---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

**FORM 10-Q**

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

or

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to
_______________

Commission File Number: 333-107002

MANAS PETROLEUM CORPORATION(Exact name of registrant as specified in its charter)

|Nevada                                                               | 91-1918324                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)

Bahnhofstrasse 9, 6341 Baar, Switzerland(Address of principal executive offices) (zip code)

41 (44) 718 10 30(Registrants
telephone number, including area code)

N/A(Former name, former address and
former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.[X] Yes  
 [   ] No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). [   ] Yes    [   ] No

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

Large accelerated filer [   ]
    
    Accelerated
      filer                 
      [   ]Non-accelerated filer   [   ]
    (Do not check if a smaller
      reporting company)
    Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). [   ]
Yes    [X] No

---

ii

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
119,051,733 shares of common stock as of August 14, 2009.

---

iii

TABLE OF CONTENTS

|PART
      IFINANCIAL INFORMATION                                                                        | 1 
|--------------------------------------------------------------------------------------------------------- | --
|Item
      1. Financial Statements                                                                        | 1 
|Item
      2. Managements Discussion and Analysis of Financial Condition and Results
      of Operations | 21
|Item
      3. Quantitative and Qualitative Disclosures about Market Risk                                  | 29
|Item
      4T. Controls and Procedures                                                                    | 29
|PART
      IIOTHER INFORMATION                                                                           | 31
|Item
      1. Legal Proceedings                                                                           | 31
|Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds                                 | 31
|Item
      3. Defaults upon Senior Securities                                                             | 31
|Item
      4. Submission of Matters to a Vote of Security Holders                                         | 31
|Item
      5. Other Information.                                                                          | 32
|Item
      6. Exhibits                                                                                    | 32
|SIGNATURES                                                                                                | 37

---

1

PART IFINANCIAL INFORMATION

Item 1. Financial Statements.

|MANAS PETROLEUM CORPORATION                                                     |  |             |   |  |             |  
|------------------------------------------------------------------------------- |  | ----------- | - |  | ----------- | -
|(A DEVELOPMENT STAGE COMPANY)                                                   |  |             |   |  |             |  
|CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                     |  |             |   |  |             |  
|UNAUDITED                                                                       |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|CONDENSED CONSOLIDATED BALANCE SHEETS                                           |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  | 06.30.2009  |   |  | 12.31.2008  |  
|                                                                                |  | USD         |   |  | USD         |  
|                                                                                |  |             |   |  |             |  
|ASSETS                                                                          |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|Cash and cash equivalents                                                       |  | 1'436'558   |   |  | 225'993     |  
|Restricted cash                                                                 |  | 2'950'845   |   |  | 7'951'784   |  
|Accounts receivable                                                             |  | 122'701     |   |  | 96'339      |  
|Prepaid expenses                                                                |  | 131'659     |   |  | 165'632     |  
|Total current assets                                                            |  | 4'641'763   |   |  | 8'439'748   |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|Debt issuance costs                                                             |  | 201'120     |   |  | 254'311     |  
|Tangible fixed assets                                                           |  | 193'226     |   |  | 231'245     |  
|Investment in associate                                                         |  | 238'304     |   |  | 238'304     |  
|Total non-current assets                                                        |  | 632'650     |   |  | 723'860     |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|TOTAL ASSETS                                                                    |  | 5'274'413   |   |  | 9'163'608   |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|LIABILITIES AND SHAREHOLDERS' DEFICIT                                           |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|Accounts payable                                                                |  | 150'610     |   |  | 1'047'315   |  
|Bank loan                                                                       |  | 1'000'000   |   |  | 1'220'000   |  
|Promissory notes to shareholders                                                |  | 540'646     |   |  | -           |  
|Warrant liability                                                               |  | 5'501'763   |   |  | -           |  
|Participation liabilities                                                       |  | 416'000     |   |  | -           |  
|Accrued expenses Exploration costs                                              |  | -           |   |  | 120'000     |  
|Accrued expenses Professional fees                                              |  | 72'108      |   |  | 259'129     |  
|Accrued expenses Interest                                                       |  | 289'387     |   |  | 98'678      |  
|Accrued expenses Commissions                                                    |  | -           |   |  | 70'000      |  
|Other accrued expenses                                                          |  | 31'843      |   |  | 122'066     |  
|Total current liabilities                                                       |  | 8'002'357   |   |  | 2'937'188   |  
|                                                                                |  |             |   |  |             |  
|Participation liabilities                                                       |  | 224'000     |   |  | 640'000     |  
|Promissory notes to shareholders                                                |  | -           |   |  | 540'646     |  
|Contingently convertible loan                                                   |  | 1'805'098   |   |  | 1'739'178   |  
|Debentures                                                                      |  | 3'666'347   |   |  | 3'448'540   |  
|Other non-current
      liabilities                                             |  | 43'861      |   |  | 43'867      |  
|Total non-current liabilities                                                   |  | 5'739'306   |   |  | 6'412'231   |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|TOTAL LIABILITIES                                                               |  | 13'741'663  |   |  | 9'349'419   |  
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|Common stock (300,000,000 shares
      authorized, USD 0.001 par value,         |  |             |   |  |             |  
|119'051'733 and 119'051'733 shares, respectively, issued and
      outstanding) |  | 119'052     |   |  | 119'052     |  
|Additional paid-in capital                                                      |  | 45'446'518  |   |  | 43'852'378  |  
|Deficit accumulated during the development stage                                |  | (54'039'352 | ) |  | (44'200'563 | )
|Accumulated other comprehensive income / (loss)                                 |  |             |   |  |             |  
|Currency translation
      adjustment                                           |  | 6'532       |   |  | 43'322      |  
|Total shareholders' deficit                                                     |  | (8'467'250  | ) |  | (185'811    | )
|                                                                                |  |             |   |  |             |  
|                                                                                |  |             |   |  |             |  
|TOTAL LIABILITIES
      AND SHAREHOLDERS' DEFICIT                               |  | 5'274'413   |   |  | 9'163'608   |  

---

2

MANAS PETROLEUM CORPORATION (A DEVELOPMENT STAGE
COMPANY)CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended
      
      
      
      For the six months ended
      
      
      
      Period from05.25.2004(Inception) to06.30.2009
      
      
      06.30.2008
      
      
      
      06.30.2009
      
      
      06.30.2008
      
      
      
      06.30.2009USD
      
      
      USD
      
      
      
      USD
      
      
      USD
      
      
      
      USD(as restated)
      
      
      
      
      
      
      (as restated)OPERATING REVENUES-
      
      
      593'196
      
      
      
      -
      
      
      593'196
      
      
      
      1'375'728Total revenues
      
      -
      
      
      593'196
      
      
      
      -
      
      
      593'196
      
      
      
      1'375'728OPERATING EXPENSESPersonnel costs
      
      (1'652'000
      )
      
      (2'491'243
      )
      
      
      (3'515'853
      )
      
      (5'056'900
      )
      
      
      (19'986'651
      )Exploration costs
      
      (66'815
      )
      
      (1'026'399
      )
      
      
      (331'075
      )
      
      (1'288'011
      )
      
      
      (6'355'606
      )Depreciation
      
      (45'563
      )
      
      (12'153
      )
      
      
      (62'059
      )
      
      (21'837
      )
      
      
      (161'568
      )Consulting fees
      
      (427'345
      )
      
      (144'805
      )
      1)
      
      (554'130
      )
      
      (2'691'792
      )
      1)
      
      (7'339'129
      )Administrative
        costs
      
      (340'999
      )
      
      (818'864
      )
      
      
      (580'044
      )
      
      (1'441'811
      )
      
      
      (10'797'073
      )Total operating
        expenses
      
      (2'532'722
      )
      
      (4'493'464
      )
      
      
      (5'043'161
      )
      
      (10'500'351
      )
      
      
      (44'640'027
      )Gain from sale of investment
      
      -
      
      
      -
      
      
      
      -
      
      
      -
      
      
      
      3'864'197Loss
        from sale of investment
      
      -
      
      
      -
      
      
      
      -
      
      
      -
      
      
      
      (900
      )OPERATING LOSS
      
      (2'532'722
      )
      
      (3'900'268
      )
      
      
      (5'043'161
      )
      
      (9'907'155
      )
      
      
      (39'401'002
      )NON-OPERATING INCOME / (EXPENSE)Exchange differences
      
      50'935
      
      
      (2'380
      )
      
      
      135'509
      
      
      59'558
      
      
      
      115'718Changes in fair value of warrants
      
      (13'902'391
      )
      
      -
      
      
      
      (13'402'226
      )
      
      -
      
      
      
      (13'402'227
      )Warrants issuance expense
      
      -
      
      
      -
      
      
      
      -
      
      
      -
      
      
      
      (9'439'775
      )Interest income
      
      22'307
      
      
      25'100
      
      
      
      46'812
      
      
      74'351
      
      
      
      550'718Interest expense
      
      (352'768
      )
      
      (115'408
      )
      
      
      (660'758
      )
      
      (118'093
      )
      
      
      (1'501'055
      )Loss
        before taxes and equity in net loss of associate
      
      (16'714'639
      )
      
      (3'992'956
      )
      
      
      (18'923'824
      )
      
      (9'891'339
      )
      
      
      (63'077'623
      )Taxes
      
      (1'482
      )
      
      160
      
      
      
      (1'936
      )
      
      (777
      )
      
      
      (5'476
      )Equity in net loss of associate
      
      -
      
      
      -
      
      
      
      -
      
      
      -
      
      
      
      (24'523
      )Minority interest
        in net income
      
      -
      
      
      -
      
      
      
      -
      
      
      -
      
      
      
      (18'700
      )Net
        loss
      
      (16'716'121
      )
      
      (3'992'796
      )
      
      
      (18'925'760
      )
      
      (9'892'116
      )
      
      
      (63'126'322
      )Weighted average
        number of outstanding shares
      
      119'051'733
      
      
      113'539'840
      
      
      
      119'051'733
      
      
      113'058'917
      
      
      
      106'505'916Basic and diluted
        loss per share
      
      (0.14
      )
      
      (0.04
      )
      
      
      (0.16
      )
      
      (0.09
      )
      
      
      (0.59
      )1) Refer to Note 7


---

3

MANAS PETROLEUM CORPORATION (A DEVELOPMENT STAGE
COMPANY)CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

|                                                                    |  | For the six months ended |   |  | Period from   |  
|------------------------------------------------------------------- |  | ------------------------ | - |  | ------------- | -
|                                                                    |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|                                                                    |  | 06.30.2009               |   |  | 06.30.2008    |  
|                                                                    |  | USD                      |   |  | USD           |  
|                                                                    |  |                          |   |  | (as restated) |  
|OPERATING ACTIVITIES                                                |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Net loss for the period                                             |  | (18'925'760              | ) |  | (9'892'116    | )
|                                                                    |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|To reconcile net loss to net cash used                              |  |                          |   |  |               |  
|in operating activities                                             |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Minority interest in net income                                     |  | -                        |   |  | -             |  
|Gain from sale of investment                                        |  | -                        |   |  | -             |  
|Loss from sale of investment                                        |  | -                        |   |  | -             |  
|Equity in net loss of associate                                     |  | -                        |   |  | -             |  
|Depreciation                                                        |  | 62'059                   |   |  | 21'837        |  
|Amortization of debt issuance costs                                 |  | 53'191                   |   |  | 17'500        |  
|Warrant issuance expense / (income)                                 |  | 13'402'226               |   |  | -             |  
|Exchange differences                                                |  | (135'509                 | ) |  | (59'558       | )
|Interest expense on contingently convertible loan                   |  | 65'920                   |   |  | -             |  
|Interest expense on debentures                                      |  | 217'807                  |   |  | 40'491        |  
|Decrease / (increase) in receivables                                |  | 7'611                    |   |  | (640'046      | )
|(Decrease) / increase
      in accounts payables                    |  | (896'705                 | ) |  | 664'675       |  
|(Decrease) / increase in accrued expenses                           |  | (211'304                 | ) |  | (478'604      | )
|Change in pension
      liability                                   |  | -                        |   |  | -             |  
|Stock-based compensation                                            |  | 2'780'648                |   |  | 5'846'247 1   | )
|Cash flow from
      operating activities                           |  | (3'579'816               | ) |  | (4'479'574    | )
|                                                                    |  |                          |   |  |               |  
|INVESTING ACTIVITIES                                                |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Purchase of tangible fixed assets and computer software             |  | (24'040                  | ) |  | (90'064       | )
|Sale of tangible fixed assets and computer
      software           |  | -                        |   |  | -             |  
|Proceeds from sale of investment                                    |  | -                        |   |  | -             |  
|Decrease / (increase) restricted cash                               |  | 5'000'939                |   |  | (6'180'000    | )
|Acquisition of investment
      in associate                        |  | -                        |   |  | -             |  
|Cash
      flow from investing activities                           |  | 4'976'899                |   |  | (6'270'064    | )
|                                                                    |  |                          |   |  |               |  
|FINANCING ACTIVITIES                                                |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Contribution share capital founders                                 |  | -                        |   |  | -             |  
|Issuance of units                                                   |  | -                        |   |  | -             |  
|Issuance of contingently convertible loan                           |  | -                        |   |  | -             |  
|Issuance of debentures                                              |  | -                        |   |  | 3'760'000     |  
|Issuance of promissory notes to shareholders                        |  | -                        |   |  | -             |  
|Issuance of warrants                                                |  | -                        |   |  | 240'000       |  
|(Decrease) / increase in participation liabilities                  |  | -                        |   |  | -             |  
|Cash arising on recapitalization                                    |  | -                        |   |  | -             |  
|Shareholder loan repaid                                             |  | -                        |   |  | (39'329       | )
|Shareholder loan raised                                             |  | -                        |   |  | -             |  
|Repayment of bank loan                                              |  | (1'220'000               | ) |  | -             |  
|Increase in bank loan                                               |  | 1'000'000                |   |  | -             |  
|Payment of debt issuance costs                                      |  | -                        |   |  | (140'000      | )
|(Decrease) / increase
      in bank overdraft                       |  | -                        |   |  | (2'305        | )
|Cash flows from financing activities                                |  | (220'000                 | ) |  | 3'818'366     |  
|                                                                    |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Net change in cash
      and cash equivalents                       |  | 1'177'083                |   |  | (6'931'272    | )
|                                                                    |  |                          |   |  |               |  
|Cash and cash equivalents at the beginning of the period            |  | 225'993                  |   |  | 8'480'771     |  
|Currency translation effect on cash and cash equivalents            |  | 33'482                   |   |  | 59'427        |  
|Cash and cash equivalents
      at the end of the period            |  | 1'436'558                |   |  | 1'608'927     |  
|                                                                    |  |                          |   |  |               |  
|                                                                    |  |                          |   |  |               |  
|Supplement schedule of non-cash investing and financing activities: |  |                          |   |  |               |  
|Forgiveness of debt by major shareholder                            |  | -                        |   |  | -             |  
|Deferred consideration for interest in CJSC South Petroleum Co.     |  | -                        |   |  | -             |  
|Warrants issued to pay placement commission expenses                |  | -                        |   |  | -             |  
|Debenture interest paid in common shares                            |  | -                        |   |  | 57'449        |  
|                                                                    |  |                          |   |  |               |  
|1) Refer to Note 7                                                  |  |                          |   |  |               |  

