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Bontan Corporation Inc.

Consolidated Financial Statements

For the Three Months Ended June 30, 2008 and 2007

(Canadian Dollars)

(UNAUDITED – see Notice to Reader dated July 30, 2008)

Index

Notice to Reader issued by the Management	2

Consolidated Balance Sheets	3

Consolidated Statements of Operations	4

Consolidated Statements of Cash Flows	5

Consolidated Statement of Shareholders’ Equity Consolidated Statement of Comprehensive Loss and Accumulated Other Comprehensive Loss	6 7
Notes to Consolidated Financial Statements	8-18

BONTAN CORPORATION INC.

NOTICE TO READER OF THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements for Bontan Corporation Inc. for the three months ended June 30, 2008 have been prepared by management in accordance with Canadian generally accepted accounting principles, consistently applied. These consolidated financial statements have not been reviewed by the auditors of the Company.

These financial statements are presented on the accrual basis of accounting. Accordingly, a precise determination of many assets and liabilities is dependent upon future events. Therefore, estimates and approximations have been made using careful judgement. Recognizing that the management is responsible for both the integrity and objectivity of the financial statements, management is satisfied that these financial statements have been fairly presented.

July 30, 2008

Bontan Corporation Inc.

Consolidated Balance Sheets

(Canadian Dollars)

(Unaudited – see Notice to Reader dated July 30, 2008)

	Note		June 30, 2008			march 31, 2008
						(Audited)
Assets
Current
Cash			$	800,064		$	1,259,062
Short term investments	3,11(vii) & (viii)			5,251,992			3,633,760
Prepaid consulting services		5		204,941			285,896
Other receivables	11(ix)			29,551			54,198

			$	6,286,548		$	5,232,916
Office equipment and furniture		4	$	5,831		$	6,206
			$	6,292,379		$	5,239,122
Liabilities and shareholders' equity
Current liabilities
Accounts payable	11(vi)		$	23,430		$	30,339
Accrued liabilities				32,198			28,685
Total current liabilities			$	55,628		$	59,024
Shareholders' Equity
Capital stock		6	$	32,901,488		$	32,901,488
Warrants		8		2,153,857			2,153,857
Contributed surplus				4,077,427			4,077,427
Accumulated other comprehensive loss				(229,893	)		(1,306,768	)
Deficit				(32,666,128	)		(32,645,906	)
				(32,896,021	)		(33,952,674	)
Total shareholders' equity			$	6,236,751		$	5,180,098
			$	6,292,379		$	5,239,122

Commitments and Contingent Liabilities (Note 10)
Related Party Transactions (Note 11)

Approved by the Board ”Kam Shah” Director ”Dean Bradley” Director

(signed) (signed)

The accompanying notes are an integral part of these consolidated financial statements.

Bontan Corporation Inc.

Consolidated Statements of Operations

(Canadian Dollars)

(Unaudited – see Notice to Reader dated July 30, 2008)

For the three months ended June 30,	Note	2008	2007
Income
Gain on disposal of short term investments		$188,549	$101,635
Interest		3,951	21,656

		192,500	123,291
Expenses
Consulting fees settled for common shares	5	80,956	78,518
Payroll		5,431	-
Travel, promotion and consulting	11(v)	50,121	50,570
Shareholders information	11(i)	30,459	36,321
Exchange loss		15,736	105,701
Professional fees		4,149	6,530
Office and general		16,577	11,660
Bank charges and interest		551	397
Communication		3,234	2,719
Rent	11(ii)	4,439	1,459
Transfer agents fees		1,069	1,451
		212,722	295,326
Net loss for period		(20,222)	(172,035)

Basic and diluted loss per share information
Net Loss per share	9	$(0.00)	$(0.01)

The accompanying notes are an integral part of these consolidated financial statements.

Bontan Corporation Inc.

Consolidated Statements of Cash Flows

(Canadian Dollars)

(Unaudited – see Notice to Reader dated July 30, 2008)

For the three months ended June 30,	Note	2008	2007
Cash flows from operating activities
Net loss for year		$(20,222)	$(172,035)
Amortization of office equipment and furniture		375	-
Gain on disposal of short term investments		-188,549	-101,635
Consulting fees settled for common shares	5	80,956	78,518
Net change in working capital components
Prepaid and other receivables		24,647	-7,579
Accounts payable and accrued liabilities		-3,396	18,362
		-106,189	-184,369
Investing activities
Purchase of short term Investments		-1,563,978	-1,330,341
Net proceeds from sale of short term investments		1,211,169	1,136,520
		-352,809	-193,821
Financing activities
Common shares issued net of issuance costs		-	110,201
		-	110,201
Decrease in cash during period		-458,998	-267,989
Cash at beginning of period		1,259,062	3,014,928
Cash at end of period		$800,064	$2,746,939
Supplemental disclosures
Non-cash operating activities
Consulting fees settled for common shares and	5	80,956	75,518
options and expensed during the period	5	80,956	75,518
Consulting fees prepaid in shares	5	204,941	197,628
		$285,897	$273,146

The accompanying notes are an integral part of these consolidated financial statements.

Bontan Corporation Inc.

Consolidated Statement of Shareholders’ Equity

(Canadian Dollars)

For the three months ended June 30, 2008

(Unaudited – see Notice to Reader dated July 30, 2008)

	Number of Shares		Capital Stock		Warrants		Contributed surplus		Accumulated Deficit			Accumulated other comprehensive loss			Shareholders' Equity
Balance March 31, 2007		28,430,203	$	32,413,811	$	2,215,213	$	4,069,549	$	(32,074,107	)				$	6,624,466
Warrants excercised		315,540		122,446				-								122,446
Value of warrants transferred to capital stock upon exercise				61,356		-61,356
Finder fee				-12,245												-12,245
Issued under 2007 Consultant stock compensation plan		1,350,000		316,120												316,120
Options granted								7,878								7,878
Net loss										(571,799	)					(571,799	)
Unrealised loss on short term investments considered avilable for sale, cumulative to march 31, 2008 on adoption of new Accounting Policy													(1,306,768	)		(1,306,768	)

Balance, March 31, 2008		30,095,743	$	32,901,488	$	2,153,857	$	4,077,427	$	(32,645,906	)	$	(1,306,768	)	$	5,180,098
Unrealised gain on short term investments considered available for sale during the quarter ended June 30, 2008													1,076,875			1,076,875
Net loss for the quarter										-20,222						-20,222
Balance, June 30, 2008		30,095,743	$	32,901,488	$	2,153,857	$	4,077,427	$	(32,666,128	)	$	(229,893	)	$	6,236,751

The accompanying notes are an integral part of these consolidated financial statements.

