--12-31 mnap MANAS PETROLEUM Corp 2012-09-30 0001074447 No Smaller Reporting Company No 10-Q false 172592292 Yes 2012 Q3 0001074447 2012-11-13 0001074447 2012-01-01 2012-09-30 0001074447 2012-09-30 0001074447 2011-12-31 0001074447 2012-07-01 2012-09-30 0001074447 2011-07-01 2011-09-30 0001074447 2011-01-01 2011-09-30 0001074447 2004-05-25 2012-09-30 0001074447 2010-12-31 0001074447 2004-05-24 0001074447 2011-09-30 0001074447 2004-05-26 2004-12-31 0001074447 us-gaap:CommonStockMember 2004-05-26 2004-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2004-05-26 2004-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2004-05-26 2004-12-31 0001074447 us-gaap:RetainedEarningsMember 2004-05-26 2004-12-31 0001074447 2004-12-31 0001074447 us-gaap:CommonStockMember 2004-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2004-12-31 0001074447 us-gaap:RetainedEarningsMember 2004-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2004-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2005-01-01 2005-12-31 0001074447 2005-01-01 2005-12-31 0001074447 us-gaap:RetainedEarningsMember 2005-01-01 2005-12-31 0001074447 2005-12-31 0001074447 us-gaap:CommonStockMember 2005-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2005-12-31 0001074447 us-gaap:RetainedEarningsMember 2005-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2005-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2006-01-01 2006-12-31 0001074447 2006-01-01 2006-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2006-01-01 2006-12-31 0001074447 us-gaap:RetainedEarningsMember 2006-01-01 2006-12-31 0001074447 2006-12-31 0001074447 us-gaap:CommonStockMember 2006-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2006-12-31 0001074447 us-gaap:RetainedEarningsMember 2006-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2006-12-31 0001074447 2007-01-01 2007-12-31 0001074447 us-gaap:CommonStockMember 2007-01-01 2007-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2007-01-01 2007-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2007-01-01 2007-12-31 0001074447 us-gaap:RetainedEarningsMember 2007-01-01 2007-12-31 0001074447 2007-12-31 0001074447 us-gaap:CommonStockMember 2007-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2007-12-31 0001074447 us-gaap:RetainedEarningsMember 2007-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2007-12-31 0001074447 2008-01-01 2008-12-31 0001074447 us-gaap:CommonStockMember 2008-01-01 2008-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2008-01-01 2008-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2008-01-01 2008-12-31 0001074447 us-gaap:RetainedEarningsMember 2008-01-01 2008-12-31 0001074447 2008-12-31 0001074447 us-gaap:CommonStockMember 2008-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2008-12-31 0001074447 us-gaap:RetainedEarningsMember 2008-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2008-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2009-01-01 2009-12-31 0001074447 us-gaap:RetainedEarningsMember 2009-01-01 2009-12-31 0001074447 2009-01-01 2009-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2009-01-01 2009-12-31 0001074447 2009-12-31 0001074447 us-gaap:CommonStockMember 2009-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2009-12-31 0001074447 us-gaap:RetainedEarningsMember 2009-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2009-12-31 0001074447 2010-01-01 2010-12-31 0001074447 us-gaap:CommonStockMember 2010-01-01 2010-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2010-01-01 2010-12-31 0001074447 us-gaap:RetainedEarningsMember 2010-01-01 2010-12-31 0001074447 us-gaap:CommonStockMember 2010-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2010-12-31 0001074447 us-gaap:RetainedEarningsMember 2010-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2010-12-31 0001074447 2011-01-01 2011-12-31 0001074447 us-gaap:CommonStockMember 2011-01-01 2011-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2011-01-01 2011-12-31 0001074447 us-gaap:RetainedEarningsMember 2011-01-01 2011-12-31 0001074447 us-gaap:CommonStockMember 2011-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2011-12-31 0001074447 us-gaap:RetainedEarningsMember 2011-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2011-12-31 0001074447 us-gaap:CommonStockMember 2012-01-01 2012-09-30 0001074447 us-gaap:AdditionalPaidInCapitalMember 2012-01-01 2012-09-30 0001074447 us-gaap:RetainedEarningsMember 2012-01-01 2012-09-30 0001074447 us-gaap:CommonStockMember 2012-09-30 0001074447 us-gaap:AdditionalPaidInCapitalMember 2012-09-30 0001074447 us-gaap:RetainedEarningsMember 2012-09-30 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2012-09-30 shares iso4217:USD iso4217:USD shares pure

6483593

13629370

102725

102735

161260

45699

10000000

576109

356252

17323687

14134056

113938

80829

238304

876856

20049078

29366063

21278176

29685196

38601863

43819252

247316

1194844

2272979 237657

131244

472397

173022

212590

2824561

2117488

80427

2904988

2197915

172592

172467

77578374

76702841

-42105092

-35304972

51001

35696875

41621337

38601863

43819252

0.001

300000000

172592292

172467292

172592292

172467292

1375728

644165

743672

1978122

1446244

29783368

3720565

1700656

4958255

2327222

18294911

12572

13490

38128

35987

318097

391336

344523

1416390

518537

12551236

392214

579223

1251151

1407303

16627570

5160852

3381564

9642046

5735293

77575182

0 0 0 0 3864197 0 0 0 0 900

-5160852

-3381564

-9642046

-5735293

-72336157

46859

-12111

63657

-57587

206392

0 0 0 0 -10441089 0 0 0 0 9439775

57850918

-6671220 -32854768 6306060 -49090911 -10734698

2169

2534

245

606550

8943

8412

23304

27709

2630428

-117049

-3507397

-15299384

-36256826

-6800496

-54911255

-50542733

241

285

-376

-652

10556

-24523

-15299625

-36257111

-6800120

-54910603

-50577812

72000

51663

-647213

72000

51663

-595550

-15299625

-36185111

-6800120

-54858940

-51173362

18700

-15299625

-36185111

-6800120

-54858940

-51192062

51001

-15299625

-36185111

-6800120

-54858940

-51141061

-18700

-15299625

-36185111

-6800120

-54858940

-51122361

172592292

170641205

172532073

155641007

121436358

172592292

170641205

172532073

155641007

121436358

-0.09

-0.21

-0.04

-0.35

-0.42

-0.09

-0.21

-0.04

-0.35

-0.41

-0.01

-0.09

-0.21

-0.04

-0.35

-0.42

-0.09

-0.21

-0.04

-0.35

-0.41

-0.01

3507397 0 3508297

72000

349910

0 0 -19880864 0 0 -204753 0 0 25619 0 0 236798 0 0 83202 0 0 764142 0 0 33847

875658

320448

27083559

-335418

-25968

-733804

-947528

838334

-262053

1125169

-45868

1761014

80427

-8906431

-4659509

-49533720

10000000

-307856

75340

4541

551525

4103

83429

12115648

72000

26953458

-10

3575

102725

67747

1736565

63884

16007034

0 0 80019

22225250

37282734

1680000

3760000

540646

2000000

4000000

540646

240062

670571

0 0 2260959 0 0 6510

3385832

4653720

2520000

917698

2348250

279910

-39568

240000

173022

-39568

20117000

39711303

-7209434

15521375

6184617

1736571

63657

-57586

298976

17200360

-569000 0 -569000 0 0 1466052 0 0 193003 0 280172 280172 0 0 2689910 0 0 213479 0 0 917698 0 0 46406821 0 0 3449704 80000000 80000 19 80019