---

4

MANAS PETROLEUM CORPORATION (A DEVELOPMENT STAGE
COMPANY)CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY /
(DEFICIT)

SHAREHOLDERS' EQUITY /
      (DEFICIT)
      Number of
      Shares
      Share Capital
      Additionalpaid-incapital
      Deficit accumulated**during the** **development**stage
      Accumulated Other
      **Compre-**hensive
      **Income** (Loss)
      **Total share-**
      holders' equity / (deficit)
      Compre- hensive
      Income (Loss)Balance May 25, 2004
      -
      -
      -
      -
      -
      -
      -Contribution share capital from founders
      80'000'000
      80'000
      19
      -
      -
      80'019
      -Currency translation adjustment
      -
      -
      -
      -
      (77'082)
      (77'082)
      (77'082)Net loss for the period
      -
      -
      -
      (601'032)
      -
      (601'032)
      (601'032)Balance December 31, 2004
      80'000'000
      80'000
      19
      (601'032)
      (77'082)
      (598'095)
      (678'114)Balance January 1, 2005
      80'000'000
      80'000
      19
      (601'032)
      (77'082)
      (598'095)Currency translation adjustment
      -
      -
      -
      
      218'699
      218'699
      218'699Net loss for the year
      -
      -
      -
      (1'993'932)
      -
      (1'993'932)
      (1'993'932)Balance December 31, 2005
      80'000'000
      80'000
      19
      (2'594'964)
      141'617
      (2'373'328)
      (1'775'233)Balance January 1, 2006
      80'000'000
      80'000
      19
      (2'594'964)
      141'617
      (2'373'328)Forgiveness of debt by major shareholder
      -
      -
      1'466'052
      -
      -
      1'466'052
      -Currency translation adjustment
      -
      -
      -
      -
      (88'153)
      (88'153)
      (88'153)Net income for the year
      -
      -
      -
      1'516'004
      -
      1'516'004
      1'516'004Balance December 31, 2006
      80'000'000
      80'000
      1'466'071
      (1'078'960)
      53'464
      520'575
      1'427'851Balance January 1, 2007
      80'000'000
      80'000
      1'466'071
      (1'078'960)
      53'464
      520'575Recapitalization transaction (Note 1)
      20'110'400
      20'110
      (356'732)
      -
      -
      (336'622)
      -Stock-based compensation
      880'000
      880
      7'244'409
      -
      -
      7'245'289
      -Private placement of Units, issued for cash
      10'330'152
      10'330
      9'675'667
      -
      -
      9'685'997
      -Private placement of Units
      10'709
      11
      (11)
      -
      -
      -
      -Private placement of Units, issued for cash
      825'227
      825
      3'521'232
      -
      -
      3'522'057
      -Currency translation adjustment
      -
      -
      -
      -
      3'069
      3'069
      3'069Net loss for the year
      -
      -
      -
      (12'825'496)
      -
      (12'825'496)
      (12'825'496)Balance December 31, 2007
      112'156'488
      112'156
      21'550'636
      (13'904'456)
      56'533
      7'814'870
      (12'822'427)Balance January 1, 2008
      112'156'488
      112'156
      21'550'636
      (13'904'456)
      56'533
      7'814'870Stock-based compensation
      2'895'245
      2'895
      9'787'978
      -
      -
      9'790'874
      -Private placement of Units, issued for cash
      4'000'000
      4'000
      1'845'429
      -
      -
      1'849'429
      -Issuance of warrants
      -
      -
      10'110'346
      -
      -
      10'110'346
      -Beneficial Conversion Feature
      -
      -
      557'989
      -
      -
      557'989
      -Currency translation adjustment
      -
      -
      -
      -
      (13'212)
      (13'212)
      (13'212)Net loss for the period
      -
      -
      -
      (30'296'106)
      -
      (30'296'106)
      (30'296'106)Balance December 31, 2008
      119'051'733
      119'052
      43'852'378
      (44'200'563)
      43'322
      (185'811)
      (30'309'318)Balance January 1, 2009
      119'051'733
      119'052
      43'852'378
      (44'200'563)
      43'322
      (185'811)Adoption of EITF 07-05
      -
      -
      (9'679'775)
      9'086'971
      -
      (592'804)
      -Reclassification warrants
      -
      -
      8'493'267
      -
      -
      8'493'267
      -Stock-based compensation
      -
      -
      2'780'648
      -
      -
      2'780'648
      -Currency translation adjustment
      -
      -
      -
      -
      (36'790)
      (36'790)
      (36'790)Net loss for the period
      -
      -
      -
      (18'925'760)
      -
      (18'925'760)
      (18'925'760)Balance June 30, 2009
      119'051'733
      119'052
      45'446'518
      (54'039'352)
      6'532
      (8'467'250)
      (18'962'550)


---

5

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial
statements of Manas Petroleum Corporation ("Manas" or the Company") and its
subsidiaries (Group) for the three months ended March 31, 2009 have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto, included in the Group's Annual Report on Form 10-K for the year
ended December 31, 2008.

The Company considers itself as a development stage company
since it has not realized any revenues from its planned principal operations. As
a development stage enterprise, the Company discloses the deficit accumulated
during the development stage and the cumulative statements of operations and
cash flows from inception to the current balance sheet date.

The Company, formerly known as Express Systems Corporation, was
incorporated in the State of Nevada on July 9, 1988. The Group has a focused
strategy on exploration and developing oil and gas resources in Central Asia
(Kyrgyz Republic and subsidiary in Republic of Tajikistan), in the Balkan Region
(subsidiary in Albania) as well as in Latin America (subsidiary in Chile).

On April 10, 2007, the Company completed the Exchange
Transaction whereby it acquired its then sole subsidiary DWM Petroleum AG, Baar
(DWM) pursuant to an exchange agreement signed in November 2006 whereby 100% of
the shares of DWM were exchanged for 80,000,000 common shares of the Company. As
part of the closing of this exchange transaction, the Company issued 800,000
shares as finders fees at the closing price of $3.20.

The acquisition of DWM has been accounted for as a merger of a
private operating company into a non-operating public shell. Consequently, the
Company is the continuing legal registrant for regulatory purposes and DWM is
treated as the continuing accounting acquirer for accounting and reporting
purposes. The assets and liabilities of DWM remained at historic cost. Under US
GAAP in transactions involving the merger of a private operating company into a
non-operating public shell, the transaction is equivalent to the issuance of
stock by DWM for the net monetary assets of the Company, accompanied by a
recapitalization. The accounting is identical to a reverse acquisition, except
that no goodwill or other intangibles are recorded.

2. GOING CONCERN

The condensed consolidated financial statements have been
prepared on the assumption that the Group will continue as a going concern. The
Group has no operating income and therefore will remain dependent upon continued
funding from its shareholders or other sources. Our cash balance as of June 30,
2009 was $4,387,403, of which $2,950,845 has been restricted for a bank
guarantee for the first phase of our work program in Albania (covering the
seismic and geological and geographical (G&G) costs in Albania) and two
escrow accounts for the first phase of our work program in Mongolia (covering
the seismic and G&G costs in Mongolia), leaving a balance of $1,436,558. The
Groups net losses since inception until June 30, 2009 were $63,126,322.

---

6

These matters raise substantial doubt about the Groups ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

On April 3, 2009, we successfully negotiated new work programs
for our exploration blocks A, B and D, E in Albania with the Albanian
authorities (AKBN), which allows us to reduce the bank guarantee, held as
restricted cash on our accounts on behalf of exploration work in Albania, by
$2,541,800 at our own disposal without any restrictions or limitations to these
funds after the release, which took place by April 23, 2009 following completion
of the procedural formalities. On April 4, 2009, we finalized negotiation for an
additional loan of $1,300,000, which will be secured by the remaining escrow
funds in Mongolia. On May 1, 2009, $1,000,000 of this loan was made available to
our company. The remaining $300,000 is subject to further proof of performance
of the work program.

Based on our expected monthly burn rate of $320,000 on basic
operational activities, we estimate that we have sufficient working capital to
fund operations for four months.

In order to continue to fund operations for the next twelve
months and implement the geological work program for our projects particularly
in Central Asia and the Balkan Region as well as to finance continuing
operations, the Group will require further funds. We expect these funds will be
raised through additional equity and/or debt financing. If we are not able to
raise the required funds, we would consider farming-out projects in order to
reduce our financial commitments. If the Company is unable to obtain such
funding, or complete farming-out projects, the Company will not be able to
continue its business. Any additional equity financing may be dilutive to
shareholders, and debt financing, if available, will increase expenses and may
involve restrictive covenants. The Company will be required to raise additional
capital on terms which are uncertain, especially under the current capital
market conditions. Under these circumstances, if the Company is unable to obtain
capital or is required to raise it on undesirable terms, it may have a material
adverse effect on the Company's financial condition.

Based on our business plan, in the next 12 months, we expect
  to obtain $2,700,000 from internal sources and to need additional funding from
  external sources of approximately $4,200,000.

3. ACCOUNTING POLICIES

The Groups condensed consolidated financial statements are
prepared in accordance with US GAAP. The preparation of financial statements in
conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures, if any,
of contingent assets and liabilities at the date of the financial statements.
Actual results could differ from these estimates.

The accompanying financial data as of June 30, 2009 and
December 31, 2008 and for the three and six months ended June 30, 2009 and 2008
and for the period from inception, May 25, 2004, to June 30, 2009 has been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC).

The complete accounting policies followed by the Group are set
forth in Note 3 to the audited consolidated financial statements contained in
the Group's Annual Report on Form 10-K for the year ended December 31, 2008.

In the opinion of management, all adjustments (which include
normal recurring adjustments, except as disclosed herein) necessary to present a
fair statement of financial position as of June 30, 2009 and December 31, 2008,
results of operations for the three and six months ended June 30, 2009 and 2008
and

---

7

for the period from inception, May 25, 2004, to June 30, 2009,
cash flows for the three and six months ended June 30, 2009 and 2008 and for the
period from inception, May 25, 2004, to June 30, 2009 and statement of
shareholders equity (deficit) for the period from inception, May 25, 2004, to
June 30, 2009, as applicable, have been made. The results of operations for the
three and six months ended June 30, 2009 are not necessarily indicative of the
operating results for the full fiscal year or any future periods.

Fair Value of Financial Instruments

The Companys financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, bank loan, warrant
liability, contingently convertible loan, debentures and promissory notes to
shareholders. The fair value of these financial instruments approximate their
carrying value due to the short maturities of these instruments, unless
otherwise noted.

Valuation of Freestanding Warrants

FAS 133, "Accounting for Derivative Instruments and Hedging
Activities" requires measurement of free standing warrants classified as
liability at fair value. In determining the appropriate fair value, the Company
used a Black Scholes model. These warrants are adjusted to reflect fair value at
each period end, with any increase or decrease in the fair value being recorded
in results of operations as change in fair value of warrants.

Non-current liabilities

Non-current liabilities include all known liabilities as per
year end, which can reliably be quantified with a due date of at least one year
after the date of the balance sheet. Non-current liabilities are initially
recorded at fair value and are subsequently carried at amortized cost.

4. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS 141(R) "Business
Combinations," which replaces SFAS 141. SFAS 141(R) requires all business
combinations completed after the effective date to be accounted for by applying
the acquisition method (previously referred to as the purchase method).
Companies applying this method will have to identify the acquirer, determine the
acquisition date and purchase price and recognize at their acquisition date fair
values of the identifiable assets acquired, liabilities assumed, and any
non-controlling interests in the acquirer. In the case of a bargain purchase the
acquirer is required to reevaluate the measurements of the recognized assets and
liabilities at the acquisition date and recognize a gain on that date if an
excess remains. SFAS 141(R) becomes effective for fiscal periods beginning after
December 15, 2008. This statement did not have an effect on the Company's
financial statements.

In December 2007, the FASB issued Financial Accounting Standard
No. 160, Non-controlling Interests in Financial Statementsan amendment of ARB
No. 51 (SFAS 160). SFAS 160 requires that a non-controlling interest in a
subsidiary be reported as equity and the amount of net income specifically
attributable to the non-controlling interest be identified in the financial
statements. It also calls for consistency in the manner of reporting changes in
the parents ownership interest and requires fair value measurement of any
non-controlling equity investment retained in a deconsolidation. SFAS 160 was
adopted by the Company effective January 1, 2009 and did not have an effect on
the Companys financial statements.

