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BASIS OF PRESENTATION</strong> </p> <p align="justify"> The financial statements presented in this Form 10-Q comprise Manas Petroleum Corporation ("Manas" or the &#8220;Company") and its subsidiaries (collectively, the &#8220;Group&#8221;). The unaudited interim <i>Consolidated Financial Statements</i> included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (&#8220;US GAAP&#8221;) and present our financial position, results of operations, cash flows and changes in stockholder&#8217;s equity. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2011. </p> <p align="justify">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.</p> <p align="justify">The Company, formerly known as Express Systems Corporation, was incorporated in the State of Nevada on July 9, 1988.</p> <p align="justify"> On April 10, 2007, the Company completed the Exchange Transaction whereby it acquired its then sole subsidiary DWM Petroleum AG (&#8220;DWM Petroleum&#8221;) 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&#8217;s fees at the closing price of $3.20. </p> <p align="justify">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.</p> <p align="justify">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.</p> 1 80000000 800000 3.2 <p align="justify"> <b>2.</b> <b> <b>ACCOUNTING POLICIES</b> </b> </p> <p align="justify">The accompanying financial data as of June 30, 2012 and December 31, 2011 and for the three and six months periods ended June 30, 2012 and 2011 and for the period from inception, May 25, 2004, to June 30, 2012, has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).</p> <p align="justify">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.</p> <p align="justify">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.</p> <p align="justify">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 June 30, 2012 and December 31, 2011, results of operations for the three and six months periods ended June 30, 2012 and 2011 and for the period from inception, May 25, 2004, to June 30, 2012, cash flows for the six months periods ended June 30, 2012 and 2011 and for the period from inception, May 25, 2004, to June 30, 2012 and statement of shareholders&#8217; equity (deficit) for the period from inception, May 25, 2004, to June 30, 2012, as applicable, have been made. The result of operations for the three and six months periods ended June 30, 2012 is not necessarily indicative of the operating results for the full fiscal year or any future periods.</p> <p align="justify"> <b> <b>Reclassification</b> </b> </p> <p align="justify"> The Company reclassified $200,020 from "Accrued Expenses Professional Fees" to &#8220;Other Accrued Expenses&#8221; as of December 31, 2011 in order to conform to the current period presentation. </p> <p align="justify"> <b> <b>Successful Efforts Method of Accounting</b> </b> </p> <p align="justify">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.</p> <p align="justify">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.</p> <p align="justify">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. The costs of oil and natural gas properties are periodically assessed for impairment.</p> <p align="justify"> <b> <b>Reclassification</b> </b> </p> <p align="justify"> The Company reclassified $200,020 from "Accrued Expenses Professional Fees" to &#8220;Other Accrued Expenses&#8221; as of December 31, 2011 in order to conform to the current period presentation. </p> <p align="justify"> <b> <b>Successful Efforts Method of Accounting</b> </b> </p> <p align="justify">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.</p> <p align="justify">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.</p> <p align="justify">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. The costs of oil and natural gas properties are periodically assessed for impairment.</p> 200020 <p align="justify"> <b>3.</b> <b> <b>RECENT ACCOUNTING PRONOUNCEMENTS</b> </b> </p> <p align="justify"> <b> <b>Recently adopted accounting pronouncements</b> </b> </p> <p align="justify"> In May 2011, the FASB released ASU 2011-5, <i>Comprehensive Income (Topic 220) - Presentation of Comprehensive Income</i> 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&#8217; 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. </p> <p align="justify"> In May 2011, the FASB released ASU 2011-4, <i>Fair Value Measurement (Topic 720) &#8211; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and in IFRS</i> 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. 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rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> <b> <b>EUR)</b> </b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> <b> <b>CHF)</b> </b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> <b> <b>other currencies)</b> </b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> <b> <b>June 30, 2012</b> </b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="9%"> <b> <b>Dec 31, 2011</b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Cash and cash equivalents</td> <td align="left" bgcolor="#e6efff" width="1%"> <b>&#160;</b> </td> <td align="right" bgcolor="#e6efff" width="9%"> 3,156,744 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" 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<p align="justify"> 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 has granted to DWM Petroleum an option to purchase 80% of the equity of a company that owns producing oilfield assets in Central Asia. Although DWM Petroleum has provided the third party with a cash deposit to be adjusted against the purchase price in case option is pursued by DWM Petroleum, the Option Agreement does not bind DWM Petroleum, except in respect of a requirement that the details of the agreement be kept in confidence, and the cash deposit is fully refundable. The Option Agreement is subject to the completion &#8211; to DWM Petroleum&#8217;s satisfaction - of a due diligence review and the negotiation of a purchase price for the optioned equity in a subsequent definitive agreement. A due diligence investigation, including a financial audit, is currently ongoing. Once due diligence is completed, DWM Petroleum will have one month to decide whether to exercise the option. 