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FALCON OIL & GAS LTD. (A Development Stage Company) Interim Consolidated Financial Statements Nine Months Ended September 30, 2007 and 2006 (Presented in U.S. Dollars) NOTICE TO READER The interim consolidated financial statements which follow are prepared by management and are neither audited nor reviewed by the Company’s auditor. 2 FALCON OIL & GAS LTD. (A Development Stage Company) INTERIM CONSOLIDATED BALANCE SHEETS (U.S. Dollars) (Unaudited) ASSETS September 30, 2007 December 31, 2006 Current assets Cash & cash equivalents $ 21,075,336 $ 137,208,050 Restricted cash (Note 2) 7,171,660 5,429,509 Amounts receivable (Note 4 ) 5,449,013 14,058,604 Prepaids & other 1,324,291 1,550,562 Total current assets 35,020,300 158,246,725 Property and equipment, net 1,052,557 749,441 Pipeline 3,586,408 3,282,288 Petroleum and natural gas properties (Note 3) 234,934,259 123,777,478 Other 195,316 327,543 Total Assets $ 274,788,840 $ 286,383,475 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 15,726,972 $ 23,617,673 Property contract payable (Note 3) 1,000,000 - Asset retirement obligation - 66,500 Total current liabilities 16,726,972 23,684,173 Asset retirement obligations (Note 5) 1,993,133 1,692,605 Property contract payable (Note 3) - 1,000,000 Total liabilities 18,720,105 26,376,778 Commitments and contingencies (Note 10) Shareholders' equity (Notes 6 & 7) Share capital 273,870,968 273,068,217 Contributed surplus 14,630,503 12,174,587 Deficit accumulated during development stage (32,432,736) (25,236,107) Total shareholders' equity 256,068,735 260,006,697 Total liabilities and shareholders' equity $ 274,788,840 $ 286,383,475 Subsequent event (Note 11) On behalf of the Board: "David Fisher"___________________, Director "Stephen Schultz"________________, Director The accompanying notes are an integral part of these interim consolidated financial statements. 3 FALCON OIL & GAS LTD. (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (U.S. Dollars) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2007 2006 2007 2006 Petroleum revenue $ 25,561 $ 18,157 $ 162,446 $ 77,388 Direct costs Production costs 70,252 13,469 83,939 28,868 Depreciation, depletion and accretion 9,757 9,261 18,970 28,260 80,009 22,730 102,909 57,128 Costs and expenses Accounting 123,334 60,356 447,154 238,024 Depreciation and amortization 73,256 34,687 199,063 58,372 Consulting 647,527 528,875 1,872,979 1,108,696 Director fees 39,268 34,500 108,268 77,000 Investor relations 561,683 149,519 890,697 826,225 Legal costs 400,664 269,254 1,617,145 734,678 Office and administrative 459,205 522,873 1,585,195 1,221,737 Payroll and related costs 1,018,826 181,389 2,810,895 552,685 Stock based compensation 874,637 1,680,276 2,507,916 7,629,467 Travel and promotion 760,623 490,226 2,081,513 1,389,771 4,959,023 3,951,955 14,120,825 13,836,655 Other (income) expense Interest income (324,171) (1,239,402) (2,179,687) (2,054,062) Abandonment costs 139,344 - 757,811 - Impairment of petroleum and natural gas properties 25,451 - 25,451 - (Gain) on foreign exchange (258,297) (291,864) (5,468,234) (1,852,408) (417,673) (1,531,266) (6,864,659) (3,906,470) Net (loss) for the period (4,595,798) (2,425,262) (7,196,629) (9,909,925) Accumulated deficit, beginning of period (27,836,938) (12,462,418) (25,236,107) (4,977,755) Accumulated deficit, end of period $ (32,432,736) $ (14,887,680) $ (32,432,736) $ (14,887,680) Net loss per common share - basic and diluted $ (0.010) $ (0.006) $ (0.016) $ (0.026) Weighted average number of common shares outstanding – basic and diluted 464,499,463 434,359,976 463,718,485 388,207,451 The accompanying notes are an integral part of these interim consolidated financial statements. 4 FALCON OIL & GAS LTD. (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. Dollars) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2007 2006 2007 2006 Cash flows (provided) used in operating activities Net (loss) $ (4,595,798) $ (2,425,262) $ (7,196,629) $ (9,909,925) Adjustments to reconcile net loss to Net cash (used) in operating activities Stock based compensation 874,637 1,680,276 2,507,916 7,629,467 Depreciation, depletion and amortization 83,013 43,834 218,033 86,518 Property abandonment 139,344 - 757,811 - Property impairment 25,451 - 25,451 - Unrealized foreign exchange (gain) loss (258,297) (142,353) (5,468,234) (1,852,408) Changes in non-cash working capital accounts Amounts receivable 7,146,449 (2,751,204) 8,609,591 (5,035,466) Prepaids and other 370,026 (1,874,522) 340,977 (3,895,222) Accounts payable and