Empower Clinics Inc. - Annual Report: 2004 (Form 10-K)

FORWARD LOOKING STATEMENTS

Certain information in this report including statements made in "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Description of Business" and elsewhere contain "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements", including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "estimates," "potential," or "continue," or the negative thereof or other comparable terminology. Although AMG Oil believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in these forward-looking statements.

Forward-looking statements include but are not limited to:

• AMG Oil's ability to implement successfully its operating strategy as described in its business plan;

• Future financial performance as estimated in AMG Oil's financial projections;

• AMG Oil's forecasts of market demand; and,

• Highly competitive market conditions.

This list of categories of forward-looking statements should not be construed as exhaustive. AMG Oil will not update or revise any forward-looking statements.

Certain factors that could cause AMG Oil's forward-looking statements not to be correct and cause AMG Oil's actual results to materially vary from projections made in forward-looking statements as further described under the caption in Risk Factors contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this report.

ITEM 1. DESCRIPTION OF BUSINESS.

History

AMG Oil Ltd. (the "Registrant"), a company engaged in the acquisition and, formerly, exploration of mineralized properties, was incorporated on February 20, 1997 under the name "Trans New Zealand Oil Company" by filing its Articles of Incorporation with the Secretary of State of Nevada. The Registrant changed its name to AMG Oil Ltd. on July 27, 1998. The Registrant's fiscal year end is September 30.

The Registrant's operations are conducted through its corporate office located at #1407-1050 Burrard Street, Vancouver, British Columbia, Canada V6Z 2S3. In previous years, the Company conducted its exploration activities in New Zealand and focused on Petroleum Exploration Permit 38256 ("PEP 38256" or the "Permit"), further described below. The Registrant withdrew from the permit and assigned its interest to the other participants in the permit during the 2003 fiscal year. The Company had intended to focus to complete the acquisition of, and then develop, a business related to Touchpoint Metrics, a research consultancy asset owned by private California based company, The Innes Group, Inc., however on April 21, 2004 the Company gave notice to The Innes Group, Inc. that it did not want to proceed with the acquisition of Touchpoint Metrics. The Company is now focusing on acquiring suitable oil and gas properties.

During the 2004 and 2003 fiscal years the Registrant did not issue any securities. During the 2003 fiscal year, the Registrant repurchased, for cancellation and return to treasury, 3,000,000 of the Company's common shares for $0.01 per share from International Resource Management Corp., a private company owned by Mr. Alex Guidi.

Business

The Registrant is a Vancouver, British Columbia, Canadian based company focused on acquiring suitable oil and gas properties for exploration and development.

The Registrant does not receive any revenue from its discontinued oil & gas operations in New Zealand and is in a start-up phase with no significant assets, tangible or intangible. The Registrant has no history of earnings and there is no assurance that the business of the Registrant will be profitable. As at the end of the Registrant's fiscal year dated September 30, 2004, the Registrant has an accumulated deficit of $2,806,964 and the Registrant is expected to continue incurring operating losses and accumulating deficits in future periods. The Registrant has no significant future obligations.

Insurance

Currently, we do not have any insurance coverage.

Government Regulation

There is no governmental regulation which we are aware of or that would affect our Company.

Employees and Consultants

The Registrant has no employees, with the exception of our Corporate Officer, Mr. Michael Hart, and has not retained the services of any consultants.

The Registrant is in the start-up stage and none of the Registrant's executive officers have employment agreements with the Registrant

The Registrant receives corporate services from DLJ Management Corp., a subsidiary of Trans-Orient Petroleum Corp, based on an oral agreement. The services consist of shareholder relations and communications, administrative and accounting support. DLJ Management Corp. provides their services on an hourly basis. DLJ Management Corp. bills monthly for its services on a cost recovery basis, billing the Registrant and other associated companies for costs already incurred with no mark-up or other such charges, for items such as labor and rent, office costs, and employee benefits.

Risks associated with AMG Oil:

1. The Registrant may be unable to continue as a going concern. The Registrant's auditors have expressed considerable doubt as to the Registrant's ability to continue as a going concern. The Registrant will be unable to continue as a going concern if it is unable to earn sufficient revenues from its operations or to raise additional capital through debt or equity financings to meet our working capital and joint venture capital contribution obligations. At December 19, 2004, we had working capital of approximately $12,000, which is not sufficient for the Registrant to maintain its operations. Currently, the Registrant's management has determined that if the Registrant does not raise the capital required to complete an acquisition of an oil and gas interest and maintain its monthly overhead that allows the Registrant to continue operating, it will be unable to continue as a going concern and you may lose your entire investment.

2. We have historically incurred losses and these losses are expected to continue in the future. We have never been profitable. At September 30, 2004, we had an accumulated deficit of $2,806,964. In order to become profitable, we will need to generate significant revenues through an acquisition of an oil and gas interest that leads to a commercial discovery of hydrocarbons to offset our cost of revenues and general and administrative expenses. We may not achieve or sustain our revenue or profit objectives and our losses may increase in the future.

3. Our operating results are difficult to predict and may fluctuate significantly from quarter to quarter due to a number of factors, many of which are outside our control. These factors include, but are not limited to:

4. An evaluation of our business is difficult because we are in the start-up phase of our current business after discontinuing our oil and gas operations in New Zealand and declining to proceed with the acquisition of Touchpoint Metrics. We face a number of risks encountered by companies in our sector, including:

5. If we do not attain revenue from the sale of hydrocarbons, our business will not be successful. Our success depends on our ability to attain revenue from the sale of hydrocarbons and we currently do not have an oil and gas interest.

6. We have limited resources and may be unable to manage any growth in operations.

7. We may be subject to litigation that could result in significant costs to us. We may be subject to litigation in the ordinary course of business relating to any number or type of claims. As a result, we could be required to pay substantial amounts of money for damages, court costs and attorney's fees.

