0001298824
2011-10-01
2012-06-30
0001298824
2012-08-14
0001298824
2012-06-30
0001298824
2011-09-30
0001298824
2012-04-01
2012-06-30
0001298824
2011-04-01
2011-06-30
0001298824
2010-10-01
2011-06-30
0001298824
2011-06-30
0001298824
2010-09-30
0001298824
us-gaap:FairValueInputsLevel1Member
2012-06-30
0001298824
us-gaap:FairValueInputsLevel1Member
2011-09-30
0001298824
us-gaap:MinimumMember
2011-10-01
2012-06-30
0001298824
us-gaap:MaximumMember
2011-10-01
2012-06-30
0001298824
us-gaap:MinimumMember
2012-06-30
0001298824
us-gaap:MinimumMember
2011-09-30
0001298824
us-gaap:MaximumMember
2012-06-30
0001298824
us-gaap:MaximumMember
2011-09-30
0001298824
PHUN:BrunerFamilyTrustMember
2012-06-30
0001298824
PHUN:GlobalFinanceAgMember
2012-06-30
0001298824
PHUN:BrunerFamilyTrustMember
2011-10-01
2012-06-30
0001298824
PHUN:GlobalFinanceAgMember
2011-10-01
2012-06-30
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
PETROHUNTER ENERGY CORPORATION
0001298824
10-Q
2012-06-30
false
--09-30
No
No
Yes
Smaller Reporting Company
Q3
2011
439078759
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The interim condensed
consolidated financial statements of PetroHunter Energy Corporation (“we,” “us,” “our,” or the “Company”)
are unaudited and contain all adjustments necessary for a fair statement of the results for the interim period presented. Results
for interim period are not necessarily indicative of results to be expected for a full year or for previously reported periods
due in part, but not limited to, interest rates and our ability to obtain additional capital to sustain operations. You should
read these consolidated interim financial statements in conjunction with the audited consolidated financial statements and notes
thereto included in our Annual Report on Form 10-K for the year ended September 30, 2011.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Basis of Accounting–
</b>The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern,
which contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The report of
our independent registered public accounting firm on our financial statements for the fiscal year ended September 30, 2011
includes an explanatory paragraph relating to substantial doubt or uncertainty of our ability to continue as a going concern.  As
shown in the accompanying balance sheet, we have an accumulated deficit of $297,964,291 and our current liabilities exceeded our
current assets by $16,874,603 as of June 30, 2012. <font style="background-color: white">The Company’s ability to meet its
contractual obligations and remit payment to its vendors depends on its ability to generate additional financing.  PetroHunter's
management continues to explore arrangements whereby it may raise additional capital through the sale of existing assets and/or
through joint ventures related to its pending permit applications as well as through potential debt or equity issuances; however
there are no assurances the plans of the Company will result in its ability to raise funds. If the Company is unable to execute
these plans it may have to further curtail or cease operations.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Cash and Cash
Equivalents</b><i> </i>– We consider investments in highly liquid financial instruments with an original stated maturity
of three months or less to be cash equivalents.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Comprehensive
Income (Loss)</b> – Financial Accounting Standards Board (“FASB”) ASC 220,<i> “Comprehensive Income,”
</i>establishes standards for reporting and display of comprehensive income and its components in financial statements. It requires
that all items that are required to be recognized under accounting standards as components of comprehensive income be reported
in the financial statement that is displayed with the same prominence as other financial statements.  The Company’s
comprehensive income (loss) consists of both net losses on foreign currency translation adjustments and unrecognized losses in
connection with mark to market adjustments on its marketable securities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Concentration
of Credit Risk</b> – Financial instruments which potentially subject us to concentrations of credit risk consist of cash
and marketable securities. We periodically evaluate the credit worthiness of financial institutions, and maintain cash accounts
only with major financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts. On occasion,
the Company may have cash in banks in excess of federally insured amounts. We believe that credit risk associated with cash is
remote.  Marketable securities credit risk is discussed later in Note 3 – Restricted Cash and Marketable Securities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Fair Value
</b>– We apply the provisions of FASB ASC 820, “<i>Fair Value Measurements.</i>” The carrying amounts reported
in the consolidated balance sheets for cash, prepaid assets, accounts payable and accrued liabilities approximate fair value because
of the immediate or short-term maturity of these financial instruments. Fair values of assets and liabilities measured on a recurring
basis as of June 30, 2012 and September 30, 2011 included marketable securities, recorded at fair values of $nil and $650,000,
respectively, which had quoted prices in active markets for identical assets (level 1) of $nil and $650,000, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Income Taxes
</b>– We record income taxes under the asset and liability method prescribed by FASB ASC 740, “<i>Income Taxes.</i>”
Under this method, deferred tax assets and liabilities are recognized for temporary differences</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">between the financial
statement amounts and the tax basis of certain assets and liabilities by applying statutory rates in effect when the temporary
