
   filing of notice of the sale of shares of Common Stock.

Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about
the Company.  A stockholder who is deemed not to have been an "affiliate" of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned restricted shares for at least two years, would be entitled
to sell shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions or public information requirements.

Of the 15,500,000 shares of Common Stock outstanding as of July 31, 2001,
approximately 3,340,000 of Common Stock are freely tradable without
restriction in the public market, unless the shares are held by affiliates.
The remaining shares of Common Stock outstanding (including the 10,075,000
issued in connection with the merger with SARG) are "restricted securities"
under the Securities Act and may be sold in the public market upon the
expiration of the holding periods under Rule 144, described above, subject to
the volume, manner of sale, and other limitations of Rule 144.

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING
AUDITED FINANCIAL STATEMENTS AS AT JULY 31, 2001, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE AUDITED FINANCIAL STATEMENTS AND THE NOTES TO
THOSE STATEMENTS, APPEARING ELSEWHERE IN THIS REPORT.

IN ADDITION, THE COMPANY INCORPORATES HEREIN BY REFERENCE THAT SECTION OF PART
I, ITEM 1, ENTITLED "RISK FACTORS."

The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes to financial statements included
elsewhere in this Annual 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 its future
economic performance and its current beliefs regarding revenues it might earn
if it were successful in implementing its business strategies.  The forward-
looking statements and associated risks may include, relate to or be qualified
by other important factors, including, without limitation:

         o   market acceptance of new product or service introductions by the
              Company or its competitors;
         o   the financial health of its clients;
         o   the overall state of the energy industry; and
         o   economic conditions generally.

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 its
business or the risks associated with an investment in its common stock.  You
should carefully review and consider the various disclosures it made in this
report, and in the Company's other materials filed with the Securities and
Exchange Commission that discuss its business in greater detail and that
disclose various risks, uncertainties and other factors that may affect its
business, results of operations or financial condition.

Any of the factors described above or in the "Risk Factors" section above in
Part I, Item I, could cause its financial results, including its net income
(loss) or growth in net income (loss) to differ materially from prior results,
which in turn could, among other things, cause the price of its common stock
to fluctuate substantially.

Organization - Reverse Merger Treatment

Malahat Energy Corporation ("Malahat" or the "Company") was incorporated in
Nevada on July 13, 1994, as Granada Mineral Products, Inc. ("Granada").  On
May 9, 2001, Granada acquired Sarenghetti Enterprises, a private Nevada
corporation ("SARG") formed on March 27, 2001, that had previously acquired
all the assets, liabilities and properties of Malahat Systems Corporation, a
producer of thermal and electrical energy using biomass waste as fuel.
Granada and SARG combined, pursuant to a Stock Exchange Agreement dated May 8,
2001 (the Stock Exchange Agreement), that provided for the merger of SARG with
and into Granada as the surviving entity, pursuant to a tax-free
reorganization in accordance with Sections 354 and 368 of the Internal Revenue
Code, as amended.  Upon the effectiveness of the merger, Granada changed its
name to Malahat Energy Corporation and also changed its fiscal year end from
December 31 to July 31.

In April 2001, in anticipation of the transactions set forth in the Stock
Exchange Agreement, Granada effected a 10 for 1 forward split of its Common
Stock.

Further, pursuant to the terms of the Stock Exchange Agreement, the sole
director and officer of Granada resigned, and the management of SARG filled
the vacancies, thereby effecting a change in control.

At the closing of the merger, among other things, SARG exchanged 6,765,929
shares of its common stock, par value $0.001 per share, representing all of
its issued and outstanding stock for 10,075,000 shares of common stock, par
value $0.001 per share, of the Company.  The 10,075,000 shares of Common Stock
issued by the Company in the exchange were not registered under the Securities
Act of 1933, as amended (the "Securities Act"), are "restricted securities" as
defined therein and are subject to the limitations of Rule 144 promulgated
thereunder.  After the issuance of the 10,075,000 shares of Common Stock, the
Company had a total of 15,500,000 shares of Common Stock issued and
outstanding. Of the 15,500,000 shares of Common Stock that remained
outstanding as of July 31, 20011, approximately 3,340,000 shares of Common
Stock were freely tradeable without restriction in the public market unless
the shares are held by affiliates.

Prior to the merger with SARG, the Company had no significant operations. Upon
the closing of the Stock Exchange Agreement, the Company acquired and assumed
the properties, intellectual property rights, operations, assets, liabilities
and obligations of SARG.  In conformance with generally accepted accounting
principles, the merger has been accounted for as a "reverse merger" and the
accounting survivor is the Company, a Nevada corporation, formerly known as
Granada.

Overview

The Company develops and manufactures thermal gas reformers capable of
economically producing a green renewable fuel gas from biomass wastes.
Through 7 years of prototype testing, engineering and modification, the
company has advanced in its research and development phase and has developed a
unit for commercialization known as the M500 BioFuel System, with proprietary
technology which converts biomass wastes into a synthesized gas, SynGas.

Through a process called pyrolysis, the M500 BioFuel System breaks the complex
structures of various biomass feed stocks, such as wood and agricultural
waste, by the action of heat.  This results in the division of large molecules
and their reformation into a green, renewable fuel gas which can produce a
high value energy such as electricity, without the need for an expensive steam
generator or steam turbine systems, or alternatively, the gas can be utilized
as a supplement or replacement for natural gas, in such applications as
greenhouse boilers and gas fired dry kilns.

