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76702841 -35304972 51001 41621337 125000 125 1126045 1126170 -11778750 -11778750 172592292 172592 77828886 -47083722 51001 499573 499573 -11106637 172592292 172592 78328459 -58190359 51001 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>1.</b> <b>BASIS OF PRESENTATION</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The financial statements presented in this Form 10-Q comprise Manas Petroleum Corporation (&#8220;Manas&#8221; or the &#8220;Company&#8221;) and its subsidiaries (collectively, the &#8220;Group&#8221;). The unaudited interim <i>Consolidated Financial Statements</i> included in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (&#8220;US GAAP&#8221;) and present our financial position, results of operations, cash flows and changes in stockholder&#8217;s equity. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2012. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">In terms of the oil and gas industry lifecycle, the Company considers itself to be an exploration stage company. Since it has not realized any revenues from its planned principal operations, the Company presents its financial statements in conformity with US GAAP that apply in establishing operating enterprises, i.e. development stage companies. As an exploration stage enterprise, the Company discloses the deficit accumulated during the exploration stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.</p> <p align="justify" 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, 1988.</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 (&#8220;DWM Petroleum&#8221;) pursuant to an exchange agreement signed in November 2006 whereby 100% of the shares of DWM Petroleum were exchanged for 80,000,000 common shares of the Company. As part of the closing of this exchange transaction, the Company issued 800,000 shares as finder&#8217;s fees at the closing price of USD3.20. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The acquisition of DWM Petroleum has been accounted for as a merger of a private operating company into a non-operating public shell. Consequently, the Company is the continuing legal registrant for regulatory purposes and DWM Petroleum is treated as the continuing accounting acquirer for accounting and reporting purposes. The assets and liabilities of DWM Petroleum remained at historic cost. Under US GAAP in transactions involving the merger of a private operating company into a non-operating public shell, the transaction is equivalent to the issuance of stock by DWM Petroleum for the net monetary assets of the Company, accompanied by a recapitalization. The accounting is identical to a reverse acquisition, except that no goodwill or other intangibles are recorded.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Group has a focused strategy on exploration and developing oil and gas resources in Central Asia (Tajikistan, Mongolia and Kyrgyz Republic). The Company holds an investment in associate in Petromanas Energy Inc.</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>ACCOUNTING POLICIES</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The accompanying financial data as of June 30, 2013 and December 31, 2012 and for the three and Six-month periods ended June 30, 2013 and 20112 and for the period from inception, May 25, 2004, to June 30, 2013, has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The complete accounting policies followed by the Group are set forth in Note 2 to the audited consolidated financial statements contained in the Group's Annual Report on Form 10-K for the year ended December 31, 2012.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">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;">In the opinion of management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present a fair statement of financial position as of June 30, 2013 and December 31, 2012, results of operations for the three and Six-month period ended June 30, 2013 and 2012 and for the period from inception, May 25, 2004, to June 30, 2013, cash flows for the Six-month period ended March, 2013 and 2012 and for the period from inception, May 25, 2004, to June 30, 2013 and statement of shareholders&#8217; equity (deficit) for the period from inception, May 25, 2004, to June 30, 2013, as applicable, have been made. The result of operations for the three and Six-month period ended June 30, 2013 is not necessarily indicative of the operating results for the full fiscal year or any future periods.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>3.</b> <b>RECENT ACCOUNTING PRONOUNCEMENTS</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Recently adopted accounting pronouncements</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">In February 2013, the FASB released ASU 2013-02 &#8212; Accounting Standards Update 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This Update was issued to end the deferral of new presentation requirements for reclassifications out of accumulated other comprehensive income (required by ASU 2011-05 and subsequently deferred by ASU 2011-12) and to resolve certain cost/benefit concerns related to reporting reclassification adjustments.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">This Update provides entities with two basic options for reporting the effect of significant reclassifications &#8212; either 1) on the face of the statement where net income is presented or 2) as a separate footnote disclosure. Public entities will report reclassifications in both annual and interim periods, while private entities are only required to report them in annual financial statements.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Under option 1, the effect of significant reclassifications is presented parenthetically by component of OCI on the respective line items of net income. Examples of OCI components include cash flow hedges, unrealized gains and losses on certain marketable securities, pension adjustments and foreign currency translation adjustments. Entities must also parenthetically report the aggregate tax effect of reclassifications in the income tax expense (benefit) line item.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Under option 2, the significant amounts of each component of OCI must be presented in a single footnote. Pre- and net of- tax presentations are both acceptable. For reclassifications that are recorded entirely in net income (e.g., the gain on sale of an available for sale security), the income statement line item affected by the reclassification must be identified. For any reclassification that is not recorded entirely in net income (e.g., pension cost capitalized in inventory), a cross-reference must be provided to the footnote where additional information can be found (e.g., a cross-reference to the pension footnote). The Company adopted option 1 of this ASU, as of January 1, 2013. The adoption did not materially impact the Company&#8217;s consolidated financial statements.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>4.</b> <b>CASH AND CASH EQUIVALENTS</b> </p> <div> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 9pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="middle">&#160;</td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in USD)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in EUR)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in CHF)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in other</b> <br/> <b>currencies)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD Total</b> <br/> <b>Jun 30, 2013</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD Total</b> <br/> <b>Dec 31, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Cash and cash equivalents</td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; 136,143 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 13,812 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 22,413 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 5,705 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; 178,073 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 2,842,495 </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Cash and cash equivalents are available to the Group without restriction or limitation on withdrawal and/or use of these funds. The Group&#8217;s cash equivalents are placed with high credit rated financial institutions. The carrying amount of these assets approximates their fair value.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 9pt; border-collapse: collapse; font-family: times new roman,times,serif;" width="100%"> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" valign="middle">&#160;</td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in USD)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in EUR)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in CHF)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD</b> <br/> <b>(held in other</b> <br/> <b>currencies)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD Total</b> <br/> <b>Jun 30, 2013</b> </td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" valign="middle" width="13%"> <b>USD Total</b> <br/> <b>Dec 31, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Cash and cash equivalents</td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; 136,143 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 13,812 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 22,413 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 5,705 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; 178,073 </td> <td align="left" bgcolor="#e6efff" width="13%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; 2,842,495 </td> </tr> </table> 136143 13812 22413 5705 178073 2842495 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>5.</b> <b>PLAN FOR ACQUISITION</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b> <i>Plan for Acquisition</i> </b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On December 31, 2012, DWM Petroleum AG, our wholly-owned Swiss subsidiary, entered into a Share Purchase Agreement with an unrelated third party, a small, private company known only in Tajikistan, to purchase, for USD21,000,000 in cash, 80% of the equity interest in a Swiss company which, at the time of closing of the transaction described in the Share Purchase Agreement, will own a Tajik company (&#8220;target company&#8221;) which in turn will own 100% of the interest in certain producing oilfield assets located in Tajikistan. The seller&#8217;s wholly-owned subsidiary, a small, private company known only in Tajikistan, currently owns the majority of the equity in the target company. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> As previously disclosed, DWM Petroleum has already advanced an aggregate of USD10,111,656 as a deposit on account of the purchase price. If the seller satisfies certain conditions ("Conditions for the next Advance"), DWM Petroleum will be required to make an additional advance of USD7,000,000 to the seller. DWM Petroleum will be required to pay the remaining balance (USD3,888,344) of the purchase price to the seller on the closing date, no later than the seventh Business Day after the closing conditions are satisfied. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> If the transaction is not completed because the seller does not satisfy the conditions to the next advance, the seller must refund to DWM Petroleum the USD10,111,656 deposit, subject to payment by DWM Petroleum of a termination fee in the amount of USD2,000,000 intended to compensate the seller for expenses it has incurred in connection with the transaction. The conditions for the next advance were originally required to be fulfilled on or before March 31, 2013. Effective December 31, 2012, this date was extended to May 30, 2013 pursuant to Amendment 1 to the Share Purchase Agreement. Effective April 30, 2013, this date was further extended to June 30, 2013 pursuant to Amendment 3 to the Share Purchase Agreement. Effective June 27, 2013, seller has fulfilled all conditions for the next payment. Effective June 27, 2013 pursuant to Amendment 4, the date for next advance payment is ninety days of the date the seller has satisfied the requisite conditions. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> If DWM Petroleum is required to make the next advance but fails to do so, the seller will be required to refund to DWM Petroleum the USD10,111,656 deposit previously paid by delivering to DWM Petroleum 65% shares of the company that is the majority owner of the producing oilfield assets being purchased. In that event, DWM Petroleum will also be required to pay to the seller the sum of USD2,000,000, which is intended to compensate the seller for its expenses. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Completion of the purchase is subject to conditions and the completion of certain ancillary transactions by the seller in respect of the assets to be owned at closing by the target company ("the closing conditions"). These conditions were originally required to be fulfilled or waived on or before April 30, 2013. Effective December 31, 2012, this date was extended to June 27, 2013 pursuant to Amendment 1 to the Share Purchase Agreement. Effective April 30, 2013, this date was further extended to September 27, 2013 pursuant to Amendment 3 to the Share Purchase Agreement.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Effective April 30, 2013, pursuant to Amendment 2 to the Share Purchase Agreement, a condition for the next advance that requires the target company to enter into a certain contract with the Tajik government was changed to the extent that the seller is only required to confirm to DWM Petroleum that the target company has agreed with the responsible government authority, the terms for the aforementioned contract &#8211; and not actually signed such contract.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Effective June 27, 2013, the seller has met all conditions and completed certain ancillary transactions required for the next advance payment. Pursuant to the SPA and the amendments mentioned above, the payment of USD7,000,000 is due by September 27, 2013. </p> 21000000 0.80 1.00 10111656 7000000 3888344 10111656 2000000 10111656 0.65 2000000 7000000 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>6.</b> <b>TANGIBLE FIXED ASSETS</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="100%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle"> <b>2013 (in USD)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Office equipment <br/> &amp; furniture </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%">Vehicles</td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Leasehold <br/> improvements </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Computer <br/> software </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%">Total</td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Cost at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 147,141 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 117,884 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 47,375 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 33,212 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 345,612 </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Additions</td> <td align="right" width="14%"> 37,900 </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> 37,900 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid">Disposals</td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> ( 17,384) </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> ( 17,384) </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Cost at Jun 30, 2013</td> <td align="right" width="14%"> 185,041 </td> <td align="right" width="14%"> 100,500 </td> <td align="right" width="14%"> 47,375 </td> <td align="right" width="14%"> 33,212 </td> <td align="right" width="14%"> 366,128 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Accumulated depreciation at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 112,608) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 50,146) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 47,375) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 3,048) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 213,177) </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Depreciation</td> <td align="right" width="14%"> ( 3,478) </td> <td align="right" width="14%"> ( 11,580) </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> ( 10,730) </td> <td align="right" width="14%"> ( 25,788) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid">Disposals</td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> 17,384 </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> 17,384 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Accumulated depreciation at Jun 30, 2013</td> <td align="right" width="14%"> ( 116,086) </td> <td align="right" width="14%"> ( 44,342) </td> <td align="right" width="14%"> ( 47,375) </td> <td align="right" width="14%"> ( 13,778) </td> <td align="right" width="14%"> ( 221,581) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Net book value at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 34,533 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 67,738 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> - </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 30,164 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 132,435 </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 2px solid"> <b> Net book value at Jun 30, 2013 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 68,955 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 56,158 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> - </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 19,434 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 144,547 </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Depreciation expense for the six-month period ended June 30, 2013 and 2012 was USD25,788 and USD25,556, respectively. Depreciation expense for the Three-month period ended June 30, 2013 and 2012 was USD13,858 and USD11,336 respectively. </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" nowrap="nowrap" style="BORDER-RIGHT: #000000 1px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle"> <b>2013 (in USD)</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Office equipment <br/> &amp; furniture </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%">Vehicles</td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Leasehold <br/> improvements </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%"> Computer <br/> software </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="14%">Total</td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Cost at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 147,141 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 117,884 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 47,375 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 33,212 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 345,612 </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Additions</td> <td align="right" width="14%"> 37,900 </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> 37,900 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid">Disposals</td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> ( 17,384) </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> ( 17,384) </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Cost at Jun 30, 2013</td> <td align="right" width="14%"> 185,041 </td> <td align="right" width="14%"> 100,500 </td> <td align="right" width="14%"> 47,375 </td> <td align="right" width="14%"> 33,212 </td> <td align="right" width="14%"> 366,128 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Accumulated depreciation at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 112,608) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 50,146) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 47,375) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 3,048) </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> ( 213,177) </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Depreciation</td> <td align="right" width="14%"> ( 3,478) </td> <td align="right" width="14%"> ( 11,580) </td> <td align="right" width="14%"> - </td> <td align="right" width="14%"> ( 10,730) </td> <td align="right" width="14%"> ( 25,788) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid">Disposals</td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> 17,384 </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> - </td> <td align="right" bgcolor="#E6EFFF" width="14%"> 17,384 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid">Accumulated depreciation at Jun 30, 2013</td> <td align="right" width="14%"> ( 116,086) </td> <td align="right" width="14%"> ( 44,342) </td> <td align="right" width="14%"> ( 47,375) </td> <td align="right" width="14%"> ( 13,778) </td> <td align="right" width="14%"> ( 221,581) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF" style="BORDER-RIGHT: #000000 1px solid"> <b>Net book value at Dec 31, 2012</b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 34,533 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 67,738 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> - </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 30,164 </b> </td> <td align="right" bgcolor="#E6EFFF" width="14%"> <b> 132,435 </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 1px solid; BORDER-BOTTOM: #000000 2px solid"> <b> Net book value at Jun 30, 2013 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 68,955 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 56,158 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> - </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 19,434 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="14%"> <b> 144,547 </b> </td> </tr> </table> 147141 117884 47375 33212 345612 37900 0 0 0 37900 0 17384 0 0 17384 185041 100500 47375 33212 366128 112608 50146 47375 3048 213177 3478 11580 0 10730 25788 0 17384 0 0 17384 116086 44342 47375 13778 221581 34533 67738 0 30164 132435 30 68955 56158 0 19434 144547 25788 25556 13858 11336 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>7.</b> <b>OIL AND GAS PROPERTIES</b> </p> <div align="center"> <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" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Capitalized exploration costs</b> </td> <td align="right" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="25%"> <b>Mar 31, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="25%"> <b>Dec 31, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Unproved, not subject to depletion</td> <td align="right" bgcolor="#e6efff" width="25%"> 772,855 </td> <td align="right" bgcolor="#e6efff" width="25%"> 772,855 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Proved subject to depletion</td> <td align="right" width="25%"> - </td> <td align="right" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Accumulated depletion</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total capitalized exploration costs</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> <b> 772,855 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> <b> 772,855 </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> During the year 2012, two wells were drilled as part of one large campaign which included three drillings in Mongolia. During the year 2012, the Company capitalized USD2,998,636 of which USD2,225,781 was expensed as &#8220;Exploration Costs&#8221; in the Statement of Operations during the third quarter of 2012 as the two wells were found dry. The Company had a remaining capitalized balance of USD772,855 as of June 30, 2013. This balance relates to specific costs for the third well still to be drilled including capitalized costs recorded as accruals for USD312,000. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">If the third well is found to be a dry hole, all remaining capitalized costs related to the campaign will de facto be expensed, with the exception of the tangible equipment, which will continue to have a salvage value (it will be either sold or written off). If the well is found to have proven reserves, the capitalized drilling costs will be reclassified as part of the cost of the well. No exploration costs were capitalized during the first and second quarter of 2013.