--12-31 mnap MNP Petroleum Corp 2014-12-31 0001074447 No Smaller Reporting Company No 10-K false 166112792 Yes 8456628 2014 FY 0001074447 2015-03-31 0001074447 2014-06-30 0001074447 2014-01-01 2014-12-31 0001074447 2014-12-31 0001074447 2013-12-31 0001074447 2013-01-01 2013-12-31 0001074447 2012-12-31 0001074447 us-gaap:CommonStockMember 2012-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2012-12-31 0001074447 us-gaap:RetainedEarningsMember 2012-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2012-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2013-01-01 2013-12-31 0001074447 us-gaap:RetainedEarningsMember 2013-01-01 2013-12-31 0001074447 us-gaap:CommonStockMember 2013-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2013-12-31 0001074447 us-gaap:RetainedEarningsMember 2013-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2013-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2014-01-01 2014-12-31 0001074447 us-gaap:TreasuryStockMember 2014-01-01 2014-12-31 0001074447 us-gaap:RetainedEarningsMember 2014-01-01 2014-12-31 0001074447 us-gaap:CommonStockMember 2014-12-31 0001074447 us-gaap:AdditionalPaidInCapitalMember 2014-12-31 0001074447 us-gaap:TreasuryStockMember 2014-12-31 0001074447 us-gaap:RetainedEarningsMember 2014-12-31 0001074447 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2014-12-31 0001074447 mnap:GobiEnergyPartnersLlcMember 2014-01-01 2014-12-31 0001074447 mnap:CjscSomonOilCompanyMember 2014-01-01 2014-12-31 shares iso4217:USD iso4217:USD shares pure utr:D utr:Y iso4217:CAD shares utr:M iso4217:CAD 1369778 3063947 208621 46738 14359 32508 206382 7478799 771203 302713 2570343 10924705 83254 132374 687645 772855 12000000 10111656 12770899 11016885 15341242 21941590 1165472 447736 0 312000 146825 332835 1312297 1092571 340349 142271 340349 142271 1652646 1234842 172592 172592 78622945 78527990 551018 0 -64606924 -58044835 51001 51001 13688596 20706748 15341242 21941590 600000000 600000000 0.001 0.001 172592292 172592292 166112792 172592292 0 0 0 0 2075805 2301938 1813475 1146948 47351 52986 1516416 1838909 1429650 1201888 -15964 0 6898661 6542669 -320287 -37137 665378 -4247067 340 1391 633 613 344798 -4283426 -6553863 -10826095 8226 135018 -6562089 -10961113 -6562089 -10961113 170134834 172592292 170134834 172592292 -0.04 -0.06 -0.04 -0.06 0 238305 287578 0 94955 699105 -450341 42592 717736 320453 -186010 166588 198078 32870 -6181869 -5124010 2000000 0 -514368 0 14195 52926 0 17384 7887401 5655492 50227 -75783 5308611 5695733 551018 0 0 -377125 -551018 -377125 -1424276 194597 2842495 -269893 26855 312000 0 111656 0 172592292 172592 77828886 -47083722 51001 30968757 699104 699104 -10961113 172592292 172592 78527990 -58044835 51001 94955 94955 551018 551018 -6562089 172592292 172592 78622945 -551018 -64606924 51001 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>1.</b> <b>CORPORATE INFORMATION</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The consolidated financial statements comprise MNP Petroleum Corporation (&#8220;MNP&#8221; or the &#8220;Company&#8221;) and its subsidiaries (collectively, &#8220;the Group&#8221;) for the years ended December 31, 2014 and 2013.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company is in the business of exploring for oil and gas, primarily in Central and East Asia. If the Company discovers sufficient reserves of oil or gas, it intends to exploit them. The Company has not commenced planned principal operations and therefore has not realized any revenues to date. The Company carries out its operations both directly and through participation in ventures with other oil and gas companies. It is actively involved in exploration projects in Tajikistan and Mongolia. In addition, the Company recently purchased producing oilfields in Tajikistan. As the Company currently depends upon funding from various sources to continue operations and to implement its growth strategy, the Company&#8217;s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company&#8217;s licenses.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company, formerly known as Express Systems Corporation, was incorporated in the State of Nevada on July 9, 1998.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On April 10, 2007, the Company completed the Exchange Transaction whereby it acquired its then sole subsidiary DWM Petroleum AG, Baar (&#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 finders&#8217; fees at the closing price of USD3.20. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The acquisition of DWM Petroleum was 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 accounting principles generally accepted in the United States of America, 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" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company has a focused strategy on exploration and developing oil and gas resources in Central Asia and East Asia (Tajikistan and Mongolia).</p> 1.00 80000000 800000 3.20 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>2.</b> <b>GOING CONCERN</b></p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The consolidated financial statements have been prepared on the assumption that the Group will continue as a going concern. The Group has no operating income and therefore will remain dependent upon continued funding from its shareholders or other sources. Our cash balance as of December 31, 2014 was USD1,578,399, of which USD208,621 has been restricted leaving a balance of USD1,369,778. Additionally, the Group has 4,000,000 shares in PMI valuing the investment at USD206,382.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> These matters raise substantial doubt about the Group&#8217;s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Based on our expected monthly burn rate of USD382,596 on basic operational activities, we estimate that we have sufficient working capital to fund operations for four months.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In order to continue to fund operations for the next twelve months and implement the geological work program for our projects in Central Asia as well as to finance continuing operations, the Group will require further funds. We expect these funds will be raised through additional equity and/or debt financing through the expected Stichting VB Vagobel (&#8220;Vagobel&#8221;) transaction disclosed to the market on September 9, 2014, the terms of which are outlined below, or through other transactions which are currently under negotiations.</p> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">On November 29, 2014, we entered into a private placement agreement with Vagobel, pursuant to which we agreed to sell, and Vagobel agreed to purchase, the following securities of our company:</font></font> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr> <td valign="top" width="5%"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">(a)</font></font></td> <td> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">43,000,000 shares of our common stock (the &#8220;Initial Shares&#8221;) at a purchase price of US$0.15 per Initial Share for an aggregate purchase price of US$6,450,000 ; and</font></font></td> </tr> <tr> <td valign="top" width="5%"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">(b)</font></font></td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">for no additional consideration, two non-transferable common share purchase warrants. The first of these non- transferable common share purchase warrants (the &#8220;Initial Warrant&#8221;) will provide that Vagobel must purchase, on the fifth business day (the &#8220;Warrant Exercise Date&#8221;) following the date upon which our stockholders approve the private placement with Vagobel, an additional 23,717,633 shares of our common stock (the &#8220;Initial Warrant Shares&#8221;) at an exercise price of US$0.20 per Initial Warrant Share for aggregate proceeds of US$4,743,527. The second of these non-transferable common share purchase warrants (the &#8220;Second Warrant&#8221;) will provide that Vagobel must purchase, on the Warrant Exercise Date, an additional 5,771,130 shares of our common stock (the &#8220;Second Warrant Shares&#8221;) at an exercise price of US$0.15 per Second Warrant Share for aggregate proceeds of US$865,669 ;</font></font></p> </td> </tr> </table> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">On the Warrant Exercise Date:</font></font> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr> <td valign="top" width="5%"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">(a)</font></font></td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">one non-transferable convertible debenture (the &#8220;First Debenture&#8221;) in the amount of US$25,000,000 ;</font></font></p> </td> </tr> <tr> <td valign="top" width="5%"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">(b)</font></font></td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">one non-transferable common share purchase warrant (the &#8220;Interest Warrant&#8221;) pursuant to which Vagobel must purchase, on each interest payment date such number of shares of our common stock (each an &#8220;Interest Warrant Share&#8221;) as is equal to the amount of interest payable in Interest Warrant Shares (as contemplated by the terms of each of the First Debenture and the Second Debenture (as defined below)) on that interest payment date, at an exercise price of US$0.70 per Interest Warrant Share; and</font></font></p> </td> </tr> </table> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">On the four-month anniversary of the stockholder approval of the private placement, one non-transferable convertible debenture (the &#8220;Second Debenture&#8221;) in the principal amount of US$25,000,000.</font></font> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">The purchase price for the First Debenture and the Interest Warrant will be US$25,000,000 and the purchase price for the Second Debenture will be US$25,000,000.