Exhibit 18.0

2015 FORM - 20F EXHIBIT - 18.0

AUDITED CONSOLIDATED FINANCIAL S TATEMENTS

CONTINENTAL ENERGY CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

30 JUNE 2015

Expressed in U.S. Dollars





INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Continental Energy Corporation

We have audited the accompanying consolidated financial statements of Continental Energy Corporation, which comprise the consolidated statements of financial position as at June 30, 2014 and 2013, and the consolidated statements of comprehensive loss, changes in equity (deficiency) and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation 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 Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Continental Energy Corporation as at June 30, 2014 and 2013, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which describes certain conditions that indicate the existence of a material uncertainty that cast significant doubt about Continental Energy Corporation’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from this uncertainty.

DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS

Vancouver, Canada
October 22, 2014







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of
Continental Energy Corporation

We have audited the accompanying consolidated financial statements of Continental Energy Corporation, which comprise the consolidated statement of financial position as of June 30, 2015, and the related consolidated statements of loss and comprehensive loss, changes in equity (deficiency), and cash flows for the year ended June 30, 2015, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and 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 auditors’ 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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 in our audits is sufficient and appropriate to provide a basis for our audit opinion.






Opinion

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Continental Energy Corporation as at June 30, 2015, and its financial performance and its cash flows for the year ended June 30, 2015, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicate that Continental Energy Corporation has suffered recurring losses from operations and has a net capital deficiency. These matters, along with the other matters set forth in Note 1, indicate the existence of material uncertainties that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Other Matters

The consolidated financial statements of Continental Energy Corporation as at June 30, 2014, and the financial performance and cash flows for the year ended June 30, 2014, were audited by another auditor who expressed an unmodified opinion on those statements on October 22, 2014.

“DAVIDSON & COMPANY LLP”

Vancouver, Canada Chartered Professional Accountants

May 24, 2017





CONTINENTAL ENERGY CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

30 JUNE 2015

Expressed in U.S. Dollars





Continental Energy Corporation
Consolidated Financial Statements
(Expressed in US Dollars)

STATEMENTS OF FINANCIAL POSITION

ASSETS Note 30 June 2015   30 June 2014  
Current   $   $  

Cash

  4,015   242,436  

Receivables

  731   7,065  

Prepaid expenses and deposits

  12,636   24,557  

Assets held for sale

9 -   565,596  
    17,382   839,654  
Non-current assets          

Property, plant and equipment

  2,922   5,845  
    20,304   845,499  
LIABILITIES          
Current          

Accounts payable and accrued liabilities

12 434,244   398,262  

Loans

11 -   750,000  

Convertible debt

10 419,890   374,890  

Liabilities associated with assets held for sale

9 -   10,296  
    854,134   1,533,448  
DEFICIENCY          
Share capital 11 16,201,630   16,131,630  
Conversion rights reserve 10 92,966   56,966  
Share based payment and other reserve   9,901,487   9,401,487  
Foreign currency translation reserve   -   (120 )
Deficit   (27,029,913 ) (26,073,495 )
Deficiency attributable to:          

Shareholders

  (833,830 ) (483,532 )

Non-controlling interests

  -   (204,417 )
    (833,830 ) (687,949 )
    20,304   845,499  

Nature of Operations and Going Concern (Note 1)
Subsequent Events (Note 16)

ON BEHALF OF THE BOARD:

“Richard L. McAdoo”, Director & CEO

“Robert V. Rudman”, Director & CFO

- See Accompanying Notes -





Continental Energy Corporation
Consolidated Financial Statements
(Expressed in US Dollars)

STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

    Year Ended   Year Ended  
  Note 30 June 2015   30 June 2014  
EXPENSES   $   $  

Depreciation

  2,923   4,777  

Interest and bank charges

10 84,551   135,354  

Management and consulting fees

12 336,889   282,497  

Office and investor relations

  122,321   80,579  

Professional fees

  104,918   67,266  

Rent, maintenance and utilities

  21,216   20,188  

Share-based payments

11 100,000   20,877  

Travel and accommodation

  26,561   18,975  
    (799,379 ) (630,513 )
Other income (expenses)          

Interest and foreign exchange

  2,798   2,996  

Loss on disposal of subsidiary

9 (159,837 ) -  
Loss for the year from continuing operations   (956,418 ) (627,517 )
Loss for the year from discontinued operations 9 -   (311,972 )
Net loss for the year   (956,418 ) (939,489 )
Net loss attributable to:          

Shareholders of the Company

  (956,418 ) (786,623 )

Non-controlling interests

  -   (152,866 )
           
COMPREHENSIVE LOSS FOR THE YEAR          
Net loss for the year   (956,418 ) (939,489 )
Other Comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:          

Exchange differences on translation of foreign operations

  37,900   (236 )

Recycle of translation differences on disposal of subsidiary

9 (19,209 ) -  
Comprehensive loss for the year   (937,727 ) (939,725 )
Comprehensive loss attributable to:          

Shareholders of the Company

  (956,298 ) (786,743 )

Non-controlling interests

  18,571   (152,982 )
Loss Per Share – Basic and Diluted   (0.01 ) (0.01 )
Weighted Average Number of Shares   128,601,682   123,488,258  

- See Accompanying Notes -

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Continental Energy Corporation
Consolidated Financial Statements
(Expressed in US Dollars)

STATEMENTS OF CASH FLOW

    Year Ended   Year Ended  
Cash Resources Provided By (Used In) Note 30 June 2015   30 June 2014  
Operating Activities   $   $  

Loss for the year

  (956,418 ) (939,489 )

Items not affecting cash

         

Depreciation

  2,923   4,777  

Interest on convertible debt

10 81,000   127,532  

Interest on related party loan

  -   1,376  

Equity loss from investment in affiliates

9 -   303,165  

Loss on disposal of subsidiary

9 159,837   -  

Share-based payments

11 100,000   20,877  

Changes in non-cash working capital

         

Receivables

  6,334   (4,732 )

Prepaid expenses and deposits

  11,921   (24,040 )

Accounts payable and accrued liabilities

  35,982   (22,479 )
    (558,421 ) (533,013 )
Investing Activities          

Purchase of equipment

  -   (1,219 )

Consideration received upon disposal of subsidiary

9 200,000   -  
    200,000   (1,219 )
Financing Activities          

Shares issued – cash

11 120,000   40,000  

Proceeds from loans

  -   850,000  

Repayment of loans

  -   (100,000 )

Repayment of related party loan

  -   (26,599 )

Interest paid

  -   (1,884 )
    120,000   761,517  
           
Change in cash   (238,421 ) 227,285  
Cash classified as held for sale   -   (6,528 )
Effect of exchange rate changes on cash   -   (320 )
Cash Position – Beginning of Year   242,436   21,999  
Cash Position – End of Year   4,015   242,436  

Supplemental cash flow information (Note 14)

- See Accompanying Notes -

4





Continental Energy Corporation
Consolidated Financial Statements
(Expressed in US Dollars)

STATEMENTS OF CHANGES IN EQUITY (DEFICIENCY )

            Share Based   Foreign              
            Payment and Conversion Currency       Non-      
            Other Rights Translation       controlling      
    Share Capital   Reserve Reserve Reserve   Deficit   Interest   Total  
  Note Number   Amount $   $ $ $   $   $   $  
Balance on 30 June 2013   122,815,381   16,100,792   9,353,635 10,966 -   (25,286,872 ) (51,435 ) 127,086  