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bgcolor="#e6efff" width="12%"> (59,456 </td> <td align="left" bgcolor="#e6efff" width="2%">)</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</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: 2px solid rgb(0, 0, 0);">Cost at June 30</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 147,140 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 117,884 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 47,376 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 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bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 58,946 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 58,946 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Accumulated depreciation at June 30</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> (104,661 </td> <td align="left" width="2%">)</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> (37,947 </td> <td align="left" width="2%">)</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> (43,283 </td> <td align="left" width="2%">)</td> 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border-right: 2px solid rgb(0, 0, 0);">Recorded under &#8220;Consulting fees&#8221;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (13,352 </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%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (325,828 </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%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 36,883 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> (301,183 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">)</td> </tr> </table> 255926 -241552 579130 -133213 20449 15146 35704 29842 276375 -226406 614834 -103371 289727 99422 577951 197812 -13352 -325828 36883 -301183 20000000 0.1 1246825 1.32 0.12 125000 100000 90 25000 90 <p> <b>9.</b> <b> <strong>PUBLIC OFFERING &#8211; UNIT FINANCING</strong> </b> </p> <p align="justify"> 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 (&#8220;Unit Warrants&#8221;). Each Unit Warrant entitles the purchaser to purchase one additional common share until May 6, 2014 at a purchase price of $0.70. </p> <p align="justify"> 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 (&#8220;Agent Warrants&#8221;) 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: </p> <div align="center"> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" 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> <p align="justify"> 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&#8217;s statement of operations. </p> <p align="justify">The following table summarizes the payments of issuance costs:</p> <div align="center"> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" width="50%"> <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> <p align="justify"> Net cash proceeds from the public offering amounted to $19,877,000 and were recorded in shareholders&#8217; 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. </p> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" 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 0.0056 2 <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" width="50%"> <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 <p align="justify"> <b>10.</b> <b> <b>WARRANTS</b> </b> </p> <p align="justify"> <b> <b>Warrants outstanding</b> </b> </p> <p align="justify">The following table summarizes information about the Company&#8217;s warrants outstanding as of June 30, 2012:</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; 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border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b>Grant date</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b>Expiry date</b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Grant</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="15%"> 150,000 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 0.80 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%">June 2, 2010</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%">June 2, 2013</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Unit warrants</td> <td align="left" width="1%">&#160;</td> <td align="right" width="15%"> 44,450,500 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 0.70 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%">May 6, 2011</td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%">May 6, 2014</td> <td align="left" width="2%">&#160;</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);">Agent warrants</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 1,333,515 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 0.60 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%">May 6, 2011</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%">May 6, 2013</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</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);"> <b> <b>Total warrants outstanding</b> </b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> <b> <b> 45,934,015 </b> </b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> </tr> </table> <p align="justify">The Company has enough shares of common stock authorized in the event these warrants are exercised.