----

| UNITED      STATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SECURITIES      AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Washington,      D.C. 20549                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| ————————                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| FORM      10-Q                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ————————                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (Mark      One)  ý QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934                                                                                                                                                                                                                                                                                                                                                                                                                |
| For      the quarterly period ended September 30, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  o TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Commission      file      number                                                      000-52770                                                                                                                                                           |
| PACIFIC      ASIA PETROLEUM, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (Exact      name of issuer as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ————————                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 30-0349798 |
| (State      or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (IRS      Employer Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 250      East Hartsdale Ave.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Hartsdale,      New York 10530                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (Address      of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (914)      472-6070                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (Issuer’s      telephone number)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| ————————                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Indicate      by check mark whether the registrant (1) has filed all reports      required to be filed by Section 13 or 15(d) of the 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.Yes ý                      No      o |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and      large accelerated filer” in Rule 12b-2 of the      Exchange Act. (Check one):Large accelerated      filer o   Accelerated      filer o        Non-accelerated filer ý         Smaller reporting company  ̈                                                  |
|       Indicate      by check mark whether the registrant is a shell company (as defined in      Rule 12b-2 of the Exchange Act).  Yes o                      No      ý      The      Issuer had 40,006,185 shares of its common stock outstanding as of      November 3, 2008.                                                            |

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- Table of Contents-

| PACIFIC      ASIA PETROLEUM, INC. |
|-----------------------------------|
| FORM      10-Q                    |
| Table      of Contents            |

|                 | Page                                                                                                                                                                                                                                                                     |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                          |
| CAUTIONARY STATEMENT | 1                                                                                                                                                                                                                                                                             |
|                 |                                                                                                                                                                                                                                                                          |   |
| PART      I          | FINANCIAL INFORMATION                                                                                                                                                                                                                                                         | 2 |
| Item 1.              | Financial Statements                                                                                                                                                                                                                                                          | 2 |
|                 | Condensed Consolidated Balance Sheets as of September 30, 2008      (unaudited) and December 31, 2007                                                                                                                                                                         | 2 |
|                 | Condensed Consolidated Statements of Income and Comprehensive      Income (unaudited) for the nine months and the three months ended September 30, 2008      and 2007 and for the period from inception (August 25, 2005) through      September 30,      2008 | 3 |
|                 | Condensed Consolidated Statement of Stockholders' Equity      (Deficiency) (unaudited) for the period from inception (August 25, 2005)      through September 30,      2008                                                                                              | 4 |
|                 | Condensed Consolidated Statements of Cash      Flows  (unaudited) for the nine months ended September 30, 2008      and 2007 and for the period from inception (August 25, 2005) through      September 30,      2008                                | 5 |
|                 | Notes to Condensed Consolidated Financial Statements      (unaudited)                                                                                                                                                                                                         | 6 |
| Item 2.              | Management’s Discussion and Analysis of Financial Condition      and Results of Operations.                                                                                                                                                                             | 9 |
| Item 3.              | Quantitative and Qualitative Disclosures About Market      Risk                                                                                                                                                                                                               | 15 |
| Item 4.              | Controls and Procedures                                                                                                                                                                                                                                                       | 15 |
|                 |                                                                                                                                                                                                                                                                          |   |
| PART      II         | OTHER INFORMATION                                                                                                                                                                                                                                                             | 16 |
| Item 1.              | Legal Proceedings                                                                                                                                                                                                                                                             | 16 |
| Item 1A.             | Risk Factors                                                                                                                                                                                                                                                                  | 16 |
| Item 2.              | Unregistered Sales of Equity Securities and Use of      Proceeds                                                                                                                                                                                                              | 16 |
| Item 3.              | Defaults Upon Senior Securities                                                                                                                                                                                                                                               | 17 |
| Item 4.              | Submission of Matters to a Vote of Security      Holders                                                                                                                                                                                                                      | 17 |
| Item 5.              | Other Information                                                                                                                                                                                                                                                             | 17 |
| Item 6.              | Exhibits                                                                                                                                                                                                                                                                      | 18 |
|                 |                                                                                                                                                                                                                                                                          |   |
| SIGNATURES           |                                                                                                                                                                                                                                                                          | 19 |
|                 |                                                                                                                                                                                                                                                                          |   |
|                 |                                                                                                                                                                                                                                                                          |   |
|                 |                                                                                                                                                                                                                                                                          |   |