Private placements – cash

11 800,000   30,838   9,162 - -   -   -   40,000  

Convertible debt amendments

10 -   -   17,813 46,000 -   -   -   63,813  

Share-based payments

11 -   -   20,877 - -   -   -   20,877  

Foreign currency translation

  -   -   - - (120 ) -   (116 ) (236 )

Loss for the period

  -   -   - - -   (786,623 ) (152,866 ) (939,489 )
Balance on 30 June 2014   123,615,381   16,131,630   9,401,487 56,966 (120 ) (26,073,495 ) (204,417 ) (687,949 )
                               

Private placements – cash

11 2,400,000   120,000   - - -   -   -   120,000  

Conversion of loan

11 15,000,000   750,000   - - -   -   -   750,000  

Convertible debt amendments

10 -   -   - 36,000 -   -   -   36,000  

Shares issued for services

11 2,000,000   100,000   - - -   -   -   100,000  

Foreign currency translation

  -   -   - - 19,329   -   18,571   37,900  

Disposal of subsidiary

9 (20,000,000 ) (900,000 ) 500,000 - (19,209 ) -   185,846   (233,363 )

Loss for the year

  -   -   - - -   (956,418 ) -   (956,418 )
Balance on 30 June 2015   123,015,381   16,201,630   9,901,487 92,966 -   (27,029,913 ) -   (833,830 )

- See Accompanying Notes -

5





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

 

1. Nature of Operations and Going Concern

Continental Energy Corporation (“Continental” or the “Company”) is incorporated under the laws of the Province of British Columbia, Canada. The Company’s registered address and records office is 900-885 West Georgia Street, Vancouver, British Columbia, Canada V6C 3H1.

The Company has historically been engaged in the assembly of a portfolio of oil and gas exploration properties but has begun diversifying its business into a broader range upstream and downstream oil and gas activities. These include new small-scale, distributed oil refineries and gas-turbine power plant developments fully integrated with smaller and stranded oil and gas production in underserved local markets.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred operating losses over the past several fiscal years and has no current source of operating cash flows. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to acquire and develop its projects as well as fund ongoing administration expenses. There are no assurances that sufficient funding will be available.

Management intends to obtain additional funding by issuing common shares in private placements. There can be no assurance that management’s future financing actions will be successful. Management is not able to assess the likelihood or timing of improvements in the equity markets for raising capital for future acquisitions or expenditures.

These uncertainties indicate the existence of material uncertainty that cast significant doubt on the Company’s ability to continue as a going concern in the future. If the going concern assumption were not appropriate for these consolidated financial statements, liquidation accounting would apply and adjustments would be necessary to the carrying values and classification of assets, liabilities, the reported income and expenses, and such adjustments could be material.

2. Basis of Preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). The policies presented in Note 3 were consistently applied to all periods presented.

The Company’s Board of Directors, upon the recommendation of its Audit Committee, has approved these consolidated financial statements on 24 May 2017.

These consolidated financial statements have been prepared on a historical cost basis and presented in United States (“US”) dollars, the functional currency of the Company, except when otherwise indicated.

3. Summary of Significant Accounting Policies

Basis of Consolidation

Control is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has:

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

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Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of loss and comprehensive loss from the date the Company gains control until the date the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the shareholders of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of the subsidiary to bring its accounting policies into line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between the Company and its subsidiary are eliminated in full on consolidation.

The Company disposed of the operations of Visionaire Energy AS (“Visionaire Energy”) during the current fiscal year (Note 9). Visionaire Energy’s operations have been included in these consolidated financial statements for fiscal year ended 30 June 2014. As at 30 June 2015, the Company had no subsidiaries.

Non-current Assets Held for Sale and Discontinued Operations

The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Such non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and their fair value less cost to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs and income tax expense.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or the disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the sale will be withdrawn. Management must be committed to the sale expected within one year from the date of the classification.

Equipment is not depreciated once classified as held for sale. Equity accounting or the accounting for joint operations cease from the date held for sale criteria are met.

Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.

Foreign Currencies

The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency of the Company is the U.S. dollar. Visionaire Energy’s, the Company’s subsidiary disposed of during the year (Note 9) is the Norwegian Krone. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, the Effects of Changes in Foreign Exchange Rates (“IAS 21”).

Any transactions in currencies other than the functional currency have been translated to the U.S. dollar in accordance with IAS 21. Transactions in currencies other than the functional currency are recorded at that rates of exchange prevailing on dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the date when the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

The Company’s presentation currency is the U.S. dollar.

Assets and liabilities of the Company’s subsidiary, having a functional currency other than the U.S. dollar, are translated at the period end rates of exchange, and the results of its operations are translated at average rates of exchange for the period. The resulting changes are recognized in accumulated OCI within equity as foreign currency translation adjustment.

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Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Loss per Share

Basic loss per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method. In the years when the Company reports a loss, the effect would be anti-dilutive, and therefore, basic and diluted loss per share are the same.

Share Based Payments

The Company grants stock options to buy common shares of the Company to directors, officers, employees and service providers. The board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options were granted. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.

The fair value of the share purchase options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the share purchase options were granted. At each statement of financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share purchase options that are expected to vest.

Valuation of Warrants

The Company values warrants issued as part of a private placement unit by allocating the proceeds from the issuance of units between common shares and common share purchase warrants on a pro-rata basis based on relative fair values as follows:

The fair value attributed to the warrants is recorded in the share based payment reserve.

Property, Plant and Equipment

Equipment is carried at cost less accumulated depreciation. Depreciation is charged so as to write-off the cost of these assets, less residual value, over their estimated useful economic lives on 50% declining balance basis, for automobiles, office furniture, computers and other equipment including software.

Financial Instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Financial assets:

Financial assets are classified into one of the following categories:

The classification is determined at initial recognition and depends on the nature and purpose of the financial asset.

  (i)     

FVTPL financial assets

8





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Financial instruments are classified as FVTPL when the financial instrument is held for trading or is designated as FVTPL.

A financial instrument is classified as held for trading if:

Financial instruments classified as FVTPL are stated at fair value with any resultant gain or loss recognized in profit or loss.

The Company has no financial assets classified as FVTPL.

  (ii) AFS financial assets

Instruments held by the Company that are classified as AFS are stated at fair value. Gains and losses arising from changes in fair value are recognized directly in equity in the investments revaluation reserve. When an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the investments revaluation reserve is included in profit or loss for the period.

The fair value of AFS monetary assets denominated in a foreign currency is translated at the spot rate on the statement of financial position date. The change in fair value attributable to translation differences due to a change in amortized cost of the asset is recognized in profit or loss, while all other changes are recognized in equity.

The Company has no financial assets classified as AFS.

  (iii) HTM financial assets

Investments are recognized on a trade-date basis and are initially measured at fair value, including transaction costs. After initial recognition, the Company carries the assets at amortized costs less impairment. The Company assesses its intention and ability to hold its held-to-maturity investments to maturity not only when those financial assets are initially recognized, but also at the end of each subsequent reporting period. The Company has no HTM financial assets.

  (iv) Loans and receivable

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Loans and receivables are initially recognized at the transaction value and subsequently carried at amortized cost less impairment losses. The impairment loss of receivables is based on a review of all outstanding amounts at year end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

The Company has classified receivables and cash as loans and receivables.

  (v) Effective interest method

The effective interest method calculates the amortized cost of a financial asset and allocates interest income over the corresponding period. The effective interest rate is the rate that discounts estimated future cash receipts over the expected life of the financial instrument, or, where appropriate, a shorter period.

  (vi) Derecognition of financial assets

A financial instrument is derecognized when:

9





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Financial liabilities:

Financial liabilities are classified into one of the following categories:

The classification is determined at initial recognition and depends on the nature and purpose of the financial liability.