Bontan Corporation Inc.

Consolidated Statement of Comprehensive Loss and Accumulated Other Comprehensive Loss

(Canadian Dollars)

(Unaudited – see Notice to Reader dated July 30, 2008)

	Note		Three months ended June 30,						Year ended March 31
			2008			2007			2008
			(Unaudited)			(Unaudited)			(Audited)
Net loss for year			$	(20,222	)	$	(172,035	)	$	(571,799	)
Other comprehensive loss
Unrealised gain(loss) for period on short term investments considered available for sale		3		1,076,875			(615,691	)		(2,266,470	)
Comprehensive Gain(loss)				1,056,653			-787,726			-2,838,269

Accumulated other comprehensive income(loss)
Beginning of period				(1,306,768	)		-			-
Adjusment on adoption of new Accounting Policy				-			959,702.00			959,702
				(1,306,768	)		959,702			959,702
Other comprehensive gain(loss) for period				1,076,875			(615,691	)		(2,266,470	)
Accumulated other comprehensive income (loss), end of period			$	(229,893	)	$	344,011		$	(1,306,768	)

The accompanying notes are an integral part of these consolidated financial statements.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

1. NATURE OF OPERATIONS

Bontan Corporation Inc. (“the Company”) is a diversified natural resource company that invests in major oil and gas exploration and exploitation projects in countries around the globe through its subsidiary by acquiring joint venture, indirect participation interest and working interest in those projects.

The company focuses on projects where the other project partners have proven experience in oil and gas exploration, development and distribution.

The Company currently does not have any active project participation and has now expanded its search for participation in suitable projects in all sectors.

2. PRINCIPLES AND USE OF ESTIMATES

These financial statements consolidated the accounts of the Company and its wholly owned subsidiary, Bontan Oil and Gas Corporation., and have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") with respect to interim financial statements, applied on a consistent basis. Accordingly, they do not include all of the information and footnotes required for compliance with GAAP in Canada for annual audited financial statements. These Statements and notes should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report for the fiscal year ended March 31, 2008.

The accounting policies adopted for the preparation of these Statements are the same as those applied for the Company’s audited financial statements for the fiscal year ended March 31, 2008, except for the adoption of the new accounting and disclosure policies detailed below.

The preparation of these Statements and the accompanying unaudited notes requires management to make estimates and assumptions that affect the amounts reported. In the opinion of management, these Statements reflect all adjustments necessary to state fairly the results for the periods presented. Actual results could vary from these estimates and the operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

Adoption of new accounting and disclosure policies

Effective April 1, 2008 the Company adopted two new accounting standards issued by The Canadian Institute of Chartered Accountants ("CICA") on financial instruments comprising handbook sections 3862 "Financial Instruments – Disclosures" and 3863 "Financial Instruments – Presentation", which apply to interim and annual financial statements. These sections revise and enhance the current disclosure requirements but do not change the existing presentation requirements for financial instruments. The new disclosures provide additional information on the nature and extent of risks arising from financial instruments to which the Company is exposed and how it manages those risks. This disclosure is provided in note 13. The Company also adopted CICA handbook section 1535 "Capital Disclosures", which requires the Company to disclose qualitative and quantitative information relating to its objectives, policies and processes for managing its capital. This disclosure is provided in note 14.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

3. SHORT TERM INVESTMENTS

	30-Jun-08					March 31, 2008
	Carrying average costs		fair market value			Carrying average costs		fair market value
Marketable securities		5,179,985		4,950,092			4,637,738		3,330,970
Non-marketable securities		301,900		301,900			302,790		302,790
	$	5,481,885	$	5,251,992		$	4,940,528	$	3,633,760
Unrealised loss before tax			$	(229,893	)			$	(1,306,768	)
Movements in unrealised (loss)gain
At beginning of period				-1,306,768					959,702
(loss)gain during period				1,076,875					-2,266,470
At end of year			$	(229,893	)			$	(1,306,768	)

a. Marketable securities

Marketable securities are designated as “available-for-sale”.

Marketable securities are stated at fair value based on quoted market prices on the balance sheet as at June 30, 2008. An unrealised gain of $ 1,076,875 for the quarter ended June 30, 2008 was included in the consolidated statement of comprehensive loss and accumulated other comprehensive loss.

As at June 30, 2008, the Company held warrants in certain marketable securities which are exercisable at its option to convert into equal number of common shares of the said securities. The total exercise price of these warrants was $ 413,482 and the market value of the underlying securities was $452,993 as at that date. These warrants and the underlying unrealised gains and losses have not been accounted for in the financial statements since the Company has not yet determined if it would exercise these warrants when they become exercisable.

b. Non-marketable securities

The following investments which are stated at cost since their market value was not easily ascertainable as at June 30, 2008 and the management believes that it approximates the cost.