</p> <p align="justify"> <b> <b>Warrant activity</b> </b> </p> <p align="justify">The following table summarizes the Company&#8217;s warrant activity for the six months period ended June 30, 2012:</p> <div align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" 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);"> <b> <b>Warrants</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>Number of warrants</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>Weighted average exercise price</b> </b> </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="30%"> 45,934,015 </td> <td align="center" bgcolor="#e6efff" width="30%"> 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="30%"> - </td> <td align="center" width="30%"> - </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="30%"> - </td> <td align="center" bgcolor="#e6efff" width="30%"> - </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="30%"> - </td> <td align="center" width="30%"> - </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="30%"> - </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> - </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);"> <b> <b>Outstanding at June 30, 2012</b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b> 45,934,015 </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>0.70</b> </b> </td> </tr> </table> </div> <p align="justify"> <b>&#160;</b> </p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" 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: 2px solid rgb(0, 0, 0);"> <b> <b>Warrant series</b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="15%"> <b> <b>Number of warrants</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b>Strike price</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b>Grant date</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b>Expiry date</b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Grant</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="15%"> 150,000 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 0.80 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%">June 2, 2010</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%">June 2, 2013</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Unit warrants</td> <td align="left" width="1%">&#160;</td> <td align="right" width="15%"> 44,450,500 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 0.70 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%">May 6, 2011</td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%">May 6, 2014</td> <td align="left" width="2%">&#160;</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);">Agent warrants</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 1,333,515 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 0.60 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%">May 6, 2011</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%">May 6, 2013</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</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);"> <b> <b>Total warrants outstanding</b> </b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> <b> <b> 45,934,015 </b> </b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> <b>&#160;</b> </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> </tr> </table> 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;" 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);"> <b> <b>Warrants</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>Number of warrants</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>Weighted average exercise price</b> </b> </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="30%"> 45,934,015 </td> <td align="center" bgcolor="#e6efff" width="30%"> 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="30%"> - </td> <td align="center" width="30%"> - </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="30%"> - </td> <td align="center" bgcolor="#e6efff" width="30%"> - </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="30%"> - </td> <td align="center" width="30%"> - </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="30%"> - </td> <td align="center" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> - </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);"> <b> <b>Outstanding at June 30, 2012</b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b> 45,934,015 </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="30%"> <b> <b>0.70</b> </b> </td> </tr> </table> 45934015 0.7 0 0 0 0 0 0 0 0 45934015 0.7 <p> <b>11.</b> <b>INVESTMENT IN PETROMANAS</b></p> <p align="justify"> On February 12, 2010, the Company&#8217;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. (&#8220;Petromanas&#8221;). After closing, the Share Purchase Agreement was amended by an amending agreement dated May 25, 2010. As a result of this transaction, the Company owns 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 June 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:</p> <div align="center"> <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" width="40%"> <tr valign="top"> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);"> <b>Release dates</b></td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="50%"> <b>Number of shares</b></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);"> &nbsp;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="50%"> <b>released from escrow</b></td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px solid rgb(0, 0, 0);"> <b>Total</b></td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="50%"> <b>200,000,000 </b></td> </tr> </table> </div> </div> <p align="justify"> At June 30, 2012, DWM Petroleum owned and controlled 200,000,000 common shares of Petromanas and it had the right to acquire a further 50,000,000 common shares (referred to as &#8220;Performance Shares&#8221;) upon the occurrence of certain conditions. The 200,000,000 common shares represented approximately 31.7% of the issued and outstanding common shares of Petromanas.&nbsp; On July 6, 2012, DWM Petroleum sold 10,000,000 of these shares to one unrelated party. 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 unrelated parties, together with the right to receive 22.5% of the Performance Shares if and when any Performance Shares are issued by Petromanas.