UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A
(Amendment No. 2)

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 15, 2015

MNP Petroleum Corporation
(Exact name of registrant as specified in its charter)

Nevada 333-107002 91-1918324
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)

Bahnhofstrasse 9, 6341 Baar, Switzerland
(Address of principal executive offices) (Zip Code)

+41 (44) 718 10 30
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


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Explanatory Note

On January 15, 2015, MNP Petroleum Corporation filed a Current Report on Form 8-K to disclose the acquisition of a 65% interest in EPA.at Beteiligungsgesellschaft mbH (“EPA”), an Austria registered company, for total consideration of US$12 million to the seller, Kavsar General Trading FZE. EPA holds 57.42% of the equity interest in the Tajik company, Petroleum Sugd; the remaining 42.58% equity interest in Petroleum Sugd is held by the Tajik state oil company, Sugdnaftugaz. Petroleum Sugd owns ten producing oil fields.

This Amendment No. 2 on Form 8-K/A is being filed to amend the unaudited pro forma financial statements (the “Previous Pro Forma Financial Statements”) filed with the Amendment No.1 on Form 8-K/A filed on April 24, 2015. The Previous Pro Forma Financial Statements were prepared using the equity method. Due to the unavailability of timely financial statements of Petroleum Sugd, we have decide to prepare the pro forma financial statements using the cost method and are filing this Amendment No. 2 on Form 8-K/A to file the amended pro forma financial information using the cost method.

Item 9.01 Financial Statements and Exhibits

(a)

Financial statements of businesses acquired.

   

The audited financial statements of EPA at December 31, 2013 and 2012 and for the years ended December 31, 2013 and 2012 are filed hereto as Exhibit 99.1.

   

The unaudited financial statements of EPA at September 30, 2014 and December 31, 2013 and for the nine month periods ended September 30, 2014 and 2013 are filed as Exhibit 99.2.

   
(b)

Pro forma financial information.

   

The unaudited pro forma financial statements of MNP Petroleum Corporation at September 30, 2014 and for the nine month period ended September 30, 2014 and the unaudited pro forma statement of comprehensive loss of MNP Petroleum Corporation for the year ended December 31, 2013, giving effect to the acquisition of EPA are filed hereto as Exhibit 99.3.

   
(c)

Exhibits.


No. Description
   
23.1 Consent of BDO AG
   
99.1 Audited financial statements of EPA at December 31, 2013 and 2012 and for the years ended December 31, 2013 and 2012.
   
99.2 Unaudited financial statements of EPA at September 30, 2014 and December 31, 2013 and for the nine month periods ended September 30, 2014 and 2013.
   
99.3 Unaudited pro forma financial statements of MNP Petroleum Corporation at September 30, 2014 and for the nine month period ended September 30, 2014 and the year ended December 31, 2013.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MNP PETROLEUM CORPORATION

By:  
   
/s/ Peter-Mark Vogel  
Peter-Mark Vogel  
Chief Financial Officer, Treasurer and Secretary  
Date: May 15, 2015  










Contents

Independent Auditor’s Report
 
Financial Statements
   Consolidated Balance Sheets
   Consolidated Statements of Comprehensive Income
   Consolidated Statements of Shareholders’ Equity
   Consolidated Statements of Cash Flows
   Notes to Consolidated Financial Statements


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Tel.+41 44 444 35 55
Fax +41 44 444 35 35
www.bdo.ch
BDO AG
Fabrikstrasse 50
CH-8031 Zürich

Independent Auditor’s Report

Board of Directors
EPA.at Beteiligungsgesellschaft mbH

We have audited the accompanying consolidated financial statements of EPA.at Beteiligungsgesellschaft mbH and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


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Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EPA.at Beteiligungsgesellschaft mbH and its subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

BDO AG  
April 24, 2015 Zurich  
   
/s/ Christoph Tschumi /s/ Julian Snow
   
Christoph Tschumi ppa. Julian Snow


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EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED BALANCE SHEETS

    12.31.2013     12.31.2012  
    USD     USD  
ASSETS            
Cash and cash equivalents   2,922,774     818,183  
Accounts receivable   229,901     845,573  
Prepaid expenses and other assets   280,533     282,895  
Inventories   621,545     652,085  
Deferred tax asset   175,633     178,819  
Total current assets   4,230,386     2,777,555  
             
Property, plant and equipment   2,275,204     2,361,967  
Oil and gas properties   5,709,394     5,700,544  
Investment   100,513     100,662  
Deferred tax asset   325,328     431,486  
Total non-current assets   8,410,439     8,594,659  
             
TOTAL ASSETS   12,640,825     11,372,214  
             
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Loan due to related party   6,045,490     6,049,564  
Accounts payable   171,544     251,110  
Other accrued expenses and liabilities   701,059     771,393  
Total current liabilities   6,918,093     7,072,067  
             
Asset retirement obligation   3,553,695     3,431,971  
Total non-current liabilities   3,553,695     3,431,971  
             
TOTAL LIABILITIES   10,471,788     10,504,038  
             
Common Stock (As of December 31, 2013, USD 103,588 par value, 1 share issued and outstanding)   103,588     103,588  
Other comprehensive income   3,152,618     3,425,704  
Accumulated deficit   (4,594,175 )   (5,607,155 )
Total EPA shareholders' equity   (1,337,969 )   (2,077,863 )
Noncontrolling interest   3,507,006     2,946,039  
TOTAL SHAREHOLDERS' EQUITY   2,169,037     868,176  
             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   12,640,825     11,372,214  


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EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    12.31.2013     12.31.2012  
    USD     USD  
OPERATING REVENUES            
Revenues   5,713,769     5,373,454  
Cost of sales   (3,060,484 )   (4,173,149 )
Gross profit   2,653,285     1,200,305  
             
OPERATING EXPENSES            
Administrative costs   (493,125 )   (151,494 )
Accretion of asset retirement obligation   (127,037 )   (206,575 )
Total operating expenses   (620,162 )   (358,069 )
             
Total income from operations   2,033,123     842,236  
             
NON-OPERATING INCOME / (EXPENSE)            
Other income   231,043     1,686  
Other expense   (70,225 )   (137,378 )
Total non-operating income/(expense)   160,818     (135,692 )
             
Income before taxes   2,193,941     706,544  
             
Income taxes   (403,319 )   (286,459 )
Net income   1,790,622     420,085  
             
Net income attributable to non-controlling interest   777,642     190,722  
Net income attributable to EPA   1,012,980     229,363  
             
Other comprehensive loss   (279,092 )   (138,402 )
Net comprehensive income   1,511,530     281,683  
             
Net comprehensive income attributable to non-controlling interest   771,636     186,117  
Net comprehensive income attributable to EPA   739,894     95,566  
             
Weighted average number of outstanding shares (basic)   1     1  
Weighted average number of outstanding shares (diluted)   1     1  
             
Basic earnings per share   1,012,980     229,363  
Diluted earnings per share   1,012,980     229,363  


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EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

    EPA Shareholder's equity              
  Number of     Share     Accumulated     Accumulated other     Noncontrolling     Total shareholders'  
SHAREHOLDERS' EQUITY   shares     capital     deficit     comprehensive     interest     equity  
                      income              
Balance January 1, 2012   1     103,588     (5,836,518 )   3,559,501     2,909,329     735,900  
Currency translation   -     -     -     (133,797 )   (4,605 )   (138,402 )
Net income for the year   -     -     229,363     -     190,722     420,085  
Dividends paid to noncontrolling interest   -     -     -     -     (149,407 )   (149,407 )
Balance December 31, 2012   1     103,588     (5,607,155 )   3,425,704     2,946,039     868,176  
                                     