(a)	50,000 preference shares held in a private corporation for a cost of US$50,000. (CDN$ 50,950)

(b)	500,000 Class A shares held in a private corporation for a cost of US$50,000. (CDN$ 50,950)

(c)	1,000,000 common shares in a private corporation for a cost of $200,000. (see note 11(vii))

Based on the management review of the affairs of the above investee companies and discussions with their management, it was concluded that there was no other than temporary impairment in the carrying costs of these investments as at June 30, 2008. The factors considered in our impairment review included length of time the security was held, extent to which the fair value was below cost, current financial conditions of the investee companies, near term prospects of the investee companies and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

4. OFFICE EQUIPMENT AND FURNITURE

	Cost		Accumulated Amortisation		Net book value		Net book value
	As at June 30, 2008						March 31, 2008
							(Audited)
Office furniture	$	4,725	$	685	$	4,040	$	4,252
Computer	$	2,298	$	507	$	1,791	$	1,954

	$	7,023	$	1,192	$	5,831	$	6,206

5. PREPAID CONSULTING SERVICES

Prepaid consulting services relate to the fair value of shares and options issued under the Company’s Consultants’ Stock Compensation and Stock Option Plans to consultants for services that will be performed during the period subsequent to the balance sheet date. Changes during the period were as follows:

	Balance at April 1, 2008	Deferred during period	Expensed during period	Balance at June 30, 2008
Options	$7,878	$-	$(1,970)	$5,908
Stocks	278,018	1	(78,986)	199,033
	$285,896	1	$(80,956)	$204,941

	Balance at April 1, 2007	Deferred during the year	Expensed during the year	Balance at March 31, 2008
Options	$-	$7,878	$-	$7,878
Stocks	276,146	316,120	(314,248)	278,018
	$276,146	$323,998	$(314,248)	$285,896

	Balance at April 1, 2007	Deferred during period	Expensed during period	Balance at June 30, 2007
Stocks	276,146	-	(78,518)	197,628
	$276,146	$-	$(78,518)	$197,628

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

6. CAPITAL STOCK

(a) Authorized

Unlimited number of common shares

(b) Issued

	June 30, 2008				March 31, 2008
					(Audited)
	Common				Common
	Shares		Amount		Shares		Amount
Beginning of period		30,095,743	$	32,901,488		28,430,203	$	32,413,811
Warrants exercised		-		-		315,540		122,446
Expenses relating to warrants excercised				-				(12,245	)
Value of warrants transferred to capital stoock upon exercise		-		-				61,356
Issued under 2007 Consultant Stock Compensation Plan		-		-		1,350,000		316,120
		30,095,743	$	32,901,488		30,095,743	$	32,901,488

7. STOCK OPTION PLANS

(a) The following is a summary of all Stock Option Plans as at June 30, 2008::

Plan	Date of registration *	# of Options
		Registered		Issued		Expired		Exercised		Outstanding
1999 Stock option Plan	April 30, 2003		3,000,000		3,000,000		-70,000		-1,200,000		1,730,000
2003 Stcok Option Plan	July 22, 2004		2,500,000		2,500,000		-155,000		-400,000		1,945,000
The Robinson Plan	December 5, 2005		1,100,000		1,100,000		-		-		1,100,000
2005 Stock Option Plan	December 5, 2005		1,000,000		50,000		-		-		50,000
			7,600,000		6,650,000		-225,000		-1,600,000		4,825,000

* Registered with the Securities and Exchange Commission of the United States of America (SEC) as required under the Securities Act of 1933.

All options were fully vested on the dates of their grant.

(b) There were no movements during the quarter ended June 30, 2008. The weighted average exercise of the outstanding stock options is US$.46.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

7. STOCK OPTION PLANS - continued……..

		June 30, 2008				March 31, 2008
						(Audited)
		Options outstanding & excercisable				Options outstanding & excercisable
Exercise price in US$		Number		Weighted average remaining contractual life (years)		Number		Weighted average remaining contractual life (years)
	0.35		1,680,000		1.43		1,680,000		1.67
	0.50		3,015,000		1.60		3,015,000		1.85
	0.75		125,000		1.13		125,000		1.38
	1.00		5,000		1.13		5,000		1.38
	0.46		4,825,000		1.53		4,825,000		1.78

All options were fully vested immediately as at June 30 and March 31, 2008. The options can be exercised at any time after vesting within the exercise period in accordance with the applicable option agreement. The exercise price was more than the market price on the date of the grants for 1,995,000 options and less than the market price for the balance of 2,830,000 options. Upon expiry or termination of the contracts, vested options must be exercised within 30 days for consultants and 90 days for directors.

8. WARRANTS

a) Movement in warrants during the period are as follows:

	June 30, 2008						March 31, 2008
							(Audited)
	# of warrants		Weighted average exercise price		Fair value		# of warrants			Weighted average exercise price		Fair value

Issued and outstanding, beginning of period		12,846,420		0.44		2,153,857		13,161,960			0.44		2,215,213
Exercised during year		-				-		(315,540	)				(61,356	)
Issued and outstanding, end of year		12,846,420		0.44		2,153,857		12,846,420			0.44		2,153,857

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

8. WARRANTS - - Continued...

b) Details of weighted average remaining life of the warrants granted and outstanding are as follows:

		June 30, 2008				March 31, 2008
						(Audited)
		Warrants outstanding & excercisable				Warrants outstanding & excercisable
Exercise price in US$		Number		Weighted average remaining contractual life (years)		Number		Weighted average remaining contractual life (years)
	1.00		1,721,960		0.75		1,721,960		1.00
	0.35		11,124,460		0.52		11,124,460		0.77

	0.46		12,846,420		0.55		12,846,420		0.80

9. LOSS PER SHARE

Loss per share is calculated on the weighted average number of common shares outstanding during the period, which were 30,095,743 shares for the three months ended June 30, 2008 (three months ended June 30, 2007– 28,675,383).