</p> <p align="justify"> Since the shares were subject to a hold period of thirteen 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.</p> <p align="justify"> The quoted market price for one common share of Petromanas on June 30, 2012 was CAD $0.22 (approximately USD $0.22) .</p> <p align="justify"> In order to calculate the fair value of the Company&#8217;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 1.35% .</p> <p align="justify"> During the six month period ended June 30, 2012 and 2011, respectively, the Company recorded $12,977,280 unrealized loss/gain on investment in Petromanas and $(16,236,143) unrealized loss on investment, respectively.</p> <p align="justify"> During the three month periods ended June 30, 2012 and 2011, respectively, the Company recorded $(2,792,540) unrealized loss/gain on investment in Petromanas and $(7,615,886) unrealized loss on investment, respectively.</p> <p align="justify"> 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&#8217;s operating and financial policies.</p> <p align="justify"> 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 timely manner.</p> <p align="justify"> 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.</p> <p align="justify"> Based on the foregoing, the Company has concluded that it does not have the ability to exercise significant influence over Petromanas&#8217; (the investee&#8217;s) operating and financial policies.&nbsp; In addition, the sale of 100,000,000 Petromanas 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align="left" style="border-right: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px 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: 2px solid rgb(0, 0, 0);"> <b>Total</b> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="50%"> <b> 200,000,000 </b> </td> </tr> </table> 10000000 15000000 15000000 40000000 30000000 30000000 30000000 30000000 200000000 200000000 100000000 100000000 200000000 50000000 200000000 0.317 10000000 90000000 0.225 2 0.12 0.22 0.22 0.0135 12977280 -16236143 -2792540 -7615886 100000000 <p align="justify"> <b>12.</b> <b/> <b>RELATED PARTY DISCLOSURE</b> </p> <p align="justify">The consolidated financial statements include the financial statements of Manas Petroleum Corporation and the entities listed in the following table:</p> <div align="center"> <table 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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 the Kyrgyz Republic, Republic of Tajikistan, Mongolia and Chile.</p> <p align="justify"> <b>Chile</b> </p> <p align="justify">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.</p> <p align="justify">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.</p> <p align="justify">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 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.</p> <p align="justify">At June 30, 2012, there had been no legal actions against any member of the Group in the Kyrgyz Republic, Republic of Tajikistan and Mongolia.</p> <p align="justify">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. 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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. 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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.</p> <p align="justify">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.</p> <p align="justify">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. 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border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Level 2</b> </b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Level 3</b> </b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); 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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%">&#160;</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%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</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%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> </div> <p align="justify">The following table summarizes the changes in the fair value of the Company&#8217;s level 2 financial assets for the period ending June 30, 2012:</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" width="100%"> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b> <b> <b>Balance at January 1, 2012</b> </b> </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="25%"> <b> <b> <b> 29,366,063 </b> </b> </b> </td> </tr> <tr valign="top"> <td align="left">Total gains (losses) realized and unrealized:</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Included in earnings</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="25%"> 12,980,280 (1) </td> </tr> <tr valign="top"> <td align="left">Included in other comprehensive income</td> <td align="left" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Purchase, sale, or settlement</td> <td align="left" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left">Net transfer in / (out) of level 2</td> <td align="left" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b> <b> <b>Balance at June 30, 2012</b> </b> </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="25%"> <b> <b> <b> 42,343,343 </b> </b> </b> </td> </tr> </table> <p align="justify">(1) Recorded in change in fair value of investment in associate (Petromanas)</p> <p align="justify"> <b> <b> <b>15.2.</b> <b> <b>Fair Value of Financial Instruments</b> </b> </b> </b> </p> <p align="justify">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.