Balance January 1, 2013   1     103,588     (5,607,155 )   3,425,704     2,946,039     868,176  
Currency translation   -     -     -     (273,086 )   (6,006 )   (279,092 )
Net income for the year   -     -     1,012,980     -     777,642     1,790,622  
Dividends paid to noncontrolling interest   -     -     -     -     (210,669 )   (210,669 )
Balance December 31, 2013   1     103,588     (4,594,175 )   3,152,618     3,507,006     2,169,037  


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EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED CASH FLOW STATEMENT

    12.31.2013     12.31.2012  
    USD     USD  
OPERATING ACTIVITIES            
Net income including noncontrolling interest   1,790,622     420,085  
             
To reconcile net income/(loss) to net cash used in operating activities        
Depreciation and amortization   933,099     537,347  
Accretion of asset retirement obligation   127,037     206,575  
Deferred income taxes   109,344     104,916  
Decrease / (increase) in inventories   29,633     720,114  
Decrease / (increase) in accounts receivable   615,596     (419,675 )
Decrease / (increase) in prepaid expenses and other assets   2,004     202,600  
(Decrease) / increase in accounts payable   (28,853 )   27,170  
(Decrease) / increase in other accrued expenses and other liabilities   (119,983 )   223,536  
Cash flow from operating activities   3,458,499     2,022,668  
             
INVESTING ACTIVITIES            
Purchase of property, plant and equipment   (837,364 )   (754,717 )
Purchase of oil and gas properties   (27,957 )   (174,359 )
Cash flow used in investing activities   (865,321 )   (929,076 )
             
FINANCING ACTIVITIES            
Loan due to related party   (247,330 )   (380,586 )
Dividends paid   (210,669 )   (149,407 )
Cash flow used in financing activities   (457,999 )   (529,993 )
             
Net change in cash and cash equivalents   2,135,179     563,599  
             
Cash and cash equivalents at the beginning of the period   818,183     265,311  
Translation effect on cash   (30,588 )   (10,727 )
Cash and cash equivalents at the end of the period   2,922,774     818,183  


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Notes to Consolidated Financial Statements of EPA.at Beteiligungsgesellschaft mbH and Subsidiary

1. Nature of Business and Significant Accounting Policies Nature of business

EPA.at Beteiligungsgesellschaft mbH (“EPA” or the “Company”), is headquartered in Vienna, Austria. The Company, through its subsidiary, Petroleum Sugd LLC (“Petroleum Sugd”), is engaged in the production of crude oil and gas in the north of Tajikistan.

Operating environment

In recent years Tajikistan has undergone substantial political, economic and social change. As in any emerging market Tajikistan does not possess overly sophisticated and efficient business, regulatory, power and transportation infrastructure as generally exists in more developed market economies. Management cannot predict what economic, political, legal or other changes may occur in these or other emerging markets, but such changes could adversely affect the Company’s ability to carry out exploration, development or production activities. Particularly the legal system of Tajikistan is less developed than those of more established jurisdictions, which may result in risks such as: the lack of effective legal redress in the courts, whether in respect to a breach of law or regulation, or, in an ownership dispute, a higher degree of discretion from the governmental authorities, delays caused by extensive bureaucracy and the lack of judicial or administrative guidance on interpreting applicable laws and regulations, inconsistencies or conflicts between various laws, regulations, decrees, order and resolutions.

2. Summary of significant accounting policies

Basis of Presentation and Preparation

The Company’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). 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.

Theses financial statements are prepared on a going concern bases and reflect the Company management’s assessment of the impact of the Tajik business environment on the operations and the financial position of the company.

Scope and methods of consolidation

The accompanying consolidated financial statements include the accounts of the Company, EPA.at Beteiligungsgesellschaft mbH, and all companies which EPA directly or indirectly controls (over 50% of voting interest). The sole subsidiary included in the consolidation is Petroleum Sugd, of which the Company owns 57.42% . Intercompany accounts and transactions have been eliminated.

Investments in which the Company exercises significant influence, but not control (generally 20% to 50% ownership) are accounted for using the equity method. The Group’s share of earnings or losses is included in consolidated net loss and the Group’s share of the net assets is included in long-term assets. Investments where the Company holds less than 20% ownership are accounted for using the cost method.

Concentrations of risk


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Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand. Cash and cash equivalents are subject to currency exchange rate fluctuations.

Cash and cash equivalents

Cash and cash equivalents are comprised of cash on hand, cash at banks and other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value with original maturities of three months or less.

Accounts receivable and allowance for doubtful accounts

We carry accounts receivable at sales value less an allowance for doubtful accounts. We periodically evaluate accounts receivable and establish an allowance for doubtful accounts based on a combination of specific customer circumstances, credit conditions and the history of write-offs and collections. We evaluate items on an individual basis when determining accounts receivable write-offs. In general, our policy is to not charge interest on trade receivables after the invoice becomes past due. A receivable is considered past due if payment has not been received within agreed upon invoice terms.

Property, plant and equipment

Tangible fixed assets are recorded at cost and are depreciated on a straight-line basis over the following estimated useful lives:

    Years  
       
Buildings   10 - 20 years  
Machinery and equipment   1 - 10 years  
Vehicles   4 - 10 years  
Office equipment   1 - 7 years  
Materials and spare parts   2 - 3 years  

Impairment of property, plant and equipment

Tangible fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The carrying value of a long-lived asset or asset group is considered to be impaired when the undiscounted expected cash flows from the asset or asset group are less than its carrying amount. In that event, an impairment loss is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined based on quoted market prices, where available, or is estimated as the present value of the expected future cash flows from the asset or asset group discounted at a rate commensurate with the risk involved.

Oil and gas properties

Oil and gas properties consists of rigs and equipment in use to produce oil and gas as well as any asset retirement cost and is depreciated using the unit of production method. Unit of production depreciation is a critical accounting estimate that measures the depreciation of oil and gas assets. It is the ratio of actual volumes produced to total proved reserves or proved developed reserves (those proved reserves recoverable through existing wells with existing equipment and operating methods), applied to the asset cost. The volumes produced and asset cost are known and, while proved reserves have a high probability of recoverability, they are based on estimates that are subject to some variability.

Investment in OJSC Rogun Dam


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For the years ended December 31, 2013 and 2012, the Company recorded its investment in OJSC Rogun Dam (“OJSC”) at cost since the company holds less than 20% in voting and capital interest in OJSC.

Current liabilities

Current liabilities include current or renewable liabilities due within a maximum period of one year. Current liabilities are carried at their nominal value, which approximates fair market value.

Fair value of financial instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, investments, accounts payable and a loan from a related party. The fair value of these financial instruments approximate their carrying value due to the short maturities of these instruments, unless otherwise noted.

Non-current liabilities

Non-current liabilities include all known liabilities as per year end, which can reliably be quantified with a due date of at least one year after the date of the balance sheet.

Income taxes

Taxes on income are accrued in the same period as the revenues and expenses to which they relate.

Deferred taxes are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet of the Company prepared for consolidation purposes, with the exception of temporary differences arising on investments in foreign subsidiaries where the Company has plans to permanently reinvest profits into the foreign subsidiaries.

Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is more likely than not, that future profits will be available and the tax loss carry-forward can be utilized.

Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the determination of the applicable tax rate provided that they are likely to be applicable in the period when the deferred tax assets or tax liabilities are realized.