-77082

-601032

80000000

80000

-601032

-77082

-598095

218699

-1993932

80000000

80000

-2594964

141617

-2373328

1466052 1466052

-88153

1516004

80000000

80000

1466071

-1078960

53464

520575

20110400 20111 -356732 -336621

880000

880

7244409

7245289

10330152 10330 9675667 9685997 10709 11 -11 825227 825 3521232 3522057

3069

-12825496

112156488

112157

21550636

-13904456

56533

7814870

2895245

2895

9787978

9790873

4000000 4000 1845429 1849429 10110346 10110346 557989 557989

-13212

-30296106

119051733

119052

43852378

-44200563

43322

-185811

-9679776 9086972 -592804 10883811 10883811

4475953

7679

-21618015

119051733

119052

49532366

-56731606

51001

-7029187

3832133

3832

2257127

2260959

72644 72644 77439 77439

2103527

2103

4174558

4176661

240062 240062

2517447

74442353

124987393

124987

53836749

17710747

51001

71723484

2106082

2106

797190

799296

44450500 44451 19552378 19596829

923317

923

-923

-2517447

-53015719

172467292

172467

76702841

-35304972

51001

125000

125

875533

875658

-6800120

172592292

172592

77578374

-42105092

51001

1.     BASIS OF PRESENTATION The financial statements presented in this Form 10-Q comprise Manas Petroleum Corporation (“Manas” or the “Company”) and its subsidiaries (collectively, the “Group”). The unaudited interim Consolidated Financial Statements included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and present our financial position, results of operations, cash flows and changes in stockholder’s equity. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. In terms of the oil and gas industry lifecycle, the Company considers itself to be an exploration stage company. Since it has not realized any revenues from its planned principal operations, the Company presents its financial statements in conformity with US GAAP that apply in establishing operating enterprises, i.e. development stage companies. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. The Company, formerly known as Express Systems Corporation, was incorporated in the State of Nevada on July 9, 1988. On April 10, 2007, the Company completed the Exchange Transaction whereby it acquired its then sole subsidiary DWM Petroleum AG (“DWM Petroleum”) pursuant to an exchange agreement signed in November 2006 whereby 100% of the shares of DWM Petroleum were exchanged for 80,000,000 common shares of the Company. As part of the closing of this exchange transaction, the Company issued 800,000 shares as finder’s fees at the closing price of $3.20. The acquisition of DWM Petroleum has been accounted for as a merger of a private operating company into a non-operating public shell. Consequently, the Company is the continuing legal registrant for regulatory purposes and DWM Petroleum is treated as the continuing accounting acquirer for accounting and reporting purposes. The assets and liabilities of DWM Petroleum remained at historic cost. Under US GAAP in transactions involving the merger of a private operating company into a non-operating public shell, the transaction is equivalent to the issuance of stock by DWM Petroleum for the net monetary assets of the Company, accompanied by a recapitalization. The accounting is identical to a reverse acquisition, except that no goodwill or other intangibles are recorded. The Group has a focused strategy on exploration and developing oil and gas resources in Central Asia (Tajikistan, Mongolia and Kyrgyz Republic). In the Balkan Region (Albania) the Company holds an investment in associate Petromanas Energy Inc.

1 80000000 800000 3.2

2.     ACCOUNTING POLICIES The accompanying financial data as of September 30, 2012 and December 31, 2011 and for the three and nine-month periods ended September 30, 2012 and 2011 and for the period from inception, May 25, 2004, to September 30, 2012, has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The complete accounting policies followed by the Group are set forth in Note 2 to the audited consolidated financial statements contained in the Group's Annual Report on Form 10-K for the year ended December 31, 2011. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures, if any, of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates.   In the opinion of management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present a fair statement of financial position as of September 30, 2012 and December 31, 2011, results of operations for the three and nine-month periods ended September 30, 2012 and 2011 and for the period from inception, May 25, 2004, to September 30, 2012, cash flows for the nine-month periods ended September 30, 2012 and 2011 and for the period from inception, May 25, 2004, to September 30, 2012 and statement of shareholders’ equity (deficit) for the period from inception, May 25, 2004, to September 30, 2012, as applicable, have been made. The result of operations for the three and nine-month periods ended September 30, 2012 is not necessarily indicative of the operating results for the full fiscal year or any future periods. Reclassification The Company reclassified $200,020 from “Accrued Expenses Professional Fees” to “Other Accrued Expenses” as of December 31, 2011 in order to conform to the current period presentation. Successful Efforts Method of Accounting The Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation, depletion and amortization are eliminated from property accounts and the resultant gain or loss is recognized. Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. Development costs of proved oil and natural gas properties, including estimated dismantlement, restoration, abandonment costs and acquisition costs, are depreciated and depleted on a well by well basis by the units-of-production method using estimated proved developed reserves. We perform quarterly assessments of unproved oil properties for impairment on a field basis, and recognize a loss at the time of impairment by recording an expense to “exploration costs”. In determining whether an unproved property is impaired we consider numerous factors including, but not limited to, dry holes drilled, current exploration plans, favorable or unfavorable exploratory activity on adjacent areas and our geologists' evaluation.

Reclassification The Company reclassified $200,020 from “Accrued Expenses Professional Fees” to “Other Accrued Expenses” as of December 31, 2011 in order to conform to the current period presentation.

Successful Efforts Method of Accounting The Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation, depletion and amortization are eliminated from property accounts and the resultant gain or loss is recognized. Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. Development costs of proved oil and natural gas properties, including estimated dismantlement, restoration, abandonment costs and acquisition costs, are depreciated and depleted on a well by well basis by the units-of-production method using estimated proved developed reserves. We perform quarterly assessments of unproved oil properties for impairment on a field basis, and recognize a loss at the time of impairment by recording an expense to “exploration costs”. In determining whether an unproved property is impaired we consider numerous factors including, but not limited to, dry holes drilled, current exploration plans, favorable or unfavorable exploratory activity on adjacent areas and our geologists\' evaluation.

200020

3.       RECENT ACCOUNTING PRONOUNCEMENTS Recently adopted accounting pronouncements In May 2011, the FASB released ASU 2011-5, Comprehensive Income (Topic 220) - Presentation of Comprehensive Income and then amended in December, to narrow the options that are available for reporting financial performance. While the rules for determining net income and earnings per share (EPS) remain unchanged, the items reported below net income that make up other comprehensive income (OCI), including pension adjustments and changes in the fair value of some marketable securities, may no longer be presented in a statement of changes in stockholders’ equity. The amendments in ASU 2011-5 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. The adoption of this standard as of January 1, 2012 had no effect on our results of operation or our financial position. In May 2011, the FASB released ASU 2011-4, Fair Value Measurement (Topic 720) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and in IFRS as part of its convergence efforts with the IASB to ensure that fair value has the same meaning in US GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same, except for minor stylistic differences. Importantly, the ASU does not change when a fair value measurement is required under US GAAP. The amendments in ASU 2011-4 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011. The adoption of this standard as of January 1, 2012 had no effect on our results of operation or our financial position. See Note 15 for additional information.

4.       CASH AND CASH EQUIVALENTS <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 8pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="11%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD Total </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD Total </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> USD) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> EUR) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> CHF) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="11%"> other currencies) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> Dec 31, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Cash and cash equivalents</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 6,382,551 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 13,841 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 86,195 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="11%"> 1,006 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 6,483,593 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 13,629,370 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table> Cash and cash equivalents are available to the Group without restriction or limitation on withdrawal and/or use of these funds. The Group’s cash equivalents are placed with high credit rated financial institutions. The carrying amount of these assets approximates their fair value.

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 8pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="11%"> USD (held in </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD Total </td> <td align="left" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" nowrap="nowrap" width="9%"> USD Total </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> USD) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> EUR) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> CHF) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="11%"> other currencies) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> Dec 31, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Cash and cash equivalents</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 6,382,551 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 13,841 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 86,195 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="11%"> 1,006 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 6,483,593 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="9%"> 13,629,370 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table>

6382551 13841 86195 1006 6483593 13629370

5.       PLAN FOR ACQUISITION Plan for Acquisition During the second quarter of 2012, DWM Petroleum AG, a wholly-owned subsidiary of the Company, entered into an option agreement with an unrelated third party pursuant to which the third party granted to DWM Petroleum an option to purchase 80% of the equity of a company that owns producing oilfield assets in Central Asia. On May 8, 2012, DWM Petroleum wired an initial refundable cash deposit to the third party in the amount of US$5 million. On July 3, 2012, DWM Petroleum made a second refundable cash deposit in the amount of US$2 million. On August 17, 2012 a third refundable cash deposit in the amount of US$3 million was paid. These cash deposits have been recorded on the Company’s balance sheet as “Transaction Prepayment”. Under the terms of the Option Agreement, this cash deposit remains fully refundable until DWM Petroleum exercises the option and the parties sign a definitive purchase agreement. On October 23, 2012, DWM Petroleum exercised the option, subject to the seller taking certain actions and to successful negotiation of the share purchase agreement. The transaction prepayment of US$10 million will be netted against the final purchase price which remains to be negotiated.