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">As of June 27, 2013, we have entered into a Moratorium with the Petroleum Authority of Mongolia. The exploration term shall be suspended for a period of one year and the initial five years exploration term, extended until May 20, 2015; thereafter we would have the possibility to extend the licenses for an additional two years if required. The base for the Moratorium is the lack of drillable economic structures to fulfill our outstanding PSC commitments. Drilling activities will commence once the full evaluation of the new area is completed and drillable economic structures are available to fulfill our outstanding commitments, which is currently four wells.</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="70%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Capitalized exploration costs</b> </td> <td align="right" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="25%"> <b>Mar 31, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="25%"> <b>Dec 31, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Unproved, not subject to depletion</td> <td align="right" bgcolor="#e6efff" width="25%"> 772,855 </td> <td align="right" bgcolor="#e6efff" width="25%"> 772,855 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Proved subject to depletion</td> <td align="right" width="25%"> - </td> <td align="right" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Accumulated depletion</td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> <td align="right" bgcolor="#e6efff" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total capitalized exploration costs</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> <b> 772,855 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> <b> 772,855 </b> </td> </tr> </table> 772855 772855 0 0 0 0 772855 772855 2998636 2225781 772855 312000 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>8.</b> <b>STOCK COMPENSATION PROGRAM</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>2011 Stock Option Plan</b> </p> <p align="justify" style="font-family: times new roman,times,serif; 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.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> The 2011 Stock Option Plan authorizes the Company to issue options to purchase such number of the Company&#8217;s common shares as is equal to on aggregate, together with options issued under any prior plan, of up to 10% of the number of issued and outstanding shares of the Company&#8217;s common stock at the time of the grant (it is the type of stock option plan referred to as a &#8220;rolling&#8221; stock option plan). </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">If all or any portion of any stock option granted under the 2011 Stock Option Plan expires or terminates without having been exercised in full, the unexercised balance will be returned to the pool of stock available for grant under the 2011 Stock Option Plan.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Recognition of Stock-based Compensation Costs</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. For employees fair value is estimated at the grant date and for non-employees fair value is re-measured at each reporting date. Compensation costs for unvested stock options and unvested share grants are expensed over the requisite service period on a straight-line basis.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Grants</b> </p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>8.1.</b> <b>Stock Option Grants</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company calculates the fair value of options granted by applying the Black-Scholes option pricing model. Expected volatility is based on the Company&#8217;s own historical share price volatility. The Company&#8217;s share price data can be traced back to April 2, 2007, and the Company believes that this set of data is sufficient to determine expected volatility as input for the Black-Scholes option pricing model.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Effective as of February 1, 2013, the Company granted 750,000 stock options to General Research GmbH. Subject to vesting, each stock option is exercisable at a price of CAD0.15 (USD0.15) per share for a period of five years vesting over two years in quarterly installments. General Research GmbH provides marketing and investment relations consulting services to Manas Petroleum Corp. and its affiliates. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Effective as of February 1, 2013, the Company granted 1,000,000 stock options to each of Murray Rodgers and Darcy Spady, two of our directors, for an aggregate of 2,000,000 stock options. Subject to vesting, each stock option is exercisable at a price of CAD0.15 (USD0.15) per share for a period of ten years and vesting in two years in quarterly installments. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Effective as of June 26, 2013, the Company granted 750,000 stock options to Undiscovered Equities Inc. 250,000 of these stock options are exercisable at a price of USD0.15 per share, 250,000 are exercisable at a price of USD0.30 per share, and 250,000 are exercisable at a price of USD0.45 per share. Subject to vesting, each stock option is exercisable for a period of five years, vesting over one year in quarterly installments. Undiscovered Equities Inc. provides marketing and investment relations consulting services to Manas Petroleum Corp. and its affiliates. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> As of February 1, 2013, some of the Company&#8217;s directors and officers have agreed to cancel an aggregate of 4,850,000 stock options to allow us to grant stock options to others. Currently, the stock option plan allows the Company to grant stock options to acquire up to a maximum of 10% of the number of issued and outstanding shares of its common stock at the time of the grant. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> During the Six-month period ended June 30, 2013 the Company granted a total of 3,500,000 options. During the same period in 2012, no options were granted. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table shows the Company's outstanding and exercisable stock options as of June 30, 2013:</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="100%"> <tr valign="top"> <td align="center" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle"> <b>Outstanding options 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%">Shares under option</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Weighted-average <br/> exercise price </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Weighted-average <br/> remaining contractual term <br/> (years) </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Aggregate <br/> intrinsic value </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid"> <b>Outstanding at December 31, 2012</b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> 15,950,000 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> USD0.39 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> 7.04 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> - </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Granted</td> <td align="right" width="17%"> 3,500,000 </td> <td align="right" width="17%"> USD0.18 </td> <td align="right" width="17%"> 7.53 </td> <td align="right" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Exercised</td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Forfeited, canceled or expired</td> <td align="right" width="17%"> ( 5,350,000) </td> <td align="right" width="17%"> USD0.62 </td> <td align="right" width="17%"> 4.64 </td> <td align="right" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Outstanding at June 30, 2013</td> <td align="right" bgcolor="#e6efff" width="17%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="17%"> USD0.24 </td> <td align="right" bgcolor="#e6efff" width="17%"> 7.76 </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Exercisable at June 30, 2013</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> 8,297,750 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> USD0.28 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> 7.74 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> - </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table depicts the Company&#8217;s non-vested options as of June 30, 2013 and changes during the period:</p> <div align="center"> <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-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid" width="25%">&#160;</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid" width="25%">Weighted-average</td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Non-vested options</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="25%">Shares under option</td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="25%">grant date fair value</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Non-vested at December 31, 2012</td> <td align="right" bgcolor="#e6efff" width="25%"> 5,254,909 </td> <td align="right" bgcolor="#e6efff" width="25%"> USD0.17 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Non-vested granted</td> <td align="right" width="25%"> 3,500,000 </td> <td align="right" width="25%"> USD0.04 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Vested</td> <td align="right" bgcolor="#e6efff" width="25%"> ( 2,664,417) </td> <td align="right" bgcolor="#e6efff" width="25%"> USD0.15 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Non-vested, forfeited or canceled</td> <td align="right" width="25%"> ( 288,242) </td> <td align="right" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Non-vested at June 30, 2013</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> 5,802,250 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> USD0.09 </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> As of June 30, 2013, the expected total of unrecognized compensation costs related to unvested stock-option grants was USD324,239. The Company expects to recognize this amount over a weighted average period of 0.95 years. </p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>8.2.</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;">As of June 30, 2013, 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>8.3.