accrued expenses (1,534,178) (220,457) (48,669) 710,461 Net cash provided (used) in operating activities 2,250,647 (5,689,688) (253,753) (12,266,575) Cash flows used in investing activities Property and equipment (91,379) (241,404) (484,659) (384,854) Additions to petroleum and natural gas properties (26,894,766) (14,209,641) (119,567,016) (49,085,846) Pipeline additions (165,569) - (304,120) - Net cash used in investing activities (27,151,714) (14,451,045) (120,355,795) (49,470,700) Cash flows from financing activities Proceeds from the sale of common stock - 154,490,508 - 240,766,698 Proceeds from warrant and option exercise - 1,077,540 750,751 5,716,122 Offering costs - (8,576,919) - (15,289,220) Net cash provided by financing activities - 146,991,129 750,751 231,193,600 Effect of exchange rate on cash 258,297 142,353 5,468,234 1,852,408 Net (decrease) increase in cash and cash equivalents (24,642,770) 126,992,749 (114,390,563) 171,308,733 Cash and cash equivalents, beginning of period 52,889,766 61,990,156 142,637,559 17,674,172 Cash and cash equivalents, end of period $ 28,246,996 $ 188,982,905 $ 28,246,996 $ 188,982,905 The accompanying notes are an integral part of these interim consolidated financial statements. 5 FALCON OIL & GAS LTD. (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (U.S. Dollars) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2007 2006 2007 2006 Supplemental schedule of cash flow information Cash paid for interest $ - $ - $ - $ - Cash paid for income taxes $ - $ - $ - $ - Supplemental disclosures of non-cash investing and financing activities Stock options granted $ 874,637 $ 1,680,276 $ 2,507,916 $ 7,629,467 Agent warrants issued $ - $ 1,207,000 $ - $ 2,052,700 Petroleum and natural gas property costs in accounts payable $ 13,711,431 $ 7,774,172 $ 13,711,431 $ 7,774,172 Cash and cash equivalents at September 30, 2007 is comprised of: Cash $ 21,075,336 Restricted cash (Note 2) 7,171,660 $ 28,246,996 The accompanying notes are an integral part of these interim consolidated financial statements. FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 6 NOTE 1 – ORGANIZATION Falcon Oil & Gas Ltd. (“Falcon”) was incorporated under the laws of British Columbia on January 18, 1980 for the purpose of acquiring, exploring, and developing petroleum and natural gas properties. Falcon is considered a development stage company as defined by Canadian Institute of Chartered Accountants Accounting Guideline No. 11. The Company has producing petroleum and natural gas properties in Alberta, Canada and exploration projects in Hungary and Romania. The Company’s exploration projects in Hungary continue to be evaluated, and management believes that the carrying costs of these projects are recoverable. Should the Company be unsuccessful in these exploration activities, the carrying cost of these prospects will be charged to operations. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include Falcon and its directly and indirectly wholly owned subsidiaries: Mako Energy Corporation (Mako), a United States Company, TXM Oil and Gas Exploration Kft., a Hungarian limited liability company doing business as TXM Energy, LLC (“TXM”), TXM Marketing Trading & Service, LLC (“TXM Marketing”) a Hungarian limited liability company, JVX Energy S.R.L. (“JVX”), a Romanian limited liability company, and CH Holdings, Inc., a Maryland corporation (collectively “the Company”). All significant intercompany transactions have been eliminated on consolidation. The unaudited interim consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) for interim financial information using the same accounting policies and methods of application as the audited consolidated financial statements of the Company for the year ended December 31, 2006, and are presented in United States dollars. The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The interim consolidated financial statements have, in management’s opinion, been properly prepared using careful judgment within reasonable limits of materiality. These unaudited interim consolidated financial statements do not include all the information and note disclosures required by Canadian GAAP for annual financial statements and therefore should be read in conjunction with the Company’s most recently reported annual audited consolidated financial statements. CASH EQUIVALENTS For purposes of reporting cash flows, the Company considers as cash equivalents all highly liquid investments with a maturity of three months or less at the time of purchase. Restricted cash at September 30, 2007 and December 31, 2006 