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- Table of Contents -

CAUTIONARY STATEMENT

|   | · | Lack      of operating history, operating revenue or earnings    history. |
|--------|--------|---------------------------------------------------------------------------|

|   | · | Dependence      on key personnel. |
|--------|--------|-----------------------------------|

|   | · | Fluctuation      in quarterly operating results and seasonality in certain of our      markets. |
|--------|--------|-------------------------------------------------------------------------------------------------|

|   | · | Possible      significant influence over corporate affairs by significant      shareholders. |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | Our      ability to enter into definitive agreements to formalize foreign energy      ventures and secure necessary exploitation  rights. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Our      ability to raise capital to fund ouroperations. |
|--------|--------|----------------------------------------------------------|

|   | · | Our      ability to successfully integrate and operate acquired or newly formed      entities and multiple foreign energy ventures and      subsidiaries. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      competition from large petroleum and other energy    interests. |
|--------|--------|--------------------------------------------------------------------------|

|   | · | Changes      in laws and regulations that affect our operations and the energy industry      in general. |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | Risks      and uncertainties associated with exploration, development and production      of oil and gas, drilling and productionrisks. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expropriation      and other risks associated with foreign  operations. |
|--------|--------|-------------------------------------------------------------------------|

|   | · | Risks      associated with anticipated and ongoing third party pipeline construction      and transportation of oil and gas. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      lack of availability of oil and gas field goods and    services. |
|--------|--------|---------------------------------------------------------------------------|

|   | · | Environmental      risks, economic conditions, and other risk factors detailed      herein. |
|--------|--------|---------------------------------------------------------------------------------------------|

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- Table of Contents -

| PART I                                                                                                                            |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| FINANCIAL      INFORMATION                                                                                                        |   |
| Item 1.  Financial Statements                                                                                           |   |   |   |   |   |   |
| Pacific      Asia Petroleum, Inc. and Subsidiaries                                                                                |   |
| (A      Development Stage Company)                                                                                                |   |
| Condensed      Consolidated Balance Sheets                                                                                        |   |
|                                                                                                                              |   | As      of |   |   | As      of |   |
|                                                                                                                              |   | September      30, |   |   | December      31, |   |
|                                                                                                                              |   | 2008 |   |   | 2007 |   |
|                                                                                                                              |   | (Unaudited) |   |   |   |   |
| Assets                                                                                                                            |   |   |   |   |   |   |
| Current      assets                                                                                                               |   |   |   |   |   |   |
| Cash      and cash equivalents                                                                                                    |   | $ | 10,195,025 |   |   | $ | 2,208,969 |   |
| Short-term      investments                                                                                                       |   |   | 300,000 |   |   |   | 11,200,000 |   |
| Income      tax refunds receivable                                                                                                |   |   | 27,868 |   |   |   | - |   |
| Prepaid      expenses                                                                                                             |   |   | 76,126 |   |   |   | 46,247 |   |
| Deposits                                                                                                                          |   |   | 30,291 |   |   |   | 22,954 |   |
| Advances                                                                                                                          |   |   | 531 |   |   |   | 2,758 |   |
|       Total      current assets                                                                     |   |   | 10,629,841 |   |   |   | 13,480,928 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Non-current      assets                                                                                                           |   |   |   |   |   |   |   |   |
| Property,      plant and equipment - at cost (net of accumulated depreciation and      amortization:                              |   |   |   |   |   |   |   |   |
|      September      30, 2008: $61,921;  December 31, 2007: $20,779)                            |   |   | 567,684 |   |   |   | 285,027 |   |
| Intangible      assets                                                                                                            |   |   | 384 |   |   |   | 384 |   |
| Long-term      advances                                                                                                           |   |   | 659,953 |   |   |   | 534,530 |   |
| Deferred      charges                                                                                                             |   |   | 3,719,479 |   |   |   | 3,156,058 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Total      Assets                                                                                                                 |   | $ | 15,577,341 |   |   | $ | 17,456,927 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders'      Equity                                                                                         |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                               |   |   |   |   |   |   |   |   |
| Accounts      payable                                                                                                             |   | $ | 27,060 |   |   | $ | 2,739 |   |
| Income      taxes payable                                                                                                         |   |   | 3,860 |   |   |   | 38,791 |   |
| Accrued      and other liabilities                                                                                                |   |   | 348,586 |   |   |   | 122,704 |   |
|       Total      current liabilities                                                                |   |   | 379,506 |   |   |   | 164,234 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Minority      interest in subsidiaries                                                                                            |   |   | 388,574 |   |   |   | 395,094 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Stockholders'      equity                                                                                                         |   |   |   |   |   |   |   |   |
| Common      stock:                                                                                                                |   |   |   |   |   |   |   |   |
|      Authorized      - 300,000,000 shares at $.001 par value; Issued and outstanding      -              |   |   |   |   |   |   |   |   |
|      40,006,185      as of September 30, 2008; 39,931,109 at December 31, 2007                           |   |   | 40,006 |   |   |   | 39,931 |   |
| Preferred      stock:                                                                                                             |   |   |   |   |   |   |   |   |
|      Authorized      - 50,000,000 shares at $.001 par value;                                             |   |   |   |   |   |   |   |   |
|      Issued      - 23,708,952 as of September 30, 2008 and December 31,2007                              |   |   |   |   |   |   |   |   |
|      Outstanding      - none as of September 30, 2008 and December 31, 2007                              |   |   | - |   |   |   | - |   |
| Paid-in      capital                                                                                                              |   |   | 21,349,618 |   |   |   | 20,251,022 |   |
| Other      comprehensive income - currency translation adjustment                                                                 |   |   | 250,042 |   |   |   | 128,061 |   |
| Deficit      accumulated during the development stage                                                                             |   |   | (6,830,405 | ) |   |   | (3,521,415 | ) |
| Total      stockholders' equity                                                                                                   |   |   | 14,809,261 |   |   |   | 16,897,599 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| Total      Liabilities and Stockholders' Equity                                                                                   |   | $ | 15,577,341 |   |   | $ | 17,456,927 |   |
|                                                                                                                              |   |   |   |   |   |   |   |   |
| The      accompanying notes to unaudited condensed consolidated financial      statements are an integral part of this statement. |   |