The Company had approximately 12.8 million warrants and 4.8 million options, which were not exercised as at June 30, 2008. Inclusion of these warrants and options in the computation of diluted loss per share would have an anti-dilutive effect on loss per share and are therefore excluded from the computation. Consequently, there is no difference between loss per share and diluted loss per share.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

10. COMMITMENTS AND CONTINGENT LIABILITIES

(a)	The Company entered into media relations and investor relations contracts with Current Capital Corp., a shareholder corporation, effective July 1, 2004 initially for a period of one year and renewed automatically unless cancelled in writing by a 30-day notice for a total monthly fee of US$10,000.00

(b)

The Company entered into a consulting contract with Mr. Kam Shah, the Chief Executive Officer and Chief Financial Officer on April 1, 2005 for a five-year term up to March 31, 2010. The fee for each of the years is to be decided at the board meeting after the end of the third quarter of the calendar year. The fee for the calendar year ending December 31, 2008 consists of 450,000 common shares of the Company issued under 2007 Consultant compensation plan. Mr. Shah was also approved cash fee of $10,000 plus taxes per month for the period from January 2008 to May 2008 for his services in connection with the new internal control compliance matters. Effective June 1, 2008, Mr. Shah is allowed to draw $10,000 per month in arrears until market price of the Company’s common shares reaches $0.50 provided that such drawings will be considered as fee advances to be repaid when the market price of the common shares of the Company stays at $0.50 or above for a consecutive period of three months. . Further, the contract provides for a lump sum compensation of US$250,000 for early termination of the contract without cause. The contract also provides for entitlement to stock compensation and stock options under appropriate plans as may be decided by the board of directors from time to time.

(c)

The Company entered into a consulting contract with Mr. Terence Robinson, a key consultant and a former Chief Executive Officer, on April 1, 2003 for a six-year term up to March 31, 2009. The contract provides for a monthly fee of $10,000 inclusive of taxes plus reimbursement of expenses and a lump sum compensation of $250,000 for early termination of the contract without cause. Mr. Robinson accepted 550,000 common shares issued under 2007 Consultant Stock Compensation Plan, in lieu of his fees for the year ending December 31, 2008.

(d) The Company has a consulting contract with Mr. John Robinson. Mr. John Robinson is sole owner of Current Capital Corp., a firm with which the Company has an ongoing contract for media and investor relations, and a brother of Mr. Terence Robinson who is a key consultant to the Company and a former Chief Executive Officer of the Company. On March 28, 2008, the Company renewed the consulting contract with Mr. John Robinson for another year to June 30, 2009. The consulting fee was agreed to be US$82,000 which was pre-paid by issuance of 350,000 common shares under 2007 Consultant Stock Compensation Plan. Mr. Robinson will provide services that include assisting the management in evaluating new projects and monitoring short term investment opportunities that the Company may participate in from time to time.

(e) The Company has agreed to payment of a finder’s fee to Current Capital Corp., a related party, at the rate of 10% of the proceeds from exercise of any of the outstanding warrants. The likely fee if all the remaining warrants are exercised will be approximately US$562,000.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

11. RELATED PARTY TRANSACTIONS

Transactions with related parties are incurred in the normal course of business and are measured at the exchange amount. Related party transactions and balances have been listed below, unless they have been disclosed elsewhere in the financial statements. Amounts are for three months ended June 30, 2008 and balances are at June 30, 2008. Comparative amounts are for the three months ended June 30, 2007 and balances as at June 30, 2007.

(i)	Included in shareholders information expense is $30,459 (2007 – $33,254) to Current Capital Corp, (CCC) for media relation’s services. CCC is a shareholder corporation and a director of the Company provides accounting services as a consultant.

(ii)	CCC charged $4,439 for rent (2007: $1,459).

(iii)

Finders fees of $ nil (2007: $12,245) was charged by CCC in connection with the private placement.

(iv)	Business expenses of $5,008 (2007: $7,062) were reimbursed to directors of the corporation and $20,049 (2007 - $38,376) to a key consultant and a former chief executive officer of the Company.

(v)	Cash fee paid to directors for services of $22,500 (2007: $ nil). Fees prepaid to a director $2,470 (2007: $ nil). These fees are included under travel, promotion and consulting expenses.

(vi)	Accounts payable includes $9,576 (2007: $11,158) due to CCC, $3,355 (2007: $1,431) due to directors and $2,382 (2007: $10,125) due to a key consultant and a former chief executive officer of the Company.

(vii)

Included in short term investments is an investment of $200,000 (2007: $nil) in a private corporation controlled by a brother of the key consultant.

(viii)

Included in short term investments is an investment of $1,833,966 carrying cost and $1,932,320 fair value (2007: $1,771,745 carrying cost and $2,921,360 fair value) in a public corporation controlled by a key shareholder of the Company. This investment represents common shares acquired in open market or through private placements and represents less than 1% of the said Corporation.

(ix)	Included in other receivable is an advance of $10,000 made to a director. (2007: $ nil). The advance is repayable upon happening of certain events as explained in note 10 (b).

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

12. SEGMENTED INFORMATION

As at June 30 and March 31, 2008, the Company had only one major business segment-

Energy sector: This segment includes the Company’s acquisition of interests in joint ventures and projects relating to exploration and commercial drilling of oil and gas and related products.

The accounting policies of the segments are same as those described in Note 2 of the audited consolidated financial statements for the year ended March 31, 2008.

The Company had no business activity in the above segment.

The Company is now seeking business participation opportunities in all sectors. This may change the future major business segments for the Company.

Geographic Information

The Company operates from one location in Canada. Its assets were located in Canada as at June 30, 2008, March 31, 2008 and June 30, 2007.

13. FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISKS

The Company is exposed in varying degrees to a number of risks arising from financial instruments. Management’s close involvement in the operations allows for the identification

of risks and variances from expectations. The Company does not participate in the use of financial instruments to mitigate these risks and has no designated hedging transactions.

The Board approves and monitors the risk management processes. The Board’s main objectives for managing risks are to ensure liquidity, the fulfilment of obligations, the

continuation of the Company’s search for new business participation opportunities, and limited exposure to credit and market risks while ensuring greater returns on the surplus

funds on hand. There were no changes to the objectives or the process from the prior period.

The types of risk exposure and the way in which such exposures are managed are as follows:

(a) Concentration risk:

Concentration risks exist in cash and cash equivalents because significant balances are maintained with one financial institution and two brokerage firms. The risk is mitigated because the financial institution is a prime Canadian bank and the brokerage firms are well known Canadian brokerage firms with good market reputation.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

13. FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISKS – Continued ....

(b) Market price risk:

Market risk primarily arises from the Company’s short term investments in marketable securities which accounted for approximately 84% of total assets of the Company as at June 30, 2008( 69% at March 31, 2008). Further, the Company’s holding in one Canadian marketable security accounted for approximately 36% (March 31, 2008: 31%) of the total short term investment in marketable securities or 30% (March 31, 2008: 21%) of total assets at June 30, 2008.