8. The reporting of inaccurate relevant information could cause us be exposed to legal liability.

9. Fluctuations in the value of foreign currencies could result in increased product costs and operating expenses. We may have acquisition or working commitments that are located outside Canada and the U.S. Our functional currency is the U.S. dollar and we report our results in U.S. dollars. Fluctuations in the value of the U.S. dollar are difficult to predict and can cause us to incur currency exchange costs. We cannot predict the effect of exchange rate fluctuations on our future operating results.

10. A limited number of stockholders collectively continue to own a majority of our stock and may act, or prevent certain types of corporate actions, to the detriment of other stockholders. Our principal shareholders that own greater than five percent of our stock own a majority of our outstanding common stock. Accordingly, these stockholders, working alone or together, may exercise significant influence over all matters requiring stockholder approval, including the election of a majority of the directors and the determination of significant corporate actions.

11. The market for our common stock is limited. There is currently only a limited trading market for our common stock. Our common stock trades on the OTC Bulletin Board under the symbol "AMGO" which is a limited market in comparison to the NASDAQ National Market, the American Stock Exchange and other national securities exchanges.

12. Penny stock rules limit the liquidity of our common stock. Our common stock may now and in the future be subject to the penny stock rules under the Securities Exchange Act of 1934, as amended (referred to herein as the Exchange Act). These rules regulate broker-dealer practices for transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These additional penny stock disclosure requirements are burdensome and may reduce the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their securities.

13. We have never paid cash dividends on our common stock. We have never paid dividends on our common stock and do not presently intend to pay cash dividends on our common stock. Any future decisions as to the payment of dividends will be at the discretion of our Board of Directors, subject to applicable law.

14. An investment in our company may be diluted. We may issue a substantial number of shares of our common stock without investor approval and we may consolidate the current common stock outstanding. Any such issuance or consolidation of our securities in the future could reduce an investor's ownership percentage and voting rights in our company and further dilute the value of your investment.

15. Due to the nature of our business, the market price of our common stock may rise and fall in response to:

ITEM 2. DESCRIPTION OF PROPERTY.

The Registrant's administrative offices are located at 1407-1050 Burrard Street, Vancouver, British Columbia, Canada, V6Z 2S3 and our telephone number is (604) 682-6496. The Registrant utilizes the office space, on a rent-free basis, per a verbal agreement, from affiliated company Trans-Orient Petroleum Ltd. and from TAG Oil Ltd.

ITEM 3. LEGAL PROCEEDINGS.

There are no material legal proceedings to which the Registrant is subject to or which are anticipated or threatened.

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

There were no matters submitted to a vote of the Registrant's shareholders in the fourth quarter of the Registrant's fiscal year.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Registrant's shares are traded on the Bulletin Board operated by the National Association of Securities Dealers, Inc. under the trading symbol "AMGO".

Summary trading by quarter, as found at www.yahoo.com, for the 2004 and 2003 fiscal years are as follows:

Note:

(1) These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

At December 17, 2004 there were 16,600,000 shares of Common Stock of the Registrant issued and outstanding.

As of December 17, 2004 there were 59 holders of record and the closing share price on that date was $0.03.

Dividend Policy

No cash dividends have been declared by the Registrant nor are any intended to be declared. The Registrant is not subject to any legal restrictions respecting the payment of dividends, except that they may not be paid to render the Registrant insolvent. Dividend policy will be based on the Registrant's cash resources and needs and it is anticipated that all available cash will be needed for property acquisition, exploration and development for the foreseeable future. In addition dividend policy under Nevada law is limited in that dividends can't be paid if, after giving effect to the dividend (i) the Company would not be able to pay its debts as they become due in the usual course of business, or (ii) the Company's total assets would be less than the sum of its total liabilities.

Securities authorized for issuance under equity compensation plans

The Registrant, during the 2000 fiscal year, established a non-qualified stock option plan (the "Plan") for directors, officers, employees and consultants who provide services to the Registrant. Under the terms of the plan, 3,000,000 shares will be reserved for issuance under the plan. Any options issued under the plan will expire on the earlier of 10 years from the establishment of the Plan or the expiry date assigned to the individual option grant. As of September 30, 2004, 232,500 options have been granted but had not been exercised. All options that have been granted by the Registrant are exercisable.

On June 20, 2000 the Registrant's board of directors granted options to acquire up to 217,500 shares of Common Stock at an exercise price of $1.50 per share to directors, officers and individuals providing services to the Registrant and the PEP 38256 joint venture. Additionally, on October 31, 2000 the Registrant's Board of Directors granted options to acquire up to 15,000 shares of Common Stock at an exercise price of $2.00 per share to a director. The options granted are subject to a vesting schedule whereby 1/6 of the total granted vests every six months from the date of granting. Additionally the options carry restrictions on resale whereby a maximum of 25% of the amount vested can be resold in any 30-day period. The directors and officers who were granted options are the following:

Section 15(g) of the Securities Exchange Act of 1934

Our company's shares are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale.

Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as "bid" and "offer" quotes, a dealers "spread" and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the NASD's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

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

Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. At each balance sheet date, management evaluates its estimates, including, but not limited to, those related to accounts receivable, inventories, and deferred revenue. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and results of operations are discussed below.

Amortization of Property and Equipment

Property and equipment are recorded at cost and amortized over their useful lives as follows:

Furniture and Office Equipment         20% to 30% Declining Balance Method
Leasehold Improvements                  20% Declining Balance Method

Foreign Currency Transactions/Balances

The Company's functional currency of the Company's foreign subsidiaries, is the United States dollar.