differences are expected to reverse.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Loss Per Common
Share</b> – We do not report fully diluted loss per common share as the effect would be anti-dilutive.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Marketable
Securities</b> – We account for marketable securities in accordance with FASB ASC 320,<i> “Accounting for Certain
Investments in Debt and Equity Securities.”</i> Historically we accounted for marketable securities by marking to market
with unrealized gains and losses reflected as a component of Other Comprehensive Income, until such gains or losses became realized,
at which time they are then recognized in our statement of operations. In addition, in circumstances where significant price declines
are experienced subsequent to the balance sheet date, we consider whether such declines are other than temporary. After considering
our expected holding period, we may record a provision for impairment in the event we do not expect the value of the securities
to recover from such a decline in market value. We consider our accounting for marketable securities to involve significant management
judgment that is subject to estimation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Property and
Equipment</b> – Property and equipment are stated at cost and depreciated using the straight-line method over the estimated
useful lives of the related assets approximating three to five years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Reclassifications
</b><i>– </i>Certain prior period amounts have been reclassified in the condensed consolidated financial statements to conform
to current period presentation. Such reclassifications have had no effect on the net loss.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Restricted
Cash</b> – Restricted cash consists of certificates of deposit, underlying letters of credit for exploration permits, state
and local bonds and guarantees to vendors.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Share-Based
Compensation</b> – We use the Black-Scholes option-pricing model and the straight-line attribution approach to determine
the fair-value of stock-based awards in accordance with FASB ASC 718,<i> “Stock Compensation.”</i>   The option-pricing
model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility
of the underlying stock. The Company’s expected term represents the period that stock-based awards are expected to be outstanding
and is determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based
awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based
awards. The expected stock price volatility is based on the Company’s historical stock prices.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Use of Estimates
</b>– The preparation of our consolidated financial statements in accordance with Generally Accepted Accounting Principles
(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses
during the reporting period. Actual results could differ materially from those estimates.  Our significant estimates include
the asset retirement obligation liabilities, other accrued liabilities and the market value of securities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Asset Retirement
Obligation</b> – Asset retirement obligations associated with tangible long-lived assets are accounted for in accordance
with FASB ASC 410, “<i>Accounting for Asset Retirement Obligations.”</i> The estimated fair value of the future costs
associated with dismantlement, abandonment and restoration of oil and gas properties is recorded generally upon acquisition or
completion of a well. The net estimated costs are discounted to present values using a risk adjusted rate over the estimated economic
life of the oil and gas properties. Such costs are capitalized as part of the related asset. The liability is periodically adjusted
to reflect (1) new liabilities incurred, (2) liabilities settled during the period, (3) accretion expense, and
(4) revisions to estimated future cash flow requirements. Accretion expense is recorded as a component of depreciation, depletion,
amortization and accretion expense.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Recently Issued
Accounting Pronouncements</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The Company has
evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute
of Certified Public Accountants (“AICPA”) and the SEC and we have not identified any that would have a material impact
on the Company’s financial position, or statements.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">As of June 30,
2012 and September 30, 2011, we held approximately 50,000,000 shares in Falcon Oil & Gas Australia Limited (“Falcon Australia”),
a related party. We have accounted for this investment under the equity method. As of June 30, 2012 and September 30, 2011, our
basis in this investment had been reduced to $nil as the result of historical losses of $164,506 recorded during the fiscal year
ended September 30, 2010.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Compensation
Expense</b><i> - </i>Stock-based employee and non-employee compensation expense of $66,900 was charged to operations during the
nine months ended June 30, 2012. Stock-based compensation expense of $45,226 was charged to operations during the nine months
ended June 30, 2011. Stock-based compensation has been included in general and administrative expense in the consolidated statements
of operations.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt">The following stock purchase warrants
were outstanding at June 30, 2012 and September 30, 2011:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font></p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 70%"><font style="font-size: 8pt"> </font></td>
<td style="width: 14%"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font-size: 8pt"><b>June