</p> <ul style="text-align: justify;"> <li> <p> <b> <b> <b> <b>Cash and cash equivalents</b> </b> </b> </b> &#8211; 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border-collapse: collapse; font-size: 10pt;" 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);"> <b> <b> <b>&#160;</b> </b> </b> </td> <td align="center" colspan="2" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <b> <b> <b> <i> <u>June 30, 2012</u> </i> </b> </b> </b> </b> </td> <td align="center" colspan="2" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <b> <b> <b> <i> <u>December 31, 2012</u> </i> </b> </b> </b> </b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b>&#160;</b> </b> </b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b>&#160;</b> </b> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b> <b>&#160;</b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b> <b>Carrying</b> </b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b> <b>Fair</b> </b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b> <b>Carrying</b> </b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b>&#160;</b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b> <strong> <em>Fair Value</em> </strong> </b> </b> </b> </td> <td align="center" width="13%"> <b> <b> <b> <b> <i>Reference</i> </b> </b> </b> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b> <b>&#160;</b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b> <b>Amount</b> </b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b> <b>Value</b> </b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b> <b>Amount</b> </b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b> <b>Fair Value</b> </b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b> <b> <i>Levels</i> </b> </b> </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> <b>&#160;</b> </b> </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Cash and cash equivalents</td> <td align="right" bgcolor="#e6efff" width="13%"> 3,208,621 </td> <td align="right" bgcolor="#e6efff" width="13%"> 3,208,621 </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: 2px solid rgb(0, 0, 0);">Restricted cash</td> <td align="right" width="13%"> 101,536 </td> <td align="right" width="13%"> 101,536 </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%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Transaction prepayment</td> <td align="right" bgcolor="#e6efff" width="13%"> 5,000,000 </td> <td align="right" bgcolor="#e6efff" width="13%"> 5,000,000 </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: 2px solid rgb(0, 0, 0);">Accounts receivable</td> <td align="right" width="13%"> 113,188 </td> <td align="right" width="13%"> 113,188 </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%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Investment in Petromanas</td> <td align="right" bgcolor="#e6efff" width="13%"> 42,343,343 </td> <td align="right" bgcolor="#e6efff" width="13%"> 42,343,343 </td> <td align="right" bgcolor="#e6efff" width="13%"> 45,135,883 </td> <td align="right" bgcolor="#e6efff" width="13%"> 45,135,883 </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: 2px solid rgb(0, 0, 0);">Accounts Payable</td> <td align="right" width="13%"> 122,234 </td> <td align="right" width="13%"> 122,234 </td> <td align="right" width="13%"> 280,000 </td> <td align="right" width="13%"> 280,000 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%">&#160;</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);">Refundable Deposits</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 190,534 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 190,534 </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%">&#160;</td> </tr> </table> </div> <p align="justify"> <b> <b> <b>&#160;</b> </b> </b> </p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" width="70%"> <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);"> <b> <b> <b>Assets</b> </b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Level 1</b> </b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Level 2</b> </b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Level 3</b> </b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="1%"> <b> <b>&#160;</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b> <b> <b>Total</b> </b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);" width="2%"> <b> <b>&#160;</b> </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 2px solid rgb(0, 0, 0);">Investment in associate (Petromanas)</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</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%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</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%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</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%">&#160;</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%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</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%">&#160;</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 42,343,343 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> 0 42343343 0 42343343 0 42343343 0 42343343 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; 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width="2%"> <b>&#160;</b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> <b>&#160;</b> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> <b> <b> 172,834,966 </b> </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> <b>&#160;</b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="1%"> <b>&#160;</b> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="12%"> <b> <b> 148,016,597 </b> </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" valign="bottom" width="2%"> <b>&#160;</b> </td> </tr> </table> <p align="justify">The following table shows the total number of stock equivalents that was excluded from the computation of diluted 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style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b> <b>June 30, 2011</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b> <b>June 30, 2012</b> </b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b> <b>June 30, 2011</b> </b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> 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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.