</font></font></p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <font style="font-family:times new roman,times,serif;"><font style="font-size: 10pt;">Each of the First Debenture and the Second Debenture (the &#8220;Debentures&#8221;) will have a maturity date of five years from the date of issuance.</font></font></p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> We must pay all or any part of the principal amounts outstanding under the Debentures by way of conversions into shares of our common stock at a conversion price of US$0.70 per share. At any time after the date of issuance and until the maturity date, Vagobel will be entitled to convert some or all of the outstanding principal amounts under the Debentures into shares of our common stock at a conversion price of US$0.70 per share. All principal that remains outstanding on the maturity date will be automatically converted on the maturity date.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Outstanding principal under the Debentures will bear interest at the rate of 3% per annum, with interest payable annually within 30 days after each anniversary of issuance of the Debentures. 2% of the interest is to be paid through exercise of the Interest Warrant providing for the purchase of up to an aggregate of up to 7,142,857 Interest Warrant Shares at an exercise price of US$0.70 per Interest Warrant Share for a period coterminous with the Debentures and the residual of 1% is to be paid in cash. The right to purchase Interest Warrant Shares will vest only as and when interest becomes payable under the Debentures and the number of such vested Interest Warrant Shares will be determined by dividing the amount of interest accrued and unpaid on each anniversary of issuance of the Debentures by an exercise price of US$0.70 per Interest Warrant Share.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> If we are not able to raise the required funds, we would consider farming-out projects in order to reduce our financial commitments. If the Company is unable to obtain such funding, or complete farming-out projects, the Company will not be able to continue its business. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, will increase expenses and may involve restrictive covenants. The Company will be required to raise additional capital on terms which are uncertain, especially under the current capital market conditions. Under these circumstances, if the Company is unable to obtain capital or is required to raise it on undesirable terms, it may have a material adverse effect on the Company's financial condition.</p> 1578399 208621 1369778 4000000 206382 382596 43000000 0.15 6450000 23717633 0.20 4743527 5771130 0.15 865669 25000000 0.70 25000000 25000000 25000000 0.70 0.70 0.03 30 0.02 7142857 0.70 0.01 0.70 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>3.</b> <b>ACCOUNTING POLICIES</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company&#8217;s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. 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" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Successful Efforts Method of Accounting</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">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" style="font-family: times new roman,times,serif; font-size: 10pt;">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" style="font-family: times new roman,times,serif; font-size: 10pt;">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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">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 &#8220;exploration costs&#8221;. 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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Scope and methods of consolidation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The consolidated financial statements include MNP Petroleum Corporation and all companies which MNP Petroleum Corporation directly or indirectly controls (over 50% of voting interest). The companies included in the consolidation are listed in Note 11. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Investments in which the Company exercises significant influence, but not control (generally 20% to 50% ownership) are accounted for using the equity method. The Group&#8217;s share of earnings or losses is included in consolidated net loss and the Group&#8217;s share of the net assets is included in long-term assets. Investments where the Company holds less than 50% and has no ability to exercise significant influence are accounted for using the cost method, unless we have elected the fair value option in accordance with ASC 820. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Principles of consolidation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The annual closing date of the individual financial statements is December 31, with all cost and income items being reported in the period to which they relate. Intercompany income and expenses, including unrealized gross profits from internal Group transactions and intercompany receivables, payables and loans, have been eliminated. Companies acquired or divested in the course of the year are included in the consolidated financial statements as of the date of purchase respectively up to the date of sale.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Foreign currency translation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The consolidated financial statements of the Group are presented in US dollars (USD). The parent Company&#8217;s functional currency is the US dollar. Transactions in currencies other than the book currency are recorded using the appropriate exchange rate at the time of the transaction.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The functional currency for all of our consolidated subsidiaries is US dollar. For our subsidiary in Tajikistan that keeps its books in a currency other than US dollars, the company re-measures the Tajik financials as follows: Monetary assets and liabilities are translated using the balance sheet period-end date, while for the non-monetary assets and liabilities the historical rate is used. Expenses are translated using the average rate for the reporting period, except for depreciation and amortization, where the historical rate of the related asset or liability applies. Foreign currency translation gains and losses are reported on the statement of operations.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Concentrations of risk</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand. Cash and cash equivalents are subject to currency exchange rate fluctuations.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Cash and cash equivalents</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Cash and cash equivalents include highly liquid investments with original maturities of three months or less (petty cash, bank balances and fiduciary deposits).</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Investment in associate measured at fair value</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> For periods ended December 31, 2014 and 2013, we classified our investment in associates as Level 1 and account for it in accordance with ASC 320 <i>Investments - Debt and Equity Securities</i> . We classified the investment in associates as trading securities and report it at fair value, with unrealized gains and losses included in earnings. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Accounts receivable and prepaid expenses</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">This position includes receivables from third parties, value added taxes, withholding taxes, loans to employees, prepaid expenses for goods and services not yet received as well as income from the current year that will not be received until the following year. The carrying amount of these assets approximates their fair value. There is currently no reserve for bad debt.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Tangible fixed assets, computer software and depreciation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Tangible fixed assets (office equipment, vehicles and furniture) and computer software are recorded at cost and are depreciated on a straight-line basis over the following estimated useful lives:</p> <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Office equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Operating equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Vehicles</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 - 6 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Leasehold improvements</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Computer software</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 2 years </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Tangible fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The carrying value of a long-lived asset or asset group is considered to be impaired when the undiscounted expected cash flows from the asset or asset group are less than its carrying amount. In that event, an impairment loss is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined based on quoted market prices, where available, or is estimated as the present value of the expected future cash flows from the asset or asset group discounted at a rate commensurate with the risk involved.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Leased assets</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Rentals payable under operating leases are charged to the income statement on a straight line basis.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Current liabilities</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Current liabilities include current or renewable liabilities due within a maximum period of one year. Current liabilities are carried at their nominal value, which approximates fair market value.