RE: 2ND QTR.
e) Shares for services agreements
Effective March 1, 2012, the Company entered into management agreements with two of its senior executives or companies for their services in performing the functions of President and Chief Executive Officer and Executive Chairman, respectively. For these services, each is entitled is entitled to compensation comprised of, among other things, such number of common shares (collectively, the "Shares for Services") of the Company equal to $1,000,000 divided by the Discounted Market Price (as such term is defined in the TSX Venture Exchange Corporate Finance Manual) on the date after certain company milestones have been reached and services have been provided. The issuance of the Shares for Services is subject to approval by the TSX Venture Exchange, who has further required that the shares be approved by the shareholders.
The milestone for the granting of the Shares for Services was achieved on May 31, 2102 with the successful drilling of the Flami-1 well. However, as the requisite shareholder approval has not been obtained, the individuals have agreed to defer their rights under their respective management agreements until a later date when shareholder approval can be obtained.