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- Table of Contents -

| Pacific Asia Petroleum, Inc. and Subsidiaries                                                                                         |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|
| (A      Development Stage Company)                                                                                                    |   |
| Condensed      Consolidated Statements of Income and Comprehensive Income                                                             |   |
| (Unaudited)                                                                                                                           |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   | For      the period |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   | from      inception |   |
|                                                                                                                                  |   | For      the nine months |   |   | For      the three months |   |   | (August      25, 2005) |   |
|                                                                                                                                  |   | ended      September 30, |   |   | ended      September 30, |   |   | through |   |
|                                                                                                                                  |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |   | 9/30/2008 |   |
| Operating      Expenses                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                          |   | $ | 40,115 |   |   | $ | 10,039 |   |   | $ | 17,323 |   |   | $ | 6,064 |   |   | $ | 60,705 |   |
| All      other operating expenses                                                                                                     |   |   | 3,562,286 |   |   |   | 2,018,354 |   |   |   | 1,233,600 |   |   |   | 582,671 |   |   |   | 7,762,300 |   |
|     Total      operating expenses                                                                                 |   |   | 3,602,401 |   |   |   | 2,028,393 |   |   |   | 1,250,923 |   |   |   | 588,735 |   |   |   | 7,823,005 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Loss                                                                                                                   |   |   | (3,602,401 | ) |   |   | (2,028,393 | ) |   |   | (1,250,923 | ) |   |   | (588,735 | ) |   |   | (7,823,005 | ) |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income      (Expense)                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      income                                                                                                                  |   |   | 275,231 |   |   |   | 411,008 |   |   |   | 82,037 |   |   |   | 233,328 |   |   |   | 992,726 |   |
| Other      income                                                                                                                     |   |   | 14,695 |   |   |   | 12,937 |   |   |   | 14,695 |   |   |   | 648 |   |   |   | 27,632 |   |
| Other      expense                                                                                                                    |   |   | (37 | ) |   |   | (713 | ) |   |   | 35 |   |   |   | (671 | ) |   |   | (751 | ) |
|     Total      Other Income                                                                                       |   |   | 289,889 |   |   |   | 423,232 |   |   |   | 96,767 |   |   |   | 233,305 |   |   |   | 1,019,607 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss before income taxes and                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    minority      interest                                                                                              |   |   | (3,312,512 | ) |   |   | (1,605,161 | ) |   |   | (1,154,156 | ) |   |   | (355,430 | ) |   |   | (6,803,398 | ) |
| Income      tax (expense) benefit                                                                                                     |   |   | (6,647 | ) |   |   | - |   |   |   | (6,807 | ) |   |   | - |   |   |   | (45,473 | ) |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss before minority interest                                                                                                |   |   | (3,319,159 | ) |   |   | (1,605,161 | ) |   |   | (1,160,963 | ) |   |   | (355,430 | ) |   |   | (6,848,871 | ) |
| Minority      interest                                                                                                                |   |   | 10,169 |   |   |   | 4,165 |   |   |   | 2,983 |   |   |   | 2,406 |   |   |   | 18,466 |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss                                                                                                                         |   |   | (3,308,990 | ) |   |   | (1,600,996 | ) |   |   | (1,157,980 | ) |   |   | (353,024 | ) |   |   | (6,830,405 | ) |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Comprehensive Income (Loss),                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net      of Tax:                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Foreign      currency translation adjustment                                                            |   |   | 121,981 |   |   |   | 63,272 |   |   |   | 19,282 |   |   |   | 37,079 |   |   |   | 250,042 |   |
| Comprehensive      Income (Loss)                                                                                                      |   | $ | (3,187,009 | ) |   | $ | (1,537,724 | ) |   | $ | (1,138,698 | ) |   | $ | (315,945 | ) |   | $ | (6,580,363 | ) |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss per Share of Common Stock:                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Loss - Basic and Diluted                                                                                                     |   | $ | (0.08 | ) |   | $ | (0.06 | ) |   | $ | (0.03 | ) |   | $ | (0.01 | ) |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      Average Number of                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares      Outstanding                                                                                                               |   |   | 39,993,133 |   |   |   | 28,744,811 |   |   |   | 39,984,024 |   |   |   | 39,931,106 |   |   |   |   |   |
|                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to the unaudited condensed consolidated financial      statements are an integral part of this statement. |   |

