Incorporated by reference from Form 10-SB Registration Statement filed April 26, 1994.

Incorporated by reference from 10-Q Report for the quarter ended 7-30-94.

Incorporated by reference from our 10-KSB for the fiscal year ended April 30, 2000.

Incorporated by reference from our 10-KSB for the fiscal year ended April 30, 2001

Incorporated by reference from our 10-KSB for the fiscal year ended April 30, 2002

Incorporated by reference from our 10-KSB for the fiscal year ended April 30, 2003

Incorporated by reference from our 10-KSB for the fiscal year ended April 30, 2007

Incorporated herein.

NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS

The Company was incorporated in the State of Oregon, U.S.A., on July 27, 1992.

The Company is a development stage company engaged in the business of developing and commercially exploiting an improved axial vane type rotary engine known as the Rand Cam/Direct Charge Engine (the “RC/DC Engine”) in the U.S. The world-wide marketing and intellectual rights, other than in the U.S., are held by Reg Technologies, Inc. (“Reg”), a major shareholder, which owns 12% of the Company’s issued and outstanding stock, and controls the Company by way of a voting trust arrangement. The Company owns the U.S. marketing and intellectual rights and has a project cost sharing agreement, whereby it will fund 50% of the further development of the RC/DC Engine and Reg will fund 50%.

The Company formed a wholly-owned subsidiary, Rad Max Technologies, Inc. (“Rad Max”) on April 10, 2007 in the State of Washington. Rad Max hopes to win military contracts for custom versions of the RC/DC Engine. The accounts of the subsidiary are incorporated in the accounts of the Company as at April 30, 2007. All inter- company balances have been eliminated upon consolidation.

In a development stage company, management devotes most of its activities to establishing a new business. Planned principal activities have not yet produced any revenues and the Company has suffered recurring operating losses as is normal in development stage companies. The Company has accumulated losses of $9,192,104 since inception. These factors raise substantial doubt about the Company’s ability to continue as a going-concern. The ability of the Company to emerge from the development stage with respect to its planned principal business activity is dependent upon its successful efforts to raise additional equity financing, receive funding from affiliates and controlling shareholders, and develop a market for its products.

The Company plans to raise funds through loans from Rand Energy Group Inc. (“Rand”), a private company with officers and directors in common with the Company. Further, Rand owns approximately 11% of the shares of the Company, and may sell shares as needed to meet ongoing funding requirements if traditional equity sources of financing prove to be insufficient. The Company also receives interim support from affiliated companies and plans to raise additional capital through debt and/or equity financings. The Company has an equity line of credit whereby the investor agreed to purchase up to $10,000,000 of the Company’s common stock (See Note 3(e)). There continues to be insufficient funds to provide enough working capital to fund ongoing operations for the next twelve months. The Company may also raise additional funds through the exercise of warrants and stock options, if exercised.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States and are presented in U.S. dollars.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Instruments

Fair Value

The carrying values of cash, due to related parties, accounts payable and accrued liabilities approximate their fair values because of the short-term maturity of these financial instruments.

Interest Rate Risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary assets and liabilities.

Credit Risk

The Company’s financial asset that is exposed to credit risk consists primarily of cash. To manage the risk, cash is placed with major financial institutions.

Currency Risk

The Company’s functional and reporting currency is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109, “Accounting for Income Taxes”, as of its inception. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

Research and Development

The Company is in the development stage and all costs relating to research and development are charged to operations as incurred.

Stock-Based Compensation

Prior to May 1, 2005, the Company accounted for stock-based awards under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, using the intrinsic value method of accounting, under which compensation expense was only recognized if the exercise price of the Company’s employee stock options was less than the market price of the underlying common stock on the date of grant. Effective May 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based Payments”, using the modified prospective transition method. There has been no effect on the Company’s reported loss from operations, cash flows or loss per share as a result of adopting SFAS No. 123R.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation (Continued)

The fair value for options granted was estimated at the date of grant using the Black-Scholes option pricing model and the weighted average fair value of stock options granted during the year ended April 30, 2007, was $1.32 (2006 - $0.44). During the year ended April 30, 2007, the Company recorded stock-based compensation of $260,569 (2006 - $124,793) as general and administrative expense. At April 30, 2007, the Company had $1,247,391 of total unrecognized compensation cost related to non-vested stock options held by employees, which will be recognized over future periods.