The Company is required to pay income taxes in Austria and the Republic of Tajikistan. Significant judgment is required in determining income tax provisions and in evaluating tax positions.

The Company recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition of measurement of its uncertain tax positions. Interest and penalties related to uncertain tax positions are recognized as income tax expense.

Revenue recognition

Revenues are recognized when products are delivered or services are provided to customers, title is transferred, the sales price is fixed or determinable and collectability is reasonably assured. Revenues are recorded net of discounts granted to customers. Shipping and other transportation costs billed to customers are presented on a gross basis in revenues and cost of sales. Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, services rendered stated net of discounts, returns and value added taxes.


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Exploration and development costs

The Company uses the successful efforts method of accounting for oil and natural gas producing activities. Under this method, acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole drilling costs, are expensed. Development costs, including the costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves, are capitalized. Upon sale or retirement of a proved property, the cost and accumulated depreciation, depletion and amortization are eliminated from property accounts and the resultant gain or loss is recognized.

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made.

Development costs of proved oil and natural gas properties, including estimated dismantlement, restoration, abandonment costs and acquisition costs, are depreciated and depleted on a well by well basis by the units-of-production method using estimated proved developed reserves.

We perform annual assessments of unproved oil properties for impairment on a field basis, and recognize a loss at the time of impairment by recording an expense to “exploration costs”. In determining whether an unproved property is impaired we consider numerous factors including, but not limited to, dry holes drilled, current exploration plans, favorable or unfavorable exploratory activity on adjacent areas and our geologists' evaluation.”

Loans payable

Loans payable are recognized initially at fair value, net of transaction costs incurred. Loans payable are subsequently carried at amortized costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Related parties

Parties are considered to be related if one party directly or indirectly controls, is controlled by, or is under common control with the other party, if it has an interest in the other party that gives it significant influence over the party, if it has joint control over the party, or if it is an associate or a joint venture. Senior management of the company and close family members are also deemed to be related parties.

Foreign Currency Translation and Transactions

The consolidated financial statements of the Company are presented in US Dollars (USD). The financial position and results of operations of our foreign subsidiaries are determined using the currency of the environment in which an entity primarily generates and expends cash as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end. Statement of comprehensive income accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income/(loss) in shareholders’ equity. Gains and losses resulting from foreign currency transactions are included in other income and expenses (exchange differences), except intercompany foreign currency transactions that are of a long-term-investment nature which are included in accumulated other comprehensive income/(loss) in shareholders’ equity.


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Contingent liabilities and gains

A loss contingency is recognized when it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Gain contingencies are not reflected in financial statements.

Asset retirement obligation

Recognition and measurement:

Any liability for an asset retirement obligation (“ARO”) is recognized at fair value in the period in which it is incurred if a reasonable estimate of fair value can be made. If a reasonable estimate of the fair value of the liability cannot be made in the period the obligation is incurred, a liability shall be recognized when a reasonable estimate of fair value can be made.

Subsequent measurement:

Changes in the liability for the ARO that are due to changes in the timing or amount of the original estimated cash flows are added to or deducted from the liability and the cost of the asset. Downward revisions in the amount of undiscounted cash flows are discounted using the credit-adjusted risk-free rate used on initial recognition. Upward revisions in the amount of undiscounted cash flows are discounted using the current credit-adjusted risk-free rate.

Changes in the liability for the asset retirement obligation that are due to the passage of time are recognized in the statement of comprehensive income.

Employee benefits and social insurance contributions

The Company pays social tax in the territory of the Republic of Tajikistan. These contributions are recorded on an accrual basis. Social tax comprises contributions to the state budget in respect of the Company’s employees. These expenses are recognized as incurred and are included in staff costs. The Company does not have pension arrangements separate from the state pension system of the Republic of Tajikistan. Wages, salaries, contributions to the Republic of Tajikistan state budget, paid annual leaves and paid sick leaves, bonuses and non-monetary benefits are accrued as the Company’s employees render the related service.

Inventories

Inventories are initially recognized at cost, and subsequently at the lower of cost or market value. Costs comprise of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average cost is used to determine the value of inventory.

Dividends

Dividends are recorded in equity in the period in which they are declared at the Annual General Meeting (“AGM”). Dividends declared after the balance sheet date and before the financial statements are authorized for issue are disclosed in the subsequent events note.


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3. Cash and cash equivalents

Cash and cash equivalents (in USD)   Dec 31, 2013     Dec 31, 2012  
Cash in bank   2,873,161     808,243  
Cash on hand   49,613     9,940  
Total cash and cash equivalents   2,922,774     818,183  

4. Inventories

Inventories (in USD)   Dec 31, 2013     Dec 31, 2012  
Work in progress1   340,367     447,619  
Finished goods   250,714     127,443  
Fuel   21,142     72,369  
Other   9,322     4,654  
Total inventories   621,545     652,085  

1 Work in progress represents crude oil which needs additional processing to be available for sale.

5. Investment

Investment represents shares acquired in the company OJSC Rogun Dam. The Company holds 85 shares of OJSC which is less than 1% of total outstanding shares of OJSC. The nominal value of each share is different and ranges from USD 21 to USD 4,191 (TJS 100 to 20,000). The value of the investment as at December 31, 2013 and 2012 was USD 100,513 (TJS 479,800) and USD 100,662 (TJS 479,800), respectively.

6. Property, plant and equipment

    Building     Materials           Office              
Year 2013 (in USD) s and spares Vehicles equipment Other Total
Cost at Jan 1, 2013   398,002     1,595,180     716,856     10,203     164,805     2,885,046  
Additions   1,015     772,503     49,379     2,083     12,384     837,364  
Cost at Dec 31, 2013   399,017     2,367,683     766,235     12,286     177,189     3,722,410  
Accumulated depreciation at Dec 31, 2013   (57,137 )   (1,196,793 )   (139,775 )   (4,173 )   (49,328 )   (1,447,206 )
Net book value at Dec 31, 2013   341,880     1,170,890     626,460     8,113     127,861     2,275,204  

    Building     Materials           Office              
Year 2012 (in USD)   s     and spares     Vehicles     equipment     Other     Total  
Cost at Jan 1, 2012   398,590     908,755     654,090     8,114     165,049     2,134,598  
Additions   -     688,785     63,827     2,105     -     754,717  
Cost at Dec 31, 2012   398,590     1,597,540     717,917     10,219     165,049     2,889,315  
Accumulated depreciation at Dec 31, 2012   (28,575 )   (405,410 )   (67,661 )   (1,896 )   (23,806 )   (527,348 )
Net book value at Dec 31, 2012   370,015     1,192,130     650,256     8,323     141,243     2,361,967  

Depreciation expense of property, plant and equipment for the years ended December 31, 2013 and 2012 was USD 922,395 and USD 527,706, respectively.

7. Oil and gas properties

Oil and gas properties (in USD)   Dec 31, 2013     Dec 31, 2012  
Cost   5,729,705     5,710,185  
Accumulated depletion   (20,311 )   (9,641 )
Total oil and gas properties   5,709,394     5,700,544  


-14-

The oil and gas properties held by the company consists of drilling costs, rigs and equipment that is in place to allow the production of oil and gas. During 2013, the company capitalized pumps with a value of USD 27,957.

8. Asset retirement obligation

The Company incurs retirement obligations for certain assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. In the estimation of fair value, assumptions and judgments are used regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, discount rates and inflation rates. Asset retirement obligations incurred in the current period were Level 3 fair value measurements. The costs associated with these liabilities are capitalized as part of the related assets and depreciated as the reserves are produced. Over time, the liabilities are accreted for the change in their present value.