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- Table of Contents -

| Pacific Asia Petroleum, Inc. and    Subsidiaries                                                                                      |                 |
|---------------------------------------------------------------------------------------------------------------------------------------|----------------------|
| (A      Development Stage Company)                                                                                                    |                 |
| Condensed      Statement of Stockholders' Equity (Deficiency)                                                                         |                 |
| For      the period from inception (August 25, 2005) to September 30,      2008                                                       |                 |
| (Unaudited)                                                                                                                           |                 |
|                                                                                                                                  |                 |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |   |
|                                                                                                                                  |                 |   |   |   |   |   |   |   |   |   |   |   | Comprehensive |   | Deficit |   |   |   |
|                                                                                                                                  | No.      of          |   |   |   |   |   | No.      of |   |   |   |   |   | Income      (Loss)- |   | Accumulated |   | Total |   |
|                                                                                                                                  | Common               |   |   |   |   |   | Preferred |   |   |   |   |   | Foreign |   | During      the |   | Stockholders' |   |
|                                                                                                                                  | Shares               |   | Common |   | Subscriptions |   | Shares |   | Preferred |   | Paid-in |   | Currency |   | Development |   | Equity |   |
|                                                                                                                                  | $.001      par value |   | Stock |   | Receivable |   | $.001      par value |   | Stock |   | Capital |   | Translation |   | Stage |   | (Deficiency) |   |
| Balance      - August 25, 2005                                                                                                        | -                    |   | $ | - |   | $ | - |   | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   |
| Issued      for cash                                                                                                                  | 1,852,320            |   |   | 1,852 |   |   | - |   | - |   |   | - |   |   | 10,148 |   |   | - |   |   | - |   |   | 12,000 |   |
| Subscriptions                                                                                                                         | 3,451,680            |   |   | 3,452 |   |   | (28,000 | ) | - |   |   | - |   |   | 24,548 |   |   | - |   |   | - |   |   | - |   |
| Net      loss                                                                                                                         | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | - |   |   | (51,344 | ) |   | (51,344 | ) |
| Balance      - December 31, 2005                                                                                                      | 5,304,000            |   |   | 5,304 |   |   | (28,000 | ) | - |   |   | - |   |   | 34,696 |   |   | - |   |   | (51,344 | ) |   | (39,344 | ) |
| Subscriptions      paid                                                                                                               | -                    |   |   | - |   |   | 28,000 |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 28,000 |   |
| Issued      for fees and services                                                                                                     | -                    |   |   | - |   |   | - |   | 1,829,421 |   |   | 1,829 |   |   | 195,776 |   |   | - |   |   | - |   |   | 197,605 |   |
| Issued      for cash                                                                                                                  | -                    |   |   | - |   |   | - |   | 8,161,802 |   |   | 8,162 |   |   | 4,215,262 |   |   | - |   |   | - |   |   | 4,223,424 |   |
| Amortization      of options fair value                                                                                               | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | 29,065 |   |   | - |   |   | - |   |   | 29,065 |   |
| Currency      translation                                                                                                             | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | 19,228 |   |   | - |   |   | 19,228 |   |
| Net      loss                                                                                                                         | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | - |   |   | (1,086,387 | ) |   | (1,086,387 | ) |
| Balance      - December 31, 2006                                                                                                      | 5,304,000            |   |   | 5,304 |   |   | - |   | 9,991,223 |   |   | 9,991 |   |   | 4,474,799 |   |   | 19,228 |   |   | (1,137,731 | ) |   | 3,371,591 |   |
