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<table cellpadding="0" style="margin-top: 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>1.</b></td>
<td><b>Nature of Operations and Basis of Presentation</b></td></tr></table>
<p style="text-align: justify; margin: 0pt 0px 0pt 4.3pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">Discovery Energy Corp. (the "Company") was incorporated in Nevada on May 24, 2006 under the name “Santos Resource Corp.” The Company is an Exploration Stage Company. The Company's principal business is the proposed exploration and development of the 584,651 gross acres (the “Prospect”) in the State of South Australia covered by Petroleum Exploration License (PEL) 512. The Prospect involves a 100% working interest in the preceding acreage, which overlies portions of the Cooper and Eromanga basins... The Company has not presently determined whether the Prospect contains any crude oil and natural gas reserves that are economically recoverable. While the Company’s present focus is on the Prospect, the Company may consider the acquisition of other attractive oil and gas properties under the right circumstances. On May 7, 2012, the Company changed its name to Discovery Energy Corp.</p>
<p style="text-align: justify; margin: 0pt 0px 0pt 4.3pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">In May 2012, the Company incorporated a wholly-owned Australian subsidiary, Discovery Energy SA Ltd. for purposes of acquiring the Prospect.</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s February 29, 2012 Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end February 29, 2012, as reported on Form 10-K, have been omitted.</p>
<table cellpadding="0" style="margin-top: 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>2.</b></td>
<td><b>Going Concern</b></td></tr></table>
<p style="text-align: justify; margin: 0pt 0px 0pt 4.5pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The accompanying financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and has never paid dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity or debt financing to continue operations, the successful development of the Prospect or one or more alternative oil and gas properties, and the attainment of profitable operations. As of November 30, 2012, the Company has not generated any revenues and has an accumulated loss of $971,571 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. During October 2012, the Company entered into a services agreement with Chrystal Capital Partners LLP (“Chrystal”), a corporate finance firm based in London regulated by the British Financial Services Authority. Chrystal has agreed to assist the Company in connections with its efforts to complete a major capital raising transaction of up to US$20.0 million.</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The term of the Engagement Agreement was initially for two months, and it will now continue on a month-to-month basis until either party terminates it. In the event of a successful capital raise, the term of the Engagement Agreement will continue on a year-to-year basis thereafter until either party terminates it. After termination of the Engagement Agreement, Chrystal will be entitled to the success fees described below for any transaction completed within 18 months after termination with any prospect presented by Chrystal.</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">Pursuant to the Engagement Agreement, the Company agreed to pay the following fees to Chrystal:</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Monthly fees in the amount of GBP £7,500 (Sterling) (or approximately US$12,100);</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Cash success fees generally in amounts equal to 7% of the gross amount of all funds raised;</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">A stock success fee represented by 6,472,425 shares of the Company’s common stock, which stock success fee is subject to forfeiture (see footnote 6 below); and</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">An option success fee - In the event of a successful capital raise, Chrystal will be entitled to be issued options to purchase shares of the Company’s common stock. The number of shares to be covered by the options will equal 7% of the number of shares issued in the related capital raise. The exercise price for the options will equal the sale price of the Company’s shares in the related capital raise. The options will have a term of three years in which they could be exercised, and they will feature anti-dilution provisions.</td></tr></table>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The Company will also reimburse Chrystal for its expenses in connection with its services.</p>
<table cellpadding="0" style="margin-top: 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>3.</b></td>
<td><b>Related Party Transactions</b></td></tr></table>
<p style="margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">During January 2012, the Company entered into an assignment agreement (the “Assignment”) with Keith D. Spickelmier, who is now (but was not then) the Company’s Chairman of the Board. The transactions provided for by the Assignment were fully consummated in the Company’s third quarter 2013. Because Mr. Spickelmier is now the Company’s Chairman of the Board, the Company regards the consummation of the the transactions provided for by the Assignment as related party transactions. Moreover, because certain transactions between Mr. Spickelmier and other members of the Company’s management required the Company to issue certain Company shares to these other members instead of Mr. Spickelmier, the Company regards these share issuances to be related party transactions with those members for purposes of this footnote.</p>