0.8 5000000 2000000 3000000 10000000

6.       TANGIBLE FIXED ASSETS <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);" valign="middle"> 2012 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Office equipment & furniture </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Vehicles </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Leasehold improvements </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Total </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Cost at January 1 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 151,303 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 101,340 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 47,375 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 300,018 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Additions</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 76,000 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 76,000 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Disposals</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (4,162 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (59,456 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (63,618 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Cost at September 30</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 147,141 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 117,884 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 47,375 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 312,400 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Accumulated depreciation at January 1 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (95,691 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (85,103 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (38,545 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (219,339 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Depreciation</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (12,972 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (18,049 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (7,107 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (38,128 </td> <td align="left" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Disposals</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 59,005 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 59,005 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Accumulated depreciation at September 30</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (108,663 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (44,147 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (45,652 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (198,462 </td> <td align="left" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Net book value at September 30 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 38,478 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 73,737 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 1,723 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 113,938 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> Depreciation expense for the nine-month period ended September 30, 2012 and 2011 was $38,128 and $35,987, respectively. Depreciation expense for the three-month period ended September 30, 2012 and 2011 was $12,572 and $13,490, respectively.

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);" valign="middle"> 2012 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Office equipment & furniture </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Vehicles </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Leasehold improvements </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="12%"> Total </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Cost at January 1 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 151,303 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 101,340 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 47,375 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 300,018 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Additions</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 76,000 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 76,000 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Disposals</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (4,162 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (59,456 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (63,618 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Cost at September 30</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 147,141 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 117,884 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 47,375 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 312,400 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Accumulated depreciation at January 1 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (95,691 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (85,103 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (38,545 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (219,339 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Depreciation</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (12,972 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (18,049 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (7,107 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (38,128 </td> <td align="left" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Disposals</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 59,005 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 59,005 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Accumulated depreciation at September 30</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (108,663 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (44,147 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (45,652 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> (198,462 </td> <td align="left" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Net book value at September 30 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 38,478 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 73,737 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 1,723 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 113,938 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table>

151303 101340 47375 300018 0 76000 0 76000 -4162 -59456 0 -63618 147141 117884 47375 312400 -95691 -85103 -38545 -219339 -12972 -18049 -7107 -38128 0 59005 0 59005 -108663 -44147 -45652 -198462 38478 73737 1723 113938 38128 35987 12572 13490

7.      OIL AND GAS PROPERTIES <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month period ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month period ended    </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Capitalized exploration costs </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012  </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011      </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Unproved, not subject to depletion</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 783,050 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 876,856 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Proved subject to depletion</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Accumulated depletion</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr> <td style="border-right: 1px solid rgb(0, 0, 0);"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="2%"> </td> <td width="1%"> </td> <td width="12%"> </td> <td width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total capitalized exploration costs </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 783,050 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 876,856 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> During the three-month period, two wells were drilled as part of one large campaign which included three drillings in Mongolia. At the beginning of the quarter, the Company had a balance of $93,806 related to unproved properties in Mongolia. During the three-month period, the Company capitalized $2,998,636 of which $2,215,586 was expensed as “Exploration Costs” in the Statement of Operations during the third quarter as the two wells were found dry. The Company had a remaining balance of $876,856 as of September 30, 2012. All of the unproved properties are located in Mongolia.

783050 0 876856 0 0 0 0 0 0 0 0 0 783050 0 876856 0 93806 2998636 2215586 876856

8.      STOCK COMPENSATION PROGRAM 2007 Omnibus Stock Option Plan On May 1, 2007, the Board of Directors approved the granting of stock options according to a Nonqualified Stock Option Plan. This stock option plan has the purpose (a) to ensure the retention of the services of existing executive personnel, key employees, and Directors of the Company or its affiliates; (b) to attract and retain competent new executive personnel, key employees, consultants and Directors; (c) to provide incentive to all such personnel, employees, consultants and Directors to devote their utmost effort and skill to the advancement and betterment of the Company, by permitting them to participate in the ownership of the Company and thereby in the success and increased value of the Company; and (d) allowing vendors, service providers, consultants, business associates, strategic partners, and others, with or that the Board of Directors anticipates will have an important business relationship with the Company or its affiliates, the opportunity to participate in the ownership of the Company and thereby to have an interest in the success and increased value of the Company. This plan constitutes a single “omnibus” plan, the Nonqualified Stock Option Plan (“NQSO Plan”) which provides grants of nonqualified stock options (“NQSOs”). The maximum number of shares of common stock that may be purchased under the plan is 20,000,000. This plan has been superseded by the 2011 Stock Option Plan; future grants of stock options will be made under the 2011 Stock Option Plan. 2011 Stock Option Plan At the Company’s Annual and Special Meeting of Shareholders held on September 22, 2011, the shareholders approved the Company’s 2011 Stock Option Plan. The purpose of the 2011 Stock Option Plan is to advance the interests of the Company by encouraging its directors, officers, employees and consultants to acquire shares of the Company’s common stock, thereby increasing their proprietary interest in the Company, encouraging them to remain associated with the Company and providing them with additional incentive to assist the Company in building value. The 2011 Stock Option Plan authorizes the Company to issue options to purchase such number of the Company’s common shares as is equal to on aggregate, together with options issued under any prior plan, of up to 10% of the number of issued and outstanding shares of the Company’s common stock at the time of the grant (it is the type of stock option plan referred to as a “rolling” stock option plan). If all or any portion of any stock option granted under the 2011 Stock Option Plan expires or terminates without having been exercised in full, the unexercised balance will be returned to the pool of stock available for grant under the 2011 Stock Option Plan. Recognition of Stock-based Compensation Costs Stock-based compensation costs are recognized in earnings using the fair-value based method for all awards granted. For employees fair value is estimated at the grant date and for non-employees fair value is re-measured at each reporting date. Compensation costs for unvested stock options and unvested share grants are expensed over the requisite service period on a straight-line basis. Grants 8.1.     Stock Option Grants The Company calculates the fair value of options granted by applying the Black-Scholes option pricing model. Expected volatility is based on the Company’s own historical share price volatility. The Company’s share price data can be traced back to April 2, 2007, and the Company believes that this set of data is sufficient to determine expected volatility as input for the Black-Scholes option pricing model. During the nine-month period ended September 30, 2012 no options were granted. During the same period in 2011, 9,600,000 options were granted. The following table shows the Company's outstanding and exercisable stock options as of September 30, 2012: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);" valign="middle"> Outstanding options </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Shares under option </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Weighted-average exercise price </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Weighted-average remaining contractual term (years) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Aggregate intrinsic value </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Outstanding at December 31, 2011 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 18,350,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 0.37 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 7.04 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Granted</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Exercised</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Forfeited or expired</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> (2,400,000 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 0.26 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Outstanding at September 30, 2012</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 0.39 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 7.29 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Exercisable at September 30, 2012 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 9,653,424 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 0.48 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 6.57 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> - </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> The following table depicts the Company’s non-vested options as of September 30, 2012 and changes during the period: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="70%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="22%"> Shares under </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="22%"> Weighted-average </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Non-vested options </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> option </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> grant date fair value </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested at December 31, 2011</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="22%"> 11,520,248 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="22%"> 0.18 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested granted</td> <td align="left" width="1%"> </td> <td align="right" width="22%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="22%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Vested</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="22%"> (5,223,672 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="22%"> 0.17 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested, forfeited or cancels</td> <td align="left" width="1%"> </td> <td align="right" width="22%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="22%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Non-vested at September 30, 2012</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> 6,296,576 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> 0.17 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> </div> As of September 30, 2012, the expected total of unrecognized compensation costs related to unvested stock-option grants was $959,163. The Company expects to recognize this amount over a weighted average period of 0.94 years. 8.2.     Share Grants The Company calculates the fair value of share grants at the grant date based on the market price at closing. For restricted share grants, the Company applies a prorated discount of 12% on the market price of the shares over the restriction period. The discount rate is an estimate of the cost of capital, based on previous long-term debt the Company has issued. On May 11, 2012, the Company issued 125,000 shares of common stocks to one of its employees. As per employment agreement, 100,000 shares were issued to the employee between May 1, 2011 and May 1, 2012. The employment agreement terminated effective July 31 including a 90 days’ notice period. Accordingly, the employee received another 25,000 shares for the 90 days’ notice period. Since the employee did not provide service for the month of July, its monthly salary and issued shares for the month of July were accrued in accordance to US GAAP.   With the termination, all of the issued shares became eligible for resale, subject to regulatory restrictions imposed by the SEC and/or TSX Venture Exchange. The following table summarizes the Company's activity with respect to share grants for the nine-month period ended September 30, 2012: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="70%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="21%"> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="3%"> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="21%"> Weighted-average </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="3%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Non-vested shares </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="21%"> Shares </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="3%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="21%"> grant date fair value </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="3%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested at December 31, 2011</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="21%"> 500,000 </td> <td align="left" bgcolor="#e6efff" width="3%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="21%"> 0.47 </td> <td align="left" bgcolor="#e6efff" width="3%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Granted</td> <td align="left" width="1%"> </td> <td align="right" width="21%"> - </td> <td align="left" width="3%"> </td> <td align="left" width="1%"> </td> <td align="right" width="21%"> - </td> <td align="left" width="3%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Vested</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="21%"> (125,000 </td> <td align="left" bgcolor="#e6efff" width="3%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="21%"> 0.47 </td> <td align="left" bgcolor="#e6efff" width="3%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested, forfeited or canceled</td> <td align="left" width="1%"> </td> <td align="right" width="21%"> (375,000 </td> <td align="left" width="3%">)</td> <td align="left" width="1%"> </td> <td align="right" width="21%"> 0.47 </td> <td align="left" width="3%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Non-vested at September 30, 2012</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="21%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="3%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="21%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="3%"> </td> </tr> </table> </div> As of September 30, 2012, there were no unrecognized compensation costs related to unvested share grants. 8.3.     Summary of Stock-based Compensation Expenses A summary of stock-based compensation expense for the respective reporting periods is presented in the following table: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Stock based compensation </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month period ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month period ended </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> expenses </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Option grants</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 260,824 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 48,616 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 839,954 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (84,597 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Share grants</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 375,203 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 35,704 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 405,045 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 260,824 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 423,819 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 875,658 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 320,448 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Recorded under “Personnel”</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 259,498 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 480,605 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 837,448 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 678,417 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Recorded under “Consulting fees”</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 1,326 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (56,786 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 38,210 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (357,969 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">)</td> </tr> </table>