The management mitigates this risk by daily monitoring of all its investments by experienced consultants.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due.

The Company ensures there is sufficient capital to meet short term business requirements. In addition, management and key consultants have opted to accept the Company’s common shares instead of cash towards their fee to ensure greater cash flow for other operational and business needs.

One of management’s goals is to maintain an optimal level of liquidity through the active management of the assets, liabilities and cash flows.

The Company’s maintains limited cash for its operational needs while most of its surplus cash is invested in short term marketable securities which are available on short notice to fund the Company’s operating costs and other financial demands.

(d) Currency risk

The operating results and financial position of the Company are reported in Canadian dollars. Significant part of cash and short term investments are held in US dollars – approximately 17% of total assets at June 30, 2008 (23% as at March 31, 2008). The results of the Company’s operations are therefore subject to currency transaction and translation risk.

The fluctuation of the US dollar in relation to the Canadian dollar will consequently impact the loss of the Company and may also affect the value of the Company’s assets and the amount of shareholders’ equity.

Comparative foreign exchange rates are as follows:

June 30, 2008 March 31, 2008

US Dollar to CDN Dollar 1.0190 1.0279

The Company has not entered into any agreements or purchased any foreign currency hedging arrangements to hedge possible currency risks at this time.

Bontan Corporation Inc.

Notes to Consolidated Financial Statements

(Canadian Dollars)

June 30, 2008 and 2007

(Unaudited – see Notice to Reader dated July 30, 2008)

14. CAPITAL DISCLOSURES

The Company considers the items included in Shareholders’ Equity as capital. The Company currently has no debts or significant financial commitments. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business opportunities and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and short term investments.

As at June 30, 2008, the shareholders’ equity was approximately $ 6.2 million (March 31, 2008: $ 5.2 million). Approximately 85% or $5.2 million was held in short term investments (March 31, 2008: $3.6 million or 69%) and the balance was held in cash. Absence of any external debts indicates the Company’s continued financial strength.

The Company is not subject to any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital.

The Company expects its current capital resources will be sufficient to carry its business plans and operations through its current operating period.

15. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These financial statements have been prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP"). Which are not materially different from principles, practices and methods used in the United States ("US GAAP") and in SEC Regulation S-X.

Future U.S. accounting policy changes

There were no new accounting developments in the US standards that would affect the results of operations or financial position of the Company other than those detailed in the

audited consolidated financial statements for the year ended March 31, 2008.

mda1q09.htm

BONTAN CORPORATION INC.

THREE MONTHS ENDED JUNE 30, 2008

MANAGEMENT’S DISCUSSION AND ANALYSIS

Prepared as at July 30, 2008

Index

Overview 60; 3

Summary of results 3

Number of common shares, options and warrants 4

Business environment 4

Risk factors 4

Forward looking statements 4

Business plan 5

Results of operations 5

Liquidity and Capital Resources 9

Working capital 9

Operating cash flow 10

Investing cash flows 10

Financing cash flows 10

Key contractual obligations 10

Off balance sheet arrangements 11

Transactions with related parties 11

Financial and derivative instruments 12

Critical accounting estimates 12

Disclosure controls and procedures 13

Internal controls over financial reporting 13

Current Outlook 14

Public securities filing 14

Management Discussion and Analysis

The following discussion and analysis by management of the financial condition and financial results for Bontan Corporation Inc. for the three months ended June 30, 2008 should be read in conjunction with the unaudited Consolidated Financial Statements for the three months ended June 30, 2008 and the audited Consolidated Financial Statements and Management Discussion and Analysis for the year ended March 31, 2008. The financial statements and the financial information herein have been prepared in accordance with generally accepted accounting principles in Canada.

This management discussion and analysis is prepared by management as at July 30, 2008. The Company’s auditors have not reviewed it.

In this report, the words “us”, “our”, “the Company” and “Bontan” have the same meaning unless otherwise stated and refer to Bontan Corporation Inc. and its subsidiary.

Overview

Summary of Results

During the three months ended June 30, 2008, the management remained primarily busy with completion of the annual financials and related audit preparations. Several proposals were received involving participation in oil or gas exploration projects during the quarter under review. We short listed one oil exploration project that met our criteria and subjected it to our detailed due diligence. The said proposal is still under review. As a result, at the end of the quarter, the Company had no exploration projects and had no proven reserves of oil or gas. We are also seeking opportunities into other sectors

Meanwhile, the surplus cash on hand continued to be invested in short-term marketable securities. Market value of the securities on hand improved significantly during the quarter resulting in unrealised gains of approximately $1.1 million as at June 30, 2008.

The following table summarizes financial information for the 1st quarter ended June 30, 2008 and the preceding seven quarters: ( All amounts in ‘000 CDN$ except Net income(loss) per share, which are actual amounts)

Quarter ended	June 30		Mar-31		Dec. 31		Sept.30		Jun-30		Mar-31		Dec. 31		Sept.30
	2008		2008		2007		2007		2007		2007		2006		2006
Total Revenue		193		156		18		25		123		499		130		89
Net (loss) income		-20		23		-170		-253		-172		309		-3		-91
Working capital		6,231		5,174		5,692		6,453		6,907		6,625		6,002		6,011
Shareholders equity		6,237		5,180		5,694		6,455		6,907		6,624		6,002		6,011
Net loss per share - basic and diluted		0.00		0.00		-0.01		-0.01		-0.01		0.00		0.00		0.00

Number of common shares, options and warrants

These are as follows:

	As at June 30, 2008 and July 30, 2008
Shares issued and outstanding	30,095,743
Warrants issued and outstanding ( a)	12,846,420
Options granted but not yet exercised (b)	4,825,000

(a)	Warrants are convertible into equal number of common shares of the Company within two years of their issuance, at average exercise price of $0.46. These warrants have weighted average remaining contractual life of 0.55 years.