includes $ 7,171,660 and $5,429,509, respectively, on deposit as collateral for letters of credit issued by the Company, bank guarantees and reclamation deposits. TRANSLATION OF FOREIGN CURRENCIES The Company’s foreign operations, conducted through its subsidiaries, are of an integrated nature and, accordingly, the temporal method of foreign currency translation is used for conversion of foreign-denominated amounts into U.S. dollars. Monetary assets and liabilities are translated into U.S. dollars at the rates prevailing on the balance sheet date. Other assets and liabilities are translated into U.S. dollars at the rates prevailing on the transaction dates. Revenues and expenses arising from foreign currency transactions are translated into U.S. dollars at the average rate for the year. Exchange gains and losses are recorded as income or expense in the year in which they occur. FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 7 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) COMPARATIVE FIGURES Certain comparative figures have been reclassified, where applicable, to conform to the current period’s presentation. Such reclassifications had no effect on the Company’s net loss in any of the periods presented. NEW ACCOUNTING STANDARDS Effective on January 1, 2008, the Company will be required to adopt the following new accounting standards issued by the Accounting Standards Board (“AcSB”) of the Canadian Institute of Chartered Accountants. Section 3862 “Financial instruments – Disclosures” replaces the disclosure requirements of Section 3861 “Financial instruments – Presentation and disclosure”. Section 3862 will require additional disclosure of the risks associated with financial instruments and of how those risks are managed. Section 1535 “Capital disclosures” will require disclosure of information to enable users of the financial statements to evaluate the Company’s objectives, policies and processes for managing capital. Section 3031 “Inventories” requires inventory to be carried at the lower of cost and net realizable value using, in certain cases, the specific identification method or either of the first-in, first-out or average cost methods. Write downs to net realizable value may be reversed, to the extent of the original write down, if there is clear evidence of an increase in value due to a change in circumstances. Also, the AcSB has adopted a strategic plan under which Canadian accounting standards for publicly-listed companies will converge with International Financial Reporting Standards (“IFRS”) by the end of 2011. The Company understands there to be material differences between Canadian GAAP and IFRS, and is therefore monitoring this project with a view to understanding the possible future effects of the transition to IFRS. FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 8 NOTE 3 – PETROLEUM AND NATURAL GAS PROPERTIES Interests in petroleum and natural gas proven and unproven properties include the following acquisition, exploration and development costs: Hungary Canada Romania Total Balance, December 31, 2006 $ 123,722,417 $ 55,061 $ - $ 123,777,478 Acquisition costs - - - - Exploration costs 110,819,626 - 824,311 111,643,937 Development costs - 81,046 - 81,046 Asset retirement obligation 299,787 - - 299,787 Impairment loss - (25,451) (824,311) (849,762) Depletion and depreciation expense - (18,227) - (18,227) Balance, September 30, 2007 $ 234,841,830 $ 92,429 $ - $ 234,934,259 Balance, January 1, 2006 $ 25,328,798 $ 53,359 $ 975,586 $ 26,357,743 Acquisition costs - - - - Exploration costs 97,821,528 - 622,347 98,443,875 Development costs - 32,858 - 32,858 Asset retirement obligation 572,091 (1,359) (36,067) 534,665 Impairment loss - - (1,561,866) (1,561,866) Depletion and depreciation expense - (29,797) - (29,797) Balance, December 31, 2006 $ 123,722,417 $ 55,061 $ - $ 123,777,478 The Company’s Canadian properties are all proven and are subject to a ceiling test; the Company’s properties in Hungary are unproven. HUNGARY The Company holds two petroleum and natural gas exploration licenses – the Tisza License and the Mako License (collectively, the “Licenses”) –The Licenses relate to properties located in south central Hungary near the town of Szolnok. The licenses were obtained from an unrelated entity, Prospect Resources, Inc. (“Prospect”). The Company originally had the exclusive right to explore for petroleum and natural gas until December 2005 under both the Tisza and Mako Licenses, and in December 2005, the Company received a two year extension on the Licenses through December 2007. All revenues