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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2008

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

For the transition period from [   ] to [  
]

Commission file number 000-52506

PANTERA PETROLEUM INC.(Name of small business issuer in its charter)

|Nevada                                                               | 98-0440762                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|                                                                     |                                     
|111 Congress Avenue, Suite 400, Austin, Texas                        | 78701                               
|(Address of principal executive offices)                             | (Zip Code)                          

Issuers telephone number (512) 391-3868

Securities registered pursuant to Section 12(b) of the Exchange
Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Nil                 | Nil                                      

Securities registered pursuant to Section 12(g) of the Exchange
Act:

Common Shares, par value $0.001(Title of class)

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Note:Checking the box above will not relieve any
registrant required to file reports pursuant to Section 13 or 15(d) of the
Exchange act from their obligations under those Sections.

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X]   No [   ]

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Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [   ]

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

State issuers revenues for its most recent fiscal year. $Nil.

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked prices of such
common equity, as of a specified date within 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.)

Note: If determining whether a person is an affiliate will
involve an unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates on the basis
of reasonable assumptions, if the assumptions are stated.

46,045,655 common shares @ $0.28(1)= $12,892,783

(1)Represents the price at which our shares were
last traded on the OTC BB on August 13, 2008. Used only for the 
  purpose of this calculation.

State the number of shares outstanding of each of the issuers
classes of equity stock, as of the latest practicable date.

94,045,655 common shares issued and outstanding as of
September 8, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X].

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PART I

ITEM 1. DESCRIPTION OF BUSINESS.

This annual report contains forward-looking statements as that
term is defined under applicable securities laws. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as may, should,
expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors, that may cause our companys or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements 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, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States generally accepted
accounting principles.

In this annual report, unless otherwise specified, all
references to common shares refer to the common shares of our capital stock.

As used in this annual report, the terms we, us and our
mean Pantera Petroleum Inc., unless otherwise indicated.

Corporate History

We were incorporated on October 27, 2004, in the State of
Nevada. Our principal offices are located at 111 Congress Avenue, Suite 400,
Austin, TX 78701.

Effective September 28, 2007, we completed a merger with our
subsidiary, Pantera Petroleum Inc., a Nevada corporation. As a result, we
changed our name from Arthro Pharmaceuticals, Inc. to Pantera Petroleum Inc.
We changed the name of our company to better reflect the direction and business
of our company.

In addition, effective September 28, 2007, we effected a
sixteen (16) for one (1) forward stock split of our authorized, issued and
outstanding common stock. As a result, our authorized capital increased from
75,000,000 shares of common stock with a par value of $0.001 to 1,200,000,000
shares of common stock with a par value of $0.001. At that time, our issued and
outstanding share capital increased from 6,970,909 shares of common stock to
111,534,544 shares of common. As of August 25, 2008, there were 94,045,655
shares of common stock issued and outstanding. The name change and forward stock
split became effective with the OTC Bulletin Board at the opening for trading on
September 28, 2007 under the new stock symbol PTPE. Our new CUSIP number is
69866L 101.

Business

We are an exploration stage company engaged in the acquisition
of prospective oil and gas properties. Following the change in our business, we
conducted due diligence on potential acquisitions of suitable oil and gas
properties. As a result of the due diligence period, on November 21, 2007, we
entered into a share purchase agreement, as amended March 17, 2008 and July 30,
2008, among our company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC),
Aurora Petroleos SA and Boreal Petroleos SA, whereby we agreed to: (i) issue
4,000,000 shares of our common stock to Pantera Oil and Gas; and (ii) pay
$25,000 to each of Aurora and Boreal, for an aggregate payment of $50,000, as
consideration for the right to purchase up to 85% of the shares of each of
Aurora and Boreal as follows:

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| | 1. | on or before November 30, 2007, we have the right, but
      not the obligation, to acquire 15% of the issued and outstanding shares of
      each of Aurora and Boreal for an aggregate payment of $150,000 to Aurora
      and Boreal (as to $75,000 to each of Aurora and Boreal) (Investment
      One), which was paid in full on November 30, 2007;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                            
| | 2. | on or before July 31, 2008, and subject to the completion
      of Investment One, Pantera shall have the right, but not the obligation,
      to:                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (i)                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (ii)                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                            
| | 3. | on or before April 30, 2009 and subject to the completion
      of:                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (i)                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (ii)                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                            
| | 4. | on or before January 31, 2010 and subject to the
      completion of:                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (i)                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                            
| |    | (ii)                                                                                                                                                                                                                                                                                                                                                       

Each of Aurora and Boreal agreed to use all funds that they
respectively receive from our company in connection with the share purchase
agreement exclusively towards the exploration and development of the concessions
held by each of Aurora and Boreal.

Aurora and Boreal have also agreed that we will have the right
to nominate one or more directors to the board of directors of each of Aurora
and Boreal as follows:

| | 1. | upon execution of the share purchase agreement, we have
      the right to nominate one director to the board of directors of each of
      Aurora and Boreal, provided that such boards of directors will consist of
      no more than four directors;                                                                        
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                 
| | 2. | upon completion of Investment One, Aurora Investment Two
      and Boreal Investment Two, as set forth above, we will have the right to
      nominate two directors to the board of directors of each of Aurora and
      Boreal, provided that such boards of directors will consist of no more
      than four directors; and
| |    |                                                                                                                                                                                                                                                                                                                                 
| | 3. | upon completion of Investment One, Aurora Investment Two,
      Boreal Investment Two, Aurora Investment Three and Boreal Investment
      Three, as set forth above, we will have the right to nominate the majority
      of the directors to the board of directors of each of Aurora and
      Boreal,                      

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provided that Artemis Energy PLC
(formerly Pantera Oil and Gas PLC) will have the right to nominate two directors
to the board of directors each of Aurora and Boreal.

To more effectively align the interests of our company with
Artemis, Aurora and Boreal, and to provide for a potentially more efficient
accounting and tax treatment for our company, Artemis, Aurora and Boreal under
their respective tax and accounting regimes, the parties entered negotiations
and further revised the share purchase agreement. As a result of these
negotiations, on September 9, 2008, we entered into an amended and restated
share purchase agreement with Artemis Energy PLC (formerly Pantera Oil and Gas
PLC), Aurora Petroleos SA and Boreal Petroleos SA. The amended agreement amends
and restates the share purchase agreement dated November 21, 2007, as amended
March 17, 2008 and July 30, 2008, such that the share purchase agreement, as
amended, is replaced in its entirety by the amended agreement. Pursuant to the
amended agreement, the parties agreed as follows:

| | (a) | Aurora acknowledged and agreed to:
| | --- | ----------------------------------
| |     |                                   
| |     | (i)                               
| |     |                                   
| |     | (ii)                              
| |     |                                   
| |     | (iii)                             
| |     |                                   
| | (b) | Boreal acknowledged and agreed to:
| |     |                                   
| |     | (i)                               
| |     |                                   
| |     | (ii)                              
| |     |                                   
| |     | (iii)                             
| |     |                                   
| | (c) | Artemis agreed to:                
| |     |                                   
| |     | (i)                               
| |     |                                   
| |     | (ii)                              
| |     |                                   
| |     |                                   
| |     |                                   
| |     |                                   
| |     |                                   
| |     |                                   

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| | D. | up to an additional 55% of the shares of Boreal for
      future payments in the aggregate amount of $2,000,000 to be made by our
      company to Boreal in accordance with the terms of the amended agreement;
      and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | We agreed to issue a share purchase warrant entitling
      Artemis to purchase up to 2,600,000 shares of our common stock at an
      exercise price of $0.27 per share, with the other terms and conditions of
      the warrants to be mutually agreed upon by Artemis and our
  company.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, each of Aurora and Boreal agreed to use all funds
that they respectively receive from our company in connection with the amended
agreement exclusively towards the exploration and development of the concessions
held by each of Aurora and Boreal. Each of Aurora and Boreal have agreed to (i)
consult and work together with our company to plan and execute any exploration
and development activities either of them conduct; (ii) provide our company with
annualized budgets with monthly cost projections; and (iii) not incur costs in
excess of $5,000 for any transactions without the prior written consent of
either our company or Artemis.

Please review the amended agreement attached as Exhibit 10.9 to
this annual report for a complete description of all of the terms and conditions
of the amended agreement.

Aurora has acquired the rights to concessions in northern
Paraguay consisting of three tracts: Tagua, Toro, and Cerro Cabrera. They are
located in the eastern extensions of the Chaco Basin, where, in Bolivia and
Argentina significant reserves of natural gas, oil and condensate have been
discovered. The Chaco Basin extends across Paraguay, Bolivia and Argentina, and
in Paraguay,the Chaco Basin is composed of two Sub-Basins, the Curupayty
and Carandayty Sub-Basins. The sources for most of the known hydrocarbons in the
Chaco Basin are the Devonian Los Monos and Silurian Kirusillas shales. Both are
mixed oil and gas prone source rocks. The amalgamated fans and channel
sandstones of the Carboniferous Tarija and Tupambi formations are the main
producing reservoirs in the Chaco Basin. The Tagua tract, approximately 116
square miles in area, is located in the Carandayty Sub-Basin on the border with
Bolivia. The Curupayty Sub-Basin is located along the southern margin of the
Chaco Basin. The Toro tract, approximately 927 square miles in area, is located
in the Curupayty Sub-Basin in north central Paraguay. The Cerro Cabrera Block,
approximately 1,996 square miles in area, is located in northern Paraguay on the
Bolivian border. Aurora entered into a Concession Contract with the government
of Paraguay on March 2, 2007. This Concession Contract is assigned Law Number
3,551, dated July 16, 2008, having been duly ratified by the Congress of
Paraguay and signed by President Nicanor Duarte Frutos.

Boreal has acquired the rights to concessions in northern
Paraguay consisting of two tracts: Pantera and Bahia Negra. They are also
located in the eastern extensions of the Chaco Basin. The Pantera tract,
approximately 1,158 square miles in area, is located in the Curupayty Sub-Basin
on the border with Bolivia. The Bahia Negra tract, approximately 1,853 square
miles in area, is located at the southern end of the Curupayty Sub-Basin in
north central Paraguay. Boreal entered into a Concession Contract with the
government of Paraguay on March 2, 2007. This Concession Contract is assigned
Law Number 3,478, dated May 13, 2008, having been duly ratified by the Congress
of Paraguay and signed by President Nicanor Duarte Frutos.

In addition, on February 24, 2008, we purchased a 10% interest
in a joint venture formed pursuant to a joint venture agreement, with Trius
Energy, LLC, as the managing venturer, and certain other joint venturers, in
consideration for $800,000. Pursuant to the joint venture agreement, our company
and the other joint venturers agreed, among other things, (a) to form a joint
venture for the limited purpose of (i) securing, re-entering, re-opening,
managing, cultivating, drilling and operating the Gulf-Baker 83 #1 Well, the
Sibley 84 #1 Well and the Sibley 84 #2 Well located in West Gomez oil and gas
fields in Pecos County, Texas, (ii) such other business agreed to by the joint
venturers, and (iii) all such actions incidental to the foregoing as the joint
venturers determine; (b) that the joint venturers shall have equal rights to
manage and control the joint venture and its affairs and business, and that the
joint venturers designate Trius Energy, LLC, as the managing venturer and
delegate to the managing venturer the day-to-day management of the joint
venture; (c) that distributions from and contributions to the joint venture
shall be made in a prescribed manner; and (d) that all property acquired by the
joint venture shall be owned by the joint venture, in the name of the joint
venture, and beneficially owned by the joint venturers in the percentages of
each joint venturer from time to time. On April 1, 2008, the joint venture began
re-entry operations on the Sibley 84 #1 Well.

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Principal Products

We are engaged in the business of exploring and, if warranted,
developing commercial reserves of oil and gas. Since we are currently an
exploration stage company, there is no assurance that commercially viable
resources or reserves exist on any of our properties, and a great deal of
further exploration will be required before a final evaluation as to the
economic and legal feasibility for our future operation is determined. As of the
date of this annual report, we have not discovered any economically viable
resource or reserve on the properties owned by Aurora or Boreal, and there is no
assurance that we will discover any. On August 16, 2008, the Sibley 84 #1 well
of Block 83 84 Project JV entered production and began to sell natural gas.

Distribution Methods

A new gas field discovery in Paraguay will require new
infrastructure, such as gas processing plants, gas gathering pipelines, and
construction of a connection into the existing pipeline system in Brazil and
Argentina for international export. A new oil discovery will also require new
infrastructure, such as oil tanks and pumps. Crude oil must be moved from the
production site to refineries. These movements can be made using a number of
different modes of transportation, including trucks and trains, and also via an
oil pipeline, which would need to be constructed in Paraguay. We would not, on
our own, be able to distribute any oil and gas we discover, from our operations
in Paraguay. We would need to rely on third party contractors to distribute any
such oil and gas or sell any such oil and gas to third parties at the point of
production.

Competition

The oil and gas industry is very competitive. We compete with
numerous individuals and companies, including many major oil and gas companies,
which have substantially greater technical, financial and operational resources
and staffs. Accordingly, there is a high degree of competition for desirable oil
and gas interests, suitable properties for drilling operations and necessary
drilling equipment, as well as for access to funds. This competition could
adversely impact our ability to finance property acquisitions and further
exploration.

Licenses, concessions, royalty agreements or labor
contracts

Pursuant to a share purchase agreement, as amended March 17,
2008 and July 30, 2008, among our company, Artemis Energy PLC (formerly Pantera
Oil and Gas PLC), Aurora and Boreal, we have the right to purchase up to 85% of
the shares of each of Aurora and Boreal. In accordance with the terms of the
share purchase agreement, on November 30, 2007, we paid $75,000 to each of
Aurora and Boreal, for an aggregate payment of $150,000, as consideration for
the acquisition of 15% of the issued and outstanding shares of each of Aurora
and Boreal. As of May 31, 2008, we had paid an additional $128,625 towards our
next contractual payment for the acquisition of a further equity interest in
Aurora, and $208,625 towards our next contractual agreement for the acquisition
of a further equity interest in Boreal, for an aggregate payment of $337,250.
Aurora and Boreal have acquired rights to concessions in Paraguay representing
approximately 3,872,000 acres or 6,050 square miles pursuant to a Concession
Contract with the government of Paraguay dated March 2, 2007. Subsequent to May
31, 2008, on September 9, 2008, we entered into an amended and restated share
purchase agreement with Artemis Energy PLC (formerly Pantera Oil and Gas PLC),
Aurora Petroleos SA and Boreal Petroleos SA. For further details of our
agreements and concessions, please see our disclosure under the section entitled
Description of Property below.

Government Approval and Regulation

We are required to obtain licenses and permits from various
governmental authorities. We anticipate that we will be able to obtain all
necessary licenses and permits to carry on the activities which we intend to
conduct, and that we intend to comply in all material respects with the terms of
such licenses and permits. However, there can be no guarantee that we will be
able to obtain and maintain, at all times, all necessary licenses and permits
required to undertake our proposed exploration and development or to place our
properties into commercial production. In the event that we proceed with our
operation without necessary licenses and permits, we may be subject to large
fines and possibly even court orders and injunctions to cease operations.

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Oil and gas operations in United States and elsewhere are also
subject to federal and state laws and regulations which seek to maintain health
and safety standards by regulating the design and use of drilling methods and
equipment. Furthermore oil and gas operations in the United States are also
subject to federal and state laws and regulations including, but not limited to:
the construction and operation of facilities; the use of water in industrial
processes; the removal of natural resources from the ground; and the
discharge/release of materials into the environment.

Environmental Laws

In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuance of a given operation. Compliance with these laws and regulations has
not had a material effect on our operations or financial condition to date.
Specifically, we are subject to legislation regarding emissions into the
environment, water discharges and storage and disposition of hazardous wastes.
In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However,
such laws and regulations are frequently changed and we are unable to predict
the ultimate cost of compliance. Generally, environmental requirements do not
appear to affect us any differently or to any greater or lesser extent than
other companies in the industry.

Number of Employees

Other than our directors and officers, we have no employees. We
anticipate that we will be conducting most of our business through our
management and any consultants which we may engage.

RISK FACTORS

An investment in our common stock involves a high degree of
risk. You should carefully consider the risks described below and the other
information in this annual report before investing in our common stock. If any
of the following risks occur, our business, operating results and financial
condition could be seriously harmed. The trading price of our common stock could
decline due to any of these risks, and you may lose all or part of your
investment.

RISKS RELATED TO OUR BUSINESS

We have had negative cash flows from operations.

To date we have had negative cash flows from operations and we
have been dependent on sales of our equity securities and debt financing to meet
our cash requirements and have incurred losses totalling $1,441,959 for the year
ending May 31, 2008. As of May 31, 2008, we had working capital of $274,738. We
do not expect positive cash flow from operations in the near term. There is no
assurance that actual cash requirements will not exceed our estimates. In
particular, additional capital may be required in the event that:

- drilling and completion costs
increase beyond our expectations; or

- we encounter greater costs associated
with general and administrative expenses or offering costs.

The occurrence of any of the aforementioned events could
adversely affect our ability to meet our business plans.

We will depend almost exclusively on outside capital to pay for
the continued exploration and development of our properties. Such outside
capital may include the sale of additional stock and/or commercial borrowing.
Capital may not continue to be available if necessary to meet these continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. The issuance of additional equity securities by us would
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

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9

If we are unable to obtain financing in the amounts and on
terms deemed acceptable to us, we may be unable to continue our business and as
a result may be required to scale back or cease operations of our business, the
result of which would be that our stockholders would lose some or all of their
investment.

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been primarily
financed through the sale of equity securities, a decline in the price of our
common stock could be especially detrimental to our liquidity and our continued
operations. Any reduction in our ability to raise equity capital in the future
would force us to reallocate funds from other planned uses and would have a
significant negative effect on our business plans and operations, including our
ability to continue our current operations. If our stock price declines, we may
not be able to raise additional capital or generate funds from operations
sufficient to meet our obligations.

We have a history of losses and fluctuating operating
results.

From inception through to May 31, 2008, we have incurred
aggregate losses of $1,591,943. Our net loss for the year ended May 31, 2008 was
$1,441,959. There is no assurance that we will operate profitably or will
generate positive cash flow in the future. In addition, our operating results in
the future may be subject to significant fluctuations due to many factors not
within our control, such as the general economic cycle, the market price of oil
and gas and exploration and development costs. If we cannot generate positive
cash flows in the future, or raise sufficient financing to continue our normal
operations, then we may be forced to scale down or even close our
operations.

Until such time as we generate revenues, we expect an increase
in development costs and operating costs. Consequently, we expect to incur
operating losses and negative cash flow until our properties enter commercial
production.

We have a limited operating history and if we are not
successful in continuing to grow our business, then we may have to scale back
our operations and may not be able to continue as a going concern.

We have no history of revenues from operations and have no
significant tangible assets. We have yet to generate positive earnings and there
can be no assurance that we will ever operate profitably. Our company has a
limited operating history and must be considered in the development stage. The
success of our company is significantly dependent on a successful acquisition,
drilling, completion and production program. Our companys operations will be
subject to all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the absence of a significant
operating history. We may be unable to locate recoverable reserves or operate on
a profitable basis. We are in the development stage and potential investors
should be aware of the difficulties normally encountered by enterprises in the
development stage. If our business plan is not successful, and we are not able
to operate profitably, we may not be able to continue as a going concern and
investors may lose some or all of their investment in our company.

Due to the speculative nature of the exploration of oil and
gas properties, there is substantial risk that our business will fail.

The business of oil and gas exploration and development is
highly speculative involving substantial risk. There is generally no way to
recover any funds expended on a particular property unless reserves are
established and unless we can exploit such reserves in an economic manner. We
can provide investors with no assurance that any property interest that we may
acquire will provide commercially exploitable reserves. Any expenditure by our
company in connection with locating, acquiring and developing an interest in a
mineral or oil and gas property may not provide or contain commercial quantities
of reserves.

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10

Because of the early stage of development and the nature of
our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally
because of the nature of our business and the early stage of its development. We
are engaged in the business of exploring and, if warranted, developing
commercial reserves of oil and gas. Our properties are in the exploration stage
only and are without known reserves of oil and gas. Accordingly, we have not
generated any revenues nor have we realized a profit from our operations to date
and there is little likelihood that we will generate any revenues or realize any
profits in the short term. Any profitability in the future from our business
will be dependent upon locating and developing economic reserves of oil and gas,
which itself is subject to numerous risk factors as set forth herein. Since we
have not generated any revenues, we will have to raise additional monies through
the sale of our equity securities or debt in order to continue our business
operations.

The potential profitability of oil and gas ventures depends
upon factors beyond the control of our company.

The oil and gas industry in general is cyclical in nature. It
tends to reflect and be amplified by general economic conditions, both
domestically and abroad. Historically, in periods of recession or periods of
minimal economic growth, the operations of oil and gas companies have been
adversely affected. Certain end-use markets for oil and petroleum products
experience demand cycles that are highly correlated to the general economic
environment which is sensitive to a number of factors outside our control.

A recession or a slowing of the economy could have a material
adverse effect on our financial results and proposed plan of operations. A
recession may lead to significant fluctuations in demand and pricing for oil and
gas. If we elect to proceed with the development of any of our property
interests, our profitability may be significantly affected by decreased demand
and pricing of oil and gas. Reduced demand and pricing pressures will adversely
affect our financial condition and results of operations. We are not able to
predict the timing, extent and duration of the economic cycles in the markets in
which we operate.

The potential profitability of oil and gas properties is
dependent upon many factors beyond our control. For instance, world prices and
markets for oil and gas are unpredictable, highly volatile, potentially subject
to governmental fixing, pegging, controls, or any combination of these and other
factors, and respond to changes in domestic, international, political, social,
and economic environments. Additionally, due to worldwide economic uncertainty,
the availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. These changes and events
may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations.
A productive well may become uneconomic in the event water or other deleterious
substances are encountered which impair or prevent the production of oil and/or
gas from the well. In addition, production from any well may be unmarketable if
it is impregnated with water or other deleterious substances. The marketability
of oil and gas which may be acquired or discovered will be affected by numerous
factors beyond our control. These factors include the proximity and capacity of
oil and gas pipelines and processing equipment, market fluctuations of prices,
taxes, royalties, land tenure, allowable production and environmental
protection. These factors cannot be accurately predicted and the combination of
these factors may result in our company not receiving an adequate return on
invested capital.

Competition in the oil and gas industry is very intense and
there is no assurance that we will be successful in acquiring additional
property interests.

The oil and gas industry is very competitive. We compete with
numerous individuals and companies, including many major oil and gas companies,
which have substantially greater technical, financial and operational resources
and staff. Accordingly, there is a high degree of competition for desirable oil
and gas interests, suitable properties for drilling operations and necessary
drilling equipment, as well as for access to funds. We cannot predict if the
necessary funds can be raised or that any projected work will be completed.

We are required to obtain licenses and permits from various
governmental authorities. We anticipate that we will be able to obtain all
necessary licenses and permits to carry on the activities which we intend to
conduct, and that we

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11

intend to comply in all material respects with the terms of
such licenses and permits. However, there can be no guarantee that we will be
able to obtain and maintain, at all times, all necessary licenses and permits
required to undertake our proposed exploration and development or to place our
properties into commercial production. In the event that we proceed with our
operation without necessary licenses and permits, we may be subject to large
fines and possibly even court orders and injunctions to cease operations.

The acquisition of oil and gas interests involve many risks
and disputes as to the title of such interests will result in a material adverse
effect on our company.

The acquisition of interests in mineral properties involves
certain risks. Title to mineral claims and the borders of such claims may be
disputed. The concessions may be subject to prior unregistered agreements or
transfers and title may be affected by undetected defects. If it is determined
that any of our companys concessions are based upon a claim with an invalid
title, a disputed border, or subject to a prior right, the balance sheet of our
company will be adversely affected and we may not be able to recover damages
without incurring expensive litigation costs.

The marketability of natural resources will be affected by
numerous factors beyond our control which may result in us not receiving an
adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or
discovered by us will be affected by numerous factors beyond our control. These
factors include market fluctuations in oil and gas pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of oil and gas and environmental protection regulations.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in us not receiving an adequate return
on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive
regulation which may cause substantial delays or require capital outlays in
excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local
laws relating to the protection of the environment, including laws regulating
removal of natural resources from the ground and the discharge of materials into
the environment. Oil and gas operations are also subject to federal, state, and
local laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted, and
no assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages which we may elect not to insure against due to
prohibitive premium costs and other reasons. To date, we have not been required
to spend any material amount on compliance with environmental regulations.
However, we may be required to do so in the future and this may affect our
ability to expand or maintain our operations.

Exploration and production activities are subject to certain
environmental regulations which may prevent or delay the commencement or
continuance of our operations.

In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuance of a given operation. Compliance with these laws and regulations has
not had a material effect on our operations or financial condition to date.
Specifically, we are subject to legislation regarding emissions into the
environment, water discharges and storage and disposition of hazardous wastes.
In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However,
such laws and regulations are frequently changed and we are unable to predict
the ultimate cost of compliance. Generally, environmental requirements do not
appear to affect us any differently or to any greater or lesser extent than
other companies in the industry.

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12

We believe that our operations comply, in all material
respects, with all applicable environmental regulations. However, we are not
fully insured against all possible environmental risks.

Any future operations will involve many risks and we may
become liable for pollution or other liabilities which may have an adverse
effect on our financial position.

In the course of the exploration, acquisition and development
of mineral properties, several risks and, in particular, unexpected or unusual
geological or operating conditions may occur. Drilling operations generally
involve a high degree of risk. Hazards such as unusual or unexpected geological
formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire,
inability to obtain suitable or adequate machinery, equipment or labor, and
other risks are involved. We may become subject to liability for pollution. It
is not always possible to fully insure against such risks, and we do not
currently have any insurance against such risks nor do we intend to obtain such
insurance in the near future due to high costs of insurance. Should such
liabilities arise, they could reduce or eliminate any future profitability and
result in an increase in costs and a decline in value of the securities of our
company.

We are not insured against most environmental risks. Insurance
against environmental risks (including potential liability for pollution or
other hazards as a result of the disposal of waste products occurring from
exploration and production) has not been generally available to companies within
the industry. We will periodically evaluate the cost and coverage of such
insurance. If we became subject to environmental liabilities and do not have
insurance against such liabilities, the payment of such liabilities would reduce
or eliminate our available funds and may result in bankruptcy. Should we be
unable to fully fund the remedial cost of an environmental problem, we might be
required to enter into interim compliance measures pending completion of the
required remedy.

Resource exploration involves many risks, regardless of the
experience, knowledge and careful evaluation of the property by our company.
These hazards include unusual or unexpected formations, formation pressures,
fires, power outages, labour disruptions, flooding, explosions and the inability
to obtain suitable or adequate machinery, equipment or labour.

Operations in which we will have a direct or indirect interest
will be subject to all the hazards and risks normally incidental to the
exploration, development and production of resource properties, any of which
could result in damage to or destruction of producing facilities, damage to life
and property, environmental damage and possible legal liability for any or all
damage. We do not currently maintain liability insurance and may not obtain such
insurance in the future. The nature of these risks is such that liabilities
could represent a significant cost to our company, and may ultimately force our
company to become bankrupt and cease operations.

Any change to government regulation/administrative practices
may have a negative impact on our ability to operate and/or our
profitability.

The laws, regulations, policies or current administrative
practices of any government body, organization or regulatory agency in the
United States or any other jurisdiction, may be changed, applied or interpreted
in a manner which will fundamentally alter the ability of our company to carry
on our business.

The actions, policies or regulations, or changes thereto, of
any government body or regulatory agency, or other special interest groups, may
have a detrimental effect on us. Any or all of these situations may have a
negative impact on our ability to operate and/or our profitably.

We may be unable to retain key employees or
consultants.

We may be unable to retain key employees or consultants or
recruit additional qualified personnel.Our extremely limited personnel
means that we would be required to spend significant sums of money to locate and
train new employees in the event any of our employees resign or terminate their
employment with us for any reason. Due to our limited operating history and
financial resources, we are entirely dependent on the continued service of Mr.
Chris Metcalf, our chief executive officer. Further, we do not have key man life
insurance on Mr. Metcalf. We may not have the financial resources to hire a
replacement if we lost the services of Mr. Metcalf. The loss of service of Mr.
Metcalf could therefore significantly and adversely affect our operations.

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13

RISKS RELATED TO OUR COMMON STOCK

Our stock is a penny stock. Trading of our stock may be
restricted by the Securities and Exchange Commissions penny stock regulations
which may limit a stockholders ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the Securities and Exchange Commission which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customers
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customers confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholders ability
to buy and sell our stock.

In addition to the penny stock rules described above, FINRA
has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment
is suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.

Our common stock is illiquid and the price of our common
stock may be negatively impacted by factors which are unrelated to our
operations.

Our common stock currently trades on a limited basis on the OTC
Bulletin Board. Trading of our stock through the OTC Bulletin Board is
frequently thin and highly volatile. There is no assurance that a sufficient
market will develop in our stock, in which case it could be difficult for
shareholders to sell their stock. The market price of our common stock could
fluctuate substantially due to a variety of factors, including market perception
of our ability to achieve our planned growth, quarterly operating results of our
competitors, trading volume in our common stock, changes in general conditions
in the economy and the financial markets or other developments affecting our
competitors or us. In addition, the stock market is subject to extreme price and
volume fluctuations. This volatility has had a significant effect on the market
price of securities issued by many companies for reasons unrelated to their
operating performance and could have the same effect on our common stock.

ITEM 2.      DESCRIPTION OF
PROPERTY.

Our principal offices are located at 111 Congress Avenue, Suite
400, Austin, Texas 78701. We pay $1,510 per month in rent and our lease expires
on April 30, 2009.

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14

Pursuant to a share purchase agreement dated November 21, 2007,
as amended March 17, 2008 and July 30, 2008, and as restated on September 9,
2008, among our company, Artemis Energy PLC (formerly Pantera Oil and Gas PLC),
Aurora and Boreal, we have the right to purchase up to 85% of the shares of each
of Aurora and Boreal. Aurora and Boreal have acquired rights to concessions in
Paraguay representing approximately 3,872,000 acres or 6,050 square miles
pursuant to a Concession Contract with the government of Paraguay dated March 2,
2007. The concessions offer the exclusive right to explore the granted area for
a term of four years following the date of ratification by the Congress of
Paraguay, extendible for an additional two years in which the concessionaire
shall be obligated to fulfill a minimum work plan. The concessions offer a term
of twenty years for exploitation following the date entered into the
exploitation stage, extendible for an additional ten years at the
concessionaires request.

Aurora has acquired the rights to concessions in northern
Paraguay consisting of three tracts: Tagua, Toro, and Cerro Cabrera. They are
located in the eastern extensions of the Chaco Basin, where, in Bolivia and
Argentina, significant reserves of gas, oil and condensate have been discovered.
The Chaco Basin extends across Paraguay, Bolivia and Argentina, and in
Paraguay,the Chaco Basin is composed of two Sub-Basins, the Curupayty
and Carandayty Sub-Basins. The sources for most of the known hydrocarbons in the
Chaco Basin are the Devonian Los Monos and Silurian Kirusillas shales. Both are
mixed oil and gas prone source rocks. The amalgamated fans and channel
sandstones of the Carboniferous Tarija and Tupambi formations are the main
producing reservoirs in the Chaco Basin. The Tagua tract, approximately 116
square miles in area, is located in the Carandayty Sub-Basin on the border with
Bolivia. It is approximately 12 miles from a Paraguayan well (Mendoza 1-R) that
tested gas from two zones and approximately 68 miles from the nearest producing
field in Bolivia. The Toro tract, approximately 927 square miles in area, is
located in the Curupayty Sub-Basin in north central Paraguay. The Cerro Cabrera
Block, approximately 1,996 square miles in area, is located in northern Paraguay
on the Bolivian border. It is located directly across the Izozog High from the
Mendoza 1-R and approximately 149 miles from the nearest producing fields in
Bolivia. Aurora entered into a Concession Contract with the government of
Paraguay on March 2, 2007. This Concession Contract is assigned Law Number
3,551, dated July 16, 2008, having been duly ratified by the Congress of
Paraguay and signed by President Nicanor Duarte Frutos. The Concession area for
Exploration is located and delimited by the following geographic coordinates:

TORO BLOCK

COORDINATES
    LATITUDE:
    LONGITUDEA
    20°
      1030
    59°
      4807.2B
    20°
      1030
    58°
      3849.2C
    20°
      2118
    58°
      3849.2D
    20°
      2118
    59°
      4807.2


Approximate area: 593,053 acres.

TAGUA BLOCK

POINTS
    Longitude
    LatitudeA
    62°
      0640.68
    20°
      2118B
    61°
      5508.4
    20°
      2118C
    61°
      5508.4
    20°
      0451.6D Boundary Marker IV Gabino Mendoza
    61° 5521.13
    20° 0521.16


Approximate area: 74,132 acres.

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15

BLOCK: CERRO CABRERA

POINTS
    Longitude
    LatitudeBoundary Marker V C. Cabrera
    61°
      4406.44
    19°
      3803.86Boundary Marker VI Palmar de las Islas
    60°
      371.2
    19°
      2736C
    60°
      3419.2
    19°
      2652.8D
    60°
      3419.2
    19°
      4846.8E
    60°
      4550.4
    19°
      4846.8F
    60°
      4550.4
    19°
      551.2G
    61°
      401.2
    19°
      551.2H
    61°
      401.2
    19°
      5938.4I
    61°
      5237.2
    19°
      5938.4


Approximate area: 1,277,535 acres.

Boreal has recently acquired the rights to concessions in
northern Paraguay consisting of two tracts: Pantera and Bahia Negra. They are
also located in the eastern extensions of the prolific Chaco Basin, where, in
Bolivia and Argentina, significant reserves of gas, oil and condensate have been
discovered. The Pantera tract, approximately 1,158 square miles in area, is
located in the Curupayty Sub-Basin on the border with Bolivia. The Bahia Negra
tract, approximately 1,853 square miles in area, is located at the southern end
of the Curupayty Sub-Basin in north central Paraguay. Boreal entered into a
Concession Contract with the government of Paraguay on March 2, 2007. This
Concession Contract is assigned Law Number 3,478, dated May 13, 2008, having
been duly ratified by the Congress of Paraguay and signed by President Nicanor
Duarte Frutos. The Concession area for Exploration is located and delimited by
the following geographic coordinates:

PANTERA BLOCK

POINTS
    LONGITUDE
    LATITUDE:Boundary Marker VII C. Sanchez
    59o5840
    19o1740. 87Boundary Marker VIII C. Chovoreca
    59o0408.14
    19o1715.53C.
    59o0155.52
    19o1836D
    59o0155.52
    19o2707.2E
    59o5942
    19o2707.2F
    59o5942
    19o3758.8G
    60o2248
    19o3758.8H
    60o2248
    19o2352.8


Approximate area: 741,316 acres.

BAHIA NEGRA BLOCK

POINTS
    LONGITUDE
    LATITUDE:A
    59o0155.2
    20°
      2118B
    58°
      3849.2
    20°
      2118C
    58°
      3849.2
    21°
      2620.4D
    59o0155.2
    21°
      2620.4


Approximate area: 1,186,106 acres.

ITEM 3.      LEGAL PROCEEDINGS.

We know of no material, active or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.

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16

ITEM 4.      SUBMISSIONS OF MATTERS
TO A VOTE OF SECURITY HOLDERS.

None.

PART II

|ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
      SECURITIES.
|------- | ------------------------------------------------------------------------------------------------------------------------------

Our common shares were approved for quotation on the OTC
Bulletin Board on April 16, 2007, and are currently quoted for trading under the
symbol PTPE. The following quotations obtained from the OTC Bulletin Board
reflect the high and low bids for our common stock based on inter-dealer prices,
without retail mark-up, mark-down or commission an may not represent actual
transactions. The high and low bid prices of our common stock for the periods
indicated below are as follows:

OTC
        Bulletin Board(1)Quarter Ended
      High
      LowMay 31, 2008
      $0.84
      $0.40February 29, 2008
      $1.98
      $0.80November 30, 2007(2)
      $0.50
      $0.00August 31, 2007
      N/A
      N/AMay 31, 2007
      N/A
      N/AFebruary 28, 2007
      N/A
      N/ANovember 30, 2006
      N/A
      N/AAugust 31, 2006
      N/A
      N/A


| | (1) | OTC Bulletin Board quotations reflect inter-dealer prices
      without retail mark-up, mark-down or commission, and may not represent
      actual transactions. Our common shares are issued in registered form. The
      transfer agent and registrar for our common stock is American Stock
      Transfer and Trust Company, LLC (Telephone: (718) 921- 8521; Facsimile:
      (718) 765-8742).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                      
| | (2) | Our common shares were approved for quotation on the OTC
      Bulletin Board on April 16, 2007. The first trade of our stock on the OTC
      Bulletin Board as indicated on Yahoo Finance occurred on October 9,
      2007.                                                                                                                                                                       

On August 25, 2008, the shareholders list of our common shares
showed 28 registered shareholders and 94,045,655 shares outstanding.

Dividend Policy

No cash dividends have been paid by our company on our common
stock. We anticipate that our companys future earnings will be retained to
finance the continuing development of our business. The payment of any future
dividends will be at the discretion of our companys board of directors and will
depend upon, among other things, future earnings, any contractual restrictions,
the success of business activity, regulatory and corporate law requirements and
the general financial condition of our company.

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17

Recent Sales of Unregistered Securities

On April 3, 2008, we issued to one accredited investor
1,111,111 units for gross proceeds of $500,000, pursuant to a private placement
subscription agreement. Each unit is comprised of one common share and one
common share purchase warrant. Each warrant entitles the holder thereof to
purchase an additional common share at $0.75 per share up to April 3, 2009 and
at $1.00 per share from April 4, 2009 to April 3, 2010. The units were issued
relying on Section 4(2) and/or Rule 506 of Regulation D of the Securities Act of
1933.

Equity Compensation Plan Information

We currently do not have any stock option or equity
compensation plans or arrangements.

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

Other than as set out below, we did not purchase any of our
shares of common stock or other securities during our fiscal year ended May 31,
2008.

In connection with Peter Hughes resignation as the secretary
and a director of our company, on February 26, 2008, we entered into a return to
treasury agreement with Peter Hughes, whereby Mr. Hughes agreed to return
27,000,000 shares of our common stock which he held to the treasury of our
company for the sole purpose of our company retiring such shares.

ITEM 6.      MANAGEMENT DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION.

Plan of Operation

The following is a discussion and analysis of our plan of
operation for the next year ended May 31, 2009, and the factors that could
affect our future financial condition and plan of operation.

This discussion and analysis should be read in conjunction with
our financial statements and the notes thereto included elsewhere in this annual
report. Our financial statements are prepared in accordance with United States
generally accepted accounting principles. All references to dollar amounts in
this section are in United States dollars unless expressly stated otherwise.
Please see our Note on Forward Looking Statements and Risk Factors for a
list of our risk factors.

Chaco Basin Concessions

Pursuant to a share purchase agreement, as amended March 17,
2008, among our company, Pantera Oil and Gas PLC (now called Artemis Energy
PLC), Aurora Petroleos SA and Boreal Petroleos SA, we have the right to purchase
up to 85% of the shares of each of Aurora and Boreal. In accordance with the
terms of the share purchase agreement, on November 30, 2007, we paid $75,000 to
each of Aurora and Boreal, for an aggregate payment of $150,000, as
consideration for the acquisition of 15% of the issued and outstanding shares of
each of Aurora and Boreal. As of May 31, 2008, we had paid an additional
$128,625 towards our next contractual payment for the acquisition of a further
equity interest in Aurora, and $208,625 towards our next contractual agreement
for the acquisition of a further equity interest in Boreal, for an aggregate
payment of $337,250.

To more effectively align the interests of our company with
Artemis, Aurora and Boreal, and to provide for a potentially more efficient
accounting and tax treatment for our company, Artemis, Aurora and Boreal under
their respective tax and accounting regimes, the parties entered negotiations
and further revised the share purchase agreement. As a result of these
negotiations, on September 9, 2008, we entered into an amended and restated
share purchase agreement with Artemis Energy PLC (formerly Pantera Oil and Gas
PLC), Aurora Petroleos SA and Boreal Petroleos SA. The amended agreement amends
and restates the share purchase agreement dated November 21, 2007, as amended
March 17, 2008 and July 30, 2008, such that the share purchase agreement, as
amended, is replaced in its entirety by the amended agreement. Pursuant to the
amended agreement, the parties agreed as follows:

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18

| | (a) | Aurora acknowledged and agreed to:                                                                                                                                                                                                                                                                   
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (i)                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (ii)                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (iii)                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                      
| | (b) | Boreal acknowledged and agreed to:                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (i)                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (ii)                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (iii)                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                      
| | (c) | Artemis agreed to:                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (i)                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                      
| |     | (ii)                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                      
| | (d) | Pantera agreed to issue a share purchase warrant
      entitling Artemis to purchase up to 2,600,000 shares of our common stock
      at an exercise price of $0.27 per share, with the other terms and
      conditions of the warrants to be mutually agreed upon by Artemis and our
      company.

In addition, each of Aurora and Boreal agreed to use all funds
that they respectively receive from our company in connection with the amended
agreement exclusively towards the exploration and development of the concessions
held by each of Aurora and Boreal. Each of Aurora and Boreal have agreed to (i)
consult and work together with our company to plan and execute any exploration
and development activities either of them conduct; (ii) provide our company with
annualized budgets with monthly cost projections; and (iii) not incur costs in
excess of $5,000 for any transactions without the prior written consent of
either our company or Artemis.

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19

Please review the amended agreement attached as Exhibit 10.9 to
this annual report for a complete description of all of the terms and conditions
of the amended agreement.

Aurora and Boreal have acquired rights to concessions in
Paraguay representing approximately 3,872,000 acres or 6,050 square miles
pursuant to a Concession Contract with the government of Paraguay dated March 2,
2007. The Concession Contract for Aurora is assigned Law Number 3,551, dated
July 16, 2008, and the Concession Contract for Boreal is assigned Law Number
3,478, dated May 13, 2008, having been duly ratified by the Congress of Paraguay
and signed by President Nicanor Duarte Frutos. These Concessions are located in
a well established hydrocarbon area, named the Chaco Basin, where oil and gas
has been produced in Bolivia since the 1920s. Aurora has acquired the rights to
concessions in northern Paraguay consisting of three tracts: Tagua, Toro, and
Cerro Cabrera; and Boreal has acquired the rights to concessions in northern
Paraguay consisting of two tracts: Pantera and Bahia Negra. The concessions
offer the exclusive right to explore the granted area for a term of four years
following the date of ratification by the Congress of Paraguay, extendible for
an additional two years in which the concessionaire shall be obligated to
fulfill a minimum work plan. The concessions offer a term of twenty years for
exploitation following the date entered into the exploitation stage, extendible
for an additional ten years at the concessionaires request.

In conjunction with our 15% acquisition of each of Aurora and
Boreal as of May 31, 2008, we are designing an exploration program to cost
effectively evaluate the concessions. We plan to accomplish this through the
proper mix of seismic and drilling. The Curupayty Sub-Basin already has about
1,800 miles of 2D seismic with approximately 1,100 miles of 1970 vintage data
and about 560 miles of more recent 1993 data. Three wells have been drilled in
proximity to the prospective acreage. We are currently seeking to acquire all
available data on the concessions, including additional vintage seismic data.

On January 30, 2008, we entered into an agreement with T.B.
Berge, P.G., for the reprocessing of 1993 vintage Phillips Petroleum 2D seismic
data and 1971 vintage Texaco 2D seismic data, located on our Pantera concession,
consisting of approximately 988,000 acres in northern Paraguay. On July 10,
2008, Mr. Berge completed the reprocessing and interpretation of approximately
178 miles of 2-D seismic data and submitted his processing report to our
company. The reprocessed data, along with well, surface, and cultural
information, were loaded and mapped in an SMT project. Mr. Berge submitted
relevant horizons and maps to show hydrocarbon systems and prospects and
determined a probabilistic range for identified prospects, as well as a mean
outcome for economics, using SPE (Society of Petroleum Engineers), WPC (World
Petroleum Council), and AAPG (American Association of Petroleum Geologists)
guidelines. Existing well files from the Pantera #1 well, drilled by Phillips
Petroleum in 1995, were recovered from storage in Paraguay and fully digitized
and incorporated into the report. The Pantera #1 well tops and intervals were
tied to existing seismic lines and correlated around the rest of the reprocessed
data grid.

We are evaluating the results and considering additional steps,
including the processing of a number of large seismic displays on paper that are
from the older Texaco surveys through a process called seismic vectorization (or
SEGY conversion) to recover and reprocess that data as if we had the tapes. The
process should allow us to do post-stack processing (migration) and then load
the data with our existing data. This may be useful information of a more
regional nature that would help put the regional perspective together. We are
currently accumulating additional well data to aid in this survey. This survey
is intended to further add to our evaluation of identified prospects and aid in
the formulation of the drilling plan.

West Gomez Field Joint Venture

On February 24, 2008, we entered into an agreement to purchase
a 10% interest in a joint venture (Block 83 84 Project) formed pursuant to a
joint venture agreement, with Trius Energy, LLC, as the managing venturer, and
certain other joint venturers, in consideration for $800,000.

Located on 1280 acres in the West Gomez Field in Pecos County,
Texas, the Block 83 84 Project consists of two reentry wells (Sibley 84 #1 and
Gulf-Baker 83 #1) and one infill, shallow depth drill (Sibley 84 #2). Lakehills
Production, Inc., our operating partner in the project, and Trius Energy began
the re-entry phase of the Block 83 84 Project on April 1, 2008. The drilling rig
was mobilized to location on Sibley 84 #1 along with the pump, water tanks, pipe
racks and drilling string. Atlas Well Service ran the hole with tubing and
continued to drill out plugs until achieving the target depth for the Fusselman
and Devonian pay zones. The crew completed the well and

---

20

placed the well back into production on August 16, 2008. Upon
completion of the Sibley 84 #1, Block 83 84 joint venture intends to re-enter a
second well, the Gulf-Baker 83 # and drill the Sibley 84 #2, a shallow drill of
approximately 4000 feet. The primary objectives of the Block 83 84 Project are
the Ellenberger, Fusselman, Devonian, Upper and Lower Wolfcamp, Atoka and Yates
7 Rivers sands.

Financings

On February 12, 2008, we entered into an equity financing
agreement with FTS Financial Investments Ltd., a corporation organized under the
laws of Switzerland, whereby we, at our sole and exclusive option, may issue and
sell to FTS Financial Investments and FTS Financial Investments agreed to
irrevocably purchase from our company, shares of our common stock for an
aggregate purchase price of up to $10,000,000, at a price of $1.00 per share. If
and when we elect to issue and sell shares of our common stock to FTS Financial
Investments pursuant to the agreement, we are required to deliver to FTS
Financial Investments, among other things, a draw down notice in a prescribed
form.

Pursuant to the agreement, we, among other things, agreed to:

| | (a) | reserve an aggregate of 10,000,000 shares of our common
      stock which may be issued to FTS Financial Investments pursuant to the
      agreement; and                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| | (b) | issue one non-transferable common share purchase warrant
      to FTS Financial Investments for each share of our common stock issued to
      FTS Financial Investment pursuant to the agreement, with each warrant
      permitting the purchase of one share of our common stock, for a period of
      three years following the issuance of such warrants at the following
      exercise prices:
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                 

The agreement expires on the earliest to occur of:

| | (a) | the date on which FTS Financial Investments has purchased
      shares of our common stock for an aggregate purchase price of
      $10,000,000;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                 
| | (b) | the date of termination of the agreement in accordance
      with the terms of the agreement; or                                                
| |     |                                                                                                                                                 
| | (c) | the date that is 24 months from the date of the
      agreement.                                                                                

As at May 31, 2008, no shares were issued under the February
12, 2008 equity financing agreement.

On February 25, 2008, we entered into a subscription agreement
with Trius Energy, LLC, of which Scott Tyson is a significant shareholder,
whereby we agreed to issue 1,200,000 shares of our common stock for aggregate
proceeds of $720,000.

On April 3, 2008, we entered into a subscription agreement with
Belair Minex USA Corporation, whereby we agreed to issue 1,111,111 units for
aggregate proceeds of $499,999.50. Each unit consists of one share of our common
stock and one common share purchase warrant. Each warrant may be exercised until
April 3, 2010 at an exercise price of $0.75 per share if exercised on or before
April 3, 2009, or $1.00 per share if exercised between April 4, 2009 to April 3,
2010.

---

21

Cash Requirements

Our plan of operations for the next 12 months involves the
exploration of our oil and gas properties. As of May 31, 2008, our company had
cash of $168,134 and working capital of $274,738.

We estimate that our general operating expenses for the next
twelve month period to include $2,800,000 for exploration expenses and $380,000
for professional fees and general and administrative expenses for a total
estimated funding of $3,180,000. Estimated operating expenses include provisions
for consulting fees, salaries, travel, telephone, office rent, and on-going
legal, accounting, and audit expenses to comply with our reporting
responsibilities as a public company under the United States Exchange Act of
1934, as amended.

We will require additional funds to continue our operations and
implement our growth strategy in exploration operations. To date, we have had
negative cash flows from operations and we have been dependent on sales of our
equity securities and debt financing to meet our cash requirements. We expect
this situation to continue for the foreseeable future. We anticipate that we
will have negative cash flows during the next twelve month period. These funds
may be raised through equity financing, debt financing, or other sources, 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.

We incurred a net loss of $1,441,959 for the year ended May 31,
2008. As indicated above, we anticipate that our projected operating expenses
for the next twelve months will be $3,180,000. We will be required to raise
additional funds through the issuance of equity securities or through debt
financing in order to carry-out our plan of operations for the next twelve month
period. There can be no assurance that we will be successful in raising the
required capital or that actual cash requirements will not exceed our estimates.

Given that we have not generated any revenues to date, our cash
requirements are subject to numerous contingencies and risk factors beyond our
control, including operation and acquisition risks, competition from well-funded
competitors, and our ability to manage growth. We can offer no assurance that
our company will generate cash flow sufficient to achieve profitable operations
or that our expenses will not exceed our projections. If our expenses exceed
estimates, we will require additional monies during the next twelve months to
execute our business plan.

There are no assurances that we will be able to obtain funds
required for our continued operation. 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
additional financing on a timely basis, we will not be able to meet our other
obligations as they become due and we will be forced to scale down or perhaps
even cease the operation of our business.

Going Concern

Due to our being an exploration stage company and not having
generated revenues, in their report on our audited financial statements for the
year ended May 31, 2008, our independent auditors included an explanatory
paragraph regarding substantial doubt about our ability to continue as a going
concern.

We have historically incurred losses, and through May 31, 2008
have incurred losses of $1,591,943 since our inception. Because of these
historical losses, we will require additional working capital to develop our
business operations. We intend to raise additional working capital through
private placements, public offerings, bank financing and/or advances from
related parties or shareholder loans.

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

---

22

There are no assurances that we will be able to achieve a level
of revenues adequate to generate sufficient cash flow from operations. To the
extent that funds generated from operations and any private placements, public
offerings and/or bank financing are insufficient, we will have to raise
additional working capital. No assurance can be given that additional financing
will be available, or if available, will be on terms acceptable to us. If
adequate working capital is not available we may not increase our
operations.

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.

Off-Balance Sheet Arrangements

Our company has no outstanding derivative financial
instruments, off-balance sheet guarantees, interest rate swap transactions or
foreign currency contracts. Our company does not engage in trading activities
involving non-exchange traded contracts.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with
United States generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying disclosures of our company. Although these estimates
are based on managements knowledge of current events and actions that our
company may undertake in the future, actual results may differ from such
estimates.

Development Stage Company

We are a development stage company as defined in Statement of
Financial Accounting Standards (FAS) No. 7.

Foreign Currency Translation

Our functional and reporting currency is the United States
dollar. Monetary assets and liabilities are translated into United States
dollars at the exchange rate in effect at the end of the period. Non-monetary
assets and liabilities are translated at the exchange rate prevailing when the
assets were acquired or the liabilities assumed. Revenues and expenses are
translated at average rate of exchange for the period. All exchange gains and
losses on transactions denominated in currencies other than the functional
currency are included in the determination of net income (loss) for the period.

Basic and Diluted Loss Per Share

We report basic loss per share in accordance with the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. Basic loss per share is computed using
the weighted average number of shares outstanding during the period. Diluted
earnings (loss) per share are computed similar to basic income (loss) per share
except that the denominator is increased to include the number of common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, at either the beginning of the
respective period presented or the date of issuance, whichever is later, and
only if the common stock equivalents are considered dilutive based upon our net
income (loss) position at the calculation date. Diluted loss per share has not
been provided as it would be antidilutive.

Equipment

Equipment, which consists of computer equipment, is recorded at
cost. We provide for depreciation using a 30% declining balance annual rate. All
equipment was written off during the year ended May 31, 2008, as it was no
longer being used by our company.

---

23

Investments

Investments in companies and joint ventures where no
significant influence exists are carried at the lower of cost or fair value. The
investments are assessed for impairment when it appears the amount may not be
recovered.

Oil and Gas Properties

We follow the full cost method of accounting for oil and gas
operations whereby all costs of exploring for and developing oil and gas
reserves are initially capitalized on a country-by-country (cost centre) basis.
Such costs include land acquisition costs, geological and geophysical expenses,
carrying charges on non-producing properties, costs of drilling and overhead
charges directly related to acquisition and exploration activities.

Costs capitalized, together with the costs of production
equipment, will be depleted and amortized on the unit-of-production method based
on the estimated gross proved reserves. Petroleum products and reserves are
converted to a common unit of measure, using 6 MCF of natural gas to one barrel
of oil.

Costs of acquiring and evaluating unproved properties are
initially excluded from depletion calculations. These unevaluated properties are
assessed periodically to ascertain whether impairment has occurred. When proved
reserves are assigned or the property is considered to be impaired, the cost of
the property or the amount of the impairment is added to costs subject to
depletion calculations.

If capitalized costs, less related accumulated amortization and
deferred income taxes, exceed the full cost ceiling the excess is expensed in
the period when such excess occurs. The full cost ceiling is determined based
on the present value of estimated future net revenues attributed to proved
reserves, using current prices less estimated future expenditures plus the lower
of cost and fair value of unproven properties within the cost centre.

Future net cash flows from proved reserves using period-end,
non-escalated prices and costs are discounted to present value and compared to
the carrying value of oil and gas properties.

Proceeds from a sale of petroleum and natural gas properties
are applied against capitalized costs, with no gain or loss recognized, unless
such a sale would alter the rate of depletion by more than 25%. Royalties paid
net of any tax credits received are netted with oil and gas sales.

Asset Retirement Obligations

We recognize the fair value of a liability for an asset
retirement obligation in the year in which it is incurred when a reasonable
estimate of fair value can be made. The carrying amount of the related
long-lived asset is increased by the same amount as the liability.

Changes in the liability for an asset retirement obligation due
to the passage of time will be measured by applying an interest method of
allocation. The amount will be recognized as an increase in the liability and an
accretion expense in the statement of operations. Changes resulting from
revisions to the timing or the amount of the original estimate of undiscounted
cash flows are recognized as an increase or a decrease in the carrying amount of
the liability for an asset retirement obligation and the related asset
retirement cost capitalized as part of the carrying amount of the related
long-lived asset. At May 31, 2008, our company had no asset retirement
obligations as we recently entered into a new development stage.

Environmental Costs

Environmental expenditures that relate to current operations
are expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, and the
cost can be reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or our companys
commitments to a plan of action based on the then known facts.

---

24

As at May 31, 2008, we have not incurred any environmental
expenditures.

Financial Instruments

The carrying value of our financial instruments consisting of
cash, accounts payable and accrued liabilities and due to related parties
approximate their fair value due to the short-term maturity of such instruments.
Loan payable is carried at cost plus accrued interest and the carrying value is
equal to the fair value. Unless otherwise noted, it is managements opinion that
our company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. The Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure related to the use of fair
value measures in financial statements. The Statement is to be particularly
effective for our financial statements issued for the fiscal year beginning June
1, 2008. We are currently evaluating the timing of adoption and the impact that
adoption might have on its financial position or results of operations.

On February 15, 2007, the FASB issued SFAS No. 159 The Fair
Value Option for Financial Assets and Financial Liabilities. The Statement
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. SFAS No. 159 is effective for our
financial statements issued for the fiscal year beginning June 1, 2008. We are
currently evaluating the impact that the adoption of SFAS No. 159 might have on
its financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements. The standard requires all
entities to report noncontrolling (minority) interests as equity in consolidated
financial statements. SFAS No. 160 eliminates the diversity that currently
exists in accounting for transactions between an entity and noncontrolling
interests by requiring they be treated as equity transactions. We are currently
reviewing the guidance, which is effective for fiscal years beginning after
December 15, 2008, to determine the potential impact, if any, on our financial
statements.

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 requires enhanced 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 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. We are currently
evaluating the impact of SFAS 161 on our financial statements.

ITEM 7.      FINANCIAL STATEMENTS.

Our financial statements are stated in United States dollars
and are prepared in accordance with United States generally accepted accounting
principles.

It is the opinion of management that the audited financial
statements for the fiscal year ended May 31, 2008 include all adjustments
necessary in order to ensure that the audited financial statements are not
misleading.

---

25

The following financial statements are filed as part of this
annual report:

|1. | Balance Sheet as at May 31, 2008 and 2007                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                            
|2. | Statements of Operations for the years ended May 31, 2008
      and 2007 and for the period from October 27, 2004 (Date of inception) to
      May 31, 2008
|   |                                                                                                                                                            
|3. | Statement of Cash Flows for the years ended May 31, 2008
      and 2007 and for the period from October 27, 2004 (Date of inception) to
      May 31, 2008 
|   |                                                                                                                                                            
|4. | Statement of Stockholders Deficit for the period from
      October 27, 2004 (Date of inception) to May 31, 2008                                          
|   |                                                                                                                                                            
|5. | Notes to Financial
Statements                                                                                                                              

---

26



PANTERA PETROLEUM INC.

(formerly Arthro Pharmaceuticals, Inc.)

(A Development Stage Company)

FINANCIAL STATEMENTS

May 31, 2008 and 2007

(Stated in US Dollars)



---

27

| | BDO DunwoodyLLP Chartered
      Accountants | #604  750 West Pender Street Vancouver,
      BC, Canada V6C 2T7 Telephone: (604) 689-0188 Fax: (604) 689-9773
| | ------------------------------------------- | ---------------------------------------------------------------------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Pantera Petroleum Inc. (formerly
Arthro Pharmaceuticals, Inc.) (A Development Stage Company)

We have audited the accompanying balance sheet of Pantera
Petroleum Inc. (formerly Arthro Pharmaceuticals, Inc.) (the Company) (A
Development Stage Company) as of May 31, 2008 and the related statements of
operations, cash flows and stockholders' equity (deficiency) for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We did not audit the financial statements of the
Company for the period from October 27, 2004 (Date of Inception) to May 31,
2007. Such statements are included in the cumulative from inception to May 31,
2008 totals of the statements of operations, cash flows and stockholders equity
(deficiency) and reflect a net loss of 9% of the related cumulative totals.
Those financial statements were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to the amount for the
period from October 27, 2004 (Date of Inception) to May 31, 2007 included in the
cumulative totals, is based solely upon the report of the other auditors.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit and the
report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other
auditors, these financial statements referred to above present fairly, in all
material respects, the financial position of Pantera Petroleum Inc. (formerly
Arthro Pharmaceuticals, Inc.) as of May 31, 2008 and the results of its
operations and its cash flows for the year then ended and for the period from
October 27, 2004 (Date of Inception) to May 31, 2008 in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements referred to above have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company is in the
development stage, has not yet achieved profitable operations and is dependent
on its ability to raise capital from stockholders or other sources to meet its
obligations and repay its liabilities arising from normal business operations
when they come due. These factors, along with other matters as set forth in Note
1, raise substantial doubt that the Company will be able to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

(signed) BDO Dunwoody LLP

Chartered Accountants

Vancouver, Canada September 9, 2008

BDO DunwoodyLLP is a Limited Liability Partnership
registered in Ontario

---

28

|A PARTNERSHIPOFINCORPORATEDPROFESSIONALS | AMISANO HANSON      
|---------------------------------------- | --------------------
|                                         | CHARTEREDACCOUNTANTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Pantera Petroleum Inc. (formerly
Arthro Pharmaceuticals, Inc.) (A Development Stage Company)

We have audited the accompanying balance sheet of Pantera
Petroleum Inc. (formerly Arthro Pharmaceuticals, Inc.) (A Development Stage
Company) as of May 31, 2007 and the related statements of operations,
stockholders equity a nd cash flows for the year ended May 31, 2007 and the
period from October 27, 2004 (Date of Inception) to May 31, 2007. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, these financial statements referred to above
present fairly, in all material respects, the financial position of Pantera
Petroleum Inc. (formerly Arthro Pharmaceuticals Inc.) as of May 31, 2007 and the
results of its operations and its cash flows for the year ended May 31, 2007 and
the period October 27, 2004 (Date of Inception) to May 31, 2007, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying financial statements referred to above have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company is in the
development stage, has no established sources of revenue and is dependent on its
ability to raise capital from shareholders or other sources to sustain
operations. These factors, along with other matters as set forth in Note 1,
raise substantial doubt that the Company will be able to continue as a going
concern. Management plans in regard to their planned financing and other matters
are described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.



|Vancouver, Canada | AMISANO HANSON     
|----------------- | ---------------------
|July 27, 2007     | Chartered Accountants



750 WEST PENDER STREET, SUITE 604
    TELEPHONE:
    604-689-0188VANCOUVER CANADA
    FACSIMILE:
    604-689-9773V6C 2T7
    E-MAIL:
    amishan@telus.net


---

29

PANTERA PETROLEUM INC.(formerly Arthro
Pharmaceuticals, Inc.) (A Development Stage Company) BALANCE SHEETS
May 31, 2008 and 2007 (Stated in US Dollars)

|                                                                               |   | 2008       |   |   | 2007     |  
|------------------------------------------------------------------------------ | - | ---------- | - | - | -------- | -
|**ASSETS**                                                                     |  
|                                                                               |   |            |   |   |          |  
|Current                                                                        |   |            |   |   |          |  
|Cash                                                                           | $ | 168,134    |   | $ | 1,720    |  
|Prepaid expense and
      deposit                                              |   | 118,533    |   |   | 1,500    |  
|                                                                               |   | 286,667    |   |   | 3,220    |  
|                                                                               |   |            |   |   |          |  
|Investments  Note 6                                                           |   | 541,907    |   |   | -        |  
|Oil and gas interests  Notes 7 and 12                                         |   | 800,000    |   |   | -        |  
|Equipment  Note 3                                                             |   | -          |   |   | 767      |  
|License agreement  Note 4                                                     |   | -          |   |   | 1        |  
|                                                                               |   |            |   |   |          |  
|                                                                               | $ | 1,628,574  |   | $ | 3,988    |  
|                                                                               |   |            |   |   |          |  
|LIABILITIES                                                                    |  
|                                                                               |   |            |   |   |          |  
|Current                                                                        |   |            |   |   |          |  
|Accounts payable and accrued
      liabilities                                 | $ | 11,929     |   | $ | 12,951   |  
|Due to related parties
       Note 9                                          |   | -          |   |   | 67,060   |  
|                                                                               |   | 11,929     |   |   | 80,011   |  
|                                                                               |   |            |   |   |          |  
|Consulting fees payable in stock  Note 11(c)                                  |   | 27,500     |   |   | -        |  
|Loan payable  Notes 5 and 12                                                  |   | 75,448     |   |   | -        |  
|                                                                               |   |            |   |   | -        |  
|                                                                               |   | 114,877    |   |   | 80,011   |  
|                                                                               |   |            |   |   |          |  
|STOCKHOLDERS EQUITY
      (DEFICIENCY)                                        |  
|                                                                               |   |            |   |   |          |  
|                                                                               |   |            |   |   |          |  
|Common stock, 1,200,000,000 shares authorized, $0.001 par
      value;         |   |            |   |   |          |  
|92,245,655 shares issued (2007: 111,534,544)                                   |   |            |   |   |          |  
| Notes 11 and 12                                                              |   | 92,246     |   |   | 111,535  |  
|Additional paid-in capital                                                     |   | 3,013,394  |   |   | (37,574  | )
|Deficit accumulated during the development stage                               |   | (1,591,943 | ) |   | (149,984 | )
|                                                                               |   | 1,513,697  |   |   | (76,023  | )
|                                                                               |   |            |   |   |          |  
|                                                                               | $ | 1,628,574  |   | $ | 3,988    |  
|                                                                               |   |            |   |   |          |  
|Nature of Operations and Ability to
      Continue as a Going Concern  Note 1 |   |            |   |   |          |  
|Commitments  Note 11                                                          |   |            |   |   |          |  
|Subsequent Events  Notes 6, 11 and 12                                         |   |            |   |   |          |  

The accompanying notes are an integral part of these financial
statements.

---

30

PANTERA PETROLEUM INC.(formerly Arthro
Pharmaceuticals, Inc.) (A Development Stage Company) STATEMENTS OF
OPERATIONS for the years ended May 31, 2008 and 2007 and for the period
October 27, 2004 (Date of Inception) to May 31, 2008 (Stated in US
Dollars)

|                                               |   |             |   |   |             |   |   | October 27,   |  
|---------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ------------- | -
|                                               |   |             |   |   |             |   |   | 2004 (Date of |  
|                                               |   |             |   |   |             |   |   | Inception) to |  
|                                               |   | Years ended |   |   | May 31,     |  
|                                               |   | May 31,     |   |   | 2008        |  
|                                               |   | 2008        |   |   | 2007        |   |   | (Cumulative)  |  
|                                               |   |             |   |   |             |   |   |               |  
|Expenses                                       |   |             |   |   |             |   |   |               |  
|Consulting fees                                | $ | 920,330     |   | $ | 2,000       |   | $ | 947,080       |  
|General and administrative
       Note 9      |   | 518,419     |   |   | 50,658      |   |   | 639,654       |  
|Write-down of license agreement 
      Note 4 |   | 1           |   |   | 1,999       |   |   | 2,000         |  
|Write-down of equipment                        |   | 767         |   |   | -           |   |   | 767           |  
|                                               |   | (1,439,517  | ) |   | (54,657     | ) |   | (1,589,501    | )
|                                               |   |             |   |   |             |   |   |               |  
|Other expense:                                 |   |             |   |   |             |   |   |               |  
|Interest expense                               |   | (2,442      | ) |   | -           |   |   | (2,442        | )
|                                               |   |             |   |   |             |   |   |               |  
|Net loss for the period                        | $ | (1,441,959  | ) | $ | (54,657     | ) | $ | (1,591,943    | )
|                                               |   |             |   |   |             |   |   |               |  
|Basic and diluted loss per share               | $ | (0.02       | ) | $ | (0.00       | ) |   |               |  
|                                               |   |             |   |   |             |   |   |               |  
|Weighted average number of shares outstanding  |   | 96,097,750  |   |   | 111,534,544 |   |   |               |  

The accompanying notes are an integral part of these financial
statements.

---

31

PANTERA PETROLEUM INC. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) STATEMENTS OF CASH FLOWS for the
years ended May 31, 2008 and 2007 and for the period October 27, 2004 (Date
of Inception) to May 31, 2008 (Stated in US Dollars)

|                                                      |   |             |   |   |         |   |   | October 27,   |  
|----------------------------------------------------- | - | ----------- | - | - | ------- | - | - | ------------- | -
|                                                      |   |             |   |   |         |   |   | 2004 (Date of |  
|                                                      |   |             |   |   |         |   |   | Inception) to |  
|                                                      |   | Years ended |   |   | May 31, |  
|                                                      |   | May 31,     |   |   | 2008    |  
|                                                      |   | 2008        |   |   | 2007    |   |   | (Cumulative)  |  
|Operating Activities                                  |   |             |   |   |         |   |   |               |  
|Net loss for the period                               | $ | (1,441,959  | ) | $ | (54,657 | ) | $ | (1,591,943    | )
|Add amounts not involving cash                        |   |             |   |   |         |   |   |               |  
|Depreciation                                          |   | -           |   |   | 329     |   |   | 993           |  
|Consulting fees paid by stock                         |   | 864,500     |   |   | -       |   |   | 866,250       |  
|Consultants
      warrants                           |   | 112,255     |   |   | -       |   |   | 112,255       |  
|Accrued interest                                      |   | 2,442       |   |   | -       |   |   | 2,442         |  
|Write-down
      of license agreement                 |   | 1           |   |   | 1,999   |   |   | 2,000         |  
|Write-down of equipment                               |   | 767         |   |   | -       |   |   | 767           |  
|Change in non-cash working capital
      balances     |   |             |   |   |         |   |   |               |  
|related to operations                                 |   |             |   |   |         |   |   |               |  
|Prepaid expenses
      and deposit                    |   | (117,033    | ) |   | -       |   |   | (118,533      | )
|Accounts payable and accrued
      liabilities        |   | (1,022      | ) |   | 4,773   |   |   | 11,929        |  
|Due to related
      party                            |   | 13,865      |   |   | 48,128  |   |   | 80,925        |  
|Consulting fees payable in
      stock                |   | 27,500      |   |   | -       |   |   | 27,500        |  
|Cash provided by (used in) operating
      activities |   | (538,684    | ) |   | 572     |   |   | (605,415      | )
|                                                      |   |             |   |   |         |   |   |               |  
|Investing Activities                                  |   |             |   |   |         |   |   |               |  
|Purchase of equipment                                 |   | -           |   |   | -       |   |   | (1,760        | )
|Investments                                           |   | (537,907    | ) |   | -       |   |   | (537,907      | )
|Oil and gas interests                                 |   | (800,000    | ) |   | -       |   |   | (800,000      | )
|Cash used in investing activities                     |   | (1,337,907  | ) |   | -       |   |   | (1,339,667    | )
|                                                      |   |             |   |   |         |   |   |               |  
|Financing Activities                                  |   |             |   |   |         |   |   |               |  
|Issuance of common stock                              |   | 1,970,000   |   |   | -       |   |   | 2,040,211     |  
|Shares repurchased                                    |   | (1          | ) |   |         |   |   | (1            | )
|Proceeds from loan                                    |   | 73,006      |   |   | -       |   |   | 73,006        |  
|Cash used in financing activities                     |   | 2,043,005   |   |   | -       |   |   | 2,113,216     |  
|                                                      |   |             |   |   |         |   |   |               |  
|Increase in cash during the period                    |   | 166,414     |   |   | 572     |   |   | 168,134       |  
|                                                      |   |             |   |   |         |   |   |               |  
|Cash, beginning of the period                         |   | 1,720       |   |   | 1,148   |   |   | -             |  
|                                                      |   |             |   |   |         |   |   |               |  
|Cash, end of the period                               | $ | 168,134     |   | $ | 1,720   |   | $ | 168,134       |  
|                                                      |   |             |   |   |         |   |   |               |  
|Non-cash Transactions  Note 10                       |   |             |   |   |         |   |   |               |  

The accompanying notes are an integral part of these financial
statements.

---

32

PANTERA PETROLEUM INC.(formerly Arthro
Pharmaceuticals, Inc.) (A Development Stage Company) STATEMENTS OF
STOCKHOLDERS EQUITY (DEFICIENCY) for the period October 27, 2004 (Date of
Inception) to May 31, 2008 (Stated in US Dollars)

DeficitAccumulatedAdditional
      
      
      Prior to theCommon
        Stock
      
      
      Paid-in
      
      
      Development*Number
      
      
      Par Value
      
      
      Capital
      
      
      Stage
      
      
      TotalBalance, October 27, 2004 (Date of Inception)
      
      
      
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Issued for cash:For private placement
      
      - at $0.000063
      
      48,000,000
      
      
      48,000
      
      
      (45,000
      )
      
      -
      
      
      3,000- at $0.0022
      
      30,734,544
      
      
      30,735
      
      
      36,476
      
      
      -
      
      
      67,211Issued for license agreement
      
      - at $0.000063
      
      32,000,000
      
      
      32,000
      
      
      (30,000
      )
      
      -
      
      
      2,000Net loss for the period
      
      
      
      -
      
      
      -
      
      
      -
      
      
      (31,379
      )
      
      (31,379
      )Balance, May 31, 2005
      
      
      
      110,734,544
      
      
      110,735
      
      
      (38,524
      )
      
      (31,379
      )
      
      40,832Issued for consulting services
      
      - at $0.0022
      
      800,000
      
      
      800
      
      
      950
      
      
      -
      
      
      1,750Net loss for the year
      
      
      
      -
      
      
      -
      
      
      -
      
      
      (63,948
      )
      
      (63,948
      )Balance, May 31, 2006
      
      
      
      111,534,544
      
      
      111,535
      
      
      (37,574
      )
      
      (95,327
      )
      
      (21,366
      )Net loss for the year
      
      
      
      -
      
      
      -
      
      
      -
      
      
      (54,657
      )
      
      (54,657
      )Balance, May 31, 2007
      
      
      
      111,534,544
      
      
      111,535
      
      
      (37,574
      )
      
      (149,984
      )
      
      (76,023
      )Forgiveness of debt by related parties  Note 9
      
      
      
      -
      
      
      -
      
      
      80,925
      
      
      -
      
      
      80,925Issued for share purchase agreement 
        Note 6- at $0.001
      
      4,000,000
      
      
      4,000
      
      
      -
      
      
      -
      
      
      4,000Issued to advisory board
      
      - at $1.33
      
      650,000
      
      
      650
      
      
      863,850
      
      
      -
      
      
      864,500Issued for cash:For private
        placements
      
      - at $1.00
      
      750,000
      
      
      750
      
      
      749,250
      
      
      -
      
      
      750,000- at $0.60
      
      1,200,000
      
      
      1,200
      
      
      718,800
      
      
      -
      
      
      720,000- at $0.45
      
      1,111,111
      
      
      1,111
      
      
      498,889
      
      
      -
      
      
      500,000Shares repurchased  Note 11
      
      - at $0.001
      
      (27,000,000
      )
      
      (27,000
      )
      
      (23,733,000
      )
      
      -
      
      
      (23,760,000
      )Capital contribution  Note 11
      
      
      
      -
      
      
      -
      
      
      23,759,999
      
      
      -
      
      
      23,759,999Consultants warrants  Note 11
      
      
      
      -
      
      
      -
      
      
      112,255
      
      
      -
      
      
      112,255Net loss for the year
      
      
      
      -
      
      
      -
      
      
      -
      
      
      (1,441,959
      )
      
      (1,441,959
      )Balance, May 31, 2008
      
      
      
      92,245,655
      
      $
      92,246
      
      $
      3,013,394
      
      $
      (1,591,943
      )
      $
      1,513,697


|* | The common stock issued has been retroactively restated
      to reflect a forward stock split of 16 new shares of common stock for one
      old share of common stock, effective September 28, 2007. The number of
      authorized shares and the par value per share as referred to in these
      financial statements have been restated where applicable to give
      retroactive effect on the forward stock split.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial
statements.

---

33

PANTERA PETROLEUM INC.(formerly Arthro
Pharmaceuticals, Inc.) (A Development Stage Company) NOTES TO THE
FINANCIAL STATEMENTS May 31, 2008 (Stated in US Dollars)

|Note 1 | Nature of Operations and Ability to Continue as a
      Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The Company was incorporated in the State of Nevada on
      October 27, 2004, and is in the development stage. On November 8, 2004,
      the Company entered into a License Agreement to manufacture, market and
      distribute an arthritic pain reliever under the name Arthrospray. The
      business was abandoned during the year ended May 31, 2008. The Companys
      current business is the acquisition and exploration of oil and gas
      properties in North and South America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | On September 18, 2007, the directors of the Company
      approved of a plan of merger effective September 28, 2007 between the
      Company and Pantera Petroleum Inc. (Pantera), a company incorporated in
      the state of Nevada on September 18, 2007. Upon completion of the merger,
      the Company changed its name to Pantera Petroleum Inc. and Panteras
      existence ceased. The purpose of the merger was to facilitate a name
      change to Pantera Petroleum Inc. to better reflect the direction and
      business of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | These financial statements have been prepared in
      accordance with generally accepted accounting principles applicable to a
      going concern, which assumes that the Company will be able to meet its
      obligations and continue its operations for its next fiscal year.
      Realization values may be substantially different from carrying values as
      shown and these financial statements do not give effect to adjustments
      that would be necessary to the carrying values and classification of
      assets and liabilities should the Company be unable to continue as a going
      concern. At May 31, 2008, the Company had not yet achieved profitable
      operations, has accumulated losses of $1,591,943 since its inception, does
      not have adequate cash to fund its operations and expects to incur further
      losses in the development of its business, all of which casts substantial
      doubt about the Companys ability to continue as a going concern. The
      Companys ability to continue as a going concern is dependent upon its
      ability to generate future profitable operations and/or to obtain the
      necessary financing to meet its obligations and repay its liabilities
      arising from normal business operations when they come due. Management
      plans to continue to provide for its capital needs during the year ending
      May 31, 2009, by issuing equity securities, however there is no assurance
      of additional equity funding being available.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 2 | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The financial statements of the Company have been
      prepared in accordance with generally accepted accounting principles in
      the United States of America. Because a precise determination of many
      assets and liabilities is dependent upon future events, the preparation of
      financial statements for a period necessarily involves the use of
      estimates, which have been made using careful judgement. Actual results
      may vary from these estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The financial statements have, in managements opinion,
      been properly prepared within the framework of the significant accounting
      policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | Development Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | The Company is a development stage company as defined in
      Statement of Financial Accounting Standards (FAS) No. 7.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

34

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 2

|Note 2 | Summary of Significant
      Accounting Policies (contd)
|------ | ----------------------------------------------------------

Foreign Currency Translation

The Companys functional and reporting
currency is the United States dollar. Monetary assets and liabilities are
translated into United States dollars at the exchange rate in effect at the end
of the period. Non-monetary assets and liabilities are translated at the
exchange rate prevailing when the assets were acquired or the liabilities
assumed. Revenues and expenses are translated at average rate of exchange for
the period. All exchange gains and losses on transactions denominated in
currencies other than the functional currency are included in the determination
of net income (loss) for the period.

Basic and Diluted Loss Per
Share

The Company reports basic loss per
share in accordance with the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share. Basic loss per share is computed using the weighted average number of
shares outstanding during the period. Diluted earnings (loss) per share are
computed similar to basic income (loss) per share except that the denominator is
increased to include the number of common stock equivalents (primarily
outstanding options and warrants). Common stock equivalents represent the
dilutive effect of the assumed exercise of the outstanding stock options and
warrants, at either the beginning of the respective period presented or the date
of issuance, whichever is later, and only if the common stock equivalents are
considered dilutive based upon the Companys net income (loss) position at the
calculation date. Diluted loss per share has not been provided as it would be
antidilutive.

Income Taxes

The Company uses the assets and
liability method of accounting for income taxes pursuant to SFAS No. 109
Accounting for Income Taxes. Under the assets and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.

In June 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48).
The interpretation clarifies the accounting for uncertainty in income taxes
recognized in a companys financial statements in accordance with SFAS No. 109,
Accounting for Income Taxes. Specifically, the pronouncement prescribes a
recognition threshold and a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The interpretation also provides guidance on the related
derecognition, classification, interest and penalties, accounting for interim
periods, disclosure and transition of uncertain tax positions. The
interpretation is effective for fiscal years beginning after December 15, 2006.
The adoption of FIN 48 did not have a material impact on the Companys financial
position, results of operations or cash flows.

---

35

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 3

|Note 2 | Summary of Significant
      Accounting Policies (contd)
|------ | ----------------------------------------------------------

Equipment

Equipment, which consists of computer
equipment, is recorded at cost. The Company provides for depreciation using a
30% declining balance annual rate. All equipment was written off during the year
ended May 31, 2008, as it was no longer being used by the Company.

Investments

Investments in companies and joint
ventures where no significant influence exists are carried at the lower of cost
or fair value. The investments are assessed for impairment when it appears the
amount may not be recovered.

Impairment of Long-lived Assets

Long-lived assets are reviewed for
impairment in accordance with SFAS No 144, Accounting for the Impairment or
Disposal of Long-lived Assets. Under SFAS No. 144, these assets are tested for
recoverability whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. An impairment charge is recognized for
the amount, if any, which the carrying value of the asset exceeds the fair
value.

Oil and Gas Properties

The Company follows the full cost
method of accounting for oil and gas operations whereby all costs of exploring
for and developing oil and gas reserves are initially capitalized on a
country-by-country (cost centre) basis. Such costs include land acquisition
costs, geological and geophysical expenses, carrying charges on non-producing
properties, costs of drilling and overhead charges directly related to
acquisition and exploration activities.

Costs capitalized, together with the
costs of production equipment, will be depleted and amortized on the
unit-of-production method based on the estimated gross proved reserves.
Petroleum products and reserves are converted to a common unit of measure, using
6 MCF of natural gas to one barrel of oil.

Costs of acquiring and evaluating
unproved properties are initially excluded from depletion calculations. These
unevaluated properties are assessed periodically to ascertain whether impairment
has occurred. When proved reserves are assigned or the property is considered to
be impaired, the cost of the property or the amount of the impairment is added
to costs subject to depletion calculations.

If capitalized costs, less related
accumulated amortization and deferred income taxes, exceed the full cost
ceiling the excess is expensed in the period when such excess occurs. The full
cost ceiling is determined based on the present value of estimated future net
revenues attributed to proved reserves, using current prices less estimated
future expenditures plus the lower of cost and fair value of unproven properties
within the cost centre.

Future net cash flows from proved
reserves using period-end, non-escalated prices and costs are discounted to
present value and compared to the carrying value of oil and gas properties.

Proceeds from a sale of petroleum and
natural gas properties are applied against capitalized costs, with no gain or
loss recognized, unless such a sale would alter the rate of depletion by more
than 25%. Royalties paid net of any tax credits received are netted with oil and
gas sales.

---

36

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 4

|Note 2 | Summary of Significant
      Accounting Policies (contd)
|------ | ----------------------------------------------------------

Asset Retirement Obligations

The Company recognizes the fair value
of a liability for an asset retirement obligation in the year in which it is
incurred when a reasonable estimate of fair value can be made. The carrying
amount of the related long-lived asset is increased by the same amount as the
liability.

Changes in the liability for an asset
retirement obligation due to the passage of time will be measured by applying an
interest method of allocation. The amount will be recognized as an increase in
the liability and an accretion expense in the statement of operations. Changes
resulting from revisions to the timing or the amount of the original estimate of
undiscounted cash flows are recognized as an increase or a decrease in the
carrying amount of the liability for an asset retirement obligation and the
related asset retirement cost capitalized as part of the carrying amount of the
related long-lived asset. At May 31, 2008, the Company had no asset retirement
obligations as it recently entered into a new development stage.

Environmental Costs

Environmental expenditures that relate
to current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed. Liabilities
are recorded when environmental assessments and/or remedial efforts are
probable, and the cost can be reasonably estimated. Generally, the timing of
these accruals coincides with the earlier of completion of a feasibility study
or the Companys commitments to a plan of action based on the then known facts.

As at May 31, 2008, there have been no
environmental expenses incurred by the Company.

Financial Instruments

The carrying value of the Companys
financial instruments consisting of cash, accounts payable and accrued
liabilities and due to related parties approximate their fair value due to the
short-term maturity of such instruments. Loan payable is carried at cost plus
accrued interest and the carrying value is equal to the fair value. Unless
otherwise noted, it is managements opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these financial
instruments.

New Accounting Standards

In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements. This Statement defines fair value as
used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
The Statement is to be particularly effective for the Companys financial
statements issued for its fiscal year beginning June 1, 2008. The Company is
currently evaluating the timing of adoption and the impact that adoption might
have on its financial position or results of operations.

On February 15, 2007, the FASB issued
SFAS No. 159 The Fair Value Option for Financial Assets and Financial
Liabilities. This Statement establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
SFAS No. 159 is effective for the Companys financial statements issued for its
fiscal year beginning June 1, 2008. The Company is currently evaluating the
impact that the adoption of SFAS No. 159 might have on its financial position or
results of operations.

---

37

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 5

|Note 2 | Summary of Significant Accounting Policies (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | New Accounting Standards (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | In December 2007, the FASB issued SFAS No. 160,
      Noncontrolling Interests in Consolidated Financial Statements. The
      standard requires all entities to report noncontrolling (minority)
      interests as equity in consolidated financial statements. SFAS No. 160
      eliminates the diversity that currently exists in accounting for
      transactions between an entity and noncontrolling interests by requiring
      they be treated as equity transactions. The Company is currently reviewing
      the guidance, which is effective for fiscal years beginning after December
      15, 2008, to determine the potential impact, if any, on its financial
      statements.                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 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 requires enhanced 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 is effective for
      financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008. The Company is currently evaluating the impact of
      SFAS 161 on its financial statements.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Note 3 | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| |                    |   |      |  |   | May
      31, 2008 |  |   |     | 
| | ------------------ | - | ---- |  | - | ------------------ |  | - | --- | 
| |                    |   |      |  |   | Accumulated        |  |   |     | 
| |                    |   | Cost |  |   | Depreciation       |  |   | Net | 
| |                    |   |      |  |   |                    |  |   |     | 
| | Computer equipment | $ | 767  |  | $ | 767                |  | $ | -   | 

| |                    |   |       |  |   | May
      31, 2007 |  |   |     | 
| | ------------------ | - | ----- |  | - | ------------------ |  | - | --- | 
| |                    |   |       |  |   | Accumulated        |  |   |     | 
| |                    |   | Cost  |  |   | Depreciation       |  |   | Net | 
| |                    |   |       |  |   |                    |  |   |     | 
| | Computer equipment | $ | 1,760 |  | $ | 993                |  | $ | 767 | 

|Note 4 | License Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The Company entered into a License Agreement on November
      8, 2004, to acquire the intellectual and marketing license rights, in the
      United States and its territories, to an arthritic pain reliever
      Arthrospray. The Company issued 32,000,000 common shares to the
      President of the Company at a fair value of $0.000063, for a cost of
      $2,000, to acquire the license. During the year ended May 31, 2007, the
      Company determined that this asset was impaired and wrote it down to its
      fair value of $1. The remaining $1 balance was written off during the year
      ended May 31, 2008 as the company has abandoned the business.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Note 5 | Loan Payable Note 12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | The loan payable is unsecured, bears interest at 5% per
      annum and is due on September 30, 2012. Interest has been accrued as at
      the year ended May 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

38

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 6

|Note 6 | Investments                                                            
|------ | -----------------------------------------------------------------------
|       |                                                                        
|       | The Company held investments at May 31, 2008
      and 2007 as follows:

| |        |   | 2008    |  |   | 2007 | 
| | ------ | - | ------- |  | - | ---- | 
| |        |   |         |  |   |      | 
| | Aurora | $ | 230,856 |  | $ | -    | 
| | Boreal |   | 311,051 |  |   | -    | 
| |        |   |         |  |   |      | 
| | Total  | $ | 541,907 |  | $ | -    | 

Aurora and Boreal

On November 21, 2007 and amended on
March 17, 2008 and July 30, 2008, the Company entered into a share purchase
agreement with Artemis Energy PLC (formerly Pantera Oil and Gas PLC)
(Artemis), whereby the Company issued 4,000,000 shares of the Companys common
stock (valued at a nominal amount of $4,000) to Artemis and paid $50,000 in
consideration for the right to acquire up to 85% of the shares of each of Aurora
Petroleos SA (Aurora) and Boreal Petroleos SA (Boreal) as follows:

| | (a) | on or before November 30, 2007, the Company had the right
      to acquire 15% of the issued and outstanding shares of each of Aurora and
      Boreal for an aggregate payment of $150,000 by the Company to Aurora and
      Boreal (as to $75,000 to each of Aurora and Boreal) (Investment One)
      (paid);
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                    
| | (b) | on or before July 31, 2008, and subject to the completion
      of Investment One, the Company shall have the right, but not the
      obligation, to:                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                    
| |     | (i)                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                    
| |     | (ii)                                                                                                                                                                                                                                                                                                               

| | (c) | on or before April 30, 2009 and subject to the completion
      of:
| | --- | -------------------------------------------------------------------
| |     |                                                                    
| |     | (i)                                                                
| |     |                                                                    
| |     | (ii)                                                               

---

39

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 7

|Note 6 | Investments (contd)
|------ | ---------------------

| | (d) | on or before January 31, 2010 and subject to the
      completion of:
| | --- | ---------------------------------------------------------------------
| |     |                                                                      
| |     | (i)                                                                  
| |     |                                                                      
| |     | (ii)                                                                 

In the event that the Company makes
less than the required investment amount to complete any of Aurora or Boreal
Investments Two, Three or Four, the Company shall be entitled to receive a
portion of the additional percentage of the issued and outstanding shares of
Aurora or Boreal pro rata based on the percentage of the amount paid as compared
to the total required to be paid.

Aurora and Boreals business is its
rights to oil and gas commissions in northern Paraguay.

On September 9, 2008, the terms of the
agreement were amended and restated as follows:

| | i)   | Aurora and Boreal, in consideration for all amounts
      advanced in a) and b) above and the payment of $50,000 as the partial
      consideration for the right to acquire up to 85% of the shares of Aurora
      and Boreal, will each issue a five year note bearing interest at 5% for
      $335,000 and for any additional amounts paid under this agreement. If
      after the date of this agreement, there occurs a sale, consolidation,
      amalgamation or merger or the transfer of assets to another entity of
      Aurora or Boreal which results in either company receiving cash proceeds,
      then that company will repay each of the Company and Artemis equal
      payments until the Company and Artemis each receive $221,126 plus
      accumulated interest, in the case of Aurora and $193,041 plus accumulated
      interest, in the case of Boreal. Once $221,126 plus accumulated interest,
      in the case of Aurora, or $193,041 plus accumulated interest, in the case
      of Boreal, is repaid, then Aurora or Boreal will repay any further amounts
      that the Company has advanced under these notes.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ii)  | 2,600,000 of the 4,000,000 common shares issued by the
      Company as partial consideration for the right to acquire up to 85% of the
      shares of Aurora and Boreal will be returned to the Company and
      cancelled.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | iii) | Artemis will issue to the Company options to enable the
      Company, on terms to be agreed upon, to purchase 27% of the outstanding
      shares of Aurora and 30% of the outstanding shares of Boreal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | iv)  | Artemis will issue to the Company additional options to
      enable the Company to purchase 38% of the outstanding shares of Aurora and
      35% of the outstanding shares of Boreal, by making a payment of $500,000
      each on or before April 30, 2009 (Aurora and Boreal Investment Three).
      On completion of both the Aurora and Boreal Investment Three, the Company
      will issue to Artemis share purchase warrants to purchase 1,200,000 common
      shares of the Company at $0.27 per share, exercisable for a period of five
      years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

40

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 8

|Note 6 | Investments (contd)
|------ | ---------------------

| | v) | Subject to the completion of Aurora and Boreal Investment
      Three, Artemis will issue to the Company additional options to enable the
      Company to purchase 20% of the outstanding shares of Aurora and 20% of
      Boreal, by making a payment of $1,500,000 each on or before January 10,
      2010 (Aurora and Boreal Investment Four). On completion of both the
      Aurora and Boreal Investment Four, the Company will issue to Artemis share
      purchase warrants to purchase 1,400,000 common shares of the Company at
      $0.27 per share, exercisable for a period of five
years.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|       | In the event that the Company makes less than the
      required investment amount to complete any of Aurora or Boreal Investments
      Three or Four, the Company shall be entitled to receive a portion of the
      additional percentage of the issued and outstanding shares of Aurora or
      Boreal pro rata based on the percentage of the amount paid as compared to
      the total required to be paid.                                                                                                    
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Note 7 | Oil and Gas Interests Note 12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Block 83 and 84 Project, JV Unproven Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | On March 6, 2008, the Company purchased a 10% interest in
      a joint venture formed pursuant to a joint venture agreement dated
      February 24, 2008, with Trius Energy, LLC, as the managing venturer, and
      certain other joint venturers, in consideration for $800,000. The joint
      venture was formed for the purpose of drilling certain oil and gas fields
      in Texas, USA. Upon entering into this agreement a director of Trius
      Energy, LLC was appointed as a director of the Company.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Note 8 | Deferred Tax Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company's income tax expense for the years ended May
      31, 2008 and 2007 differed from the United States statutory rates:                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                          |   | 2008     |   |   | 2007    |  
| | -------------------------------------------------------- | - | -------- | - | - | ------- | -
| |                                                          |   |          |   |   |         |  
| | Effective tax rate                                       |   | 35%      |   |   | 35%     |  
| |                                                          |   |          |   |   |         |  
| | Statutory rate applied to loss before
      income taxes | $ | (505,000 | ) | $ | (19,000 | )
| | Increase in income taxes resulting from:                 |   |          |   |   |         |  
| | Forgiveness of debt by
      related parties             |   | 28,000   |   |   | -       |  
| | Change in valuation allowance                            |   | 477,000  |   |   | 19,000  |  
| |                                                          |   |          |   |   |         |  
| | Income tax expense                                       | $ | -        |   | $ | -       |  

---

41

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 9

|Note 8 | Deferred Tax Assets (contd)                                                        
|------ | -------------------------------------------------------------------------------------
|       |                                                                                      
|       | The significant components of the Companys
      deferred tax assets are as follows:

| |                                   |   | 2008     |   |   | 2007    |  
| | --------------------------------- | - | -------- | - | - | ------- | -
| |                                   |   |          |   |   |         |  
| | Deferred tax assets               |   |          |   |   |         |  
| | Net operating losses carryforward | $ | 528,000  |   | $ | 52.000  |  
| | Less: valuation allowance         |   | (528,000 | ) |   | (52,000 | )
| |                                   |   |          |   |   |         |  
| | Deferred tax assets               | $ | -        |   | $ | -       |  

At May 31, 2008, the Company has
incurred accumulated net operating losses in the United States of America
totalling approximately $1,509,000 which are available to reduce taxable income
in future taxation years.

These losses expire as follows:

| | Year of Expiry |   | Amount    | 
| | -------------- | - | --------- | 
| |                |   |           | 
| | 2025           | $ | 31,000    | 
| | 2026           |   | 64,000    | 
| | 2027           |   | 54,000    | 
| | 2028           |   | 1,360,000 | 
| |                |   |           | 
| |                | $ | 1,509,000 | 

|       | The amount taken into income as deferred tax assets must
      reflect that portion of the income tax loss carryforwards that is more
      likely-than-not to be realized from future operations. Management
      considers it more-likely-than-not that the loss carryforward amounts will
      not be utilized against future income and, accordingly, a full valuation
      allowance has been applied.
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                               
|Note 9 | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The Company was charged $120,000 (2007: nil) for
      salaries, $6,000 (2007: $24,000) for management services and $1,200 (2007:
      $4,800) for rent to directors and an officer of the Company.                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                               
|       | During the year ended May 31, 2008, a director and former
      director of the Company forgave amounts due to them totalling $80,925.
      This forgiveness has been recorded as a capital contribution.                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                               
|       | Amounts due to related parties of $67,060 at May 31, 2007
      are for cash advances, management fees, rent and office expenses incurred
      or paid on behalf of the Company by the Company's directors. These amounts
      were non-interest bearing and comprise a portion of the amount forgiven,
      as noted above.                                                                               

---

42

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 10

|Note 10 | Non-cash Transactions                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Investing and financing activities that do not have a
      direct impact on current cash flows are excluded from the statements of
      cash flows. The following transactions were excluded from the statements
      of cash flows during the year ended May 31, 2008:                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company issued 4,000,000 common shares at $0.001
      totaling $4,000 pursuant to a share purchase agreement;                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | A director and a former director forgave $80,925 which
      was previously included in due to related parties;                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company issued 500,000 shares of the common stock
      pursuant to the terms of the advisory board agreements dated December 6,
      2007. An additional 150,000 shares were issued in connection with services
      related to the formation of the Advisory Board. The shares were valued at
      $864,500.                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | These transactions were excluded from the investing and
      financing activities of the statements of cash flows.                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Note 11 | Stockholders Equity Note 12                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Private Placements:                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | On October 18, 2007 and January 9, 2008, the Company
      issued 250,000 common shares and 500,000 common shares, respectively, at
      $1.00 per share for $750,000 pursuant to a private placement subscription
      agreement.                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | On March 7, 2008, the Company issued 1,200,000 common
      shares at $0.60 per share for $720,000 pursuant to a private placement
      subscription agreement.                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | On April 3, 2008, the Company issued 1,111,111 units at
      $0.45 per unit for a total of $500,000, pursuant to a private placement
      subscription agreement. Each unit is comprised of one common share and one
      common share purchase warrant. Each warrant entitles the holder to
      purchase an additional common share at $0.75 per share until April 3, 2009
      and at $1.00 per share until April 3, 2010.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company applied the residual approach and allocated
      the total proceeds of $500,000 to the common shares and $nil to the
      attached warrants.                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Share Repurchase:                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company repurchased 27,000,000 common shares from
      former directors of the Company for $1. The fair value of this transaction
      was recorded at $0.88 per share and consequently the Company has received
      a capital contribution of $23,759,999.                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Consulting Agreement:                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | On April 30, 2008, the Company entered into a consulting
      agreement for services in exchange for 1,000,000 share purchase warrants
      exercisable at $0.52 per share. Theses warrants expire on October 9, 2010.
      250,000 warrants vested on April 30, 2008 and an additional 250,000
      warrants vest on each of the dates July 31, 2008, October 30, 2008 and
      January 31, 2009.                           

---

43

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 11

|Note 11 | Stockholders Equity Note 12 
      (contd)                                                                                                                                                                                                                                                                                                                                                                               
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Consulting Agreement:  (contd)                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The fair value is measured at the vesting date and
      recognized over the term of the agreement with a charge to earnings and a
      corresponding increase in additional paid-in capital. Consideration paid
      to the Company on exercise of all warrants is credited to common stock.
      The Company recognized $112,255 (2007: $Nil) as the value of the
      consultants warrants vested as of May 31, 2008.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | The fair value of each warrant vesting is estimated on
      the date of vesting using the Black-Scholes option valuation model with
      the following assumptions:                                                                                                                                                                                                                                                        

| |                                 | 2008      | 2007
| | ------------------------------- | --------- | ----
| |                                 |           |     
| | Expected dividend yield         | 0.00%     | -   
| | Expected stock price volatility | 186%      | -   
| | Exercise price                  | $0.52     | -   
| | Risk-free interest rate         | 2.98%     | -   
| | Expected life of options        | 2.5 years | -   

Commitments:

| | a) | Equity Financing Agreement                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | On February 12, 2008, the Company entered into an equity
      financing agreement whereby the Company, at their sole and exclusive
      option, agreed to issue and sell shares of the Companys common stock for
      an aggregate purchase price of up to $10,000,000 at $1.00 per share. The
      Company is required to deliver a draw-down notice in prescribed form.
      Pursuant to the agreement, the Company agreed to:
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | a)                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | b)                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | The agreement expires on the earliest of the date on
      which the aggregate of $10,000,000 of common stock are purchased, the date
      of termination of the agreement, and February 12, 2010.                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | As of May 31, 2008, no shares of common stock have been
      sold under this agreement.                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | Share Purchase Warrants                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | As at May 31, 2008, there are 2,111,111 share purchase
      warrants outstanding entitling the holders to purchase one common share
      for each warrant held as follows:                                                                                                                                                                                                                                                          

---

44

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 12

|Note 11 | Stockholders Equity Note 12 
      (contd)
|------- | ----------------------------------------------
|        |                                               
|        | Commitments: - (contd)                       

| | b) | Share Purchase Warrants
  (contd)
| | -- | -----------------------------------

Number of
    ExerciseWarrants
    Price
    Expiry1,111,111
    $0.75
    April 3, 2009or at $1.00
    April 3, 20101,000,000
    $0.52
    October 9, 20102,111,111


The summary of the changes in the
Companys share purchase warrants for the years ended May 31, 2008 and 2007 is
presented below:

| |                           |  | 2008      |  |   | 2007     | 
| | ------------------------- |  | --------- |  | - | -------- | 
| |                           |  |           |  |   | Weighted | 
| |                           |  |           |  |   | Average  | 
| |                           |  | Number of |  |   | Exercise | 
| |                           |  | Warrants  |  |   | Price    | 
| |                           |  |           |  |   |          | 
| | Balance, beginning of the |  |           |  |   |          | 
| | year                      |  | -         |  |   | -        | 
| | Issued                    |  | 2,111,111 |  | $ | 0.71     | 
| |                           |  |           |  |   |          | 
| | Balance, end of year      |  | 2,111,111 |  | $ | 0.71     | 

| |    | The remaining average life of the warrants at May 31,
      2008 is 2.09 years.                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                          
| | c) | The Company entered into a consulting agreement during
      the year ended May 31, 2008 whereby the Company agreed to issue 50,000
      common shares (issued subsequent to May 31, 2008) in exchange for
      services. The shares to be issued were valued at the fair value on the
      date of the agreement at $0.55 per share for a total value of
    $27,500.

|Note 12 | Subsequent Events Notes 6 and 11
|------- | ---------------------------------

| | a) | On July 30, 2008, the Company received proceeds from a
      loan in the amount of $100,000. On August 29, 2008, the Company received
      proceeds from an additional loan in the amount of $100,000. The loans bear
      interest at 5%. The amounts are unsecured and are due on July 22,
    2013.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                         
| | b) | By an agreement dated August 11, 2008, the Company agreed
      to acquire a 95% working interest, 71.25% revenue interest, in the Baker
      80 Lease located in Pecos County, Texas (the Property) in consideration
      for $726,000 to be paid as follows:                                      

---

45

Pantera Petroleum Inc. (formerly Arthro Pharmaceuticals,
Inc.) (A Development Stage Company) Notes to the Financial Statements
May 31, 2008 (Stated in US Dollars)  Page 13

|Note 12 | Subsequent Events Notes 6 and 11 
      (contd)
|------- | --------------------------------------------------

| | b) |  (contd)
| | -- | ----------

| | i.   | $150,000 on or before August 11, 2008 15.66% (paid
      subsequent to May 31, 2008) 
| | ---- | --------------------------------------------------------------------------------------
| | ii.  | $200,000 on or before August 20, 2008  27.55% (paid
      subsequent to May 31, 2008)
| | iii. | $376,000 on or before September 30, 2008 
  51.79%                                   

| |    | In the event that the Company makes less than the
      required investment amount to complete any of the payments, the Company
      shall be entitled to receive a percentage of the Property lease
      assignments per the above described percentages.                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | On August 11, 2008, the Company completed two private
      placements of 500,000 units and 250,000 units at $0.20 per unit for gross
      proceeds of $100,000 and $50,000, respectively. The Company incurred
      finders fees of $5,000 relating to the private placements. On August 18,
      2008, the Company completed an additional private placement of 1,000,000
      units at $0.20 per unit for gross proceeds of $200,000. Each unit is
      comprised of one common share in the capital of the Company and oil and
      gas net revenue interests in the Baker 80 lease (the Property) as
      follows:
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|Note 13 | Comparative Figures                                                                                                                             
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                 
|        | Certain of the prior periods comparative figures have
      been reclassified to conform to the presentation adopted in the current
      year.

---

46

ITEM 8.      CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Amisano Hanson, Chartered Accountants (Amisano Hanson)
recently entered into an agreement with BDO Dunwoody LLP (BDO Dunwoody),
pursuant to which Amisano Hanson will merge its operations into BDO Dunwoody and
certain of the professional staff and partners joined BDO Dunwoody either as
employees or partners of BDO Dunwoody and will continue to practice as members
of BDO Dunwoody.

Commensurate with the merger of Amisano Hanson with BDO
Dunwoody, on January 31, 2008, Amisano Hanson resigned as our independent
accountant; and concurrent with the resignation of Amisano Hanson, we engaged
BDO Dunwoody as our independent accountant. Prior to engaging BDO Dunwoody, we
did not consult with BDO Dunwoody regarding the application of accounting
principles to a specific completed or contemplated transaction or regarding the
type of audit opinion that might be rendered by BDO Dunwoody on our companys
financial statements, and BDO Dunwoody did not provide any written or oral
advice that was an important factor considered by our company in reaching a
decision as to any such accounting, auditing or financial reporting issue. The
engagement of BDO Dunwoody was approved by the Board of Directors of our
company.

The reports of Amisano Hanson regarding our companys financial
statements for the fiscal years ended May 31, 2007 and 2006, and for the period
from October 27, 2004 (date of inception) to May 31, 2007, did not contain any
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except that such reports on
our financial statements for the years ended May 31, 2007 and 2006, and for the
period from October 27, 2004 (date of inception) to May 31, 2007, contained an
explanatory paragraph in respect to uncertainty as to our companys ability to
continue as a going concern. During the years ended May 31, 2007 and 2006, and
the period from October 27, 2004 (date of inception) to May 31, 2007, and during
the period from the end of the most recently completed fiscal year through
January 31, 2008, the date of resignation, there were no disagreements with
Amisano Hanson on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of Amisano Hanson would have caused it to make
reference to such disagreements in its reports.

We provided Amisano Hanson with a copy of our Current Report on
Form 8-K prior to its filing with the Securities and Exchange Commission and
requested that Amisano Hanson furnish our company with a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statements and, if it does not agree, the respects in which it does not agree. A
copy of such letter, dated February 20, 2008, was filed as Exhibit 16.1 to our
Current Report on Form 8-K filed on February 20, 2008.

ITEM 8AT.  CONTROLS AND PROCEDURES.

As required by Rule 13a-15 under the Securities Exchange Act of
1934, as of the end of the period covered by this annual report, being May 31,
2007, we have carried out an evaluation of the effectiveness of the design and
operation of our companys disclosure controls and procedures. This evaluation
was carried out under the supervision and with the participation of our
companys management, including our companys President and Chief Executive
Officer. Based upon that evaluation, our companys President and Chief Executive
Officer concluded that our companys disclosure controls and procedures are
effective as at the end of the period covered by this report. There have been no
changes in our internal controls over financial reporting that occurred during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect our internal controls over financial
reporting.

Disclosure controls and procedures and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management
including our President and Chief Executive Officer, to allow timely decisions
regarding required disclosure.

---

47

Managements report on internal control over financial
reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Rule 13a-15(f)
of the 1934 Act. Management has assessed the effectiveness of our internal
control over financial reporting as at May 31, 2008, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Our internal control over
financial reporting includes maintaining records that in reasonable detail
accurately and fairly reflect our transactions and dispositions of our assets;
providing reasonable assurance that transactions are recorded as necessary for
preparation of our financial statements in accordance with generally accepted
accounting principles; providing reasonable assurance that receipts and
expenditures are made in accordance with authorizations of management and our
directors; and providing reasonable assurance that unauthorized acquisition, use
or disposition of our assets that could have a material effect on our financial
statements would be prevented or detected on a timely basis. As a result of this
assessment, management concluded that, as at May 31, 2008, our internal control
over financial reporting was effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. However, because of its inherent limitations, internal
control over financial reporting may not provide absolute assurance that a
misstatement of our financial statements would be prevented or detected.

This annual report does not include an attestation report of
our independent auditors regarding internal control over financial reporting.
Management's report was not subject to attestation by our independent auditors
pursuant to temporary rules of the SEC that permit our company to provide only
management's report in this annual report.

ITEM 8B.      OTHER INFORMATION

None.

PART III

|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL
      PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF
      THE EXCHANGE ACT.
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------

Directors and Executive Officers, Promoters and Control
Persons

All directors of our company hold office until the next annual
meeting of our shareholders and until such directors successor is elected and
has been qualified, or until such directors earlier death, resignation or
removal. The following table sets forth the names, positions and ages of our
executive officers and directors. Our board of directors elects officers and
their terms of office are at the discretion of our board of directors.

Name
      Position Held with the Company
      Age
      Date First Elected or AppointedChris Metcalf
    President, Chief Executive Officer and a
      Director
    38
    September 12, 2007Scott Tyson
    Director
    39
    February 26, 2008


Business Experience

The following is a brief account of the education and business
experience during at least the past five years of our directors and executive
officers, indicating their principal occupations during that period, and the
name and principal business of the organizations in which such occupation and
employment were carried out.

---

48

Chris Metcalf  President, Chief Executive Officer and
Director

Mr. Metcalf is an executive with extensive private equity and
investment banking experience, with expertise in early to growth stage oil and
gas companies, along with many technology and financial services companies. He
brings oil and gas investment and acquisition experience in west Texas and the
Gulf of Mexico. In addition, Mr. Metcalf brings with him venture capital
experience in advanced oil and gas discovery technologies, including 3D seismic
interpretive software and surface geochemical survey technologies. Prior to
joining the Company, Mr. Metcalf was a Vice President with GF Private Equity
Group LLC, where he served on the investment committee responsible for all
aspects of the funds venture capital portfolio in early to growth stage
companies across several sectors, including energy and clean technology,
application and enterprise software, and financial services. Mr. Metcalf was
also the President of Altitude Funds LLC, which sponsors and manages premier
private equity partnerships on behalf of the GF Private Equity Group. From
October, 2002 to February, 2006, Mr. Metcalf was a Vice President of Morgan
Stanley where he was a portfolio and research analyst covering a variety of
private equity and hedge fund investments in the U.S., Europe, Asia, and South
America. Graystone Research Group builds customized private equity, real estate,
and hedge fund portfolios for Morgan Stanleys corporate institutional, pension,
and ultra high net worth clients. Mr. Metcalf also serves on the board of
directors of Sinobiopharma, Inc, since August 2008, Uranium 308 Corp., since
November 2007, and Sinobiomed, Inc., since March 2007.

Mr. Metcalf received a Bachelor of Science in Commerce from the
University of Virginia, a Juris Doctor Degree from the University of Virginia
School of Law, and an MBA from the University of Chicago Graduate School of
Business where he graduated with honors. Mr. Metcalf is currently a member of
the California and Virginia State Bar Associations.

Scott Tyson  Director

Mr. Tyson is the President and CEO of Trius Energy LLC, a
privately held independent oil and gas producer that has a major presence as a
re-entry specialist in the West Gomez Field in Pecos County, Texas. Trius
specializes in low risk developmental wells that offset proven production and
reserves in Texas. Mr. Tyson oversees the daily operations of the company and
leads its leasehold acquisition program. Mr. Tyson brings vast operational
experience across the exploration and production cycle, including his work with
other oilfield related businesses dealing with disposal wells, vacuum truck
services, mobile frac tank rentals, and drilling fluid sales. Mr. Tyson earned
his BBA from the University of Texas at Austin at the McCombs School of
Business.

Family Relationships

There are no family relationships among our directors or
executive officers.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

|1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                
|2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offenses);                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                
|3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
|   |                                                                                                                                                                                                                                                                                                                                
|4. | being found by a court of competent jurisdiction (in a
      civil action), the Securities and Exchange Commission or the Commodity
      Futures Trading Commission to have violated a federal or state securities
      or commodities law, and the judgment has not been reversed, suspended, or
      vacated.             

---

49

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended May 31, 2008, all filing requirements
applicable to our officers, directors and greater than 10% percent beneficial
owners were complied with, with the exception of the following:

Name
      Number of Late
      Reports
      Number of Transactions Not Reported
      on a Timely Basis
      Failure to File
      Requested FormsChris Metcalf
    1(1)
    2(1)
    NilScott Tyson
    1(1)
    Nil
    1Peter Hughes
    1(2)
    1
    1


|(1) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 3  Initial Statement of
      Beneficial Ownership of Securities.   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                          
|(2) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 4 - Statement of Changes in
      Beneficial Ownership of Securities.

Code of Ethics

Effective August 17, 2007, our companys board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our companys president (being our principal executive officer,
principal financial officer and principal accounting officer), as well as
persons performing similar functions. As adopted, our Code of Business Conduct
and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:

|1. | honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships;                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                              
|2. | full, fair, accurate, timely, and understandable
      disclosure in reports and documents that we file with, or submit to, the
      Securities and Exchange Commission and in other public communications made
      by us;
|   |                                                                                                                                                                                                                              
|3. | compliance with applicable governmental laws, rules and
      regulations;                                                                                                                                                   
|   |                                                                                                                                                                                                                              
|4. | the prompt internal reporting of violations of the Code
      of Business Conduct and Ethics to an appropriate person or persons
      identified in the Code of Business Conduct and Ethics; and                            
|   |                                                                                                                                                                                                                              
|5. | accountability for adherence to the Code of Business
      Conduct and Ethics.                                                                                                                                               

Our Code of Business Conduct and Ethics requires, among other
things, that all of our companys personnel shall be accorded full access to our
president with respect to any matter which may arise relating to the Code of
Business Conduct and Ethics. Further, all of our companys personnel are to be
accorded full access to our companys board of directors if any such matter
involves an alleged breach of the Code of Business Conduct and Ethics by our
president.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our companys president. If
the incident involves an alleged breach of the Code of Business Conduct and
Ethics by the president, the incident must be reported to any member of our
board of directors. Any failure to report such inappropriate or

---

50

irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
companys Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics was filed as an exhibit
with our annual report on Form 10-KSB filed with the Securities and Exchange
Commission on August 28, 2007. We will provide a copy of the Code of Business
Conduct and Ethics to any person without charge, upon request. Requests can be
sent to: Pantera Petroleum Inc., of 111 Congress Avenue, Suite 400, Austin,
Texas 78701.

Nomination Process

As of August 25, 2008, we did not effect any material changes
to the procedures by which our shareholders may recommend nominees to our board
of directors. Our board of directors does not have a policy with regards to the
consideration of any director candidates recommended by our shareholders. Our
board of directors has determined that it is in the best position to evaluate
our companys requirements as well as the qualifications of each candidate when
the board considers a nominee for a position on our board of directors. If
shareholders wish to recommend candidates directly to our board, they may do so
by sending communications to the president of our company at the address on the
cover of this annual report.

Committees of the Board

All proceedings of our board of directors were conducted by
resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the corporate laws of the State of Nevada and the
bylaws of our company, as valid and effective as if they had been passed at a
meeting of the directors duly called and held.

Our company currently does not have nominating, compensation or
audit committees or committees performing similar functions nor does our company
have a written nominating, compensation or audit committee charter. Our board of
directors does not believe that it is necessary to have such committees because
it believes that the functions of such committees can be adequately performed by
our board of directors.

Our company does not have any defined policy or procedure
requirements for shareholders to submit recommendations or nominations for
directors. The board of directors believes that, given the early stage of our
development, a specific nominating policy would be premature and of little
assistance until our business operations develop to a more advanced level. Our
company does not currently have any specific or minimum criteria for the
election of nominees to the board of directors and we do not have any specific
process or procedure for evaluating such nominees. The board of directors
assesses all candidates, whether submitted by management or shareholders, and
makes recommendations for election or appointment.

A shareholder who wishes to communicate with our board of
directors may do so by directing a written request addressed to our president,
at the address appearing on the first page of this annual report.

Audit Committee Financial Expert

Our board of directors has determined that we do not have a
board member that qualifies as an audit committee financial expert as defined
in Item 407(d)(5)(ii) of Regulation S-B.

We believe that our board of directors is capable of analyzing
and evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have an audit committee because our company
believes that the functions of an audit committee can be adequately performed by
our board of directors. In addition, we believe that retaining an independent
director who would qualify as an audit committee financial expert would be
overly costly and burdensome and is not warranted in our circumstances given the
early stages of our development.

---

51

ITEM 10.      EXECUTIVE
COMPENSATION.

Executive Compensation

The particulars of compensation paid to the following persons:

|(a) | our principal executive officer;                                                                                                                                                                                                  
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                   
|(b) | each of our two most highly compensated executive
      officers who were serving as executive officers at the end of the year
      ended May 31, 2008; and                                                                      
|    |                                                                                                                                                                                                                                   
|(c) | up to two additional individuals for whom disclosure
      would have been provided under (b) but for the fact that the individual
      was not serving as our executive officer at the end of the year ended May
      31, 2008,

who we will collectively refer to as the named executive
officers of our company for the years ended May 31, 2008 and 2007, are set out
in the following summary compensation table, except that no disclosure is
provided for any named executive officer, other than our principal executive
officer, whose total compensation does not exceed $100,000 for the respective
fiscal year:

SUMMARY
        COMPENSATION TABLENameand PrincipalPosition
      Year
      Salary($)
      Bonus($)
      StockAwards($)
      OptionAwards($)
      Non-EquityIncentivePlanCompensa-tion($)
      Change inPensionValue andNonqualifiedDeferredCompensationEarnings($)
      AllOtherCompensa-tion($)
      Total($)Chris Metcalf 
        President Chief 
        Executive 
        Officer 
        and Director(1)
      2008 
        2007
      $120,000 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      Nil 
        N/A
      $120,000 
        N/APeter Hughes 
        Secretary and 
        Director(2)
      2008 
        2007
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        $24,000
      Nil 
        $24,000


(1)          
Chris Metcalf was appointed as our president and chief executive officer and as
a director of our company on September 12, 2007.

(2)           Peter
Hughes resigned as our president and chief executive officer of our company on
September 12, 2007 and as our secretary and as a director on February 26, 2008.

Executive Compensation

During the year ended May 31, 2008, we did not pay any
management fees owing to Peter Hughes and during the year ended May 31, 2007, we
paid management fees owing to Peter Hughes totalling $24,000. In addition, we
have agreed to pay a monthly salary of $15,000 per month to Chris Metcalf in
consideration for his services as the president and chief executive officer of
our company. During the year ended May 31, 2008, we paid a total of $120,000 to
Chris Metcalf.

Equity Compensation Plan Information and Stock Options

We do not currently have any equity compensation plans or any
outstanding stock options.

---

52

Compensation of Directors

We currently have no formal plan for compensating our directors
for their services in their capacity as directors, although we may elect to
issue stock options to such persons from time to time. Directors are entitled to
reimbursement for reasonable travel and other out-of-pocket expenses incurred in
connection with attendance at meetings of our board of directors. Our board of
directors may award special remuneration to any director undertaking any special
services on our behalf other than services ordinarily required of a director.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.

|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENTAND RELATED STOCKHOLDER MATTERS.
|-------- | ----------------------------------------------------------------------------------------------------

The following table sets forth, as of August 25, 2008, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock.
Beneficial ownership consists of a direct interest in the shares of common
stock, except as otherwise indicated.

Name and Address of Beneficial Owner
      Amount and Nature ofBeneficial
      Ownership(1)
      Percentageof Class(1)Chris Metcalf c/o 111 Congress Avenue, Suite 400
      Austin, TX 78701
    48,000,000
    51%Scott Tyson c/o 111 Congress Avenue, Suite 400
      Austin, TX 78701
    Nil
    NilDirectors and Executive Officers as a Group (two
      persons)
    48,000,000
    51%


|(1) | Based on 94,045,655 shares of common stock issued and
      outstanding as of August 25, 2008. Except as otherwise indicated, we
      believe that the beneficial owners of the common stock listed above, based
      on information furnished by such owners, have sole investment and voting
      power with respect to such shares, subject to community property laws
      where applicable. Beneficial ownership is determined in accordance with
      the rules of the Securities and Exchange Commission and generally includes
      voting or investment power with respect to
securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Change in Control

We are not aware of any arrangement that might result in a
change in control of our company in the future.

Equity Plan Compensation Information

Our company does not currently have a stock option plan or
other form of equity plan.

ITEM 12.      CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Except as described below, no director, executive officer,
principal shareholder holding at least 5% of our common shares, or any family
member thereof, had any material interest, direct or indirect, in any
transaction, or proposed

---

53

transaction, during the year ended May 31, 2008, in which the
amount involved in the transaction exceeded or exceeds the lesser of $120,000 or
one percent of the average of our total assets at the year end for the last
three completed fiscal years.

We have agreed to pay a monthly salary of US$15,000 per month
to Chris Metcalf in consideration for his services as the president and chief
executive officer of our company.

We were charged $120,000 (2007: nil) for salaries for Chris
Metcalf, a director and officer of our company. In addition, we were charged,
$6,000 (2007: $24,000) for management services to Peter Hughes, a former
director and officer of our company, and $1,200 (2007: $4,800) for rent to
Celine Totman, a former director and an officer of our company.

During the year ended May 31, 2008, Peter Hughes and Celine
Totman forgave amounts due to them totalling $80,925 ($69,382 for Peter Hughes;
$11,543 for Celine Totman). This forgiveness has been recorded as a capital
contribution.

Amounts due to related parties of $67,060 at May 31, 2007 are
for cash advances, management fees, rent and office expenses incurred or paid on
behalf of our company by Peter Hughes and Celine Totman. These amounts were
non-interest bearing and comprise a portion of the amount forgiven, as noted
above.

Corporate Governance

We currently act with two directors consisting of Chris Metcalf
and Scott Tyson. Scott Tyson is considered an independent director as defined
by Rule 4200(a)(15) of the Rules of Nasdaq Marketplace Rules.

We do not have a standing audit, compensation or nominating
committee, but our entire board of directors acts in such capacities. We believe
that the members of our board of directors are capable of analyzing and
evaluating our financial statements and understanding internal controls and
procedures for financial reporting. The board of directors of our company does
not believe that it is necessary to have a standing audit, compensation or
nominating committee because we believe that the functions of such committees
can be adequately performed by the board of directors, consisting of Chris
Metcalf and Scott Tyson. In addition, we believe that retaining one or more
additional directors who would qualify as independent as defined in Rule
4200(a)(15) of the Rules of Nasdaq Marketplace Rules would be overly costly and
burdensome and is not warranted in our circumstances given the early stages of
our development and the fact the we have not generated any revenues from
operations to date.

ITEM 13.      EXHIBITS.

| | Exhibit | Description                                                                                                                                                                                                                                    
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number  |                                                                                                                                                                                                                                                
| |         |                                                                                                                                                                                                                                                
| | 1.1     | Licensing Agreement with Peter Hughes (incorporated by
      reference from our Registration Statement on Form SB-2 filed on April 18,
      2006)                                                                                             
| |         |                                                                                                                                                                                                                                                
| | 3.1     | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on April 18, 2006)                                                                                                               
| |         |                                                                                                                                                                                                                                                
| | 3.2     | Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on April 18, 2006)                                                                                                                                  
| |         |                                                                                                                                                                                                                                                
| | 3.3     | Articles of Merger filed with the Secretary of State of
      Nevada on September 19, 2007 and which is effective September 28, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 28, 2007)   
| |         |                                                                                                                                                                                                                                                
| | 3.4     | Certificate of Change filed with the Secretary of State
      of Nevada on September 19, 2007 and which is effective September 28, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      September 28, 2007)

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54

| | 4.1   | Regulation S
        Securities Subscription Agreement (incorporated by reference from our
        Registration Statement on Form SB-2 filed on April 18, 2006)                                                                                                                          
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                            
| | 10.1  | Share Purchase
        Agreement dated November 21, 2007 among our company, Pantera Oil and Gas
        PLC, Aurora Petroleos SA and Boreal Petroleos SA (incorporated by reference
        from our Current Report on Form 8-K filed on November 26, 2007)                                
| |       |                                                                                                                                                                                                                                                                                            
| | 10.2  | Form of Advisory
        Board Agreement (incorporated by reference from our Current Report on
        Form 8-K filed on February 4, 2008)                                                                                                                                                 
| |       |                                                                                                                                                                                                                                                                                            
| | 10.3  | Equity Financing
        Agreement dated February 12, 2008 with FTS Financial Investments Ltd.
        (incorporated by reference from our Current Report on Form 8-K filed on
        February 15, 2008)                                                                                  
| |       |                                                                                                                                                                                                                                                                                            
| | 10.4  | Return to Treasury
        Agreement dated February 26, 2008 with Peter Hughes (incorporated by reference
        from our Current Report on Form 8-K filed on February 28, 2008)                                                                                                          
| |       |                                                                                                                                                                                                                                                                                            
| | 10.5  | Amending Agreement
        dated March 17, 2008 with Artemis Energy PLC, Aurora Petroleos SA and
        Boreal Petroleos SA (incorporated by reference from our Current Report
        on Form 8-K filed on March 19, 2008)                                                               
| |       |                                                                                                                                                                                                                                                                                            
| | 10.6  | Subscription
        Agreement dated February 28, 2008 with Trius Energy, LLC (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on April 14,
        2008)                                                                                                 
| |       |                                                                                                                                                                                                                                                                                            
| | 10.7  | Joint Venture
        Agreement dated February 24, 2008 with Trius Energy, LLC (incorporated
        by reference from our Quarterly Report on Form 10-QSB filed on April 14,
        2008)                                                                                                
| |       |                                                                                                                                                                                                                                                                                            
| | 10.8  | Second Amending
        Agreement dated July 30, 2008 among our company, Artemis Energy PLC (formerly
        Pantera Oil and Gas PLC), Aurora Petroleos SA and Boreal Petroleos SA
        (incorporated by reference from our Current Report on Form 8-K filed on
        August 5, 2008)
| |       |                                                                                                                                                                                                                                                                                            
| | 10.9* | Amended
        and Restated Share Purchase Agreement dated September 9, 2008 among company,
        Artemis Energy PLC (formerly Pantera Oil and Gas PLC), Aurora Petroleos
        SA and Boreal Petroleos SA                                                                            
| |       |                                                                                                                                                                                                                                                                                            
| | 14.1  | Code of Ethics
        (incorporated by reference from our Annual Report on Form 10-KSB filed
        on August 28, 2007)                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                            
| | 31.1* | Certification
        of the Principal Executive Officer and Principal Financial Officer pursuant
        to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934as
        adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                      
| |       |                                                                                                                                                                                                                                                                                            
| | 32.1* | Certification
        of the Principal Executive Officer and Principal Financial Officer pursuant
        to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002                                                                           

*Filed herewith

ITEM 14.      PRINCIPAL ACCOUNTANT
FEES AND SERVICES.

Audit Fees

The aggregate fees billed by BDO Dunwoody LLP, Chartered
Accountants, for professional services rendered for the audit of our annual
financial statements included in our annual report on Form 10-KSB for the fiscal
years ended May 31, 2008 and 2007 were $7,076 and $6,935 respectively.

Audit Related Fees

For the fiscal years ended May 31, 2008 and 2007, the aggregate
fees billed for assurance and related services by BDO Dunwoody LLP, Chartered
Accountants, relating to the performance of the audit of our financial
statements which are not reported under the caption Audit Fees above, was
$21,458 and $6,681 respectively.

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55

Tax Fees

For the fiscal years ended May 31, 2008 and 2007, the aggregate
fees billed by BDO Dunwoody LLP, Chartered Accountants, for other non-audit
professional services, other than those services listed above, totalled $Nil and
$Nil respectively.

All Other Fees

We did not incur any other fees, other than described above,
during the years ended May 31, 2008 and 2007.

Our board of directors, who acts as our audit committee, has
adopted a policy governing the pre-approval by the board of directors of all
services, audit and non-audit, to be provided to our company by our independent
auditors. Under the policy, the board or directors has pre-approved the
provision by our independent auditors of specific audit, audit related, tax and
other non-audit services as being consistent with auditor independence. Requests
or applications to provide services that require the specific pre-approval of
the board of directors must be submitted to the board of directors by the
independent auditors, and the independent auditors must advise the board of
directors as to whether, in the independent auditors view, the request or
application is consistent with the Securities and Exchange Commissions rules on
auditor independence.

The board of directors has considered the nature and amount of
the fees billed by BDO Dunwoody LLP and believes that the provision of the
services for activities unrelated to the audit is compatible with maintaining
the independence of BDO Dunwoody LLP, Chartered Accountants.

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56

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

PANTERA PETROLEUM INC.

By: /s/ Chris
MetcalfChris Metcalf President, Chief Executive Officer and Director
(Principal Executive Officer and Principal Financial Officer) Date:
September 15, 2008

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

By: /s/ Chris
MetcalfChris Metcalf President, Chief Executive Officer and Director
(Principal Executive Officer and Principal Financial Officer) Date:
September 15, 2008

By:/s/ Scott
TysonScott Tyson Director Date: September 15, 2008



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