The following table shows the changes in asset retirement obligation for the years ended December 31, 2013 and 2012:

ARO (in USD)   Dec 31, 2013     Dec 31, 2012  
Balance at beginning of year   3,431,971     3,230,456  
Accretion   127,037     206,575  
Translation adjustment   (5,313 )   (5,060 )
Balance at end of year   3,553,695     3,431,971  

9. Revenue

The Company generates revenue primarily from the sale of oil and gas and additional revenue from other activities such as providing repair and maintenance services to independent third parties. In 2012, the Company used its own electricity distribution infrastructure in Neftabod, in the Sugd region, to provide electricity within the city. A tariff was charged on this electricity received from Barki Tajik, a state owned company, calculated based on the electricity usage.

The major customers of the Company that purchased oil and gas are local companies, registered in Tajikistan. In 2013, the Company sold 11,167 tons (2012: 10,264 tons) of oil at an average price of USD 490 (TJS 2,338) per ton (2012: USD 481 (TJS 2,290)) and 1,116 thousand m3 (2012: 1,224 thousand m3) of gas at an average price of USD 210 (TJS 1,002) for 1 thousand m3 (2012: USD 176 (TJS 836)).

The following table shows the sales of the Company for the years ended December 31, 2013 and 2012:

Revenue (in USD)   Year ended     Year ended  
    Dec 31, 2013     Dec 31, 2012  
Oil   5,482,457     4,932,878  
Gas   231,312     182,065  
Electricity distribution   -     37,853  
Repair and maintenance for third parties   -     161,765  
Other   -     58,893  
Total revenue   5,713,769     5,373,454  


-15-

10. Cost of sales

The following table shows the cost of sales incurred by the Company for the years ended December 31, 2013 and 2012:

Cost of sales (in USD)   Year ended     Year ended  
    Dec 31, 2013     Dec 31, 2012  
Staff salaries and related taxes   743,605     735,722  
Repair of oil well and technical services   305,196     584,530  
Depreciation and amortization   884,207     494,698  
Losses and own consumption of oil   205,896     1,153,065  
Other taxes   400,266     354,088  
Social costs   61,967     183,931  
Transportation   6,576     205,260  
Costs for oil treatment   57,309     168,171  
Electricity   218,328     137,321  
Reservoir pressure cost   16,665     48,922  
Communication   36,366     37,296  
Others   124,103     70,145  
Total cost of sales   3,060,484     4,173,149  

11. Income tax

The Company and its subsidiary is duly registered with the tax authorities of Austria and the Republic of Tajikistan, respectively, and is subject to periodic reviews by the tax authorities.

The Company provides for taxes based on the tax accounts maintained and prepared in accordance with the tax regulations of Austria and the Republic of Tajikistan, which may differ from US GAAP standards. For the years ended December 31, 2013 and 2012, no taxes were paid in Austria. The income tax rate in the Republic of Tajikistan for the years ended December 31, 2013 and 2012 was 15%, excluding other taxes such as road tax, etc.

The Company does not intend to repatriate any of its earnings to Austria since all funding is managed through an intercompany loan and is therefore considered permanently invested. If earnings were to be repatriated they would be subject to a withholding tax of 5% pursuant to the double tax treaty between Austria and Tajikistan if the Company holds at least 15% of the capital of the Company.

The components of income from continuing operations before income taxes are as follows:

Pre-tax income/(loss) (in USD)   Year ended     Year ended  
    Dec 31, 2013     Dec 31, 2012  
Domestic (Austria)   (34,191 )   (25,580 )
Foreign (Tajikistan)   2,228,132     732,124  
Income from operations before income tax   2,193,941     706,544  

Income taxes at the Tajikistan statutory rate compared to the Company’s income tax expenses as reported are as follows:

    Year ended     Year ended  
Income taxes at the Tajik statutory rate (in USD)   Dec 31,     Dec 31, 2012  
    2013        
Net income before income tax   2,193,941     706,544  
Statutory tax rate   15%     15%  
Expected income tax expense   (329,091 )   (105,982 )
Impact on income tax expense of the following:            
Permanent differences:            
Expenses on asset retirement obligation and non tax deductible depreciations   (74,228 )   (180,477 )
Income tax expense   (403,319 )   (286,459 )


-16-

As at December 31, 2013, the Company had deferred tax assets arising from deductible temporary differences between the tax basis and carrying value of the inventory and property, plant and equipment. In addition, during 2013 there were permanent differences in relation to the asset retirement obligation. These deductions were not permitted by the tax authority of Tajikistan and therefore resulted in an increase in the effective tax rate.

The Company assesses the recoverability of its deferred tax assets and, to the extent recoverability does not satisfy the “more likely than not” recognition criterion under ASC 740, records a valuation allowance against its deferred tax assets if necessary. The Company considered its recent operating results and anticipated future taxable income in assessing the need for its valuation allowance.

The Company’s deferred tax assets and liabilities as at December 31, 2013 and 2012 consist of the following:

Deferred tax assets and liabilities (in   Dec 31, 2013     Dec 31, 2012  
USD)            
Deferred tax assets            
Inventory – short term   175,633     178,819  
Property, plant and equipment – long term   325,328     431,486  
Valuation allowance   -     -  
Deferred tax assets   500,961     610,305  

The Company’s income tax expense for the years ended December 31, 2013 and 2012 consists of the following:

    Year     Year  
Income tax (in USD)   ended     ended  
    Dec 31, 2013     Dec 31, 2012  
Income tax expense – current   (293,975 )   (181,543 )
Income tax expense – deferred   (109,344 )   (104,916 )
Total income tax expense   (403,319 )   (286,459 )

The following tax years remain subject to examination:

    Open  
Significant Jurisdictions   Years  
Austria   2014  
Tajikistan   2014  

12. Noncontrolling interest

The shareholders of Petroleum Sugd as at December 31, 2013 are EPA.at Beteiligungsgesellschaft mbH and Sugdneftugas, a Tajik state owned company, with 57.42% and 42.58%, respectively. These ownership percentages remained unchanged from December 31, 2012 with EPA and Sugdneftugas holding 57.42% and 42.58% respectively.


-17-

13. Related parties

Parties are considered related when one has the power, through ownership, contractual right, family relationship, or otherwise, to directly or indirectly control or significantly influence the other. Parties are also related when they are under the common control or significant influence of a third party.

Kavsar General Trading FZE (“Kavsar”), is the owner of EPA with 100% control as at December 31, 2013 and December 31, 2012.

The following table shows the outstanding related party balances as at December 31, 2013 and 2012:

Related party (in USD)   Dec 31, 2013     Dec 31, 2012  
Loan due to Kavsar   6,045,490     6,049,564  
Balance at end of year   6,045,490     6,049,564  

The outstanding balance is a short term loan and bears no interest. The Company had insufficient funds on hand to repay this balance during the year.

14. Fair value measurement

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.

Fair Value of Financial Instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments.

  • Cash and cash equivalents – carrying amount approximated fair value.
  • Accounts receivable – carrying amount approximated fair value.
  • Investment – shares acquired at cost in OJSC, a state owned company with a value determined by the government.
  • Loan from related party – carrying amount approximated fair value due to the short term nature of the loan.
  • Accounts payable – carrying amount approximated fair value.