---

8

In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133" (SFAS 161). SFAS 161 amends and expands the disclosure requirements
of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133), by requiring enhanced disclosures about how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 requires qualitative disclosures
about objectives and strategies for using derivatives, quantitative disclosures
about fair value amounts of, and gains and losses on, derivative instruments,
and disclosures about credit-risk-related contingent features in derivative
agreements. SFAS 161 was adopted by the Company as of January 1, 2009 and did
not have an impact on the Companys results of operations, cash flows or
financial positions. However, the Company was required to expand its disclosures
around the use of and purpose for its derivative instruments, which are
discussed below:

The Companys risk management objectives are to ensure that
business and financial exposures to risk that have been identified and measured
are minimized using the most effective and efficient methods to reduce, transfer
and, when possible, eliminate such exposures. Operating decisions contemplate
associated risks and management strives to structure proposed transactions to
avoid or reduce risk whenever possible. SFAS No. 133 requires companies to
recognize all derivative instruments as either assets or liabilities at fair
value in the statement of financial position. In accordance with SFAS No. 133,
the Company determined that 56,439,826 of the warrants outstanding at June 30,
2009 are not considered indexed to the Company's own stock under EITF 07-05, as
the respective agreements include reset features. As such, the Company
determined these warrants to be under the scope of SFAS No. 133. The fair value
of the warrants subject to EITF 07-05, and therefore under the scope of SFAS No.
133, are adjusted to fair market value at the end of each reporting period.
Refer to Note 9 for further information.

In February 2008, the FASB issued Staff Position (FSP) FAS
157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2") which defers the
implementation for the non-recurring financial assets and liabilities from
fiscal years beginning after November 15, 2007 to fiscal years beginning after
November 15, 2008. The provisions of SFAS 157 will be applied prospectively. The
statement provisions effective as of January 1, 2008, do not have a material
effect on the Companys financial position and results of operations. The
adoption of as of January 1, 2009 the remaining provisions did not have a
material effect on the Companys financial position and results of
operations.

In April 2008, the FASB issued Emerging Issues Task Force
(EITF) 07-05, "Determining whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock" (EITF 07-05). EITF 07-05 provides guidance
on determining what types of instruments or embedded features in an instrument
held by a reporting entity can be considered indexed to its own stock for the
purpose of evaluating the first criteria of the scope exception in paragraph
11(a) of SFAS 133. EITF 07-05 is effective for financial statements issued for
fiscal years beginning after December 15, 2008 (our fiscal year 2009). We
adopted EITF 07-05 as of January 1, 2009 and upon adoption, we reclassified
$592,804, comprising of an adjustment of $(9,679,775) to additional paid in
capital and $9,086,971 to deficit accumulated during the development stage, from
stockholders equity to a short-term liability. Additionally, the fair value of
the warrants subject to EITF 07-05 are adjusted to fair market value at the end
of each reporting period. The impact of the adoption on net loss and on loss per
share for the six months period ended June 30, 2009 was $13,402,226 and $0.11
respectively.

In June 2009, the FASB issued SFAS 168, "The FASB Accounting
Standards CodificationTM and the Hierarchy of Generally Accepted Accounting
Principles" ("SFAS 168"). SFAS 168 will replace Statement 162 and establish the
FASB Accounting Standards CodificationTM (Codification) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental

---

9

entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. Management is currently evaluating the requirements of SFAS
168 and does not expect an impact on the Company's results of operations or
financial positions.

In November 2008, the Emerging Issues Task Force issued Issue
08-6 (EITF 08-06), Equity Method Investment Accounting Considerations.
This Issue addresses the impact that SFAS 141(R) and SFAS 160 might have on the
accounting for equity method investments including how the initial carrying
value of an equity method investment should be determined, how it should be
tested for impairment and how changes in classification from equity method to
cost method should be treated. The Issue is to be implemented prospectively and
is effective for fiscal years beginning after December 15, 2008. The adoption of
EITF 08-06 did not have a significant impact on the Companys results of
operations or financial positions.

In May 2008 the FASB issued FSP APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)," which alters the accounting for
Convertible Debentures. FSP APB 14-1 requires issuers to account for convertible
debt securities that allow for either mandatory or optional cash settlement
(including partial cash settlement) by separating the liability and equity
components in a manner that reflects the issuers nonconvertible debt borrowing
rate at the time of issuance and requires recognition of additional (non-cash)
interest expense in subsequent periods based on the nonconvertible rate.
Additionally, FSP APB 14-1 requires that when such debt instruments are repaid
or converted any consideration transferred at settlement is to be allocated
between the extinguishment of the liability component and the reacquisition of
the equity component. FSP APB 14-1 is effective for the Companys fiscal year
beginning January 1, 2009, and has been applied retrospectively, as required.
The adoption of this pronouncement did not have an impact on the Company's
results of operations or financial positions.

In April 2009, the FASB issued FSP Financial Accounting
Standards (FAS) 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP changes existing guidance for
determining whether an impairment of debt securities is other-than-temporary.
The FSP requires other-than-temporary impairments to be separated into the
amount representing the decrease in cash flows expected to be collected from a
security (referred to as credit losses) which is recognized in earnings and the
amount related to other factors (referred to as noncredit losses) which is
recognized in other comprehensive income. This noncredit loss component of the
impairment may only be classified in other comprehensive income if both of the
following conditions are met (a) the holder of the security concludes that it
does not intend to sell the security and (b) the holder concludes that it is
more likely than not that the holder will not be required to sell the security
before the security recovers its value. If these conditions are not met, the
noncredit loss must also be recognized in earnings. When adopting the FSP, an
entity is required to record a cumulative effect adjustment as of the beginning
of the period of adoption to reclassify the noncredit component of a previously
recognized other-than-temporary impairment from retained earnings to accumulated
other comprehensive income. FSP FAS 115-2 and FAS 124-2 is effective for interim
and annual periods ending after June 15, 2009. The adoption of this
pronouncement did not have an impact on the Company's results of operations or
financial positions.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly. This
FSP provides additional guidance on estimating fair value when the volume and
level of activity for an asset or liability have significantly decreased in
relation to normal market activity for the asset or liability. The FSP also
provides additional guidance on circumstances that may indicate that a

---

10

transaction is not orderly. FSP FAS 157-4 is effective for
interim and annual periods ending after June 15, 2009. The Company adopted FSP
FAS 157-4 during the second quarter of 2009, and its application had no impact
on the Companys results of operations or financial positions..

In May 2009, the FASB issued Statement of Financial Accounting
  Standards (SFAS) No. 165, Subsequent Events, which establishes
  general standards of accounting for and disclosure of events that occur after
  the balance sheet date but before the financial statements are issued or are
  available to be issued. SFAS No. 165 provides guidance on the period after the
  balance sheet date during which management of a reporting entity should evaluate
  events or transactions that may occur for potential recognition or disclosure
  in the financial statements, the circumstances under which an entity should
  recognize events or transactions occurring after the balance sheet date in its
  financial statements and the disclosures that an entity should make about events
  or transactions that occurred after the balance sheet date. The Company adopted
  SFAS No. 165 during the second quarter of 2009, and its application had no impact
  on the Companys condensed consolidated financial statements. The Company
  evaluated subsequent events through the date the accompanying financial statements
  were issued, which was August 14, 2009.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB
Interpretation (FIN) No. 46(R), which changes how a reporting entity
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The
determination of whether a reporting entity is required to consolidate another
entity is based on, among other things, the other entitys purpose and design
and the reporting entitys ability to direct the activities of the other entity
that most significantly impact the other entitys economic performance. SFAS No.
167 will require a reporting entity to provide additional disclosures about its
involvement with variable interest entities and any significant changes in risk
exposure due to that involvement. A reporting entity will be required to
disclose how its involvement with a variable interest entity affects the
reporting entitys financial statements. SFAS No. 167 is effective for fiscal
years beginning after November 15, 2009, and interim periods within those fiscal
years. Management is currently evaluating the requirements of SFAS No. 167 and
has not yet determined the impact on the Companys condensed consolidated
financial statements.

5. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

USD (heldUSD (held
    
    
    USD (held
    
    
    USD (held
    
    
    in other
    
    
      USD TOTAL
    
    
    USD TOTALin
      USD)
    
    
    in
      EUR)
    
    
    in
      CHF)
    
    
    currencies)
    
    
      June 30, 2009
    
    
    Dec 31, 2008Bank and postal accounts
    
    814'505
    
    
    1'429
    
    
    617'362
    
    
    3'262
    
    
      1'436'558
    
    
    225'993Cash and Cash
      Equivalents
    
    814'505
    
    
    1'429
    
    
    617'362
    
    
    3'262
    
    
      1'436'558
    
    
    225'993


Cash and cash equivalents are available at the Groups own
disposal, and there is no restriction or limitation on withdrawal and/or use of
these funds. The Groups cash equivalents are placed with high credit rated
financial institutions. The carrying amount of these assets approximates their
fair value.

On January 22, 2009, the restricted cash in Mongolia was
reduced from $4,000,000 to $2,000,000 in agreement with the Mongolian
authorities.

On April 3, 2009, we successfully negotiated new work programs
for our exploration blocks A, B and D, E in Albania with the Albanian
authorities (AKBN), which allows us to reduce the bank guarantee, held as
restricted cash on our accounts on behalf of exploration work in Albania, by
$2,541,800 at our own disposal without any restrictions or limitations to these
funds after the release, which took place by April 23, 2009 following completion
of the procedural formalities.

---

11

6. TANGIBLE FIXED ASSETS

|2009                                        |  | Office Equipment |   |  | Vehicles |   |  | Leasehold    |   |  | Total   |  
|------------------------------------------- |  | ---------------- | - |  | -------- | - |  | ------------ | - |  | ------- | -
|                                            |  | & Furniture      |   |  |          |   |  | Improvements |   |  |         |  
|                                            |  | USD              |   |  | USD      |   |  | USD          |   |  | USD     |  
|Cost at January
      1                     |  | 129'563          |   |  | 127'379  |   |  | 47'375       |   |  | 304'317 |  
|Additions                                   |  | 1'892            |   |  | 50'648   |   |  | -            |   |  | 52'540  |  
|Sales                                       |  | -                |   |  | (89'500  | ) |  | -            |   |  | (89'500 | )
|Cost at June
      30                       |  | 131'455          |   |  | 88'527   |   |  | 47'375       |   |  | 267'357 |  
|                                            |  |                  |   |  |          |   |  |              |   |  |         |  
|Accumulated
      depreciation at January 1 |  | (36'554          | ) |  | (26'400  | ) |  | (10'117      | ) |  | (73'072 | )
|Depreciation                                |  | (15'480          | ) |  | (41'841  | ) |  | (4'738       | ) |  | (62'059 | )
|Sales                                       |  | -                |   |  | 61'000   |   |  | -            |   |  | 61'000  |  
|Accumulated depreciation
      at June 30   |  | (52'034          | ) |  | (7'241   | ) |  | (14'855      | ) |  | (74'131 | )
|                                            |  |                  |   |  |          |   |  |              |   |  |         |  
|Net book value
      at June 30             |  | 79'421           |   |  | 81'286   |   |  | 32'520       |   |  | 193'226 |  

Depreciation expense for the six months period ended June 30,
2009 and 2008 were $62,059 and $21,837, respectively. Depreciation expense for
the three months period ended June 30, 2009 and March 31, 2009 were $45,563 and
$12,153, respectively.

7. STOCK COMPENSATION PROGRAM

On May 1, 2007 the Board of Directors approved the granting of
stock options according to a Nonqualified Stock Option Plan. This stock option
plan has the purpose (a) to ensure the retention of the services of existing
executive personnel, key employees, and Directors of the Company or its
affiliates; (b) to attract and retain competent new executive personnel, key
employees, consultants and Directors; (c) to provide incentive to all such
personnel, employees, consultants and Directors to devote their utmost effort
and skill to the advancement and betterment of the Company, by permitting them
to participate in the ownership of the Company and thereby in the success and
increased value of the Company; and (d) allowing vendors, service providers,
consultants, business associates, strategic partners, and others, with or that
the Board of Directors anticipates will have an important business relationship
with the Company or its affiliates, the opportunity to participate in the
ownership of the Company and thereby to have an interest in the success and
increased value of the Company.

This plan constitutes a single omnibus plan, the Nonqualified
Stock Option Plan (NQSO Plan) which provides grants of nonqualified stock
options (NQSOs). The maximum number of shares of common stock that may be
purchased under the plan is 20,000,000.

The fair value of all of the options was determined using the
Black-Scholes option pricing model applying the weighted average assumptions
noted in the following table.

|                         |  | Six months period
      ended |  |  | Three months period ended | 
|------------------------ |  | ----------------------------- |  |  | ------------------------- | 
|                         |  | June 30, 2009                 |  |  | June 30, 2008             | 
|Expected dividend yield  |  | 0%                            |  |  | 0%                        | 
|Expected volatility      |  | 90%                           |  |  | 50%                       | 
|Risk-free interest rate  |  | 1.170%                        |  |  | 4.851%                    | 
|Expected term (in years) |  | 2.5                           |  |  | 6                         | 

The expected volatility is based on a peer group of companies
in a similar or the same industry for a period equal to the expected term of the
options. During the six months ended June 30, 2009 and 2008, the weighted
average fair value of options granted was $0.14 and $1.13 at the grant date,
respectively.