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Fair value of financial instruments</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company&#8217;s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, investment in Petromanas, transaction prepayment, accounts payable and refundable deposits. The fair value of these financial instruments approximate their carrying value due to the short maturities of these instruments, unless otherwise noted.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Non-current liabilities</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Non-current liabilities include all known liabilities as per year end, which can reliably be quantified with a due date of at least one year after the date of the balance sheet.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Income taxes</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Taxes on income are accrued in the same period as the revenues and expenses to which they relate.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Deferred taxes are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet of the Group companies prepared for consolidation purposes, with the exception of temporary differences arising on investments in foreign subsidiaries where the Group has plans to permanently reinvest profits into the foreign subsidiaries.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely than not, that future profits will be available and the tax loss carry-forward can be utilized.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the determination of the applicable tax rate provided that they are likely to be applicable in the period when the deferred tax assets or tax liabilities are realized.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Group is required to pay income taxes in a number of countries. Significant judgment is required in determining income tax provisions and in evaluating tax positions.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The Group recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Group adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition of measurement of its uncertain tax positions. Interest and penalties related to uncertain tax positions are recognized as income tax expense. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Revenue recognition</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured. The Group did not earn revenue during the years 2014 and 2013.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Exploration costs</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">For exploration and evaluation costs the successful efforts method is applied.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Related parties</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is under common control with the other party, if it has an interest in the other party that gives it significant influence over the party, if it has joint control over the party, or if it is an associate or a joint venture. Senior management of the company and close family members are also deemed to be related parties.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Pension plans</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In accordance with ASC 715-30, <i>Defined Benefit Plans &#8211; Pension</i> , the Group recognizes the funded status of the defined benefit plans in the balance sheet. Actuarial gains and losses are fully recognized in the statement of operations of the respective period. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Stock-based compensation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Stock-based compensation costs are recognized in earnings using the fair-value based method for all awards granted. Compensation costs for unvested stock options and awards are recognized in earnings over the requisite service period based on the fair value of those options and awards. For employees, fair value is estimated at the grant date and for non-employees fair value is re-measured at each reporting date as required by ASC 718, <i>Compensation-Stock Compensation,</i> and ASC 505-50, <i>Equity-Based Payments to Non-Employees</i> . Fair values of awards granted under the share option plans are estimated using a Black-Scholes option pricing model. The model input assumptions are determined based on available internal and external data sources. The risk free rate used in the model is based on the US treasury rate for the expected contractual term. Expected volatility is based on the Company&#8217;s own historical share price volatility, since the Company&#8217;s share price data can be traced back to April 2, 2007. For restricted share grants, we calculate the fair value applying a prorated discount of 12% on the share price at the grant date 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. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Earnings per share</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Basic earnings per share are calculated using the Company&#8217;s weighted-average outstanding common shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares and the dilutive effect of warrants and stock options as determined under the treasury stock method.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Successful Efforts Method of Accounting</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">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" style="font-family: times new roman,times,serif; font-size: 10pt;">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" style="font-family: times new roman,times,serif; font-size: 10pt;">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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">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 &#8220;exploration costs&#8221;. 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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Scope and methods of consolidation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The consolidated financial statements include MNP Petroleum Corporation and all companies which MNP Petroleum Corporation directly or indirectly controls (over 50% of voting interest). The companies included in the consolidation are listed in Note 11. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Investments in which the Company exercises significant influence, but not control (generally 20% to 50% ownership) are accounted for using the equity method. The Group&#8217;s share of earnings or losses is included in consolidated net loss and the Group&#8217;s share of the net assets is included in long-term assets. Investments where the Company holds less than 50% and has no ability to exercise significant influence are accounted for using the cost method, unless we have elected the fair value option in accordance with ASC 820. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Principles of consolidation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The annual closing date of the individual financial statements is December 31, with all cost and income items being reported in the period to which they relate. Intercompany income and expenses, including unrealized gross profits from internal Group transactions and intercompany receivables, payables and loans, have been eliminated. Companies acquired or divested in the course of the year are included in the consolidated financial statements as of the date of purchase respectively up to the date of sale.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Foreign currency translation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The consolidated financial statements of the Group are presented in US dollars (USD). The parent Company&#8217;s functional currency is the US dollar. Transactions in currencies other than the book currency are recorded using the appropriate exchange rate at the time of the transaction.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The functional currency for all of our consolidated subsidiaries is US dollar. For our subsidiary in Tajikistan that keeps its books in a currency other than US dollars, the company re-measures the Tajik financials as follows: Monetary assets and liabilities are translated using the balance sheet period-end date, while for the non-monetary assets and liabilities the historical rate is used. Expenses are translated using the average rate for the reporting period, except for depreciation and amortization, where the historical rate of the related asset or liability applies. Foreign currency translation gains and losses are reported on the statement of operations.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Concentrations of risk</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand. Cash and cash equivalents are subject to currency exchange rate fluctuations.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Cash and cash equivalents</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Cash and cash equivalents include highly liquid investments with original maturities of three months or less (petty cash, bank balances and fiduciary deposits).</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Investment in associate measured at fair value</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> For periods ended December 31, 2014 and 2013, we classified our investment in associates as Level 1 and account for it in accordance with ASC 320 <i>Investments - Debt and Equity Securities</i> . We classified the investment in associates as trading securities and report it at fair value, with unrealized gains and losses included in earnings. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Accounts receivable and prepaid expenses</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">This position includes receivables from third parties, value added taxes, withholding taxes, loans to employees, prepaid expenses for goods and services not yet received as well as income from the current year that will not be received until the following year. The carrying amount of these assets approximates their fair value. There is currently no reserve for bad debt.