Revenues and expenses arising from foreign currency transactions are translated into United States dollars at the average rate for the year. Monetary assets and liabilities are translated into United States dollars at the rates prevailing at the balance sheet date. Other assets and liabilities are translated into United States dollars at the rates prevailing on the transaction dates. Exchange gains and losses are recorded as income or expense in the year in which they occur.

Stock-Based Compensation

The Company applies Accounting Principles Board Opinion No. 25: Accounting for Stock Issued to Employees ("APB 25") to account for all compensatory stock options granted. Further, Statement of Financial Accounting Standards No. 123: Accounting for Stock-Based Compensation ("SFAS 123") requires additional disclosure to reflect the results of the Company had it elected to follow SFAS 123.

There were no changes in the Company's stock options for the fiscal years ended September 30, 2004 and 2003. The weighted average exercise price to purchase 232,500 common shares through options is $1.53 per share.

The following stock options are outstanding at September 30, 2004:

Income Tax

Statement of Financial Accounting Standards No. 109: Accounting for Income Taxes ("SFAS 109") requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. The adoption of SFAS 109 had no material effect on the Company's financial statements. Pursuant to SFAS 109, the potential benefit of net operating loss carry forwards has not been recognized in the financial statements since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The components of the net deferred tax asset, the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are as follows:

A valuation allowance has been established, and accordingly, no benefit has been recognized for the Company's deferred tax assets. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a full valuation allowance has been recorded. These factors include the Company's current history of net losses and the expected near-term future losses. The Company will continue to assess the realizability of the deferred tax assets based on actual and forecasted operating results.

Recent Accounting Pronouncements

In a December 11, 2003 speech, the American Institute of Certified Public Accountants and Securities and Exchange Commission (the "SEC") expressed an opinion that rate-lock commitments represent written put options, and therefore are valued as liabilities. The SEC expressed that it expects registrants to disclose the effect on the financial statements of recognizing the rate-lock commitments as written put options for quarters commencing after March 15, 2004. Additionally, the SEC recently issued Staff Accounting Bulletin No. 105 ("SAB 105") "Application of Accounting Principles to Loan Commitments". SAB 105 clarifies the SEC's position that the inclusion of cash flows from servicing or ancillary income in the determination of the fair value of interest rate lock commitments is not appropriate. The Company has determined that the adoption of SAB No. 105 does not have an impact on its results of operations or financial position.

In December 2003, the United States Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB 104), which supersedes SAB 101, "Revenue Recognition in Financial Statements." The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, which was superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on our Company's financial statements.

In December 2003, FASB Issued revised FASB Interpretation No. 46 ("FIN 46(R)"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No 51". FIN 46(R) requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46(R) is effective for all new variable interest entities created or acquired after December 31, 2003.

In December 2003, FASB revised Statement of Financial Accounting Standards No. 132 ("SFAS 132(R)"), "Employers Disclosures About Pensions And Other Post-retirement Benefits". SFAS 132(R) revises employers' disclosures about pension plans and other post-retirement benefit plans. SFAS 132(R) does not change the measurement or recognition of those plans required by FASB Statements No. 87, "Employers' Accounting for Pensions", No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" or No. 106, "Employers Accounting For Post-Retirement Benefits Other Than Pensions". SFAS 132 (R) retains the disclosure requirements contained in FASB Statement No. 132, "Employers Disclosures about Pensions and other Post-retirement Benefits", which it replaces. It requires additional disclosures to those in the original SFAS 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit post-retirement plans. The required information should be provided separately for pension plans and for other post-retirement benefit plans.

Overview

The Registrant no longer has any oil or gas properties as the Registrant withdrew from it sole oil and gas property on May 2, 2003. The Registrant intended to acquire Touchpoint Metrics during the 2003 and 2004 fiscal years until April 21, 2004 when the Registrant informed The Innes Group, Inc. that it did not wish to proceed with the acquisition of Touchpoint Metrics so that the Registrant could re-focus on acquiring suitable oil and gas interests to explore for commercial hydrocarbons.

The Registrant, during the 2003 fiscal year, entered into a loan agreement with The Innes Group, Inc.("Innes"), a California based private company that currently owns Touchpoint Metrics on March 7, 2003, whereby the Registrant loaned Innes $30,000. The loan agreement stated that the loan (the "advance") was an initial payment against an asset-purchase transaction between the Registrant and Innes. The assets included the name, business model, marketing material, client lists, website and other proprietary and non proprietary processes, procedures and any and all such similar items as are relevant to the business. The advance was to be converted to equity in the Assets at a negotiated day and rate. The completion date had been extended to August 6, 2004. If an asset-purchase agreement was not completed by August 6, 2004, the advance was to be converted to a promissory note. The promissory note was to bear interest at a rate of 5% per year starting August 6, 2004, payable monthly over three years until the principal is paid in full, with payments starting on September 6, 2004. As a result of the Company not wanting to proceed with the acquisition and because the note, according to the terms in the agreement, is in default the Company has written-off the loan because the payments according to the agreement are unlikely to be received.

The Registrant's required future expenditures for the period up to September 30, 2005 are approximately $30,000 and relate to accounting, legal and administrative expenses.

However, the Registrant does not have sufficient working capital required for the September 2005 fiscal year. The Registrant currently does not have sufficient capital to maintain its required overhead, has no revenues and will rely principally on the issuance of Common Stock to raise funds to finance the expenditures that are expected to be incurred during the 2005 fiscal year. The Registrant has relied principally on the issuance of Common Stock in private placements to individuals known to officers and directors of the Registrant, Trans-Orient Petroleum Ltd. and Austral Pacific Energy Ltd., companies that are related through common controlling shareholders, to raise funds to support the business. There can be no assurance that the Registrant will be successful in raising additional funds through the issuance of additional equity nor that the parties that provided funds in the past will continue to do so.

The Registrant does not expect any significant purchases of plant & equipment or employees.