The weighted average assumptions used are as follows:

Basic and Diluted Income (Loss) per Share

The Company computes income (loss) per share in accordance with SFAS No. 128, “Earnings per Share”. SFAS No. 128 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if- converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of common shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 did not have a material effect on its financial statements.

Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements (Continued)

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of cash flows, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement did not have a material effect on the Company's future reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and, second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on de-recognition, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

COMMON STOCK

Stock Option Plan

The Company has a Stock Option Plan to issue up to 2,500,000 shares to certain key directors and employees, approved April 30, 1993 and amended December 5, 2000.

Prior to January 1, 2006, the Company accounted for stock-based awards under the recognition and measurement provisions of APB Opinion No. 25, using the intrinsic value method of accounting, under which compensation expense was only recognized if the exercise price of the Company’s employee stock options was less than the market price of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, “Share Based Payments”, using the modified retrospective transition method. Under that transition method, compensation cost is recognized for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods have not been restated. There was no change to the Company income from operations for the year ended April 30, 2007 than if it had continued to account for share-based compensation under APB No. 25.

All options granted by the Company under the 2000 Plan have the following vesting schedule:

Up to 25% of the option may be exercised at any time during the term of the option; such initial exercise is referred to as the “First Exercise”.

The second 25% of the option may be exercised at any time after 90 days from the date of First Exercise; such second exercise is referred to as the “Second Exercise”.

The third 25% of the option may be exercised at any time after 90 days from the date of Second Exercise; such third exercise is referred to as the “Third Exercise”.

The fourth and final 25% of the option may be exercised at any time after 90 days from the date of the Third Exercise.

The options expire 60 months from the date of grant.

On April 12, 2007, the Company approved a new 2007 Stock Option Plan to issue up to 2,000,000 shares to certain key directors and employees. Pursuant to the Plans, the Company has granted stock options to certain directors and employees.

All options granted by the Company under the 2007 Plan have the following vesting schedule:

Up to 25% of the option may be exercised 90 days after the grant of the option.

The second 25% of the option may be exercised at any time after July 12, 2008.

The third 25% of the option may be exercised at any time after July 12, 2009.

The fourth and final 25% of the option may be exercised at any time after July 12, 2010.

The options expire 60 months from the date of grant.

On June 29, 2006, the Company granted 25,000 stock options to an employee exercisable at $2.09 per share, up to June 29, 2011. The fair value of options was estimated at the date of grant using the Black- Scholes option pricing model using the following weighted average assumptions: risk free interest rate of 5.05%, expected volatility of 161%, an expected option life of 2.5 years and no expected dividends. The weighted average fair value of options granted was $1.69 per option.

On November 1, 2006, the Company granted 125,000 stock options to two employees exercisable at $1.37 per share, up to November 1, 2011. The fair value of options was estimated at the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions: risk free interest rate of 4.53%, expected volatility of 152%, an expected option life of 2.5 years and no expected dividends. The weighted average fair value of options granted was $1.07 per option.

On January 30, 2007, the Company granted 200,000 stock options to an employee exercisable at $1.30 per share, up to January 30, 2012. The fair value of options was estimated at the date of grant using the Black- Scholes option pricing model using the following weighted average assumptions: risk free interest rate of 4.86%, expected volatility of 152%, an expected option life of 2.5 years and no expected dividends. The weighted average fair value of options granted was $0.73 per option

COMMON STOCK (Continued)

Stock Option Plan (Continued)

On April 12, 2007, the Company granted 1,025,000 stock options from the 2007 Stock Option Plan to four directors and three consultants exercisable at $1.30 per share, up to April 12, 2012. The fair value of options was estimated at the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions: risk free interest rate of 4.54%, expected volatility of 142%, an expected option life of 2.5 years and no expected dividends. The weighted average fair value of options granted was $0.85 per option.