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Tangible fixed assets, computer software and depreciation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Tangible fixed assets (office equipment, vehicles and furniture) and computer software are recorded at cost and are depreciated on a straight-line basis over the following estimated useful lives:</p> <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Office equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Operating equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Vehicles</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 - 6 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Leasehold improvements</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Computer software</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 2 years </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Tangible fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The carrying value of a long-lived asset or asset group is considered to be impaired when the undiscounted expected cash flows from the asset or asset group are less than its carrying amount. In that event, an impairment loss is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined based on quoted market prices, where available, or is estimated as the present value of the expected future cash flows from the asset or asset group discounted at a rate commensurate with the risk involved.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Leased assets</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Rentals payable under operating leases are charged to the income statement on a straight line basis.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Current liabilities</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Current liabilities include current or renewable liabilities due within a maximum period of one year. Current liabilities are carried at their nominal value, which approximates fair market value.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Fair value of financial instruments</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company&#8217;s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, investment in Petromanas, transaction prepayment, accounts payable and refundable deposits. The fair value of these financial instruments approximate their carrying value due to the short maturities of these instruments, unless otherwise noted.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Non-current liabilities</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Non-current liabilities include all known liabilities as per year end, which can reliably be quantified with a due date of at least one year after the date of the balance sheet.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Income taxes</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Taxes on income are accrued in the same period as the revenues and expenses to which they relate.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Deferred taxes are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet of the Group companies prepared for consolidation purposes, with the exception of temporary differences arising on investments in foreign subsidiaries where the Group has plans to permanently reinvest profits into the foreign subsidiaries.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely than not, that future profits will be available and the tax loss carry-forward can be utilized.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the determination of the applicable tax rate provided that they are likely to be applicable in the period when the deferred tax assets or tax liabilities are realized.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Group is required to pay income taxes in a number of countries. Significant judgment is required in determining income tax provisions and in evaluating tax positions.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The Group recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Group adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition of measurement of its uncertain tax positions. Interest and penalties related to uncertain tax positions are recognized as income tax expense. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Revenue recognition</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured. The Group did not earn revenue during the years 2014 and 2013.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Exploration costs</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">For exploration and evaluation costs the successful efforts method is applied.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Related parties</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is under common control with the other party, if it has an interest in the other party that gives it significant influence over the party, if it has joint control over the party, or if it is an associate or a joint venture. Senior management of the company and close family members are also deemed to be related parties.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Pension plans</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In accordance with ASC 715-30, <i>Defined Benefit Plans &#8211; Pension</i> , the Group recognizes the funded status of the defined benefit plans in the balance sheet. Actuarial gains and losses are fully recognized in the statement of operations of the respective period. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Stock-based compensation</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Stock-based compensation costs are recognized in earnings using the fair-value based method for all awards granted. Compensation costs for unvested stock options and awards are recognized in earnings over the requisite service period based on the fair value of those options and awards. For employees, fair value is estimated at the grant date and for non-employees fair value is re-measured at each reporting date as required by ASC 718, <i>Compensation-Stock Compensation,</i> and ASC 505-50, <i>Equity-Based Payments to Non-Employees</i> . Fair values of awards granted under the share option plans are estimated using a Black-Scholes option pricing model. The model input assumptions are determined based on available internal and external data sources. The risk free rate used in the model is based on the US treasury rate for the expected contractual term. Expected volatility is based on the Company&#8217;s own historical share price volatility, since the Company&#8217;s share price data can be traced back to April 2, 2007. For restricted share grants, we calculate the fair value applying a prorated discount of 12% on the share price at the grant date 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. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Earnings per share</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Basic earnings per share are calculated using the Company&#8217;s weighted-average outstanding common shares. When the effects are not anti-dilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares and the dilutive effect of warrants and stock options as determined under the treasury stock method.</p> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="40%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Office equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Operating equipment</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 3 - 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Vehicles</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 - 6 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Leasehold improvements</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 5 years </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Computer software</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 2 years </td> </tr> </table> 3 5 3 5 5 6 5 2 0.50 0.20 0.50 0.50 0.50 0.12 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>4.</b> <b>NEW ACCOUNTING STANDARDS</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In June 2014, the FASB released ASU 2014-10 &#8212; Accounting Standards Update 2014-10, <i>Eliminati</i> <i>on of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation</i> . </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">This update was issued to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. Users of financial statements of development stage entities determined that the inception to date information, and certain other disclosures currently required under U.S. generally accepted accounting principles (GAAP) in the financial statements of development stage entities provide information that has limited relevance and is generally not decision useful. As a result, the amendments in this Update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> This update eliminates the requirements for development stage entities to (1) present inception to date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments also clarify that the guidance in <i>Topic 275, Risks and Uncertainties</i> , is applicable to entities that have not commenced planned principal operations. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">This ASU has been early adopted by the Company as of July 1, 2014 and therefore for the year ended December 31, 2014 as such early adoption is permitted for all financial statements that have not been issued or made available for issuance. 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The agreement provided that, at the time of the closing of the transaction, TF Petroleum would own Petroleum Sugd, a limited liability joint venture formed under the laws of Tajikistan. Petroleum Sugd owns and operates certain producing oilfield assets located in Tajikistan. Energy Partners Austria GmbH, Kavsar&#8217;s then wholly-owned subsidiary and an Austria registered company, currently owns the majority of the equity in Petroleum Sugd. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On March 31, 2014 DWM Petroleum and Kavsar signed a Supplement Agreement dated for effect September 27, 2013. The Supplement Agreement provided that DWM Petroleum was entitled to receive from Kavsar 65% of the equity in Energy Partners Austria, which was the beneficial owner of 57.42% of the equity in Petroleum Sugd, subject to the payment of USD2,000,000 by DWM Petroleum. 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font-size: 10pt;"> At the Company&#8217;s Annual and Special Meeting of Shareholders held on September 22, 2011, the shareholders approved the Company&#8217;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&#8217;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. 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Subject to vesting, each stock option is exercisable at a price of USD0.06 per share for a period of ten years and vesting over two years in quarterly installments. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On August 20, 2014, the Company granted 750,000 stock options to Streicher Capital LLC. 250,000 of these stock options are exercisable at a price of USD0.076 per share, 250,000 are exercisable at a price of USD0.084 per share, and 250,000 are exercisable at a price of USD0.09 per share. Subject to vesting, each stock option is exercisable for a period of five years, vesting over a period of less than one year on specific dates agreed by both parties. 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These expenses are expected to be recognized over a weighted average period of 0.77 years. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following tables summarize information about the Company&#8217;s stock options as of December 31, 2014:</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 8pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Outstanding</i> </b> </td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Exercisable</i> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <br/> <b>Exercise Price in USD</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.06 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 300,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 9.52 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 37,500 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 9.52 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.076 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.084 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.09 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4,64 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.15 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 750,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 3.09 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 656,250 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 3.09 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.20 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1.90 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1.90 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.215 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.77 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.77 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.68 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.79 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b>Total</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 11,300,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.21 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 10,381,250 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.22 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Outstanding</i> </b> </td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Exercisable</i> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <br/> <b>Exercise Price in CAD</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.15 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8.09 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 875,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8.09 </b> </td> </tr> </table> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>9.2.</b> <b>Share Grants</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> 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. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">No share grants were granted in 2014. As of December 31, 2014, there were no unrecognized compensation costs related to unvested share grants.</p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>9.3.</b> <b>Summary of Stock-based Compensation Expenses</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">A summary of stock-based compensation expense for the respective reporting periods is presented in the following table:</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; 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);">&#160;</td> <td align="center" colspan="2" style="border-top: 2px solid rgb(0, 0, 0);" width="30%"> <i>Year ended</i> </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);"> <b>Stock based compensation expenses (in USD)</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2014</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2013</b> </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Option grants</td> <td align="right" width="15%"> 94,954 </td> <td align="right" width="15%"> 699,104 </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="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> - </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> - </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> <b>Total</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b> 94,954 </b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b> 699,104 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Recorded under &#8220;Personnel&#8221;</td> <td align="right" width="15%"> 37,803 </td> <td align="right" width="15%"> 668,564 </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Recorded under &#8220;Consulting fees&#8221;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 57,151 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 30,540 </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="60%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>Assumption used</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>2014</b> </td> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>2013</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> 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</td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> 15950000 0.39 7.07 0 3500000 0.18 6.21 0 0 0 0 0 -7350000 0.50 0 0 12100000 0.25 7.07 0 10631250 0.26 7.17 0 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);">&#160;</td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="12%">&#160;</td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="12%"> <b>Weighted-average</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> <b>Non-vested options</b> </td> <td align="left" width="1%">&#160;</td> <td align="right" nowrap="nowrap" width="12%"> <b>Shares under option</b> </td> <td align="left" nowrap="nowrap" width="2%">&#160;</td> <td align="left" nowrap="nowrap" width="1%">&#160;</td> <td align="right" nowrap="nowrap" width="12%"> <b>grant date fair value</b> </td> <td align="left" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);">&#160;</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%">&#160;</td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%">&#160;</td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Non-vested at December 31, 2013</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 1,468,750 </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%"> 0.06 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</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%">&#160;</td> <td align="right" width="12%"> 1,050,000 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 0.06 </td> <td align="left" width="2%">&#160;</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%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> (1,475,000 </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%"> 0.06 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</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%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Non-vested at December 31, 2014</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%"> 1,043,750 </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%"> 0.06 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> 1468750 0.06 1050000 0.06 -1475000 0.06 0 0 1043750 0.06 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 8pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Outstanding</i> </b> </td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Exercisable</i> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <br/> <b>Exercise Price in USD</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.06 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 300,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 9.52 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 37,500 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 9.52 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.076 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.084 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.09 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 250,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.64 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 62,500 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4,64 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.15 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 750,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 3.09 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 656,250 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 3.09 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.20 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1.90 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1.90 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.215 