</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> <div align="center"> <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: #000000 2px solid; BORDER-TOP: #000000 2px solid"> <b>Stock based compensation</b> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Three-month period ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Six-month period ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>expenses</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Option grants</td> <td align="right" bgcolor="#e6efff" width="17%"> 205,074 </td> <td align="right" bgcolor="#e6efff" width="17%"> 255,926 </td> <td align="right" bgcolor="#e6efff" width="17%"> 499,573 </td> <td align="right" bgcolor="#e6efff" width="17%"> 579,130 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid">Share grants</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> - </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 20,449 </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> - </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 35,704 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Total</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 205,074 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 276,375 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 499,573 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 614,834 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Recorded under &#8220;Personnel&#8221;</td> <td align="right" width="17%"> 199,835 </td> <td align="right" width="17%"> 289,727 </td> <td align="right" width="17%"> 502,707 </td> <td align="right" width="17%"> 577,951 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Recorded under &#8220;Consulting fees&#8221;</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> 5,239 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> ( 13,352) </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> ( 3,134) </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> 36,883 </td> </tr> </table> </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="100%"> <tr valign="top"> <td align="center" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle"> <b>Outstanding options 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%">Shares under option</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Weighted-average <br/> exercise price </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Weighted-average <br/> remaining contractual term <br/> (years) </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" valign="middle" width="17%"> Aggregate <br/> intrinsic value </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid"> <b>Outstanding at December 31, 2012</b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> 15,950,000 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> USD0.39 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> 7.04 </b> </td> <td align="right" bgcolor="#e6efff" width="17%"> <b> - </b> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Granted</td> <td align="right" width="17%"> 3,500,000 </td> <td align="right" width="17%"> USD0.18 </td> <td align="right" width="17%"> 7.53 </td> <td align="right" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Exercised</td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Forfeited, canceled or expired</td> <td align="right" width="17%"> ( 5,350,000) </td> <td align="right" width="17%"> USD0.62 </td> <td align="right" width="17%"> 4.64 </td> <td align="right" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Outstanding at June 30, 2013</td> <td align="right" bgcolor="#e6efff" width="17%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="17%"> USD0.24 </td> <td align="right" bgcolor="#e6efff" width="17%"> 7.76 </td> <td align="right" bgcolor="#e6efff" width="17%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Exercisable at June 30, 2013</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> 8,297,750 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> USD0.28 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> 7.74 </b> </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> <b> - </b> </td> </tr> </table> 15950000 0.39 7.04 0 3500000 0.18 7.53 0 0 0 0 0 5350000 0.62 4.64 0 14100000 0.24 7.76 0 8297750 0.28 7.74 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="70%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid" width="25%">&#160;</td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid" width="25%">Weighted-average</td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Non-vested options</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="25%">Shares under option</td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="25%">grant date fair value</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Non-vested at December 31, 2012</td> <td align="right" bgcolor="#e6efff" width="25%"> 5,254,909 </td> <td align="right" bgcolor="#e6efff" width="25%"> USD0.17 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Non-vested granted</td> <td align="right" width="25%"> 3,500,000 </td> <td align="right" width="25%"> USD0.04 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Vested</td> <td align="right" bgcolor="#e6efff" width="25%"> ( 2,664,417) </td> <td align="right" bgcolor="#e6efff" width="25%"> USD0.15 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Non-vested, forfeited or canceled</td> <td align="right" width="25%"> ( 288,242) </td> <td align="right" width="25%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Non-vested at June 30, 2013</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> 5,802,250 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="25%"> USD0.09 </td> </tr> </table> 5254909 0.17 3500000 0.04 2664417 0.15 288242 0 5802250 0.09 <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="80%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid"> <b>Stock based compensation</b> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Three-month period ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Six-month period ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>expenses</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Option grants</td> <td align="right" bgcolor="#e6efff" width="17%"> 205,074 </td> <td align="right" bgcolor="#e6efff" width="17%"> 255,926 </td> <td align="right" bgcolor="#e6efff" width="17%"> 499,573 </td> <td align="right" bgcolor="#e6efff" width="17%"> 579,130 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid">Share grants</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> - </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 20,449 </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> - </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 35,704 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Total</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 205,074 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 276,375 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 499,573 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="17%"> 614,834 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Recorded under &#8220;Personnel&#8221;</td> <td align="right" width="17%"> 199,835 </td> <td align="right" width="17%"> 289,727 </td> <td align="right" width="17%"> 502,707 </td> <td align="right" width="17%"> 577,951 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Recorded under &#8220;Consulting fees&#8221;</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> 5,239 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> ( 13,352) </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> ( 3,134) </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="17%"> 36,883 </td> </tr> </table> 205074 255926 499573 579130 0 20449 0 35704 205074 276375 499573 614834 199835 289727 502707 577951 5239 13352 3134 36883 0.10 750000 0.15 0.15 1000000 2000000 0.15 0.15 750000 250000 0.15 250000 0.30 250000 0.45 4850000 0.10 3500000 324239 0.95 0.12 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>9.</b> <b>WARRANTS</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Warrants outstanding</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table summarizes information about the Company&#8217;s warrants outstanding as of June 30, 2013:</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="100%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Warrant series</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Number of warrants</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Exercise price</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Grant date</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Expiry date</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Unit warrants</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 44,450,500 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 0.70 </td> <td align="center" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%">May 6, 2011</td> <td align="center" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%">May 6, 2014</td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total warrants outstanding</b> </td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> <b> 44,450,500 </b> </td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company has enough shares of common stock authorized in the event these warrants are exercised.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Warrant activity</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table summarizes the Company&#8217;s warrant activity for the Six-month period ended June 30, 2013:</p> <div align="center"> <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="90%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Warrants 2012</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="30%"> <b>Number of warrants</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="30%"> <b>Weighted average exercise price</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Outstanding at December 31, 2012</td> <td align="right" bgcolor="#e6efff" width="30%"> 45,934,015 </td> <td align="right" bgcolor="#e6efff" width="30%"> USD0.70 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Granted</td> <td align="right" width="30%"> - </td> <td align="right" width="30%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Exercised</td> <td align="right" bgcolor="#e6efff" width="30%"> - </td> <td align="right" bgcolor="#e6efff" width="30%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Forfeit or expired</td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> ( 1,483,515) </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> USD0.62 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Outstanding at June 30, 2013</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> 44,450,500 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> USD0.70 </td> </tr> </table> </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="100%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Warrant series</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Number of warrants</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Exercise price</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Grant date</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="19%"> <b>Expiry date</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Unit warrants</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 44,450,500 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; &#160; 0.70 </td> <td align="center" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%">May 6, 2011</td> <td align="center" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="19%">May 6, 2014</td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total warrants outstanding</b> </td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%"> <b> 44,450,500 </b> </td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> <td align="left" style="BORDER-BOTTOM: #000000 2px solid" width="19%">&#160;</td> </tr> </table> 44450500 0.70 44450500 <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="90%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Warrants 2012</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="30%"> <b>Number of warrants</b> </td> <td align="left" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="30%"> <b>Weighted average exercise price</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Outstanding at December 31, 2012</td> <td align="right" bgcolor="#e6efff" width="30%"> 45,934,015 </td> <td align="right" bgcolor="#e6efff" width="30%"> USD0.70 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Granted</td> <td align="right" width="30%"> - </td> <td align="right" width="30%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Exercised</td> <td align="right" bgcolor="#e6efff" width="30%"> - </td> <td align="right" bgcolor="#e6efff" width="30%"> - </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid">Forfeit or expired</td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> ( 1,483,515) </td> <td align="right" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> USD0.62 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Outstanding at June 30, 2013</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> 44,450,500 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="30%"> USD0.70 </td> </tr> </table> 45934015 0.70 0 0 0 0 1483515 0.62 44450500 0.70 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>10.</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 A.G., 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. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">In addition, all of these shares were deposited into an escrow pursuant to the requirements of the TSX Venture Exchange which provides for the release of the shares from escrow according to the following schedule:</p> <div align="center"> <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="50%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Release dates</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="65%"> <b>Number of shares released from escrow</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">June 24, 2010</td> <td align="right" bgcolor="#e6efff" width="65%"> 10,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">August 24, 2010</td> <td align="right" width="65%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">February 24, 2011</td> <td align="right" bgcolor="#e6efff" width="65%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">June 24, 2011</td> <td align="right" width="65%"> 40,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">August 24, 2011</td> <td align="right" bgcolor="#e6efff" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">February 24, 2012</td> <td align="right" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">August 24, 2012</td> <td align="right" bgcolor="#e6efff" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">February 24, 2013</td> <td align="right" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="65%"> <b> 200,000,000 </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On July 6, 2012, DWM Petroleum sold 10,000,000 of these shares to one unrelated party at a price of CAD0.17 per common share for gross proceeds of CAD1,700,000 (USD1,670,598). On August 17, 2012, pursuant to agreements dated August 13, 2012, DWM Petroleum sold an additional 90,000,000 of these Petromanas shares to twelve purchasers at a price of 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. 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;"> DWM Petroleum initially owned 200,000,000 shares of Petromanas Energy. Since July 6, 2012, DWM Petroleum sold 100,000,000 of these shares to various purchasers and it has agreed not to resell the remaining 100,000,000 until August 14, 2013 without prior agreement from some of those purchasers, unless, before that date, the market price per share equals or exceeds CAD0.60 for five business days. Of the 100,000,000 common shares of Petromanas held by DWM Petroleum at June 30, 2013, none were then eligible for immediate resale. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On June 30, 2013 DWM Petroleum owned and controlled 100,000,000 common shares of Petromanas and it had the right to acquire a further 50,000,000 common shares (referred to as &#8220;Performance Shares&#8221;) upon the occurrence of certain conditions. The 100,000,000 common shares represent approximately 14.4% of the issued and outstanding common shares of Petromanas. </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 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 is an estimate of the cost of capital, based on previous long-term debt the Company has issued. Since February 25, 2013, the fair value of investment in Petromanas has been reclassified to Level 1 and no annual 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;"> The quoted market price for one common share of Petromanas on June 30, 2013 was CAD0.105 (USD0.0998). </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> During the Six-month periods ended June 30, 2013 and 2012, the Company recorded USD7,487,735 unrealized loss on investment in Petromanas and USD12,977,280 unrealized gain on investment, respectively. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">When a company chooses the fair value option, pursuant to ASC 323 further disclosures regarding the investee are required in cases where the Company has the ability to exercise significant influence over the investee&#8217;s operating and financial policies.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">As of today, there is no managerial interchange and there are no material intercompany transactions. In addition, technological dependencies do not exist. The majority ownership of the investee is concentrated among a small group of shareholders who operate the investee without regard to the views of the Company. The Company made an effort to obtain from Petromanas financial information that would be needed in order for the for the Company to include that information in its own financial disclosure, but Petromanas, which is a reporting company in Canada and subject to the Canadian regulatory requirements in respect of selective disclosure, has refused to provide this information in advance of it being made available to the general public in its own periodic disclosure filings. This information would be necessary if the Company were to disclose selected financial data of Petromanas in accordance with US GAAP in a timely manner.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Company has previously requested that Petromanas provide detailed financial records in order to enable the Company to reconcile between Canadian GAAP and US GAAP but Petromanas has refused, stating that Petromanas is a public company and required to comply with securities legislation and TSX Venture Exchange rules and it cannot provide selective disclosure to any shareholder, nor can it permit its results to be publicly disclosed through any document published by a third party until after it has publicly disseminated the information.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Based on the foregoing, the Company has concluded that it does not have the ability to exercise significant influence over Petromanas&#8217; (the investee&#8217;s) operating and financial policies. In addition, the sale of 10,000,000 on July 6, 2012 and the sale of 90,000,000 on August 17, 2012 of Petromanas shares may have further diminished any influence the Company may have had prior to the date of these sales. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> Effective August 14, 2013 all Petromanas shares held by the Company, are free of any restrictions and are eligible for resale. The Company intends to use these shares for its working capital requirements or pledge them as collateral for a short term financing facility. Pursuant to that we have reclassified the 100 million Petromanas shares from non-current to current assets. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On August 8, 2013 we entered into a Loan Agreement with Tulip Fund NV with a term of 6 months with a roll-over option at the discretion of Manas&#8217; subsidiary DWM Petroleum AG for a further 6 months. As collateral for the loan, DWM Petroleum has agreed to pledge the 100,000,000 shares of Petromanas Energy Inc. We anticipate repaying the loan though other financing measures within the term of the loan. See Foot Note 16 Subsequent Events. </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="50%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Release dates</b> </td> <td align="center" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid" width="65%"> <b>Number of shares released from escrow</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">June 24, 2010</td> <td align="right" bgcolor="#e6efff" width="65%"> 10,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">August 24, 2010</td> <td align="right" width="65%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">February 24, 2011</td> <td align="right" bgcolor="#e6efff" width="65%"> 15,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">June 24, 2011</td> <td align="right" width="65%"> 40,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">August 24, 2011</td> <td align="right" bgcolor="#e6efff" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">February 24, 2012</td> <td align="right" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">August 24, 2012</td> <td align="right" bgcolor="#e6efff" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">February 24, 2013</td> <td align="right" width="65%"> 30,000,000 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Total</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="65%"> <b> 200,000,000 </b> </td> </tr> </table> 10000000 15000000 15000000 40000000 30000000 30000000 30000000 30000000 200000000 200000000 100000000 100000000 10000000 0.17 1700000 1670598 90000000 0.115 10350000 10445050 0.225 200000000 100000000 100000000 0.60 100000000 100000000 50000000 100000000 0.144 0.12 0.105 0.0998 7487735 12977280 10000000 90000000 100000000 6 6 100000000 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>11.</b> <b>RELATED PARTY DISCLOSURE</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The consolidated financial statements include the financial statements of Manas Petroleum Corporation and the entities listed in the following table:</p> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse; 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font-size: 10pt;margin:inherit;"> Gobi Energy Partners LLC was founded in 2009 by DWM Petroleum AG (formerly Manas Gobi LLC). 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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> </table> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;">&#160;</p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> -&#160;&#160;&#160;&#160;&#160; <b>CJSC South Petroleum Company</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On October 4, 2006 a contract was signed with Santos International Holdings PTY Ltd. (&#8220;Santos&#8221;) to sell a 70% interest in CJSC South Petroleum Company, Jalalabat for a payment of USD4,000,000, a two phase work program totalling USD53,500,000 (Phase 1: USD11,500,000, Phase 2: USD42,000,000), additional working capital outlays of USD1,000,000 per annum and an earn-out of USD1,000,000 to former DWM shareholders to be settled in shares of Santos if they elect to enter into Phase 2 of the work program. If Santos does not exercise the option to enter into Phase 2, the 70% interest is returned to DWM Petroleum at no cost. On December 2, 2008, Santos announced the commencement of Phase 2 and the earn-out was paid to former DWM shareholders. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> In phase 2 of the work program, in the event Santos spends in excess of USD42,000,000 on the appraisal wells, the Company would be obligated to pay 30% of the excess expenditure. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The Group is not recording its share of the losses. The contractual agreement requires Santos to pay all of the costs as of June 30, 2013.</p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> -&#160;&#160;&#160;&#160;&#160; <b>CJSC Somon Oil (Tajikistan)</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Until recently, the Company&#8217;s interest in CJSC Somon was fully carried by Santos International Ventures Pty Ltd pursuant to a 2007 Option Agreement. On December 21, 2012, Santos International informed the Company that it had decided not to pursue its option. Santos International continued to fund Somon Oil&#8217;s operations through January, 2013. Based on the review of the data, management is confident that the project has high exploration potential and we are actively working on establishing a new consortium for this acreage. The Company anticipates that any farm-in agreement, still provide that DWM will be fully carried and there are no liquidated damages in case of failure. 