30,</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font-size: 8pt"><b>2012</b></font></p></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 14%"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font-size: 8pt"><b>September
30,</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font-size: 8pt"><b>2011</b></font></p></td></tr>
<tr style="vertical-align: top; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Number of warrants</font></td>
<td style="text-align: center"><font style="font-size: 8pt">70,094,223</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font-size: 8pt">72,094,223</font></td></tr>
<tr style="vertical-align: top; background-color: white">
<td><font style="font-size: 8pt">Exercise price</font></td>
<td style="text-align: center"><font style="font-size: 8pt">$0.12-$2.10</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font-size: 8pt">$0.12 - $2.10</font></td></tr>
<tr style="vertical-align: top; background-color: #CCEEFF">
<td><font style="font-size: 8pt">Expiration date</font></td>
<td style="text-align: center"><font style="font-size: 8pt">2012-2014</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font-size: 8pt">2011 - 2014</font></td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">Our policy is
to enter into transactions with related parties on terms that, on the whole, are more favorable, or no less favorable than those
available from unaffiliated third parties.  Based on our experience in oil and gas exploration and development and considering
the terms of our transactions with unaffiliated third parties, we believe that all of the transactions described below met this
policy standard at the time they occurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Accounts Payable</b>–During
the nine months ended June 30, 2012, $171,670 that had been previously included in accounts payable and had been due to Falcon
related to our share of expenses and GST taxes associated with costs incurred in drilling the Shenandoah #1A well in the Beetaloo
Basin were repaid. A refund we had applied for in April 2010 was received from the Australian tax authorities. The amount received
was used to repay the outstanding balance due Falcon. In connection with this repayment we recognized a gain of $171,670 which
has been recorded in other income (expense) in our condensed consolidated statements of operations.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Bruner Family
Trust– </b>As of June 30, 2012, we owed $2,828,060 in principal and $501,286 in accrued interest to the Bruner Family Trust
related to seven outstanding notes payable. We have recognized interest expense in the amount of $77,409 during the nine months
ended June 30, 2012 related to these notes.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Equity Method
Investment</b> – In April 2010, we were issued 50,000,000 shares of common stock in Falcon Australia in consideration for
our contribution of our 25% interest in four exploration permits related to 7 million acres in the Beetaloo Basin, Australia.  As
of June 30, 2012, our interest in the investment was 24% and we have recorded no value related to the investment as a result of
the dilutive impact of losses incurred during the periods prior to June 30, 2012 (Note 4).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Global Finance
</b>– As of June 30, 2012, we owed $40,650,000 in principal and $8,641,415 in accrued interest and fees payable to Global
Finance AG. These amounts relate to an outstanding line of credit, notes payable, and advance fees due.  During the
nine months ended June 30, 2012, we recorded interest expense in the amount of $2,591,316 related to the various instruments.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Marketable
Securities</b> - As of June 30, 2012, we have recorded restricted marketable securities totaling $nil on our consolidated condensed
balance sheet. These securities were received from a related party, Falcon. In October 2011, we transferred 800,000 shares of
our Falcon stock to Global Finance in consideration for the forgiveness of certain amounts previously accrued as interest. In
connection therewith we have recorded a loss of $61,455.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"><b>Palter Petroleum
Ltd</b> – Through June 30, 2012, we received $300,000 in cash from Paltar Petroleum Ltd (“Paltar”) as partial consideration
of an option to purchase a 50% interest in our permit applications in the Beetaloo Basin in Australia. Paltar is controlled by
Marc Bruner, a significant shareholder of the Company.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">The Company has
evaluated<b> </b>subsequent events  through the date the financial statements were issued. There were no items which
would have materially impacted the Company’s condensed consolidated financial statements.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">During the nine
months ended June 30, 2012, we continued to accrue interest related to amounts owed to Clear Creek Energy Services (“CCES”)
as discussed in the audited annual consolidated financial statements for the year ended September 30, 2011.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="margin: 0pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">As of June 30,
2012, long term restricted cash consists of $85,000 in certificates of deposit and letters of credit for exploration permits,
state and local bonds.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">As of June 30,
2012, we have recorded $nil in marketable securities on our Condensed Consolidated Balance Sheet. During the quarter ended June
30, 2012, we sold our remaining shares of Falcon Oil & Gas Ltd. (“Falcon”) common stock. As described in Note
2, we had accounted for these securities in accordance with FASB ASC 320,<i> “Accounting for Certain Investments in Debt
and Equity Securities.”</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 8pt">During the nine