During the year ended April 30, 2007, the Company recorded stock-based compensation of $260,569 as general and administrative expense.

Option pricing models require the input of highly subjective assumptions including the expected price volatility. The subjective input assumptions can materially affect the fair value estimate.

The following table summarizes the continuity of the Company’s stock options:

COMMON STOCK (Continued)

Stock Option Plan (Continued)

Additional information regarding options outstanding and exercisable as at April 30, 2007, is as follows:

COMMON STOCK (Continued)

Stock Option Plan (Continued)

At April 30, 2007, the Company had $1,247,391 of total unrecognized compensation cost related to non- vested stock options held by employees, which will be recognized at the point the options are exercisable. A summary of the status of the Company’s non-vested shares as of April 30, 2007, and changes during the year ended April 30, 2007, is presented below:

Performance Stock Plan

The Company has allotted 2,500,000 shares to be issued pursuant to a Performance Stock Plan approved and registered on June 27, 1997, and amended in June 2004. On April 27, 2007, the Company further amended the Plan so that the term of the Plan is extended to the twentieth anniversary of the effective date.

Non-Cash Consideration

Shares issued for non-cash consideration to third parties were valued based on the fair market value of the services provided. During the year ended April 2005, the Company issued a total of 150,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $24,000 for services to be rendered over a two-year period. The Company charged $1,000 (2006 - $12,000) to operations for the pro-rata portion of services performed during the year ended April 30, 2007.

During the year ended April 30, 2007, the Company entered into a Financial Advisory Agreement valued at $120,000 for services to be rendered over a one-year period. Part of this agreement stated that $60,000 was to be paid by issuance of the Company’s shares of common stock. At the date of this obligation, 29,000 shares were issued when the value of the Company’s stock was $2.07 per share. The Company charged $47,500 (2006 – $nil) to operations for the pro-rata portion of services performed during the year ended April 30, 2007 and $12,500 as prepaid expenses.

COMMON STOCK (Continued)

Share Purchase Warrants

The following table summarizes the continuity of the Company’s warrants:

On November 17, 2006, the Company entered into a Securities Purchase Agreement (“equity line of credit”), whereby an investor agreed to purchase up to $10,000,000 of the Company’s common stock over a term of 36 months at the Company’s discretion. Each purchase will be for a minimum of $150,000 and up to a maximum of the lessor of $750,000, or 200% of the average weighted volume for the Company’s common stock for the 20 trading days prior to the date of purchase. Each purchase will be at a 15% discount to the market price of the Company’s common stock over the 10 trading days prior to the purchase.

In connection with the equity line of credit, the Company issued to the investor a warrant (“Investor warrant”) to purchase 1,000,000 shares of the Company’s common stock at $1.30 per share (the “Exercise Price”) for five years, and to an agent a warrant (”Placement warrant”) to purchase 640,000 shares of the Company’s common stock at $1.30 per share for five years. If the Company fails to register the shares issuable upon the exercise of the Investor or Placement warrant, the holder is entitled to exercise the warrant and receive, for no consideration, a certificate equal to the number of shares obtained by subtracting the Exercise Price of the warrant for the volume weighted average price on the trading day immediately preceding the date of such election and multiplying that amount by the number of shares issuable upon the exercise of the warrant.

The Company filed an SB-2 Registration Statement with the United States Securities and Exchange Commission that was declared effective February 9, 2007, to register shares of common stock potentially issuable under this equity line of credit (6,160,000 shares) and the related warrants (1,640,000 shares).