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);" valign="middle"> Outstanding options </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Shares under option </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Weighted-average exercise price </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Weighted-average remaining contractual term (years) </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="14%"> Aggregate intrinsic value </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" valign="middle" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Outstanding at December 31, 2011 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 18,350,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 0.37 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 7.04 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Granted</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Exercised</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Forfeited or expired</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> (2,400,000 </td> <td align="left" width="2%">)</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 0.26 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> - </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Outstanding at September 30, 2012</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 0.39 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 7.29 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Exercisable at September 30, 2012 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 9,653,424 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 0.48 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 6.57 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> - </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table>

18350000 0.37 7.04 0 0 0 0 0 0 0 0 0 -2400000 0.26 0 0 15950000 0.39 7.29 0 9653424 0.48 6.57 0

11520248 0.18 0 0 -5223672 0.17 0 0 6296576 0.17

500000 0.47 0 0 -125000 0.47 -375000 0.47 0 0

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Stock based compensation </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month period ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month period ended </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> expenses </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Option grants</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 260,824 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 48,616 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 839,954 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> (84,597 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Share grants</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 375,203 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 35,704 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 405,045 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 260,824 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 423,819 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 875,658 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 320,448 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Recorded under “Personnel”</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 259,498 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 480,605 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 837,448 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 678,417 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Recorded under “Consulting fees”</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 1,326 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (56,786 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 38,210 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (357,969 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">)</td> </tr> </table>

260824 48616 839954 -84597 0 375203 35704 405045 260824 423819 875658 320448 259498 480605 837448 678417 1326 -56786 38210 -357969 20000000 0.1 9600000 959163 0.94 0.12 125000 100000 90 25000 90 9.      PUBLIC OFFERING – UNIT FINANCING On May 6, 2011, the Company completed a public offering of units pursuant to a long form prospectus filed in all of the Provinces of Canada except Quebec and a registration statement filed with the Securities and Exchange Commission on Form S-1 in the United States. In the Offering, the Company sold a total of 44,450,500 units at a price of $0.50 per unit for aggregate gross proceeds of $22,225,250. Each unit consisted of one share of common stock in the capital of the Company and one common share purchase warrant (“Unit Warrants”). Each Unit Warrant entitles the purchaser to purchase one additional common share until May 6, 2014 at a purchase price of $0.70. Raymond James Ltd. acted as agent in the Offering. As consideration for its assistance, the Company paid to Raymond James a cash commission equal to 6.75% of the gross proceeds of the offering (i.e. $1,500,204) and reimbursed Raymond James for expenses. In addition, the Company issued to Raymond James agents' warrants (“Agent Warrants”) that entitle Raymond James to purchase 1,333,515 shares of the Company's common stock at a purchase price of $0.60 until May 6, 2013. The fair value of the Agent Warrants was determined using the Black-Scholes option pricing model. The inputs for the variables used in the Black-Scholes formula per May 6, 2011 are shown in the following table: <div align="center"> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left">Stock price</td> <td align="right" width="25%"> 0.46 </td> </tr> <tr valign="top"> <td align="left">Expected dividend yield</td> <td align="right" width="25%"> 0% </td> </tr> <tr valign="top"> <td align="left">Expected volatility</td> <td align="right" width="25%"> 99% </td> </tr> <tr valign="top"> <td align="left">Risk-free rate</td> <td align="right" width="25%"> 0.57% </td> </tr> <tr valign="top"> <td align="left">Expected term (in years)</td> <td align="right" width="25%"> 2 </td> </tr> </table> </div>   The fair value per Agent Warrant was $0.2101. The total costs associated with all Agent Warrants amounted to $280,171. This amount was directly charged against equity and had no impact on the Company’s statement of operations. The following table summarizes the payments of issuance costs: <div align="center"> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left">Agent commission</td> <td align="right" width="25%"> 1,552,093 </td> </tr> <tr valign="top"> <td align="left">Legal</td> <td align="right" width="25%"> 448,857 </td> </tr> <tr valign="top"> <td align="left">Audit</td> <td align="right" width="25%"> 128,876 </td> </tr> <tr valign="top"> <td align="left">Other</td> <td align="right" width="25%"> 218,424 </td> </tr> <tr valign="top"> <td align="left">Total issuance costs (cash)</td> <td align="right" width="25%"> 2,348,250 </td> </tr> </table> </div> Net cash proceeds from the public offering amounted to $19,877,000 and were recorded in shareholders’ equity, net of non-cash issuance costs associated with the Agent Warrants, i.e. $19,596,829. Refer to Note 10 for the discussion of the warrants.