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.77 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.77 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.68 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.79 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 500,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 4.61 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b>Total</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 11,300,000 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.21 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 10,381,250 </b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 6.22 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Outstanding</i> </b> </td> <td align="center" colspan="2" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="26%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; <b> <i>Options Exercisable</i> </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <br/> <b>Exercise Price in CAD</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <br/> <b>Number of Options</b> </td> <td align="center" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b>WA Remaining</b> <br/> <b>Contractual Term</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);"> <b> 0.15 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 1,000,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8.09 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 875,000 </b> </td> <td align="center" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-width: 1px; border-style: solid; border-color: rgb(0, 0, 0);" width="20%"> <b> 8.09 </b> </td> </tr> </table> 0.06 300000 9.52 37500 9.52 0.076 250000 4.64 62500 4.64 0.084 250000 4.64 62500 4.64 0.09 250000 4.64 62500 464 0.15 750000 3.09 656250 3.09 0.20 500000 1.90 500000 1.90 0.215 8000000 6.77 8000000 6.77 0.68 500000 4.61 500000 4.61 0.79 500000 4.61 500000 4.61 11300000 6.21 10381250 6.22 0.15 1000000 8.09 875000 8.09 <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; 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);">&#160;</td> <td align="center" colspan="2" style="border-top: 2px solid rgb(0, 0, 0);" width="30%"> <i>Year ended</i> </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);"> <b>Stock based compensation expenses (in USD)</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2014</b> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2013</b> </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Option grants</td> <td align="right" width="15%"> 94,954 </td> <td align="right" width="15%"> 699,104 </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="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> - </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> - </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);"> <b>Total</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b> 94,954 </b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b> 699,104 </b> </td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Recorded under &#8220;Personnel&#8221;</td> <td align="right" width="15%"> 37,803 </td> <td align="right" width="15%"> 668,564 </td> </tr> <tr bgcolor="#e6efff" valign="top"> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0); border-right: 1px solid rgb(0, 0, 0);">Recorded under &#8220;Consulting fees&#8221;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 57,151 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="15%"> 30,540 </td> </tr> </table> 94954 699104 0 0 94954 699104 37803 668564 57151 30540 0.10 34500000 1050000 850000 300000 0.06 750000 250000 0.076 250000 0.084 250000 0.09 2000000 0.15 10 2 750000 0.15 5 2 750000 250000 0.15 250000 0.30 250000 0.45 12 4850000 500000 1000000 0.06 0.05 45289 0.77 0.12 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>10.</b> <b>WARRANTS</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On May 6, 2011, upon completion of a public offering, the Company issued 44,450,500 Unit Warrants and 1,333,515 Agent Warrants. The Unit Warrants are exercisable until May 6, 2014 and the Agent Warrants until May 6, 2013, respectively. 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border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Number of warrants</b> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Weighted average exercise price</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Outstanding at December 31, 2013</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 44,450,500 </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%"> USD0.70 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Granted</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</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%">&#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%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Forfeit or expired</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%"> (44,450,500 </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%"> USD0.70 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Outstanding at December 31, 2014</b> </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%"> <b> - </b> </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%"> <b> - </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> <br/> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>Warrants 2013</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Number of warrants</b> </td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> <td align="left" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Weighted average exercise price</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Outstanding at December 31, 2012</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 45,934,015 </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%"> USD0.70 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Granted</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> - </td> <td align="left" width="2%">&#160;</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%">&#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%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); 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font-family: times new roman,times,serif; font-size: 10pt;"> <b>10.2.</b> <b>Warrants Outstanding</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> As of December 31, 2014, the Company had no warrants outstanding to purchase common stock. 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font-size: 10pt;"> <b>11.</b> <b>INVESTMENT IN PETROMANAS</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> 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 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. 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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 CAD0.115 per common share for gross proceeds of CAD10,350,000 (USD10,445,050) together with the right to receive 22.5% of the Performance Shares if and when any Performance Shares are issued by Petromanas. As of December 31, 2012 no proceeds were allocated to these performance shares as they are only issuable upon achievement of certain conditions and the likelihood of the contingent event is not reasonably determined. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> During the Period of October 18, 2013 to October 29, 2013, DWM Petroleum sold 1,000,000 shares at a price of CAD0.12 per common share for gross proceeds of CAD120,000 (USD114,900) on the open market. On October 25, 2013, DWM Petroleum sold an additional 3,000,000 shares at a price of CAD0.10 per common shares for gross proceeds of CAD300,000 (USD288,510) on the open market. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On November 8, 2013, DWM Petroleum sold an additional 46,000,000 shares at a volume weighted price of CAD0.12 per common shares for gross proceeds of CAD5,595,710 (USD5,366,286) on the open market. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Since the shares were subject to a hold period of thirty months until February 24, 2013, 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 had applied an annual discount rate of 12% on the quoted market price based on the time before the shares become freely tradable. The discount rate was an estimate of the cost of capital, based on previous long-term debt the Company has issued. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Since February 25, 2013 the fair value of the investment in Petromanas has been reclassified to Level 1 and no additional discount rate is being used for the current calculation of the investment.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Effective from and after August 14, 2013 all Petromanas shares held by the Company were free of any restrictions and are eligible for resale. The Company intends to use these shares for its working capital requirements or pledge them for a short term financing facility. Pursuant to that we have reclassified the remaining Petromanas shares from non-current to current assets.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On December 31, 2013, DWM Petroleum owned and controlled 50,000,000 common shares of Petromanas and it had the right to acquire a further 38,750,000 common shares (referred to as &#8220;Performance Shares&#8221;) upon the occurrence of certain conditions. The 50,000,000 common shares represented approximately 7.2% of the issued and outstanding common shares of Petromanas. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Between February 26, 2014 and February 27, 2014 DWM Petroleum sold 1,500,000 shares of Petromanas (PMI) at a weighted average price of CAD0.23 per common share for gross proceeds of CAD337,500 (USD300,602). 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<td valign="top" width="5%">(1)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;">Included Branch in Albania that was sold in February 2010.</p> </td> </tr> <tr> <td valign="top" width="5%">(2)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;">Founded in 2007.