  (i) FVTPL financial liabilities

This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried on the statement of financial position at fair value with changes in fair value recognized in the statements of comprehensive loss.

  (ii) Other financial liabilities

These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expenses over the corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments over the expected life of the financial liability, or, where appropriate, a shorter period.

The Company has classified accounts payable, accrued liabilities, loans, convertible debt and liabilities associated with assets held for sale as other financial liabilities.

  (iii) Derecognition of financial liabilities

Financial liabilities are derecognized when the Company’s obligations are discharged, cancelled or they expire.

Impairment

Financial assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. If such evidence exists, the Company recognizes an impairment loss as follows:

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized. Impairment losses on available-for-sale equity instruments are not reversed.

Non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its long lived assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.

10





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of comprehensive loss.

Where an impairment loss subsequently reverses for assets with a finite useful life, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior periods. A reversal of an impairment loss is recognized in the statement of comprehensive loss

Compound Financial Instruments

Compound financial instruments issued by the Company comprise convertible promissory notes that can be converted into fixed number of common shares of the Company. The liability component of the compound financial instrument is recognized initially at the fair value of a similar liability that does not have any equity conversion option. The equity component is recognized as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Should a compound financial instrument have more than one equity component, transaction costs are allocated to the equity components in proportion to their respective fair values.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Income Taxes

Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in the statements of comprehensive loss.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred taxes are recorded using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it provides a valuation allowance against the excess.

The following temporary differences do not result in deferred tax assets or liabilities:

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset when they relate to income taxes levied by the same taxation authority.

4. Significant Accounting Estimates and Judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, profit and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying

11





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if it affects both current and future periods.

Critical Accounting Estimates:

Significant estimates relate to, but are not limited to

Share based compensation

The Company provides compensation benefits to its employees, directors and officers through a stock option plan. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate option exercises and forfeiture rates within the valuation model. The risk-free interest rate for the expected term of the option is based on the yields of government bonds.

When the Company determines it necessary to modify the terms of the options, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original option.

Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.

Warrant valuation

The Company grants warrants in conjunction with private placements and as compensation for debt financing arrangements. The fair value of each warrant granted is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate the timing of warrant exercises within the valuation model. The risk-free interest rate for the expected term of the warrant is based on the yields of government bonds. When the Company determines it necessary to modify the terms of a warrants, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original warrant if the warrants were originally issued as compensation.

Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.

Critical Judgments:

Assets held for sale and discontinued operations

Pursuant to the sales and purchase agreement dated 15 September 2014, the Company reached an agreement with Visionaire Invest AS, the owner of 49% of Visionaire Energy, to sell the Company's 51% interest in Visionaire Energy to Visionaire Invest AS (Note 9).

The Company considered that Visionaire Energy met the criteria to be classified as held for sale on 30 June 2014 for the following reasons:

Visionaire Energy also met the criteria for discontinued operations as Visionaire Energy's activity represents the sole business operations for the Company in Norway.

Recovery of deferred taxes

12





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require management to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. The Company has not recognized any deferred tax assets on the statement of financial position as at 30 June 2015.

5. New and Amended Standards and Interpretations

The Company has adopted the following new standards, along with any consequential amendments, effective 1 July 2014. These changes are made in accordance with the applicable transitional provisions. Certain other new standards and interpretations were applied for the first time in fiscal 2015 but are not discussed as they were not relevant to the Company.

IFRIC 21 Levies

IFRIC 21, Levies, sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of a levy. The Company is not currently subjected to significant levies and therefore the adoption of the interpretation did not have any impact on the Company’s consolidated financial statements.

6. Standards Issued but Not Yet Effective

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC, that are mandatory for accounting periods on after July 1, 2015. Many are not applicable or do not have a significant impact on the Company and have been excluded from the summary below.

The Company is currently assessing the impact of the following standards, which have not yet been adopted.

IFRS 9 Financial Instruments

This standard and its consequential amendments will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted.

IFRS 2, Share Based Payments:

The IASB issued amendments to IFRS 2 Share-Based Payments that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018, with early application permitted.

IFRS 16, Leases

This standard and its consequential amendments will replace IAS 17 – Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-

13





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. IFRS 16 is effective for annual periods beginning on or after January 1, 2019.

7. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business development and to maintain a flexible capital structure for its projects for the benefits of its stakeholders. The Company’s principal source of funds is from the issuance of common shares.

In the management of capital, the Company includes the components of shareholders’ equity (deficiency) as well as cash and receivables.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture property arrangements, acquire or dispose of assets, or adjust the amount of cash and short-term investments.

The Company’s investment policy is to invest any excess cash in highly liquid short-term interest-bearing investments selected with regard to the expected timing of expenditures from continuing operations.

The Company is not subject to any externally imposed capital requirements and there was no change in the Company’s capital management during the year ended 30 June 2015.

8. Financial Risk Management

The Company’s financial instruments are exposed to certain financial risks. The risk exposures and the impact on the Company’s financial instruments are summarized below.

Currency risk

The Company is primarily exposed to currency fluctuations relative to the U.S. dollar through expenditures that are denominated in foreign currencies. Also, the Company is exposed to the impact of currency fluctuations on its foreign currency monetary assets and liabilities.

The Company is exposed to foreign currency risk through the following financial assets and liabilities denominated in currencies other than U.S. dollars:

      Accounts  
      payable and  
      accrued  
  Cash Receivables liabilities  
30 June 2015 $ $ $  
Canadian dollars 23 912 (73,999 )
Indonesian Rupiah 13,563,611 - (32,305,867 )
         
      Accounts  
      payable and  
      accrued  
  Cash Receivables liabilities  
30 June 2014 $ $ $  
Canadian dollars 69 7,542 (100,304 )
Indonesian Rupiah 11,791,555 - (50,111,786 )

At 30 June 2015, with other variables unchanged, a 10% change in exchange rates would affect the loss by $5,998 (2014 -$9,004).

14





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Credit risk

Credit risk is the risk of loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s cash is held by reputable financial institutions. Receivables consist of goods and services taxes due from the Federal Government of Canada. Management believes that the credit risk concentration with respect to receivables is remote.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Liquidity requirements are managed based on expected cash flows to maintain sufficient capital to meet short term obligations. As at 30 June 2015, the Company had a cash balance of $4,015 which is not sufficient to settle current liabilities of $854,134. Management is currently working on obtaining financing to meet these obligations and also on reaching alternative arrangements with relevant parties.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has a positive cash balance and its debt bears interest at fixed rates. The Company has no significant concentrations of interest rate risk arising from operations.

9. Disposal of Subsidiary

On 4 June 2013, the Company acquired 51% of the shares of Visionaire Energy AS (“Visionaire Energy”), a privately held Norwegian holding company by issuing 20,000,000 of its common shares at a value of $900,000 to Visionaire Invest AS (the “Vendor”). Visionaire Energy is an inactive, holding entity with its principal assets being its shareholdings in two separate, privately owned, offshore oil and gas service providers both based in Bergen, Norway. Visionaire Energy owns a 49% equity interest in VTT Maritime AS (“VTT”) and a 41% equity interest in RADA Engineering and Consulting AS (“RADA”). Visionaire Energy exerts significant influence over both VTT and RADA, and accounts for them using the equity method.

Pursuant to a sales and purchase agreement dated 15 September 2014, with an effective date of 30 June 2014, the Company reached an agreement with the Vendor to sell its 51% interest in Visionaire Energy for $200,000 cash and the return of 20,000,000 common shares of the Company. The operations of Visionaire Energy were therefore classified as discontinued operations held for sale in the Company’s consolidated financial statements dated 30 June 2014.