<table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left">Stock price</td> <td align="right" width="25%"> 0.46 </td> </tr> <tr valign="top"> <td align="left">Expected dividend yield</td> <td align="right" width="25%"> 0% </td> </tr> <tr valign="top"> <td align="left">Expected volatility</td> <td align="right" width="25%"> 99% </td> </tr> <tr valign="top"> <td align="left">Risk-free rate</td> <td align="right" width="25%"> 0.57% </td> </tr> <tr valign="top"> <td align="left">Expected term (in years)</td> <td align="right" width="25%"> 2 </td> </tr> </table>

0.46 0 0.99 0.0057 2 <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left">Agent commission</td> <td align="right" width="25%"> 1,552,093 </td> </tr> <tr valign="top"> <td align="left">Legal</td> <td align="right" width="25%"> 448,857 </td> </tr> <tr valign="top"> <td align="left">Audit</td> <td align="right" width="25%"> 128,876 </td> </tr> <tr valign="top"> <td align="left">Other</td> <td align="right" width="25%"> 218,424 </td> </tr> <tr valign="top"> <td align="left">Total issuance costs (cash)</td> <td align="right" width="25%"> 2,348,250 </td> </tr> </table> 1552093 448857 128876 218424 2348250 44450500 0.5 22225250 0.7 0.0675 1500204 1333515 0.6 0.2101 280171 19877000 19596829 10.     WARRANTS Warrants outstanding The following table summarizes information about the Company’s warrants outstanding as of September 30, 2012: <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Warrant series </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="19%"> Number of warrants </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="19%"> Strike price </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="19%"> Grant date </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="19%"> Expiry date </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Grant</td> <td align="right" bgcolor="#e6efff" width="19%"> 150,000 </td> <td align="right" bgcolor="#e6efff" width="19%"> 0.80 </td> <td align="right" bgcolor="#e6efff" width="19%">June 2, 2010</td> <td align="right" bgcolor="#e6efff" width="19%">June 2, 2013</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Unit warrants</td> <td align="right" width="19%"> 44,450,500 </td> <td align="right" width="19%"> 0.70 </td> <td align="right" width="19%">May 6, 2011</td> <td align="right" width="19%">May 6, 2014</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Agent warrants</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> 1,333,515 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> 0.60 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%">May 6, 2011</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%">May 6, 2013</td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total warrants outstanding </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> 45,934,015 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="19%"> </td> </tr> </table> </div> The Company has enough shares of common stock authorized in the event these warrants are exercised. Warrant activity The following table summarizes the Company’s warrant activity for the nine-month period ended September 30, 2012: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="90%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Warrants </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="33%"> Number of warrants </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="33%"> Weighted average exercise price </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Outstanding at December 31, 2011</td> <td align="center" bgcolor="#e6efff" width="33%"> 45,934,015 </td> <td align="center" bgcolor="#e6efff" width="33%"> 0.70 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Granted</td> <td align="center" width="33%"> - </td> <td align="center" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Exercised</td> <td align="center" bgcolor="#e6efff" width="33%"> - </td> <td align="center" bgcolor="#e6efff" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Forfeit or expired</td> <td align="center" width="33%"> - </td> <td align="center" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);">Outstanding at March</td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> - </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Outstanding at September 30, 2012 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> 45,934,015 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> 0.70 </td> </tr> </table> </div>

150000 0.8 44450500 0.7 1333515 0.6 45934015 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="90%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Warrants </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="33%"> Number of warrants </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="33%"> Weighted average exercise price </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Outstanding at December 31, 2011</td> <td align="center" bgcolor="#e6efff" width="33%"> 45,934,015 </td> <td align="center" bgcolor="#e6efff" width="33%"> 0.70 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Granted</td> <td align="center" width="33%"> - </td> <td align="center" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Exercised</td> <td align="center" bgcolor="#e6efff" width="33%"> - </td> <td align="center" bgcolor="#e6efff" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Forfeit or expired</td> <td align="center" width="33%"> - </td> <td align="center" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);">Outstanding at March</td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> - </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Outstanding at September 30, 2012 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> 45,934,015 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="33%"> 0.70 </td> </tr> </table> 45934015 0.7 0 0 0 0 0 0 0 0 45934015 0.7 11.     INVESTMENT IN PETROMANAS On February 12, 2010, the Company’s wholly-owned subsidiary DWM Petroleum, signed a Share Purchase Agreement and completed the sale of all of the issued and outstanding shares of Manas Adriatic to Petromanas Energy Inc. (“Petromanas”). After closing, the Share Purchase Agreement was amended by an amending agreement dated May 25, 2010. As a result of this transaction, the Company acquired 200,000,000 common shares of Petromanas. 100,000,000 of these were issued on March 3, 2010 pursuant to the original terms of the Share Purchase Agreement; the additional 100,000,000 were received on May 26, 2010, pursuant to the amending agreement. The shares were subject to a hold period expiring September 24, 2011 and bore a legend to that effect.   In addition, all of these shares were deposited into an escrow pursuant to the requirements of the TSX Venture Exchange which provides for the release of the shares from escrow according to the following schedule: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Release dates </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="50%"> Number of shares </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> released from escrow </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">June 24, 2010</td> <td align="right" bgcolor="#e6efff" width="50%"> 10,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2010</td> <td align="right" width="50%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2011</td> <td align="right" bgcolor="#e6efff" width="50%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">June 24, 2011</td> <td align="right" width="50%"> 40,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2011</td> <td align="right" bgcolor="#e6efff" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2012</td> <td align="right" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2012</td> <td align="right" bgcolor="#e6efff" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2013</td> <td align="right" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="50%"> 200,000,000 </td> </tr> </table> </div> On July 6, 2012, DWM Petroleum sold 10,000,000 of these shares to one unrelated party at a price of CA$0.17 per common share for gross proceeds of CA$1,700,000 (US$1,670,598). On August 17, 2012, pursuant to agreements dated August 13, 2012, DWM Petroleum sold an additional 90,000,000 of these Petromanas shares to twelve purchasers at a price of CA$0.115 per common share for gross proceeds of CA$10,350,000 (US$10,445,050) together with the right to receive 22.5% of the Performance Shares if and when any Performance Shares are issued by Petromanas. On June 30, 2012, we owned 200,000,000 shares of Petromanas Energy. Since that date, we sold 100,000,000 of these shares to various purchasers and we have agreed not to resell the remaining 100,000,000 until August 14, 2013 without prior agreement from some of those purchasers, unless, before that date, the market price per share equals or exceeds CA$0.60 for five business days. Of the 100,000,000 common shares of Petromanas held by us at September 30, 2012, none were currently eligible for immediate resale. On September 30, 2012, DWM Petroleum owned and controlled 100,000,000 common shares of Petromanas and it had the right to acquire a further 50,000,000 common shares (referred to as “Performance Shares”) upon the occurrence of certain conditions. The 100,000,000 common shares represent approximately 15.85% of the issued and outstanding common shares of Petromanas. Since the shares were subject to a hold period of thirty months, and because the shares were also deposited into escrow and subject to a fixed escrow release schedule, the Company deemed them to have a Level 2 input for the calculation of the fair value in accordance with ASC 820 (Fair value measurements and disclosures). The Company applies an annual discount rate of 12% on the quoted market price based on the time before the shares become freely tradable. The discount rate is an estimate of the cost of capital, based on previous long-term debt the Company has issued. The quoted market price for one common share of Petromanas on September 30, 2012 was CA$0.20. In order to calculate the fair value of the Company’s investment in Petromanas the Company has discounted the market price of the shares based on the escrow release schedule. The effective discount applied on the quoted market price of the shares is 1.37% . During the nine-month periods ended September 30, 2012 and 2011, respectively, the Company recorded $6,306,060 unrealized gain on investment in Petromanas and $(49,090,911) unrealized loss on investment, respectively. During the three-month periods ended September 30, 2012 and 2011, respectively, the Company recorded $(6,671,220) unrealized loss on investment in Petromanas and $(32,854,768) unrealized loss on investment, respectively. When a company chooses the fair value option, pursuant to ASC 323 further disclosures regarding the investee are required in cases where the Company has the ability to exercise significant influence over the investee’s operating and financial policies.     As of today, there is no managerial interchange and there are no material intercompany transactions. In addition, technological dependencies do not exist. The majority ownership of the investee is concentrated among a small group of shareholders who operate the investee without regard to the views of the Company. The Company made an effort to obtain from Petromanas financial information that would be needed in order for the for the Company to include that information in its own financial disclosure, but Petromanas, which is a reporting company in Canada and subject to the Canadian regulatory requirements in respect of selective disclosure, has refused to provide this information in advance of it being made available to the general public in its own periodic disclosure filings. This information would be necessary if the Company were to disclose selected financial data of Petromanas in accordance with US GAAP in a timely manner. The Company has previously requested that Petromanas provide detailed financial records in order to enable the Company to reconcile between Canadian GAAP and US GAAP but Petromanas has refused, stating that Petromanas is a public company and required to comply with securities legislation and TSX Venture Exchange rules and it cannot provide selective disclosure to any shareholder, nor can it permit its results to be publicly disclosed through any document published by a third party until after it has publicly disseminated the information. Based on the foregoing, the Company has concluded that it does not have the ability to exercise significant influence over Petromanas’ (the investee’s) operating and financial policies. In addition, the sale of 10,000,000 on July 6, 2012 and the sale of 90,000,000 on August 17, 2012 of Petromanas shares may have further diminished any influence the Company may have had prior to the date of these sales.   <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Release dates </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="50%"> Number of shares </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> released from escrow </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">June 24, 2010</td> <td align="right" bgcolor="#e6efff" width="50%"> 10,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2010</td> <td align="right" width="50%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2011</td> <td align="right" bgcolor="#e6efff" width="50%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">June 24, 2011</td> <td align="right" width="50%"> 40,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2011</td> <td align="right" bgcolor="#e6efff" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2012</td> <td align="right" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">August 24, 2012</td> <td align="right" bgcolor="#e6efff" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">February 24, 2013</td> <td align="right" width="50%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> Total </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="50%"> 200,000,000 </td> </tr> </table> 10000000 15000000 15000000 40000000 30000000 30000000 30000000 30000000 200000000 200000000 100000000 100000000 10000000 0.17 1700000 1670598 90000000 0.115 10350000 10445050 0.225 200000000 100000000 100000000 0.6 100000000 100000000 50000000 100000000 0.1585 0.12 0.2 0.0137 6306060 -49090911 -6671220 -32854768 10000000 90000000