</p> </td> </tr> <tr> <td valign="top" width="5%">(3)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;">Petromanas Energy Inc. participation resulted from partial sale of Manas Adriatic GmbH; fair value method applied.</p> </td> </tr> <tr> <td valign="top" width="5%">(4)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;">CJSC South Petroleum Company was founded by DWM Petroleum AG; equity method investee that is not consolidated. 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Gobi Energy Partners GmbH holds record title to 100% of Gobi Energy Partners LLC. </p> </td> </tr> <tr> <td valign="top" width="5%">(9)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;"> 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. </p> </td> </tr> <tr> <td valign="top" width="5%">(10)</td> <td> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt; margin: inherit;"> TF Petroleum was founded in 2012 pursuant to the Supplement Agreement dated March 31, 2014. 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align="right" width="8%"> 4,285,071 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> 4,285,071 </td> <td align="left" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF">2029</td> <td align="left" bgcolor="#E6EFFF" width="1%">&#160;</td> <td align="right" bgcolor="#E6EFFF" width="8%"> 3,245,872 </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="8%"> - </td> <td align="left" bgcolor="#E6EFFF" width="2%">&#160;</td> <td align="left" 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align="right" bgcolor="#E6EFFF" width="8%"> 2,851,080 </td> <td align="left" bgcolor="#E6EFFF" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left">2032</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> 277,493 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> - </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> <td align="right" width="8%"> 277,493 </td> <td align="left" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF">2033</td> <td align="left" bgcolor="#E6EFFF" width="1%">&#160;</td> <td align="right" bgcolor="#E6EFFF" width="8%"> 280,630 </td> <td align="left" bgcolor="#E6EFFF" 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align="left" bgcolor="#e6efff">US Federal</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="20%">2014</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left">Switzerland</td> <td align="left" width="1%">&#160;</td> <td align="right" width="20%">2014</td> <td align="left" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Mongolia</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="20%">2014</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left">Tajikistan</td> <td align="left" width="1%">&#160;</td> <td align="right" width="20%">2014</td> <td align="left" width="2%">&#160;</td> </tr> </table> 0.74 12 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>15.</b> <b>ISSUED CAPITAL AND RESERVES</b> </p> <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; 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-left: #000000 1px solid;">&#160;</td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); BORDER-left: #000000 1px solid" width="1%">&#160;</td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="27%"> <i>Year ended</i> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> <b>Shares MNP Petroleum Corporation</b> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0); BORDER-left: #000000 1px solid" width="1%">&#160;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Dec 31, 2014</b> </td> <td 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solid" width="1%">&#160;</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="12%"> 172,592 </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%"> 172,592 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">All shares are common shares. 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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 Mongolia and the Republic of Tajikistan.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">At December 31, 2014, there had been no legal actions against any member of the Group in Mongolia and the Republic of Tajikistan.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Management believes that the members of the Group are in substantial compliance with the tax laws affecting their respective operations in the Republic of Tajikistan and Mongolia. However, the risk remains that relevant authorities could take differing positions with regards to interpretative issues.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>License agreements held by Gobi Energy Partners (Mongolia)</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table sets forth the approximate financial commitment amounts pursuant to each production sharing contract for Blocks XIII and XIV during the periods indicated (in USD):</p> <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="70%"> <tr valign="top"> <td align="left"> <b>Production Sharing Contract</b> </td> <td align="right" width="20%"> <b>2013*</b> </td> <td align="right" width="20%"> <b>2014*</b> </td> </tr> <tr valign="top"> <td align="left">Block XIII</td> <td align="right" width="15%"> 6,900,000 </td> <td align="right" width="15%"> 6,900,000 </td> </tr> <tr valign="top"> <td align="left">Block XIV</td> <td align="right" width="15%"> 6,900,000 </td> <td align="right" width="15%"> 6,900,000 </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">* Financial commitment for the fifth contract year (starting April 21 of each year) of the production sharing contract</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The contract is currently under a Moratorium, which extends the contract period by one year. Afterwards the licenses can be extended. The Moratorium ends in May 2014. It was entered due to lack of potentially economic prospects to fulfill the outstanding commitments. We have applied for a further extension of the Moratorium until the end of May 2015. The approval is still pending.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>License agreement held by CJSC Somon Oil (Republic of Tajikistan)</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table sets forth the approximate commitments pursuant to the licenses during the periods indicated (in USD):</p> <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left"> <b>License Area</b> </td> <td align="right" width="20%"> <b>2013*</b> </td> <td align="right" width="20%"> <b>2014*</b> </td> <td align="right" width="20%"> <b>2015*</b> </td> <td align="right" width="20%"> <b>2016*</b> </td> </tr> <tr valign="top"> <td align="left"> West <sup>1</sup> </td> <td align="right" width="20%"> 4,500,000 </td> <td align="right" width="20%"> 2,500,000 </td> <td align="right" width="20%">to be agreed</td> <td align="right" width="20%">to be agreed</td> </tr> <tr valign="top"> <td align="left"> North-West <sup>2</sup> </td> <td align="right" width="20%"> 8,680,000 </td> <td align="right" width="20%"> 8,700,000 </td> <td align="right" width="20%"> 3,600,000 </td> <td align="right" width="20%"> 4,600,000 </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> *Commitments are based on calendar year. Amounts indicative, work plan prevails <br/> <sup>1</sup> Granted on July 25, 2007, extension after July 25, 2014 and the related commitments to be agreed <br/> <sup>2</sup> License granted on July 28, 2009 </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Santos International Ventures Pty Ltd funded all expenditures of Somon Oil, and had an option to enter into a farm-in agreement in respect of these licenses, but decided on December 21, 2012 not to pursue this option. Santos continued to fund current capital expenditures, as well as certain general and administrative costs of Somon Oil until January 2013. We remain confident that the project has exploration potential and we are actively working to form a new consortium.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Operating leases</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In October 2011, the Company entered into lease contracts for two cars. The contracts have a term of 48 months each. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> For the years ended December 31, 2014 and 2013 we had expenses for these items of USD24,951 and USD120,765, respectively. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Future net lease payments for two leased cars are presented in the table below (in USD):</p> <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="30%"> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> <b>Year</b> </td> <td align="right" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> <b>Lease payments</b> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">2015</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> 18,597 </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">2016</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Thereafter</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);"> <b>Total</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="50%"> <b> 18,597 </b> </td> </tr> </table> </div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="70%"> <tr valign="top"> <td align="left"> <b>Production Sharing Contract</b> </td> <td align="right" width="20%"> <b>2013*</b> </td> <td align="right" width="20%"> <b>2014*</b> </td> </tr> <tr valign="top"> <td align="left">Block XIII</td> <td align="right" width="15%"> 6,900,000 </td> <td align="right" width="15%"> 6,900,000 </td> </tr> <tr valign="top"> <td align="left">Block XIV</td> <td align="right" width="15%"> 6,900,000 </td> <td align="right" width="15%"> 6,900,000 </td> </tr> </table> 6900000 6900000 6900000 6900000 <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left"> <b>License Area</b> </td> <td align="right" width="20%"> <b>2013*</b> </td> <td align="right" width="20%"> <b>2014*</b> </td> <td align="right" width="20%"> <b>2015*</b> </td> <td align="right" width="20%"> <b>2016*</b> </td> </tr> <tr valign="top"> <td align="left"> West <sup>1</sup> </td> <td