The major classes of assets and liabilities of Visionaire Energy classified as held for sale were as follows:

  30 June 2014  
  $  
Cash 6,528  
Investment in VTT and RADA 559,068  
Assets held for sale 565,596  
     
Accounts payable 10,296  
Liabilities associated with assets held for sale 10,296  

The agreement was subject to the approval of the shareholders which was obtained at the Company’s annual meeting held on 5 December 2014, the effective date of disposal of Visionaire Energy.

Based on the book value of the net assets disposed of on 5 December 2014, the related sales proceeds and the effect of recycling of foreign exchange, the loss on disposal of Visionaire Energy was calculated to be $159,837, as summarized below:

15





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

 

  5 December 2014  
  $  
Cash 5,611  
Investment in VTT and RADA 596,439  
Accounts Payable (8,850 )
Non-controlling interest 185,846  
Total net assets 779,046  
     
Consideration – Cash 200,000  
Consideration – Common shares of Continental 400,000  
Total consideration 600,000  
     
Loss on disposal before recycling of foreign exchange 179,046  
Recycling of foreign exchange (19,209 )
Loss on disposal of Visionaire Energy 159,837  

The discontinued results of Visionaire Energy during fiscal 2014 are presented below. Visionaire Energy did not have any transactions during the year ended June 30, 2015.

  Year Ended  
  30 June 2014  
  $  
Office expenses (518 )
Professional fees (8,293 )
Equity income (loss) from investment in associates (303,165 )
Interest income 4  
Loss from discontinued operations (311,972 )
Attributable to non-controlling interest (152,866 )
Attributable to the shareholders of the Company (159,106 )

 

10. Convertible Debt

 

  Total  
  $  
Balance on 30 June 2013 311,171  

Interest

127,532  

Conversion rights - amendments

(46,000 )

Additional consideration warrants - amendment

(17,813 )
Balance on 30 June 2014 374,890  

Interest

81,000  

Conversion rights - amendments

(36,000 )
Balance on 30 June 2015 419,890  

On 21 September 2011, the Company issued a convertible promissory note for proceeds of $250,000. As additional consideration, the Company also issued 1,562,500 warrants (“the additional consideration warrants”) to the note holder.

16





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

The Company has since entered into multiple arrangements with the note holder for amendment of the terms of the convertible promissory note and the additional consideration warrants. The series of modifications caused additional value to the note holder and up until 30 June 2014, the Company recognized share based payments reserve and conversion rights reserve of $34,532 and $48,000, respectively (2013 – $16,719 and $2,000; 2014 - $17,813 and $46,000). As at 30 June 2014, the promissory note earned interest at 18% per annum, had maturity date of 30 April 2014, and could be converted to the common shares of the Company at $0.05 per share. The additional consideration warrants are exercisable at $0.05 per common share and expire on 31 December 2015.

On 28 July 2014, the Company reached an agreement with the note holder to extend the maturity date of the promissory note to 30 September 2014 without any additional consideration. This amendment resulted in an incremental value of $36,000.

The convertible promissory note is in default as of the date of these consolidated financial statements.

The incremental value of the conversion rights of the note and the additional consideration warrants were calculated using the Black-Scholes model with the following assumptions:

      Additional  
  Conversion   Consideration  
Fiscal 2014 Rights   Warrants  
Expected dividend yield Nil   Nil  
Expected stock price volatility 86%   86%  
Risk-free interest rate 0.05%   0.30%  
Expected life (years) 0.09 – 0.14   1.27 – 1.76  
         
      Additional  
  Conversion   Consideration  
Fiscal 2015 Rights   Warrants  
Expected dividend yield Nil   -  
Expected stock price volatility 87%   -  
Risk-free interest rate 0.04%   -  
Expected life (years) 0.18   -  

 

11. Share Capital

Authorized Share Capital
500,000,000 common shares without par value and without special rights or restrictions attached.
500,000,000 preferred shares without par value and without special rights or restrictions attached.

Shares issued

Year ended 30 June 2015

On 4 August 2014, the Company completed a private placement consisting of 2,400,000 common shares at a price of $0.05 per share for total proceeds of $120,000.

On 22 August 2014, $750,000 loan, previously obtained on 3 March 2014, was converted into 15,000,000 common shares of the Company at a price of $0.05 per share.

On 29 October 2014, the Company issued 2,000,000 common shares at fair value of $100,000 for consulting services. The amount is recognized as share-based payments expense on the Company’s statement of loss.

On 5 December 2014, Visionaire Invest AS returned 20,000,000 common shares of the Company, with fair value of $400,000, for cancellation pursuant to the sale of the Company’s 51% interest in Visionaire Energy (Note 9).

Year ended 30 June 2014

17





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

On 25 July 2013, a private placement was completed for 500,000 units for total proceeds of $25,000. Each unit consists of one common share of the Company and one-half share purchase warrant. Each warrant has a term of three years and an exercise price of $0.10 per share. The Company allocated $19,623 to common shares and $5,377 to the share purchase warrants based on management’s estimate of relative fair values.

On 21 October 2013, a private placement was completed for 300,000 units for total proceeds of $15,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant has a term of three years and an exercise price of $0.10 per share. The Company allocated $11,215 to common shares and $3,785 to the share purchase warrants based on management’s estimate of relative fair values.

18





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Stock options

The Company has an approved incentive stock option plan under which the Board of Directors may, from time to time, grant options to directors, officers, employees or consultants. Options granted must be exercised within a period as determined by the board. Options vest on the grant date unless otherwise determined by the board. The aggregate number of common shares which may be reserved as outstanding options shall not exceed 25,000,000, and the maximum number of options held by any one individual at any one time shall not exceed 7.5% of the total number of the Company's issued and outstanding common shares and 15% of same for all related parties (officers, directors, and insiders) as a group.

A reconciliation of the Company’s stock options outstanding on 30 June 2015 and 30 June 2014 is as follows:

      Weighted  
      Average  
  Number of   Exercise Price  
  Warrants   $ per Share  
Outstanding on 30 June 2013 and 2014 15,800,000   0.05  
Expired (9,000,000 ) 0.05  
Outstanding on 30 June 2015 6,800,000   0.05  

Year ended 30 June 2015

A total 9,000,000 stock options exercisable at $0.05 per share expired without being exercised.

A summary of the Company’s options outstanding on 30 June 2015 is as follows:

Options Options Exercise Expiry
Outstanding Exercisable Price Date
6,800,000 6,800,000 $0.05 31 December 2015 (Note 16)

Warrants

A reconciliation of the Company’s warrants outstanding on 30 June 2015 and on 30 June 2014 is as follows:

      Weighted  
      Average  
  Number of   Exercise Price  
  Warrants   $ per Share  
Outstanding on 30 June 2013 11,555,500   0.05  

Issued

2,550,000   0.06  

Expired

(2,643,000 ) 0.05  
Outstanding on 30 June 2014 11,462,500   0.05  

Expired

(2,000,000 ) 0.05  
Outstanding on 30 June 2015 9,462,500   0.05  

19





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

Year ended 30 June 2015

On 5 January 2015, the terms of 2,600,000 and 375,000 outstanding share purchase warrants expiring on 7 January 2015 and 15 January 2015, respectively, were extended to expire on 7 January 2016 and 15 January 2016. The exercise price of these warrants remained at $0.05 per share. As these warrants were originally issued to investors in a private placement, no amount was recognized for the incremental increase in their fair value.