The fair value of our financial instruments is presented in the table below (in USD):

    December 31, 2013     December 31, 2012     Fair        
    Carrying     Fair     Carrying     Fair     Value        
    Amount     Value     Amount     Value     Levels     Reference  
Cash and cash equivalents   2,922,774     2,922,774     818,183     818,183     1     Note 3  
Accounts receivable   229,901     229,901     845,573     845,573     1        
Investment   100,513     100,513     100,662     100,662     3     Note 5  
Loan from related party   6,045,490     6,045,490     6,049,564     6,049,564     3     Note 13  
Accounts payable   171,544     171,544     251,110     251,110     1        


-18-

15. Contingencies and commitments

The oil and gas industry is affected by numerous laws and regulations, including discharge permit for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, pooling of properties, taxation and other laws and regulations. Changes in any of these laws and regulations or the denial or vacating of permits and licenses could have a material adverse effect on the Company's business. Generally, legal structures, codes and regulations in emerging markets are not as well defined as they can be in more developed markets and they are therefore more likely to change rapidly. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to the Company, we cannot predict the overall effect of such laws and regulations on future business operations of the Company. Management believes that the Company's operations currently comply in all material aspects with applicable laws and regulations. There are no pending or threatened enforcement actions related to any such laws or regulations.

There are no pending legal proceedings to which the Company is a party or to which any of the Company's properties are subject. In addition, Management does not know of any such proceedings contemplated by a governmental institution.

16. Environmental matters

The Company is subject to national and local environmental law and regulations relating to water, air, hazardous substances and wastes, and threatened or endangered species that restrict or limit the Company's business activities or purposes of protecting human health and environment. Compliance with the multitude of regulations issued by the appropriate administrative agencies can be burdensome and costly. Management believes that Company's operations currently comply in all material respects with applicable national and local environmental laws and regulations.

17. Subsequent Events

The Company has evaluated subsequent events through April 24, 2015, which is the date of issuance of this Form 8-K/A and has determined that the following events require additional disclosure.

Work Program:

In the fourth quarter of 2014, Petroleum Sugd completed its 2015 work program budget. EPA, as a 57.42% owner of Petroleum Sugd has a funding obligation that amounts to USD 14.9 million relating to its portion of this 2015 work program for Petroleum Sugd in Tajikistan.

Social Responsibility Project:

On June 10, 2014, the governor of the Farkhor district of Tajikistan decreed that the Petroleum Sugd has a two year funding obligation related to a social responsibility project concerning the construction of a secondary school in this district.





EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED BALANCE SHEETS

    (Unaudited)        
    09.30.2014     12.31.2013  
    USD     USD  
ASSETS            
Cash and cash equivalents   2,511,264     2,922,774  
Accounts receivable   1,560,188     229,901  
Prepaid expenses and other assets   330,543     280,533  
Inventories   718,756     621,545  
Deferred tax asset   176,666     175,633  
Total current assets   5,297,417     4,230,386  
             
Property, plant and equipment   2,166,048     2,275,204  
Oil and gas properties   5,485,755     5,709,394  
Investment   96,104     100,513  
Deferred tax asset   194,683     325,328  
Total non-current assets   7,942,590     8,410,439  
             
TOTAL ASSETS   13,240,007     12,640,825  
             
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Loan due to related party   4,958,732     6,045,490  
Accounts payable   30,857     171,544  
Other accrued expenses and liabilities   996,849     701,059  
Total current liabilities   5,986,438     6,918,093  
             
Asset retirement obligation   3,499,734     3,553,695  
Total non-current liabilities   3,499,734     3,553,695  
             
TOTAL LIABILITIES   9,486,172     10,471,788  
             
Common Stock (As of September 30, 2014, USD 103,588 par value, 1 share issued and outstanding)   103,588     103,588  
Other comprehensive income   3,433,910     3,152,618  
Accumulated deficit   (3,756,883 )   (4,594,175 )
Total EPA shareholders' equity   (219,385 )   (1,337,969 )
Noncontrolling interest   3,973,220     3,507,006  
TOTAL SHAREHOLDERS' EQUITY   3,753,835     2,169,037  
             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   13,240,007     12,640,825  


-2-

EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

    09.30.2014     09.30.2013  
    USD     USD  
OPERATING REVENUES            
Revenues   4,778,574     4,029,548  
Cost of sales   (2,576,797 )   (2,278,954 )
Gross profit   2,201,777     1,750,594  
             
OPERATING EXPENSES            
Administrative costs   (357,654 )   (510,166 )
Accretion of asset retirement obligation   (104,244 )   (127,100 )
Total operating expenses   (461,898 )   (637,266 )
             
Total income from operations   1,739,879     1,113,328  
             
NON-OPERATING INCOME / (EXPENSE)            
Other income   56,534     23,740  
Other expense   (32,123 )   (25,645 )
Total non-operating income/(expense)   24,411     (1,905 )
             
Income before taxes   1,764,290     1,111,423  
             
Income taxes   (282,280 )   (86,309 )
Net income   1,482,010     1,025,114  
             
Net income attributable to non-controlling interest   644,718     447,890  
Net income attributable to EPA   837,292     577,224  
             
Other comprehensive income/(loss)   102,788     (209,319 )
Net comprehensive income   1,584,798     815,795  
             
Net comprehensive income attributable to non-controlling interest   466,214     443,385  
Net comprehensive income attributable to EPA   1,118,584     372,410  
             
Weighted average number of outstanding shares (basic)   1     1  
Weighted average number of outstanding shares (diluted)   1     1  
             
Basic earnings per share   837,292     577,224  
Diluted earnings per share   837,292     577,224  


-3-

EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED

    EPA Shareholder's equity              
  Number of     Share     Accumulated     Accumulated other     Noncontrolling     Total shareholders'  
SHAREHOLDERS' EQUITY   shares     capital     deficit     comprehensive     interest     equity  
                      income              
                                     
Balance January 1, 2014   1     103,588     (4,594,175 )   3,152,618     3,507,006     2,169,037  
Currency translation   -     -     -     281,292     (178,504 )   102,788  
Net income for the period   -     -     837,292     -     644,718     1,482,010  
Balance September 30, 2014   1     103,588     (3,756,883 )   3,433,910     3,973,220     3,753,835  


-4-

EPA.at Beteiligungsgesellschaft mbH and Subsidiary

CONSOLIDATED CASH FLOW STATEMENT - UNAUDITED

    09.30.2014     09.30.2013  
    USD     USD  
OPERATING ACTIVITIES            
Net income including noncontrolling interest   1,482,010     1,025,114  
             
To reconcile net income/(loss) to net cash used in operating activities        
Depreciation and amortization   817,785     777,583  
Accretion of asset retirement obligation   104,244     127,037  
Deferred income taxes   129,612     60,139  
Decrease / (increase) in inventories   (127,298 )   21,378  
Decrease / (increase) in accounts receivable   (1,370,753 )   376,871  
Decrease / (increase) in prepaid expenses and other assets   (63,868 )   162,703  
(Decrease) / increase in accounts payable   1,063     (99,458 )
(Decrease) / increase in other accrued expenses and other liabilities   196,919     76,329  
Cash flow from operating activities   1,169,714     2,527,696  
             
INVESTING ACTIVITIES            
Purchase of property, plant and equipment   (783,610 )   (797,015 )
Purchase of oil and gas properties   (33,526 )   (24,509 )
Cash flow used in investing activities   (817,136 )   (821,524 )
             
FINANCING ACTIVITIES            
Loan due to related party   (654,390 )   (11,815 )
Cash flow used in financing activities   (654,390 )   (11,815 )
             
Net change in cash and cash equivalents   (301,812 )   1,694,357  
             
Cash and cash equivalents at the beginning of the period   2,922,774     818,183  
Effect of translation on cash flow   (109,698 )   (23,541 )
Cash and cash equivalents at the end of the period   2,511,264     2,488,999  


-5-

Notes to Consolidated Financial Statements of EPA.at Beteiligungsgesellschaft mbH and Subsidiary

1. Basis of presentation

The financial statements presented here comprise EPA.at Beteiligungsgesellschaft mbH (“EPA” or the “Company”) and its subsidiary Petroleum Sugd LLC (“Petroleum Sugd”). The unaudited interim Consolidated Financial Statements included have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and present our financial position, results of operations, cash flows and changes in shareholder’s equity. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Annual Report on Form 8-K/A for the year ended December 31, 2013.