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transactions</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2012</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2013</b> </td> <td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b>Affiliates</b> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left">Management services performed to Petromanas*</td> <td align="right" valign="bottom" width="15%"> ( 241) </td> <td align="right" valign="bottom" width="15%"> 4,194 </td> <td align="right" valign="bottom" width="15%"> ( 11,734) </td> <td align="right" valign="bottom" width="15%"> ( 11,118) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b>Board of directors</b> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left">Payments to directors for office rent</td> <td align="right" valign="bottom" width="15%"> 6,288 </td> <td align="right" valign="bottom" width="15%"> 6,387 </td> <td align="right" valign="bottom" width="15%"> 12,564 </td> <td align="right" valign="bottom" width="15%"> 12,935 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid">Payments to related companies controlled by directors for rendered consulting services</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 89,138 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 90,540 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 178,100 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 183,357 </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">* Services invoiced or accrued are recorded as contra-expense in personnel cost and administrative cost</p> <p>&#160;</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" nowrap="nowrap"> <b>Company</b> </td> <td align="left" nowrap="nowrap" width="34%"> <b>Country</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Equity share</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Equity share</b> </td> </tr> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 2px solid">&#160;</td> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 2px solid" width="34%">&#160;</td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> <b>Dec 31, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">DWM Petroleum AG, Baar (1)</td> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid">DWM Energy AG Baar (2)</td> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Switzerland</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">Petromanas Energy Inc., Calgary (3)</td> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Canada</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 14.4% </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 14.4% </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid">CJSC South Petroleum Company, Jalalabat (4)</td> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Kyrgyz Republic</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 25% </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 25% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">CJSC Somon Oil Company, Dushanbe (5)</td> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Republic of Tajikistan</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 90% </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 90% </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid">Manas Management Services Ltd., Nassau (6)</td> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Bahamas</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">Manas Chile Energia Limitada, Santiago (7)</td> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Chile</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 100% </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid">Gobi Energy Partners LLC, Ulaan Baator (8)</td> <td align="left" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Mongolia</td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 74% </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 74% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">Gobi Energy Partners GmbH (9)</td> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="34%">Switzerland</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 74% </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> 74% </td> </tr> </table> 1.00 1.00 1.00 1.00 0.144 0.144 0.25 0.25 0.90 0.90 1.00 1.00 1.00 1.00 0.74 0.74 0.74 0.74 <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" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Three-month ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Six-month ended</i> </td> </tr> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid"> <b>Related parties&#8217; transactions</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2012</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2013</b> </td> <td align="center" style="BORDER-BOTTOM: #000000 1px solid" width="15%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b>Affiliates</b> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left">Management services performed to Petromanas*</td> <td align="right" valign="bottom" width="15%"> ( 241) </td> <td align="right" valign="bottom" width="15%"> 4,194 </td> <td align="right" valign="bottom" width="15%"> ( 11,734) </td> <td align="right" valign="bottom" width="15%"> ( 11,118) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> <b>Board of directors</b> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> <td align="right" bgcolor="#e6efff" valign="bottom" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left">Payments to directors for office rent</td> <td align="right" valign="bottom" width="15%"> 6,288 </td> <td align="right" valign="bottom" width="15%"> 6,387 </td> <td align="right" valign="bottom" width="15%"> 12,564 </td> <td align="right" valign="bottom" width="15%"> 12,935 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid">Payments to related companies controlled by directors for rendered consulting services</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 89,138 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 90,540 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 178,100 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" width="15%"> 183,357 </td> </tr> </table> 241 4194 11734 11118 6288 6387 12564 12935 89138 90540 178100 183357 1.00 0.74 0.70 4000000 53500000 11500000 42000000 1000000 1000000 0.70 42000000 0.30 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>12.</b> <b>COMMITMENTS &amp; CONTINGENT LIABILITIES</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Legal actions and claims (Kyrgyz Republic, Republic of Tajikistan, Mongolia and Chile)</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">In the ordinary course of business, members of the Group doing business in Mongolia, Republic of Tajikistan, the Kyrgyz Republic, and Chile may be subject to legal actions and complaints from time-to-time. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition, the results of future operations or cash flows of the associates/subsidiaries in Mongolia, Republic of Tajikistan, the Kyrgyz Republic and Chile.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">During the initial phase of applying for its Chilean Exploration license, the Company formed a joint bidding group with Improved Petroleum Recovery Tranquillo Chile (commonly referred to as &#8220;IPR&#8221;) and a start-up company called Energy Focus Limitada (&#8220;Energy Focus&#8221;). Each had a one-third interest. Of its own accord, Energy Focus left the bidding group. The three parties signed a side letter which provided that Energy Focus would have an option to rejoin the bidding group under certain conditions.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Even though Energy Focus had been asked many times to join the group by contributing its prorated share of capital, it failed to do so. Despite this, Energy Focus claims that it is entitled to participate in the consortium at any future time, not just under certain conditions. The Company and IPR believe that Energy Focus no longer has any right to join the bidding group because the conditions specified in the side letter did not occur and can no longer occur.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Energy Focus commenced litigation for specific performance and damages in an unspecified amount in Santiago de Chile, claiming interest in the Tranquilo Block from the Company and IPR, and their respective subsidiaries. The Company, IPR and their respective legal counsel were of the view that the Energy Focus claim was without merit, that it was brought in the wrong jurisdiction and that Energy Focus has failed to properly serve the parties. The trial court in Santiago dismissed the case, but the verdict was open to appeal. Energy Focus took an Appeal, which was dismissed by the Chilean courts. Energy Focus has now taken a second Appeal. The Company&#8217;s legal advisors are of the opinion that Energy Focus will not succeed in the second Appeal. The Company&#8217;s management believes that the ultimate liability, if any, arising from the Energy Focus litigation will not have a material adverse effect on the financial condition, the results of future operations or cash flows of the Company.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">At June 30, 2013, there had been no legal actions against any member of the Group in the Kyrgyz Republic, Republic of Tajikistan and Mongolia.</p> <p align="justify" 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 Kyrgyz Republic, 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;">Management believes that the ultimate liability, if any, arising from any of the above will not have a material adverse effect on the financial condition or the results of future operations and on cash flows of the Group in the Kyrgyz Republic, Republic of Tajikistan and Mongolia.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>13.</b> <b>PERSONNEL COSTS AND EMPLOYEE BENEFIT PLANS</b> </p> <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;">The Company maintains Swiss defined benefit plans for eight of its 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 and Baloise Holding Ltd. 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> <div align="center"> <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" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Three-month ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-LEFT: #000000 1px solid"> <i>Six-month ended</i> </td> </tr> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Pension expense</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2013</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Net service cost</td> <td align="right" bgcolor="#e6efff" width="18%"> 10,164 </td> <td align="right" bgcolor="#e6efff" width="18%"> 5,327 </td> <td align="right" bgcolor="#e6efff" width="18%"> 20,328 </td> <td align="right" bgcolor="#e6efff" width="18%"> 10,654 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Interest cost</td> <td align="right" width="18%"> 4,802 </td> <td align="right" width="18%"> 5,944 </td> <td align="right" width="18%"> 9,604 </td> <td align="right" width="18%"> 11,888 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Expected return on assets</td> <td align="right" bgcolor="#e6efff" width="18%"> ( 3,853) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 4,976) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 7,706) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 9,952) </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Amortization of net gain</td> <td align="right" width="18%"> 4,931 </td> <td align="right" width="18%"> 2,654 </td> <td align="right" width="18%"> 9,862 </td> <td align="right" width="18%"> 5,308 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Net periodic pension cost</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 16,044 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 8,949 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 32,088 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 17,898 </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> During the Six-month period ended June 30, 2013 and 2012, the Company made cash contributions of USD91,343 and USD71,197, respectively, to its defined benefit pension plan. The Company does not expect to make any additional cash contributions to its defined benefit pension plans during the remainder of 2013. </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="80%"> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid"> <i>Three-month ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-LEFT: #000000 1px solid"> <i>Six-month ended</i> </td> </tr> <tr valign="top"> <td align="left" nowrap="nowrap" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <b>Pension expense</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2013</b> </td> <td align="right" style="BORDER-BOTTOM: #000000 1px solid" width="18%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Net service cost</td> <td align="right" bgcolor="#e6efff" width="18%"> 10,164 </td> <td align="right" bgcolor="#e6efff" width="18%"> 5,327 </td> <td align="right" bgcolor="#e6efff" width="18%"> 20,328 </td> <td align="right" bgcolor="#e6efff" width="18%"> 10,654 </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Interest cost</td> <td align="right" width="18%"> 4,802 </td> <td align="right" width="18%"> 5,944 </td> <td align="right" width="18%"> 9,604 </td> <td align="right" width="18%"> 11,888 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Expected return on assets</td> <td align="right" bgcolor="#e6efff" width="18%"> ( 3,853) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 4,976) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 7,706) </td> <td align="right" bgcolor="#e6efff" width="18%"> ( 9,952) </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">Amortization of net gain</td> <td align="right" width="18%"> 4,931 </td> <td align="right" width="18%"> 2,654 </td> <td align="right" width="18%"> 9,862 </td> <td align="right" width="18%"> 5,308 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Net periodic pension cost</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 16,044 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 8,949 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 32,088 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="18%"> <b> 17,898 </b> </td> </tr> </table> 10164 5327 20328 10654 4802 5944 9604 11888 3853 4976 7706 9952 4931 2654 9862 5308 16044 8949 32088 17898 91343 71197 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>14.