Results of Operations

During the year ended September 30, 2004, the Registrant discontinued our intention to acquire the only significant asset, besides cash, being the loan transaction entered into by the Company to acquire Touchpoint Metrics ("Touchpoint") of which we had given a convertible loan of $30,000 to The Innes Goup, Inc., the owner of Touchpoint Metrics. This loan agreement was entered into by both parties with the intention that the loan was to be converted to an initial payment for acquisition of Touchpoint, once an asset-purchase transaction between the Company and The Innes Group, Inc. could be finalized. As a result of the Company not wanting to proceed with the acquisition and because the note, according to the terms in the agreement, is in default the Company has written-off the loan because the payments according to the agreement are unlikely to be received.

We did not generate any revenues from operations during the year ended September 30, 2004, or during the comparable period. Our sole revenue during the period was $379 in interest income earned on surplus cash balances, compared to $1,291 for the year ended September 30, 2003.

After the Company withdrew from its only oil and gas interest during the 2003 fiscal year and upon liquidating its subsidiaries during the same period, the company has reallocated all relevant costs associated with its oil and gas interest totaling $1,787,410 to Loss from Discontinued Operations.

The results of discontinued operations are summarized as follows:

Our company posted a loss of $64,089 for the twelve months ending September 30, 2004. The principal component of the loss is the $30,000 write-off of our loan receivable to The Innes Group, Inc.

Our total general and administrative expenses for the twelve months ended September 30, 2004 were $34,468 compared to $73,493 for the comparable period last year. $Nil of the total expenses was amortization of deferred compensation related to our stock option plan versus $9,608 in the comparable period. Salaries were $12,421 compared to $15,560 for the twelve months ended September 30, 2003 and professional fees were $13,431, versus $26,869 last year. The balance of our general and administrative costs for the twelve months ended September 30, 2004 consisted of office expenses of $1,634, rent expense of $184, telephone expenses of $1,936, filing fees of $3,222, a foreign exchange gain of $134 and other expenses such as database management, travel and related costs and amortization of capital assets totaling $1,774.

During the twelve months ended September 30, 2004 the Company wrote-off its loan receivable of $30,000 that was made to The Innes Group, Inc. during the 2003 fiscal year. During the 2003 fiscal year the Company wrote-off its oil and gas interest amounting to $286,331 and withdrew from the interest. The Company did not make any capital expenditures during the 2004 or 2003 fiscal years.

As a result of these transactions noted above, we incurred a loss of $64,089 or $0.00 per share for the twelve months ended September 30, 2004, compared to a loss of $341,813 or $0.02 per share for the same period last year.

Liquidity and Capital Resources

During the twelve months ended September 30, 2004 there were no financing activities undertaken by the Company. During the 2003 fiscal year, the Company's financing activities consisted of the Company re-purchasing, for cancellation and return to treasury, 3,000,000 common shares of the Company at a price of $0.01 per share.

The Company did not have any investing activities during the twelve months ended September 30, 2004 and the sole investing activity for the 2003 fiscal year consisted of a $30,000 loan to The Innes Group, Inc. This loan was written-off during the 2004 fiscal year.

At September 30, 2004 our current assets totaled $22,407 compared to $56,740 at the beginning of the fiscal year. Our current assets for both periods consisted entirely of cash. Our current liabilities at September 30, 2004 were $6,138 (2003: $6,947), of which $1,138 (2003: $947) was due to related parties for administrative costs. Cash on hand is currently our only source of liquidity. We do not have any lending arrangements in place with banking or financial institutions and we do not anticipate that we will be able to secure these funding arrangements in the near future.

The Registrant proposes to raise additional financing through the sale of equity securities during the next fiscal year, although there can be no assurance that such funding will be available. In the event that future equity financing cannot be raised or negotiations for joint venture funding are not successful, the Registrant's activities may be curtailed and this may adversely affect the Registrant's ability to carry out any acquisitions of suitable oil and gas operations.

We believe our existing cash balances are sufficient to carry out our normal operations for the next twelve months. However additional cash is required for the acquisition of suitable oil and gas interests during this period and to be able to meet the permits working program costs. To the extent that we require additional funds to support our operations or the expansion of our business, we may sell additional equity or issue debt. Any sale of additional equity securities will result in dilution to our stockholders. There can be no assurance that additional financing, if required, will be available to our company or on acceptable terms.

ITEM 7. FINANCIAL STATEMENTS.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of AMG Oil Ltd. (A Development Stage Enterprise)

We have audited the accompanying balance sheets of AMG Oil Ltd. (a development stage enterprise) as at September 30, 2004 and 2003 and the related statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended September 30, 2004 and the statements of operations cash flows for the period from inception on February 20, 1997 to September 30, 2004. 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 of the Public Company Accounting Oversight Board in the United States of America. Those standards require that we plan and perform the audit 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 made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, such financial statements present fairly, in all material respects, the financial position of AMG Oil Ltd. (a development stage enterprise) as at September 30, 2004 and 2003 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2004 and for the period from inception on February 20, 1997 to September 30, 2004 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage enterprise and has yet to establish any revenues from business operations. As a result, there is substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might result from the outcome of this uncertainty.

CERTIFIED PUBLIC ACCOUNTANTS

Bellingham, Washington
November 19, 2004

NOTE 1 - NATURE OF OPERATIONS AND CONTINGENCIES

The Company's business focus is the acquisition of suitable oil and gas properties to explore for oil and gas. The operations of the Company's subsidiary for the exploration of New Zealand oil and gas properties was discontinued during the 2003 fiscal year based on managements decision that the subsidiary had limited prospects, at that time, for developing profitable operations. The Company's business focus is the acquisition of suitable oil and gas properties to explore.