</p> <p align="justify"> 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&#8217;s cash contribution of $72,000. The cash payment for the transfer of the Company&#8217;s interest in the Chilean project of $72,000 was received on September 23, 2011 from the new owners. </p> <p align="justify">With the disposal of the Company&#8217;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.</p> <p align="justify">The following table summarizes the Company&#8217;s financial results from the Chilean project since inception to date:</p> <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; border-collapse: collapse; font-size: 10pt;" 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);"> <b>&#160;</b> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <b> <i>Three months ended</i> </b> </b> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <b> <i>Six months ended</i> </b> </b> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="20%"> <b> <b> <i>Period from May 05, 2004</i> </b> </b> </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);"> <b>&#160;</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> <b> <b>June 30, 2012</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> <b> <b>June 30, 2011</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> <b> <b>June 30, 2012</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="13%"> <b> <b>June 30, 2011</b> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="20%"> <b> <b> <i>(inception) to Sep 30, 2011</i> </b> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b>OPERATING REVENUES</b> </b> </td> <td align="center" width="13%"> <b>&#160;</b> </td> <td align="center" width="13%"> <b>&#160;</b> </td> <td align="center" width="13%"> <b>&#160;</b> </td> <td align="center" width="13%"> <b>&#160;</b> </td> <td align="center" width="20%"> <b>&#160;</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Gain from divestiture</td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> (7,611) </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> (20,337) </td> <td align="center" bgcolor="#e6efff" width="20%"> 51,663 </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b>Total revenues</b> </b> </td> <td align="center" width="13%"> <b> <b> - </b> </b> </td> <td align="center" width="13%"> <b> <b> (7,611) </b> </b> </td> <td align="center" width="13%"> <b> <b> - </b> </b> </td> <td align="center" width="13%"> <b> <b> (20,337) </b> </b> </td> <td align="center" width="20%"> <b> <b> 51.663 </b> </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b>OPERATING EXPENSES</b> </b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b>&#160;</b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b>&#160;</b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b>&#160;</b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b>&#160;</b> </td> <td align="center" bgcolor="#e6efff" width="20%"> <b>&#160;</b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Personnel costs</td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="20%"> (211,228) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Exploration costs</td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="20%"> (420,985) </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Depreciation</td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="20%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Consulting fees</td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="13%"> - </td> <td align="center" bgcolor="#e6efff" width="20%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Administrative costs</td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="13%"> - </td> <td align="center" width="20%"> (15,000) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);"> <b> <b>Total operating expenses</b> </b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b> <b> - </b> </b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b> <b> - </b> </b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b> <b> - </b> </b> </td> <td align="center" bgcolor="#e6efff" width="13%"> <b> <b> - </b> </b> </td> <td align="center" bgcolor="#e6efff" width="20%"> <b> <b> (647,213) </b> </b> </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);"> <b> <b>OPERATING INCOME</b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> - </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> (7,611) </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b>&#160;</b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> <b> <b> (20,337) </b> </b> </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="20%"> <b> <b> (595,550) </b> </b> </td> </tr> </table> </div> <p align="justify"> <b>&#160;</b> </p> 72000 72000 0 -7611 0 -20337 51663 0 -7611 0 -20337 51.663 0 0 0 0 -211228 0 0 0 0 -420985 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -15000 0 0 0 0 -647213 0 -7611 -20337 -595550 <p> <b>18.</b> <b>SUBSEQUENT EVENT(S)</b> </p> <p align="justify"> On July 6, 2012, we sold 10,000,000 common shares of Petromanas at a price of $0.17 per common share for gross proceeds of $1,700,000. </p> <p align="justify"> On August 17, 2012, the Company sold 90,000,000 shares of Petromanas at a price of CAD $0.115 (approximately USD $0.115) per share pursuant to written agreements with twelve unrelated parties dated August 13, 2012. </p> <p align="justify"> On August 6, 2012, Santos International Ventures Pty Ltd, has exercised its option under an Agreement dated December 10, 2007, under which an affiliate of Santos and a third party intend to acquire an aggregate 70% shareholding in Somon Oil. The exercise of the option is subject to the negotiation and execution of definitive agreements, including a farm-in agreement and a shareholder agreement, by September 6, 2012. </p> 10000000 0.17 1700000 90000000 0.115 0.115 0.7 七次郎在线观看,久青草国产在线视频,,一夜七次郎免费线路