</b> <b>FAIR VALUE MEASUREMENT</b> </p> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>14.1.</b> <b>Fair Value Measurements</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. 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. Financial assets carried at fair value are classified in one of the three categories as follows:</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Financial assets and liabilities carried at fair value as of June 30, 2013:</p> <div align="center"> <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-right: 2px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>Financial assets 2013 (in USD)</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <b>Level 1</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <b>Level 2</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <strong>Level 3</strong> &#160;&#160; </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Investment in associate (Petromanas)</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> - </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Net periodic pension cost</b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> </tr> </table> </div> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The following table summarizes the changes in the fair value of the Company&#8217;s level 2 financial assets and liabilities for the Six-month ended June 30, 2013 (in USD):</p> <div align="center"> <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: 2px 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="right" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="35%"> <b> 17,462,734 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Total gains (losses) realized and unrealized:</td> <td align="left" bgcolor="#e6efff" width="35%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in earnings - unrealized</i> </td> <td align="right" width="35%"> (7,148,060) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in earnings - realized</i> </td> <td align="right" bgcolor="#e6efff" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in other comprehensive income</i> </td> <td align="right" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Proceeds from sale of investment in associate</td> <td align="right" bgcolor="#e6efff" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Net transfer in/(out) of level 2</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="35%"> (10,314,674) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Balance at Jun 30, 2013</b> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="35%"> <b> - </b> </td> </tr> </table> </div> <p align="justify" style="margin-left: 5%; font-family: times new roman,times,serif; font-size: 10pt;"> <b>14.2.</b> <b>Fair Value of Financial Instruments</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">In addition to the methods and assumptions the Company uses to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, the Company used the following methods and assumptions to estimate the fair value of its financial instruments.</p> <ul style="text-align: justify;"> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Cash and cash equivalents &#8211;</b> carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Restricted cash &#8211;</b> carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Accounts receivable &#8211;</b> carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Transaction prepayment &#8211;</b> carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Investment in Petromanas</b> &#8211; fair value was calculated based on quoted market prices and a discount factor for any hold period derived from the Company&#8217;s estimated cost of capital. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Accounts Payable</b> &#8211; carrying amount approximated fair value. </li> <li style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>Refundable deposits</b> &#8211; carrying amount approximated fair value. </li> </ul> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">The fair value of the Company&#8217;s financial instruments is presented in the table below (in USD):</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="100%"> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <i> Jun 30, 2013 </i> </b> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <i>Dec 31, 2012</i> </b> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">&#160;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Carrying</b> <br/> <b>Amount</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Fair</b> <br/> <b>Value</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Carrying</b> <br/> <b>Amount</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Fair Value</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b> <i>Fair Value</i> </b> <br/> <b> <i>Levels</i> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b> <i>Reference</i> </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Cash and cash equivalents</td> <td align="right" bgcolor="#e6efff" width="13%"> 178,073 </td> <td align="right" bgcolor="#e6efff" width="13%"> 178,073 </td> <td align="right" bgcolor="#e6efff" width="13%"> 2,842,495 </td> <td align="right" bgcolor="#e6efff" width="13%"> 2,842,495 </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 4</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Restricted cash</td> <td align="right" width="13%"> 118,446 </td> <td align="right" width="13%"> 118,446 </td> <td align="right" width="13%"> 122,521 </td> <td align="right" width="13%"> 122,521 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Transaction prepayment</td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 5</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Accounts receivable</td> <td align="right" width="13%"> 140,496 </td> <td align="right" width="13%"> 140,496 </td> <td align="right" width="13%"> 73,309 </td> <td align="right" width="13%"> 73,309 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Investment in Petromanas</td> <td align="right" bgcolor="#e6efff" width="13%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" width="13%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" width="13%"> 17,462,734 </td> <td align="right" bgcolor="#e6efff" width="13%"> 17,462,734 </td> <td align="center" bgcolor="#e6efff" width="13%">1/2</td> <td align="left" bgcolor="#e6efff" width="13%">Note 10</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Accounts Payable</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 561,298 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 561,298 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 127,283 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 127,283 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 1 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Refundable Deposits</td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 246,771 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 246,771 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 377,125 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 377,125 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 1 </td> </tr> </table> </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-right: 2px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);"> <b>Financial assets 2013 (in USD)</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <b>Level 1</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <b>Level 2</b> </td> <td align="center" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="22%"> <strong>Level 3</strong> &#160;&#160; </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Investment in associate (Petromanas)</td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> - </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Net periodic pension cost</b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="22%"> <b> - </b> </td> </tr> </table> 9974999 0 0 0 0 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="60%"> <tr valign="top"> <td align="left" style="border-right: 2px 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="right" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 1px solid rgb(0, 0, 0);" width="35%"> <b> 17,462,734 </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Total gains (losses) realized and unrealized:</td> <td align="left" bgcolor="#e6efff" width="35%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in earnings - unrealized</i> </td> <td align="right" width="35%"> (7,148,060) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in earnings - realized</i> </td> <td align="right" bgcolor="#e6efff" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);"> <i>Included in other comprehensive income</i> </td> <td align="right" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Proceeds from sale of investment in associate</td> <td align="right" bgcolor="#e6efff" width="35%"> - </td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Net transfer in/(out) of level 2</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="35%"> (10,314,674) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);"> <b>Balance at Jun 30, 2013</b> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 2px solid rgb(0, 0, 0);" width="35%"> <b> - </b> </td> </tr> </table> 17462734 -7148060 0 0 0 -10314674 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="100%"> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0);">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <i> Jun 30, 2013 </i> </b> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);"> <b> <i>Dec 31, 2012</i> </b> </td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> <td align="center" nowrap="nowrap" style="border-top: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">&#160;</td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Carrying</b> <br/> <b>Amount</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Fair</b> <br/> <b>Value</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Carrying</b> <br/> <b>Amount</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b>Fair Value</b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b> <i>Fair Value</i> </b> <br/> <b> <i>Levels</i> </b> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="middle" width="13%"> <b> <i>Reference</i> </b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Cash and cash equivalents</td> <td align="right" bgcolor="#e6efff" width="13%"> 178,073 </td> <td align="right" bgcolor="#e6efff" width="13%"> 178,073 </td> <td align="right" bgcolor="#e6efff" width="13%"> 2,842,495 </td> <td align="right" bgcolor="#e6efff" width="13%"> 2,842,495 </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 