The Company is engaged in the production of crude oil and gas in the north of Tajikistan.

2. Accounting Policies

The consolidated interim financial statements included herein are unaudited and do not include all of the information and footnotes required by US GAAP for complete financial statements. 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.

These statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. The consolidated balance sheet as of September 30, 2014 has been derived from the Company’s audited balance sheet as of that date. It is recommended that the interim financial statements be read in conjunction with the Company's audited financial statements for the year ended December 31, 2013. The Company adheres to the same accounting policies in preparation of its interim financial statements. As permitted under US GAAP, interim accounting for certain expenses, including income taxes are based on full year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year.

3. Cash and cash equivalents

Cash and cash equivalents (in USD)   Sept 30, 2014     Dec 31, 2013  
Cash in bank   2,425,231     2,873,161  
Cash on hand   86,033     49,613  
Total cash and cash equivalents   2,511,264     2,922,774  

4. Inventories

Inventories (in USD)   Sept 30, 2014     Dec 31, 2013  
Work in progress1   610,583     340,367  
Finished goods   68,836     250,714  
Fuel   35,054     21,142  
Other   4,283     9,322  
Total inventories   718,756     621,545  

1 Work in progress represents crude oil which needs additional processing to be available for sale.

5. Investment


-6-

Investment represents shares acquired in the company OJSC Rogun Dam. The Company holds 85 shares of OJSC which is less than 1% of total outstanding shares of OJSC. The nominal value of each share is different and ranges from USD 21 to USD 4,191 (TJS 100 to 20,000). The value of the investment as at September 30, 2014 and December 31, 2013 was USD 96,104 (TJS 479,800) and USD 100,513 (TJS 479,800), respectively.

6. Property, plant and equipment

Nine months of   Building     Materials           Office              
2014 (in USD)   s     and spares     Vehicles     equipment     Other     Total  
Cost at Jan 1, 2014   381,512     2,263,816     732,621     11,747     169,416     3,559,112  
Additions   971     721,594     47,213     1,991     11,841     783,610  
Cost at Sep 30, 2014   382,483     2,985,410     779,834     13,738     181,257     4,342,722  
Accumulated depreciation at Sep 30, 2014   (82,051 )   (1,807,639 )   (207,139 )   (6,538 )   (73,307 )   (2,176,674 )
Net book value at Sep 30, 2014   300,432     1,177,771     572,695     7,200     107,950     2,166,048  

Depreciation expense of property, plant and equipment for the nine month period ended September 30, 2014 and 2013 was USD 810,930 and USD 645,676 respectively.

7. Oil and gas properties

Oil and gas properties (in USD)   Sep 30, 2014     Dec 31, 2013  
Cost   5,511,878     5,729,705  
Accumulated depletion   (26,123 )   (20,311 )
Total oil and gas properties   5,485,755     5,709,394  

The oil and gas properties held by the company consists of drilling costs, rigs and equipment that is in place to allow the production of oil and gas. During the first nine months of 2014, the company capitalized pumps and pipelines with a value of USD 33,526.

8. Asset retirement obligation

The Company incurs retirement obligations for certain assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. In the estimation of fair value, assumptions and judgments are used regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, discount rates and inflation rates. Asset retirement obligations incurred in the current period were Level 3 fair value measurements. The costs associated with these liabilities are capitalized as part of the related assets and depreciated as the reserves are produced. Over time, the liabilities are accreted for the change in their present value.

The following table shows the changes in asset retirement obligation for the nine months ended September 30, 2014 and year ended December 31, 2013:

ARO (in USD)   Sep 30, 2014     Dec 31, 2013  
Balance at beginning of year   3,553,695     3,431,971  
Accretion   104,244     127,037  
Translation adjustment   (158,205 )   (5,313 )
Balance at end of period   3,499,734     3,553,695  


-7-

9. Revenue

The Company generates revenue from the sale of oil and gas.

The following table shows the sales of the Company for the nine month periods ended September 30, 2014 and 2013:

    Nine months     Nine months ended  
Revenue (in USD)   ended        
    Sept 30, 2014     Sept 30, 2013  
Oil   4,660,628     3,853,432  
Gas   117,946     176,116  
Total revenue   4,778,574     4,029,548  

10. Cost of sales

The following table shows the cost of sales incurred by the Company for the nine month periods ended September 30, 2014 and 2013:

    Nine months     Nine months ended  
Cost of sales (in USD)   ended        
    Sept 30, 2014     Sept 30, 2013  
Staff salaries and related taxes   567,989     509,545  
Repair of oil well and technical services   255,359     229,009  
Depreciation and amortization   781,587     668,989  
Losses and own consumption of oil   118,063     105,880  
Other taxes   268,627     240,908  
Social costs   141,997     127,178  
Transportation   191,989     172,178  
Costs for oil treatment   2,816     2,526  
Electricity   15,736     163,827  
Reservoir pressure cost   182,677     14,112  
Communication   18,407     16,508  
Others   31,550     28,294  
Total cost of sales   2,576,797     2,278,954  

11. Noncontrolling interest

The shareholders of Petroleum Sugd as at September 30, 2014 are EPA.at Beteiligungsgesellschaft mbH and Sugdneftugas, a Tajik state owned company, with 57.42% and 42.58%, respectively. These ownership percentages remained unchanged from December 31, 2013 with EPA and Sugdneftugas holding 57.42% and 42.58% respectively.

12. Related parties

Parties are considered related when one has the power, through ownership, contractual right, family relationship, or otherwise, to directly or indirectly control or significantly influence the other. Parties are also related when they are under the common control or significant influence of a third party.

Kavsar General Trading FZE (“Kavsar”), is the owner of EPA with 100% control as at September 30, 2014 and December 31, 2014.

The following table shows the outstanding related party balances as at September 30, 2014 and December 31, 2013:


-8-

Related party (in USD)   Sept 30, 2014     Dec 31, 2013  
Loan due to Kavsar   4,958,732     6,045,490  
Balance at end of period   4,958,732     6,045,490  

The outstanding balance is a short term loan and bears no interest. The Company had insufficient funds on hand to repay this balance during the nine month period.

13. Fair value measurement

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.

Fair Value of Financial Instruments

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments.

  • Cash and cash equivalents – carrying amount approximated fair value.
  • Accounts receivable – carrying amount approximated fair value.
  • Investment – shares acquired at cost in OJSC, a state owned company with a value determined by the government.
  • Loan from related party – carrying amount approximated fair value due to the short term nature of the loan.
  • Accounts payable – carrying amount approximated fair value.