Pursuant to the agreement, if the Company issues any common stock, or rights to acquire common stock at a price less than the Exercise Price, the Exercise Price will be adjusted to the lower price. In addition, the number of shares issuable will be increased such that the aggregate exercise price after adjustment is equal to the aggregate exercise price prior to adjustment.

Subsequent to the issuance of the warrants, the Company completed an equity financing at $1 per share. The issuance of the Company’s common shares lowered the Exercise Price of the Investor warrants to $1 and increased the number of shares issuable upon exercise of the warrants to 2,132,000 shares, of which 13,000 have been exercised. The Company recognized the change in fair value of the warrants of $222,681 as share issuance costs.

COMMON STOCK (Continued)

Share Purchase Warrants (Continued)

The Company has determined that, in accordance with SFAS 133, “Accounting for Derivative Instruments and Fair Value Hedges”, the warrants are not derivative instruments and, accordingly, guidance in EITF 00- 19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock”, relating to net cash settlement versus net share settlement should be followed. The contract permits the Company to settle in unregistered shares, the Company has a sufficient number of unissued authorized shares available to settle the contract, and there is an explicit limit on the number of shares to be delivered in a share settlement. As the issuance of shares and, thus, the modification of the exercise price is wholly under the control of the Company and the Company has the ability to control net-settlement, these warrants have been classified as equity and their fair value of $1,338,725 has been recognized as share issuance costs.

In the previous fiscal year, the Company received subscriptions of $3,750 upon the exercise of stock options for 18,750 shares issued during the year ended April 30, 2007.

During the year ended April 30, 2007, the Company issued 643,500 shares upon the exercise of stock options for proceeds of $140,188.

During the year ended April 30, 2007, the Company issued 255,833 shares at $0.80 per share upon the exercise of warrants for proceeds of $204,666.

During the year ended April 30, 2007, the Company issued 13,000 shares at $1 per share upon the exercise of warrants for proceeds of $13,000.

During the year ended April 30, 2007, the Company issued 120,000 shares at $1 per share pursuant to a private placement for cash proceeds of $116,496, net of issue costs of $3,504.

As of April 30, 2007, the Company had received subscriptions of $10,000 upon the exercise of warrants for 12,500 shares issued subsequent to the year-end.

As of April 30, 2007, the Company had received subscriptions pursuant to a private placement for cash proceeds of $249,027, net of subscription costs of $13,673.

RELATED PARTY TRANSACTIONS

Amounts due to related parties are unsecured, non-interest bearing and due on demand. Related parties consist of companies controlled or significantly influenced by the President of the Company.

On November 27, 2006, a company with common directors transferred 20,500 shares it holds of the Company to a consultant pursuant to a consulting agreement for services valued at $25,000. As at April 30, 2007, this was recorded as due to related parties.

The Company entered into an agreement with a professional law firm (the “Law Firm”) in which a partner of the firm is an Officer and Director of the Company. The Company agreed to pay a cash fee equal to 5% of any financings with parties introduced to the Company by the Law Firm. The Company also agreed to pay an equity fee equal to 5% of the equity issued by the Company to parties introduced by the Law Firm, in the form of options, warrants or common stock. During the year ended April 30, 2007, fees in the aggregate of $116,598 (2006 - $12,201) for legal services have been paid to the Law Firm.

During the year ended April 30, 2007, a director of the Company exercised 37,500 stock options for cash proceeds of $7,500.

During the year ended April 30, 2007, a Company controlled by the President of the Company exercised 30,000 share purchase warrants for cash proceeds of $24,000.

During the year ended April 30, 2007, a Company controlled by the President of the Company purchased 40,000 units pursuant to a private placement for cash proceeds of $40,000.

During the year ended April 30, 2007, the President of the Company exercised 570,000 stock options for cash proceeds of $114,000.

During the year ended April 30, 2007, a Company controlled by the spouse of the President of the Company exercised 25,000 share purchase warrants for cash proceeds of $20,000.

RELATED PARTY TRANSACTIONS (Continued)

During the year ended April 30, 2007, the spouse of the President of the Company exercised 100,000 share purchase warrants for cash proceeds of $80,000.