(b)	Options are exercisable into equal number of common shares at an average exercise price of US$0.46 and have a weighted average remaining contractual life of approximately 1.53 years.

Business Environment

Risk factors

Please refer to the Annual Report in the form F-20 for the fiscal 2008 for detailed information as the economic and industry factors that are substantially unchanged.

Forward looking statements

Certain statements contained in this report are forward-looking statements. All statements, other than statements of historical facts, included herein or incorporated by reference herein, including without limitation, statements regarding our business strategy, plans and objectives of management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates” or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that such forward-looking statements will prove to be correct.

Each forward-looking statement reflects our current view of future events and is subject to risks, uncertainties and other factors that could cause actual results to differ materially from any results expressed or implied by our forward-looking statements.

Risks and uncertainties include, but are not limited to:

·	Our lack of substantial operating history;

·	The success of the exploration prospects, in which we have interests;

·	Uninsured risks;

·	The impact of competition;

·	The enforceability of legal rights;

·	The volatility of oil and gas prices;

·	Weather and unforeseen operating hazards;

Important factors that could cause the actual results to differ materially from our expectations are disclosed in more detail under the “Risk Factors” in our Annual report for fiscal 2008. Our forward-looking statements are expressly qualified in their entirety by this cautionary statement.

Currently we do not hold interests in any exploration projects and have no reserves as defined in Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). All information contained herein regarding resources is references to undiscovered resources under NI 51-101, whether stated or not.

Business plan

The Company’s primary business plan has been expanded to cover projects not only in resource sector but in all other sectors given our inability to find any suitable projects in oil and gas exploration that could satisfy the Company’s business model. Most of the exploration projects that we reviewed so far were either technically highly speculative or not cost effective or demanded unreasonably higher acquisition price. On the other hand, we have recently been approached with projects in high technology, health care and alternative energy sector, which may generate better returns for our capital.

Through its wholly owned subsidiary, the Company will continue to seek highly visible opportunities in countries around the globe that offer exciting and attractive propositions. The company will seek to minimize risk by bringing in either joint venture, carried or working interest partners, depending on the size and scale of the project.

Results of operations

Three months ended June 30	2008	2007
	in 000' CDN $	in 000' CDN $
Income	193	123
Expenses	(213)	(295)
Net loss for year	(20)	(172)
Deficit at end of period	(32,666)	(32,246)

Overview

During the three months ended June 30, 2008, the main activity was the preparations for the 2008 annual financials and audit. We continued to receive and review business proposals and have focused on one proposal relating to oil and gas exploration project. Currently, we are still reviewing the details with the other parties and have not yet concluded in the matter.

We also continued to roll over funds in short term marketable securities which have shown realized gains of approximately $188,000 and an unrealized gain of approximately $1.1 million at the end of the quarter.

The key events during the three months ended June 30, 2007 were:

1.	The Company carried out due diligence on an oil exploration proposal, which was selected from some five proposals received during the period. Our due diligence however did not produce any satisfactory results and the proposal was therefore not pursued further.

2.	We also spent significant time discussing a water purification project financing proposal. This involved several discussions and meetings with the promoters of the project. We were however unable to agree on mutually acceptable terms and the proposal is not now actively pursued by us.

Several new accounting policies came into effect on April 1, 2007 and were implemented during the quarter. These policies affect the way our short term marketable investments are valued and accounted for. These are further explained in detail in the consolidated financial statements for the quarter ended June 30, 2007.

4.	The surplus funds meanwhile continued to be invested in short term marketable securities. Approximately $3.6 million remained invested in marketable securities. The fair value of these investments at June 30, 2007 was $3.9 million.

Income

Income during the quarters ended June 30, 2008 and 2007 consisted mainly of realized gains on disposal of short term marketable securities, which accounted for 98% (2007:83%) of income. The balance was interest earned on cash balances with brokerage firms.

Owing to its past successes, management decided to continue its strategy of keeping its surplus cash invested into short-term marketable securities, until the company can find an opportunity of participating in oil or gas exploration project or any other suitable business opportunity.

Expenses

The overall analysis of the expenses is as follows:

Three months ended June 30	2008	2007

Operating expenses	$116,030	$111,107
Consulting fee settled for common shares	80,956	78,518
Exchange loss	15,736	105,701

	$212,722	$295,326

Operating Expenses

Travel, promotion and consulting –

Three months ended June 30	2008	2007

Travel, meals and entertainment	$ 19,969	$ 40,992
Consulting and payroll	35,583	9,578

	$ 55,552	$ 50,570

% of operating expenses	48%	46%

These expenses were substantially incurred by the key consultant, Mr. Terence Robinson and included approximately $5,500 in visiting Los Angeles, USA in connection with a networking conference

Increased costs in 2007 period compared to 2008 period were mainly due to number of meetings on the water project being held outside of Canada and also included entertainment costs of $6,250 incurred on a group of potential investors.

Consulting costs

Consulting fee in both the quarters ended June 30, 2008 and 2007 mainly consisted of fees paid to administrative assistant. 2008 quarter also included fee of $ 20,000 paid to Mr. Shah, the CEO and CFO for his services in connection with the new internal control compliance matters.

Both Mr. Shah and Mr. Robinson, the key consultant accepted shares in lieu of their fees to minimize the cash outlay of the Company.

The Company prefers to settle the fees of their consultants in shares and options in order to retain its funds for business investments purposes.

Other operating costs -

Three months ended June 30,	2008	2007
Shareholder information	30,459	36,321
Other	30,019	24,216
	$ 60,478	$ 60,537
% of operating costs	52%	54%

Shareholder information

Shareholder information costs comprise investor and media relations fee, costs of holding annual general meeting of the shareholders and various regulatory filing fees.

Major cost for the three months ended June 30, 2008 and 2007 consisted of media relation and investor relation services provided by Current Capital Corp. under contracts dated July 1, 2004, which are being renewed automatically unless canceled in writing by a 30-day notice for a total monthly fee of US$10,000. Current Capital Corp., is a related party. Differences in the Canadian dollar costs between the two periods were due to exchange rate fluctuations between US dollar and Canadian dollar.