12.     RELATED PARTY DISCLOSURE The consolidated financial statements include the financial statements of Manas Petroleum Corporation and the entities listed in the following table: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="90%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="28%"> </td> <td align="right" width="15%"> Equity share </td> <td align="right" width="15%"> Equity share </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);"> Company </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="28%"> Country </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> Sept. 30, 2012 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> Dec. 31, 2011 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">DWM Petroleum AG, Baar (1)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">DWM Energy AG Baar (2)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Petromanas Energy Inc., Vancouver (3)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Canada</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 15.85% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 31.7% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">CJSC South Petroleum Company, Jalalabat (4)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Kyrgyz Republic</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 25% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 25% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">CJSC Somon Oil Company, Dushanbe (5)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Republic of Tajikistan</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 90% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 90% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Manas Management Services Ltd., Nassau (6)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Bahamas</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Manas Chile Energia Limitada, Santiago (7)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Chile</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Gobi Energy Partners LLC, Ulaan Baator (8)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Mongolia</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 74% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Gobi Energy Partners GmbH (9)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 74% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> </table> </div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr> <td width="5%"> </td> <td valign="top" width="5%">(1)</td> <td> Included Branch in Albania that was sold in February 2010 </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(2)</td> <td> Founded in 2007 (formerly Manas Petroleum AG). </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(3)</td> <td> Petromanas Energy Inc. participation resulted from partial sale of Manas Adriatic GmbH; fair value method applied. </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(4)</td> <td> CJSC South Petroleum Company was founded by DWM Petroleum AG; equity method investee that is not consolidated </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(5)</td> <td> CJSC Somon Oil Company was founded by DWM Petroleum AG </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(6)</td> <td> Founded in 2008 </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(7)</td> <td> Manas Chile Energia Limitada was founded by Manas Management Services Ltd.; founded in 2008 </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(8)</td> <td> Gobi Energy Partners LLC was founded in 2009 by DWM Petroleum AG (formerly Manas Gobi LLC). Gobi Energy Partners GmbH holds record title to 100% of Gobi Energy Partners LLC. </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%">(9)</td> <td> Gobi Energy Partners GmbH was founded in 2010. DWM Petroleum AG held record title to 100% of Gobi Energy Partners GmbH, of which 26% were held in trust for others. In July 2012, these 26% were transferred to the beneficial shareholders. The Company determined that no value needs to be ascribed to the non-controlling interest due to the fact that the non-controlling parties do not carry any costs. </td> </tr> </table> Due to the sale of 100,000,000 shares of Petromanas Energy, ownership and voting right percentages of Manas Petroleum Corporation has diminished as the amount of shares owned have decreased from 31.7% at December 31, 2011 to 15.85% at September 30, 2012. The following table provides the total amount of transactions, which have been entered into with related parties for the specified period:     <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month ended </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30. 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30. 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Affiliates </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Management services performed to Petromanas*</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (4,343 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (10,069 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (15,461 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (34,626 </td> <td align="left" valign="bottom" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Board of directors </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Payments to directors for office rent</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 6,213 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 6,693 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 19,148 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 18,693 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);">Payments to related companies controlled by directors for rendered consulting services</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 88,063 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 106,137 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 271,420 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 289,987 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> </tr> </table> * Services invoiced or accrued are recorded as contra-expense in personnel cost and administrative cost

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="90%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="28%"> </td> <td align="right" width="15%"> Equity share </td> <td align="right" width="15%"> Equity share </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);"> Company </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="28%"> Country </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> Sept. 30, 2012 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> Dec. 31, 2011 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">DWM Petroleum AG, Baar (1)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">DWM Energy AG Baar (2)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Petromanas Energy Inc., Vancouver (3)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Canada</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 15.85% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 31.7% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">CJSC South Petroleum Company, Jalalabat (4)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Kyrgyz Republic</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 25% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 25% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">CJSC Somon Oil Company, Dushanbe (5)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Republic of Tajikistan</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 90% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 90% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Manas Management Services Ltd., Nassau (6)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Bahamas</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Manas Chile Energia Limitada, Santiago (7)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Chile</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Gobi Energy Partners LLC, Ulaan Baator (8)</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Mongolia</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 74% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Gobi Energy Partners GmbH (9)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="28%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 74% </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 100% </td> </tr> </table>

1 1 1 1 0.1585 0.317 0.25 0.25 0.9 0.9 1 1 1 1 0.74 1 0.74 1

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month ended </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30. 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30. 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Affiliates </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Management services performed to Petromanas*</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (4,343 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (10,069 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (15,461 </td> <td align="left" valign="bottom" width="2%">)</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (34,626 </td> <td align="left" valign="bottom" width="2%">)</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Board of directors </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Payments to directors for office rent</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 6,213 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 6,693 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 19,148 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 18,693 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);">Payments to related companies controlled by directors for rendered consulting services</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 88,063 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 106,137 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 271,420 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 289,987 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> </tr> </table>

-4343 -10069 -15461 -34626 6213 6693 19148 18693 88063 106137 271420 289987 1 1 0.26 0.26 100000000 0.317 0.1585