Year ended 30 June 2014

On 25 July 2013, a total of 250,000 share purchase warrants were issued in conjunction with the Company’s private placement, with an exercise price of $0.10 and a term expiring in three years from the date of issue. The total value of the warrants was $13,700 which was utilized to allocate $5,377 of the total proceeds of $25,000 to share based payments reserve.

On 1 October 2013, the Company issued a total of 2,000,000 share purchase warrants as total compensation to two arm’s length parties in exchange for investor relations and other financial services to the Company. Each warrant had a term of one year and an exercise price of $0.05 per common share. The Company calculated the value of these warrants to be $20,877 which was charged to the statement of loss as share-based payments during the year ended 30 June 2014. These warrants expired unexercised on 30 September 2014.

On 21 October 2013, a total of 300,000 warrants were issued in conjunction with the Company’s private placement, with an exercise price of $0.10 and a term expiring in three years from the date of the grant. The total value of the warrants was $4,050 which was utilized to allocate $3,785 of the total proceeds of $15,000 to share based payments reserve.

The fair value of the warrants issued was estimated using the Black-Scholes option pricing model, with the following assumptions:

  Year Ended Year Ended  
  30 June 2015 30 June 2014  
Expected dividend yield - Nil  
Expected stock price volatility - 86%  
Risk-free interest rate - 0.21%  
Expected life of warrants (years) - 1.43  

 

A summary of the Company’s warrants outstanding on 30 June 2015 is as follows:

Number of Price Per Share Expiry Date
Shares    
250,000 $0.05 31 December 2015
1,562,500 $0.05 31 December 2015
3,975,000 $0.05 31 December 2015
2,600,000 $0.05 7 January 2016
375,000 $0.05 15 January 2016
150,000 $0.10 28 June 2016
250,000 $0.10 25 July 2016
300,000 $0.10 23 October 2016
9,462,500    
(Note 16)    

20





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

 

12. Related Party Transactions

As at 30 June 2015, $371,146 (30 June 2014 - $297,000) was payable to officers of the Company for management, consulting fees and short-term employee benefits. These amounts are included in accounts payable and are unsecured, non-interest bearing with no specific terms for repayment.

During the year ended 30 June 2015, the Company paid or accrued management, consulting fees and short-term employee benefits to officers of the Company in the amount of $305,794, respectively (2014 - $270,000).

13. Income Taxes

The Company is domiciled in Canada and is therefore subject to tax on estimated assessable profit at the rate of 26.00% (2014 – 26.00%). The Company has no assessable profit in Canada.

The tax expense at statutory rates for the Company can be reconciled to the reported income taxes per the statement of loss and comprehensive loss as follows:

  Year Ended   Year Ended  
  30 June 2015   30 June 2014  
  $   $  
Loss before income taxes (956,418 ) (786,623 )
Federal and provincial statutory tax rate 26.00%   26.00%  
Income tax recovery based on the above rates (248,669 ) (204,522 )
Non-deductible expenses and other 459,456   260,235  
Expiry of tax losses 73,454   108,024  
Losses and temporary differences for which no tax benefit has been recorded (284,241 ) (163,737 )
Total income taxes -   -  

The Company’s unrecognized deferred tax assets are as follows:

  30 June 2015   30 June 2014  
  $   $  
Non-capital losses 1,732,374   1,893,812  
Capital losses 395,425   432,065  
Resource properties 403,858   464,680  
Capital assets 143,927   167,531  
Share issue costs and other 10,318   12,055  
Total unrecognized deferred tax assets 2,685,902   2,970,143  

In assessing the recoverability of deferred tax assets other than deferred tax assets resulting from the initial recognition of assets and liabilities that do not affect accounting or taxable profit, the Company’s management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

The Company has non-capital loss carry-forwards of approximately $6,663,000 that may be available for tax purposes in Canada as follows:

21





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCI AL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

 

  Canada  
  $  
2027 1,175,000  
2028 1,059,000  
2029 1,131,000  
2030 655,000  
2031 454,000  
2032 472,000  
2033 478,000  
2034 411,000  
2035 828,000  
Non-capital loss carry-forwards 6,663,000  

The Company’s tax assets related to the other categories disclosed above are not subject to expiry provisions under the Canadian tax regime.

14. Supplemental cash flow information

 

Non-Cash Investing and Financing Activities for the   30 June 2015   30 June 2014  
Nine Months Ended Note $   $  

Conversion option and additional consideration warrants amendment

10 (36,000 ) (63,813 )
Cancellation of shares upon disposal of subsidiary 9 (400,000 ) -  
Loan converted to common shares of the Company 11 (750,000 ) -  

 

15. Segmented Information

The Company operates in one segment, being the business sector of acquiring participating interests in oil, gas, and alternative energy projects, producers, and related service providers doing business outside of North America. The Company’s non-current assets consist of computer and other equipment and are all located in Indonesia.

16. Subsequent Events

 

  1.     

On 4 November 2015, the British Columbia Securities Commission issued the Company a cease trade order. This order was issued because the Company was at the time deficient in its regulatory requirements involving the filing of its audited consolidated financial statements for the year ended 30 June 2015. The order prohibits trading of the Company’s securities in Canada until the deficiency is cured by the Company filing the required financial reports and a revocation order is issued by the British Columbia Securities Commission. In addition to the audited consolidated financial statements for the year ended 30 June 2015, the Company must prepare and file the three subsequent quarterly financial reports, the audited consolidated financial statements for the year ended 30 June 2016, and the three subsequent quarterly financial reports including the interim report for the three months ended 31 March 2017. The Company intends to continue the preparation and filing of these delinquent financial reports and apply for a revocation order from the British Columbia Securities Commission.

   

 
  2.     

A total of 9,462,500 outstanding warrants and 6,800,000 outstanding stock options, exercisable at $0.05, expired unexercised.

22





Continental Energy Corporation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2015

 

  3.     

On 4 January 2017, the Company entered into a Joint Development Agreement (the "CHI JDA") with Continental Hilir Indonesia Pte. Ltd. ("CHI"), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the date of these consolidated financial statements share three common directors. The CHI JDA provides that CHI may earn an 80% participating interest with the Company on realization of any new Small Scale Refinery ("SSR") developments in Indonesia by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 20% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.

   

 
  4.     

On 28 February 2017, the Company entered into a Consulting and Joint Development Agreement (the "CHMEA JDA") with Continental Hilir MEA (FZE) ("CHMEA"), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the date of these consolidated financial statements share one common director. The CHMEA JDA provides that CHMEA may earn a 50% participating interest with the Company on realization of any new SSR developments in the Middle East and Africa by providing consulting services and reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 50% participating interest share of feasibility studies, pre- operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.

---o---

23





CONTINENTAL ENERGY CORPORATION

FORM 51-102F1

Management’s Discussion and Analysis

For the Fourth Quarter and Fiscal Year Ended on 30 June 2015

This Management Discussion and Analysis (“MD&A”) has been prepared by the management of Continental Energy Corporation (the "Company") as of 24 May 2017 (the "Report Date").

This MD&A pertains to the three (3) month quarter ended 30 June 2015 that is hereinafter referred to as "This Quarter". This Quarter corresponds to the "Fourth Quarter" ending the Company's fiscal year. Therefore, this MD&A also pertains to the twelve (12) month period of the Company's fiscal year ended 30 June 2015 ("Fiscal 2015").

This MD&A is intended to be read in conjunction with the audited annual consolidated financial statements, the notes thereto, and the auditor's report to the Company for its Fiscal 2015 year ended on 30 June 2015 (the "Audited Annual Financial Statements") that are published and filed herewith.