An M500 can have wide ranging applications for any industry with a need for
cheap, on-site environmentally friendly, flexible and reliable energy.  The
initial focus by the company has been in the greenhouse industry wherein the
company has received wide interest and has recently concluded its first
commercial unit designated for use by a greenhouse grower in the Fraser
Valley, British Columbia.

Plan of Operation

As the M500 BioFuel System's research and development phase is completed, and
the first commercial unit becomes ready for the company's first customer, a
greenhouse grower in Fraser Valley, British Columbia. The company is
developing plans for the manufacture of two additional units to fulfil orders
from other greenhouse growers.

Can Am Installations Ltd. who supplies control units among other equipment and
accessories for the agricultural and horticulture industry throughout North
America, has an agreement with the company to distribute the M500 units for
North America.  To-date, Can Am Installations Ltd. has given a commitment to
the company for 69 M500 units to be utilized in various greenhouses throughout
USA and Canada.

The Company employs a lease model to its M500 units such that each
manufactured M500 unit is owned by the company as a capital asset and the M500
unit is leased to a customer for a fixed term of 2 or 3 years, with an initial
installation fee and a monthly lease payment for the use of the M500 unit.
The monthly lease payment levied is based on a predetermined valuation of the
capability and capacity of the M500 unit to produce SynGas for energy at a 90%
efficiency ratio through the year, which is prorated over 12 months.  The M500
produces sufficient fuel to produce up to 240 KWHs of electrical energy per
hour and is capable of processing six tons (metric) of waste wood per day.
Each M500 is capable of powering 2 acres of greenhouse or an equivalent of 180
homes.

The Company's primary focus is to fulfill the initial M500 unit orders from
greenhouse growers in North America and thereafter be in a position to accept
more orders for the M500 units from other interested greenhouse growers, to
create a consistent, recurring revenue stream.

As application for the M500 unit is wide ranging, beyond the greenhouse
industry, the company is pursuing waste management and reduction into energy.
A municipality in Eastern Canada has proposed a grant to the company for the
company to convert its municipal waste into local energy.  The Company is
currently evaluating the composition and classification of the municipal waste
to provide an estimation of the time, cost, effect and benefits of such a
municipal project.  An initial proposal jointly with an environmental waste
composting company to a significant waste management company to reduce and
convert municipal waste into energy has received preliminary in-principal
approval.

The company is in discussions with a major engineering company and some of the
major tea plantations in Sri Lanka to produce energy for the plantations using
the tea plant waste to fuel the M500.  In that vein, the Company perceives a
global need for onsite low cost green power especially in countries or remote
locations where there is no energy grid system.  The company intends to pursue
its strategy to consider licensing and securing industrial partners to
manufacture the M500 units in countries outside of North America, to
effectively expand its reach.  A company representative will be in Sri Lanka
at year end to further the project in discussion.

In addition to commercialization of its operations, the Company's future
research and development plans include designing and building larger scale
BioFuel Systems which will produce more electricity or heat and the adaptation
of the BioFuel System to other biomass feed stocks such as municipal solid
waste, waste paper and crude oils.

Liquidity and Capital Resources

In July 31, 2000 Advanced Systems Institute ("ASI") advanced $375,000 to the
Company.  During the year ended July 31, 2001 the debt was extinguished and
converted into 1,034,910 shares of the Company's common restricted stock.  In
addition, the Company issued ASI 74,454 common restricted shares valued at
$25,489 as interest on the loan during 2000.

On July 19, 2001, the Company completed the closing of a private placement to
an accredited investor for the placement of 100,000 restricted common shares
in the capital of the company for $200,000.

With the current cash on hand and anticipated revenue from the delivery of the
M500 units, the Company anticipates that it will require additional funding
for its operation to meet the increased demand for the M500 units during the
years 2001/2.  The Company is considering financing options such as a bank
leasing program of the M500 units, manufacturer's financing, equity or bond
financing.  Given the market condition and other factors, there can be no
guarantee that the Company will be successful in securing additional
financing.  If adequate funds are not available on acceptable terms when
required, the company may delay, scale-back or eliminate the manufacturing,
research or development and reduce the commitment of the M500 units for lease.

The Company has never declared or paid cash dividends on its common shares.
The Company currently intends to retain its earnings, if any, to provide funds
for the operation and expansion of its business and does not anticipate
declaring or paying any cash dividends in the foreseeable future.  The
declaration of dividends, if any, in the future, would be subject to the
discretion of the Board of Directors, which may consider such factors as the
company's earnings, financial condition, capital needs and other relevant
factors.

Results of Operations

As the company is in the research and development stage, for the years ended
July 31, 2000 and 2001, the company had no revenue.  For the year ended 2000,
the company had expended $49,508 on research and development.  For the year
ended 2001, the company had expended $67,605 on research and development.

Interest expense increased significantly over 2000 primarily due to the
discount on the conversion of debt to common stock.

Overall capital expenditures were $17,621 primarily used for the purchase of
equipment relating to research and development.