13.     COMMITMENTS & CONTINGENT LIABILITIES Legal actions and claims (Kyrgyz Republic, Republic of Tajikistan, Mongolia and Chile) In the ordinary course of business, members of the Group doing business in Mongolia, Republic of Tajikistan, the Kyrgyz Republic, and Chile may be subject to legal actions and complaints from time-to-time. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition, the results of future operations or cash flows of the associates/subsidiaries in Mongolia, Republic of Tajikistan, the Kyrgyz Republic and Chile. Chile During the initial phase of applying for our Chilean Exploration license, a joint bidding group was formed with Manas, IPR and Energy Focus. Each had a one-third interest. Of its own accord, Energy Focus left the bidding group. Energy Focus prepared a side letter, which was signed by Manas and IPR. By the terms of this side letter, Energy Focus was granted the option to rejoin the consortium under certain conditions. Even though Energy Focus has been asked many times to join the group by contributing its prorated share of capital, they have failed to do so. Despite this, Energy Focus claims that they are entitled to participate in the consortium at any future time, not just under certain conditions. IPR and Manas disagree with this interpretation. Energy Focus commenced litigation for specific performance and damages in an unspecified amount in Santiago de Chile, claiming interest in the Tranquilo Block from the Company and IPR, and their subsidiaries. The Company, IPR and their respective legal counsel are of the view that the Energy Focus claim is without merit and is brought in the wrong jurisdiction and that Energy Focus has failed to properly serve the parties. The courts of Santiago have dismissed the case, but Energy Focus made an appeal just before the appeal period expired. At September 30, 2012, there had been no legal actions against any member of the Group in the Kyrgyz Republic, Republic of Tajikistan and Mongolia. Management believes that the members of the Group are in substantial compliance with the tax laws affecting their respective operations in the Kyrgyz Republic, Republic of Tajikistan, Mongolia and Chile. However, the risk remains that relevant authorities could take differing positions with regards to interpretative issues. Management believes that the ultimate liability, if any, arising from any of the above will not have a material adverse effect on the financial condition or the results of future operations and on cash flows of the Group in the Kyrgyz Republic, Republic of Tajikistan, Mongolia and Chile.

14.     PERSONNEL COSTS AND EMPLOYEE BENEFIT PLANS Defined benefit plan We maintain Swiss defined benefit plans for seven of our employees. The plan is part of an independent collective fund which provides pensions combined with life and disability insurance. The assets of the funded plan are held independently of the Company’s assets in a legally distinct and independent collective trust fund which serves various unrelated employers. The fund’s benefit obligations are fully reinsured by AXA Winterthur Insurance Company. The plan is valued by independent actuaries using the projected unit credit method. The liabilities correspond to the projected benefit obligations of which the discounted net present value is calculated based on years of employment, expected salary increases, and pension adjustments. <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month ended </td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Pension expense </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> September 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> September 30, 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> September 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> September 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Net service cost</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 5,327 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 5,311 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 15,981 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> 15,933 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Interest cost</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 5,944 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 5,254 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 17,832 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 15,761 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Expected return on assets</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> (4,976 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> (4,517 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> (14,928 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="14%"> (13,552 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Amortization of net gain</td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 2,654 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 2,525 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 7,962 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="14%"> 7,575 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Net periodic pension cost </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 8,949 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 8,573 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 26,847 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 25,717 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> During the nine-month period ended September 30, 2012 and 2011, respectively, the Company made cash contributions of $71,197 and $63,368, respectively, to its defined benefit pension plan. The Company does not expect to make any additional cash contributions to its defined benefit pension plans during the remainder of 2012.

5327 5311 15981 15933 5944 5254 17832 15761 -4976 -4517 -14928 -13552 2654 2525 7962 7575 8949 8573 26847 25717 71197 63368

15. FAIR VALUE MEASUREMENT 15.1. Fair Value Measurements The guidance on fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants under current market conditions. This guidance also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy: •     Level 1 — Quoted prices for identical instruments in active markets. •     Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value drivers are observable in active markets. •    Level 3 — Prices and valuation techniques in which one or more significant inputs or significant value-drivers are unobservable. When available, we use quoted market prices to determine fair value, and we classify such measurements within Level 1. In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates, yield curves and currency rates. These measurements are classified within Level 3. Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.   Fair value measurement includes the consideration of nonperformance risk. Nonperformance risk refers to the risk that an obligation (either by a counterpart or by us) will not be fulfilled. For financial assets traded in an active market (Level 1), the nonperformance risk is included in the market price. For certain other financial assets and liabilities (Level 2 and 3), our fair value calculations have been adjusted accordingly. Financial assets measured on a recurring basis at fair value included in our Consolidated Financial Statements as of September 30, 2012 are classified in one of the three categories as follows: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Assets </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> Level 1 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> Level 2 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> Level 3 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> Total </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Investment in associate (Petromanas)</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 20,049,078 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 20,049,078 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);">Total assets</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 20,049,078 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 20,049,078 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> </table> </div> The following table summarizes the changes in the fair value of the Company’s level 2 financial assets for the period ending September 30, 2012: <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Balance at January 1, 2012 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0);" width="25%"> 29,366,063 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> Total gains (losses) realized and unrealized: </td> <td align="left" width="25%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Included in earnings (change in fair value)</td> <td align="right" bgcolor="#e6efff" width="25%"> 6,306,060 * </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Included in earnings (loss from sale of investment)</td> <td align="right" width="25%"> (3,507,397) * 2 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Included in other comprehensive income</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Purchase, sale, or settlement</td> <td align="right" width="25%"> (12,115,648) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Net transfer in / (out) of level 2</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Balance at September 30, 2012 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="25%"> 20,049,078 </td> </tr> </table> </div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr> <td width="10%"> </td> <td valign="top" width="5%">*</td> <td> Recorded in change in fair value of investment in associate (Petromanas) </td> </tr> <tr> <td width="10%"> </td> <td valign="top" width="5%">*</td> <td> 2 Difference between sale price and fair value at the time of sale </td> </tr> </table> 15.2. Fair Value of Financial Instruments In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments. <ul style="text-align: justify;"> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Cash and cash equivalents – carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Restricted cash – carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Accounts receivable – carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Transaction prepayment – carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Investment in Petromanas – fair value was calculated based on quoted market prices and a discount factor derived from the Company’s estimated cost of capital. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Accounts Payable – carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> Refundable deposits – carrying amount approximated fair value. </li> </ul> The fair value of our financial instruments is presented in the table below:       <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> September 30, 2012 </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> December 31, 2011 </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%"> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="center" nowrap="nowrap" width="13%"> Carrying </td> <td align="center" nowrap="nowrap" width="13%"> Fair </td> <td align="center" nowrap="nowrap" width="13%"> Carrying </td> <td align="center" nowrap="nowrap" width="13%"> </td> <td align="center" nowrap="nowrap" width="13%"> Fair Value </td> <td align="center" nowrap="nowrap" width="13%"> Reference </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> Amount </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%">     Value </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> Amount </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> Fair Value </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> Levels </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Cash and cash equivalents</td> <td align="right" bgcolor="#e6efff" width="13%"> 6,483,593 </td> <td align="right" bgcolor="#e6efff" width="13%"> 6,483,593 </td> <td align="right" bgcolor="#e6efff" width="13%"> 13,629,370 </td> <td align="right" bgcolor="#e6efff" width="13%"> 13,629,370 </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 4</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Restricted cash</td> <td align="right" width="13%"> 102,725 </td> <td align="right" width="13%"> 102,725 </td> <td align="right" width="13%"> 102,735 </td> <td align="right" width="13%"> 102,735 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Transaction prepayment</td> <td align="right" bgcolor="#e6efff" width="13%"> 10,000,000 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,000,000 </td> <td align="right" bgcolor="#e6efff" width="13%"> - </td> <td align="right" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 5</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Accounts receivable</td> <td align="right" width="13%"> 161,260 </td> <td align="right" width="13%"> 161,260 </td> <td align="right" width="13%"> 45,699 </td> <td align="right" width="13%"> 45,699 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Investment in Petromanas</td> <td align="right" bgcolor="#e6efff" width="13%"> 20,049,078 </td> <td align="right" bgcolor="#e6efff" width="13%"> 20,049,078 </td> <td align="right" bgcolor="#e6efff" width="13%"> 29,366,036 </td> <td align="right" bgcolor="#e6efff" width="13%"> 29,366,036 </td> <td align="center" bgcolor="#e6efff" width="13%"> 2 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 11</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Accounts Payable</td> <td align="right" width="13%"> 247,316 </td> <td align="right" width="13%"> 247,316 </td> <td align="right" width="13%"> 1,194,844 </td> <td align="right" width="13%"> 1,194,844 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Refundable Deposits</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 173,022 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 173,022 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 212,590 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 212,590 </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> </td> </tr> </table> </div>