The fair value of our financial instruments is presented in the table below (in USD):

    September 30, 2014     December 31, 2013     Fair        
    Carrying     Fair     Carrying     Fair     Value        
    Amount     Value     Amount     Value     Levels     Reference  
Cash and cash equivalents   2,511,264     2,511,264     2,922,774     2,922,774     1     Note 3  
Accounts receivable   1,560,188     1,560,188     229,901     229,901     1        
Investment   96,104     96,104     100,513     100,513     3     Note 5  
Loan from related party   4,958,732     4,958,732     6,045,490     6,045,490     3     Note 12  
Accounts payable   30,857     30,857     171,544     171,544     1        

14. Contingencies and commitments

The oil and gas industry is affected by numerous laws and regulations, including discharge permit for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, pooling of properties, taxation and other laws and regulations. Changes in any of these laws and regulations or the denial or vacating of permits and licenses could have a material adverse effect on the Company's business. Generally, legal structures, codes and regulations in emerging markets are not as well defined as they can be in more developed markets and they are therefore more likely to change rapidly. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to the Company, we cannot predict the overall effect of such laws and regulations on future business operations of the Company. Management believes that the Company's operations currently comply in all material aspects with applicable laws and regulations. There are no pending or threatened enforcement actions related to any such laws or regulations.


-9-

There are no pending legal proceedings to which the Company is a party or to which any of the Company's properties are subject. In addition, Management does not know of any such proceedings contemplated by a governmental institution.

15. Environmental matters

The Company is subject to national and local environmental law and regulations relating to water, air, hazardous substances and wastes, and threatened or endangered species that restrict or limit the Company's business activities or purposes of protecting human health and environment. Compliance with the multitude of regulations issued by the appropriate administrative agencies can be burdensome and costly. Management believes that Company's operations currently comply in all material respects with applicable national and local environmental laws and regulations.

16. Subsequent Events

The Company has evaluated subsequent events through April 24, 2015, which is the date of issuance of this Form 8-K/A and has determined that the following events require additional disclosure.

Work Program:
In the fourth quarter of 2014, Petroleum Sugd completed its 2015 work program budget. EPA, as a 57.42% owner of Petroleum Sugd has a funding obligation that amounts to USD 14.9 million relating to its portion of this 2015 work program for Petroleum Sugd in Tajikistan.

Social Responsibility Project:
On June 10, 2014, the governor of the Farkhor district of Tajikistan decreed that the Petroleum Sugd has a two year funding obligation related to a social responsibility project concerning the construction of a secondary school in this district.





UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On January 15, 2015, MNP Petroleum Corporation (the “Company”) acquired 65% of the outstanding common stock of EPA.at Beteiligungsgesellschaft mbH (“EPA”) for the purpose of diversifying its portfolio of oil and gas exploration and production assets. Total consideration paid was USD 12,000,000 for a 65% equity interest in EPA. The purchase price was partially funded through available cash resources as well as from the proceeds from the sale of a separate investment.

EPA, a company registered in Vienna, Austria, holds a 57.42% interest in the company Petroleum Sugd LLC, which owns 10 producing oil and gas fields in the north of Tajikistan. Through its equity investment, EPA participates directly in the profits from the sale of oil and gas.

Set forth below is the Company’s unaudited pro forma consolidated balance sheet as of September 30, 2014, reflecting the transaction as if it had taken place on September 30, 2014. The Company’s unaudited pro forma consolidated statements of comprehensive loss for the nine months ended September 30, 2014 and the audited consolidated statements of comprehensive loss for the year ended December 31, 2013 are included, reflecting the transaction as if it had taken place on January 1, 2013. The historical consolidated financial information of EPA has been adjusted in the unaudited pro forma consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the statement of income, expected to have a continuing impact on the consolidated results. There were no material transactions between the Company and EPA during the periods presented in the unaudited pro forma consolidated financial statements that needed to be eliminated.

The unaudited pro forma consolidated financial information should be read in conjunction with the accompanying notes thereto. In addition, the unaudited pro forma consolidated financial information was based on and should be read in conjunction with the:

  • Separate historical financial statements of EPA as of and for the period ended September 30, 2014 and the related notes and the separate historical financial statements of EPA for the year ended December 31, 2013 and related notes, included as an exhibit to this Current Report on Form 8-K/A; and

  • Separate historical financial statements of the Company as of and for the nine months ended September 30, 2014 and the related notes included in its Quarterly Report on Form 10-Q and separate historical financial statements of the Company for the year ended December 31, 2013 and the related notes included in its Annual Report on Form 10-K;

The unaudited pro forma consolidated financial information has been prepared using the cost method of accounting under U.S. generally accepted accounting principles. The unaudited pro forma consolidated financial information is presented for information purposes only. It has been prepared in accordance with the regulations of the Securities and Exchange Commission and is not necessarily indicative of what the Company’s financial position or results of operations actually would have been had it completed the acquisition at the dates indicated, nor does it purport to project the future financial position or operating results of the consolidated company.


-2-

The unaudited pro forma consolidated financial information does not reflect any cost savings, operating synergies or revenue enhancements that the consolidated company may achieve as a result of the merger; any costs to combine the operations of the Company and EPA; or any costs necessary to achieve these cost savings, operating synergies and potential revenue enhancements.


-3-

MNP PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEET - UNAUDITED

    09.30.2014     09.30.2014     Pro Forma        
    MNP     EPA.at Beteiligungs-     Adjustments     Pro Forma  
    Petroleum Corp.     gesellschaft mbH     (Note 1)   Consolidated  
    USD     USD     USD     USD  
ASSETS                        
Cash and cash equivalents   5,054,630     2,511,264     (4,511,264 )   3,054,630  
Restricted cash   210,959     -     -     210,959  
Accounts receivable   17,723     1,560,188     (1,560,188 )   17,723  
Investment in associate (Petromanas)   1,577,276     -     -     1,577,276  
Other prepaid expenses   395,545     330,543     (330,543 )   395,545  
Inventories   -     718,756     (718,756 )   -  
Deferred tax asset   -     176,666     (176,666 )   -  
Total current assets   7,256,133     5,297,417     (7,297,417 )   5,256,133  
                         
Tangible fixed assets   109,812     2,166,048     (2,166,048 )   109,812  
Oil and gas properties (unproved)   947,458     5,485,755     (5,485,755 )   947,458  
Investment   -     96,104     11,903,896     12,000,000  
Transaction prepayment   10,000,000     -     (10,000,000 )   -  
Deferred tax asset   -     194,683     (194,683 )   -  
Total non-current assets   11,057,270     7,942,590     (5,942,590 )   13,057,270  
                         
TOTAL ASSETS   18,313,403     13,240,007     (13,240,007 )   18,313,403  
                         
                         
LIABILITIES AND SHAREHOLDERS' EQUITY                        
Loan due to related party   -     4,958,732     (4,958,732 )   -  
Accounts payable   819,141     30,857     (30,857 )   819,141  
Other accrued expenses   93,445     996,849     (996,849 )   93,445  
Total current liabilities   912,586     5,986,438     (5,986,438 )   912,586  
                         
Asset retirement obligation   -     3,499,734     (3,499,734 )   -  
Pension liabilities   142,271     -     -     142,271  
Total non-current liabilities   142,271     3,499,734     (3,499,734 )   142,271  
                         
TOTAL LIABILITIES   1,054,857     9,486,172     (9,486,172 )   1,054,857  
                         
Common Stock (600,000,000 shares authorized as of September 30, 2014, USD 0.001 par value, 166,987,792 and 172,592,292 shares, respectively, issued and outstanding)  
172,592
   