align="right" width="20%"> 4,500,000 </td> <td align="right" width="20%"> 2,500,000 </td> <td align="right" width="20%">to be agreed</td> <td align="right" width="20%">to be agreed</td> </tr> <tr valign="top"> <td align="left"> North-West <sup>2</sup> </td> <td align="right" width="20%"> 8,680,000 </td> <td align="right" width="20%"> 8,700,000 </td> <td align="right" width="20%"> 3,600,000 </td> <td align="right" width="20%"> 4,600,000 </td> </tr> </table> 4500000 2500000 8680000 8700000 3600000 4600000 <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; 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border-bottom: 2px solid rgb(0, 0, 0);">Pension (surplus)/underfunding</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%"> 198,078 </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%"> 32,870 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Total Personnel Costs</b> </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%"> <b> 2,076,082 </b> </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%"> <b> 2,301,938 </b> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Defined Benefit Plan</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">We maintain Swiss defined benefit plans for seven of our employees. These plans are part of independent collective funds providing pensions combined with life and disability insurance. The assets of the funded plans are held independently of the Company&#8217;s assets in a legally distinct and independent collective trust fund which serves various unrelated employers. The funds&#8217; benefit obligations are fully reinsured by AXA Winterthur Insurance Company. The plans are 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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The actuarial valuation was carried out as of December 31, 2014. 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<b>Assumptions at year-end</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2014</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2013</b> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Discount rate</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.10% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 2.25% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Expected rate of return on plan assets</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.10% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 2.00% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Salary increases</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.00% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.00% </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Due to current economic conditions and the decrease in government bond rates, the discount rate used in the pension plan calculations decrease significantly in the year ended December 31, 2014.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Future benefits, to the extent that they are based on compensation, include assumed salary increases, as presented above, consistent with past experience and estimates of future increases in the Swiss industrial labor market.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Net periodic pension cost has been included in the Company&#8217;s results as follows:</p> <div> <table border="0" cellpadding="0" cellspacing="0" 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align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">All of the assets are held under the collective contract by the plan&#8217;s re-insurer AXA Winterthur Insurance Company and are invested in a mix of Swiss and international bond and equity securities within the limits prescribed by the Swiss Pension Law.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The expected future cash flows to be paid by the Group in respect of employer contributions to the pension plan for the year ended December 31, 2015 are USD72,925. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Future projected benefit payments in the next five years are expected to be zero.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">For its employees in subsidiaries outside of Switzerland, the social security policy does not require pension funding from the employer.</p> 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0);" width="15%"> <b>Dec 31, 2014</b> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> <b>Dec 31, 2013</b> </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Discount rate</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.10% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 2.25% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Expected rate of return on plan assets</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.10% </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 2.00% </td> </tr> <tr valign="top"> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);">Salary increases</td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> 1.00% </td> <td align="right" style="border-bottom: 1px solid 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style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Dec 31, 2013</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Net service cost</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="right" bgcolor="#e6efff" width="12%"> 16,424 </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%"> 47,545 </td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);">Interest cost</td> <td align="left" width="1%">&#160;</td> <td align="right" width="12%"> 21,617 </td> <td align="left" width="2%">&#160;</td> <td align="left" width="1%">&#160;</td> 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These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. 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style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>Balance at Jan 1, 2013</b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="1%">&#160;</td> <td align="right" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b> 17,462,734 </b> </td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);">Total gains (losses) realized and unrealized:</td> <td align="left" bgcolor="#e6efff" width="1%">&#160;</td> <td align="left" bgcolor="#e6efff" width="12%">&#160;</td> <td align="left" bgcolor="#e6efff" width="2%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> <i>Included in earnings - 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0);" width="8%">&#160;</td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="2%">&#160;</td> </tr> </table> 1369778 1369778 3063947 3063947 1 208621 208621 46738 46738 1 12000000 12000000 10111656 10111656 1 14359 14359 32508 32508 1 206382 206382 7478799 7478799 1 1165472 1165472 447736 447736 1 0 0 0 0 1 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>19.</b> <b>EARNINGS PER SHARE</b></p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Basic earnings per share result by dividing the Company&#8217;s net income (or net loss) by the weighted average number of shares outstanding for the contemplated period.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Diluted earnings per share are calculated applying the treasury stock method. When there is 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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The following table depicts how the denominator for the calculation of basic and diluted earnings per share was determined under the treasury stock method:</p> <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="80%"> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);"> &nbsp;</td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="1%"> &nbsp;</td> <td align="center" colspan="4" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="27%"> <i>Year ended</i></td> <td align="left" style="border-top: 2px solid rgb(0, 0, 0);" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>EPS</b></td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> &nbsp;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Dec 31, 2014</b></td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> &nbsp;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> &nbsp;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> <b>Dec 31, 2013</b></td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> <b>Company posted</b></td> <td align="left" bgcolor="#e6efff" width="1%"> &nbsp;</td> <td align="right" bgcolor="#e6efff" width="12%"> Net loss</td> <td align="left" bgcolor="#e6efff" width="2%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="1%"> &nbsp;</td> <td align="right" bgcolor="#e6efff" width="12%"> Net loss</td> <td align="left" bgcolor="#e6efff" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> Basic weighted average shares outstanding</td> <td align="left" width="1%"> &nbsp;</td> <td align="right" width="12%"> 170,134,834</td> <td align="left" width="2%"> &nbsp;</td> <td align="left" width="1%"> &nbsp;</td> <td align="right" width="12%"> 172,592,292</td> <td align="left" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0);"> Dilutive effect of common stock equivalents:</td> <td align="left" bgcolor="#e6efff" width="1%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="12%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="2%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="1%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="12%"> &nbsp;</td> <td align="left" bgcolor="#e6efff" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 1px solid rgb(0, 0, 0);"> &nbsp;&nbsp;&nbsp; - stock options under employee compensation plans and warrants</td> <td align="left" width="1%"> &nbsp;</td> <td align="right" width="12%"> -</td> <td align="left" width="2%"> &nbsp;</td> <td align="left" width="1%"> &nbsp;</td> <td align="right" width="12%"> -</td> <td align="left" width="2%"> &nbsp;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Diluted weighted average shares outstanding</b></td> <td align="left" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="1%"> &nbsp;</td> <td align="right" bgcolor="#