months ended June 30, 2012, we recognized losses of $131,521 related to sales of these marketable securities. During the nine
months ended June 30, 2011, we recognized gains of $6,144 related to the sales of these securities. These gains and losses have
been included in other income (expense) on our unaudited condensed consolidated statement of operations.</font></p>
<p style="margin: 0pt; text-align: justify"></p>
128092
749689
39306
33930
650000
1808
1808
213647
837052
555
555
85000
85000
17002695
15311408
342251
342251
9402375
8605147
556064
100000
281243
204517
2722060
2722060
717873
717873
2980829
2619560
74222277
70011172
396971
396971
1238555
840850
8586637
6464524
6238419
6238419
40759000
40759000
213647
837052
-74008630
-69174120
-297964291
-292987591
-43536
-118826
223560118
223493218
439079
439079
969599
268451
330383
955865
1808
710
308
924
-1077722
-269161
-330691
-956789
1077722
269161
330691
956789
68
48
20
3877740
1363095
1040138
3101181
-131521
-39680
478
6144
-3898978
-1402727
-1039660
-3095017
-4976700
-1671888
-1370351
-4051806
106315
-61455
171670
439078759
439078759
439078759
439078759
-0.01
-0.00
-0.00
-0.01
-290
-2415
10987
-15724
81315
81315
-4976990
-1674303
-1278049
-3986215
1808
924
66900
45226
171670
61455
-131521
-6144
-2576179
9978
1642274
3159113
5377
-4900
-673610
-841192
696637
874376
499262
874376
197375
88786
65759
108808
75624
23027
33184
4285
0.001
0.001
100000000
100000000
0.001
0.001
1000000000
1000000000
439078759
439078759
439078759
439078759
16874603
0
650000
0
650000
P3Y
P5Y
85000
-131521
6144
50000000
50000000
0
0
66900
45226
70094223
72094223
2012
2011
2014
2014
0.12
0.12
2.1
2.1
171670
0.24
2828060
40650000
501286
8641415
77409
2591316
300000
<p style="margin: 0pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Basis of Accounting– </b>The accompanying financial
statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization
of assets and extinguishment of liabilities in the normal course of business. The report of our independent registered public accounting
firm on our financial statements for the fiscal year ended September 30, 2011 includes an explanatory paragraph relating to
substantial doubt or uncertainty of our ability to continue as a going concern.  As shown in the accompanying balance
sheet, we have an accumulated deficit of $297,964,291 and our current liabilities exceeded our current assets by $16,874,603 as
of June 30, 2012. <font style="background-color: white">The Company’s ability to meet its contractual obligations and remit
payment to its vendors depends on its ability to generate additional financing.  PetroHunter's management continues to explore
arrangements whereby it may raise additional capital through the sale of existing assets and/or through joint ventures related
to its pending permit applications as well as through potential debt or equity issuances; however there are no assurances the plans
of the Company will result in its ability to raise funds. If the Company is unable to execute these plans it may have to further
curtail or cease operations.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Cash and Cash Equivalents</b><i> </i>– We consider
investments in highly liquid financial instruments with an original stated maturity of three months or less to be cash equivalents.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Comprehensive Income (Loss)</b> – Financial Accounting
Standards Board (“FASB”) ASC 220,<i> “Comprehensive Income,”</i> establishes standards for reporting and
display of comprehensive income and its components in financial statements. It requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be reported in the financial statement that is displayed
with the same prominence as other financial statements.  The Company’s comprehensive income (loss) consists of
both net losses on foreign currency translation adjustments and unrecognized losses in connection with mark to market adjustments
on its marketable securities.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Concentration of Credit Risk</b> – Financial instruments
which potentially subject us to concentrations of credit risk consist of cash and marketable securities. We periodically evaluate
the credit worthiness of financial institutions, and maintain cash accounts only with major financial institutions, thereby minimizing
exposure for deposits in excess of federally insured amounts. On occasion, the Company may have cash in banks in excess of federally
insured amounts. We believe that credit risk associated with cash is remote.  Marketable securities credit risk is discussed
later in Note 3 – Restricted Cash and Marketable Securities.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Fair Value</b> – We apply the provisions of FASB
ASC 820, “<i>Fair Value Measurements.</i>” The carrying amounts reported in the consolidated balance sheets for cash,
prepaid assets, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity
of these financial instruments. Fair values of assets and liabilities measured on a recurring basis as of June 30, 2012 and September
30, 2011 included marketable securities, recorded at fair values of $nil and $650,000, respectively, which had quoted prices in
active markets for identical assets (level 1) of $nil and $650,000, respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Income Taxes</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%">
– We record income taxes under the asset and liability method prescribed by FASB ASC 740, “<i>Income Taxes.</i>”
Under this method, deferred tax assets and liabilities are recognized for temporary differences between the financial statement
amounts and the tax basis of certain assets and liabilities by applying statutory rates in effect when the temporary differences
are expected to reverse.</font></font></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Loss Per Common Share</b> – We do not report fully