---

12

The following table summarizes the Company's stock option
activity for the six months ended June 30, 2009:

|                                 |  |              |  |  |           |  |  | Weighted-   |  |  |           | 
|-------------------------------- |  | ------------ |  |  | --------- |  |  | ----------- |  |  | --------- | 
|                                 |  |              |  |  | Weighted- |  |  | average     |  |  |           | 
|                                 |  |              |  |  | average   |  |  | remaining   |  |  | Aggregate | 
|                                 |  | Shares under |  |  | exercise  |  |  | contractual |  |  | intrinsic | 
|Options                          |  | option       |  |  | price     |  |  | term        |  |  | value     | 
|                                 |  |              |  |  |           |  |  |             |  |  |           | 
|Outstanding at December 31, 2008 |  | 11'650'000   |  |  | 4.00      |  |  |             |  |  |           | 
|Granted                          |  | 4400000      |  |  | 0.26      |  |  |             |  |  |           | 
|Exercised                        |  | 0            |  |  |           |  |  |             |  |  |           | 
|Forfeited or expired             |  | -3'650'000   |  |  | 3.31      |  |  |             |  |  |           | 
|Outstanding at June 30, 2009     |  | 12'400'000   |  |  | 2.83      |  |  | 6.08        |  |  | 1'584'000 | 
|Exercisable at June 30, 2009     |  | 5'958'425    |  |  | 4.07      |  |  | 7.65        |  |  | 91'385    | 

For the six months period ended June 30, 2009 and 2008, the
Company recorded a total charge of $2,780,648 and $5,846,247 respectively, with
respect to equity awards granted under the stock compensation and stock option
plans. For the six months period ended June 30, 2009 $2,728,375 and $52,273 were
recorded in personnel costs and consulting fees respectively. During the
comparable period 2008 the stock based compensation expenses of $3,542,314 and
$2,303,933 were recorded in personnel costs and consulting fees
respectively.

For the three months period ended June 30, 2009 the Company
recorded a total charge of $1,362,457 with respect to equity awards granted
under the stock compensation and stock option plans, of which $1,310,184 was
recorded in personnel expense and $52,273 in consulting fees. During the
comparable period 2008 the stock based compensation expenses to employees of
$1,633,065 were recorded in personnel costs and the stock based compensation
expenses to consultants positively affected consulting fees by $113,596.

Due to the termination of employment of Thomas Flottmann,
Peter-Mark Vogel and Rahul Sen Gupta, their stock option plans have been
terminated. These options remained exercisable for 90 days after termination and
forfeited unexercised during the six months ended June 30, 2009. 900,000 stock
options granted to consultants also forfeited during the six months ended June
30, 2009.

On April 28, 2009, we granted stock options to an aggregate of
three people, one of whom is an officer of our Company, one was an employee of
our Company at grant date and one is an executive officer of a corporate
consultant to our Company, to purchase an aggregate of 4,400,000 shares of our
common stock at an exercise price of $0.26 per share, for a term expiring April
28, 2012. The options will vest in 12 installments every three months, with each
installment equal to 1/12th of the total number of options granted to the
optionee.

A summary of the status of the Companys non-vested shares as
of June 30, 2009 and changes during the period is presented below:

---

13

Weighted-averageShares under
    
    
    grant dateNonvested options
    
    option
    
    
    fair valueNonvested at December 31, 2008
    
    5'506'548
    
    
    1.79Granted
    
    4'400'000
    
    
    0.14Vested
    
    (1'674'914
    )
    
    1.64Forfeited
    
    (1'790'059
    )
    
    1.49Nonvested at June 30, 2009
    
    6'441'575
    
    
    0.79


As of June 30, 2009, there was $ 5'603'163 of total
unrecognized compensation cost related to non-vested share-based compensation
arrangements granted under the Plans. That cost is expected to be recognized
over a weighted-average period of 1.26 years.

During prior periods stock options for consultants have been
accounted for under SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
123R) and expensed the fair value of the stock options at grant date over the
vesting period. During the preparation of the financial statements for the three
months ended March 31, 2009, the Company determined that it should have
accounted for stock options granted to consultants under SFAS No. 123 (revised
2004), Share-Based Payment (SFAS 123R) and EITF No. 96-18, Accounting for
Equity Investments That Are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods and Services. As such, the fair value of such
options is periodically remeasured during the vesting period using the
Black-Scholes option-pricing model and expense is recognized over the service /
vesting period.

Based on the Company's analysis in accordance with SFAS No. 154
"Accounting for Changes and Errors" (SFAS 154") and Staff Accounting Bulletin
No. 108 ("SAB 108") it was determined that the error was immaterial to prior
periods. However, the adjustments were recorded in the prior period Statement of
Operations and amounted to a reduction of consulting expense of $241,147 and
$505,430 for the three and six months periods ended June 30, 2008, respectively.
There was no impact on Earnings per Share for the two corresponding periods. The
cash flow statement was adjusted for this error accordingly.

8. DEBENTURE

On April 30, 2008, the Company successfully negotiated a
mezzanine tranche of bridge financing and raised $4,000,000 through the issuance
of 4,000 debenture notes (Debentures) of $1,000 each and 1,000,000 detachable
warrants. The warrants are exercisable to purchase the Companys unregistered
common shares at $2.10 per share and will expire on April 30, 2010. The net
proceeds after paying a finders fee were $3,790,000. The Debentures bear an
interest of 8% per annum payable twice a year (June and December) and are due
and payable in full two years from the date of issuance (April 30, 2010). The
Debentures can be prepaid along with any unpaid interest at the Companys
request without prepayment premium or penalty. The Debentures can be converted
into unregistered common shares at any time on demand of the holder at a
conversion price based upon the average price of the 20 days trading price prior
to conversion. The conversion price of 2,000 of the Debentures is subject to a
floor of $1.00 per share. Interest can be paid in the equivalent amount of
unregistered common shares of the Company. If the Company issues shares for
proceeds in excess of $40,000,000, then up to 50% of the proceeds are required
to be used to pay down the Debentures.

The aggregate proceeds received have been allocated between the
detachable warrants and the Debentures on a relative fair value basis.
Accordingly, $240,000 was credited to additional paid in capital with respect to
the warrants.

---

14

At the date of issuance the conversion price determined in
accordance with the Debenture agreement was less than the actual share price on
the issuance date. This resulted in a beneficial conversion feature of $557,989,
which has been amortized using the effective interest rate method and recorded
as part of interest expense over the term of the Debenture.

Debt issuance costs of $210,000 were incurred and will be
amortized over the term of the Debentures using the effective interest rate
method.

For the six months ended June 30, 2009 and June 30, 2008 we
have accreted the Debentures for the discount, including the beneficial
conversion feature of $217,807 and $40,491, respectively. For the three months
period ending June 30 2009 and June 30, 2008, we have accreted $120,543 and
$40,491, respectively. At June 30, 2009 and December 31, 2008, the unamortized
debt discount relating the debenture amounted to $333,653 and $551,460,
respectively.

9. WARRANTS

In April 2008, the FASB issued Emerging Issues Task Force
(EITF) 07-05, Determining whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock (EITF 07-05). EITF 07-05 provides guidance
on determining what types of instruments or embedded features in an instrument
held by a reporting entity can be considered indexed to its own stock for the
purpose of evaluating the first criteria of the scope exception in paragraph
11(a) of SFAS 133. EITF 07-05 is effective for financial statements issued for
fiscal years beginning after December 15, 2008 (our fiscal year 2009). We
adopted EITF 07-05 on the first day of our fiscal year 2009. Based on our
analysis we determined that 69,966,707 out of the 73,966,707 warrants
outstanding are not considered indexed to the Companys own stock under EITF
07-05 as the respective agreements include reset features. Hence, we
reclassified $592,804, comprising of an adjustment of $(9,679,775) to additional
paid in capital and $9,086,971 to deficit accumulated during the development
stage, from stockholders equity to a short-term liability upon adoption.
Additionally, the fair value of the warrants subject to EITF 07-05 are adjusted
to fair market value at the end of each reporting period. The impact of the
adoption on net loss and on basic and diluted loss per share for the six months
ended June 30, 2009 was $13,402,226, and $0.11 respectively while the impact of
the adoption on net loss and on basic and diluted loss per share for the three
months ended June 30, 2009 was $13,902,391and $0.12 respectively.

On April 10, 2009 17,526,881 Warrants from the Warrant A Equity
Series granted on April 10, 2007 expired unexercised.

On May 14, we asked each holder of the Warrants that had a
price protection clause to agree to amend their Warrants to delete the price
protection clause. As and when any of the holders of these Warrants agree to the
proposed amendment, we will provide them with an amended Warrant certificate
that shows the price protection clause as having been deleted. As of June 30,
2009, the following Warrant agreements have been amended and, in accordance with
EITF 07-05, needed to be reclassified as stockholders equity:

---

15

# of
    
    
    
    
    
    
    
    
    
    
    
    Fair value at date ofWarrant series
    
    Warrants
    
    
    Strike price
    
    
    Grant
      date
    
    
    Expiry date
    
    
    reclassificationWarrant B Equity PP1
    
    21'725'135
    
    
    0.59
    
    
    April 10, 2007
    
    
    April 10, 2010
    
    $
    6'165'981Warrant Equity PP2
      31-07-2007
    
    2'212'435
    
    
    0.59
    
    
    July
      31, 2007
    
    
    July
      31, 2009
    
    $
    166'277Brokerage Warrant PP # 1
    
    5'812'248
    
    
    0.59
    
    
    April 10, 2007
    
    
    April 10, 2010
    
    $
    1'918'805Brokerage Warrant
      PP # 2
    
    139'958
    
    
    0.59
    
    
    July
      31, 2007
    
    
    July
      31, 2009
    
    $
    6'809Debenture Warrants
    
    889'831
    
    
    0.59
    
    
    April 30, 2008
    
    
    April 30, 2010
    
    $
    235'394Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    8'493'267


As of June 30, 2009 and December 31, 2008, the Company had a
total of 56,439,826 and 73,966,707 warrants outstanding to purchase common
stock, respectively. Each warrant entitles the holder to purchase one share of
the Companys common stock. The Company has enough shares of common stock
authorized in the event that these warrants are exercised.

10. BANK LOAN

On January 22, 2009, the restricted cash in Mongolia was
reduced from $4,000,000 to $2,000,000 in agreement with the Mongolian
authorities. The Group immediately paid back its bank loan of $1,220,000 and
accumulated interest of $34,248 relating to a loan agreement with a group of
investors that was signed on September 21, 2008.

On April 24, 2009, we finalized negotiation for an additional
loan of $1,300,000, which will be secured by the remaining escrow funds in
Mongolia. The basic terms negotiated include a 10.8 percent per annum interest,
which is netted with the interest accrued on the escrow agreement in Mongolia,
and a repayment date of April 24, 2010. On May 1, 2009, $1,000,000 of this loan
was made available to our Company. The remaining $300,000 is subject to further
proof of performance of the work program. The funds obtained will be used for
financing the oil exploration carried out in Mongolia.

11. CONTINGENTLY CONVERTIBLE LOAN

On August 18, 2008, the Company issued contingently convertible
loans (the Loans) with a principal amount of $2,000,000 and disposed of 8% of
its interest in its operations in Mongolia related to Blocks 13 and 14 for
aggregate proceeds of $2,000,000. The net proceeds after paying finders fee were
$1,860,000. The Company is responsible for the Loan holders share of the
exploration costs attributable to Blocks 13 and 14 through phases 1, 2 and 3,
hereinafter referred to as the Participation Liability.

The Company has allocated part of the gross proceeds to a
Participation Liability for the exploration costs related to the 8% interest in
Blocks 13 and 14 in Mongolia provided to the unit holder. The Company has
estimated that there is a range of costs that could be incurred through
exploration phases 1, 2 and 3. The total minimum estimated spends for phase 1,
the only phase that is currently probable, is $4,000,000 and therefore, a
Participation Liability of $320,000 has been recorded. This liability will be
reduced as expenses are incurred. Also refer to Note 14 for additional
information.

The Loans carry an interest rate of 8% per annum and all
principal and accrued interest is payable in full two years from the date of
issuance (August 18, 2010). The Loans are secured by the Groups assets in the
Kyrgyz Republic.

The principal and any accrued but unpaid interest on the Loans
are convertible, in whole or in part, at the option of the holders if the Group
conducts a public offering at the prevailing market price. The loan was

---

16

accounted for as a liability in accordance with FAS150
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. Because the financial instrument embodies a conditional
obligation that the Company must or may settle by issuing a variable number of
equity shares and the monetary value of the obligation is based on a fixed
monetary amount known at inception.

The initial carrying amount of the Loans of $1,680,000 will be
accreted to the redemption amount of $2,000,000 over the term of the loans using
the effective interest method.

We have accreted the Loans for the discount that relates to the
six months period ended June 30, 2009 and 2008 of $65,920 and $0, respectively.
For the three months period ended June 30, 2009 and 2008, we have accreted
$37,909 and $0, respectively. At June 30, 2009 and December 31, 2008 the
unamortized debt discount relating the contingently convertible loan amounted to
$194,902 and $260,822, respectively.

12. PROMISSORY NOTE

On December 5, 2008, the Company borrowed $540,646 from four
Directors at no discount to the principal amount by selling promissory notes to
shareholders (Shareholder Notes). The parties agreed that no interest shall
accrue on the Shareholder Notes unless the Company breaches the repayment
schedule. The repayment of the principal amount of the Shareholder Notes has to
occur if the Company raises greater than $1,000,000 in financing or 90 days
after written demand for repayment by the Shareholder Notes holder, whichever is
first. The Company may also repay any or all of the principal amount of the
Shareholder Notes at any time without notice, bonus or penalty. In the event
that the Company fails to make a payment when it is due, the Company will pay
interest on the outstanding principal amount of the Shareholder Notes at the
rate of 12% per annum until the Shareholder Notes are paid in full.

