Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations

THIS ANNUAL REPORT, INCLUDING THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS, AND OTHER REPORTS FILED BY THE REGISTRANT FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION (COLLECTIVELY THE "FILINGS") CONTAIN FORWARD-LOOKING STATEMENTS WHICH ARE INTENDED TO CONVEY OUR EXPECTATIONS OR PREDICTIONS REGARDING THE OCCURRENCE OF POSSIBLE FUTURE EVENTS OR THE EXISTENCE OF TRENDS AND FACTORS THAT MAY IMPACT OUR FUTURE PLANS AND OPERATING RESULTS. THESE FORWARD-LOOKING STATEMENTS ARE DERIVED, IN PART, FROM VARIOUS ASSUMPTIONS AND ANALYSES WE HAVE MADE IN THE CONTEXT OF OUR CURRENT BUSINESS PLAN AND NFORMATION CURRENTLY AVAILABLE TO US AND IN LIGHT OF OUR EXPERIENCE AND PERCEPTIONS OF HISTORICAL TRENDS, CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AND OTHER FACTORS WE BELIEVE TO BE APPROPRIATE IN THE CIRCUMSTANCES. YOU CAN GENERALLY IDENTIFY FORWARD-LOOKING STATEMENTS THROUGH WORDS AND PHRASES SUCH AS "SEEK", "ANTICIPATE", "BELIEVE", "ESTIMATE", "EXPECT","INTEND", "PLAN", "BUDGET", "PROJECT", "MAY BE", "MAY CONTINUE", "MAY LIKELY RESULT", AND SIMILAR EXPRESSIONS. WHEN READING ANY FORWARD-LOOKING STATEMENT YOU SHOULD REMAIN MINDFUL THAT ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF OUR COMPANY, AND ARE SUBJECT TO RISKS,
UNCERTAINTIES, ASSUMPTIONS AND OTHER FACTORS RELATING TO OUR INDUSTRY AND RESULTS OF OPERATIONS, INCLUDING BUT NOT LIMITED TO THE FOLLOWING FACTORS:

o WHETHER THE ALTERNATIVE ENERGY FOR OUR PRODUCTS CONTINUES TO GROW AND, IF IT DOES, THE PACE AT WHICH IT MAY GROW;
o OUR ABILITY TO ATTRACT AND RETAIN THE PERSONNEL QUALIFIED TO IMPLEMENT OUR GROWTH STRATEGIES,
o OUR ABILITY TO OBTAIN APPROVAL FROM GOVERNMENT AUTHORITIES FOR OUR PRODUCTS;
o OUR ABILITY TO PROTECT THE PATENTS ON OUR PROPRIETARY TECHNOLOGY;
o OUR ABILITY TO FUND OUR SHORT-TERM AND LONG-TERM FINANCING NEEDS;
o OUR ABILITY TO COMPETE AGAINST LARGE COMPETITORS IN A RAPIDLY CHANGING MARKET;
o CHANGES IN OUR BUSINESS PLAN AND CORPORATE STRATEGIES; AND
o OTHER RISKS AND UNCERTAINTIES DISCUSSED IN GREATER DETAIL IN VARIOUS SECTIONS OF THIS REPORT.

SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED. EACH FORWARD-LOOKING STATEMENT SHOULD BE READ IN CONTEXT WITH, AND WITH AN UNDERSTANDING OF, THE VARIOUS OTHER DISCLOSURES CONCERNING OUR COMPANY AND OUR BUSINESS MADE IN OUR FILINGS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENT AS A PREDICTION OF ACTUAL RESULTS OR DEVELOPMENTS. WE ARE NOT OBLIGATED TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT CONTAINED IN THIS REPORT TO REFLECT NEW EVENTS OR CIRCUMSTANCES UNLESS AND TO THE EXTENT REQUIRED BY APPLICABLE LAW.

Results of Operations

For the year ended April 30, 2006, we incurred a net operating loss of $2,767,259, as compared to a net loss of $306,193 for the period year ended April 30, 2005.