from oil and gas sales are subject to a royalty to the Hungarian government in the amount of 12% and a overriding royalty to Prospect in the amount of 5%. Prospect will also be paid a “success bonus” of 20% of gross revenue from the first well drilled under the Tisza License up to $1,000,000. Upon extension of the Mako License, Prospect earned a one-time bonus of $1,000,000, due January 31, 2008. On May 21, 2007, the Company received final written approval from the Hungarian Mining Authority for a long-term production license (known as a “Mining Plot” under Hungarian law) covering all oil and gas in the identified Basin Centered Gas Accumulation (“BCGA”) resource underlying Falcon's two exploration licenses. The Mining Plot remains in effect as long as the Company continues petroleum and natural gas operations, and continues to comply with all applicable laws and regulations. FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 9 NOTE 3 – PETROLEUM AND NATURAL GAS PROPERTIES (CONTINUED) ROMANIA The Company entered into a farmout agreement (the “Farmout Agreement”) in June 2005 with a related entity, on a coalbed methane property in the Jiu Valley of Romania, under which it may earn a 75% interest in the property. Under the terms of the Farmout Agreement, the Company will initially pay 100% of the costs to drill two coalbed methane earning wells to earn a 75% working interest in the Jiu Valley property, with the right to opt out of the second well upon payment of a penalty. As of September 30, 2007, JVX had plugged and abandoned the first exploratory well. Accordingly, 100% of the costs incurred on the initial well, the Lupeni Sud-1, have been charged to operations as of September 30, 2007. CANADA The Company has working interests ranging from 12.76% to 25% in four producing petroleum and natural gas wells in Alberta, Canada (collectively, the “Hackett Wells”). During the nine months ended September 30, 2007, the Company has recorded depletion expense of $18,115 (2006-$26,724), and depreciation of the related asset retirement obligation of $113 (2006-$1,537). In the September 2007 quarter, the Company recorded an impairment of $25,451 on its Canadian petroleum and natural gas properties, as the carrying value of the Company’s Canadian properties exceeded the ceiling test under the full cost method of accounting. NOTE 4 – AMOUNTS RECEIVABLE Amounts receivable at September 30, 2007 and December 31, 2006 is comprised of the following: 2007 2006 Value added tax (VAT) – Hungary $4,328,998 $13,681,408 GST – Canada 132,472 108,106 Petroleum and natural gas revenue 52,909 7,741 Due from related party (Note 8) 498,401 105,893 Other 436,233 155,456 $5,449,013 $14,058,604 NOTE 5 – ASSET RETIREMENT OBLIGATIONS At September 30, 2007 the estimated total undiscounted amount required to settle the asset retirement obligations was $9,223,000. Costs for asset retirement have been calculated assuming a 3.0% inflation rate. These obligations will be settled based on the estimated useful lives of the underlying assets, which extend up to 20 years into the future. This amount has been discounted using a credit-adjusted risk-free interest rate of 8%. Changes to asset retirement obligations for the nine months ended September 30, 2007 and the year ended December 31, 2006 were as follows: 2007 2006 Asset retirement obligations – beginning of period $1,759,105 $1,156,253 Obligations associated with development program 299,787 992,962 Revisions to estimates - (391,793) Liabilities settled during the year (66,500) - Accretion 741 1,683 Asset retirement obligations – end of period $1,993,133 $1,759,105 FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 10 NOTE 6 – SHARE CAPITAL AUTHORIZED The Company has authorized an unlimited number of common shares, without par value. ISSUED September 30, 2007 December 31, 2006 Shares Amount Contributed Surplus Shares Amount Contributed Surplus Balance, beginning of period 462,580,763 $273,068,217 $12,174,587 314,121,063 $40,463,660 $2,520,531 Issued during the period For cash Sale of common shares - - - 126,450,000 240,766,698 - Exercise of warrants 1,268,400 567,595 - 14,259,700 4,450,700 - Exercise of options 650,000 183,156 - 7,750,000 2,094,754 Offering costs - - - - (17,389,742) - Fair value of agents warrants - - - - 2,052,700 - Stock based compensation of options - - 2,507,916 - - 10,283,503 Contributed surplus reclassified On exercise of options - 52,000 (52,000) - 629,447 (629,447) Balance, end of period 464,499,163 $273,870,968 $14,630,503 462,580,763 $273,068,217 $12,174,587 Under the requirements of