Other operating costs

These costs include rent, professional fee, telephone, Internet, transfer agents fees and other general and administration costs.

Increase in other operating costs in 2008 period compared to 2007 period was mainly due to increase in the rent cost from approximately $500 per month in 2007 to $ 1,400 per month in 2008. Effective April 1, 2008, the Company subleased larger premises from Current Capital Corp – from approximately 300 sq. ft. to 1,000 sq. ft., which increased the rent cost correspondingly. The larger premises was necessary to accommodate meeting room and provide space for visiting clients and others.

All other costs remained largely consistent.

Consulting fees settled for common shares

Three months ended June 30	2008	2007
Stocks	78,986	78,518
Options	1,970	-
	$ 80,956	$ 78,518

Stock based compensation is made up of the Company’s common shares and options being issued to various consultants and directors of the Company for services provided. The Company used this method of payment mainly to conserve its cash flow for business investments purposes. This method also allows the Company to avail the services of consultants with specialized skills and knowledge in the business activities of the Company without having to deplete its limited cash flow.

During the quarters ended June 30, 2008 and June 30, 2007, no new Plans were created. However the company still had 950,000 unalloted options from the 2005 Stock Option Plan.

Exchange Loss

Exchange loss related to translation losses arising from converting foreign currency balances, mainly in US dollar into Canadian dollar, which is the reporting unit of currency, on consolidation.

The Company’s treasury transactions – issuance of shares, exercise of warrants and options are in US dollar. Similarly, approximately 20% cash and short term investments are in US dollars.

Canadian dollar continued to strengthen over the US dollar during the three months ended June 30, 2008. However, changes were minor - The exchange rates between the two currencies changed from 1US to CDN 1.03 at March 31, 2008 to 1.1.02 at June 30, 2008. The resultant Exchange loss of $15,736 was relatively small.

Exchange loss for the quarter ended June 30, 2007 was $05,701 which was also due to continuous strengthening of Canadian dollar against US dollar on one hand and Company’s increasing exposure in US dollar, The exchange rates between the two currencies changed from 1US to CDN 1.15 at March 31, 2007 to 1US to CDN 1.06 at June 30, 2007. US Dollar assets at June 30, 2007 were higher at $1.2 million, resulting in a much higher exchange loss.

Liquidity and Capital Resources

Working Capital

As at June 30, 2007, the Company had a net working capital of approximately $6.2 million compared to a working capital of $5.2 million as at March 31, 2008.

98% of the working capital – approximately $6.1 million – at June 30, 2008 was in the form of cash and short term investments compared to 94% at March 31, 2008.

Significant improvement in the liquid working capital was entirely due to significant improvement in the market value of the short term investments on hand which rose by approximately $1.1 million.

Cash on hand as at June 30, 2008 was $0.8 million compared to $1.3 million as at March 31, 2008.

Overall the company continued to have minimum debts and high amount of cash or assets which can be easily liquidated to enable the Company to take immediate advantage of any attractive business opportunity. In our opinion, the working capital is sufficient not only to cover our overheads but also to enable us to exploit business opportunities promptly.

Operating cash flow

During the quarter ended June 30, 2008, operating activities required net cash outflow of $106,189 compared to the cash outflows of $184,369 during the quarter ended June 30, 2007.

Operating cash requirements were met primarily through cash on hand.

Investment cash flows

During the three months ended June 30, 2008, the Company invested approximately 1.6 million in short term marketable securities while realised approximately $1.2 million from the disposal of such securities, which were reinvested. Net additional investments were funded from the available cash on hand.

As a result, the Company had short term investments at a carrying cost of approximately $5.5 million as at June 30, 2008 – of which $5.2 million or 95% was held in Canadian currency and the balance 5% was held in US currency. Approximately 95% of the investments were in 35 public companies while 5% was invested in three private companies.

During the three months ended June 30, 2007, approximately $ 1.3 million was invested in short term marketable securities and $ 1.1 was realised from the disposal of such securities, net additional investment of $0.2 million was met from the net cash flow from private placement and cash on hand.

Financing cash flows

There were no treasury operations during the three months ended June 30, 2008.

During the three months ended June 30, 2007, the Company received a net amount of $110,000 due to exercise of 315,540 warrants by a shareholder at an exercise price of US$0.35 per warrant.

Key Contractual obligations

These are detailed in Note 10 – commitments and contingent liabilities to the consolidated unaudited financial statements for the three months ended June 30, 2008.

Off balance sheet arrangements

At June 30, 2008 and 2007, the Company did not have any off balance sheet arrangements, including any relationships with unconsolidated entities or financial partnership to enhance perceived liquidity.

Transactions with related parties

Given below is background information on some of the key related parties and transactions with them:

1.	Current Capital Corp. (CCC). CCC is a related party in following ways –

a.	Director/President of CCC, Mr. John Robinson is a consultant with Bontan

b.	CCC provides media and investor relation services to Bontan under a consulting contract.

c.	Chief Executive and Financial Officer of Bontan is providing services to CCC as CFO.

d.	CCC and John Robinson hold significant shares, options and warrants in Bontan.

Bontan shares premises with CCC for which CCC charges rent on a quarterly s based on the actual costs and area occupied. Charges from CCC reflect actual costs and do not include any mark ups.

Another charge from CCC relates to the investor relations and media relation services provided under a contract. The charge is a fixed sum of US$10,000 per month plus taxes.

CCC also charged a finder’s fee at the rate of 10% of the gross money raised for the Company through issuance of shares and warrants under private placements. In addition,

2.	Mr. Kam Shah is a director of the Company and also provides services as chief executive and financial officer under a five-year contract. The compensation is decided by the board on an annual basis and is usually given in the form of shares and options.

Mr. Terence Robinson was Chairman of the Board and Chief Executive Officer of the Company since October 1, 1991. He resigned from the Board on May 17, 2004 but continues with the Company as a key consultant. He advises the board in the matters of shareholders relations, fund raising campaigns, introduction and evaluation of investment opportunities and overall operating strategies for the Company.