diluted loss per common share as the effect would be anti-dilutive.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Marketable Securities</b> – We account for marketable
securities in accordance with FASB ASC 320,<i> “Accounting for Certain Investments in Debt and Equity Securities.”</i>
Historically we accounted for marketable securities by marking to market with unrealized gains and losses reflected as a component
of Other Comprehensive Income, until such gains or losses became realized, at which time they are then recognized in our statement
of operations. In addition, in circumstances where significant price declines are experienced subsequent to the balance sheet date,
we consider whether such declines are other than temporary. After considering our expected holding period, we may record a provision
for impairment in the event we do not expect the value of the securities to recover from such a decline in market value. We consider
our accounting for marketable securities to involve significant management judgment that is subject to estimation.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Property and Equipment</b> – Property and equipment
are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets approximating
three to five years.</p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Reclassifications</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%"><i>
– </i>Certain prior period amounts have been reclassified in the condensed consolidated financial statements to conform to
current period presentation. Such reclassifications have had no effect on the net loss.</font></font></p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Restricted Cash</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%">
– Restricted cash consists of certificates of deposit, underlying letters of credit for exploration permits, state and local
bonds and guarantees to vendors.</font></font></p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Share-Based Compensation</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%">
– We use the Black-Scholes option-pricing model and the straight-line attribution approach to determine the fair-value of
stock-based awards in accordance with FASB ASC 718,<i> “Stock Compensation.”</i>   The option-pricing model
requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the
underlying stock. The Company’s expected term represents the period that stock-based awards are expected to be outstanding
and is determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based
awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based
awards. The expected stock price volatility is based on the Company’s historical stock prices.</font></font></p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Use of Estimates</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%">
– The preparation of our consolidated financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting
period. Actual results could differ materially from those estimates.  Our significant estimates include the asset retirement
obligation liabilities, other accrued liabilities and the market value of securities.</font></font></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"><b>Asset Retirement Obligation</b> – Asset retirement
obligations associated with tangible long-lived assets are accounted for in accordance with FASB ASC 410, “<i>Accounting
for Asset Retirement Obligations.”</i> The estimated fair value of the future costs associated with dismantlement, abandonment
and restoration of oil and gas properties is recorded generally upon acquisition or completion of a well. The net estimated costs
are discounted to present values using a risk adjusted rate over the estimated economic life of the oil and gas properties. Such
costs are capitalized as part of the related asset. The liability is periodically adjusted to reflect (1) new liabilities
incurred, (2) liabilities settled during the period, (3) accretion expense, and (4) revisions to estimated future
cash flow requirements. Accretion expense is recorded as a component of depreciation, depletion, amortization and accretion expense.</p>
<p style="margin: 0"><font style="font-size: 8pt"><b>Recently Issued Accounting Pronouncements</b><font style="font-family: Times New Roman, Times, Serif; line-height: 115%">
– The Company has evaluated recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force),
the American Institute of Certified Public Accountants (“AICPA”) and the SEC and we have not identified any that would
have a material impact on the Company’s financial position, or statements.</font></font></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following stock purchase warrants were outstanding at
June 30, 2012 and September 30, 2011:</p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 70%; line-height: 115%"> </td>
<td style="width: 14%">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2012</b></p></td>
<td style="width: 2%; line-height: 115%"> </td>
<td style="width: 14%">
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>September 30,</b></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td></tr>
<tr style="vertical-align: top; background-color: #CCEEFF">
<td style="line-height: 115%">Number of warrants</td>
<td style="line-height: 115%; text-align: center">70,094,223</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: center">72,094,223</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="line-height: 115%">Exercise price</td>
<td style="line-height: 115%; text-align: center">$0.12-$2.10</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: center">$0.12 - $2.10</td></tr>
<tr style="vertical-align: top; background-color: #CCEEFF">
<td style="line-height: 115%">Expiration date</td>
<td style="line-height: 115%; text-align: center">2012-2014</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: center">2011 - 2014</td></tr>
</table>
<p style="font: 12pt/normal Times New Roman, Times, Serif; margin: 0"></p>