We incurred total expenses of $2,580,185 for the year ended April 30, 2006. The majority of the expense was $1,901,177, the estimated fair value of the 9,502,160 incentive share purchase warrants issued to directors, officers and employees during the period. A total of $326,517 in consulting fees was paid, of which $19,073 was paid to a former director. A total of $98,520 was paid for investor relations during the period and $44,230 in public relations and preparation and dissemination of shareholder information. A total of $83,049 was paid in professional expenses for the year ended April 30, 2006, which generally consisted of fees for legal, accounting and outside services paid in connection with the preparation and filing of our periodic reports. Research and development expense was $47,331 for the year ended April 30, 2006. The balance of general and administrative expenses were attributed to miscellaneous office expenses, filing fees, rent, travel and entertainment , and day-to-day operating expenses.

During the year, $9,870 of property and equipment was written off when Management was relocated to California.

The Company also purchased certain inventory from an unrelated party in the amount of $177,204 on behalf of a related company with two directors in common. 611,048 shares were issued to the unrelated party valued at $0.29 per share for a total value of $177,204. At April 30, 2006, the amount of $177,204 was written off although management expects to receive future advertising for consideration from the related party.

Liquidity and Capital Resources

We currently have only $1,884 in cash on hand and are seeking sources of funding to continue our operations. It is expected we will continue to need further funding until we complete a final prototype to bring to market for sale or enter into an agreement with a joint venture partner to complete our plans. We are currently researching both options; however, no definitive agreements have yet been entered into. We currently plan to fund future operations by public offerings or private placement of equity and/or debt securities as we have done in the past. However, there can be no assurance that debt or equity financing will be available to us on acceptable terms to meet these requirements, as and when needed. Our auditors have expressed substantial doubt about our ability to continue as a going concern.

As of the date of this annual report, we have not yet generated any revenues.

We do not intend to purchase any significant property or equipment, nor incur any significant changes in employees during the next 12 months.

Cash provided by financing activities for the year ended April 30, 2006 was $118,393, attributed to $143,441 in private sales of Common Stock and $10,000 received from exercise of warrants, less repayments of outstanding notes to related parties in the amount of $35,048.

There was no cash used in investing activities for the year ended April 30, 2006.

Our net loss for the year ended April 30, 2006 was $2,767,259.

Net cash provided by operating activities for the year ended April 30, 2006 was ($167,419), consisting of $1,044 in depreciation expense; $488,700 as the fair value of 2,418,130 shares issued for services during the year; $1,901,177 as the fair value of the incentive share warrants issued to officers, directors and employees; $9,870 for property and equipment written off when the Company relocated its operations from Canada to the US; and $177,204 in bad debt expense. Adjustments to reconcile net loss to net cash used by operating activities were attributed to accounts receivable and other receivables in the amount of $6,594; accounts payable in the amount of ($4,704); prepaid expense and deposits in the amount of $9,081; and accrued liabilities in the amount of $10,874.

We anticipate no material commitments for capital expenditures in the near term. Management is not aware of any trend in its industry or capital resources, which may have an impact on its income, revenue or income from operations.

Subsequent Events

Subsequent to April 30, 2006, we entered into an Engine Development and License Agreement with an unrelated third party, Obvio ! Automotoveiculos S.A. ("Obvio !"), located in Brazil, whereby Obvio ! will incorporate the Oscillating Piston Engine ("OPE") technology into their vehicles. The parties have agreed to enter into a non-exclusive joint venture to develop a third generation OPE suitable for hybrid applications. Pursuant to the terms of the Agreement, we will grant Obvio ! a license for the OPE technology in exchange for $5,000,000, which will be payable in increments of $500 for each engine installed or sold. Upon receiving the $5,000,000 from Obvio !, we will also receive royalties of $100 per vehicle sold that incorporated the OPE technology. A copy of the Agreement is attached to this annual report as Exhibit 99 and is incorporated herein by this reference.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements or contractual or commercial commitments.