For the three months ended June 30, 2009, the Company has not
received any written demand for repayment, but on May 1, 2009, received
$1,000,000 in financing (refer to Note 10). Therefore, as the payment falls due
immediately, but so far has not been paid yet, interest is being accrued.
Interest expense of $10,665 has been recorded in the three and six months period
ended June 30, 2009 and was accrued as of June 30, 2009.

13. PRIVATE PLACEMENT

On September 4, 2008, the Company conducted a private placement
in which it sold 4,000,000 units for $2,600,000, or $0.65 per unit. Each unit
consisted of one share of common stock, one warrant and an interest in rights
granted to us by the Mineral Resources and Petroleum Authority of Mongolia with
respect to certain production sharing contracts governing areas in Mongolia
referred to as Blocks 13 and 14. The Company agreed to cover the unit holders
share of the exploration costs on Blocks 13 and 14 through exploration phases 1,
2 and 3 herein after referred to as the Participation Liability.

Each of the 4,000,000 warrants granted under the Securities
Purchase Agreement is exercisable for two years at $0.95 per warrant. The
warrants carry tag-along registration rights such that if a registration
statement (other than on Form S-4 or S-8) is filed, the holders may demand that
the shares underlying their warrants be included in such registration statement.
If no such registration statement is filed by January 4, 2009, the Company has
to undertake its best efforts to file a registration statement for the shares
underlying the warrants by May 4, 2009. Based on this best effort clause and the
fact that the Company has undertaken its best effort to file a registration
statement the warrants are accounted for as an equity instrument.

---

17

Of the aggregate proceeds received of $2,600,000, $430,571 has
been allocated to the warrants based on their estimated fair value, $320,000 has
been allocated to the Participation Liability and the balance has been allocated
to the Shareholders Equity.

The amount allocated to the Participation Liability was
determined in the same manner as the Participation Liability arising in
connection with the Loans described in Note 11.

14. PARTICIPATION LIABILITY

On August 18, 2008, the Company completed the issuance of
contingently convertible loans (the Loans) and in addition to the interest
payable under the Loans, the Loan holders will obtain an interest in 8% of our
interest in our operations in Mongolia related to the Blocks 13 and 14 without
having to undertake any of the obligations of work programs connected to those
lots (governing areas in Mongolia referred to as Tsagaan-Els 13 and Zuuabayan
14).

On September 4, 2008, we conducted a private placement and each
unit consisted of one share of common stock, one warrant and an interest in
rights granted to us by the Mineral Resources and Petroleum Authority of
Mongolia with respect to certain production sharing contracts governing areas in
Mongolia referred to as Tsagaan-Els 13 and Zuuabayan 14. A total of 8% of our
interest in our operations in Mongolia related to the Blocks 13 and 14 without
having to undertake any of the obligations of work programs connected to those
lots (governing areas in Mongolia referred to as Tsagaan-Els 13 and Zuuabayan
14).

The Company considers each of the 8% participation in the
interest of our operations in Mongolia as a Participation Liability of $320,000
each (totalling $640,000).

For the three and six months period ended June 30, 2009, the
participation liability was not reduced as the Company has not incurred any
expenses on these work programs. For the next 12 months we anticipate to conduct
$1,300,000 of the $2,000,000 work program and therefore classify $416,000 of the
Participation Liability as short-term liability.

15. RELATED PARTY DISCLOSURE

The consolidated financial statements include the financial
statements of Manas Petroleum Corporation and the entities listed in the
following table:

|                                                   |                         | Equity share  | Equity share
|-------------------------------------------------- | ----------------------- | ------------- | ------------
|                                                   | Country                 | June 30, 2009 | Dec 31, 2008
|DWM Petroleum AG, Baar (1)                         | Switzerland             | 100%          | 100%        
|Manas Petroleum
      AG, Baar (2)                 | Switzerland             | 100%          | 100%        
|CJSC South Petroleum Company, Jalalabat (3)        | Kyrgyz Republic         | 25%           | 25%         
|CJSC Somon Oil
      Company, Dushanbe (4)         | Rep of
      Tajikistan | 90%           | 90%         
|Manas Petroleum of Chile Corporation, Victoria (5) | Canada                  | 100%          | 100%        
|Manas Management
      Services Ltd., Nassau (6)   | Bahamas                 | 100%          | 100%        
|Manas Chile Energia Limitada, Santiago (7)         | Chile                   | 100%          | 100%        
|Manas Gobi LLC,
      Ulaan Baator (8)             | Mongolia                | 84%           | n/a         

|(1) | Including Branch in Albania                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------
|(2) | Founded in 2007                                                                                                    
|(3) | CJSC South Petroleum Company was founded by DWM Petroleum
      AG; equity method investee that is not consolidated
|(4) | CJSC Somon Oil Company was founded by DWM Petroleum
    AG                                                         
|(5) | Founded in 2008                                                                                                    
|(6) | Founded in 2008                                                                                                    
|(7) | Manas Chile Energia Limitada was founded by Manas
      Management Services Ltd.; founded in 2008                  
|(8) | Manas Gobi LLC was founded by DWM Petroleum AG on April
      30, 2009                                             

---

18

The ultimate control owner of the Group is the management of
the Group (39%). Ownership and voting right percentages in the subsidiaries
stated above are identical to the equity share.

The following table provides the total amount of transactions,
which have been entered into with related parties for the relevant financial
period:

|Board of directors                                    |  | Six months period
      ended |  |  | Three months period ended | 
|----------------------------------------------------- |  | ----------------------------- |  |  | ------------------------- | 
|                                                      |  | June 30, 2009                 |  |  | June 30, 2008             | 
|Payments to directors for office rent                 |  | 24'923                        |  |  | 93'108                    | 
|Payments to related companies controlled by directors |  |                               |  |  |                           | 
|for rendered consulting services                      |  | 190'700                       |  |  | 5'814                     | 
|                                                      |  |                               |  |  |                           | 
|                                                      |  | June 30, 2009                 |  |  | June 30, 2008             | 
|                                                      |  | USD                           |  |  | USD                       | 
|Promissory notes from directors                       |  | 386'305                       |  |  | -                         | 

Promissory note from former director (Peter-Mark Vogel) agreed
on Dec 5, 2008 over USD 154,341

16. COMMITMENTS & CONTINGENT LIABILITIES

Legal actions and claims (Kyrgyz Republic, Republic of
Tajikistan, Chile and Albania)

In the ordinary course of business, the associate/subsidiaries
or branches in the Kyrgyz Republic, Republic of Tajikistan, Chile, Mongolia and
Albania may be subject to legal actions and complaints. Management believes that
the ultimate liability, if any, arising from such actions or complaints will not
have a material adverse effect on the financial condition or the results of
future operations of the associate/subsidiaries in the Kyrgyz Republic, Republic
of Tajikistan, Chile and Albania.

During the initial phase of making application for our Chilean
Exploration license, a joint bidding group was formed with Manas, IPR and Energy
Focus. Each had a one-third interest.

Manas and IPR are established petroleum businesses. Energy
Focus is a start-up business. On its own accord, Energy Focus left the bidding
group. Energy Focus prepared a side letter, which was signed by Manas and IPR.
By the terms of this side letter, Energy Focus was granted the option to rejoin
the consortium under certain conditions.

Even though Energy Focus has been asked many times to join the
group by contributing its prorated share of capital, they have failed to do so.
Despite this, Energy Focus claims that they are entitled to participate in the
consortium at any future time. IPR and Manas disagree with this interpretation.

No litigation has been commenced as of June 30, 2009. Manas and
IPR are firmly of the view that Energy Focus no longer has any right to join the
consortium. While Energy Focus has not accepted this position, they have not
commenced litigation.

At June 30, 2009, there had been no legal actions against the
associate/subsidiaries or branches in the Kyrgyz Republic, Republic of
Tajikistan, Chile and Albania.

Management believes that the Group, including
associate/subsidiaries or branches in the Kyrgyz Republic, Republic of
Tajikistan, Chile and Albania are in substantial compliance with the tax laws
affecting its operations. However, the risk remains that relevant authorities
could take differing positions with regards to interpretative issues.

---

19

17. PERSONNEL COSTS AND EMPLOYEE BENEFIT PLANS

Defined benefit plan

The Company maintains a Swiss defined benefit plan for 4 of its
employees. The plan is part of an independent collective fund which provides
pensions combined with life and disability insurance. The assets of the funded
plan are held independently of the Companys assets in a legally distinct and
independent collective trust fund which serves various unrelated employers. The
funds benefit obligations are fully reinsured by AXA Winterthur Insurance
Company. The plan is valued by independent actuaries using the projected unit
credit method. The liabilities correspond to the projected benefit obligations
of which the discounted net present value is calculated based on years of
employment, expected salary increases, and pension adjustments.

Six months period
        ended
      
      
      Three months period endedPension expenses
      
      June 30, 2009
      
      
      June 30, 2008
      
      
      June 30, 2009
      
      
      June 30, 2008USD
      
      
      USD
      
      
      USD
      
      
      USDNet service cost
      
      14'626
      
      
      5'165
      
      
      7'313
      
      
      2'582Interest cost
      
      9'376
      
      
      4'580
      
      
      4'688
      
      
      2'290Expected return on assets
      
      (7'037
      )
      
      (4'516
      )
      
      (3'511
      )
      
      (2'258
      )Amortization of
        net (gain)/loss
      
      0
      
      
      0
      
      
      0
      
      
      0Net periodic pension cost
      
      16'965
      
      
      5'229
      
      
      8'490
      
      
      2'614


During the six months period ended June 30, 2009 and 2008 the
Company made cash contributions of approximately $22,200 and $136,086,
respectively to its defined benefit pension plan. The company expects to make
additional cash contributions of approximately $15,380 to its defined benefit
pension plans during the remainder of 2009.

18. FAIR VALUE MEASUREMENT

SFAS 157 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level
1, defined as observable inputs such as quoted prices in active markets; Level
2, defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3, defined as unobservable inputs
in which little or no market data exists, therefore requiring an entity to
develop its own assumptions. Financial assets carried at fair value as of June
30, 2009 are classified in one of the three categories as follows:

Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalWarrants
    $
    -
    
    $
    -
    
    $
    5'501'763
    
    $
    5'501'763Total
    $
    -
    
    $
    -
    
    $
    5'501'763
    
    $
    5'501'763


The following table summarizes the changes in the fair value of
the Companys level 3 financial assets and liabilities for the period ending
June 30, 2009:

---

20

Balance at January 1, 2009
    
    -Total gains (losses) realized and unrealized:Included in earnings,
      as a part of change in fair value of warrants
      
      13'402'226
      
    1)Included in other comprehensive income
      
      -Purchase, sale, or settlement
      
      (8'493'267
      )
    2)Net transfer in / (out) of level 3
      
      592'804
      
    3)Balance at June 30, 2009
    
    5'501'7631) Recorded in Change in fair value of warrants.2) Reclassification as equity instrument.3) Transfer in upon adoption of EITF 07-05.


19. EARNINGS PER SHARE

Loss per share is calculated as Net Loss for the three months
period ended June 30, 2009 divided by 119,051,733 outstanding shares and as Net
Loss for the three months period ended on June 30, 2008 divided by 113,539,840
outstanding shares.

Loss per share is calculated as Net Loss for the six months
period ended June 30, 2009 divided by 119,051,733 outstanding shares and as Net
Loss for the six months period ended on June 30, 2008 divided by 113,058,917
outstanding shares.

For the six and three months period ended June 30, 2009 and
June 30, 2008 all share options, warrants and shared underlying convertible debt
instruments were excluded from the calculation of the diluted weighted average
number of shares, because the Group made a net loss during the calculation
period and the effect of their inclusion would be anti-dilutive.

20. COMPREHENSIVE INCOME (LOSS)

The comprehensive income (loss) are as follows:

|                                      |  | Six months period
      ended |   |  | Three months period ended |  
|------------------------------------- |  | ----------------------------- | - |  | ------------------------- | -
|                                      |  | June 30, 2009                 |   |  | June 30, 2008             |  
|                                      |  | USD                           |   |  | USD                       |  
|Net loss                              |  | (18'925'760                   | ) |  | (9'892'116                | )
|Currency translation
      adjustment |  | (36'790                       | ) |  | (129                      | )
|Total comprehensive income (loss)     |  | (18'962'550                   | ) |  | (9'892'245                | )

21. SUBSEQUENT EVENT(S)

On July 21, 2009, we announced that our wholly owned
subsidiary, DWM Petroleum AG signed an extended farm-out term sheet covering
certain Blocks in Albania to a finance group of international oil and gas
investors. Both parties have agreed to keep the terms confidential until the
signing of a shareholders agreement.

On July 28, 2009, Somon Oil was granted the Tajik North-West
petroleum license which covers 2,492 square kilometers (615,784 acre) of
exploration area. The license entitles for 7 years of exploration. In case of
discovery, Somon Oil has an exclusive right on the discovered field. The license
area is located in the north part of the Sugd region, and is bordering with
Uzbekistan and the Uzbek pipeline network. In the south-west the license area is
adjacent with Somon Oils western license areas Novobod and Obchai-Kalacha.

---

21

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Forward-Looking Statements

This quarterly report contains forward-looking statements.
Forward-looking statements are statements that relate to future events or future
financial performance. In some cases, you can identify forward looking
statements by the use of terminology such as may, should, intend,
expect, plan, anticipate, believe, estimate, project, predict,
potential, or continue or the negative of these terms or other comparable
terminology. These statements speak only as of the date of this quarterly
report. Examples of forward-looking statements made in this quarterly report
include statements pertaining to, among other things:

- the quantity of potential natural gas and crude oil resources;
- potential natural gas and crude oil production levels;
- capital expenditure programs;
- projections of market prices and costs;
- supply and demand for natural gas and crude oil;
- our need for, and our ability to raise, capital; and
- treatment under governmental regulatory regimes and tax laws.