4</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Restricted cash</td> <td align="right" width="13%"> 118,446 </td> <td align="right" width="13%"> 118,446 </td> <td align="right" width="13%"> 122,521 </td> <td align="right" width="13%"> 122,521 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Transaction prepayment</td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="right" bgcolor="#e6efff" width="13%"> 10,111,656 </td> <td align="center" bgcolor="#e6efff" width="13%"> 1 </td> <td align="left" bgcolor="#e6efff" width="13%">Note 5</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0);">Accounts receivable</td> <td align="right" width="13%"> 140,496 </td> <td align="right" width="13%"> 140,496 </td> <td align="right" width="13%"> 73,309 </td> <td align="right" width="13%"> 73,309 </td> <td align="center" width="13%"> 1 </td> <td align="left" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 2px solid rgb(0, 0, 0);">Investment in Petromanas</td> <td align="right" bgcolor="#e6efff" width="13%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" width="13%"> 9,974,999 </td> <td align="right" bgcolor="#e6efff" width="13%"> 17,462,734 </td> <td align="right" bgcolor="#e6efff" width="13%"> 17,462,734 </td> <td align="center" bgcolor="#e6efff" width="13%">1/2</td> <td align="left" bgcolor="#e6efff" width="13%">Note 10</td> </tr> <tr valign="top"> <td align="left" style="border-right: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Accounts Payable</td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 561,298 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 561,298 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 127,283 </td> <td align="right" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 127,283 </td> <td align="center" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%"> 1 </td> <td align="left" style="border-bottom: 2px solid rgb(0, 0, 0);" width="13%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="border-right: 1px solid rgb(0, 0, 0); border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);">Refundable Deposits</td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 246,771 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 246,771 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 377,125 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 377,125 </td> <td align="right" bgcolor="#e6efff" style="border-top: 2px solid rgb(0, 0, 0); border-bottom: 2px solid rgb(0, 0, 0);" width="16%"> 1 </td> </tr> </table> 30 178073 178073 2842495 2842495 1 118446 118446 122521 122521 1 10111656 10111656 10111656 10111656 1 140496 140496 73309 73309 1 9974999 9974999 17462734 17462734 561298 561298 127283 127283 1 246771 246771 377125 377125 1 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>15.</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. Diluted earnings per share are calculated applying the treasury stock method. When there is a net income, dilutive effects of all stock-based compensation awards or participating financial instruments are considered. When the Company posts a loss, basic loss per share equals diluted loss per share.</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="100%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <i>Three-month period ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> &#160; <i>Six-month period ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2012</b> </td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Company posted</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net Income</td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Basic weighted average shares outstanding</td> <td align="right" bgcolor="#e6efff" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,535,973 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,501,633 </td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Dilutive effect of common stock equivalents:</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid"> &#160;&#160;&#160;&#160;&#160; 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font-size: 10pt;">The following table shows the total number of stock equivalents that was excluded from the computation of diluted earnings per share for the respective period because the effect would have been anti-dilutive:</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="100%"> <tr valign="top"> <td align="left">&#160;</td> <td align="center" colspan="2" nowrap="nowrap"> <i>Three-month ended</i> </td> <td align="center" colspan="2" nowrap="nowrap"> <i>Six-month ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid"> <b>Stock equivalent</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2012</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Options</td> <td align="right" bgcolor="#e6efff" width="20%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 15,950,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 15,950,000 </td> </tr> <tr valign="top"> <td align="left">Warrants</td> <td align="right" width="20%"> 44,450,000 </td> <td align="right" width="20%"> 45,934,015 </td> <td align="right" width="20%"> 44,450,000 </td> <td align="right" width="20%"> 45,934,015 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">Non-vested shares</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> 166,667 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> </tr> <tr valign="top"> <td align="left"> <b>Total</b> </td> <td align="right" width="20%"> <b> 58,550,000 </b> </td> <td align="right" width="20%"> <b> 62,050,682 </b> </td> <td align="right" width="20%"> <b> 58,550,000 </b> </td> <td align="right" width="20%"> <b> 61,884,015 </b> </td> </tr> </table> </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="100%"> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid; BORDER-TOP: #000000 2px solid">&#160;</td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> <i>Three-month period ended</i> </td> <td align="center" colspan="2" nowrap="nowrap" style="BORDER-TOP: #000000 2px solid; BORDER-BOTTOM: #000000 1px solid"> &#160; <i>Six-month period ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2012</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2013</b> </td> <td align="right" nowrap="nowrap" width="15%"> <b>Jun 30, 2012</b> </td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Company posted</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net loss</td> <td align="right" bgcolor="#e6efff" width="15%">Net Income</td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Basic weighted average shares outstanding</td> <td align="right" bgcolor="#e6efff" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,535,973 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" width="15%"> 172,501,633 </td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid">Dilutive effect of common stock equivalents:</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> <td align="left" bgcolor="#e6efff" width="15%">&#160;</td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> <td align="left" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid"> &#160;&#160;&#160;&#160;&#160; - stock options and non-vested stock under <br/> &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; employee compensation plans </td> <td align="right" bgcolor="#e6efff" width="15%"> - </td> <td align="right" bgcolor="#e6efff" width="15%"> - </td> <td align="right" bgcolor="#e6efff" width="15%"> - </td> <td align="right" bgcolor="#e6efff" width="15%"> 333,333 </td> </tr> <tr> <td align="left" style="BORDER-RIGHT: #000000 2px solid">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> <td align="right" width="15%">&#160;</td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-RIGHT: #000000 2px solid; BORDER-BOTTOM: #000000 2px solid"> <b>Diluted weighted average shares outstanding</b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> <b> 173,535,973 </b> </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> 172,592,292 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 2px solid" width="15%"> <b> 172,834,966 </b> </td> </tr> </table> 172592292 172535973 172592292 172501633 0 0 0 333333 172592292 173535973 172592292 172834966 <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">&#160;</td> <td align="center" colspan="2" nowrap="nowrap"> <i>Three-month ended</i> </td> <td align="center" colspan="2" nowrap="nowrap"> <i>Six-month ended</i> </td> </tr> <tr valign="top"> <td align="left" style="BORDER-BOTTOM: #000000 1px solid"> <b>Stock equivalent</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2012</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2013</b> </td> <td align="center" nowrap="nowrap" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> <b>Jun 30, 2012</b> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">Options</td> <td align="right" bgcolor="#e6efff" width="20%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 15,950,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 14,100,000 </td> <td align="right" bgcolor="#e6efff" width="20%"> 15,950,000 </td> </tr> <tr valign="top"> <td align="left">Warrants</td> <td align="right" width="20%"> 44,450,000 </td> <td align="right" width="20%"> 45,934,015 </td> <td align="right" width="20%"> 44,450,000 </td> <td align="right" width="20%"> 45,934,015 </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid">Non-vested shares</td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> 166,667 </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> <td align="right" bgcolor="#e6efff" style="BORDER-BOTTOM: #000000 1px solid" width="20%"> - </td> </tr> <tr valign="top"> <td align="left"> <b>Total</b> </td> <td align="right" width="20%"> <b> 58,550,000 </b> </td> <td align="right" width="20%"> <b> 62,050,682 </b> </td> <td align="right" width="20%"> <b> 58,550,000 </b> </td> <td align="right" width="20%"> <b> 61,884,015 </b> </td> </tr> </table> 14100000 15950000 14100000 15950000 44450000 45934015 44450000 45934015 0 166667 0 0 58550000 62050682 58550000 61884015 <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> <b>16.</b> <b>SUBSEQUENT EVENT(S)</b> </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Effective July 31, 2013, Ari Muljana, our Chief Financial Officer and Treasurer, has resigned from his positions of Chief Financial Officer and Treasurer. There were no disagreements between Mr. Muljana and our company on any matter relating to our operations, policies or practices. Mr. Muljana relocated to Asia to complete his education, now wishes to pursue other professional and personal opportunities in Asia. We are greatly thankful to Mr. Muljana for his service and commitments as our Chief Financial Officer and Treasurer and wish him great success in his future endeavors.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">Effective August 1, 2013, our Board of Directors appointed Peter-Mark Vogel as our Interim Chief Financial Officer and Treasurer. Mr. Vogel is expected to hold these positions until our Board of Directors finds a permanent replacement for the positions of Chief Financial Officer and Treasurer. Mr. Vogel continues to be our Secretary.</p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;"> On August 8, 2013, the Company&#8217;s wholly-owned subsidiary, DWM Petroleum AG, signed a Loan Agreement with Tulip Fund NV, a tax exempt collective investment fund incorporated under the laws of the Netherlands, with a six month term and a roll-over option of up to six months at the discretion of DWM Petroleum, with one month notice prior to expiry of the first 6 month term and subject to agreement on the terms of the extension. The loan is in a principal amount of EURO 4,000,000 (USD5,322,920) and carries a per annum interest rate of 4.5%, which accrues and is payable in one lump sum at the end of term. As collateral for the loan, DWM Petroleum has agreed to pledge all of its right, title and interest in 100,000,000 shares of Petromanas Energy Inc. </p> <p align="justify" style="font-family: times new roman,times,serif; font-size: 10pt;">DWM Petroleum has the right to prepay the Loan in whole or in part without any penalties or damages.</p> 6 4000000 5322920 0.045 100000000 七次郎在线观看,久青草国产在线视频,,一夜七次郎免费线路