This MD&A is intended to supplement and complement the unaudited, condensed, interim, consolidated quarterly financial statements (the "Interim Financial Statements") that were separately prepared and filed by management, on similar forms with similar management discussion, for each one of the preceding three Fiscal 2015 quarters, ended on 30 September 2014, on 31 December 2014, and on 31 March 2015.

All financial information presented herein, and in the Interim Financial Statements, and in the Audited Annual Financial Statements has been prepared in accordance with accounting policies consistent with International Financial Reporting Standards (“IFRS”) promulgated by the International Accounting Standards Board. All amounts disclosed are in United States dollars unless otherwise stated.

PART - 1 : NATURE OF BUSINESS

The Company is an emerging developer of conventional and alternative energy capacity integrated with upstream and downstream petroleum supply within the Republic of Indonesia. Why Indonesia? Already a G20 member, Indonesia is predicted by the World Bank to grow to the 4th largest economy in the world by 2045.

PART - 2 : HIGHLIGHT EVENTS DURING THIS QUARTER

Significant events which may have a material effect on the business affairs of the Company that have occurred during This Quarter are summarized below:

Corporate Activity

The Company explored new opportunities in its core business areas and searched for new sources of capital during This Quarter.

2.1 Share Purchase Warrants Activity During This Quarter

During This Quarter, the following activity involving the Company’s share purchase warrants occurred:

2.2 Incentive Stock Options Activity During This Quarter

During This Quarter, the following activity involving the Company’s incentive stock options occurred:





2.3 Common Share Conversion Rights Activity During This Quarter

During This Quarter, the following activity involving the common share conversion rights issued by the Company occurred:

2.4 New Shares Issues During This Quarter

During This Quarter, there were no new common shares issued.

PART - 3 : SHAREHOLDING AT THE END OF THIS QUARTER AND FISCAL 2015

As at the end of This Quarter and end Fiscal 2015, the Company’s share capital was issued or held in reserve as follows:

123,015,381 common shares were issued and outstanding.
9,462,500 unexercised warrants were issued and outstanding.
6,800,000 unexercised stock options were issued and outstanding.
5,000,000 common shares were held in reserve against possible conversion of a $250,000 note.
Nil preferred shares were issued and outstanding.

PART - 4 : SUBSEQUENT EVENTS TO THE REPORT DATE

Significant events which may have a material effect on the business affairs of the Company that have occurred subsequent to the end of This Quarter and up to the Report Date are summarized below:

Cease Trade Order

On 4 November 2015, the British Columbia Securities Commission issued the Company a cease trade order. This order was issued because the Company was at the time deficient in its regulatory requirements involving the filing of its audited consolidated financial statements for the year ended 30 June 2015. The order prohibits trading of the Company’s securities in Canada until the deficiency is cured by the Company filing the required financial reports and a revocation order is issued by the British Columbia Securities Commission. In addition to the audited consolidated financial statements for the year ended 30 June 2015, the Company must prepare and file the three subsequent quarterly financial reports, the audited consolidated financial statements for the year ended 30 June 2016, and the three subsequent quarterly financial reports including the interim report for the three months ended 31 March 2017. The Company intends to continue the preparation and filing of these delinquent financial reports and apply for a revocation order from the British Columbia Securities Commission.

Small Scale Refinery Opportunity

In August and November 2016, Indonesia’s Energy Ministry issued new regulations opening up, for the first time, the crude oil refining and distribution business to private sector companies. The new regulations provide for substantial fiscal incentives and perpetual licenses to private companies to build, own, and operate "Small Scale Refineries or SSRs". SSRs are defined as having a maximum capacity of 20,000 barrels per day and are intended to be co-located with existing domestic crude oil production to both stimulate more oil production by reducing crude oil transport costs and provide refined fuel products to local domestic markets at reduced or eliminated import costs.

As an incentive to SSR operators, these crude and products transport costs savings may be passed through to the SSR operator in the form of a reduced feedstock price agreed by the Energy Ministry in the license, for locally produced crude oil delivered at the SSR plant gate.

Indonesia is taking a page from the global power generation industry. It has come to the realization that multiple small-scale, geographically distributed refining capacity is simply more cost efficient and provides more direct local and regional economic benefits than a few huge-scale refineries requiring multi-billion dollar investment.

This is a completely new business opening with no large players or competitive actors already in the market or expected to appear. The opportunity lies with smaller companies that can put together the technical expertise, Indonesian operating knowledge, and financial packages needed.





The Company's 20+ years of Indonesian oil and gas operating experience and relationship building places it in a unique position to take advantage of these SSR opportunities. To this end the Company entered into, during late 2016, four Memorandums of Understanding with private Indonesian company partners to jointly pursue SSR licenses vertically integrated with, and co-located with, upstream crude oil feedstock from four production sharing contract areas operated by the partners.

Director Resignation

Effective upon 30 December 2016, Mr. John Tate resigned from the Company's board of directors to pursue his own business interests.

Joint Development Agreement Signed

On 4 January 2017, the Company entered into a Joint Development Agreement (the "CHI JDA") with Continental Hilir Indonesia Pte. Ltd. ("CHI"), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the Report Date share three common directors. The CHI JDA provides that CHI may earn an 80% participating interest with the Company on realization of any new Small Scale Refinery ("SSR") developments in Indonesia by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 20% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.

Consulting and Joint Development Agreement Signed

On 28 February 2017, the Company entered into a Consulting and Joint Development Agreement (the "CHMEA JDA") with Continental Hilir MEA (FZE) ("CHMEA"), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the Report Date share one common director. The CHMEA JDA provides that CHMEA may earn a 50% participating interest with the Company on realization of any new Small Scale Refinery ("SSR") developments in the Middle East and Africa by providing consulting services and reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 50% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.

Director Appointment

On 31 March 2017, Mr. Karsani Aulia was appointed a director of the Company by action of the board of directors to fill the vacancy on the board. Mr. Aulia is a graduate of the Bandung Institute of Technology and received his Master’s degree in petroleum geology, cum laude, from the Colorado School of Mines in 1982.

He worked for PT Caltex Pacific Indonesia (Chevron-Texaco) from 1976 until 2004. There he held various technical and operating positions including Vice President Exploration and General Manager of Resources and Production for Caltex’s onshore Minas Field, the largest oilfield in Asia with a daily production of over 200,000 BPD. From 2002 until 2004 he served on Chevron's Worldwide Asset Management Committee and its Technology Council.

From 2004 to 2007 he served as the General Manager for the Coastal Plains Pekanbaru PSC a local government owned oil and gas operating company with 27,000 BOPD oil production from the Riau Province, onshore Sumatra. Between 2007 and 2015, he served as Senior Vice President of Operations and Technology for Samudra Energy Ltd. an oil and gas exploration and production company based in Jakarta and Singapore. Under his leadership, Samudra Energy had a period of successful growth to become one of the top ten hydrocarbon producing companies in Indonesia.

4.1 Share Purchase Warrants Activity: Since This Quarter End and Up to the Report Date




4.2 Incentive Stock Options Activity: Since This Quarter End and Up to the Report Date
4.3 Conversion Rights Activity: Since This Quarter End and Up to the Report Date
4.4 New Shares Issues: Since This Quarter End and Up to the Report Date

PART - 5 : SHAREHOLDING AT THE REPORT DATE

As at the Report Date of this MD&A, the Company’s share capital is issued or held in reserve as follows:

123,015,381 common shares were issued and outstanding.
0 unexercised warrants were issued and outstanding.
0 unexercised stock options were issued and outstanding.
5,000,000 common shares were held in reserve against possible conversion of a $250,000 note.
Nil preferred shares were issued and outstanding.