<p style="text-align: justify; text-indent: 0.5in; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">On September 12, 2011, Mr. Spickelmier entered into an agreement (the “Liberty Agreement”) with Liberty Petroleum Corporation (“Liberty”) granting to Mr. Spickelmier an exclusive right to negotiate an option to acquire the Petroleum Exploration License (PEL) 512 (the “License”) regarding the Prospect. Per the terms of the Liberty Agreement, Mr. Spickelmier paid to Liberty a $50,000 initial deposit. In anticipation of the assignment of the Liberty Agreement to the Company, the Company paid to Liberty (a) an additional $100,000 deposit to extend the exclusive right provided for by the Liberty Agreement, and (b) an additional $200,000 deposit to modify certain terms of the Liberty Agreement, including the further extension of the exclusive right. The preceding amounts were part of the $800,000 that the Company paid to Liberty, as discussed in footnote 4 below. Subsequent to the assignment to the Company of the Liberty Agreement and pursuant to its terms, the Company reached the agreements described in footnote 4 below whereby the Company would take the direct issuance of the License in place of Liberty. The purchase price for the assignment of Mr. Spickelmier's rights in the Liberty Agreement is as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">$50,000 in cash - This amount was paid during the quarter ended May 31, 2012 to reimburse for this amount paid by Mr. Spickelmier to Liberty.</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; width: 100%; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in">*</td>
<td>$100,000 in cash - This amount was paid after the issuance of the License, and after the Company and Mr. Spickelmier decided not to defer its payment.</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; width: 100%; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in">*</td>
<td>Twenty million shares of the Company’s common shares – These shares were issued upon the assignment of the Liberty Agreement in fiscal 2012.</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; width: 100%; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Fifty-five million shares of the Company’s common shares – These shares became due to Mr. Spickelmier after the issuance of the License. Mr. Spickelmier assigned to other members of the Company’s management his right to receive certain of these shares. As a result, these shares were issued to the following persons in the denominations indicated:</td></tr></table>
<p style="MARGIN: 0px"> </p>
<table cellpadding="0" style="width: 85%; border-collapse: collapse; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-left: 1in;" cellspacing="0">
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: justify; FONT-WEIGHT: bold">Name of Recipient of Shares</td>
<td nowrap="nowrap" style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold">Position with Company</td>
<td nowrap="nowrap" style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Number of Shares Received</td>
<td nowrap="nowrap" style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td></tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: justify; WIDTH: 33%">Keith Spickelmier</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: center; WIDTH: 33%">Chairman of the Board</td>
<td style="WIDTH: 1%"> </td>
<td style="width: 1%;"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 30%">30,000,000</td>
<td style="width: 1%;"> </td></tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: justify">Keith McKenzie</td>
<td> </td>
<td style="TEXT-ALIGN: center">Director & CEO</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">16,700,000</td>
<td> </td></tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: justify">William E. Begley Jr.</td>
<td> </td>
<td style="TEXT-ALIGN: center">Director & CFO</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">7,500,000</td>
<td> </td></tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: justify">Mark S. Thompson</td>
<td> </td>
<td style="TEXT-ALIGN: center">Corporate Secretary</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">800,000</td>
<td> </td></tr></table>
<p style="margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<table cellpadding="0" style="margin-top: 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>4.</b></td>
<td><b>Oil and Gas Properties</b></td></tr></table>
<p style="margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: red;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">On October 26, 2012, the South Austrailian Minister of Regional Development (the “Minister”) granted and issued the License in the name of the Company’s wholly owned subsidiary Discovery Energy SA Ltd. Originally, Liberty was the winning bidder for the License. The Company entered into agreements with Liberty whereby Liberty agreed to sell the License to the Company upon its issuance. Eventually, the Company and Liberty modified their agreements so that the Company would take the direct issuance of the License in place of Liberty. For Liberty's agreements to allow the Company to be issued the License, the Company agreed to remit to Liberty the following consideration, which has a deemed value of US$3.95 million:</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Cash in the amount of $800,000 - All of this cash amount was paid to Liberty prior to the issuance of the License.</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Two promissory notes with an aggregate principal amount of $650,000, one in the amount of $500,000 becoming due six months after the issuance of the License, and the other in the amount of $150,000 becoming due nine months after the issuance of the License – These notes were issued after the issuance of the License. These notes feature prepayment discounts if the Company pays the notes earlier than required.</td></tr></table>
<table cellpadding="0" style="margin-top: 0pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" width="100%" cellspacing="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 0.5in"> </td>
<td style="WIDTH: 0.5in">*</td>
<td style="TEXT-ALIGN: justify">Twelve million shares of the Company’s common stock - All of these shares became due to Liberty after the issuance of the License, and Liberty agreed not to sell more than 10% of the shares received in any three-month period</td></tr></table>
<p style="text-align: justify; margin: 0pt 0px 0pt 4.5pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">In addition to the preceding, Liberty was allowed to retain a 7.0% royalty interest relating to the License.</p>