These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including:

- our ability to establish or find resources or reserves;
- volatility in market prices for natural gas and crude oil;
- liabilities inherent in natural gas and crude oil operations;
- uncertainties associated with estimating natural gas and crude oil
  resources or reserves;
- competition for, among other things, capital, resources, undeveloped lands
  and skilled personnel;
- political instability or changes of laws in the countries in which we
  operate and risks of terrorist attacks;
- incorrect assessments of the value of acquisitions;
- geological, technical, drilling and processing problems; and
- other factors discussed under the section entitled Risk Factors in our
  annual report on Form 10-K filed on April 14, 2009.

These risks, as well as risks that we cannot currently
anticipate, could cause our companys or our industrys actual results, levels
of activity or performance to be materially different from any future results,
levels of activity or performance expressed or implied by these forward looking
statements.

Although we believe that the expectations reflected in the
forward looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable law,
including the securities laws of the United States and Canada, we do not intend
to update any of the forward looking statements to conform these statements to
actual results.

As used in this quarterly report, the terms we, us, and
our refer to Manas Petroleum Corporation, its wholly-owned subsidiaries DWM
Petroleum A.G., a Swiss company, Manas Petroleum A.G., a Swiss company, Manas
Energia Chile Limitada, a Chilean company, Manas Petroleum of Chile Corporation,
a Canadian company, Manas Management Services Ltd., a Bahamian company, and its
partially owned subsidiary CJSC Somon Oil Company, a Tajikistan company, and its
25% ownership interest in CJSC South Petroleum Company, a Kyrgyz company, as the
context may require.

---

22

The following discussion and analysis provides a narrative
about our financial performance and condition that should be read in conjunction
with the unaudited consolidated financial statements and related notes thereto
included in this quarterly report.

Overview

We are a development stage company. Our growth strategy is
focused on petroleum exploration and development in selected Central Asian
countries of the former Soviet Union, in the Balkan Region and in Latin America.
Our goal is to increase shareholder value through the successful acquisition and
exploration of oil and gas resources. We do not have any known reserves on any
of our properties.

We have no operating income yet and, as a result, we depend
upon funding from various sources to continue our operations and to implement
our growth strategy.

The Six Months Ended June 30, 2009 Compared to the Six
Months Ended June 30, 2008

Results of Operations

For the six months period ended June 30, 2009 we had a net loss
of $18,925,760 as compared to a net loss of $9,892,116 for the comparable period
ended June 30, 2008. 73% of the net loss, or $13,902,391, for the six months
period ended June 30, 2009 is related to the non-cash charge for a change of the
fair value of warrants.

For the six months period ended June 30, 2009 our operating
expenses decreased to $5,043,161 from $10,500,351 reported for the same period
in 2008. The 52% decrease in our total operating expenses is attributable
firstly to personnel changes and reduction of administrative costs due to
managements decision to cut down costs, and secondly, to reduced exploration
costs. 55% of the total operating expenses, or $2,780,648, for the six months
period ended June 30, 2009 is related to stock-based or stock option-based
compensation payments, which are non-cash. Compared to the same period in 2008,
where we recorded stock-based or stock option-based compensations of $5,846,247.

Personnel costs

For the six months period ended June 30, 2009 our personnel
costs decreased to $3,515,853 from $5,056,900 for the corresponding period in
2008. This decrease of 30% or 1,541,047 in the six months period comparison is
due to managements decision to cut down costs from the beginning of 2009.

For the six months period ended June 30, 2009 78%, or
$2,728,375, is related to a non-cash charge for stock compensation and our stock
option plan to obtain and retain qualified management. In the corresponding
period in 2008 70%, or $3,542,314, was related to a non cash-charge for stock
compensation and our stock option plan to obtain and retain qualified
management.

Exploration costs

For the six months ended June 30, 2009, we incurred exploration
costs of $331,075 as compared to $1,288,011 for the corresponding period in
2008. This decrease of 74% is mostly attributable to reduced exploration
activity in Albania and Tajikistan during the six months ended June 30, 2009 due
firstly to the results of analysis of reprocessed data, and secondly, to the
technical and administrative preparation for further exploration activities to
be started in the second half of 2009.

---

23

Consulting fees

For the six months ended June 30, 2009, we paid consulting fees
in the amount of $554,130 as compared to consulting fees of $2,691,792 for the
period ended June 30, 2008. This decrease of 79% is affected by a grant of stock
option-based compensation to consultants of $52,273 for the six months ended
June 30, 2009 as compared to $2,303,933 for the corresponding period in 2008.

Administrative costs

For the six months ended June 30, 2009, our administrative
costs declined to $580,044 from $1,441,811 during the six months ended June 30,
2009. This decrease of 60% or 861,767 is attributable to managements decision
to cut down costs from the beginning of 2009.

The Three Months Ended June 30, 2009 Compared to the
Three Months Ended June 30, 2008

Results of Operations

For the three months period ended June 30, 2009 we had a net
loss of $16,716,121 as compared to a net loss of $3,992,796 for the comparable
period ended June 30, 2008. 83% of the net loss, or $13,902,391, for the three
months period ended June 30, 2009 is related to the non-cash charge for a change
of the fair value of warrants.

For the three months period ended June 30, 2009 our operating
expenses decreased to $2,532,722 from $4,493,464 reported for the same period in
2008. The 44% decrease in our total operating expenses is also attributable to
managements decision to cut down costs and reduced exploration costs. During
the three months period ended June 30, 2009 54% of the total operating expenses,
or $1,362,457, for the three months period ended June 30, 2009 is related to a
non cash-charge for stock compensation and our stock option plan to obtain and
retain qualified management. Compared to the same period in 2008, $1,519,469 was
related to a non cash-charge for stock compensation and our stock option plan to
obtain and retain qualified management.

Personnel costs

For the three months period ended June 30, 2009 the personnel
costs decreased to $1,652,000 from $2,491,243 for the three months period ended
June 30, 2008. This decrease of 34% or 839,243 in the three months period
comparison is due to managements decision to cut down costs from the beginning
of 2009 and to reduce the number of employees.

For the three months period ended June 30, 2009 79%, or
$1,310,184, is related to a non-cash charge for stock compensation and our stock
option plan to obtain and retain qualified management. In the corresponding
three months period ended June 30, 2008 66%, or $1,633,065, is related to a non
cash-charge for stock compensation and our stock option plan to obtain and
retain qualified management.

Exploration costs

For the three months ended June 30, 2009 the exploration costs
decreased 93% to $66,815 from $1,026,399 for the corresponding period in 2008,
because of reduced exploration activity in Albania and Tajikistan during the
three months ended June 30, 2009 due firstly to the analysis of reprocessed
data, and secondly, to the technical and administrative preparation for further
exploration activities to be started in the second half of 2009.

---

24

Consulting fees

For the three months ended June 30, 2009, we paid consulting
fees in the amount of $427,345 as compared to consulting fees of $144,805 for
the corresponding period in 2008. The increase of 195% is attributable to our
entering consulting agreements with employees whose employment agreements were
terminated in the beginning of 2009.

For the three months ended June 30, 2009, 12% or $52,273, is
related to a non-cash charge for stock option compensation to consultants. In
the corresponding period in 2008 consulting fees were positively affected by
$113,596, which was related to a change in fair value of stock options to
consultants.

Administrative costs

For the three months ended June 30, 2009, our administrative
costs declined to $340,999 from $818,864 during the three months ended June 30,
2009. This decrease of 58% or 477,865 is attributable to managements decision
to cut down costs from the beginning of 2009.

Liquidity and Capital Resources

Our cash balance as of June 30, 2009 was $4,387,403 of which
$2,950,845 is restricted to finance the bank guarantees for the first phase of
our work program in Albania (covering the seismic and geological and geophysical
(geological and geographical) costs in Albania) and in Mongolia (covering the
seismic and geological and geographical costs in Mongolia), leaving a balance of
$1,436,558. In order to continue to fund operations for the next 12 months and
implement the geological work program for our projects particular in Central
Asia and the Balkan Region as well as to finance continuing operations, our
group of companies will require further funds. We expect these funds will be
raised through additional equity and/or debt financing (private placements). If
we are not able to raise the required funds, we would consider farming-out
projects in order to reduce our financial commitments.

On January 22, 2009, the restricted cash in Mongolia was
reduced from $4,000,000 to $2,000,000 in agreement with the Mongolian
authorities. We immediately paid our bank loan of $1,220,000 and accumulated
interest of $34,248. As a result, we were able to free up cash in the amount of
$745,752 net of all costs and charges at our own disposal (no restriction or
limitation of these funds after release).

On March 6, 2009, we negotiated new work programs for our two
PSCs for the Blocks A,B and D,E with the Albanian National Petroleum Agency (NPA
later AKBN, National Agency of Natural Resources). The new work programs need to
be formally approved by the AKBN.

On April 3, 2009, we successfully ratified the new work
programs for our exploration blocks A, B and D, E in Albania and had them
approved with the Albanian authorities (AKBN), which allows us to reduce the
bank guarantee, held as restricted cash on our accounts on behalf of exploration
work in Albania, by $2,541,800 at our own disposal without any restrictions or
limitations to these funds after the release, which took place by April 23, 2009
following completion of the procedural formalities. In addition, we finalized
negotiation for an additional loan of $1,300,000, which will be secured by the
remaining escrow funds in Mongolia. On May 1, 2009, $1,000,000 of this loan was
made available to our company. The remaining $300,000 is subject to further
proof of performance of the work program.

Our capital commitments are disclosed in this quarterly report
on Form 10-Q for the six and three months ended June 30, 2009 as well as in our
annual report on form 10-K for the year ended December 31, 2008. There have been
no material changes in these commitments as of June 30, 2009.

---

25

Operating Activities

Net cash outflow from operating activities of $3,579,816 for
the six months ended June 30, 2009 has decreased from $4,479,574 in the
comparable period 2008. This is mainly due to managements decision to cut down
costs from beginning of 2009. As a consequence, the number of employees and the
administrative costs have been reduced. Additionally, during the first two
quarters of 2008, we had extensive exploration activities in Albania and
Tajikistan.

Investing Activities

Net cash inflow from investing activities of $4,976,899 for the
six months ended June 30, 2009 has changed from a net cash outflow of $6,270,064
in the comparable period for 2008. This is due to the establishment of the bank
guarantee for the first exploration phase in Albania in the second quarter of
2008. The reduction of the bank guarantee in Albania and the reduction of the
amount on the escrow agreement in Mongolia during the six months period ended
June 30, 2009 have positively affected our Cash Flow from Investing Activities
by $5,000,939.

Financing Activities

Net cash outflow from financing activities of $220,000 for the
six months ended June 30, 2009 has changed from a net cash inflow of 3,818,366
in the comparable period for 2008. During the six months period ended June 30,
2008 Cash Flow from Financing Activities was positively affected by the issuance
of Debentures in the second quarter of 2008 by $3,860,000.

Cash Flows

|                                                      |   | Three Months Ended |  
|----------------------------------------------------- | - | ------------------ | -
|                                                      |   | June 30            |  
|                                                      |   | 2009               |  
|Net cash (used in) Operating Activities               | $ | (3,579,816         | )
|Net cash provided by (used in) Investing Activities   | $ | 4,976,899          |  
|Net cash provided by (used in) Financing Activities   | $ | (220,000           | )
|Change in Cash and Cash Equivalents During the Period | $ | 1,177,083          |  

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Cash Requirements

We will require additional funds to plan of operation. These
funds may be raised through equity financing, debt financing, or other sources,
such as additional farm-out agreements, which may result in further dilution in
the equity ownership of our shares. There is still no assurance that we will be
able to maintain operations at a level sufficient for an investor to obtain a
return on his investment in our common stock. Further, we may continue to be
unprofitable.

Specifically, we estimate our cash needs for the next 12 months
to be as follows:

---

26

Expense
    AmountGeological & Geophysical
      1'276'000General & Administrative
      3'128'577Financing
      1'613'333Legal
      208'560Audit
      440'000Open Commitments
    219'680Total Expenses planned for next 12 months
    6'886'150


As an operator, we have no seismic or drilling commitments for
the next 12 months in Albania, Mongolia and Tajikistan. As a non-operator, we
have no seismic or drilling commitments in Chile for the next 12 months. In
Kyrgyz Republic, the operational costs, including seismic are fully carried by
our partner Santos. In Mongolia, we have currently a geological and geographical
commitment of $1,300,000 for the next 12 months. Should we be able to raise
funds through equity financing, debt financing or other sources, such as
additional farm-out agreements, we would increase or speed up our programs.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
scale down or perhaps even cease the operation of our business.

Going Concern

The consolidated financial statements have been prepared on the
assumption that we will continue as a going concern. We have historically
incurred losses and have incurred a loss of $16,716,121 and 3,992,956 for the
six and three months ended June 30, 2009 respectively. Because of these
historical losses, we will require additional working capital to develop our
business operations. Our cash balance as of June 30, 2009 was $4,387,403, of
which $2,950,845 has been restricted for a bank guarantee for the first phase of
our work program in Albania (covering the seismic and geological and
geographical costs in Albania) and two escrow accounts for the first phase of
our work program in Mongolia (covering the seismic and geological and
geographical cost in Mongolia), leaving a balance of $1,436,558.

On January 22, 2009, the restricted cash in Mongolia was
reduced from $4,000,000 to $2,000,000 in agreement with the Mongolian
authorities. We immediately repaid our bank loan of $1,220,000 and accumulated
interest of $34,248. As a result, we were able to free up cash in the amount of
$745,752 net of all costs and charges at our own disposal (no restriction or
limitation of these funds after release).