$246,000 in debt from the British Columbia Advanced Systems Institute was
extinguished and was converted into 1,034,910 common restricted shares.

The company's total assets were $310,079, a significant increase over 2000.
This increase is primarily attributable to an increase in cash of $183,399, an
increase in investment tax credit refundable of $26,765, and an increase in
property and equipment of $17,621.

The company's operating loss was $821,004, an increase of $657,726 over 2000.
This increase is primarily attributable to increases in advertising and
marketing of $41,601, increasing in consulting of $186,384, increases of R & D
and material spending of $41,790, increases in professional fee spending of
$127,099 and the discount on the conversion of debt to common restricted
stock.

The loss per common share increased from $0.02 in 2000 to $0.09 in 2001.



ITEM 7.    FINANCIAL STATEMENTS


                        MALAHAT ENERGY CORPORATION
                      (A Development Stage Company)
                    CONSOLIDATED FINANCIAL STATEMENTS
                           AS OF JULY 31, 2001

                            Table of Contents
                            -----------------
                                                                Page
                                                                ----
Report of Independent Auditors                                  F-1

Balance Sheet                                                   F-2

Statements of Operations                                        F-3

Statement of Stockholders' (Deficit)                            F-4

Statements of Cash Flows                                        F-5

Notes to Financial Statements                                   F-6 - F-12



<PAGE>F-1

                      REPORT OF INDEPENDENT AUDITORS

                   Shareholders and Board of Directors

                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                     (A Development Stage Company)

We have audited the accompanying consolidated balance sheet of Malahat Energy
Corporation (a development stage company) as of July 31, 2001, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years ended July 31, 2000 and 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.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Malahat Energy Corporation as
of July 31, 2001, and the results of its operations, and its cash flows for
the years ended July 31, 2000 and 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 2 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 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

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

<PAGE>F-2

                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                      (A Development Stage Company)
                       Consolidated Balance Sheet
                            July 31, 2001


ASSETS

Current Assets:
   Cash                                                    $235,229
   Recoverable tax credits                                   57,229
                                                         ----------
      Total Current Assets                                  292,458
                                                         ----------
Property and equipment                                       17,621
                                                         ----------
                                                           $310,079
                                                         ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                                         $44,971
   Due to related parties                                     7,326
                                                         ----------
      Total Current Liabilities                              52,297
                                                         ----------
Stockholders' equity
   Common stock, $.001 par value,
    100,000,000 shares authorized,
    15,500,000 shares issued and outstanding                 15,500
   Additional paid in capital                             1,895,773
   Deficit accumulated during the development stage      (1,657,105)
                                                         ----------
                                                            254,168
Other comprehensive income:
   Currency translation adjustment                            3,614
                                                         ----------
                                                            257,782
                                                         ----------

                                                           $310,079
                                                         ==========

<PAGE>F-3
                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                      (A Development Stage Company)
                  Consolidated Statements of Operations
              For the Years Ended July 31, 2000 and 2001 and
        the Period From Inception (July 26, 1994) to July 31, 2001

<table>
<caption>

                                                <c>                      <c>                   <c>

                                                    Year Ended              Year Ended             Inception to
                                                     July 31,                July 31,                July 31,
                                                       2000                    2001                    2001
                                                    ----------              ----------             ------------

Revenue                                                 $2,296               $      -               $    6,259
                                                    ----------              ----------             ------------
Operating expenses:
  Research and development                              49,508                 67,605                  426,465
  Interest                                                   -                235,645                  235,645
  General and administrative expenses                  115,022                523,754                1,001,254
                                                    ----------              ----------             ------------
                                                       164,530                827,004                1,663,364
                                                    ----------              ----------             ------------
Net (loss)                                            (162,234)              (827,004)              (1,657,105)

Other comprehensive income:
  Currency translation adjustment                       (1,715)                 5,329                    3,614
                                                    ----------              ----------             ------------
Comprehensive income (loss)                          $(163,949)             $(821,675)             $(1,653,491)
                                                    ==========              ==========             ============
Per share information:- basic and fully diluted

Weighted average shares outstanding                  6,676,586              9,295,817                5,195,081
                                                    ==========              ==========             ============
Net (loss) per share                                    $(0.02)                $(0.09)                  $(0.32)
                                                    ==========              ==========             ============
</table>


<PAGE>F-4

                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                      (A Development Stage Company)
              Consolidated Statement of Stockholders' Equity
       For the Period from Inception (July 26, 1994) to July 31, 2001

<table>
<caption>

                                                <c>            <c>             <c>

                                                       Common Stock              Additional
                                                -------------------------          Paid in
                                                   Shares          Amount          Capital
                                                ----------        -------         ---------
Inception                                                -          $   -             $   -

Shares issued for cash at $.00001 per share      2,919,009            142                 -
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance July 31, 1995                            2,919,009            142                 -

Capital contribution                                     -              -            12,811
Shares issued for services and conversion
 of loans at $.17 per share                      1,886,838          1,887           227,709
Shares redeemed                                 (1,184,562)        (1,185)          (26,318
Reclass paid in capital                                  -          2,777            (2,777
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance July 31, 1996                            3,621,286          3,621           211,425

Shares issued for services at $.17 per share     1,588,841          1,589           185,772
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance July 31, 1997                            5,210,127          5,210           397,197