0 20049078 0 20049078 0 20049078 0 20049078 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Balance at January 1, 2012 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0);" width="25%"> 29,366,063 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> Total gains (losses) realized and unrealized: </td> <td align="left" width="25%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Included in earnings (change in fair value)</td> <td align="right" bgcolor="#e6efff" width="25%"> 6,306,060 * </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Included in earnings (loss from sale of investment)</td> <td align="right" width="25%"> (3,507,397) * 2 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Included in other comprehensive income</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Purchase, sale, or settlement</td> <td align="right" width="25%"> (12,115,648) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Net transfer in / (out) of level 2</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Balance at September 30, 2012 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="25%"> 20,049,078 </td> </tr> </table> 29366063 6306060 -3507397 0 -12115648 0 20049078

6483593 6483593 13629370 13629370 1 102725 102725 102735 102735 1 10000000 10000000 0 0 1 161260 161260 45699 45699 1 20049078 20049078 29366036 29366036 2 247316 247316 1194844 1194844 1 173022 173022 212590 212590 1

16.     EARNINGS PER SHARE Basic earnings per share result by dividing the Company’s net income (or net loss) by the weighted average number of shares outstanding for the contemplated period. Diluted earnings per share are calculated applying the treasury stock method. When there is a net income, dilutive effects of all stock-based compensation awards or participating financial instruments are considered. When the Company posts a loss, basic loss per share equals diluted loss per share. The following table depicts how the denominator for the calculation of basic and diluted earnings per share was determined under the treasury stock method: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);"> Three-month period ended </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);"> Nine-month period ended </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2012 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2011 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2012 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Company posted</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Basic weighted average shares outstanding</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 172,592,292 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 170,641,205 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 172,532,073 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 155,641,007 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Dilutive effect of common stock</td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">equivalents:</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">       - stock options and non-vested stock under          employee compensation plans </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Diluted weighted average shares outstanding </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 172,592,292 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 170,641,205 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 172,532,073 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 155,641,007 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> </tr> </table> The following table shows the total number of stock equivalents that was excluded from the computation of diluted earnings per share for the respective period because the effect would have been anti-dilutive: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left"> Stock equivalent </td> <td align="left" width="1%"> </td> <td align="right" colspan="4" nowrap="nowrap"> Three-month ended </td> <td align="right" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" colspan="4" nowrap="nowrap"> Nine-month ended </td> <td align="right" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Options</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 17,850,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 17,850,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Warrants</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Non-vested shares</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 61,884,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 63,784,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 61,884,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 63,784,015 </td> <td align="left" width="2%"> </td> </tr> </table>

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);"> Three-month period ended </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" colspan="4" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);"> Nine-month period ended </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2012 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2011 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2012 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> Sept. 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Company posted</td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%">Net loss</td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Basic weighted average shares outstanding</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 172,592,292 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 170,641,205 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 172,532,073 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 155,641,007 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Dilutive effect of common stock</td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">equivalents:</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">       - stock options and non-vested stock under          employee compensation plans </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> - </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> Diluted weighted average shares outstanding </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 172,592,292 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 170,641,205 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 172,532,073 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 155,641,007 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> </td> </tr> </table>

172592292 170641205 172532073 155641007 0 0 0 0 172592292 170641205 172532073 155641007

<table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left"> Stock equivalent </td> <td align="left" width="1%"> </td> <td align="right" colspan="4" nowrap="nowrap"> Three-month ended </td> <td align="right" nowrap="nowrap" width="2%"> </td> <td align="left" nowrap="nowrap" width="1%"> </td> <td align="right" colspan="4" nowrap="nowrap"> Nine-month ended </td> <td align="right" width="2%"> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2012 </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Sept. 30, 2011 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Options</td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 17,850,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 15,950,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 17,850,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left">Warrants</td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 45,934,015 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);">Non-vested shares</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> - </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 61,884,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 63,784,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 61,884,015 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 63,784,015 </td> <td align="left" width="2%"> </td> </tr> </table>

15950000 17850000 15950000 17850000 45934015 45934015 45934015 45934015 0 0 0 0 61884015 63784015 61884015 63784015

17.     Discontinued Operations – Disposal of the Chilean Project On January 29, 2010, the Company signed an agreement to assign its interest in the Chilean project in exchange for a return of the money it had invested in the joint venture and relief from all current and future obligations in respect of the project. On April 14, 2011, the Company transferred all its rights, interests and obligations in the project to Methanex and Wintershall. The Chilean Minister of Energy authorized this transfer on April 28, 2011.   According to an external audit report dated July 31, 2011 all previous cash contributions made by the partners in the Chilean project have been reconciled. The report confirmed the Company’s cash contribution of $72,000. The cash payment for the transfer of the Company’s interest in the Chilean project of $72,000 was received on September 23, 2011 from the new owners. With the disposal of the Company’s interest in the Chilean project, there are no continuing cash flows to be generated and there is no continuing involvement in the operations remaining. In accordance with ASC 205-20-45 the Company classified the disposed component as a discontinued operation. The following table summarizes the Company’s financial results from the Chilean project since inception to date: <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Three-month ended </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> Nine-month ended </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="20%"> Period from May 05, 2004 </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> Sept. 30, 2012 </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> Sept. 30, 2011 </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> Sept. 30, 2012 </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="14%"> Sept. 30, 2011 </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="20%"> (inception) to Sep 30, 2011 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> OPERATING REVENUES </td> <td align="center" bgcolor="#e6efff" width="14%"> </td> <td align="center" bgcolor="#e6efff" width="14%"> </td> <td align="center" bgcolor="#e6efff" width="14%"> </td> <td align="center" bgcolor="#e6efff" width="14%"> </td> <td align="center" bgcolor="#e6efff" width="20%"> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Proceeds from divestiture</td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> 72,000 </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> 72,000 </td> <td align="center" width="20%"> 51,663 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Total revenues </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> 72,000 </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> 72,000 </td> <td align="center" bgcolor="#e6efff" width="20%"> 51,663 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> OPERATING EXPENSES </td> <td align="center" width="14%"> </td> <td align="center" width="14%"> </td> <td align="center" width="14%"> </td> <td align="center" width="14%"> </td> <td align="center" width="20%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Personnel costs</td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="20%"> (211,228) </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Exploration costs</td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="20%"> (420,985) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Depreciation</td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="20%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Consulting fees</td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> (20,337) </td> <td align="center" width="20%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Administrative costs</td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="14%"> - </td> <td align="center" bgcolor="#e6efff" width="20%"> (15,000) </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> Total operating expenses </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="14%"> - </td> <td align="center" width="20%"> (647,213) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> OPERATING INCOME </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 72,000 </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="14%"> 51,663 </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="20%"> (595,550) </td> </tr> </table> </div>

0 72000 0 72000 51663 0 72000 0 72000 51663 0 0 0 0 -211228 0 0 0 0 -420985 0 0 0 0 0 0 0 0 -20337 0 0 0 0 0 -15000 0 0 0 0 -647213 72000 51663 -595550 72000 72000

18. SUBSEQUENT EVENT(S) On October 23, 2012, DWM Petroleum exercised the option, subject to the seller taking certain actions and to successful negotiation of the share purchase agreement. The transaction prepayment of US$10 million will be netted against the final purchase price which remains to be negotiated.

10000000

�ߴ��߹ۿ�,��ݹ��Ƶ,,һҹ�ߴ��·