<p style="text-align: justify; margin: 0pt 0px 0pt 4.5pt; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The compensation paid for the acqusition of the exclusive right to negotiate with Liberty to acquire the License is described in footnote 3 above.</p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">The License requires a five-year work commitment involving geologic studies at an estimated cost of AU$200,000 (US$ 208,600) in the first year after the acquisition, the completion of a 250 km (approximately 150 mile) 2D seismic survey in the second year, and even greater amounts of work, including drilling a total of 12 wells, in the subsequent years. The Company’s inability to honor this work commitment may result in the assignment of the Prospect to Liberty pursuant to the terms of the Novation Deed or its reversion back to the South Australian Government.</p>
<table cellpadding="0" style="margin-top: 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif; margin-bottom: 0pt;" cellspacing="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>5.</b></td>
<td><b>Notes Payable</b></td></tr></table>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">Two promissory notes were issued on October 26, 2012 to Liberty upon delivery of the License with aggregate principal amount of $650,000. The terms of the note are:</p>
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<td style="WIDTH: 0.5in">(i)</td>
<td>One note in the original principal amount of $500,000 is due on April 26, 2013.</td></tr></table>
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<td style="TEXT-ALIGN: left; WIDTH: 0.5in">(ii)</td>
<td>The other note in the original principal amount of $150,000 is due on July 26, 2013.</td></tr></table>
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<td style="WIDTH: 0.5in">(iii)</td>
<td>Both notes bear interest at a floating rate equal to the one month term LIBOR rate, plus an additional 3%.</td></tr></table>
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<td style="WIDTH: 0.5in">(iv)</td>
<td>Both notes feature prepayment discounts if the Company pays the notes earlier than required.</td></tr></table>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">On October 4, 2012 a promissory note was issued to Mark Thompson, the Company’s corporate secretary, with aggregate principal amount of $25,000. The loan is due to be paid on or before February 4, 2013 with interest accruing monthly at 6% and is convertible at Mr. Thompson’s option into 300,000 shares of the Company’s common stock. . In connection with the issuance of this convertible note, the Company evaluated the conversion option for derivative treatment under ASC 815-15, <i>“Embedded Derivatives”,</i> and determined the note and the conversion feature did not qualify as derivatives. The Company also evaluated the note for a beneficial conversion feature under ASC 470-20, “Debit with Conversion and Other Options”, and determined a beneficial conversion feature existed. The intrinsic value of the beneficial conversion feature of the convertible note was $11,765 and was recorded as a debt discount. The Company amortized $3,774 of the debt discount as of November 30, 2012. </p>
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<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>6.</b></td>
<td><b>Common stock</b></td></tr></table>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">During the nine months ended November 30, 2012, the Company sold an aggregate 5.99 million common shares from a private placement offering at a price of $0.125 per share for total proceeds of $748,750.</p>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">On September 19, 2012, 147,000 shares were issued as settlement of an accounts payable balance in the amount of $29,400.</p>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">In connection with it agreement with Chrystal (see footnote 2 above), the Company issued 6,472,425 shares of its common stock pursuant to a Restricted Share Award Agreement. Generally, if Chrystal fails to present timely a fund raising transaction that the Company accepts, these shares will be forfeited and returned to the Company. Under certain limited circumstances, Chrystal will be entitled to retain one-half of these shares while forfeiting the other half. As the delivery of these shares is contingent, they are not considered outstanding within the context of these financial statements.</p>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">On October 26, 2012, a total of 55 million shares became due to Keith D. Spickelmier, and his designees upon delivery of the License. In addition, another 12 million shares became due to Liberty Petroleum Corporation also upon delivery of the License, valued at $495,000 and $108,000, respectively.</p>
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<p style="text-align: justify; margin: 0pt 0px; font-size: 10pt; font-family: 'Times New Roman', Times, serif;">In May 2012, the Company amended its articles of incorporation to increase the number of authorized common shares to 500 million and to authorize 10 million preferred shares.</p>
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<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: justify; FONT-WEIGHT: bold">Name of Recipient of Shares</td>
<td nowrap="nowrap" style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold">Position with Company</td>
<td nowrap="nowrap" style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td nowrap="nowrap" style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Number of Shares Received</td>
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<td style="TEXT-ALIGN: justify; WIDTH: 33%">Keith Spickelmier</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: center; WIDTH: 33%">Chairman of the Board</td>
<td style="WIDTH: 1%"> </td>
<td style="width: 1%;"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 30%">30,000,000</td>
<td style="width: 1%;"> </td></tr>
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<td style="TEXT-ALIGN: justify">Keith McKenzie</td>
<td> </td>
<td style="TEXT-ALIGN: center">Director & CEO</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">16,700,000</td>
<td> </td></tr>
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<td style="TEXT-ALIGN: justify">William E. Begley Jr.</td>
<td> </td>
<td style="TEXT-ALIGN: center">Director & CFO</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">7,500,000</td>
<td> </td></tr>
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<td style="TEXT-ALIGN: justify">Mark S. Thompson</td>
<td> </td>
<td style="TEXT-ALIGN: center">Corporate Secretary</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right">800,000</td>
<td> </td></tr></table>
<p> </p>
495000
108000
12000000