Shares issued for services at $.17 per share       618,995            619            72,293
Shares issued for cash at $.17 per share           383,110            383            51,760
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance at July 31, 1998                         6,212,232          6,212           521,250

Shares issued for services at $.17 per share        72,071             72             7,947
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance at July 31, 1999                         6,284,303          6,284           529,197

Capital contribution                                     -              -             3,399
Shares issued for services at $.17 per share       719,046            719            81,324
Shares issued for interest at $.51 per share        74,454             74            25,415
Currency translation adjustment                          -              -                 -
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance at July 31, 2000                         7,077,803          7,077           639,335

Shares issued for conversion of debt at $.24
  per share                                      1,034,910          1,035           253,060
Discount on conversion of debt to common stock           -              -           207,000
Shares issued for services and interest at $.44
 per share                                         992,453            993           326,336
Shares issued for cash at $.44 per share           969,834            970           277,167
Shares issued pursuant to recapitalization       5,425,000          5,425            (7,125
Shares issued for cash at $1.00 per share          100,000            100           199,900
Shares retired                                    (100,000)          (100)              100
Currency translation adjustment                          -              -                 -
Net (loss) for the year                                  -              -                 -
                                                ----------        -------         ---------
Balance July 31, 2001                           15,500,000        $15,500        $1,895,773
                                                ==========        =======         =========
</table>


                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                      (A Development Stage Company)
              Consolidated Statement of Stockholders' Equity
       For the Period from Inception (July 26, 1994) to July 31, 2001

<table>
<caption>

                                                    <c>                    <c>                  <c>

                                                     Deficit Accumulated      Currency
                                                          During the         Translation
                                                       Development Stage      Adjustment             Total
                                                        --------------         ---------           ---------
Inception                                                    $      -          $       -           $       -

Shares issued for cash at $.00001 per share                         -                  -                 142
Net (loss) for the year                                       (87,983)                 -             (87,983)
                                                        --------------         ---------           ---------
Balance July 31, 1995                                         (87,983)                 -             (87,841)

Capital contribution                                                -                  -              12,811
Shares issued for services and conversion
 of loans at $.17 per share                                         -                  -             229,596
Shares redeemed                                                     -                  -             (27,503)
Reclass paid in capital                                             -                  -                   -
Net (loss) for the year                                      (122,049)                 -            (122,049)
                                                        --------------         ---------           ---------
Balance July 31, 1996                                        (210,032)                 -               5,014

Shares issued for services at $.17 per share                        -                  -             187,361
Net (loss) for the year                                      (213,522)                 -            (213,522)
                                                        --------------         ---------           ---------
Balance July 31, 1997                                        (423,554)                 -             (21,147)

Shares issued for services at $.17 per share                        -                  -              72,912
Shares issued for cash at $.17 per share                            -                  -              52,143
Net (loss) for the year                                      (121,961)                 -            (121,961)
                                                        --------------         ---------           ---------
Balance at July 31, 1998                                     (545,515)                 -             (18,053)

Shares issued for services at $.17 per share                        -                  -               8,019
Net (loss) for the year                                      (122,352)                 -            (122,352)
                                                        --------------         ---------           ---------
Balance at July 31, 1999                                     (667,867)                 -            (132,386)

Capital contribution                                                -                  -               3,399
Shares issued for services at $.17 per share                        -                  -              82,043
Shares issued for interest at $.51 per share                        -                  -              25,489
Currency translation adjustment                                     -             (1,715              (1,715)
Net (loss) for the year                                      (162,234)                 -            (162,234)
                                                        --------------         ---------           ---------
Balance at July 31, 2000                                     (830,101)            (1,715            (185,404)

Shares issued for conversion of debt at $.24
  per share                                                         -                  -             254,095
Discount on conversion of debt to common stock                      -                  -             207,000
Shares issued for services and interest at $.44
 per share                                                          -                  -             327,329
Shares issued for cash at $.44 per share                            -                  -             278,137
Shares issued pursuant to recapitalization                          -                  -              (1,700)
Shares issued for cash at $1.00 per share                           -                  -             200,000
Shares retired                                                      -                  -                   -
Currency translation adjustment                                     -              5,329               5,329
Net (loss) for the year                                      (827,004)                 -            (827,004)
                                                        --------------         ---------           ---------
Balance July 31, 2001                                     $(1,657,105)            $3,614            $257,782
                                                        ==============         =========           =========
</table>

<PAGE>F-5

                       Malahat Energy Corporation
                (Formerly Granada Mineral Products, Inc.)
                      (A Development Stage Company)
                Consolidated Statements of Cash Flows
             For the Years Ended July 31, 2000 and 2001 and
       the Period From Inception (July 24, 1994) to July 31, 2001

<table>
<caption>

                                                                <c>                <c>              <c>

                                                                    Year Ended        Year Ended        Inception to
                                                                     July 31,          July 31,           July 31,
                                                                       2000              2001               2001
                                                                    ----------        ----------        ------------