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States on a going concern basis, which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. They do not include any adjustments to the recoverability and classification of recorded assets amounts and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has incurred recurring operating losses and has an accumulated deficit of $2,806,964 and Stockholders' Equity of $28,911 at September 30, 2004. These factors, among others, raise substantial doubt about the Company's ability to be able to continue as a going concern. The future of the Company and the realization of its asset values will depend upon the Company's ability to obtain adequate financing and continuing support from shareholders and creditors to attain profitable operations.

The Company is a development stage enterprise and is required to identify that these financial statements are those of a development stage enterprise in accordance with paragraph 12 of Statement of Financial Accounting Standards No. 7 and is focusing on acquiring suitable international oil and gas properties.

Refer to Note 4

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Accounting Principles and Use of Estimates

The preparation of financial statements is in conformity with generally accepted accounting principles used in the United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal period. Actual results may differ from those estimates.

b) Financial Instruments and Financial Risk

Cash, loan receivable and accounts payable and accrued liabilities and due to related parties are carried at cost, which approximates fair value due to the short-term nature of these instruments. Investments are carried at fair value.

c) Cash

Cash is comprised of cash deposited in a high-quality financial institution.

d) Investments

Investments are classified as available-for-sale securities and reported at fair value, with any unrealized losses from temporary declines or unrealized gains reported as a component of "Cumulative Comprehensive Adjustment" in stockholders' equity. Any other-than-temporary impairment requires the cost basis of the individual security to be written down to the fair value with the amount of the write-down accounted for as a realized loss and included in earnings.

Refer to Note 3

e) Property and equipment

Property and equipment are recorded at cost and amortized over their useful lives as follows:

Furniture and Office Equipment       20% to 30% Declining Balance Method
Leasehold Improvements                20% Declining Balance Method

Refer to Note 5

f) Basic and diluted net loss per common share

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share is calculated by dividing the net loss by the sum of the weighted average number of common shares outstanding and the dilutive common equivalent shares outstanding during the year. Common equivalent shares consist of the shares issuable upon exercise of stock options and warrants calculated using the treasury stock method. Common equivalent shares are not included in the calculation of the weighted average number of shares outstanding for diluted net loss per common share when the effect would be anti-dilutive.

Statement of Financial Accounting Standards No. 128: Earnings per Share ("SFAS 128") replaces the presentation of primary earnings per share ("EPS") with a presentation of both basic and diluted EPS for all entities with complex capital structures including a reconciliation of each numerator and denominator. Basic EPS excludes dilutive securities and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the year.

Diluted EPS reflects the potential dilution that could occur if dilutive securities were converted into common stock and is computed similarly to fully-diluted EPS pursuant to previous accounting pronouncements. SFAS 128 applies equally to loss per share presentations.

g) Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, all expected future events other than enactment of changes in the tax laws or rates are considered.

h) Accounting Pronouncements Recently Issued

In a December 11, 2003 speech, the American Institute of Certified Public Accountants and Securities and Exchange Commission (the "SEC") expressed an opinion that rate-lock commitments represent written put options, and therefore are valued as liabilities. The SEC expressed that it expects registrants to disclose the effect on the financial statements of recognizing the rate-lock commitments as written put options for quarters commencing after March 15, 2004. Additionally, the SEC recently issued Staff Accounting Bulletin No. 105 ("SAB 105") "Application of Accounting Principles to Loan Commitments". SAB 105 clarifies the SEC's position that the inclusion of cash flows from servicing or ancillary income in the determination of the fair value of interest rate lock commitments is not appropriate. The Company has determined that the adoption of SAB No. 105 does not have an impact on its results of operations or financial position.

In December 2003, the United States Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB 104), which supersedes SAB 101, "Revenue Recognition in Financial Statements." The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, which was superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on our Company's financial statements.

In December 2003, FASB Issued revised FASB Interpretation No. 46 ("FIN 46(R)"), "Consolidation of Variable Interest Entities, an Interpretation of ARB No 51". FIN 46(R) requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46(R) is effective for all new variable interest entities created or acquired after December 31, 2003.

In December 2003, FASB revised Statement of Financial Accounting Standards No. 132 ("SFAS 132(R)"), "Employers Disclosures About Pensions And Other Post-retirement Benefits". SFAS 132(R) revises employers' disclosures about pension plans and other post-retirement benefit plans. SFAS 132(R) does not change the measurement or recognition of those plans required by FASB Statements No. 87, "Employers' Accounting for Pensions", No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" or No. 106, "Employers Accounting For Post-Retirement Benefits Other Than Pensions". SFAS 132 (R) retains the disclosure requirements contained in FASB Statement No. 132, "Employers Disclosures about Pensions and other Post-retirement Benefits", which it replaces. It requires additional disclosures to those in the original SFAS 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit post-retirement plans. The required information should be provided separately for pension plans and for other post-retirement benefit plans.

NOTE 3 - INVESTMENTS

At September 30, 2004, Investments are comprised of the following:

NOTE 4 - LOAN RECEIVABLE

On March 7, 2003, the Company entered into a $30,000 loan agreement with The Innes Group, Inc. ("Innes"), a private California based company. The loan receivable was to be used as an initial payment against the acquisition price of Touchpoint Metrics, an asset owned solely by Innes, if an asset-purchase agreement could be completed by the mutually extended completion date of August 6, 2004. In the event that an asset purchase agreement was not negotiated by August 6, 2004, the loan was to be converted to a promissory note bearing interest at a rate of 5% per year starting August 6, 2004, payable monthly over three years until the principal is paid in full.