103,588
   
(103,588
)  
172,592
 
Additional paid-in capital   78,593,604     -     -     78,593,604  
Treasury stock   (452,403 )   -     -     (452,403 )
Other comprehensive income   -     3,433,910     (3,433,910 )   -  
Accumulated deficit   (61,106,248 )   (3,756,883 )   3,756,883     (61,106,248 )
Currency translation adjustment   51,001     -     -     51,001  
Total EPA shareholders' equity   17,258,546     (219,385 )   219,385     17,258,546  
Noncontrolling interest   -     3,973,220     (3,973,220 )   -  
TOTAL SHAREHOLDERS' EQUITY   17,258,546     3,753,835     (3,753,835 )   17,258,546  
                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   18,313,403     13,240,007     (13,240,007 )   18,313,403  


-4-

MNP PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - UNAUDITED

    For the nine months ended              
    09.30.2014     09.30.2014     Pro Forma        
    MNP     EPA.at Beteiligungs-     Adjustments     Pro Forma  
    Petroleum Corp.     gesellschaft mbH     (Note 1)   Consolidated  
    USD     USD     USD     USD  
OPERATING REVENUES                        
Revenues   -     4,778,574     (4,778,574 )   -  
Cost of sales   -     (2,576,797 )   2,576,797     -  
Gross profit   -     2,201,777     (2,201,777 )   -  
                         
OPERATING EXPENSES                        
Personnel costs   (1,180,666 )   -     -     (1,180,666 )
Exploration costs   (1,178,469 )   -     -     (1,178,469 )
Depreciation and amortization   (36,757 )   -     -     (36,757 )
Consulting fees   (1,132,519 )   -     -     (1,132,519 )
Administrative costs   (1,048,395 )   (357,654 )   357,654     (1,048,395 )
Accretion of asset retirement obligation   -     (104,244 )   104,244     -  
Total operating expenses   (4,576,806 )   (461,898 )   461,898     (4,576,806 )
                         
Total income/(loss) from operations   (4,576,806 )   1,739,879     (1,739,879 )   (4,576,806 )
                         
NON-OPERATING INCOME / (EXPENSE)                        
Exchange differences   (189,384 )   -     -     (189,384 )
Change in fair value of investment in associate   1,714,684     -     -     1,714,684  
Interest and other income   -     56,534     (56,534 )   -  
Interest and other expense   (350 )   (32,123 )   32,123     (350 )
Total non-operating expenses   1,524,950     24,411     (24,411 )   1,524,950  
                         
Income/(Loss) before taxes   (3,051,856 )   1,764,290     (1,764,290 )   (3,051,856 )
                         
Income taxes   (9,557 )   (282,280 )   282,280     (9,557 )
Net income/(loss)   (3,061,413 )   1,482,010     (1,482,010 )   (3,061,413 )
                         
Net income/(loss) attributable to non-controlling interest   -     644,718     (644,718 )   -  
Net income/(loss) attributable to the shareholders   (3,061,413 )   837,292     (837,292 )   (3,061,413 )
                         
Other comprehensive income   -     102,788     (102,788 )   -  
Net comprehensive income/(loss)   (3,061,413 )   1,584,798     (1,584,798 )   (3,061,413 )
                         
Net comprehensive income attributable to non-controlling interest   -     466,214     (466,214 )   -  
Net comprehensive income/(loss) attributable to shareholders   (3,061,413 )   1,118,584     (1,118,584 )   (3,061,413 )
                         
Weighted average number of outstanding shares (basic)   171,371,039     1           171,371,039  
Weighted average number of outstanding shares (diluted)   171,371,039     1           171,371,039  
                         
Basic earnings/(loss) per share   (0.02 )   837,292           (0.02 )
Diluted earnings/(loss) per share   (0.02 )   837,292           (0.02 )


-5-

MNP PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - UNAUDITED

    12.31.2013     12.31.2013     Pro Forma        
    MNP     EPA.at Beteiligungs-     Adjustments     Pro Forma  
    Petroleum Corp.     gesellschaft mbH     (Note 1)   Consolidated  
    USD     USD     USD     USD  
OPERATING REVENUES                        
Revenues   -     5,713,769     (5,713,769 )   -  
Cost of sales   -     (3,060,484 )   3,060,484     -  
Gross profit   -     2,653,285     (2,653,285 )   -  
                         
OPERATING EXPENSES                        
Personnel costs   (2,301,938 )   -     -     (2,301,938 )
Exploration costs   (1,146,948 )   -     -     (1,146,948 )
Depreciation and amortization   (52,986 )   -     -     (52,986 )
Consulting fees   (1,838,909 )   -     -     (1,838,909 )
Administrative costs   (1,201,888 )   (493,125 )   493,125     (1,201,888 )
Accretion of asset retirement obligation   -     (127,037 )   127,037     -  
Total operating expenses   (6,542,669 )   (620,162 )   620,162     (6,542,669 )
                         
Total income/(loss) from operations   (6,542,669 )   2,033,123     (2,033,123 )   (6,542,669 )
                         
NON-OPERATING INCOME / (EXPENSE)                        
Exchange differences   (37,137 )   -     -     (37,137 )
Change in fair value of investment in associate   (4,247,067 )   -     -     (4,247,067 )
Interest and other income   1,391     231,043     (231,043 )   1,391  
Interest and other expense   (613 )   (70,225 )   70,225     (613 )
Total non-operating expenses   (4,283,426 )   160,818     (160,818 )   (4,283,426 )
                         
Income/(Loss) before taxes   (10,826,095 )   2,193,941     (2,193,941 )   (10,826,095 )
                         
Income taxes   (135,018 )   (403,319 )   403,319     (135,018 )
Net income/(loss)   (10,961,113 )   1,790,622     (1,790,622 )   (10,961,113 )
                         
Net income/(loss) attributable to non-controlling interest   -     777,642     (777,642 )   -  
Net income/(loss) attributable to the shareholders   (10,961,113 )   1,012,980     (1,012,980 )   (10,961,113 )
                         
Other comprehensive loss   -     (279,092 )   279,092     -  
Net comprehensive income/(loss)   (10,961,113 )   1,511,530     (1,511,530 )   (10,961,113 )
                         
Net comprehensive income attributable to non-controlling interest   -     771,636     (771,636 )   -  
Net comprehensive income/(loss) attributable to shareholders   (10,961,113 )   739,894     (739,894 )   (10,961,113 )
                         
Weighted average number of outstanding shares (basic)   172,592,292     1           172,592,292  
Weighted average number of outstanding shares (diluted)   172,592,292     1           172,592,292  
                         
Basic earnings/(loss) per share   (0.06 )   1,012,980           (0.06 )
Diluted earnings/(loss) per share   (0.06 )   1,012,980           (0.06 )

Note 1 Adjustments to the Unaudited Pro Forma Consolidated Financial Statements

The acquired company will be accounted for under the cost method due to an inability of receiving timely consolidated financial statements of EPA. Hence, no earnings from the income of EPA that is attributable to MNP will be recorded. Therefore, EPA has been deconsolidated through the pro forma adjustments. In addition to the deconsolidating entries, the following adjustments were made to the September 30, 2014 consolidated balance sheet to fully reflect the completion of the transaction as at September 30, 2014:

  i)

The USD 2,000,000 consideration outstanding as at September 30, 2014 has been deducted from cash;

  ii)

The USD 10,000,000 transaction prepayment has been deducted from “Transaction prepayment”; and

  iii)

The total consideration paid of USD 12,000,000 has been allocated to “Investment”.



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