Cash flows from operating activities:
Net (loss)                                                           $(162,234)        $(827,004)        $(1,657,105)
  Adjustments to reconcile net (loss) to net cash used in
  operating activities:
  Non cash capital contribution                                          3,399                 -              16,210
  Issuance of common shares for non cash items                         107,532           532,629           1,139,749
  Depreciation                                                               -             2,125               2,125
  (Increase) decrease in refundable tax credits                         29,373           (25,526)            (57,229)
  Decrease in inventory                                                  2,473                 -                   -
  (Increase) decrease in other assets                                       70               736                   -
  Increase (decrease) in accounts payable and accrued expenses          (8,779)           33,743              44,971
                                                                    ----------        ----------        ------------
Net cash (used in) operating activities                                (28,166)         (283,297)           (511,279)
                                                                    ----------        ----------        ------------
Cash flows from investing  activities:
  Acquisition of property and equipment                                      -           (19,746)            (19,746)
                                                                    ----------        ----------        ------------
Net cash (used in) investing activities                                      -           (19,746)            (19,746)
                                                                    ----------        ----------        ------------

Cash flows from financing activities:
  Issuance of common shares                                                  -           478,137             530,422
  Shares redeemed                                                            -                 -             (27,503)
  Proceeds from shareholder loans                                            -                 -               7,911
  Proceeds from long-term debt                                          46,125                 -             264,788
                                                                    ----------        ----------        ------------
      Net cash provided by financing activities                         46,125           478,137             775,618
                                                                    ----------        ----------        ------------

Net increase in cash                                                    17,959           175,094             244,593
Effect of exchange rate on changes in cash                                 640             5,329              (9,364)
Beginning - cash balance                                                36,207            54,806                   -
                                                                    ----------        ----------        ------------
Ending - cash balance                                                  $54,806          $235,229            $235,229
                                                                    ==========        ==========        ============
Supplemental cash flow information:
  Cash paid for income taxes                                          $      -         $       -           $       -
  Cash paid for interest                                              $      -         $       -           $       -

Non cash investing and financing activities:
   Conversion of notes payable to common stock                        $      -         $ 254,095           $ 254,095

</table>


<PAGE>F-6

                       NOTES TO FINANCIAL STATEMENTS


Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Company was incorporated on July 26, 1994 under the Canadian Business
Corporations Act of Canada. The Company is engaged in the development of a
BioFuel system to convert organic waste material into an economical,
synthesized fuel gas for energy consumption. The Company is currently in the
development stage and has chosen July 31 as fiscal year end.

On May 8, 2001, the Company acquired all of its issued and outstanding capital
stock of Sarenghetti Enterprises ("SARG") in exchange for 10,075,000 shares of
common stock representing approximately 65% of the issued and outstanding
common stock of Company. This reorganization will be accounted for as though
it were a recapitalization of SARG, and sale by SARG, of 5,425,000 shares of
common stock in exchange for the net assets of the Company. Concurrently with
the reorganization the Company changed its name to Malahat Energy Corporation.
The net liabilities of the Company consisted of $1,700 of accounts payable at
the reorganization date.

The accompanying financial statements include the accounts of SARG for the
year ended July 31, 2000, and the period from August 1, 2000 to May 8, 2001
and the consolidated accounts of Malahat Energy for the period from May 8,
2001 to July 31, 2001. Substantially all of the Company's operations and
assets are located in Canada.

Consolidation Policy

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany transactions and balances have been
eliminated in consolidation.

Revenue Recognition

The Company recognizes 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.

Property, Equipment and Depreciation

Property and equipment are stated at cost.  Depreciation is calculated using
the straight-line and accelerated methods over the estimated useful lives of
the assets.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.

Financial Instruments

Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of July 31,
2001. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, receivables and accounts payable. Fair values were assumed to
approximate carrying values for these financial instruments because they are
short term in nature and their carrying amounts approximate fair values or
they are receivable or payable on demand.

<PAGE>F-7

Long Lived Assets

The carrying value of long lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. To date, no such
impairment has been indicated. Should there be an impairment in the future,
the Company will measure the amount of the impairment based on the
undiscounted expected future cash flows from the impaired assets.

Net Income (Loss) per Common Share

The Company calculates net income (loss) per share as required by SFAS No.
128, "Earnings per Share." Basic earnings (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares and
dilutive common stock equivalents outstanding. Common stock equivalents, if
any, are excluded from the computation if their effect would be anti dilutive.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from those estimates.

Segment Information

The Company follows SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information." Certain information is disclosed, per SFAS No. 131,
based on the way management organizes financial information for making
operating decisions and assessing performance. The Company currently operates
in a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.

Income Taxes

The Company follows Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") for recording the provision for
income taxes. Deferred tax assets and liabilities are computed based upon the
difference between the 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.

Foreign Currency Translation

Local currency is the functional currency for the Company's foreign
subsidiaries. Assets and liabilities are translated using the exchange rates
in effect on the balance sheet date. Income and expenses are translated at the
average exchange rates for the year. Translation adjustments are reported as a
separate component of stockholders' equity.

<PAGE>F-8

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.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees for services
based on the fair value of the equity instruments issued and accounts for
equity instruments issued to other than employees based on the fair value of
the consideration received or the fair value of the equity instruments,
whichever is more reliably measurable.

The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro
forma effects on net income  (loss) had the fair value of the options been
expensed. The Company has elected to continue to apply APB 25 in accounting
for its stock option incentive plans.