On April 21, 2004 the Company gave notice to Innes that the Company did not wish to proceed with the acquisition of Touchpoint Metrics and therefore did not want to convert the US$30,000 advance into equity in the assets referred to in the Loan Agreement dated March 7, 2003 and as extended thereafter. The advance converted to a promissory note on August 6, 2004 and the Company has written-off the loan receivable as the payments according to the terms of the promissory note are in default and are unlikely to be received.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment are comprised as follows:

NOTE 6 - RELATED PARTY TRANSACTIONS

Certain transactions of the Company involve publicly traded companies having directors, officers and/or principal shareholders in common with the Company. These companies are Trans-Orient Petroleum Ltd. ("Trans-Orient"), TAG Oil Ltd ("TAG") and Gondwana Energy, Ltd. ("Gondwana"). Transactions with related parties have occurred in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

a) Investments

Investments consist of common shares of Trans-Orient and Gondwana.

Refer to Note 3

b) Common Stock, Private Placements and Stock Options

During the 2003 fiscal year, the Company entered a related party to re-purchase 3,000,000 shares of the Company's common shares at a price of $0.01 per share. The re-purchased shares were cancelled and returned to treasury.

Refer to Note 8

c) Consulting and Rental Agreements

During the 2004 fiscal year, the Company paid related company, TAG $ Nil (2003: $3,199) in rent, pursuant to a previously signed rental agreement, for the Company's use of office space owned by TAG. The month-to-month payments of CAD$1,000 continued until termination in February 2003.

d) Due to Related Parties

During the 2004 fiscal year, the Company incurred $15,889 (September 30, 2003: $24,178) of mainly general and administrative costs through DLJ Management Corp., ("DLJ"), a wholly owned subsidiary of Trans-Orient. This amount represents costs incurred by DLJ on behalf of the Company. At September 30, 2004 the Company owes DLJ $1,138 (September 30, 2003: $947).

NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company is not aware of any events of noncompliance in its operations with any environmental laws or regulations nor of any potentially material contingencies related to environmental issues. However, the Company cannot predict whether any new or amended environmental laws or regulations introduced in the future will have a material adverse effect on the future business of the Company.

NOTE 8 - COMMON STOCK

a) Authorized and Issued Share Capital

The authorized share capital of the Company is 100,000,000 shares of common stock with a par value of $0.00001 per share. At September 30, 2004, there were 16,600,000 shares (September 30, 2003: 16,600,000) issued and outstanding.

During the 2003 fiscal year, the Company entered into an agreement with International Resource Management Corp., a private company owned by the Company's controlling shareholder, to re-purchase 3,000,000 shares of the Company's common shares at a price of $0.01 per share. The re-purchased shares were cancelled and returned to treasury.

b) Stock Options

The Company applied Accounting Principles Board Opinion No. 25: Accounting for Stock Issued to Employees ("APB 25") to account for all compensatory stock options granted. Further, Statement of Financial Accounting Standards No. 123: Accounting for Stock-Based Compensation ("SFAS 123") requires additional disclosure to reflect the results of the Company had it elected to follow SFAS 123.

There were no changes in the Company's stock options for the fiscal years ended September 30, 2004 and 2003. The weighted average exercise price to purchase 232,500 common shares through options is $1.53 per share.

The following stock options are outstanding at September 30, 2004:

The following is a summary of the Company's net loss and basic and diluted loss per share as reported and pro forma as if the fair value based method of accounting defined in SFAS 123 had been applied for the fiscal years ending September 30, 2004, 2003 and 2002:

c) Share Purchase Warrants

The following share purchase warrants are outstanding at September 30, 2004:

NOTE 9 - DISCONTINUED OPERATIONS

During the 2003 fiscal year, the Company withdrew from, and assigned to other Joint Venture participants, its only oil and gas exploration interest. The Company has liquidated its New Zealand subsidiaries being AMG Oil (NZ) Limited and AMG Oil Holdings Ltd. and has initiated liquidation proceedings in its Papua New Guinea based subsidiary Trans New Zealand Oil (PNG) Limited. On March 7, 2003, upon approval from the Company's Board of Directors, the Company entered into an agreement with The Innes Group, a private California based company to complete an asset-purchase agreement to acquire Touchpoint Metrics, a research consultancy asset. During the 2004 fiscal year the Company notified The Innes Group that it did not wish to complete the asset-purchase agreement.

The following amounts for the discontinued operations were included in the balance sheets as of September 30, 2004 and 2003:

Refer to Note 4

NOTE 10 - INCOME TAXES

Statement of Financial Accounting Standards No. 109: Accounting for Income Taxes ("SFAS 109") requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. The adoption of SFAS 109 had no material effect on the Company's financial statements.

Pursuant to SFAS 109, the potential benefit of net operating loss carry forwards has not been recognized in the financial statements since the Company cannot be assured that it is more likely than not that such benefit will be utilized in future years. The components of the net deferred tax asset, the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are as follows:

A valuation allowance has been established, and accordingly, no benefit has been recognized for the Company's deferred tax assets. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a full valuation allowance has been recorded. These factors include the Company's current history of net losses and the expected near-term future losses. The Company will continue to assess the realizability of the deferred tax assets based on actual and forecasted operating results.

NOTE 11 - COMPARATIVE FIGURES

Certain comparative figures have been re-classified to conform to the presentation of the current year.

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

There have been no changes or disagreements with accountants during the last two years.

ITEM 8A. CONTROLS AND PROCEDURES

The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Securities Exchange Act of 1934 reports are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Registrant's management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management carried out an evaluation, with an effective date of September 30,2004, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the Registrant's chief executive officer and chief financial officer concluded that the Registrant's disclosure controls and procedures are effective in connection with the filing of this annual report on Form 10-KSB for the year ended September 30, 2004.

There were no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of its evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action.

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

The names, municipality of residence, age and position held of the directors and executive officers of the Registrant are as follows:

All directors have a term of office expiring at the next annual general meeting of the Registrant, unless re-elected or earlier vacated in accordance with the bylaws of the Registrant. All officers have a term of office lasting until their removal or replacement by the board of directors.