the TSX Venture Exchange (the “TSX-V”), 42,000,000 common shares were being held in escrow as September 30, 2007, and are being released over a one year period, with the release of the final common shares from escrow occurring on April 12, 2008. WARRANTS A summary of the number of common shares reserved pursuant to the Company’s outstanding share purchase warrants as at September 30, 2007 and December 31, 2006 and the changes for those periods is as follows: 2007 2006 Balance, beginning of period 3,786,550 14,500,000 Compensation warrants - - Placement agent warrants - 3,546,250 Warrants exercised (1,268,400) (14,259,700) Balance, end of period 2,518,150 3,786,550 Common shares reserved for share purchase warrants outstanding at September 30, 2007, are as follows: Number of Shares Exercise Price Expiry Date 1,281,900 $1.12 (CDN$1.30) March 14, 2008 1,236,250 $3.12 (CDN$3.50) August 10, 2008 2,518,150 FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 11 NOTE 7 – SHARE BASED COMPENSATION The Company, in accordance with the policies of the TSX-V, may grant options to directors, officers, employees and consultants, to acquire up to 10% of the Company’s issued and outstanding common stock. The exercise price of each option is based on the market price of the Company’s stock at the date of grant less a discount in accordance with TSX-V policies. The options can be granted for a maximum term of five years. The Company records compensation expense over the vesting period based on the fair value of options granted. These amounts are recorded as contributed surplus. Any consideration paid by employees, directors or consultants on the exercise of these options is recorded as share capital together with the related contributed surplus associated with the exercised options. A summary of the status of the Company's stock option plan as of September 30, 2007 and December 31, 2006, and changes during the periods ending on those dates is presented below: 2007 2006 Options Weighted- Average Exercise Price Options Weighted-Average Exercise Price Outstanding at beginning of period 37,840,000 $1.91 27,100,000 $0.27 Options granted 600,000 $0.54 18,490,000 3.62 Options exercised (650,000) $0.25 (7,750,000) 0.25 Options cancelled - - - 0.00 Outstanding at end of period 37,790,000 $1.92 37,840,000 $1.91 Options exercisable at end of period 25,059,400 $1.15 23,048,000 $0.82 The following summarizes information about stock options outstanding and exercisable at September 30, 2007: Options Outstanding Options Exercisable Exercise price Weighted average remaining contractual life Expiry date 16,200,000 16,200,000 $0.25 2.51 years April 2, 2010 2,500,000 2,500,000 0.50 3.06 years October 10, 2010 12,707,000 5,082,800 3.98 3.60 years May 7, 2011 5,783,000 1,156,600 2.83 4.19 years December 9, 2011 600,000 120,000 0.54 4.88 years August 17, 2012 37,790,000 25,059,400 At September 30, 2007, the weighted average remaining contractual life of stock options outstanding is 3.21 years. The weighted average fair value of the options granted during 2007 is $0.29 (2006 - $1.92). The Company measures compensation costs using the fair value-based method for employee and non-employee stock options. Compensation costs have been determined based on the fair value of the options at the grant date, for employees, and at the balance sheet for non-employees using the Black-Scholes option-pricing model. The following assumptions were used at September 30, 2007 in respect of non-employee stock options: expected term- 1.6 to 3.46 years; risk free interest rate – 4.0% to 4.5%; expected volatility-67.9% to 70.5%; and dividend yield – 0. FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 12 NOTE 7 – SHARE BASED COMPENSATION (CONTINUED) Stock based compensation expense for the nine months ended September 30, 2007 of $2,507,916 (2006- $7,629,467) was recorded in the statement of operations. Option-pricing models require the use of estimates and assumptions including the expected volatility of the Company’s share price, the expected life of the option and the risk free interest rate. Changes in the underlying assumptions can materially affect the fair value estimates. NOTE 8 – RELATED PARTY TRANSACTIONS Unless otherwise stated, transactions between related parties are measured at the exchange amount, being the amount of consideration agreed to between the parties. During the nine months ended September 30, 2007, the Company incurred $135,000 (2006-$135,000) to a current director of the Company for advisory and consulting services rendered to TXM; and paid nil (2006-$41,341) in