As of February 1, 2009, the corporate cost base had been
reduced significantly and therefore, also the expected monthly burn rate from
around $650,000 to around $320,000 on basic operational activities. The main
source of the cost savings stem from a reduction in the number of personnel as
well as significant salary cuts at the Board of Directors level.

On April 3, 2009, we successfully negotiated new work programs
for our exploration blocks A & B and D & E in Albania with the Albanian
authorities (AKBN), which allowed us to reduce the bank guarantee, held as
restricted cash on our accounts on behalf of exploration work in Albania, by
$2,541,800. There are no further restrictions or limitations to these funds
after the release, which took place by April 23, 2009 following completion of
the procedural formalities. In addition we finalized negotiation for an
additional loan of $1,300,000, which will be secured by the remaining escrow
funds in Mongolia. On May 1, 2009, $1,000,000 of this loan was made available to
our company. The remaining $300,000 is subject to further proof of performance
of the work program.

Based on the revised cost base we estimate that we have
sufficient working capital to fund operations for four months from July 2009. In
order to continue to fund operations through July 2010 and execute the

---

27

strategy to develop our assets, we will require further funds.
We expect to secure these additional funds through possible disposals or
farm-outs of our existing interests and we are currently in active negotiations
with interested parties for such transactions.

We intend to raise additional working capital through private
placements, public offerings, bank financing and/or advances from related
parties or shareholder loans as well as limit our financial obligations by
farming-out projects to third parties.

The continuation of business is dependent upon obtaining such
further financing. The issuance of additional equity securities could result in
a significant dilution in the equity interests of current or future
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase liabilities and future cash commitments.

There are no assurances that we will be able to complete the
disposals or farm-outs of our existing interests or to obtain additional
financing through either private placement, public offerings and/or bank
financing necessary to support our working capital requirements. Nevertheless
after making enquiries, and considering the uncertainties above, the directors
have a reasonable expectation that we will have adequate resources to continue
our operations for the foreseeable future.

These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

Based on our business plan, we expect to obtain $2,700,000 from
internal sources and to need additional funding from external sources of
approximately $4,200,000.

Recent Developments

We are primarily focused on our operations in Albania, Kyrgyz
Republic, Tajikistan, Mongolia and Chile. Since the end of our most recent
fiscal year, various developments have affected these operations.

Albania

On April 3, 2009, we successfully negotiated new work programs
under our two production sharing contracts for our exploration blocks A & B
and D & E in Albania with the Albanian authorities. For the production
sharing contract covering blocks A & B, we reduced the minimum seismic line
kilometers from 300 km of 2D seismic to 189 km for the first phase, which was
completed by December 31, 2008. For production sharing contract covering blocks
D & E, we reduced the minimum seismic line kilometers from 300 km to 105 km
of 2D seismic for the first phase.

On April 21, 2009, we entered into a non-binding letter of
intent with an unrelated third party concerning the possible farmout, by that
third party, to our Albanian properties. The letter of intent is subject to,
among other conditions, the negotiation and execution of a formal agreement
which is currently prepared. The party has completed a due diligence.

We also received the final results of the seismic program
relating to blocks A & B from the Geological Institute of Israel. We also
performed the final seismic interpretation of all seismic data for block A,
integrating new and existing seismic data, including well data and surface
geology. We also prepared various time and depth maps, geological map, seismic
line and well location maps for blocks A & B.

---

28

Kyrgyz Republic

South Petroleum Company (SPC), in which Manas Petroleum owns a
25% interest, prepared the drilling of the first shallow light oil target, the
North Aizar 1 well. The target depth is 2000 meters. A new roof of productive
Paleogene deposits was drilled in. The drilling operations will being carried
out by the contractor CJSC Sherik with whom a contract was finalized.

The drilling of an exploration well at the North Ayzar -1
(Tuzluk license) prospect by the Kyrgyz joint venture, SPC (South Petroleum
Company) was spudded on June 15, 2009. The North Ayzar- 1 is to test
tertiary-aged (Palaeogene) clastics and carbonates reservoirs between 1650 and
1900m. Projected total depth of this well is 1950m and it was expected to take
from 20 to 30 days to drill. Following the drilling of the North Ayzar-1, the
drill rig is scheduled to be moved to a second deeper prospect called the Huday
Nazar in the Soh license area where drilling would commence approximately 2
weeks later. Should drilling be sufficiently encouraging, testing and completion
of the wells would be made following the drilling of the Huday Nazar.

Tajikistan

Somon Oil, in which Manas Petroleum holds a 90% interest has
started to prepare a seismic campaign which will cover 123 KM of 2-D seismic and
which is planned to commence in September 2009. This included environmental
licenses, preparation of a field camp and finalizing a seismic program. A letter
of award for the seismic is signed to the Iranian geophysical company OEOC.

On July 28, 2009, Somon Oil was granted the Tajik North-West
petroleum license which covers 2,492 square kilometers (615,784 acre) of
exploration area. The license entitles for 7 years of exploration. In case of
discovery, Somon Oil has an exclusive right on the discovered field. The license
area is located in the north part of the Sugd region, and is bordering with
Uzbekistan and the Uzbek pipeline network. In the south-west the license area is
adjacent with Somon Oils western license areas Novobod and Obchai-Kalacha.
Existing exploration data within the North-West license area contain 6 wells and
1,100 km of 2-D seismic which was acquired during Soviet exploration campaigns
between 1964 and 1992. Somon Oil targets large four-way closure prospects in the
North-West license area at a depth of 3.5  4.5 km. The 7 years work program
contains 400 km of 2-D seismic, 100 square kilometers of 3-D seismic and 2 deep
wells. Financing for the exploration up to discovery is secured by the existing
option farmout to Santos International Holdings PTY Ltd.

Chile

In connection with our consortiums operations in Chile and as
part of the geological and geophysical work, the operator Geopark Holdings Ltd.
continued gathering digital data base and catalogued the well files. They have
reprocessed data from previous seismic explorations and made a field surface
geology study.

Mongolia

On April 21, 2009 a wholly-owned subsidiary of Manas Petroleum,
DWM Petroleum AG, has signed production contracts with the Petroleum Authority
of Mongolia for blocks 13 and 14 at the Hotel Khan Palace Kempinsky in
Ulaanbaatar, Mongolia. The production contracts were signed by Dashzeveg
Amarsaikhan, the Chairman of the Petroleum Authority of Mongolia, and by Alex
Becker on behalf of DWM Petroleum AG in a televised ceremony. Jamiansurengiyn
Batsuuri, Vice-Minister of the Ministry of Mineral Resources and Energy, Dr.
Ariunsan Baldanjav, Economic Policy Advisor of the Prime

---

29

Minister's office, and several distinguished members of
Parliament also attended the televised ceremony. The signing ceremony follows a
review process by Mongolian Government and Security Council and formal
ratification by parliament. Subject to payment of fees, this represented the
final step in assigning these blocks for exploration and exploitation according
to Mongolian law.

We own a 74% interest in blocks 13 and 14, which cover an
aggregate of over 20,000 square kilometers, or almost five million acres, of
land located on Mongolia's southern border. The production contracts provide for
a five-year exploration period (with two optional six month extensions allowed)
beginning on the effective date of April 21, 2009, and a twenty-year
exploitation period (with two five year extensions allowed). The remaining 26%
interest in blocks 13 and 14 is held by a Mongolian oil and gas company and two
investors.

In June we obtained the license for the right to conduct
geological exploration works within the blocks # 13 and 14 for a term of 3
years.

The agreement with the Saint Petersburgs Institute VSEGEI for
the realization of gravimetrical works within the blocks # 13 and 14 was signed.

Item 3. Quantitative and Qualitative Disclosures about
Market Risk.

Not applicable.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as that term
is defined in Rule 13a-15(e), promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. Disclosure controls
and procedures include controls and procedures designed to ensure that
information required to be disclosed in our companys reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commissions
rules and forms, and that such information is accumulated and communicated to
our management, including our principal executive officer and our principal
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.

As required by paragraph (b) of Rules 13a-15 under the
Securities Exchange Act of 1934, our management, with the participation of our
principal executive officer and our principal financial officer, evaluated our
companys disclosure controls and procedures as of the end of the period covered
by this quarterly report. Based on this evaluation, our principal executive
officer and our principal financial officer concluded that as of the end of the
period covered by this quarterly report, our disclosure controls and procedures
were not effective due to lack of US GAAP and SEC knowledge of responsible
people within our company. As a result, we failed to timely file certain
disclosure that we were required to timely file on Form 8-K and we made errors
in our accounting for certain transactions as described below and an error in
our disclosure concerning entitlement to the $1,000,000 earn-out to be made by
Santos International Holdings PTY Ltd. pursuant to the October 4, 2006 agreement
between our subsidiary, DWM Petroleum, and Santos International Holdings PTY
Ltd. All of our previous disclosure with respect to this earn-out reflected that
our company was entitled to receive this payment but, in our agreement with DWM
Petroleum and its former shareholders dated November 23, 2006, DWM Petroleum
assigned the right to receive that payment to the former shareholders of DWM
Petroleum.

---

30

Due to a lack of US GAAP and SEC knowledge by the responsible
people, the following errors have occurred in the past:

On March 31, 2009, we determined that our previously issued
consolidated statement of operations for the quarters ended June 30, 2008 and
September 30, 2008 and consolidated balance sheet as of June 30, 2008 and
September 30, 2008 presented in our Forms 10-Q filed on August 14, 2008 and
November 14, 2008, respectively, should be restated with respect to the
accounting for a beneficial conversion feature related to the issuance of
debentures. On April 30, 2008, we issued convertible debentures with a mandatory
redemption date of April 30, 2010. We appropriately concluded that the
convertible debentures contained a beneficial conversion feature at issuance but
erroneously recorded the full expense related to the beneficial conversion
feature at inception of the debentures in the quarter ended June 30, 2008. The
cost associated with the beneficial conversion feature should have been
amortized over the two year term of the debentures. The correction of this error
resulted in $517,498 less expense during the second fiscal quarter of 2008 and
$62,657 of additional expense for our third fiscal quarter of 2008.

On April 7, 2009, we determined that the terms of the warrants
issued by our company between April 10, 2007 and September 3, 2008, required
that we adjust the exercise price of those warrants on September 5, 2008, as a
result of our having issued 4,000,000 units (each consisting of one share of our
common stock, one share purchase warrant and an interest in certain rights
granted to us by the Mineral Resources and Petroleum Authority of Mongolia) on
September 4, 2008. The adjustment to the exercise price of the warrants resulted
in an accounting charge of $9,439,775 in the quarter ended September 30, 2008.
We did not record this accounting charge. As a result we have restated our Form
10-Q for the quarter ended September 30, 2008.

During the preparation of the financial statements for the
three months ended March 31, 2009, the Company determined that it should have
accounted for stock options granted to consultants under SFAS No. 123 (revised
2004), Share-Based Payment (SFAS 123R) and EITF No. 96-18, Accounting for
Equity Investments That Are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods and Services. As such, the fair value of such
options is periodically re-measured during the vesting period using the
Black-Scholes option-pricing model and expense is recognized over the service /
vesting period. The resulting cumulative adjustment as of December 31, 2008
amounted to $832,655. Based on the Companys analysis in accordance with SFAS
No. 154 Accounting for Changes and Errors (SFAS 154) and Staff Accounting
Bulletin No. 108 (SAB 108) it was determined that the error was immaterial to
any prior periods. However, since it is material to the three months period
ended March 31, 2009, we corrected the cumulative error in the opening balance
sheet as of January 1, 2009 and also adjusted the prior period consolidated
statement of operations and consolidated cash flow statement.

During the preparation of the financial statements for the
three months ended March 31, 2009, we determined that in prior periods we did
not properly account for our defined benefit pension plan in accordance with
SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of SFAS Nos. 87, 88, 106 and 132R (SFAS
158). However, on July 16, 2009, we determined that this was not an error but a
change in accounting policy that is not preferable and hence reversed the
adjustment of $129,070 again.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial
reporting during the fiscal quarter ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.

---

31

PART IIOTHER INFORMATION

Item 1. Legal Proceedings.

There are no material pending legal proceedings to which our
company or any of our subsidiaries is a party or of which any of our properties,
or the properties of any of our subsidiaries, is the subject. In addition, we do
not know of any such proceedings contemplated by any governmental authorities.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

On April 28, 2009, we granted stock options to an aggregate of
three people, one of whom is an officer of our company, one is an employee of
our company and one is an executive officer of a corporate consultant to our
company, to purchase an aggregate of 4,400,000 shares of our common stock at an
exercise price of $0.26 per share, for a term expiring April 28, 2012.

The options will vest in 12 installments every three months,
with each installment equal to 1/12th of the total number of options granted to
the optionee. Each grant is subject to the execution of a stock option agreement
by the grantee.

Two of the grantees are not U.S. persons (as that term is
defined in Regulation S of the Securities Act of 1933, as amended), and
we issued 2,400,000 of these options in to these two grantees in offshore
transactions relying on the registration exemption provided by Regulation S
and/or Section 4(2) of the Securities Act of 1933, as amended. The third
grantee is a U.S. person and we issued the options to him relying on the
registration exemption provided by Section 4(2) of the Securities Act of
1933, as amended.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

On July 8, 2009, we held our annual meeting of
stockholders.

At the annual meeting, our stockholders voted on the election
of our directors with the following votes:

For
    Against
    Abstain
    Broker Non-VotesHeinz J. Scholz
    59,351,728
    83,135
    141,795
    None(99.62%)
    (0.14%)
    (0.24%)Michael Velletta
    59,356,924
    78,200
    141,535
    None(99.63%)
    (0.13%)
    (0.24%)Dr. Richard Schenz
    59,347,574
    87,549
    141,535
    None(99.62%)
    (0.15%)
    (0.24%)Erik Herlyn
    59,346,724
    88,400
    141,535
    None(99.61%)
    (0.15%)
    (0.24%)


---

32

Neil Maedel
    15,251,082
    21,447,425
    22,878,151
    None(25.60%)
    (36.00%)
    (38.40%)


As a result, Heinz J. Scholz, Michael Velletta, Dr. Richard
Schenz and Erik Herlyn were elected as directors of our company, but Neil Maedel
was not elected as a director of our company.