During the year ended April 30, 2007, the value of consulting services of $90,000 (2006 - $90,000) was contributed by the President, CEO and Director of the Company, charged to operations and treated as donated capital.

During the year ended April 30, 2007, the value of consulting services of $30,000 (2006 - $30,000) was contributed by the Vice President and Director of the Company, charged to operations and treated as donated capital.

During the year ended April 30, 2007, the value of consulting services of $30,000 (2006 - $30,000) was contributed by the CFO, COO and Director of the Company, charged to operations and treated as donated capital.

During the year ended April 30, 2007, rent of $3,009 (2006 - $4,797) was paid to a company having common officers and directors.

During the year ended April 30, 2007, project management fees of $30,000 (2006 - $30,000) were paid to a company having common officers and directors.

COMMITMENTS

On September 15, 2006, the Company entered into a Public Relations Agreement with an advertising company for the provision of investor relations services from September 15, 2006 to September 14, 2007 in consideration for $78,000 to be paid monthly. As at April 30, 2007, $32,500 had been paid and $3,250 accrued.

On July 14, 2006, the Company entered into a Financial Advisory Agreement with a consulting company for the provision of consulting services from July 14, 2006 to July 14, 2007 in consideration for $10,000 upon the signing of the agreement (paid), shares with a fair value of $60,000 (issued) and $5,000 per month for ten months. As at April 30, 2007, the pro-rata portion of $37,500 has been recorded in accounts payable and will be paid once the Investor begins to purchase the Company’s stock pursuant to the Securities Purchase Agreement (See Note 3(e)).

Pursuant to a letter of understanding dated December 13, 1993 between the Company, Rand and Reg (collectively called the grantors) and West Virginia University Research Corporation (“WVURC”), the grantors have agreed that WVURC shall own 5% of all patented technology with regards to RC/DC Engine technology and will receive 5% of all net profits from sales, licences, royalties or income derived from the patented technology.

Pursuant to an agreement dated August 20, 1992, the Company acquired the U.S. rights to the original RC/DC Engine from Rand. The Company will pay Rand and the original owner a net profit royalty of 5% and 1%, respectively.

The Company is committed to fund 50% of the further development of the RC/DC Engine.

The Company entered into an agreement with a professional law firm (the “Law Firm”) in which a partner of the firm is an Officer and Director of the Company. The Company agreed to pay a cash fee equal to 5% of any financings with parties introduced to the Company by the Law Firm. The Company also agreed to pay an equity fee equal to 5% of the equity issued by the Company to parties introduced by the Law Firm, in the form of options, warrants or common stock. (See Note 4(c))

CONTINGENCIES

Long outstanding accounts payable in the amount of $74,766 were determined to be no longer payable and were written-off during the 2006 year. Since inception, $189,651 has been written-off.

INCOME TAXES

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has net operating losses of $7,745,000, which commence expiring in 2013. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses has not been recognized in these financial statements because the Company cannot be assured it more likely than not will utilize the net operating losses carried forward in future years. For the years ended April 30, 2007 and 2006, the valuation allowance established against the deferred tax assets increased by $350,700 and $273,100, respectively.

The components of the net deferred tax asset at April 30, 2007 and 2006 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are scheduled below:

SUBSEQUENT EVENTS

On May 24, 2007, the Company approved the increase of the authorized share capital of the Company to 100,000,000 shares from 50,000,000.

Issued 13,500 common shares upon the exercise of options for cash proceeds of $3,375.

Issued 60,000 common shares upon the exercise of warrants at $1 per share for cash proceeds of $60,000.

Issued 12,500 common shares upon the exercise of warrants at $0.80 per share for cash proceeds of $10,000.

Issued 3,000 common shares upon the exercise of options at $1.30 per share for cash proceeds of $3,900.

Extended 75,000 options set to expire on May 10, 2007 to May 10, 2009.