consulting fees to a former director of the Company. In June 2006, the Company entered into an Office Sharing Agreement with PetroHunter Energy Corporation (“PetroHunter”) for office space in Denver, Colorado, of which the Company is the lessee. Under the terms of the agreement, PetroHunter and the Company share, on an equivalent employee basis, all costs related to the office space, including rent, office operating costs, furniture and equipment and any other expenses related to the operations of the corporate offices. Certain employees of PetroHunter have provided services to the Company, and PetroHunter has invoiced the Company for these services at cost. The largest single shareholder of PetroHunter is also the President and CEO of the Company. At September 30, 2007, PetroHunter owed the Company $498,401 (2006-$89,592 Due to PetroHunter) for its share of net costs incurred. In August 2007, the Company granted options to purchase 600,000 shares of the Company’s common stock, at an exercise price of $0.54 ($0.58 CDN) per share to a consultant to the Company, who was subsequently elected to the Board of Directors. NOTE 9 – SEGMENT INFORMATION All of the Company’s operations are in the petroleum and natural gas industry with its principal business activity being in the acquisition and development of petroleum and natural gas properties. The Company has producing petroleum and natural gas properties located in Canada and considers the results from its operations to relate to the petroleum and natural gas properties. The Company has unevaluated petroleum and natural gas properties in Hungary and Romania. An analysis of the Company’s geographic areas at September 30, 2007 and 2006 is as follows: 2007 Canada Hungary Romania Total Revenue for the period $ 52,952 $ 109,494 $ - $ 162,446 Loss (income) for the period (3,021,048) 9,459,866 757,811 7,196,629 Capital assets 545,605 239,027,619 - 239,573,224 2006 Revenue for the period $ 77,388 $ - $ - $ 77,388 Loss for the period 7,358,056 2,551,869 - 9,909,925 Capital assets 366,044 78,473,694 1,089,686 79,929,424 FALCON OIL & GAS LTD. (A Development Stage Company) NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (UNAUDITED) 13 NOTE 10 – COMMITMENTS AND CONTINGENCIES (a) ENVIRONMENTAL Petroleum and natural gas producing activities are subject to extensive environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefit are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated. (b) CONTINGENCIES The Company may from time to time be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination, or breach of contract incidental to the operations of its business. The Company is not currently involved in any such incidental litigation which it believes could have a materially adverse effect on its financial condition or results of operations. (c) DRILLING CONTRACTS In June 2005, the Company entered into drilling contracts with CROSCO Integrated Drilling and Well Services Company, Ltd. (CROSCO) for two drilling rigs on its Hungarian properties. The Company has issued two letters of credit in the amount of $800,000 and $2,340,000 to secure the contracts. NOTE 11 - SUBSEQUENT EVENT As of November 22, 2007, the Company had arranged for an equity financing pursuant to a (preliminary) short form prospectus dated November 21, 2007 (the “Proposed Offering”). Under the terms of the financing, a syndicate of underwriters (the “Underwriters”) agreed to purchase an aggregate of 100,000,000 common shares at a price of CDN$0.40 per share (the “Offering Price”) for aggregate gross proceeds of CDN$40,000,000. Additionally, the Underwriters were granted an over-allotment option (the “Over-Allotment Option”) to purchase up to an additional 15,000,000 common shares exercisable up to 30 days following the closing of the Proposed Offering (the “Closing Date”). The underwriters will receive a cash commission of 6% of the gross proceeds (CDN$2,400,000) and warrants to purchase, at the Offering Price, 6% of the number of common shares sold pursuant to the Proposed Offering for a period of 24 months from the Closing Date, including those issued pursuant to the over-Allotment Option. Closing is expected to occur on or about December 11, 2007, and is subject to certain conditions, including but not limited to, receipt of all necessary securities regulatory approvals, including the approval of the TSX Venture Exchange.
aus der Diskussion:	FALCON - ALLE DATEN, ALLE FAKTEN
Autor (Datum des Eintrages):	oesitrader  (30.11.07 16:36:59)
Beitrag:	41 von 47 (ID:32629437)
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