Mr. Hart became a director of the Registrant on December 15, 1999 and he became the Registrants corporate secretary and principal financial officer on August 11, 2000. Mr. Hart also agreed, at the board of directors request, to accept the position of President and Principal Executive Officer on March 7, 2003, replacing Mr. Cameron Fink who resigned.

Between September 1995 to April 1996, Mr. Hart was an employee of Balcomp Developments Ltd., a company located in Edmonton, Alberta, which provided road construction services to the pulp and paper industry. While at Balcomp Developments Ltd., Mr. Hart worked within research and development for the purpose of aiding the company to develop a new division which would provide a marketplace for the buying and selling of used construction equipment. In October of 1996, Mr. Hart went to work for, CanAfrica Mining Co. Ltd., a private mining company whose business consisted of gemstone and precious metals exploration within Kenya, South Africa and Mozambique. Mr. Hart's function at CanAfrica Mining Co. Ltd. was as an assistant to the Managing Director. Mr. Hart's position with CanAfrica Mining Co. Ltd. continued until September 1997. Between September 1997 until early 1998, Mr. Hart joined Scimtar Hydrocarbon's Corp. as an investor relations officer. During the period in which Mr. Hart was employed, Scimtar Hydrocarbons Corp. was an Alberta Stock Exchange listed company whose business was oil and gas exploration primarily in the Middle East. Between March 1998 to March 1999, Mr. Hart was a partner in M. Nigro Consulting Ltd. a partnership formed for the purpose of providing investor relations services to public companies trading on the Alberta Stock Exchange. From April 1999 until present Mr. Hart has held the position of president of Hart-Byrne Enterprises Ltd. Hart-Byrne Enterprises Ltd. is a private company formed by Mr. Hart and other investors that develops specialized products for the music industry and he is also president of On The Wing Productions Inc., a private company which is also developing products for the music industry. Mr. Hart currently is also a director of Trans-Orient Petroleum Ltd., the Company's controlling shareholder.

Mr. Arthur Lynden Evans has been a member of the board of directors since September 2000. In 1979, Mr. Evans joined Ranger Oil Limited as Manager of International Exploration. Mr. Evans directed the ongoing activities in China, Australia and Guyana and worked on evaluating many other projects in Norway, Botswana, Indonesia and New Zealand. In 1985, Mr. Evans accepted a position with Petro-Canada Inc. as Vice-President of International Exploration. Mr. Evans was responsible for on-going international projects and for initiating new ventures in selected areas such as Colombia and Indonesia. In September 1986, Mr. Evans left Petro-Canada Inc. and started Evans International Consulting Ltd. As President of the Company, Mr. Evans continued to develop business deals in the natural resource industries, primarily focusing on the Pacific Rim and promoting petroleum exploration in British Columbia.

None of the Registrant's current officers are employed directly by the Registrant, and all officers devote less than 10% of their time to the Registrant's business. All of the Registrant's officers and directors devote a significant amount of their time to other interests or competing businesses, which may conflict with the operations and business of the Registrant.

None of the individuals listed above are subject to any anticipated or threatened legal proceedings of a material nature nor have they been subject to such proceedings within the last five years.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities and Exchange Act of 1934 requires officers, directors and persons who own more than ten percent of a registered class of a company's equity securities to file initial reports of beneficial ownership and to report changes in ownership of those securities with the Securities and Exchange Commission. They are also required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of Forms 3, 4 and 5 furnished to the Company we have determined the following:

Based solely on our review of these reports or written representations from certain reporting persons, the Registrant believes that during the fiscal year ended September 30, 2004 and during the current fiscal year, all filing requirements applicable to our officers, directors, greater-than-ten-percent beneficial owners and other persons subject to Section 16(a) of the Exchange Act were met.

Audit Committee and Charter

We have an audit committee and audit committee charter. Our audit committee is comprised of all of our directors. A copy of our audit committee charter was filed as an exhibit to the Company Form 10K-SB filed for the Company's 2003 fiscal year and is incorporated into this document by reference. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.

Audit Committee Financial Expert

We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe it would be difficult to attract a person who would qualify as a financial expert that would serve as a director and as a member of the Company's audit committee.

Code of Ethics

We have adopted a corporate code of ethics. A copy of the code of ethics was filed as an exhibit to the Company's Form 10K-SB filed for the Company's 2003 fiscal year and is incorporated into this document by reference. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

Disclosure Committee and Charter

We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us, and the accuracy, completeness and timeliness of our financial reports. A copy of our disclosure committee charter was filed as an exhibit to the Company's Form 10K-SB filed for the Company's 2003 fiscal year and is incorporated into this document by reference.

ITEM 10. EXECUTIVE COMPENSATION

Directors and Officers of the Registrant have received the following compensation for the fiscal year ending September 30, 2004:

Option/SAR Grants

There were no option/SAR Grants during the 2004, 2003 or 2002 fiscal years.

The Registrant established a non-qualified stock option plan, during the 2000 fiscal year, (the "Plan") for directors, officers, employees and consultants who provide services to the Registrant. 3,000,000 shares of Common Stock are reserved for issuance under the Plan. Any options issued under the Plan will expire on the earlier of 10 years from the establishment of the Plan or the expiry date assigned to the individual option grant.

Option /Sar Grants in the 2004 Fiscal Year: Nil

Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year-End Option Values

No stock options were exercised by any named executive officer during the 2004, 2003 or 2002 fiscal years.

(1) Based on a December 17, 2004 closing price of $0.05 per share.

Future Compensation of Our Officers

For the fiscal year ending September 30, 2005, we do not intend to pay Mr. Michael Hart, our president, chief executive officer, corporate secretary and treasurer any compensation, bonus or options.