PART - 6 : FINANCIAL RESULTS OF OPERATIONS

Selected Annual Information for Last Three Fiscal Years

The following table sets out selected annual financial information for the Company and is derived from its audited, consolidated financial statements for the last three fiscal years ended 30 June 2015, 2014 and 2013 respectively.

US$ 2015   2014   2013  
Revenue Nil   Nil   Nil  
 
Income (Loss) Attributable to the Shareholders of the Company            
From Continuing Operations (956,418 ) (627,517 ) (737,258 )
From Discontinued Operations Nil   (159,106 ) 18,943  

Total for the Year

(956,418 ) (786,623 ) (718,315 )
 
Income (Loss) Attributable to the Non-Controlling Interests            
From Continuing Operations Nil   Nil   Nil  
From Discontinued Operations Nil   (152,866 ) 18,200  

Total for the Year

Nil   (152,866 ) 18,200  
 
Net Loss for the Year (956,418 ) (939,489 ) (700,115 )
 
Basic and Diluted Loss per Share            
 
Attributable to the Shareholders of the Company            
From Continuing Operations (0.01 ) (0.01 ) (0.01 )

Total

(0.01 ) (0.01 ) (0.01 )
 
Total Assets 20,304   845,499   896,627  
Total Long-Term Liabilities Nil   Nil   Nil  
Dividends Declared Nil   Nil   Nil  

 





Summary of Quarterly Results for the Last Eight Quarters

The following table sets out selected and unaudited quarterly financial information for the Company for its last eight quarters and is derived from Interim Financial Statements prepared by management in accordance with accounting policies consistent with IFRS.

 
        Attributable to Shareholders of the Company
            Income (loss)   Basic &  
            From   Diluted  
    Total Net   Income   Continued   Per Share  
Period Revenue Income (loss)   (loss)   Operations   Income (loss)  
 
Quarter-4 of Fiscal 2015 Nil (128,476 ) (128,476 ) (128,476 ) (0.00 )
Quarter-3 of Fiscal 2015 Nil (173,476 ) (173,476 ) (173,476 ) (0.00 )
Quarter-2 of Fiscal 2015 Nil (452,987 ) (452,987 ) (452,987 ) (0.00 )
Quarter-1 of Fiscal 2015 Nil (201,479 ) (201,479 ) (201,479 ) (0.00 )
Quarter-4 of Fiscal 2014 Nil (89,934 ) (124,372 ) (160,216 ) (0.00 )
Quarter-3 of Fiscal 2014 Nil (318,556 ) (239,332 ) (156,874 ) (0.00 )
Quarter-2 of Fiscal 2014 Nil (341,133 ) (254,287 ) (163,897 ) (0.00 )
Quarter-1 of Fiscal 2014 Nil (189,866 ) (168,632 ) (146,530 ) (0.00 )
 

PART - 7 : COMPARATIVE RESULTS OF OPERATIONS

Current and Comparative Year

This Quarter and the twelve (12) month period and Fiscal Year ended 30 June 2015 (the “Current Year”); and the
Last Fiscal Year's twelve (12) month period ended 30 June 2014 (the “Comparative Year”).

 

a)     

Overall, the Company incurred a loss from operations during the Current Year of $956,418 compared to a loss of $939,489 for the Comparative Year, a decrease of $16,929.

 
b)     

The Company incurred a loss per share of $0.01 both during the Current Year the Comparative Year.





c)     

Total equity loss from the results of the Norwegian subsidiaries during the Current Period was $Nil compared to $311,972 for the Comparative Period as a result of Visionaire Energy AS’s discontinued operations. The Company disposed of its subsidiary, Visionaire Energy AS during the Current Year, for cash proceeds of $200,000 and the return of 20,000,000 common shares of the Company, with a fair value of $400,000. The book value of the net assets of Visionaire Energy AS, compared with the sales proceeds and the recycling of the related foreign exchange resulted in a loss of $159,837 during the Current Year.

 

d)     

Interest expense during the Current Year was $84,551 compared to $135,354 during the Comparative Year primarily due to the accretion of the Company’s convertible debt.

 

e)     

The Company’s administrative costs were higher in the Current Year compared to the Comparative Year, primarily a result of higher management and consulting fees due to an increase in short-term employee benefits, and higher office costs and professional fees due to the changes involving its subsidiaries and timing differences relating to the previous regulatory filings and annual meetings. These administrative costs were higher in the Current Year by $134,814 (2015 - $585,344; 2014 - $450,530).

 

f)     

Share-based payments expense were $100,000 during the Current Year compared to $20,877 during the Comparative Year.

 

g)     

Cash used in operating activities during the Current Year was $558,421 compared to $533,013 used in the Comparative Year. The change is attributable to higher activity and the availability of more funds by the Company during the Current Year.

 

h)     

Net cash raised from investing and financing activities during the Current Year was $320,000 compared to $760,298 raised during the Comparative Year.

Current and Comparative Quarters

This Quarter and the three (3) month period ended 30 June 2015 (the “Current Quarter”) and the
Last year's fourth quarter and three month period ended 30 June 2014 (the “Comparative Quarter”).

 

a)     

Overall, the Company incurred a loss from operations during the Current Quarter of $128,476 compared to a loss of $89,934 for the Comparative Quarter, a decrease of $38,542.

 

b)     

The Company incurred a loss per share of $0.00 in the Current Quarter and the Comparative Quarter.

 

c)     

The equity income from the Company’s operations in Norway, during the Comparative Quarter amounted to $70,282 and $Nil during the Current Quarter, as the activity was discontinued effective 30 June 2014.

 

d)     

Interest expense during the Current Quarter was $11,627 compared to $25,129 during the Comparative Quarter primarily due to the accretion of the Company’s convertible debt.

 

e)     

The Company’s administrative costs were lower in the Current Quarter compared to the Comparative Quarter, as a result of the reduced activity of the Company during the Current Quarter. These administrative costs amounted to $110,435 compared to $137,379 during the Comparative Quarter.

 

f)     

Share-based payments expense was $nil during the Current Quarter and the Comparative Quarter.

PART - 8 : LIQUIDITY AND CAPITAL MANAGEMENT

As at the end of this Fiscal Year 2015 on 30 June 2015, the Company’s Audited Annual Financial Statements reflect a working capital deficit of $836,752 compared to a working capital deficit of $693,794 at the end of the prior Fiscal 2014 year.

The Company has no significant operations that generate cash flow and its long term financial success is dependent on management’s ability to develop new business opportunities which become profitable. These undertakings can take many years and are subject to factors that are beyond the Company’s control.

In order to finance the Company’s growth and develop new business opportunities and to cover administrative and overhead expenses, the Company raises money through equity sales and from the exercise of convertible securities. Many factors influence the Company’s ability to raise such funds, including the health of the capital markets, the climate for investment in the sectors the Company is considering, the Company’s track record, and the experience and caliber of its management.





The Company does not have sufficient funds to meet its administrative requirements and new business development objectives over the next twelve months. Actual funding requirements may vary from those planned due to a number of factors, including providing for new opportunities as they arise. The Company believes it will be able to raise the necessary capital it requires, but recognizes there will be risks involved that may be beyond its control. The Company is actively sourcing new capital.