Financial and derivative Instruments

We are exposed to financial market risks, credit risks on investments and foreign currency exchange rates. We do not use derivative financial instruments.

Financial Market and Credit Risk

At June 30, 2008 we had invested approximately $5.4 million (March 31, 2008: $4.9 million) in short-term marketable securities. A fundamental objective of our investment policy is to obtain better than bank interest return on the surplus funds being held while we review and finalize opportunities for participation in any business opportunities. Our investments are mostly in marketable securities quoted and traded on Canadian or US exchanges. We have consultants with extensive experience monitoring our investments on a daily basis and therefore believe that we will be able to respond on time to any major factors affecting the value of our investments and reduce or eliminate the risks of significant market price fluctuations.

Foreign Currency Risk

The majority of our expenditures is in Canadian or United States dollars. As at June 30, 2008; approximately $1.0 million – 17% - of our assets were held in US dollar. (As at March 31, 2008: $1.2 million or 23%). We incurred a foreign exchange loss of $15,736 for the three months ended June 30, 2008 (see Results of Operations – Exchange loss above), which was relatively smaller due to minimal fluctuations in the exchange rates during the period and smaller holdings in US dollar.

Further, the Company also plans activities in different countries involving different local currencies. Exchange rates for these currencies in the future may have an adverse effect on our earnings or assets when these currencies are exchanged for Canadian dollars. The Company has not entered into forward foreign exchange contracts in an attempt to mitigate this risk. To date, losses and gains resulting from foreign exchange transactions have been included in our results of operations, since our subsidiary is fully integrated to the Company.

The Company has no debt instruments subject to interest payments, sales contracts, swaps, derivatives, or forward agreements or contracts, or inventory.

The Company has no currency or commodity contracts, and the Company does not trade in such instruments.

The Company periodically accesses the capital markets with the issuance of new shares to fund operating expenses and new projects.

Critical accounting estimates

The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada. The significant accounting policies used by the Company are same as those disclosed in note 2 to the consolidated financial statements for the year ended March 31, 2008. Certain accounting policies require that the management make appropriate decisions with respect to estimates and assumptions that affect the assets, liabilities, revenue and expenses reported by the Company. The Company’s management continually reviews its estimates based on new information, which may result in changes to current estimated amounts.

There were two major changes in the disclosure policies, which became effective on April 1, 2008. These changes related to disclosure and presentation of financial instruments and capital disclosures. These changes are further explained and detailed

in the unaudited consolidated financial statements for the three months ended June 30, 2008.

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings made pursuant to Multilateral Instrument 52-109 and as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the applicable regulatory bodies’ rules and forms.

Our management, including our Chief Executive Officer, who also acts as Chief Financial Officer, together with the members of our audit committee, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer has concluded that our disclosure controls and procedures were effective in relation to the level and complexity of activities in our Company as of the end of the period covered by this report.

Internal Controls over Financial Reporting

The Company has designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of the company’s financial reporting and the preparation of financial statements in compliance with Canadian generally accepted accounting principles.

The Company’s Chief Executive Officer and Chief Financial Officer are also responsible for the design of internal controls required in order to provide reasonable assurance that processes used for preparation of financial statements and financial reporting for external purposes are reliable and in accordance with Canadian GAAP. They have evaluated the design of our internal controls and procedures over financial reporting as of the end of the period covered by this report and believe the design to be sufficient to provide such reasonable assurance.

Regardless of how well an internal control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will prevent or detect all misstatements, due to error or fraud, from occurring in the financial statements due to the inherent limitations of any internal control system.

There were no major changes in the company’s internal controls over financial reporting that occurred during the three months ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

Current Outlook

Our long-term business plan continues to be focused on becoming a diversified natural resource company with emphasis on investing in major oil and gas exploration prospects. However, we have been trying in vain for the past several months to find suitable projects in oil and gas sector. We have therefore expanded our mandate to look for projects in any other sector so long as they meet our selection criteria and help improve our Company’s value for our shareholders.

Through our wholly-owned subsidiaries, we will continue to seek highly visible opportunities in countries around the globe that offer exciting and attractive propositions. We will seek to minimize risk by bringing in either joint venture, carried or working interest partners, depending on the size and scale of the project.

Therefore, our current business model, based on our experience with resource projects handled over the recent past and our assumptions set forth above, envisions the following key features:

Preference will be given to projects that have proven revenue and are on the verge of expansion/diversification

We will invest our resources in projects which involve multiple opportunities;

Preference will be given to projects with other experienced partners who are involved in the project;

We will attempt to allocate our cash or liquidity resources to more than one project.

Public securities filings

Additional information, including the Company’s annual information form in the Form 20-F annual report is filed with the Canadian Securities Administrators at www. Sedar .. com and with the United States Securities and Exchange Commission and can be viewed at www. Edgar. com

Bontan Corporation Inc. – M D & A Quarter ended June 30, 2008– prepared on July 30, 2008

form52109f09.htm

Form 52-109F2

Certification of Interim Filings

I, Kam Shah, Chief Financial Officer of Bontan Corporation Inc. (“the Issuer”), certify that:

1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of the Issuer for the interim period ending June 30, 2008

2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings;

3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the Issuer, as of the date and for the periods presented in the interim filings;

4. The Issuer’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures and internal control over financial reporting for the Issuer, and we have:

(a) designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the Issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared; and

(b) designed such internal control over financial reporting, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Issuer’s GAAP; and

5. I have caused the Issuer to disclose in the interim MD & A any change in the Issuer’s internal control over financial reporting that occurred during the Issuer’s most recent interim period that has materially affected, or is reasonably likely to materially affect, the Issuer’s internal control over financial reporting.

Date: July 30, 2008

“Kam Shah”

Kam Shah

Chief Financial Officer

form52109f209.htm

Form 52-109F2

Certification of Interim Filings

I, Kam Shah, Chief Executive Officer of Bontan Corporation Inc. (“the Issuer”), certify that:

Date: July 30, 2008

“Kam Shah”

Kam Shah

Chief Executive Officer