<PAGE>F-9

Recent Pronouncements

In December 1999, the Securities and Exchange Commission issued Bulletin No.
101 ("SAB 101").  SAB 101 provides guidance on applying accounting principles
generally accepted in the United States of America to revenue recognition in
financial statements and is effective in the Company's fourth quarter of 2000.
The implementation of SAB 101 did not have an impact on the Company's
operating results.

In July, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets.  SFAS 141 is effective for all
business combinations completed after June 30, 2001.  SFAS 142 is effective
for the year beginning January 1, 2002; however certain provisions of that
Statement apply to goodwill and other intangible assets acquired between July
1, 2001, and the effective date of SFAS 142.  The Company does not believe the
adoption of these standards will have a material impact on the Company's
financial statements.

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset
Retirement Obligations.  This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs.  This Statement
applies to all entities.  It applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition,
construction, development and (or) the normal operation of a long-lived asset,
except for certain obligations of lessees.  This Statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002.
The Company is evaluating the impact of the adoption of this standard and has
not yet determined the effect of adoption on its financial position and
results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.  This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of.  The provisions of the
statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001.  The Company is evaluating the impact of
the adoption of this standard and has not yet determined the effect of
adoption on its financial position and results of operations.

<PAGE>F-10

Note 2. BASIS OF REPORTING

The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities
in the normal course of business.

The Company has experienced a significant loss from operations as a result of
its investment necessary to achieve its operating plan, which is long-range in
nature. For the years ended July 31, 2000 and 2001 and the period from
inception (July 22, 1994) to July 31, 2001, the Company incurred net losses of
$162,234, $827,004 and $1,657,105.

The Company's ability to continue as a going concern is contingent upon its
ability to attain profitable operations, secure financing, lease more of its
products and to continue to receive government funding. In addition, the
Company's ability to continue as a going concern must be considered in light
of the problems, expenses and complications frequently encountered by entrance
into established markets and the competitive environment in which the Company
operates.

The Company 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 pay its
obligations.

The 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.

<PAGE>F-11

Note 3. PROPERY AND EQUIPMENT

Property and equipment consists of the following:

        Furniture and equipment         $     19,746
        Less: accumulated depreciation         2,125
                                            --------
                                        $     17,621
                                            ========

Depreciation expense charged to operations was $2,125 in 2001.


Note 4. LONG TERM DEBT

The British Columbia Advanced Systems Institute ("ASI") had advanced the
Company $254,095 during previous years. During the year ended July 31, 2001
this debt was converted into 1,034,910 shares of the Company's common stock.
In addition, the Company issued ASI 74,454 common shares valued at $25,489 as
interest on the loan during 2000.

Note 5. RELATED PARTIES

The amounts due to related parties are due on demand, are unsecured and have
no set interest rate.

Note 6. STOCKHOLDERS' EQUITY

At inception, the Company issued 2,919,009 shares of common stock for cash
aggregating $142.

During 1996, the Company issued 1,886,838 shares of common stock for the
conversion of loans and services valued at $229,596. The per share value
assigned to the shares corresponds to recent per share cash purchases of
common shares. In addition, 1,184,562 shares were redeemed for $27,503.

During 1997 the Company issued 1,588,841 shares of common stock for services
valued at $187,361. The per share value assigned to the shares corresponds to
recent per share cash purchases of common shares.

During 1998, the Company issued 618,995 shares of common stock for services
valued at $72,912. The per share value assigned to the shares corresponds to
recent per share cash purchases of common shares. In addition, 383,110 common
shares were sold for cash aggregating $52,143.

During 1999 the Company issued 72,071 shares of common stock for services
valued at $8,019. The per share value assigned to the shares corresponds to
recent per share cash purchases of common shares.

During 2000 the Company issued 719,046 shares of common stock for services
valued at $82,043. The per share value assigned to the shares corresponds to
recent per share cash purchases of common shares.

During 2000 the Company issued 74,454 shares of common stock as interest on a
loan (see Note 3) valued at $25,489.

During the year ended July 31, 2001 debt aggregating $254,095 was converted
into 1,034,910 shares of the Company's common stock. These shares were issued
at a discount of $207,000. This amount has been charged to interest expense
and recorded as a capital contribution.

During 2001 the Company issued 992,453 shares of common stock for services and
interest valued at $327,329. The per share value assigned to the shares
corresponds to recent per share cash purchases of common shares. In addition,
the Company issued 969,834 shares of common stock for cash aggregating
$278,137 and 100,000 shares of common stock for cash aggregating $200,000.

<PAGE>F-12

Note 7. INCOME TAXES

The Company records income taxes based on the statutes enacted in Canada. It
accounts for income taxes under Statement of Financial Accounting Standards
No. 109 (FAS 109), "Accounting for Income Taxes", which requires use of the
liability method. FAS 109 provides that deferred tax assets and liabilities
are recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences. Deferred tax assets and liabilities at
the end of each period are determined using the currently enacted tax rates
applied to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled or realized.

No provision for income taxes has been recorded due to the operating losses
incurred by the Company.

As of July 31, 2001, the Company has non capital losses aggregating $1,600,000
which expire through 2008, and deferred research and development costs
aggregating $460,000 which will be available to offset future taxable income.
The deferred tax asset relating to these items has been fully reserved at July
31, 2001.