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business development and to maintain a flexible capital structure for its projects for the benefits of its stakeholders. The Company's principal source of funds is from the issuance of common shares. In the management of capital, the Company includes the components of shareholders’ equity as well as cash and receivables.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture arrangements, acquire or dispose of assets, or adjust the amount of cash and short-term investments. The Company’s investment policy is to invest its cash in liquid short-term interest-bearing investments selected with regard to the expected timing of expenditures from continuing operations. The Company is not subject to any externally imposed capital requirements and there was no change in the Company’s capital management during the period ended 30 June 2015.

PART - 9 : RISKS AND UNCERTAINTIES

The Company has no history of profitable operations and is currently in the early stages of its development. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment and the likelihood of success must be considered in light of its early stage of operations.

The Company has no source of operating cash flow and no assurance that additional funding will be available to it to take advantage of further growth and development of new opportunities and projects when required. Although the Company has been successful in the past in obtaining financing through the sale of equity securities or joint ventures, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further growth or new opportunity development.

The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management's services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company.

PART - 10 : RELATED PARTY TRANSACTIONS

10 . 1 Transactions With Related Parties And Related Party Balances

At the end of This Quarter and Fiscal 2015, $371,146 (30 June 2014 - $297,000) was payable to the CEO and the CFO of the Company. This amount is included in accounts payable and is unsecured, non-interest bearing and has no specific terms for repayment.

10 . 2 Compensation Of Key Management Personnel

During the twelve (12) months ended 30 June 2015, the Company paid or accrued management fees and short-term employee benefits to the CEO and the CFO of the Company in the amount of $305,794 (30 June 2014 - $270,000).

PART - 11 : MATERIAL CONTRACTS AND EVENTS

11 . 1 Off - Balance Sheet Arrangements

At the end of This Quarter, the Company does not have any off-balance sheet arrangements not already disclosed elsewhere in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.

11 . 2 Material Contracts & Commitments

During This Quarter, no new material contracts or commitments were undertaken, not elsewhere disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.





11 . 3 Investor Relations, Publicity and Promotion

During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.

11 . 4 Financial Advice, New Business Consulting, Finder's Agreements, & Fund Raising

During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.

11 . 5 Claims, Contingencies & Litigation

As at the Report Date, the Company is in default of repayment of an unsecured $250,000 promissory note convertible into common shares of the Company. The Company has offered the holder terms for converting a portion of the note in accordance with its provisions together with extending its term. There are no guarantees that these discussions will result in a resolution mutually acceptable to the Company and the note holder. Except for the foregoing and any contingencies elsewhere disclosed herein, or in the Audited Annual Financial Statements that are published and filed herewith, the Company knows of no material, active or pending claims or legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation that might materially adversely affect the Company or a property interest of the Company.

PART - 12 : CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with IFRS requires that the Company’s management make judgments and estimates and form assumptions that affect the amounts in the financial statements and the related notes to those financial statements. Actual results could differ from those estimates. The Company reviews its judgments, estimates, and assumptions on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. The Company’s critical accounting estimates applied in the preparation of its Financial Statements for the year ended June 30, 2015 are as follows:

Share based compensation

The Company provides compensation benefits to its employees, directors and officers through a stock option plan. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate option exercises and forfeiture rates within the valuation model. The risk-free interest rate for the expected term of the option is based on the yields of government bonds.

When the Company determines it necessary to modify the terms of the options, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original option.

Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.

Warrant valuation

The Company grants warrants in conjunction with private placements and as compensation for debt financing arrangements. The fair value of each warrant granted is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate the timing of warrant exercises within the valuation model. The risk-free interest rate for the expected term of the warrant is based on the yields of government bonds. When the Company determines it necessary to modify the terms of a warrants, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original warrant if the warrants were originally issued as compensation.

Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.

Assets held for sale and discontinued operations





Pursuant to the sales and purchase agreement dated 15 September 2014, the Company reached an agreement with Visionaire Invest AS, the owner of 49% of Visionaire Energy, to sell the Company's 51% interest in Visionaire Energy to Visionaire Invest AS.

The Company considered that Visionaire Energy met the criteria to be classified as held for sale on 30 June 2014 for the following reasons:

Visionaire Energy also met the criteria for discontinued operations as Visionaire Energy's activity represents the sole business operations for the Company in Norway.

Recovery of deferred taxes

Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require management to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. The Company has not recognized any deferred tax assets on the statement of financial position as at 30 June 2015.

PART - 13 : FINANCIAL INSTRUMENTS

The Company’s financial instruments as at the end of This Quarter, consist of cash, accounts payable and accrued liabilities and the convertible debt. The fair value of these instruments approximates their carrying value due to their short-term maturity. There were no off-balance sheet financial instruments.

Cash, other than minor amounts of Indonesian Rupiahs, consist solely of cash deposits with major Canadian banks. The Company therefore considers its credit risk to be low. The Company does not use derivative or hedging instruments to reduce its exposure to fluctuations in foreign currency exchange rates involving Canadian dollar and Indonesian Rupiah. However, as the Company holds its funds primarily in US dollars, the risk of foreign exchange loss is considered low by the Company’s management.

PART - 14 : CONTINUOUS DISCLOSURE AND FILINGS

14 . 1 Additional Disclosure for Venture Issuers without Significant Revenue

Additional disclosure concerning the Company’s general and administrative expenses and other business development costs is provided in the Company’s statement of loss and comprehensive loss contained in the Audited Annual Financial Statements that are published and filed herewith.

14 . 2 Continuous Disclosure & Filings - Canada

Additional disclosure is made on a continuous basis in accordance with applicable laws and in compliance with securities rules and regulations of the British Columbia Securities Commission (“BCSC”). This disclosure and filings includes annual audited consolidated financial statements and quarterly unaudited interim financial statements. It also includes press releases, material change reports, and disclosure of new or changed circumstances regarding the Company. Shareholders and interested parties may obtain downloadable copies of these mandatory filings made by the Company on "SEDAR" (the System for Electronic Document Archiving and Retrieval at website www.sedar.com). The Company began filing on SEDAR in 1997. All Company filings made on SEDAR during the year and up to the date of this filing are incorporated herein by this reference.

14 . 3 Continuous Disclosure & Filings - USA

The Company is also a full reporting issuer and filer with the US Securities and Exchange Commission (“SEC”). The Company is required to file an annual report with the SEC in the format of a Form 20F annual report which includes audited annual consolidated financial statements. The Company files interim unaudited quarterly financial reports, press releases, material change reports, and disclosure of new or changed circumstances regarding the Company on a periodic basis under Form-6K. The Company has filed electronically on the SEC’s EDGAR database (website www.sec.gov/edgar) commencing with the Company’s Form 20F at its fiscal year end 2004. Prior to 2004 the Company filed Form 20F annual reports with the SEC in paper form. All Company filings made to US-SEC during the past fiscal year and during the This Quarter and up to the date of this filing are incorporated herein by this reference.





PART - 15 : FORWARD -LOOKING STATEMENTS

Forward-looking statements relate to future events or future performance and reflect management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of reserves and resources, projections of anticipated revenue, the realization of reserve estimates, the timing and amount of estimated future production, cost, work schedules, capital requirements, success of resource exploration operations, environmental risks, permitting risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.

15 . 1 Forward Looking Words and Phrases

In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "projections", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology.

15 . 2 Risks and Uncertainties

By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of exploration or new project development activities; changes in project parameters as plans continue to be refined; cash flow projections; future prices of resources; possible variations in resource reserves; accidents, labor disputes and other risks of the oil, gas, and alternative energy industries; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as other factors detailed from time to time in the Company's periodic filings on EDGAR and SEDAR.

15 . 3 No Assurance all Risks Anticipated

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

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