| Issued      for services - pre-merger                                                                                                 | 600,032              |   |   | 600 |   |   | - |   | 117,729 |   |   | 118 |   |   | 334,594 |   |   | - |   |   | - |   |   | 335,312 |   |
| Shares      retained by Pacific Asia Petroleum original                                                                               |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     stockholders      in merger - 5/7/07                                                                          | 468,125              |   |   | 468 |   |   | - |   | - |   |   | - |   |   | 83,323 |   |   | - |   |   | - |   |   | 83,791 |   |
| Shares      issued to ADS members in merger - 5/7/07                                                                                  | 9,850,000            |   |   | 9,850 |   |   | - |   | 13,600,000 |   |   | 13,600 |   |   | 15,453,957 |   |   | - |   |   | - |   |   | 15,477,407 |   |
| Post-merger      acquisition costs and adjustments                                                                                    | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | (291,093 | ) |   | - |   |   | - |   |   | (291,093 | ) |
| Automatic      conversion of Preferred Shares - 6/5/07                                                                                | 23,708,952           |   |   | 23,709 |   |   | - |   | (23,708,952 | ) |   | (23,709 | ) |   | - |   |   | - |   |   | - |   |   | - |   |
| Issued      for services, compensation cost of stock options                                                                          |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      and      restricted stock                                                                               | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | 195,442 |   |   | - |   |   | - |   |   | 195,442 |   |
| Currency      translation                                                                                                             | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | 108,833 |   |   | - |   |   | 108,833 |   |
| Net      loss                                                                                                                         | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | - |   |   | (2,383,684 | ) |   | (2,383,684 | ) |
| Balance      - December 31, 2007                                                                                                      | 39,931,109           |   |   | 39,931 |   |   | - |   | - |   |   | - |   |   | 20,251,022 |   |   | 128,061 |   |   | (3,521,415 | ) |   | 16,897,599 |   |
| Issued      on exercise of warrants                                                                                                   | 79,671               |   |   | 80 |   |   | - |   | - |   |   | - |   |   | (83 | ) |   | - |   |   | - |   |   | (3 | ) |
| Vesting      of restricted stock                                                                                                      | 10,400               |   |   | 10 |   |   | - |   | - |   |   | - |   |   | (10 | ) |   | - |   |   | - |   |   | - |   |
| Compensation      cost of stock options and restricted stock                                                                          | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | 963,187 |   |   | - |   |   | - |   |   | 963,187 |   |
| Issued      for services                                                                                                              | 15,000               |   |   | 15 |   |   | - |   | - |   |   | - |   |   | 137,985 |   |   | - |   |   | - |   |   | 138,000 |   |
| Issued      for acquisition of Navitas Corporation                                                                                    | 450,005              |   |   | 450 |   |   | - |   | - |   |   | - |   |   | 8,176,141 |   |   | - |   |   | - |   |   | 8,176,591 |   |
| Acquired      on acquisition of Navitas Corporation                                                                                   | (480,000             | ) |   | (480 | ) |   | - |   | - |   |   | - |   |   | (8,178,624 | ) |   | - |   |   | - |   |   | (8,179,104 | ) |
| Currency      translation                                                                                                             | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | 121,981 |   |   | - |   |   | 121,981 |   |
| Net      loss                                                                                                                         | -                    |   |   | - |   |   | - |   | - |   |   | - |   |   | - |   |   | - |   |   | (3,308,990 | ) |   | (3,308,990 | ) |
| Balance      - September 30, 2008                                                                                                     | 40,006,185           |   | $ | 40,006 |   | $ | - |   | - |   | $ | - |   | $ | 21,349,618 |   | $ | 250,042 |   | $ | (6,830,405 | ) | $ | 14,809,261 |   |
|                                                                                                                                  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to the unaudited condensed consolidated financial      statements are an integral part of this statement. |                 |

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| Pacific Asia Petroleum, Inc. and Subsidiaries                                                                                              |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
| (A      Development Stage Company)                                                                                                         |   |
| Condensed      Consolidated Statement of Cash Flows                                                                                        |   |
| For      the nine months ended September 30, 2008 and 2007,                                                                                |   |
| and for the period from inception (August 25, 2005) to      September 30, 2008                                                        |   |
| (Unaudited)                                                                                                                                |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |
|                                                                                                                                       |   |   |   |   |   |   |   | For      the period |   |
|                                                                                                                                       |   | Nine      months |   |   | Nine      months |   |   | from      inception |   |
|                                                                                                                                       |   | ended |   |   | ended |   |   | (August      25, 2005) |   |
|                                                                                                                                       |   | September      30, |   |   | September      30, |   |   | through |   |
|                                                                                                                                       |   | 2008 |   |   | 2007 |   |   | September      30, 2008 |   |
| Cash flows from      operating activities                                                                                                  |   |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                                              |   | $ | (3,308,990 | ) |   | $ | (1,600,996 | ) |   | $ | (6,830,405 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustments      to reconcile net loss to cash                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| used      in operating activities:                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
|      Interest      income on long-term advances                                                                   |   |   | (88,440 | ) |   |   | (65,375 | ) |   |   | (188,987 | ) |
|      Currency      transaction loss                                                                               |   |   | 56,310 |   |   |   | 37,107 |   |   |   | 99,754 |   |
|      Stock-related      compensation                                                                              |   |   | 1,101,187 |   |   |   | 411,893 |   |   |   | 1,858,611 |   |
|      Minority      interest in net loss                                                                           |   |   | (10,169 | ) |   |   | (4,165 | ) |   |   | (18,466 | ) |
|      Depreciation      and amortization expense                                                                   |   |   | 40,115 |   |   |   | 10,039 |   |   |   | 60,705 |   |
|      Changes      in current assets and current                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|         liabilities:                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|             (Increase)      decrease in accrued interest and other receivables |   |   | (27,868 | ) |   |   | (23,454 | ) |   |   | (27,868 | ) |
|             (Increase)      decrease in advances                               |   |   | 2,227 |   |   |   | - |   |   |   | (531 | ) |
|             (Increase)      in deposits                                        |   |   | (7,337 | ) |   |   | (10,036 | ) |   |   | (30,291 | ) |
|             (Increase)      decrease in prepaid expenses                       |   |   | (29,879 | ) |   |   | (8,320 | ) |   |   | (76,126 | ) |
|             Increase      (decrease) in accounts payable                       |   |   | 24,321 |   |   |   | (11,300 | ) |   |   | 11,909 |   |
|             Increase      (decrease) in income tax and accrued liabilities     |   |   | 133,306 |   |   |   | (129,734 | ) |   |   | 141,496 |   |
| Net      cash used in operating activities                                                                                                 |   |   | (2,115,217 | ) |   |   | (1,394,341 | ) |   |   | (5,000,199 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing      activities                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales (purchases ) of available for sale short-term    securities                                                                 |   |   | 10,900,000 |   |   |   | (10,300,199 | ) |   |   | (300,000 | ) |
| Increase      in deferred charges                                                                                                          |   |   | (513,421 | ) |   |   | (3,109,553 | ) |   |   | (3,669,479 | ) |
| Additions      to property, plant and equipment                                                                                            |   |   | (309,563 | ) |   |   | (77,467 | ) |   |   | (593,548 | ) |
| Net      cash provided by (used in) investing activities                                                                                   |   |   | 10,077,016 |   |   |   | (13,487,219 | ) |   |   | (4,563,027 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing      activities                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment      of notes payable                                                                                                              |   |   | - |   |   |   | (5,000 | ) |   |   | (5,000 | ) |
| Increase      in minority interest investment                                                                                              |   |   | - |   |   |   | 40,020 |   |   |   | 399,430 |   |
| Increase      in long-term advances to minority shareholder                                                                                |   |   | - |   |   |   | - |   |   |   | (400,507 | ) |
| Decrease      in subscriptions receivable                                                                                                  |   |   | - |   |   |   | - |   |   |   | 28,000 |   |
| Issuance      of common stock net of issuance costs                                                                                        |   |   | (2,513 | ) |   |   | 15,385,982 |   |   |   | 19,671,092 |   |
| Net      cash provided by (used in) financing activities                                                                                   |   |   | (2,513 | ) |   |   | 15,421,002 |   |   |   | 19,693,015 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect      of exchange rate changes on cash                                                                                               |   |   | 26,770 |   |   |   | 3,566 |   |   |   | 65,236 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      increase in cash and cash equivalents                                                                                             |   |   | 7,986,056 |   |   |   | 543,008 |   |   |   | 10,195,025 |   |
| Cash      and cash equivalents at beginning of period                                                                                      |   |   | 2,208,969 |   |   |   | 1,867,374 |   |   |   | - |   |
| Cash      and cash equivalents at end of period                                                                                            |   | $ | 10,195,025 |   |   | $ | 2,410,382 |   |   | $ | 10,195,025 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      disclosures of cash flow information                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      paid                                                                                                                         |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Income      taxes paid                                                                                                                     |   | $ | 43,684 |   |   | $ | - |   |   | $ | 43,719 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental      schedule of non-cash investing and financing activities                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Common      and preferred stock issued for services and fees                                                                               |   | $ | 138,000 |   |   | $ | 335,312 |   |   | $ | 670,917 |   |
| Stock      issuance costs paid as warrants issued                                                                                          |   | $ | - |   |   | $ | - |   |   | $ | 929,477 |   |
| Warrants      exercised for common stock                                                                                                   |   | $ | (3 | ) |   | $ | - |   |   | $ | (3 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes to unaudited condensed consolidated financial      statements are an integral part of this statement.          |   |

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| Pacific Asia Petroleum, Inc. and Subsidiaries(A      Development Stage Company)             |
|---------------------------------------------------------------------------------------------|
| Notes      to Condensed Consolidated Financial StatementsSeptember      30, 2008(Unaudited) |

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Item 2.  MANAGEMENT'S 

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|   | • | Focusing      on projects that play to the expertise of our management    team; |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | Leveraging      our productive asset base and capabilities to develop    value; |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | Actively      managing our assets and ongoing operations while attempting to limit      capital exposure; |
|--------|---------|-----------------------------------------------------------------------------------------------------------|

|   | • | Enlisting      external resources and talent as necessary to operate/manage our      properties during peak operations;and |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------|

|   | • | Implementing      an exit strategy with respect to each project with a view to maximizing      asset values and returns. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------|

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| Expenses |                              |   |                   |   |                    |   |      |   |    |
|----------|-----------------------------------|--------|------------------------|--------|-------------------------|--------|-----------|--------|---------|
|     |                              |   | Nine      months ended |   | Three      months ended |
|     |                              |   | September      30,     |   | September      30,      |
|     |                              |   | 2008                   |   | 2007                    |   | 2008      |   | 2007    |
|     | Description                       |   |                   |   |                    |   |      |   |    |
|     | Salaries                          | $      | 960,570                | $      | 502,658                 | $      | 339,950   | $      | 184,247 |
|     | Consulting      fees              |   | 336,767                |   | 659,507                 |   | 84,834    |   | 56,840  |
|     | Stock-based      compensation     |   | 963,187                |   | 76,581                  |   | 362,515   |   | 25,527  |
|     | Legal      and professional fees  |   | 335,544                |   | 176,178                 |   | 101,667   |   | 109,791 |
|     | Travel                            |   | 208,414                |   | 144,902                 |   | 93,664    |   | 44,748  |
|     | Auditing                          |   | 143,633                |   | 99,747                  |   | 27,150    |   | 29,169  |
|     | All      other operating expenses |   | 654,286                |   | 368,820                 |   | 241,143   |   | 138,414 |
|     | Total Operating      Expenses     | $      | 3,602,401              | $      | 2,028,393               | $      | 1,250,923 | $      | 588,736 |

|   | · | Salaries: For nine      months ended September 30, 2008, salaries totaled      $960,570.   For nine months ended September 30, 2007,      salaries totaled $502,658.   The increase of $457,912 was      principally due to additional personnel in 2008 and the change in the      status of an officer of the Company from a consultant in the 2007 period      to an employee in 2008. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Consulting      fees:  For nine months ended September 30, 2008,      consulting fees payable in cash totaled $198,767. Consulting fees recorded      as vested equity compensation in this period totaled      $138,000.  For nine months ended September 30, 2007, consulting      fees payable in cash were $324,195.  Consulting fees recorded as      vested equity compensation in this period were $335,312. The total      decrease of $322,740 in consulting fees in 2008 was principally due to      non-recurring amounts in 2007 relative to merger negotiation assistance      and contractual obligations for assistance in the raising of equity funds      prior to the Mergers. This was partially offset by increased cash      consulting for Sarbanes-Oxley compliancework. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Stock-based      compensation:  For nine months ended September 30, 2008,      expense was $963,187 for stock options and restricted stock      compensation.   For nine months ended September 30, 2007,      expense was $76,581.  The increase of $886,606 in 2008 was due      to option and restricted stock awards existing during 2008 that were not      present in the 2007 period. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Legal and professional      fees:  For nine months ended September 30, 2008, these      fees totaled $335,544.  For nine months ended September 30,      2007, these fees totaled $176,178.   The increase in these      fees of $159,366 was due to the increase in the Company’s activities, the      legal requirements to prepare SEC filings, and assistance in compliance      with Sarbanes-Oxley Actrequirements. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Travel:  For      nine months ended September 30, 2008, travel expense totaled      $208,414.   For nine months ended September 30, 2007,      travel expense totaled $144,902.  The increase of $63,512 was      due to increased travel in 2008 related to acquisition and possible      financing activity. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Auditing:  For      nine months ended September 30, 2008, audit and review fees totaled      $143,633.  For nine months ended September 30, 2007, these fees      totaled $99,747.   The increase of $43,886 resulted      principally from increased auditor involvement in the first quarter ended      March 31, 2008 (versus the first quarter ended March 31, 2007) as a result      of the change to a public company through the Mergers in May      2007. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Salaries: For three      months ended September 30, 2008, salaries totaled $339,950 versus      $184,247  for three months ended September 30,      2007.  The increase of $155,703 is principally due to current      period expense for additional personnel in the 2008 period and the change      in status of an officer of the Company from a consultant to an employee in      2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Consulting      fees:  For three months ended September 30, 2008,      consulting fees payable in cash totaled $61,334 versus $56,840 for the      three months ended September 30, 2007. Consulting fees recorded as vested      equity compensation were $23,500 for three months ended September 30,      2008, versus none for three months ended September 30, 2007. The increase      in cash consulting fees of $4,494 was principally due to increased      consulting for Sarbanes-Oxley compliance work, partially offset by a      decrease for the change in status of an officer of the Company and      reclassification of other personnel from consultants to employees in      2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Stock-based      compensation:  For three months ended September 30, 2008,      expense was $362,515 for stock options and restricted stock compensation,      versus $25,527 for three months ended September 30, 2007.  The      increase of $336,988 was due to option and restricted stock awards      existing during 2008 that were not present in the 2007    period. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Legal and professional      fees:  For three months ended September 30, 2008, these      fees totaled  $101,667 versus $109,791 for three months ended      September 30, 2007, a decrease of$8,124. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Travel:  For      three months ended September 30, 2008, travel expense totaled $93,664      versus   $44,748 for three months ended September 30,      2007.  The increase of $48,916 was due to increased travel      activity in 2008 related to acquisition and possible financing      activity. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Auditing: For three      months ended September 30, 2008, auditing expense totaled $27,150 versus      $29,169 for three months ended September 30, 2007, a decrease of      $2,019. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 3. QUANTITATIVE 

Item 4.  CONTROLS 

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PART II OTHER INFORMATION

Item1.                      Legal

Item 1A.  Risk 

Item 2.

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Item3.                      Defaults

Item4.                      Submission

| Name                     | For        | Against | Withheld |
|--------------------------|------------|---------|----------|
| Frank      C. Ingriselli | 22,576,337 | -       | 2,324    |
| Laird      Q. Cagan      | 22,576,337 | -       | 2,324    |
| Elizabeth      P. Smith  | 22,577,469 | -       | 1,192    |
| Robert      C. Stempel   | 22,577,469 | -       | 1,192    |

| For        | Against | Withheld |
|------------|---------|----------|
| 22,578,319 | 142     | 200      |

Item5.                      Other

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Item6.                      Exhibits

| Exhibit      Number | Description                                                                                  |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                | Certification of the Registrant’s Principal Executive      Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section      302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            |
| 31.2                | Certification of the Registrant’s Principal Financial      Officer under Exchange Act Rule 15d-14(a), as adopted pursuant to Section      302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            |
| 32.1                | Certification of the Registrant’s Principal Executive      Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906      of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                 |
| 32.2                | Certification of the Registrant’s Principal Financial      Officer under 18 U.S.C. Section 1350, as adopted pursuant to Section 906      of the Sarbanes-Oxley Act of2002.                                                                                                                                                                                                                                                                                                                                  |

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| SIGNATURES |
|------------|

| Dated:  November      3, 2008  | Pacific      Asia Petroleum, Inc.  |
|-----------------------------------------------|-----------------------------------------|
|                                          | By:                                     | /s/ Frank C.      Ingriselli                                  Frank      C. IngriselliPresident      and Chief Executive Officer |

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