At the annual meeting, our stockholders ratified the
appointment of BDO Visura as our independent registered public accounting firm
with the following votes:

For
    Against
    Abstain
    Broker Non-Votes59,270,219
    111,705
    117,125
    None(99.62%)
    (0.19%)
    (0.20%)


Item 5. Other Information.

On June 12, 2009, our companys Board of Directors amended and
restated our bylaws. Among other things, our amended and restated bylaws: (i)
decrease the quorum requirement for shareholders meetings; (ii) provide for the
appointment of inspectors of election, (iii) change the process by which our
shareholders elect directors from a plurality vote to election by a majority
vote, and (iv) provide certain shareholder protections that will become
effective if we are granted a listing on the Canadian TSX Venture stock
exchange.

On July 9, 2009, our board of directors appointed Erik Herlyn
as our President, Chief Executive Officer, and Secretary, Yaroslav Bandurak as
our Chief Technology Officer and Ari Muljana as our Chief Financial Officer and
Treasurer.

Ari Muljana has a Master of Science in Computer Science
(University of Zurich 2004) with a major in Financial Statement Analysis and
Artificial Intelligence. In 2005, he began his career in the Risk Management
department at Deloitte, where he audited and advised within the oil and
commodity trading industry. He is also specialized in the area of SOX
consulting, where he implemented financial and risk management processes for
multinational companies to comply with SEC regulations. From 2007 to 2009 Mr.
Muljana worked at Capgemini Consulting as strategic consultant, focusing on
controlling and performance measurement topics in various industries. Mr.
Muljana is 30 years of age.

Our executive officers hold office for such term as may be
prescribed by our board of directors and until their successors are chosen and
qualify, or until their death or resignation, or until their removal.

There are no family relationships between any director or
executive officer.

Item 6. Exhibits.

Exhibit Number
    Description(3)
    Articles of Incorporation and Bylaws3.1
    Articles of Incorporation (incorporated by reference to
      an exhibit to our Registration Statement on Form SB-2 filed on July 14,
      2003)3.2
    Certificate of Amendment to Articles of Incorporation of
      Express Systems Corporation filed on April 2, 2007 (changing name to Manas
      Petroleum Corporation) (incorporated by reference to an exhibit to our
      Current Report on Form 8-K filed on April 17, 2007)


---

33

Exhibit Number
    Description3.3
    Amended and Restated By-laws (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on June 15, 2009)(4)
    Instruments Defining the Rights of Security Holders,
      including Indentures4.1
    Form of Share Certificate (incorporated by reference to
      an exhibit to our Registration Statement on Form SB-2 filed on July 14,
      2003)4.2
    Form of Debenture (incorporated by reference to an
      exhibit to our Current Report on Form 8-K filed on May 16, 2008)4.3
    Form of Loan Agreement (incorporated by reference to an
      exhibit to our Current Report on Form 8-K filed on August 25, 2008)(10)
    Material Contracts10.1
    Share Exchange Agreement, dated November 23, 2007
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on April 17, 2007)10.2
    Form of Securities Purchase Agreement (incorporated by
      reference to an exhibit to our Current Report on Form 8-K filed on April
      17, 2007)10.3
    Form of Warrant A to Purchase Manas Petroleum Corporation
      Common Stock (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on April 17, 2007)10.4
    Form of Warrant B to Purchase Manas Petroleum Corporation
      Common Stock (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on April 17, 2007)10.5
    Form of July 31, 2007 Warrants to Purchase Manas
      Petroleum Corporation Common Stock (incorporated by reference to an
      exhibit to our Registration Statement on Form SB-2 filed on November 21,
      2007)10.6
    Form of Escrow Agreement (incorporated by reference to an
      exhibit to our Current Report on Form 8- K filed on April 17, 2007)10.7
    Form of Subscription Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on April 17, 2007)10.8
    Alexander Becker employment agreement, dated April 1,
      2007 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on April 17, 2007)10.9
    Heinz Scholz employment agreement, dated April 1, 2007
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on April 17, 2007)10.10
    Peter-Mark Vogel employment agreement, dated April 1,
      2007 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on April 17, 2007)10.11
    Yaroslav Bandurak employment agreement, dated April 1,
      2007 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on April 17, 2007)10.12
    Farm-In Agreement, dated April 10, 2007 (incorporated by
      reference to an exhibit to our Current Report on Form 8-K filed on April
      17, 2007)10.13
    Talas Gold Consulting Agreement, dated February 20, 2007
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on April 17, 2007)10.14
    Form of Lock-Up Agreement for Affiliates (incorporated by
      reference to an exhibit to our Current Report on Form 8-K filed on April
      17, 2007)10.15
    Form of Lock-Up Agreement for Minority Shareholders
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on April 17, 2007)10.16
    2007 Omnibus Stock Option Plan (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on April 17, 2007)


---

34

Exhibit Number
    Description10.17
    Employment Agreement between Manas Petroleum Corporation
      and Neil Maedel as Vice President of Business Development, dated and
      effective on or about June 1, 2007 (incorporated by reference to an
      exhibit to our current report on Form 8-K filed on June 7, 2007)10.18
    Form of Securities Purchase Agreement for July 31, 2007
      private placement (incorporated by reference to an exhibit to our
      Registration Statement on Form SB-2 filed on November 21, 2007)10.19
    Form of Amendment to the Securities Purchase Agreement
      for July 31, 2007 (incorporated by reference to an exhibit to our
      Registration Statement on Form SB-2 filed on November 21, 2007)10.20
    Sub-Tenancy Agreement, dated October 26, 2006, between
      Heinz Scholz and DWM Petroleum (incorporated by reference to an exhibit to
      our Registration Statement on Form SB-2 filed on November 21, 2007)10.21
    Agreement, dated September 5, 2005, between Varuna AG and
      DWM Petroleum (incorporated by reference to an exhibit to our Registration
      Statement on Form SB-2 filed on November 21, 2007)10.22
    Agreement, dated September 5, 2005, between Heinz Scholz
      and DWM Petroleum (incorporated by reference to an exhibit to our
      Registration Statement on Form SB-2 filed on November 21, 2007)10.23
    Employment Agreement between Thomas Flottmann and Manas
      Petroleum Corporation, dated December 1, 2007 (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on February 26,
      2008)10.24
    Employment Agreement between Rahul Sen Gupta and Manas
      Petroleum Corporation, dated February 1, 2007 (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on February 26,
      2008)10.25
    Form of Debenture (incorporated by reference to an
      exhibit to our Current Report on Form 8-K filed on May 16, 2008)10.26
    Form of Warrants (incorporated by reference to an exhibit
      to our Current Report on Form 8-K filed on May 16, 2008)10.27
    Form of Subscription Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on May 16, 2008)10.28
    Form of Loan Agreement (incorporated by reference to an
      exhibit to our Current Report on Form 8-K filed on August 25, 2008)10.29
    Form of Securities Purchase Agreement, Including the Form
      of the Warrant (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on September 15, 2008)10.30
    Letter Agreement  Phase 2 Work Period with Santos
      International Operations Pty. Ltd, dated August 19, 2008 (incorporated by
      reference to an exhibit to our Annual Report on Form 10-K filed on April
      15, 2009)10.31
    Side Letter Agreement  Phase 1 Completion and Cash
      Instead of Shares with Santos International Holdings Pty Ltd, dated
      November 24, 2008 (incorporated by reference to an exhibit to our Annual
      Report on Form 10-K filed on April 15, 2009)10.32
    Amended 2007 Omnibus Stock Option Plan (incorporated by
      reference to an exhibit to our Annual Report on Form 10-K filed on April
      15, 2009)10.33
    Production Sharing Contract for Exploration, Development
      and Production of Petroleum in Onshore Albania  Block A-B  between
      Ministry of Economy, Trade and Energy of Albania and DWM Petroleum dated
      July 31, 2007 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)


---

35

Exhibit Number
    Description10.34
    Production Sharing Contract for Exploration, Development
      and Production of Petroleum in Onshore Albania  Block D-E - between
      Ministry of Economy, Trade and Energy of Albania and DWM Petroleum dated
      July 31, 2007 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)10.35
    Employment and Non-Competition Agreement with Michael
      Velletta dated February 1, 2008 (incorporated by reference to an
      exhibit to our Quarterly Report on Form 10-Q/A filed on July 24, 2009)10.36
    Promissory note issued to Heinz Scholz dated December 5,
      2008 (incorporated by reference to an exhibit to our Quarterly Report on
      Form 10-Q/A filed on July 24, 2009)10.37
    Promissory Note issued to Peter-Mark Vogel dated December
      5, 2008 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.38
    Promissory note issued to Alexander Becker dated December
      5, 2008 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.39
    Promissory note issued to Michael Velletta dated December
      5, 2008 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.40
    Cancellation of Sub-Tenancy Contract with Heinz Scholz
      dated January 19, 2009 (incorporated by reference to an exhibit to our
      Quarterly Report on Form 10-Q/A filed on July 24, 2009)10.41
    Consulting Frame Contract with Varuna AG dated February
      1, 2009 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.42
    Termination Agreement with Thomas Flottmann dated January
      31, 2009 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.43
    Consulting Frame Contract with Thomas Flottmann dated
      January 22, 2009 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)10.44
    Amendment to the Notice with Terms and Condition for the
      Termination of Employment Agreement with Rahul Sen Gupta dated February
      26, 2009 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.45
    Amendment to the Termination Agreement with Rahul Sen
      Gupta dated March 31, 2009 (incorporated by reference to an exhibit to our
      Quarterly Report on Form 10-Q/A filed on July 24, 2009)10.46
    Termination Agreement with Peter-Mark Vogel dated January
      30, 2009 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q/A filed on July 24, 2009)10.47
    Consulting Frame Contract with Peter-Mark Vogel dated
      March 26, 2009 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)10.48
    Employment and Non-Competition Agreement with Erik Herlyn
      dated June 25, 2007 (incorporated by reference to an exhibit to our
      Quarterly Report on Form 10-Q/A filed on July 24, 2009)10.49
    Amendment to Employment Agreement with Erik Herlyn dated
      May 14, 2008 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)10.50
    Amendment to Employment Agreement with Yaruslav dated
      November 4, 2007 (incorporated by reference to an exhibit to our Quarterly
      Report on Form 10-Q/A filed on July 24, 2009)10.51
    Production Sharing Contract for Contract Area Tsagaan
      Els-XIII between the Petroleum Authority of Mongolia and DWM Petroleum
      (incorporated by reference to an exhibit to our Quarterly Report on Form
      10-Q/A filed on July 24, 2009)10.52
    Production Sharing Contract for Contract Area
      Zuunbayan-XIV between the Mineral Resources and Petroleum Authority of
      Mongolia and DWM Petroleum (incorporated by reference to an exhibit to our
      Quarterly Report on Form 10-Q/A filed on July 24, 2009)10.53
    Letter from AKBN regarding Production Sharing Contracts
      for Blocks A-B and D-E dated May 5, 2009 (incorporated by reference to an
      exhibit to our Quarterly Report on Form 10-Q/A filed on July 24, 2009)


---

36

Exhibit Number
      Description10.54
      Employment Agreement between
          Ari Muljana and Manas Petroleum Corporation dated April 1, 2009 (incorporated
          by reference to an exhibit to our Registration Statement on Form S-1
          filed on July 30, 2009)10.55
      Consultancy Agreement dated
          November 21, 2008 with Dr. Richard Schenz (incorporated by reference
          to an exhibit to our Current Report on Form 8-K filed on August 13,
          2009)10.56
      Non Statutory Stock Option
          Agreement dated August 10, 2009 with Dr. Richard Schenz ($0.68) (incorporated
          by reference to an exhibit to our Current Report on Form 8-K filed on
          August 13, 2009)10.57
      Non Statutory Stock Option
          Agreement dated August 10, 2009 with Dr. Richard Schenz ($0.79)  (incorporated
          by reference to an exhibit to our Current Report on Form 8-K filed on
          August 13, 2009)(14)
      Code of Ethics14.1
      Code of Ethics, adopted May
          1, 2007 (incorporated by reference to an exhibit to our Registration
          Statement on Form SB-2 filed on November 21, 2007)(21)
      Subsidiaries21.1
      Subsidiaries of Manas Petroleum
          Corporation 
          CJSC Somon Oil, Dushambe, Tajikistan, 90% interest 
          DWM Petroleum A.G., Switzerland, 100% interest
          Manas Petroleum A.G., Switzerland, 100% interest
          Manas Energia Limitada, Chile, 100% interest 
          Manas Petroleum of Chile Corporation, Canada, 100% interest 
          Manas Management Services Ltd., Bahamas, 100% interest(31)
      Rule 13a-14 Certifications31.1*
      Section 302 Certification of
          Chief Executive Officer31.2*
      Section 302 Certification of
          Chief Financial Officer(32)
      Section 1350 Certifications32.1*
      Section 906 Certification of
          Chief Executive Officer32.2*
      Section 906 Certification of
          Chief Financial Officer


* Filed herewith.

---

37

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

MANAS PETROLEUM CORPORATION

By

*/s/ Erik Herlyn*
  Erik Herlyn 
  Chief Executive Officer 
  (Principal Executive Officer)

Date: August 14, 2009

By

*/s/ Ari Muljana*
  Ari Muljana 
  Chief Financial Officer and Treasurer 
  (Principal Financial Officer and Principal Accounting Officer)

Date: August 14, 2009

---