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

Subsequent to the end of the Company's fiscal year, as of September 10, 2001,
the Company changed accountants from Andersen, Andersen and Strong, L.L.C. to
Stark Winter Schenkein & Co., LLP (formerly Stock Tinter & Associates, LLC.)

The Company decided not to reappoint Andersen, Andersen & Strong, L.L.C. as
its independent accountant.  The financial statements reported on by Andersen,
Andersen & Strong, L.L.C. were not subject to an adverse or qualified opinion,
or a disclaimer of opinion and were not modified as to uncertainty, audit
scope or accounting principles during the past two fiscal years, and the
interim period through September 10, 2001.  There were no disagreements
related to accounting principles or practices, financial statement disclosure,
or auditing scope or procedure during the past two fiscal years and the
interim period through September 10, 2001.

The decision to change accountants was approved by the Company's Board of
Directors.

As of September 10, 2001, the Company engaged Stark Winter Schenkein & Co.,
LLP, as its independent accountants.  Except for the audited financial
statements for the private company, Malahat Systems Corporation from inception
to July 31, 2000 and the unaudited financials ending March 31, 2001, the
Company did not consult with Stark Winter Schenkein & Co., LLP, its new
independent accountants, regarding any matter prior to its engagement.

On September 18, 2001, the Company filed a current report on Form 8-K
announcing, among other things, the change of accountants.  In connection
therewith, the Company provided to Andersen, Andersen & Strong, L.L.C., its
former accountants, a copy of the disclosures contained therein (and which are
set forth above in sum and substance) and requested and received a letter from
Andersen, Andersen & Strong, L.L.C., addressed to the Commission, confirming
the statements made by the Company, a copy of which letter was filed with the
Form 8-K referred to above.



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, 2001.

     NAME               AGE       POSITION/OFFICE HELD
-------------------     ---       ----------------------------------
Ben Dulley              57        President and Director

Bruce Ramsay            49        Chief Financial Officer, Secretary
                                   and a Director

Jake Neufeld            51        Chief Operating Officer

Kimberlee S. Bogen      46        Assistant Secretary and a Director


Business Experience

Ben Dulley has served as President of the Company since May 2001.  Prior
thereto, from December 1999 through May 2001, Mr. Dulley was president of
PreferSoft, Inc. (formerly IPS), a private company in the business of
developing and marketing web base e-commerce software. From January 1999
through October 1999, Mr. Dulley served as CEO and president of Beta Systems
Canada, a subsidiary of Beta Systems Software AG, a German public company
(Frankfurt BSS) in the business of providing management software for large
data centers.  From January 1998 through December 1998, he served as CEO and
president of HARBOR Systems Management Ltd., a private software company that
provided automated backup and recovery for large computer installations. From
1995 through Decenmber 1997, Mr. Dulley was vice president of Interlink
Computer Sciences Inc., a Nasdaq listed company under the trading symbol INLK,
in the business of developing and marketing software products for large
mainframe based computer networks.  Mr. Dulley also serves as a director on
the board of directors for Peterborough Capital Corp., a public capital pool
corporation (CDNX PEC), Replicon Inc. a private software company providing web
based time sheets and Hatsize Learning, a private company providing automated
technical training for computer system administrators.

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., a 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. Mr. Neufeld is a founding principal of Malahat Energy Corporation 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.

Kimberlee S. Bogen has served as Assistant Secretary and a director of the
Company since May 2001.  Since February 2001, Ms. Bogen has served as General
Counsel to BackWeb Technologies Ltd., a public company, in the business of
developing and marketing enterprise software solutions.  From 1995 to the
present, Ms. Bogen has also served as Managing Director of Bogen Associates
International, a business development and legal advisory firm for startup and
development stage companies with a focus on Internet-related and digital media
companies.

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 or former director or
executive officer of the Company: (1) Any bankruptcy petition filed by or
against any business of 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, suspended or vacated.

Section 16(A) Beneficial Ownership Reporting 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, 2001, 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 31,
2001, all Section 16(a) filing requirements applicable to its reporting
persons were met, with the following exceptions: Messrs Dulley, Neufeld,
Ramsay and Ms. Bogen filed Form 3's late.

ITEM 10.   EXECUTIVE COMPENSATION

The Company paid the following compensation to the named executive officers
for the fiscal year ended July 31, 2001:

                        SUMMARY COMPENSATION TABLE

                                                       ANNUAL COMPENSATION
                                                       -------------------
NAME AND POSITION                            YEAR       SALARY      BONUS
-----------------                            ----       ------     -------
Ben Dulley                                   2001        None       None
President

Bruce Ramsay                                 2001       $37,500     None
Chief Financial Officer and Secretary

Jake Neufeld                                 2001       $41,000     None
Chief Operating Officer


Each of the above executives officers were appointed to their respective
positions in May 2001, as a result of the closing of the Stock Exchange
Agreement by which the Company acquired the assets, liabilities and
obligations of a private Nevada entity known as Sarenghetti Enterprises.  This
transaction is described above in more detail in Part I, Item I and in Part
II, Item 6.

Neither of the above named executive officers 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.

The shares of Common Stock in the Company, set forth below in Item 11, as
being held by Messrs. Dulley, Ramsay and Neufeld, were received by them as a
result of the closing of the Stock Exchange Agreement and the conversion of
shares in SARG held by them into shares of Common Stock of the Company, as
described above.

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

The Company is in the process of developing a stock option plan that will be
reviewed and acted upon by its board of directors in the foreseeable future.
The Company expects that such plan will be presented at the next annual
shareholders meeting for shareholder approval.

There are currently no employment agreements with any of the Company's
executive officers.

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

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership
of its common stock as of July 31, 2001 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 15,500,000 shares of its common stock issued and outstanding as of
July 31, 2001. 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                   OF COMMON STOCK          OF COMMON STOCK
-------------------                   --------------------     ---------------
Ben Dulley
C/o Malahat Energy Corporation            521,178 shares             3.3%
700 - 101 Convention Centre Drive
Las Vegas, NV 89109

Bruce Ramsay (1)                          888,335 shares             5.69%
C/o Malahat Energy Corporation
700 - 101 Convention Centre Drive
Las Vegas, NV 89109

Jake Neufeld (2)                        3,105,664 shares            20.04%
C/o Malahat Energy Corporation
700 - 101 Convention Centre Drive
Las Vegas, NV 89109

Kimberlee S. Bogen                        100,000 shares             0.6%
C/o Malahat Energy Corporation
700 - 101 Convention Centre Drive
Las Vegas, NV 89109

George Neufeld (3)                      1,157,629 shares             7.47%
C/o Malahat Energy Corporation
700 - 101 Convention Centre Drive
Las Vegas, NV 89109

B.C. Advanced Systems Institute         1,034,910 shares             6.69%
450 - 1122 Mainland Street,
Vancouver, B.C. V6B 5L1

All officers and directors              4,615,177 shares             29.7%
as a group (4 persons)

(1) Includes 297,816 shares of Common Stock held by Triple F Ventures Ltd., a
firm of which Mr. Ramsay serves as a director, and 14,891 shares of Common
Stock held in the name of Mr. Ramsay's wife, Susan Ramsay.

(2) Includes 340,939 shares of Common Stock held by J. Neufeld Development
Ltd., a development firm of which Mr. Neufeld is the CEO, and 148,908 shares
of Common Stock held in the name of Mr. Neufeld's wife, Linda Neufeld.

(3) Includes 303,056 shares of Common Stock held by 11335276 Ontario Inc., a
development firm of which Mr. George Neufeld is the CEO.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Stock Exchange Agreement.  As of September 10, 2001, the Company completed the
merger reported earlier under its former name, Granada Mineral Products, Inc.,
pursuant to a Stock Exchange Agreement (the "Stock Exchange Agreement"), dated
May 8, 2001, entered into with Sarenghetti Enterprises, a Nevada
corporation("SARG"), which provided for the merger of SARG with and into the
Company which is the surviving entity, pursuant to a tax-free reorganization
in accordance with Section 354 and 368 of the Internal Revenue Code of 1986,
as amended.

Upon the closing of the Stock Exchange Agreement, which occurred on or about
May 10, 2001, and the completion of the transactions contemplated therein,
which occurred on or about September 10, 2001, there was a change in control
of the Company.

Pursuant to the Stock Exchange Agreement, at the closing, SARG exchanged
6,765,929 shares of its common stock, par value $0.001 per share, representing
all of its issued and outstanding stock for 10,075,000 shares of common stock,
par value $0.001 per share, of the Company. As a result, upon the completion
of the closing and consummation of the merger as contemplated, the holders of
shares of SARG's common stock held 65% of the Registrant's issued and
outstanding common stock.

Pursuant to the terms of the Stock Exchange Agreement, the Company changed its
name to "Malahat Energy Corporation."

In addition, pursuant to the terms of the Stock Exchange Agreement, upon the
Closing, Ben Dulley was appointed as a director and President, and Bruce
Ramsay as a director, Chief Financial Officer and Secretary of the Company and
Kimberlee Bogen as a director and Assistant Secretary.


ITEM 13.        FINANCIAL STATEMENTS, EXHIBITS AND FORM 8-K FILINGS

(a)    The following documents are filed as a part of this Annual Report on
       Form 10-KSB at item 7 on pages F-1 through F-12:

       Financial Statements
       Auditors Report to the Shareholders
       Consolidated Balance Sheets
       Consolidated Statement of Stockholders' Equity
       Consolidated Statements of Cash Flows
       Consolidated Statements of Operations
       Notes to Consolidated Financial Statements

(b)    Financial Statement Schedule
       Auditors Report from inception to December 31, 1999


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

EXHIBIT INDEX:

EXHIBITS

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



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 the 13th day of
November, 2001.

                                                    MALAHAT ENERGY CORPORATION

By: /s/ BEN DULLEY
        Ben Dulley
        President


Power Of Attorney

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Ben Dulley, his 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/ BEN DULLEY              President and Director         November 13, 2001
     Ben Dulley

 /s/ BRUCE RAMSAY            Chief Financial Officer,
     Bruce Ramsay             Secretary and a Director      November 13, 2001


 /s/ KIMBERLEE S. BOGEN      Assistant Secretary and        November 13, 2001
     Kimberlee S. Bogen       Director