Long-Term Incentive Plan Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock price, or any other measure other than our 2000 Incentive/or Nonqualified Stock Option Plan.

Compensation of Directors

We do not have any plans to pay our directors any money. We do not intend to grant our directors any additional options, than those already granted in 2000, for serving on our board of directors.

Indemnification

Pursuant to the articles of incorporation and bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. In certain cases, we may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the state of Nevada.

Regarding indemnification for liabilities arising under the Securities Act of 1933 which may be permitted to directors or officers pursuant to the foregoing provisions, we are informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy, as expressed in the Act and is, therefore unenforceable.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Registrant's securities are recorded on the books of its transfer agent in registered form. However, a substantial amount of such shares are registered in the name of intermediaries, such as, brokerage houses and clearing houses on behalf of their respective clients and the Registrant does not have knowledge of the beneficial owners thereof. The Registrant is controlled by Trans-Orient Petroleum Ltd., an associated corporation that owns a controlling interest consisting of 8,200,000 shares (49.4%) of the outstanding shares of the Registrant.

As of December 17, 2004, the Registrant had an authorized share capital of 100,000,000 shares of Common Stock with a par value of $0.00001 per share, of which 16,600,000 shares were issued and outstanding.

The following table sets forth, as of December 17, 2004, the beneficial shareholdings of persons or entities holding five per cent (5%) or more of the Registrant's common stock, each director individually, and each named executive officer and all directors and officers of the Registrant as a group. Each person has sole voting and investment power with respect to the shares of Common Stock shown, and all ownership is of record and beneficial.

1. These shares represent Common Stock that may be acquired within the next 60 days under a stock option held by the individual.

2. Of the 13,200,000 shares of Common Stock reported, 5,000,000 shares are attributable to shares of Common Stock issuable under warrants within the next 60 days. Trans-Orient Petroleum Ltd. is a publicly owned company with a registered office in Vancouver, British Columbia.

Changes in Control of the Registrant

To the knowledge of management there are no present arrangements or pledges of our securities that may result in a change of control of our company.

As at December 17, 2004, Trans-Orient Petroleum Ltd. owns 8,200,000, or approximately 49.4%, of the issued and outstanding shares of Common Stock and has the right to acquire a further 5,000,000 shares of Common Stock through the exercise of fully vested options and warrants. Upon full exercise of these options and warrants and assuming no other issuances by the Registrant to other parties, Trans-Orient Petroleum Ltd. can increase its ownership to 61% of the Registrant and thereby effectively control the Registrant. Trans-Orient Petroleum Ltd. is a Yukon incorporated, publicly-traded company with its head office located in Vancouver, BC, Canada. Mr. Michael Hart is also a director of Trans-Orient.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

RELATED PARTY TRANSACTIONS

The following transactions are reported as transactions between the Registrant and a related party for the last two years prior:

During the 2004 fiscal year the Registrant incurred $15,889 (2003 fiscal year: $24,178) of mainly general and administrative costs through DLJ Management Corp., ("DLJ"), a wholly owned subsidiary of Trans-Orient, an affiliate of the Registrant. This amount represents costs incurred by DLJ on behalf of the Company for administrative and accounting services. In addition, Trans-Orient Petroleum Ltd. has warrants to acquire up to 5,000,000 more shares of Common Stock. Additionally, Mr. Alex Guidi, an affiliate of the Registrant, is also the former President and a former member of the board of directors of Trans-Orient Petroleum Ltd.

Investments for the 2004 fiscal year consist of common shares of Trans-Orient and Gondwana.

During the 2004 fiscal year, the Company paid $Nil (September 30, 2003: $477) in consulting fees to a director of the Company.

During the 2004 fiscal year, the Company paid affiliated company, TAG $Nil (2003: $3,199) in rent, pursuant to a previously signed rental agreement, for the Company's use of office space owned by TAG. The month-to-month payments of CAD$1,000 continued until termination in February 2003.

Payments made to DLJ were on a cost basis with no mark-up, based on time spent by the employees of DLJ providing accounting and administrative services for the Registrant. The Registrant believes that it would have had to pay more for these services if it had sought such services from unaffiliated third-parties.

TRANSACTIONS WITH MR. GUIDI

In addition to his former position in the management of the Registrant, Mr. Alex Guidi is a promoter of the Registrant. During the previous five-year period Mr. Guidi received directly or indirectly, from the Registrant the following:

On March 4, 2003, the Registrant entered into an agreement with International Resource Management Corporation, a private company wholly-owned by Alex Guidi, to re-purchase 3,000,000 shares of Common Stock at a price of $0.01 per share. The shares of the Registrant have been cancelled and returned to treasury. As a result of this transaction, the Registrants common stock issued and outstanding has changed from 19,600,000 to 16,600,000.

ITEM 13. EXHIBITS

(a) The following exhibits are incorporated herein by reference from our Form 10-SB registration statement and all amendments thereto filed with the Securities and Exchange Commission, and amendments thereto, SEC file No. 000-30087:

The following exhibits are hereby incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on April 21, 2004:

The following exhibits are hereby incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on March 5, 2003:

The following exhibits are hereby incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on February 6, 2004:

The following exhibits are filed with this report:

The following exhibits are hereby incorporated by reference from our Form 10-KSB filed with the Securities and Exchange Commission on December 29, 2003:

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

(1) Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-QSBs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:

2004- $10,015
2003- $10,000

(2) Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:

2004- $Nil
2003- $Nil

(3) Tax Fees

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:

2004- $Nil
2003 - $Nil

(4) All Other Fees

The aggregate fees billed in each of the last tow fiscal yeas for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:

2004- $Nil
2003- $Nil

(5) Our audit committee's pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.

(6) The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full time, permanent employees was 0%.

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 23rd day of December 2004.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities.