Document:

EX-10.3

 Exhibit 10.3 

SECURITY AGREEMENT 
  

DATE AND PARTIES. The date of this Security Agreement (Agreement) is February 20, 20 15. The parties and their addresses are as follows: 

SECURED PARTY: 
 ANB BANK 

3033 E. First Avenue 
 Denver, CO
80206 
 Telephone: (303) 394-5100 

DEBTOR: 
 MUSCLEPHARM CORPORATION

 a Nevada Corporation 
 4721
Ironton Street # A 
 Denver, CO 80239 
 The
pronouns “you” and “your” refer to the Secured Party. The pronouns “I,” “me” and “my” refer to each person or entity signing this Agreement as Debtor and agreeing to give the Property described in
this Agreement as security for the Secured Debts. 
  

	1.	SECURED DEBTS. The term “Secured Debts” includes and this Agreement will secure each of the following: 

  

	 	A.	Specific Debts. The following debts and all extensions, renewals, refinancings, modifications and replacements. A promissory note or other agreement, No. 0135164202, dated February 20, 2015, from me to
you, in the amount of $4,000,000.00. 

  

	 	B.	All Debts. All present and future debts from me to you, even if this Agreement is not specifically referenced, the future debts are also secured by other collateral, or if the future debt is unrelated to or of a
different type than this debt. If more than one person signs this Agreement, each agrees that it will secure debts incurred either individually or with others who may not sign this Agreement. Nothing in this Agreement constitutes a commitment to
make additional or future loans or advances. Any such commitment must be in writing. 

 This Agreement will not secure any debt
for which a non-possessory, non-purchase money security interest is created in “household goods” in connection with a “consumer loan,” as those terms are defined by federal law governing unfair and deceptive credit practices. In
addition, this Agreement will not secure any other debt if, with respect to such other debt, you fail to fulfill any necessary requirements or conform to any limitations of Regulations Z and X that are required for loans secured by the Property or
if, as a result, the other debt would become subject to Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007. 
  

	 	C.	Sums Advanced. All sums advanced and expenses incurred by you under the terms of this Agreement. Loan Documents refer to all the documents executed in connection with the Secured Debts. 

 

	2.	SECURITY INTEREST. To secure the payment and performance of the Secured Debts, I grant you a security interest in all of the Property described in this Agreement that I own or have sufficient rights in which to
transfer an interest, now or in the future, wherever the Property is or will be located, and all proceeds and products from the Property (including, but not limited to, all parts, accessories, repairs, replacements, improvements, and accessions to
the Property). Property is all the collateral given as security for the Secured Debts and described in this Agreement, and includes all obligations that support the payment or performance of the Property. “Proceeds” includes cash proceeds,
non-cash proceeds and anything acquired upon the sale, lease, license, exchange, or other disposition of the Property; any rights and claims arising from the Property; and any collections and distributions on account of the Property.

 This Agreement remains in effect until terminated in writing, even if the Secured Debts are paid and you are no longer
obligated to advance funds to me under any loan or credit agreement. 
  

	3.	PROPERTY DESCRIPTION. The Property is described as follows: 

  

	 	A.	Inventory. All inventory which I hold for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in my
business. “Inventory” means goods, other than farm products, which: (A) are leased by a person as lessor; (8) are held by a person tor sale or lease or to be furnished under a contract of service; (Cl are furnished by a person
under a contract of service; or (DJ consist of raw materials, work in process, or materials used or consumed in a business. The term “Inventory” is as defined by the Uniform Commercial Code and further as modified or amended by the laws of
the jurisdiction which governs this transaction. 

  

	 	B.	 Accounts and Other Rights to Payment. All rights I have now or in the future to payments including, but not limited to, payment for property or
services sold, leased, rented, licensed, or assigned, whether or not I have earned such payment by performance. This includes any rights and interests (including all liens and security interests) which I may have by law or agreement against any
Account Debtor or obligor of mine. “Account” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed
of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the
use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or
sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. The term includes health-care-insurance receivables. The term

  

							
	MusclePharm Corporation	 	 	 	 	 	 
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“Accounts” does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment
property, (v) letter-of-credit rights or letters of credit or rights to payment, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on
or for use with the card. The term “Accounts” is as defined by the Uniform Commercial Code and further as modified or amended by the laws of the jurisdiction which governs this transaction. 

 

	 	C.	General Intangibles. All general intangibles including, but not limited to, tax refunds, applications for patents, patents, copyrights, trademarks, trade secrets, good will, trade names, customer lists, permits
and franchises, payment intangibles, computer programs and all supporting information provided in connection with a transaction relating to computer programs, and the right to use my name. “General intangible” means any personal property,
including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before
extraction. The term includes payment intangibles and software. The term “General Intangibles” is as defined by the Uniform Commercial Code and further as modified or amended by the laws of the jurisdiction which governs this transaction.

  

	 	D.	Specific Property. 600000.000 shares of Common stock in MusclePharm Corporation, represented by certificate number(s) 5172-2. and additionally described: CUSIP 627335201. 260900.000 shares of Common stock in
MusclePharm Corporation, represented by certificate number(s) 5179-7. and additionally described: CUSIP 627335201. All financial assets credited to my securities account held by Deutsche Bank, 60 Wall Street- 2nd Floor, New York , NY 10005 in
account number 145-39018- 1-9 recorded in my name. 

  

	4.	WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and representations which will continue as long as this Agreement is in effect: 

 

	 	A.	Power. I am duly organized, and validly existing and in good standing in all jurisdictions in which I operate. I have the power and authority to enter into this transaction and to carry on my business or activity
as it is now being conducted and, as applicable, am qualified to do so in each jurisdiction in which I operate. 

  

	 	B.	Authority. The execution, delivery and performance of this Agreement and the obligation evidenced by this Agreement are within my powers, have been duly authorized, have received all necessary governmental
approval, will not violate any provision of law, or order of court or governmental agency, and will not violate any agreement to which I am a party or to which I am or any of my property is subject. 

 

	 	C.	Name and Location. My name indicated in the DATE AND PARTIES section is my exact legal name. I am an entity organized and registered under the laws of Nevada. I will provide verification of registration and
location upon your request. I will provide you with at least 30 days notice prior to any change in my name, address, or state of organization or registration. 

  

	 	D.	Business Name. Other than previously disclosed in writing to you I have not changed my name or principal place of business within the last 10 years and have not used any other trade or fictitious name. Without
your prior written consent, I do not and will not use any other name and will preserve my existing name, trade names and franchises. 

  

	 	E.	Ownership of Property. I represent that I own all of the Property. Your claim to the Property is ahead of the claims of any other creditor, except as disclosed in writing to you prior to any advance on the
Secured Debts. I represent that I am the original owner of the Property and, if I am not, that I have provided you with a list of prior owners of the Property. 

  

	5.	DUTIES TOWARD PROPERTY. 

  

	 	A.	Protection of Secured Party’s Interest. I will defend the Property against any other claim. I agree to do whatever you require to protect your security interest and to keep your claim in the Property ahead
of the claims of other creditors. I will not do anything to harm your position. 

 I will keep books, records and accounts
about the Property and my business in general. I will let you examine these and make copies at any reasonable time. I will prepare any report or accounting you request which deals with the Property. 

 

	 	B.	Use, Location, and Protection of the Property. I will keep the Property in my possession and in good repair. I will use it only for commercial purposes. I will not change this specified use without your prior
written consent. You have the right of reasonable access to inspect the Property and I will immediately inform you of any loss or damage to the Property. I will not cause or permit waste to the Property. 

I will keep the Property at my address listed in the DATE AND PARTIES section unless we agree I may keep it at another location. If the
Property is to be used in other states, I will give you a list of those states. The location of the Property is given to aid in the identification of the Property. It does not in any way limit the scope of the security interest granted to you. I
will notify you in writing and obtain your prior written consent to any change in location of any of the Property. I will not use the Property in violation of any law. I will notify you in writing prior to any change in my address, name or, if an
organization, any change in my identity or structure. 
 Until the Secured Debts are fully paid and this Agreement is terminated, I will not
grant a security interest in any of the Property without your prior written consent. I will pay all taxes and assessments levied or assessed against me or the Property and provide timely proof of payment of these taxes and assessments upon request.

  

	 	C.	Selling, Leasing or Encumbering the Property. I will not sell, offer to sell, lease, or otherwise transfer or encumber the Property without your prior written permission, except for Inventory sold in the ordinary
course of business at fair market value, or at a minimum price established between you and me. If I am in default under this Agreement, I may not sell the Inventory portion of the Property even in the ordinary course of business. Any disposition of
the Property contrary to this Agreement will violate your rights. Your permission to sell the Property may be reasonably withheld without regard to the creditworthiness of any buyer or transferee. I will not permit the Property to be the subject of
any court order affecting my rights to the Property in any action by anyone other than you. If the Property includes chattel paper or instruments, either as original collateral or as proceeds of the Property, I will note your security interest on
the face of the chattel paper or instruments. 

  

							
	MusclePharm Corporation	 	 	 	 	 	 
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	 	D.	Additional Duties Specific to Accounts. I will not settle any Account for less than its full value without your written permission. Until you tell me otherwise, I will collect all Accounts in the ordinary course
of business. I will not dispose of the Accounts by assignment without your prior written consent. I will keep the proceeds from all the Accounts and any goods which are returned to me or which I take back. I will not commingle them with any of my
other property. I will deliver the Accounts to you at your request. If you ask me to pay you the full price on any returned items or items retaken by me, I will do so. I will make no material change in the terms of any Account, and I will give you
any statements, reports, certificates, lists of Account Debtors (showing names, addresses and amounts owing), invoices applicable to each Account, and other data in any way pertaining to the Accounts as you may request. 

 

	 	E.	Additional Duties Specific to Investment Property or Securities. Upon receipt, I will deliver to you all Property such as stock dividends and securities resulting from stock splits, reorganizations and
recapitalizations. 

 I will issue instructions and take all necessary actions to assure your control over the Property which
may include any of the following: 
  

	 	(1)	Registering or delivering certificates to you with the proper endorsements. 

  

	 	(2)	Informing an issuer, securities intermediary, or commodities intermediary that I have consensually entered into an agreement with you requesting them to comply with instructions or entitlement orders issued by you
regarding the Property without further consent from me. 

  

	 	(3)	Causing the clearing corporation to reduce my account or the financial intermediary’s account where I hold the Property and to increase your account or the financial intermediary’s account where you hold
securities by the amount of the Secured Debts or the number of shares assigned. 

  

	 	(4)	Causing the issuer of the Property to register this security interest (pledge) to you and to send written confirmation of the registration to you. 

 

	6.	INSURANCE. I agree to keep the Property insured against the risks reasonably associated with the Property. I will maintain this insurance in the amounts you require. This insurance will last until the Property is
released from this Agreement. I may choose the insurance company, subject to your approval, which will not be unreasonably withheld. 

I will have the insurance company name you as loss payee on any insurance policy. I will give you and the insurance company immediate notice of
any loss. You may apply the insurance proceeds toward what is owed on the Secured Debts. You may require added security as a condition of permitting any insurance proceeds to be used to repair or replace the Property. 

If you acquire the Property in damaged condition, my right to any insurance policies and proceeds will pass to you to the extent of the Secured
Debts. 
 I will immediately notify you of cancellation or termination of insurance. If I fail to keep the Property insured, you may obtain
insurance to protect your interest in the Property and I will pay for the insurance on your demand. You may demand that I pay for the insurance all at once, or you may add the insurance premiums to the balance of the Secured Debts and charge
interest on it at the rate that applies to the Secured Debts. This insurance may include coverages not originally required of me, may be written by a company other than one I would choose, and may be written at a higher rate than I could obtain if I
purchased the insurance. I acknowledge and agree that you or one of your affiliates may receive commissions on the purchase of this insurance. 
  

	7.	COLLECTION RIGHTS OF THE SECURED PARTY. Account Debtor means the person who is obligated on an account, chattel paper, or general intangible. I authorize you to notify my Account Debtors of your security interest
and to deal with the Account Debtors’ obligations at your discretion. You may enforce the obligations of an Account Debtor, exercising any of my rights with respect to the Account Debtors’ obligations to make payment or otherwise render
performance to me, including the enforcement of any security interest that secures such obligations. You may apply proceeds received from the Account Debtors to the Secured Debts or you may release such proceeds to me. 

I specifically and irrevocably authorize you to exercise any of the following powers at my expense, without limitation, until the Secured Debts
are paid in full: 
  

	 	A.	demand payment and enforce collection from any Account Debtor or Obligor by suit or otherwise. 

  

	 	B.	enforce any security interest, lien or encumbrance given to secure the payment or performance of any Account Debtor or any obligation constituting Property. 

 

	 	C.	file proofs of claim or similar documents in the event of bankruptcy, insolvency or death of any person obligated as an Account Debtor. 

 

	 	D.	compromise, release, extend, or exchange any indebtedness of an Account Debtor. 

  

	 	E.	take control of any proceeds of the Account Debtors’ obligations and any returned or repossessed goods. 

  

	 	F.	endorse all payments by any Account Debtor which may come into your possession as payable to me. 

  

	 	G.	deal in all respects as the holder and owner of the Account Debtors’ obligations. 

  

	8.	AUTHORITY TO PERFORM. I authorize you to do anything you deem reasonably necessary to protect the Property, and perfect and continue your security interest in the Property. If I fail to perform any of my duties
under this Agreement or any other Loan Document, you are authorized, without notice to me, to perform the duties or cause them to be performed. 

These authorizations include, but are not limited to, permission to: 
  

	 	A.	pay and discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Property 

  

	 	B.	pay any rents or other charges under any lease affecting the Property. 

  

	 	C.	order and pay for the repair, maintenance and preservation of the Property. 

  

	 	D.	file any financing statements on my behalf and pay for filing and recording fees pertaining to the Property. 

  

							
	MusclePharm Corporation	 	 	 	 	 	 
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	 	E.	place a note on any chattel paper indicating your interest in the Property. 

  

	 	F.	take any action you feel necessary to realize on the Property, including performing any part of a contract or endorsing it in my name. 

 

	 	G.	exercise all voting or other ownership rights pertaining to the Property (although you are not obligated to do so) . 

  

	 	H.	handle any suits or other proceedings involving the Property in my name. 

  

	 	I.	prepare, file, and sign my name to any necessary reports or accountings. 

  

	 	J.	make an entry on my books and records showing the existence of this Agreement. 

  

	 	K.	notify any Account Debtor or Obligor of your interest in the Property and tell the Account Debtor or Obligor to make payments to you or someone else you name. 

If you perform tor me, you will use reasonable care. If you exercise the care and follow the procedures that you generally apply to the
collection of obligations owed to you, you will be deemed to be using reasonable care. Reasonable care will not include: any steps necessary to preserve rights against prior parties; the duty to send notices, perform services or take any other
action in connection with the management of the Property; or the duty to protect, preserve or maintain any security interest given to others by me or other parties. Your authorization to perform for me will not create an obligation to perform and
your fail re to perform will not preclude you from exercising any other rights under the law or this Agreement. All cash and non-cash proceeds of the Property may be applied by you only upon your actual receipt of cash proceeds against such of the
Secured Debts, matured or unmatured, as you determine in your sole discretion. 
 If you come into actual or constructive possession of the
Property, you will preserve and protect the Property. For purposes of this paragraph, you will be in actual possession of the Property only when you have physical, immediate and exclusive control over the Property and you have affirmatively accepted
that control. You will be in constructive possession of the Property only when you have both the power and the intent to exercise control over the Property. 
  

	9.	DEFAULT. I will be in default if any of the following events (known separately and collectively as an Event of Default) occur: 

 

	 	A.	Payments. I fail to make a payment in full when due. 

  

	 	B.	Insolvency or Bankruptcy. The death, dissolution or insolvency of, appointment of a receiver by or on behalf of, application of any debtor relief law, the assignment for the benefit of creditors by or on behalf
of, the voluntary or involuntary termination of existence by, or the commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition or debtor relief law by or against me, Obligor, or
any co-signer, endorser, surety or guarantor of this Agreement or any other obligations Obligor has with you. 

  

	 	C.	Business Termination. I merge, dissolve, reorganize, end my business or existence, or a partner or majority owner dies or is declared legally incompetent. 

 

	 	D.	Failure to Perform. I fail to perform any condition or to keep any promise or covenant of this Agreement. 

  

	 	E.	Other Documents. A default occurs under the terms of any other Loan Document. 

  

	 	F.	Other Agreements. I am in default on any other debt or agreement I have with you. 

  

	 	G.	Misrepresentation. I make any verbal or written statement or provide any financial information that is untrue, inaccurate, or conceals a material fact at the time it is made or provided. 

 

	 	H.	Judgment. I fail to satisfy or appeal any judgment against me. 

  

	 	I.	Forfeiture. The Property is used in a manner or for a purpose that threatens confiscation by a legal authority. 

  

	 	J.	Name Change. I change my name or assume an additional name without notifying you before making such a change. 

  

	 	K.	Property Transfer. I transfer all or a substantial part of my money or property. 

  

	 	L.	Property Value. You determine in good faith that the value of the Property has declined or is impaired. 

  

	 	M.	Material Change. Without first notifying you, there is a material change in my business, including ownership, management, and financial conditions. 

 

	 	N.	Insecurity. You determine in good faith that a material adverse change has occurred in my financial condition from the conditions set forth in my most recent financial statement before the date of this Agreement
or that the prospect for payment or performance of the Secured Debts is impaired for any reason. 

  

	10.	DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire balance of this Agreement to be immediately due and payable upon the creation of, or contract for the creation of, any lien, encumbrance,
transfer or sale of all or any part of the Property. This right is subject to the restrictions imposed by federal law, as applicable. However, if I am in default under this Agreement, I may not sell the inventory portion of the Property even in the
ordinary course of business. 

  

	11.	REMEDIES. After I default, you may at your option do any one or more of the following. 

  

	 	A.	Acceleration. You may make all or any part of the amount owing by the terms of the Secured Debts immediately due. 

  

	 	B.	Sources. You may use any and all remedies you have under state or federal law or in any Loan Document. 

  

	 	C.	Insurance Benefits. You may make a claim for any and all insurance benefits or refunds that may be available on my default. 

  

	 	D.	Payments Made On My Behalf. Amounts advanced on my behalf will be immediately due and may be added to the Secured Debts. 

  

	 	E.	Assembly of Property. You may require me to gather the Property and make it available to you in a reasonable fashion. 

  

	 	F.	 Repossession. You may repossess the Property so long as the repossession does not involve a breach of the peace. You may sell, lease or
otherwise dispose of the Property as provided by law. You may apply what you receive from the disposition of the Property to your expenses, your attorneys’ fees and legal expenses (where not prohibited by law),

  

							
	MusclePharm Corporation	 	 	 	 	 	 
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and any debt I owe you. If what you receive from the disposition of the Property does not satisfy the debt, I will be liable for the deficiency (where permitted by law). In some cases, you may
keep the Property to satisfy the debt. 

 Where a notice is required, I agree that ten days prior written notice sent by first
class mail to my address listed in this Agreement will be reasonable notice to me under the Colorado Uniform Commercial Code. If the Property is perishable or threatens to decline speedily in value, you may, without notice to me, dispose of any or
all of the Property in a commercially reasonable manner at my expense following any commercially reasonable preparation or processing. 
 If
any items not otherwise subject to this Agreement are contained in the Property when you take possession, you may hold these items for me at my risk and you will not be liable for taking possession of them 

 

	 	G.	Use and Operation. You may enter upon my premises and take possession of all or any part of my property for the purpose of preserving the Property or its value, so long as you do not breach the peace. You may use
and operate my property for the length of time you feel is necessary to protect your interest, all without payment or compensation to me. 

  

	 	H.	Waiver. By choosing any one or more of these remedies you do not give up your right to use any other remedy. You do not waive a default if you choose not to use a remedy. By electing not to use any remedy, you do
not waive your right to later consider the event a default and to use any remedies if the default continues or occurs again. 

  

	12.	WAIVER OF CLAIMS. I waive all claims for loss or damage caused by your acts or omissions where you acted reasonably and in good faith. 

 

	13.	ADDITIONAL TERMS. The security interest created herein shall also secure all obligations and indebtedness of the Debtor to the Secured Party, including, but not limited to, that certain Promissory Note
#0135164201 dated September 12, 2014, executed by MusclePharm Corporation, in the amount of $8,000,000.00 together with all modifications, extensions and renewals thereof. 

 

	14.	PERFECTION OF SECURITY INTEREST AND COSTS. I authorize you to file a financing statement and/or security agreement, as appropriate, covering the Property. I will comply with, facilitate, and otherwise assist you
in connection with obtaining perfection or control over the Property for purposes of perfecting your security interest under the Uniform Commercial Code. I agree to pay all taxes, fees and costs you pay or incur in connection with preparing, filing
or recording any financing statements or other security interest filings on the Property. I agree to pay all actual costs of terminating your security interest. 

  

	15.	APPLICABLE LAW. This Agreement is governed by the laws of Colorado, the United States of America, and to the extent required, by the laws of the jurisdiction where the Property is located, except to the extent
such state laws are preempted by federal law. In the event of a dispute, the exclusive forum, venue and place of jurisdiction will be in Colorado, unless otherwise required by law. 

 

	16.	JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. Each Debtor’s obligations under this Agreement are independent of the obligations of any other Debtor. You may sue each Debtor individually or together with any
other Debtor. You may release any part of the Property and I will still be obligated under this Agreement for the remaining Property. Debtor agrees that you and any party to this Agreement may extend, modify or make any change in the terms of this
Agreement or any evidence of debt without Debtor’s consent. Such a change will not release Debtor from the terms of this Agreement. If you assign any of the Secured Debts, you may assign all or any part of this Agreement without notice to me or
my consent, and this Agreement will inure to the benefit of your assignee to the extent of such assignment. You will continue to have the unimpaired right to enforce this Agreement as to any of the Secured Debts that are not assigned. This Agreement
shall inure to the benefit of and be enforceable by you and your successors and assigns and any other person to whom you may grant an interest in the Secured Debts and shall be binding upon and enforceable against me and my personal representatives,
successors, heirs and assigns 

  

	17.	AMENDMENT. INTEGRATION AND SEVERABILITY. This Agreement may not be amended or modified by oral agreement. No amendment or modification of this Agreement is effective unless made in writing and executed by you and
me. This Agreement and the other Loan Documents are the complete and final expression of the understanding between you and me. If any provision of this Agreement is unenforceable, then the unenforceable provision will be severed and the remaining
provisions will still be enforceable 

  

	18.	INTERPRETATION. Whenever used, the singular includes the plural and the plural includes the singular. The section headings are for convenience only and are not to be used to interpret or define the terms of this
Agreement. 

  

	19.	NOTICE AND ADDITIONAL DOCUMENTS. Unless otherwise required by law, any notice will be given by delivering it or mailing it by first class mail to the appropriate party’s address listed in the DATE A ND
PARTIES section, or to any other address designated in writing. Notice to one Debtor will be deemed to be notice to all Debtors. I will inform you in writing of any change in my name, address or other application information. I will provide you any
other, correct and complete information you request to effectively grant a security interest on the Property. I agree to sign, deliver, and file any additional documents or certifications that you may consider necessary to perfect, continue, and
preserve my obligations under this Agreement and to confirm your lien status on any Property. Time is of the essence. 

  

	20.	WAIVER OF JURY TRIAL. All of the parties to this Agreement knowingly and intentionally, irrevocably and unconditionally, waive any and all right to a trial by jury in any litigation arising out of or concerning this
Agreement or any other Loan Document or related obligation. All of these parties acknowledge that this section has either been brought to the attention of each party’s legal counselor that each party had the opportunity to do so.

 SIGNATURES. By signing, I agree to the terms contained in this Agreement. I also acknowledge receipt of a copy of this
Agreement. 

  

							
	MusclePharm Corporation	 	 	 	 	 	 
	Colorado Security Agreement	 	                Wolters Kluwer Financial Services ©1996, 2015 Bankers SystemsTM	 	                Initials	 	  

	CO/4FWOGAMAN00000000000676047022015N	 		 		 	 Page 
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 DEBTOR: 

MusclePharm Corporation 
  

											
		 	By	 	  
	 		 	Date	 	  

		 	Richard Estalella, President	 		 		 	
				
	 BORROWER:
	 		 		 	
		 	ANB Bank	 		 		 	
						
		 	By	 	  
	 		 	Date	 	  

		 	Sean Ribble, Vice President	 		 		 	

  

							
	MusclePharm Corporation	 	 	 	 	 	 
	Colorado Security Agreement	 	                Wolters Kluwer Financial Services ©1996, 2015 Bankers SystemsTM	 	                Initials	 	  

	CO/4FWOGAMAN00000000000676047022015N	 		 		 	 Page 
 6Exhibit
10.8

 

 

 

 

Great
East Energy Inc.

DISCLOSURE OF OIL AND GAS OPERATIONS

for

 

Lysychansko-Toshkivskay
Project

 

 

Located
in

the
Donetsk Basin

SOUTHEASTERN
UKRAINE 

 

 

EFFECTIVE
JANUARY 1, 2014

 

 

PREPARED
OCTOBER 20, 2014

 

REVISED
DECEMBER 31, 2014

 

 

by
B.L. Whelan, P. Geo.

 

 

 

 

    	 

    	 

    

 

Great
East, Lysychansko-Toshkivskay, Ukraine, NI51-101, 2014

 

	TABLE
    OF CONTENTS
	 

 

	1.0
    	AUTHORIZATION	7
	2.0
    	PURPOSE	7
	3.0	DEFINITIONS	7
	4.0	PRODUCT
    PRICES	8
	5.0	SUBSOIL
    FEE (ROYALTY)	8
	6.0	CAPITAL
    EXPENDITURES AND OPERATING COSTS	8
	7.0	ABANDONMENT
    AND RESTORATION	8
	8.0	ABBREVIATIONS
    AND CONVERSIONS	8
	9.0	INTRODUCTION	12
	10.0
    	EXECUTIVE
    SUMMARY	13
	11.0	NATURAL
    GAS RESOURCES AND NET PRESENT VALUE OF FUTURE NET REVENUE	21
	11.1
    	CLASSIFICATION
    OF RESOURCES	21
	11.2
    	TOTAL
    FUTURE NET REVENUE (UNDISCOUNTED) BASED ON FORECAST PRICES AND COSTS WITH COST RECOVERY	22
	12.0	PRICING
    ASSUMPTIONS	22
	12.1
    	PRICING
    ASSUMPTIONS – FORECAST PRICES AND COSTS	22
	13.0	RECONCILIATION
    OF COMPANY NET RESERVES BY PRINCIPAL PRODUCT TYPE BASED ON FORECAST PRICES AND COSTS	23
	14.0
    	UNDEVELOPED
    RESOURCES	23
	14.1	RISK
    AND UNCERTAINTY	23
	14.2
    	PROSPECT
    ANALYSIS	23
	15.0	RECONCILIATION
    OF CHANGES IN NET PRESENT VALUE OF FUTURE RESERVES DISCOUNTED AT 10%, FORECAST PRICES ($000)	23
	16.0	SIGNIFICANT
    FACTORS OR UNCERTAINTIES AFFECTING RESOURCES  DATA	23
	17.0
    	OIL
    AND GAS PROPERTIES	24
	17.1
    	GENERAL	24
	17.2
    	GEOLOGY	24
	17.2.1
    	DONBASS
    DEVELOPMENT AREA	25
	17.2.2	LYSYCHANSKO-TOSHKIVSKAY	25
	17.3
    	PRODUCTION	29
	17.4
    	RESERVOIR
    CHARACTERISTICS	29
	18.0
    	COSTS
    TO BE INCURRED	29
	18.1
    	LEASE
    COSTS	29
	19.0	EXPLORATION
    AND DEVELOPMENT ACTIVITIES	29
	19.1	EXPLORATION
    AND DEVELOPMENT COSTS	29
	19.2
    	CAPITAL
    COSTS	30
	19.3
    	OPERATING
    COSTS	30
	20.0
    	FORWARD
    CONTRACTS	30
	21.0	ABANDONMENT
    AND RECLAMATION COSTS	30
	22.0	TAX
    HORIZON	30
	23.0
    	PRODUCTION
    ESTIMATES	30
	24.0	PRODUCTION
    HISTORY	30

 

    	2

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, NI51-101, 2014

 

	24.1	AVERAGE
    DAILY PRODUCTION	31
	24.2	PRICES
    RECEIVED, ROYALTIES PAID, PRODUCTION COSTS AND NETBACKS	31
	25.0	PRODUCTION
    VOLUME BY FIELD	31
	26.0	RECOMMENDATIONS	31
	27.0	REFERENCES	32
	28.0	CERTIFICATE
    OF QUALIFICATIONS	33

 

	 	FIGURES
	 	 	 
	 	FIGURE
    1,	RESOURCES CLASSIFICATION FRAMEWORK (SPE-PRMS,
    FIGURE 1.1)
	 	FIGURE
    2,	LOCATION MAP
	 	FIGURE
    3,	LOCATION MAP
	 	FIGURE
    4,	PERMIT OUTLINE WITH DOMAL STRUCTURES
	 	FIGURE
    5,	STRUCTURE ON THE TOMASHEVSKAY DOMES
	 	FIGURE
    6,	CROSS-SECTION I-I’, TOMASHEVSKAY
    NORTH DOME
	 	FIGURE
    7,	CROSS-SECTION II-II’, TOMASHEVSKAY
    SOUTH DOME
	 	FIGURE
    8,	TYPE SECTION
	 	FIGURE
    9,	CHRONO-
    AND LITHOSTRIGRAPHY OF THE DONBAS FOLD 
	 	 	BELT
    SHOWING THE DISTRIBUTION OF SOURCE ROCKS, 

POTENTIAL RESERVOIRS, SEALING BEDS AND ERODED 

FORMATIONS IN THE STUDY AREA. MAJOR
    MAGMATIC AND 

TECTONIC EVENTS ARE ALSO SHOWN
	 	 	 
	 	TABLES	 
	 	 	 
	 	TABLE
    1,	PRODUCT
    PRICES
	 	TABLE
    2,	TOMASHEVSKOYA
    SOUTH DOME INPUT PARAMETERS 
	 	TABLE
    3,	VOLUMETRIC
    ESTIMATES LYSYCHANSK-TOSHKIVSKAY LICENSE
	 	TABLE
    4,	SUMMARY
    OF RESERVES
	 	TABLE
    5,	ACREAGE
    AND WELLS
	 	TABLE
    6,	UKRAINE
    LICENSE 
	 	TABLE
    7,	LICENSE
    COORDINATES 
	 	TABLE
    8,	DOMAL
    STRUCTURES
	 	TABLE
    9,	PRESENT
    VALUES OF CURRENT PRODUCTION, CONSTANT PRICE
	 	TABLE
    10,	PRESENT
    VALUE CASES FOR SINGLE NEW WELL
	 	TABLE
    11,	PRESENT
    VALUES CASES FOR DEVELOPMENT/EXPLORATION  PROGRAM (AFTER TAXES) 
	 	TABLE
    12,	TOTAL
    FUTURE NET REVENUE (UNDISCOUNTED) BASED ON FORECAST PRICES AND COSTS WITH COST RECOVERY, SINGLE WELL
	 	TABLE
    13,	FUTURE
    NET REVENUE BY PRODUCTION GROUP BASED ON 

FORECAST PRICES AND COSTS WITH COST RECOVERY, 

DEVELOPMENT/EXPLORATION PROGRAM

 

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Great
East, Lysychansko-Toshkivskay, Ukraine, NI51-101, 2014

 

	 	TABLE
    14,	SALES
    PRICES
	 	TABLE
    15,	GENERAL
    INFORMATION, TOSHKIVSKAY MINE
	 	TABLE
    16,	COAL
    METHANE LIBERATED AT DECONTAMINATION, TOSHKIVSKAY MINE
	 	TABLE
    17,	SCHEDULE
    OF EXPLORATION AND DEVELOPMENT
	 	TABLE
    18,	PRODUCTION
    HISTORY
	 	 
	 	APPENDIX
	 	 	 
	 	CHART
    1,	ANNUAL
    PRODUCTION
	 	TABLE
    19,	FORECAST
    CASH FLOW, SINGLE WELL, 250 Mcfd
	 	TABLE
    20,	FORECAST
    CASH FLOW, CURRENT PRODUCTION A3555a 
	 	TABLE
    21,	FORECAST
    CASH FLOW, CURRENT PRODUCTION 11K 
	 	TABLE
    22,	FORECAST
    CASH FLOW, COMBINED CURRENT PRODUCTION 
	 	TABLE
    23,	FORECAST
    CASH FLOW, CONSTANT PRICE, SEQUENTIAL DRILL PROGRAM, COST RECOVERY
	 	TABLE
    24,	FORECAST
    CASH FLOW, CONSTANT PRICE, NO COST RECOVERY
	 	TABLE
    25,	FORECAST
    CASH FLOW, ESCALATED PRICE, STAGGERED DRILL PROGRAM, COST RECOVERY
	 	TABLE
    26,	FORECAST
    CASH FLOW, ESCALATED PRICE, NO COST RECOVERY
	 	GAMMA
    RAY ELECTRIC LOG, A3335

    	4

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Barry
l. Whelan, P. GEO.

Suite
1290, 625 Howe Street, Vancouver, B.C. V6C 2T6

Phone: (604)-259-2525: Fax: 604-674-5113

e-mail:
blwhelan@gmail.com

 

October
20, 2014

 

Great
East Energy Inc. 

173 Keith St., Suite 300

Warrenton, VA 20186 

USA

 

Attention:

 

Dear Sir:

 

	Re:	Evaluation
    of Resources – Great East Energy Inc. 

    Lysychansko-Toshkivskay Project, Ukraine,

 

In
accordance with your authorization, we have performed an evaluation of the resources on the Lysychansk-Toshkivskay project in
the Ukraine for Great East Energy Inc. (the “Company”), in order to determine the feasibility of the Company’s
geological investigations and potential industrial development of resources within the area under the terms proposed and the value
of the resources after consideration of risk. This evaluation has been conducted utilizing forecast prices and costs.

 

Our
analysis has included a review of the available technical data including the geological and geophysical interpretation presented
by the Company, the proposed financial terms under which the Company shall operate, information from wells within the area, and
the proposed program for any prospects and the expenditures anticipated. We have reviewed this material with respect to the estimated
resources and productivity that would be expected from a successful program, the anticipated capital costs, the average operating
costs in the area and the expected product prices. We have considered the availability of product markets and pipelines within
the area.

 

In
forming our opinion of the prospects we have relied to considerable extent on the information provided by the Company, which together
with our independent analysis and judgment was sufficient for us to establish the nature of the prospects and risks involved.

 

An
economic analysis has been performed for the Company’s interest position. This analysis has been utilized for formulating
and supporting our recommendation on the project and the values do not necessarily infer “fair market value” of these
resources. All monetary units in this report are US dollars.

 

Based
on our analysis, after consideration of risk, we have concluded that the potential of the prospects is of sufficient merit to
justify the work program being proposed, and we therefore recommend and support the Company’s planned activities.

 

All
data gathered and calculations created in support of this report are stored in our files and can be made available or presented
upon request. We reserve the right to make revisions to this report in light of additional information made available or which
becomes known subsequent to the preparation this report. Due to the risks involved in oil and gas exploration, our assessment
of the project cannot be considered a guarantee that any wells drilled will be successful.

 

Prior
to public disclosure of any information contained in the report, or our name as author, our written consent must be obtained,
as to the information being disclosed and the manner in which it is presented. This report may not be reproduced, distributed
or made available for use by any other party without out written consent and may not be reproduced for distribution at any time
without the complete report, unless otherwise reviewed and approved by us.

 

    	5

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

We
consent to the submission of this report, in its entirety, to securities regulatory agencies and stock exchanges, by the Company.

 

Very
truly yours,

 

 

Barry
L. Whelan, P. Geo.

 

    	6

    	 

    

  Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

SCOPE
OF REPORT

 

	1.0	AUTHORIZATION

 

This
report has been authorized by Mr. Timur Khromaev on behalf of Great East Energy Inc. The technical analysis of this project has
been performed during the months of August and November 2013 and a revision was performed in October, 2014 to bring the report
current to January 1, 2014.

 

	2.0	PURPOSE

 

The
purpose of this report was to independently determine the economic feasibility of the Company undertaking the exploration and
industrial development of the resources in the Lysychansko-Toshkivskay area of Ukraine, determine the magnitude of the resources
and their economic value.

 

	3.0	DEFINITIONS

 

The
following definitions are derived from of the United States Securities and Exchange Commission Rule 4-10 of Regulation S-X Part
210.

 

RESERVES
are estimated remaining quantities of oil and natural gas and related substances anticipated to be economically, as of a given
date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable
expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering
oil and gas or related substances to market, and all permits and financing required to implement the project. Reserves are further
classified according to the level of certainty associated with the estimates and may be sub classified based on development and
production status.

 

PROVED
RESERVES. Proved oil and gas reserves are those quantities of oil or gas, which, by analysis of geoscience and engineering
data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs,
and under existing economic condition, operating methods, and government regulations – prior to the time at which contracts
providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic
or probabilistic methods were used for the estimation. The project to extract the hydrocarbons must have commenced or the operator
must be reasonably certain that it will commence the project within a reasonable time.

 

PRODUCTION
is the cumulative quantity of petroleum that has been recovered at a given date.

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Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

	4.0	PRODUCT
    PRICES

 

The
product prices were derived from the current (December 2013) sales price for gas within Ukraine and escalated the price at 1.5%
per year in subsequent years.

 

Table
1, Product Prices

 

	Year 

Forecast	Natural Gas, 

($US/Mcf)
	 	Constant Price	Forecast Price
	1	$10.97	$10.97
	2	$10.97	$11.19
	3	$10.97	$11.41
	4	$10.97	$11.64
	5	$10.97	$11.87
	6	$10.97	$12.11
	7	$10.97	$12.35
	8	$10.97	$12.60
	9	$10.97	$12.85
	10	$10.97	$13.11
	 	Thereafter 

escalated at 2% 

per year

 

	5.0	SUBSOIL
    FEE (ROYALTY)

 

Production
is subject to a subsoil fee (royalty) of 25%.

 

	6.0	CAPITAL
    EXPENDITURES AND OPERATING COSTS

 

Capital
expenditures have been based on the proposed exploration and development program (Table 17). Operating costs for gas wells are
estimated at $500/month/well.

 

	7.0	ABANDONMENT
    AND RESTORATION

 

Abandonment
and restoration costs have not been taken into account in the cash flows as there is no history upon which to base the costs.

 

	8.0	ABBREVIATIONS
    AND CONVERSIONS

 

In
this document, the abbreviations set forth below have the following meanings:

 

	Oil,
    Natural Gas Liquids and Natural Gas
	atm	atmospheres	Co/100m	degrees
    Celsius per 100 meters
	m3/tonne	cubic
    meters per tonne	mD	MilliDarcy10-3
    Darcy
	MPa	MegaPascal
    106 Pascal	CBM	Coalbed
    methane
	Bcf	billion
    cubic feet	Gt	gigatonnes
    (tonnes x 109)
	Bm3	billion
    cubic meters	Mcf	thousand
    cubic feet
	bbl	barrel	MMcf	million
    cubic feet
	bbls	barrels	Mcfd	thousand
    cubic feet per day
	Mbbls	thousands
    of barrels	MMcfd	million
    cubic feet per day
	MMbbls	million
    barrels	MMt	million
    tonnes
	Mstb	1,000
    stock tank barrels	bopd	barrels
    of oil per day
	Bcf	billion
    cubic feet	stb	stock
    tank barrels
	GJ	gigajoule	GIIP	Gas
    Initially In Place
	PPIP	Petroleum
    Initially In Place	$000s	thousands
    of dollars
	m3	cubic
    meters	Mm3	thousand
    cubic meters
	 	 	MMm3	million
    cubic meters

 

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 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Calculations
of Discovered Petroleum-Initially-In-Place (PIIP) for the Tomashevskay structure is listed below in Tables 2 and 3. Two examples
of the PIIP in the Tomashevskoya South dome are illustrated. Table 2 is based on a specific well, A3335a, analyzed by a third
party. Table 3 is based on the average of a wide range of parameters from several wells drilled on the structure.

 

Table
2, Tomashevskay South Dome Input parameters

 

	 	 	 	 
	Zone	h6+	500
    

    all	G3	600SS	600LS	700
	Area,
    km2	8.9	8.9	8.9	8.9	8.9	8.9
	Net
    Pay, m	24	6	14	13	7	12
	Porosity,
    %	10	10	8	9	4	7
	Hydrocarbon
    Saturation, %	54	59	39	43	20	32
	Gas
    Recovery Efficiency, %	57	85	41	77	73	75
	Gas
    Expansion Factor	48	50	55	56	57	67
	PIIP,
    MMm3	543	150	218	246	28	164
	PIIP,
    Bft3	19	5	8	9	1	6
	Recoverable
    GIP, MMm3	309	127	89	189	21	123
	Recoverable
    GIP, Bft3	11	4	3	7	1	4
	Total
    PIIP, MMm3	1348	 	 	 	 	 
	Total
    PIIP, Bcf	48	 	 	 	 	 
	Total
    Recoverable PIIP, MMm3	859	 	 	 	 	 
	Total
    Recoverable PIIP, Bft3	30	 	 	 	 	 

 

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Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
3 Volumetric estimates Lysychansko-Toshkivskay License

 

	 	 	max	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	TD,	 	 	P,	 	CH4,	Porosity,	PIIP,	PIIP,	Recovery	 	 	 
	 	Structure	m	km2	T,
    m	Atm	Temp.oR	%	%	MMm3	Bcf	%	MMm3	Bcf	Rank
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Proven
	1	Tomashevskay
    South	450	8	38	40	538.8	90	9	951	34	0.75	713	25	producing
	2	Tomashevskay
    North	400	9	25	61.4	537	74	9	891	32	0.7	624	22	undeveloped

 

Table
4, Summary of Reserves

 

	 	Estimated
    Reserves	Average
	 	Gross	Net
    to Company	Per
    Location (160 acres)
	 	MMm3	Bcf	MMm3	Bcf	MMm3	Bcf
	Category	 	 	 	 	 	 
	Proved	713	25	535	19	43	6
	 	 	 	 	 	 	 
	Undeveloped	624	22	468	17	34	5

 

Table
5, Acreage and Wells

  

	Structure	Size,
    acre	Gross
    acres	Net
    Acres	Producing
    wells	Non-
    

    producing 

    well(s)	Gross/Net
    

    wells*
	Developed	 	 	 	 	 	 
	Tomashevskay
    North	2,100	2,100	2,100	0	3	3
	Tomashevskay
    South	1,977	1,977	1,977	2	5	7
	Total	4,077	4,077	4,077	 	 	 
	Undeveloped	99,954	99,954	99,954	0	 	0
	Total	104,031	104,031	104,031	2	8	10

 

*
Company has 100% interest in property, thus net=gross ownership.

 

    	10

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

  Map
No. 3773 Rev. 5 UNITED NATIONS Department of Field Support September 2008 Cartographic Section

Figure
2, Location Map

 

    	11

    	 

    

 

  

	9.0	INTRODUCTION

 

The
statement of resource data and other oil and gas information set out below has an effective date of January 1, 2014 and a preparation
date of October 2014. The resource data set forth below follows the format found in the Canadian Oil and Gas Evaluation Handbook
(COGEH) and the reserves definitions are those defined by the SEC which vary from those contained in NI 51-101 and the COGEH.

 

Information
required to be disclosed is listed below. A more detailed discussion regarding the project is presented in the Executive Summary
and subsequent sections.

 

		(a)	The
                                         subject resources are categorized as Discovered Petroleum Initially In Place (PIIP) Reserves
                                         .
		(b)	The
                                         expected product is natural gas.
	 	(c)	The
                                         subject property is located in the southeastern area of Ukraine within the Donetsk Basin.

		(d)	The
                                         risk on the property is the possibility of encountering a gas reservoir which is not
                                         capable of delivering at economic rates.
		(e)	There
                                         is some political risk because of the influence of the Russian Federation in the region.

 

The
standards of NI 51-101 differ from the standards of the SEC. The SEC generally permits U.S. reporting oil and gas companies in
their filings with the SEC, to disclose only proved and probable reserves, net of royalties and interests of others.

 

The
geologic risk of recovering these resources has not been incorporated in the future net revenue forecast.

    	12

    	 

    

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

The
Resource Data summarizes the natural gas resources from the property on which Great East Energy Inc. (the “Company”
or “Great East”) has permission to operate within the area outlined and the net present values of future net revenue
for these resources discovered or developed using constant prices and costs and forecast prices and costs. Additional information
not required by the SEC has been supplied to provide additional information which is relevant to the readers of this information.

 

It
should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value
of the Company’s resources. There is no assurance that the constant prices and cost assumptions and forecast prices and
cost assumptions will be attained and variances could be material. The recovery and resource estimates of oil and natural gas
provided herein are estimates only and there is no guarantee that the estimated resources will be recovered. Actual recovery of
natural gas may be greater or less than the estimates provided herein (see Section 20.0 Notes and Definitions).

 

10.0
Executive Summary

 

Great
East has received special permission to conduct geological investigations and experimental industrial development in the
Lysychansko-Toshkivskay area in the Donetsk Basin in Ukraine (Figures 2, 3, Tables 6, 7).

 

Table
6, Ukraine license

 

	name	km2	Gross
    

    acres	Net
    

    acres	depth
    m	approx.
    geog. coordinates 

    latitude/longitude
	Lysychansko-
    

    Toshkivskay	421	104,030	104,030	unlimited	48°50’30"N/38°12’30”E

 

Table
7, license coordinates

 

	 	Point	Latitude	Longitude	 
	 	1	49001'50.00"N	380 07'17.00"E	 
	 	2	480 05'05.00"N	380 08'03.00"E	 
	 	3	480 01'04.00"N	380 09'47.00"E	 
	 	4	480 02'15.00"N	380 04'33.00"E	 
	 	5	48008'53.00"N	38000'60.00"E	 
	 	6	480 08'45.00"N	380 02'50.00"E	 
	 	7	480 01'18.00"N	380 05'18.00"E	 
	 	8	480 03'36.00"N	380 01'39.00"E	 
	 	9	480 06'10.00"N	38031'10.00"E	 
	 	10	480 02'07.00"N	380 09'10.00"E	 
	 	11	480 01'33.00"N	380 07'20.00"E	 
	 	12	480 02'43.00"N	380 04'28.00"E	 
	 	13	480 08'30.00"N	380 08'40.00"E	 
	 	14	49000'55.00"N	380 05'15.00"E	 

  

In
1999, Ukraine coal mines generated approximately 2,060 million cubic meters (73 Bcf) of methane of which 1,981 million cubic meters
(70 Bcf) were lost to the atmosphere. In 1999, the government of Ukraine drafted a  national energy program with the stated
objective of achieving, among other objectives, production of methane sufficient to satisfy local needs. The Lysychansko-Toshkivskay
project is a result of that policy. As a consequence of this policy there is a tax exemption in effect until January 2020 for
mining activities and coal gas deposits. Thus, in the cash flow statement, no after tax figures are created.

  

    	13

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

The
resources for the project are classified as Reserves, Proven and Probable. The hydrocarbon in place will be gas.

 

The
economic cases (Tables 19 through 26) in the Appendix of the report are the best estimate of potential revenue, production and
recovery and utilize forecast prices as of December 2014, for a single well. The most likely case is based upon production records
from two producing wells on the property. The revenue stream is with the cost of the well included in the capital costs and cost
recovery is performed in the analysis.

 

Coal
fields within the Donetsk basin are well documented and data is available for determining the resource base. The basin provides
approximately 95.4% of the Ukraine’s coal production. Values have been attributed to sands which occur within the section,
and other areas within the basin have been noted as being charged with gas (see Section 17.1). Coal metamorphism in the Donetsk
Basin has led to the formation of a significant methane resource, which by estimates provided by Ukraine and Western CBM professionals,
could be as high as 117 trillion cubic meters (U.S. EPA, 2001). Sand bodies adjacent to the coal beds and at deeper horizons are
gas charged targets.

 

The
production history over the last ten years of the two wells drilled on the license (Table 15) has been used to estimate flow rates
and decline rates for the cash flow statements. Several (5) other wells have been drilled on the license but have not been put
into production.

 

The
license encompasses seven domal structures as follows:

Tomashevskay
South containing wells # A3335, A3335a, A3335b, A33455, A3364 (11K) 6K.

Tomashevskay
North containing wells #7K, 8K, 9K

Lysychanskay

Vovcheyarskay

Toshkivskay

Petrograd-Donetskay

Zolotarivskay

 

The
Tomashevskay structure was the basis for the calculation of reserves as it has a history of production.

The
area of the dome was determined by one of the productive horizons, usually the bottom-most horizon and a specific contour line.

 

Table
8, Domal structures

 

	Domes	Size,km2	Size,
    acre
	Tomashevskay
    North	8.5	2,100
	Tomashevskay
    South	8	1,977
	Toshkivskay	15	3,706
	Lysychanskay	8	1,977
	Vovcheyarskay	6	1,482
	Zolotarivskay	within
    GEEI area 

    10/ total 16	within
    GEEI area 

    2,470/ total 3,954
	Petrograd-Donetskay	7	1,730

 

    	14

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

To
summarize for the following information is included:

 

	 	a)	Pursuant to the Agreement, the Company has a Special Permit to carry out
geological investigation and experimental industrial development within 421 km2 in the Lysychansko-Toshkivskay
area in the Donetsk Basin.

		b)	All
                                         resources are in Ukraine.

		c)	All
                                         future production is anticipated to be gas.

		d)	The
                                         area is located is highly developed with respect to infrastructure.

		e)	The
                                         license overlies an area in which extensive coal mining has been and is still being carried
                                         out.

		f)	The
                                         risks are the undefined production potential, confirmation of economic hydrocarbon production
                                         in the license area, the license life and product prices.

		g)	The
                                         current license has a term of five years. Subsequent to this term an application must
                                         be made for a production license.

 

It
is recommended that the Company carry out an exploratory/development drilling/seismic program to determine the content and deliverability
gas from gas bearing units within the license. For an expanded discussion of the program, see Section 19.1.

 

The
report was prepared by a “Qualified Reserves Evaluator” who is independent of the Company.

 

This
report has been prepared for the Company at the request of Mr. Timur Khromaev, Director, Chief Executive Officer, Chief Financial
Officer and Treasurer of the Great East Energy Inc.

 

Table
9, Present Value of Current Production, Constant Prices

 

	 	 	Combined
    A3335a and 11K	 
	 	 	BT($000s)	 	 	tax($000s)	 	 	AT($000s)	 
	Net
    present Value @ 0%	 	$	431	 	 	$	12	 	 	$	419	 
	Net
    present Value @ 5%	 	$	373	 	 	$	9	 	 	$	365	 
	Net
    Present Value @ 10%	 	$	328	 	 	$	6	 	 	$	321	 
	Net
    Present Value @ 15%	 	$	291	 	 	$	5	 	 	$	287	 
	Net
    Present Value @ 20%	 	$	262	 	 	$	3	 	 	$	259	 

  

Table
10, Present Values Cases for single new well

 

		 	Initial
    Flow  Rate 250  Mcfd	 	 	Initial
    Flow  Rate 250  Mcfd	 
	 	 	Constant
     price	 	 	Escalated
     price	 
	Net
    cash flow with cost recovery 	 	 	Before
                                         tax  ($000s)	 	 	 	Before
                                         tax  ($000s)	 
	Net
    present Value @ 0%	 	$	1,488	 	 	$	1,583	 
	Net
    present Value @ 5%	 	$	1,097	 	 	$	1,162	 
	Net
    Present Value @ 10%	 	$	817	 	 	$	864	 
	Net
    Present Value @ 15%	 	$	611	 	 	$	645	 
	Net
    Present Value @ 20%	 	$	454	 	 	$	481	 

 

    	15

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
11, Present Value Cases for Development/Exploration Program (after taxes)

 

	constant
    price	 	 	 	 	escalated
    prices	 
	 	recover
                                         costs	 	 	 	no
                                         cost recovery	 	 	 	 	 	recover
                                         costs	 	 	 	no
                                         cost recovery	 
		$000s		 		$000s		 	 	 		$000s		 		$000s	
	$	85,354	 	 	$	171,878	 	 	net
    present value @ 0%	 	$	132,289	 	 	$	218,740	 
	$	41,426	 	 	$	111,677	 	 	net
    present value @ 5%	 	$	62,534	 	 	$	133,578	 
	$	19,500	 	 	$	77,808	 	 	met
    present value @ 10%	 	$	33,068	 	 	$	88,526	 
	$	7,970	 	 	$	57,295	 	 	net
    present value @ 15%	 	$	16,293	 	 	$	62,766	 
	$	1,673	 	 	$	44,091	 	 	net
    present value @ 20%	 	$	7,179	 	 	$	46,999	 

 

    	16

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

    	17

    	 

    

 

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

    	18

    	 

    

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

 

    	19

    	 

    

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

 

    	20

    	 

    

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East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

11.0
NATURAL GAS RESOURCES AND NET PRESENT VALUE OF FUTURE NET REVENUE

 

Following
the guidelines of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities, and the SEC/SPE standards for
reserves, the author B.L. Whelan, P. Geo., prepared a report (the “Report”) dated October, 2014, subsequently revised
December 31, 2014. The Report evaluated as of January 1, 2014, the Lysychansk-Toshkivskay license, in which the Company can acquire
an interest, with respect to potential natural gas resources and the net present value of future net revenue attributable to such
resources as evaluated in the Report based on constant and forecast price and cost assumptions. The tables summarize the data
contained in the Report and as result may contain slightly different numbers than such report due to rounding. The net present
value of future net revenue attributable to the Company’s resources is stated without provision for interest cost and general
and administrative costs, but after providing for the estimated royalties, production costs, development costs, and abandonment
costs for only those wells assigned resources by the author.

 

The
Report is based on data supplied by the Company, public documents and the author’s opinion of reasonable practices in the
industry. The extent and character of ownership and of all factual data pertaining to the Company’s properties were supplied
by the Company and accepted without further investigation. The author accepted this data as presented and did not conduct title
searches or field inspections.

 

The
undiscounted or discounted net present value of future net revenue attributable to the Company’s resources estimated by
the author may not represent the fair market value of those resources. Other assumptions and qualifications relating to costs,
prices for future production and other matters are summarized within the Report. The recovery and resource estimates of the Company’s
natural gas resources provided within the Report are estimates only and there is no guarantee that the estimated resources will
be recovered. Actual resources may be greater or less than the estimates provided in the Report.

 

All
amounts are in United States dollars unless otherwise noted. The following tables are derived from the most likely case scenario.
The cash flows generated are for single wells, current production and for the development/exploration proposed program utilizing
constant and escalated product prices.

 

11.1
CLASSIFICATION OF RESOURCES

 

The
resources stated in the report are Petroleum Initially In Place (PIIP) and the stated recoverable portion is considered Reserves
and Prospective Resources.

 

The
classification of the various structures is based upon the following criteria:

 

1Tomashevskay
South, Proven Reserves, is based on the history of production from the A335a and 11K wells (Table 18) and the occurrence
of gas zones within several other wells on the structure.

 

2Tomashevskay
North, Probable Reserves, is based on the history of production from the 7K and 8K wells which has water influx but the structure
has recognized gas zones within several other wells on the structure.

 

3The
remaining domal structures, Prospective Resources, based on the presence throughout the license of underlying coal beds,
gas seeps, ventilated gas, but no wells for definition of zones. Prospective Resources are not reserves

    	21

    	 

    

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

11.2
TOTAL FUTURE NET REVENUE (UNDISCOUNTED) BASED ON FORECAST PRICES AND COSTS WITH COST RECOVERY

 

Table
12, Total future net revenue (undiscounted) based on forecast prices and costs with cost recovery,

single
well

 

	Revenue	Royalties	Operating
    Costs	Well
    

    Costs 

    Workover	Future
    Net Revenue Before Income Taxes	Future
    

    Net 

    Revenue 

    After 

    Income 

    Taxes
	($000s)	($000s)	($000s)	($000s)	($000s)	($000s)
	Potential
    production 250 Mcfd	 	 	 
	$3,464	$866	$116	$800	$1,683	$1,407

 

Table
13 Total future net revenue (undiscounted) based on forecast prices and costs with cost recovery, development/exploration program

  

	Revenue	Royalties	Operating
    Costs	Well
    

    Costs	Future
    

    Net 

    Revenue 

    After 

    Income 

    Taxes
	($000s)	($000s)	($000s)	($000s)	($000s)
	 	 	 	 	 
	$361,074	$90,269	$4,050	$102,350	$132,289

 

12.0
PRICING ASSUMPTIONS

 

12.1
PRICING ASSUMPTIONS – FORECAST PRICES AND COSTS

 

The
author employed the local price of $10.97 as of December, 2014, held constant and escalated at 2%/year in estimating the Company’s
resources data.

 

Table
14, Sales prices

 

	Year
    

    Forecast	Natural
    Gas, 

    ($US/Mcf)
	 	Constant
    Price	Forecast
    Price
	1	$10.97	$10.97
	2	$10.97	$11.19
	3	$10.97	$11.41
	4	$10.97	$11.64
	5	$10.97	$11.87
	6	$10.97	$12.11
	7	$10.97	$12.35
	8	$10.97	$12.60
	9	$10.97	$12.85
	10	$10.97	$13.11
	 	Thereafter
    

    escalated at 2%

 

    	22

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

13.0
RECONCILIATION OF COMPANY NET RESERVES BY PRINCIPAL PRODUCT TYPE BASED ON FORECAST PRICES AND COSTS

 

No
reconciliation has been performed as no reserves were previously determined.

 

14.0
UNDEVELOPED RESOURCES

 

The
following discussion generally describes the basis upon which the Company attributes Prospective Resources for undrilled structures
on the license and its plan for developing those Prospective Resources (Section 19).

 

The
assignment of Prospective Resources was made on the basis of:

 

		1.	The
                                         presence of coal bed methane being vented over an indeterminate number of years but more
                                         than 20 years.
		2.	The
                                         presence of gas in all wells drilled to date on the license.
		3.	The
                                         presence of two wells that have produced from the license on the Tomashevskay structure
                                         as test wells for gas production.
		4.	The
                                         history of gas being ventilated from the various coal operations in the region.

 

14.1
RISK AND UNCERTAINTY

 

In
the present case there is evidence that the named formations, i.e. the sands and limestones, have hydrocarbons in place and that
they have been, in one instance, economically produced. The risk involved is whether the members as a whole contains sufficient
recoverable hydrocarbons to justify the resource assigned to it. This risk is mitigated by the record of vented gases from the
various properties and the production history from the A3335 well (Table 18).

 

14.2
PROSPECT ANALYSIS 

 

	Risk
    components	 	 	%	 
	Source	 	 	100	 
	Reservoir	 	 	100	 
	Trap,
    seal	 	 	90	 
	Timing,
    migration	 	 	100	 
	 	 	 	 	 
	Geological
    success	 	 	90	 
	Commerciality	 	 	70	 
	 	 	 	 	 
	Commercial
    success	 	 	63	 

 

15.0
RECONCILIATION OF CHANGES IN NET PRESENT VALUE OF FUTURE RESERVES DISCOUNTED AT 10%, FORECAST PRICES ($000) 

 

No
reserves have been previously determined, thus there is no reconciliation. 

 

    	23

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

16.0 SIGNIFICANT FACTORS
OR UNCERTAINTIES AFFECTING RESOURCES DATA

 

The
estimation of resources requires judgment and decisions based upon available geological, geophysical, engineering and economic
data. These estimates can change substantially as additional information from ongoing development activities and production performance
becomes available and as economic and political conditions impact gas prices and costs change. The Company’s estimates are
based on current production forecasts, prices and economic conditions. All of the Company’s resources are evaluated by an
independent person, the author, an independent consulting geologist.

 

As
circumstances change and additional data becomes available, resource estimates change. Based on new information, resource estimates
are reviewed and revised, either upward or downward, as warranted. Although reasonable efforts have been made by the Company to
ensure resource estimates are accurate, revisions arise as new information becomes available. As new geological, production and
economic information is incorporated into the process of estimating the accuracy of the resource estimates improves. Such revisions
can be either positive or negative.

 

17.0
OIL AND GAS PROPERTIES

 

Pursuant
to an agreement the Company has a license to operate geological investigations and experimental industrial development in the
Lysychansko-Toshkivskay Project, Ukraine.

 

17.1
GENERAL

 

The
Donetsk Basin is one of the major coal fields in the world with over 95% of Ukraine’s coal production from the basin. The
basin is estimated to contain proven coal reserves of 52 Gt with an additional resource base of 42 Gt (Privalov V.A. et al, 2003).
The basin contains more than 300 coal seams of which 130 seams have a thickness of greater than 0.45m. The basin is 150 km wide
and extends approximately 500 km from eastern Ukraine into the Rostov region of Russia. Almost all of the coal fields in the basin
are characterized by high CBM content with most of the methane sorbed onto microporous surfaces of the coal beds and dispersed
coaly matter in the encompassing host rock. Data obtained from the Toshkivskay Mine was used as the model for calculations of
Petroleum-Initially-In-Place (PIIP) as the Toshkivskay Mine has considerable published data.

 

Multiple
sandstone beds, separated by shales, coals, and carbonates are present in the Carboniferous section (Figure 5). The thickness
of reservoir beds ranges from several meters to 75m. Reservoir properties of sandstones vary significantly, depending on the facies,
composition and diagenetic changes (Ulmishek, G., 2001). As these sandstones are the principal reservoir for oil and gas in other
areas of the basin, the potential of the sands is the objective during the proposed drilling program. “In addition, for
both CMM and CBM recovery projects, the methane contained within non-coal interbeds can represent a significant source of additional
methane. Therefore, it is important to consider these sources when assessing resource potential as well as in the development
of the extraction programs”. (EPA, Triplett, J. eta al.).

 

17.2
GEOLOGY

 

In
general, the Donetsk Basin is bounded on the north and southwest by outcrops of the bottom coal seams. The eastern boundary is
represented by a general pinch-out of the coal seams, and the southern boundary by crystalline rocks of the Ukrainian shield.
To the northwest of the basin, a general depression of the coal beds can be found that reaches the depth of 1,800m (EPA, 2001).

 

Search
http://www.epa.gov/cmop/docs/ukraine_handbook.pdf for a complete description of the basin. Extracts from various reports which
deal with the properties of interest are included below.

 

    	24

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

The
basin is principally a Late Devonian rift that is overlain by Carboniferous to Early Permian postrift sag (Ulmishek, G.F., USGS,
2007). The sedimentary succession of the basin consists of four tectono-stratigraphic sequences (Figure 8):

 

		1.	The
                                         prerift platform sequence includes Middle Devonian to lower Frasnian, mainly clastic
                                         rocks that were deposited in an extensive intercratonic basin.
		2.	The
                                         Upper Devonian sequence is composed of marine carbonate, clastic and volcanic rocks and
                                         two salt formations of Frasnian and Famennian age that are deformed into salt domes and
                                         plugs.
		3.	The
                                         postrift sag sequence consists of Carboniferous and Lower Permian clastic marine and
                                         alluvial deltaic rocks. The basin was affected by strong compression in Early Permian
                                         time when the southeastern basin area was uplifted and deeply eroded and the Donetsk
                                         fold belt was formed.
		4.	The
                                         postrift platform sequence includes Triassic through Tertiary rocks that were deposited
                                         in a shallow platform depression that extended far beyond the Dnieper-Donetsk basin boundaries.

 

17.2.1DONBASS
DEVELOPMENT AREA

 

The
Donbas area contains the Lysychansko-Toshkivskay area and includes 5 operating mines and 11 closed mines. The relevant area is
located in the Lugansk region. The lease area has a SE-NW orientation and the largest nearby town is Lysychanskaya. Ninety percent
of the area is used for agricultural purposes or is not cultivated, and is owned by individuals, farmers or municipal bodies.
The large (700mm diameter) Donetsk – Mariupol pipeline runs to the east of the lease.

 

17.2.2Lysychansko-Toshkivskay

 

The
Lysychansko-Toshkivskay license is located 165 km north-northeast of Donetsk. The data utilized to generate the regional resource
figures was partially derived from the information published on the Toshkivskay mine (Table 15, 16) which lies within the license
and has similar geological properties and well information. The stratigraphic sequence is monotonous throughout the license and
has been delineated by multiple drill holes which were drilled to evaluate the coal seams throughout the area. No electric logs
were rum on the holes as they were slim-hole drill holes drilled as stratigraphic tests. The information derived was used to map
the sedimentary sequence which, as stated, was constantly regular and disturbed only by faulting.

 

Table
15 General Information, Toshkivskay Mine

 

	Total
    mineable reserves, thousand tonnes	 	 	45,639	 
	Mineable
    reserves, active mine levels, thousand tonnes	 	 	30,153	 
	Total
    mining area, km2	 	 	15	 
	Depth
    of shafts, m	 	 	486	 
	Mining
    capacity, tonnes/day	 	 	181	 
	Coal
    seam gas content, m3/tonne	 	 	8.0	 
	Pressure
    gradient, MPa/1000m	 	 	No
                                         data	 
	Porosity,
    sandstone	 	 	12.8-0.8	 
	Permeability,
    sandstone, mD	 	 	13.33	 
	Total
    methane resources, million m3	 	 	400	 
	Methane
    liberated by mine ventilation, million m3/year	 	 	0.658	 

    	25

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table 16, Coal methane liberated at decontamination,
Toshkivskay Mine

 

	Year	Methane
    liberated

 at ventilation

 Mm3/year	Coal
 production  

thousand  tonnes 

    /year
	2003	142	18.9
	2004	32	37.1
	2005	509	60.0
	2006	559	61.5
	2007	334	61.6
	2008	605	61.9
	2009	2,210	172.5
	2010	1,740	139.5
	2011	742	66.2
	2012	462	42.1

 

    	26

    	 

    

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East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

 

    	27

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

 

Figure
9, Chrono- and lithostratigraphy of the Donbass fold belt showing the distribution of source rocks, potential reservoirs, sealing
beds and eroded formations in the study area. Major magmatic and tectonic events are also shown (Alsaab, D., et al, 2008).

 

    	28

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

17.3
PRODUCTION

 

Two
wells have been placed on production to test for natural gas in the sands present (see Section 24.0). There are numerous vents
for degasification of the mines from which volumes have been recorded.

 

17.4
RESERVOIR CHARACTERISTICS

 

See
Table 3, Section 8.

 

18.0
COSTS TO BE INCURRED

 

18.1 LEASE COSTS

 

Pursuant to the Agreement, the buy-in costs for the Company on the license is less than $1,000 (U.S.).

 

19.0
EXPLORATION AND DEVELOPMENT ACTIVITIES

 

19.1 EXPLORATION AND DEVELOPMENT COSTS

 

Table
17, Schedule of exploration and development

 

	Year	1	2	3	4	Total
                                         costs,

        $000

	type	Rework/
    

    Prod'n	Prod’n	Prod'n
    Expl'n/	Prod'n	Expl'n/
    

    Prod'n	Expl'n/
    

    Prod'n	Expl'n	Expl'n/
    

    Prod'n	 
	wells	2**	3	2*	4	2*	1	2*	2	 
	depth,
    m	500m	800m	2500m	1500m	2500m	2500m	2500m	2500m	 
	location	Tomash	Tomash	Zolot	Tomash	Zolot	Toshk	Toshk	PD	 
	output,
    Mm3/d	 	8	2	20	4	20	20	20	 
	output,
    Mcf/d	 	280	70	705	140	705	705	705	 
	decline,
    %	 	20	10	15	10	15	15	15	 
	cost,
    $000	$700	$2,150	$5,400	$7,900	$5,400	$2,700	$5,300	$5,300	$34,850
	seismic,
    $000	 	 	$500	 	 	$500	 	 	$1,000
	facilities,
    $000	 	$1,200	$1,200	 	 	$1,200	 	$1,200	$4,800
	cost
    in year, $000	$700	$3,350	$7,100	$7,900	$5,400	$4,400	$5,300	$6,500	$40,650
	PD
    - Petrograd-Donetsk dome, Tomash - Tomashevskay domes, Toshk - Toshkivskay dome, Zolot - Zolotarivskay dome
	*
    depending on result of previous well
	**In
    year 1, deepen well 7K, cost $400k for exploration purposes, then plug back to produce from upper horizon at cost of $150k;
    rework of well 1G

 

    	29

    	 

    

 Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

19.2
CAPITAL COSTS 

  

No
capital costs were incurred by the Company during 2013.

 

19.3
OPERATING COSTS

 

For
future cash flow purposes operating costs were estimated to be $500 per month per well once the new well is underway. No transportation
costs were assigned as the Company owns the pipeline.

 

20.0
FORWARD CONTRACTS

 

None.
Present production is sold to local end users.

 

21.0
ABANDONMENT AND RECLAMATION COSTS

 

The
estimated abandonment costs are estimated to be $10,000 but were not included in the cash flow because of the indeterminate well
life and lack of data on abandonment costs.

 

22.0
TAX HORIZON

 

A
tax of 18% is levied on profits..

 

23.0
PRODUCTION ESTIMATES

 

Production
rates for CBM vary significantly depending upon the basin in which they are exploited. As examples, the following basins within
North America have production rates per well as follows:

 

	Powder River basin	319 - 266 Mcfd
	Alberta	75 Mcfd
	Black Warrior Basin	20 – 1,000 Mcfd
	Raton Basin	300 Mcfd

 

The
rates used for the economic analysis in this Report were selected based on a general average from various basins and the production
history of the A3335a well on the Tomashevskay South dome. The producing well, 11K on the Tomashevskay North dome has a poor history
of production because of a rapid draw down resulting in formation damage and water entry. The estimates of future production is
250 Mcf/day/well initially, declining 25% in year 1, and 10% in subsequent years.

 

24.0
PRODUCTION HISTORY

 

Two
wells have been placed on production for natural gas. The production history is tabulated in Table 18 and Chart 1 (Appendix).
Venting from coal mining operations has been carried out for an indeterminate but substantial period (Table 16).

 

    	30

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table 17, Production history

 

	Annual
    Production MMcf
	Well	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014
	A3335a	61.1	168.7	90.7	68.6	59.8	56.6	53.9	42.7	29.8	26.8	24.6	20.1
	11K	0	1.75	14.8	11.4	8.8	6.3	5.22	4.46	3.99	4.24	3.89	3.8
	Daily
    Gas Flow, Mcf/d
	A3335a	531	441.4	287	205	171	152	138	120	101	87.9	70.3	57.5
	11K	0	56.5	35.3	30	23.8	18.4	14.1	12.7	13.1`	12.7	11.8	10.8

 

Future
discounted cash flows for the two currently producing wells see Tables 20, 21, 22.

 

24.1
AVERAGE DAILY PRODUCTION

 

See
Table 17 above.

 

24.2
PRICES RECEIVED, ROYALTIES PAID, PRODUCTION COSTS AND NETBACKS

 

The
sales prices used in the economic runs are those for gas sales within the Donetsk Basin. An estimate of netbacks follows:

 

	Price
    received/Mcf	 	$	10.97	 
	Royalty
    (25%)	 	$	2.74	 
	Production
    costs ($500/m)	 	$	0.13	 
	Netback	 	$	8.10	 

 

25.0
PRODUCTION VOLUME BY FIELD

 

To
date there are only two wells which have produced as a result of development. Total production to the end of 2014 was 779 MMcf.

 

26.0
RECOMMENDATIONS

 

It
is recommended that the drilling and testing program be carried out over the Lysychansko-Toshkivskay license to a minimum depth
of 800 m and a maximum depth of 2500m in order to:

		1.	determine
                                         the potential for deliverability of natural gas from the sand intervals.
		2.	obtain
                                         petrophysical data to determine the reservoir characteristics and contents of the sandstone
                                         formations which are prevalent in the section of the Lysychansko-Toshkivskay license,
		3.	obtain
                                         drawdown parameters,
		4.	determine
                                         the spacing pattern for future development of the Lysychansko-Toshkivskay license,
		5.	penetrate
                                         below the major fault underlying the Tomashevskay structure, and
		6.	determine
                                         the optimum depth to drill wells.
		7.	add
                                         compressors to existing wells

 

It
is recommended that several test wells be drilled on the Lysychansko-Toshkivskay license for a total expenditure of $8.15 million
(see Table 17). This will satisfy the objectives set out above and the requirements of the Agreement. Upon confirmation that
the potential for reasonable production is present, it is recommended that a continuous drill program be carried out to efficiently
produce the resource.

 

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East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

27.0
REFERENCES

 

Alsaab,
D, Elie, M., Izart, A, Sachsenhofer, R. F. Predicting methane accumulations generated from humic carboniferous coals in the Donbas
fold belt (Ukraine), 2007 AAPG Bulletin, August 2008, v. 92; no. 8; p. 10-29 – 1053.

 

Coal
Mine Methane and Coalbed Methane Development in the Donetsk Region, Ukraine, by Advanced Resources International, Inc., May 2008,
for Donetsk Regional Administration and U.S. Trade and Development Agency.

 

Coal
Mine Methane in Ukraine: Opportunities for Production and Investment in the Donetsk Coal Basin, by Partnership for Energy and
Environmental Reform for U.S. Environmental Protection Agency, Triplett, J., Filippov, A., Pisarenko A., 2001.

 

Canadian
Oil and Gas Evaluation Handbook, (COGEH), Volume 1, Reserves Definitions and Evaluation Practices and Procedures, Second Edition,
September 1, 2007, Society of Petroleum Evaluation Engineers (Calgary Chapter) and Canadian Institute of Mining, Metallurgy &
Petroleum (Petroleum Society).

 

Marathon
Oil, Power Point, 2006, Donbass, Ukraine: Estimation of Tomashevskiy and Lysychansko-Toshkivskiy licensed blocks

Mavor, Matt, and Nelson, C.R., 1997, Coalbed Reservoir Gas-In-Place Analysis, Gas Research Institute Report No. GRI-97/0263; Chicago,
Illinois.

 

Privalov,
V.A., Zhykalyak, M.V., Panova, E.A., 2003 Geologic Controls on Coalbed Occurrence in the Donets Basin (Ukraine), www.coalinfo.net.cn/coalbed/meeting/2203/papers/coal-mining/cm054.pdf.

 

Swindell,
Gary S., Powder River Basin Coalbed Methane Wells, Reserves and Rates, SPE.

 

Ulmishek,
Gregory F., 2001, Petroleum Geology and Resources of the Dnieper-Donets Basin, Ukraine and Russia, USGS Bulletin 2201-E.

 

    	32

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

28.0
CERTIFICATE OF QUALIFICATIONS

 

I,
Barry l. Whelan, of the city of Vancouver, Province of British Columbia,
do hereby certify:

	1.	That
                                         I did prepare a review of the properties held by Great East Energy Inc.
	 	 
	2.	That
                                         I am a Professional Geoscientist in the Province of British Columbia and that I have
                                         in excess of forty years experience as a Geologist, fifteen years with Gulf Oil Corporation
                                         and twenty five years as a Consulting Geologist.
	 	 
	3.	That
                                         I have experience in exploration and development geology in North America, South America,
                                         Asia, Africa and Europe.
	 	 
	4.	That
                                         I have performed evaluations of a similar type to this evaluation continuously starting
                                         in 1970 with Gulf Oil Corporation and subsequently as a consultant to individuals and
                                         companies since 1980.
	 	 
	5.	That
                                         I have conducted the evaluation in accordance with generally accepted industry standards.
	 	 
	6.	That
                                         I have no interest, direct or indirect, nor do I expect to receive any direct or indirect
                                         interest in the property evaluated in this report or in Great East Energy Inc.
	 	 
	7.	That
                                         a personal field inspection of the properties was made from October 15th to
                                         the 23rd, 2013. The report was generated by material from Great East Energy
                                         Inc., conversations with the technical staff of Great East Energy Inc. and public records.
	 	 
	8.	That
                                         Great East Energy Inc. provided ownership data and the terms of the Agreement.

 

Dated
at Vancouver, British Columbia on the 30th of December, 2014

	 	 	 
	BARRY
L. WHELAN”,
P. GEO

	 	 

 

    	33

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

APPENDIX

 

 

    	34

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

    	35

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
19, Forecast cash flow, single well, 250 Mcfd

 

	 	Great
    East	 	 	 	 	 	 	 
	 	Constant
    Prices	 	 	 	 	 	 	 
	 	Ukraine	 	 	 	 	SUMMARY	 	 	 
	 	Initial
    flow rate 250 Mcfd	 	 	RESERVES
    AND ECONOMICS	 	 	 
	 	100%
    W.I.,75% N.R.I.	 	 	 	As
    of December 2014	 	 	 
	 	All
    amounts in $US	 	 	 	CONSTANT
    PRICES	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Gross
    Gas	Net
    Gas	 	 	 	 	 	 	 	 	 
	 	Year	Prod	to
    Company	Price	revenue	Royalty	Gas	Op
    Costs	Future
    BT	Taxes	Future
    Atax	Cumulative
	 	 	Mcf	Mcf	$/Mcf	$000s	$000s	Transm.	 	Cash
    Flow	20%	Cash
    Flow	Total
	 	 	(100%
    WI)	(75%
    NRI.)	 	(100%
    WI)	(25%)	000$	000$	$000s	$000s	$000s	$000s
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2015	1	80,938	60,703	$10.97	$888	$222	$81	$6.00	$666	$0	$666	$666
	2016	2	68,797	51,598	$10.97	$755	$189	$69	$6.09	$566	$0	$566	$1,232
	2017	3	58,477	43,858	$10.97	$641	$160	$58	$6.18	$481	$0	$481	$1,713
	2018	4	49,706	37,279	$10.97	$545	$136	$50	$6.27	$409	$0	$409	$2,122
	2019	5	42,250	31,687	$10.97	$463	$116	$42	$6.37	$348	$0	$348	$2,470
	2020	6	35,912	26,934	$10.97	$394	$98	$36	$6.46	$295	$59	$236	$2,706
	2021	7	30,526	22,894	$10.97	$335	$84	$31	$6.56	$251	$50	$201	$2,907
	2022	8	25,947	19,460	$10.97	$285	$71	$26	$6.66	$213	$43	$171	$3,078
	2023	9	22,055	16,541	$10.97	$242	$60	$22	$6.76	$181	$36	$145	$3,223
	2024	10	18,746	14,060	$10.97	$206	$51	$19	$6.86	$154	$31	$123	$3,346
	2025	11	15,935	11,951	$10.97	$175	$44	$16	$6.96	$131	$26	$105	$3,451
	2026	12	13,544	10,158	$10.97	$149	$37	$14	$7.07	$111	$22	$89	$3,540
	2027	13	11,513	8,635	$10.97	$126	$32	$12	$7.17	$95	$19	$76	$3,616
	2028	14	9,786	7,339	$10.97	$107	$27	$10	$7.28	$81	$16	$64	$3,680
	2029	15	8,318	6,238	$10.97	$91	$23	$8	$7.39	$68	$14	$55	$3,735
	 	 	492,448	369,336	 	$5,402	$1,351	$492	$100.09	$4,052	$316	$3,735	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	BT($000s)	Tax
    ($000s)	AT
    ($000s)	 	 	 	 	 
	 	 	Net
    present Value @ 0%	 	$4,052	$316	$3,735	 	 	 	 	 
	 	 	Net
    present Value @ 5%	 	$3,190	$204	$2,986	 	 	 	 	 
	 	 	Net
    Present Value @ 10%	 	$2,608	$136	$2,472	 	 	 	 	 
	 	 	Net
    Present Value @ 15%	 	$2,196	$93	$2,103	 	 	 	 	 
	 	 	Net
    Present Value @ 20%	$1,887	$65	$1,823	 	 	 	 	 

  

    	36

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
20, Forecast cash flow, current production A3555a

 

	 	Great
    East	 	 	Well
    # A3335a	 	 	 	 	 	 
	 	Constant
    Prices	 	 	SUMMARY	 	 	 	 	 	 
	 	Ukraine	 	 	RESERVES
    AND ECONOMICS	 	 	 	 	 	 
	 	Initial
    flow rate 75 Mcfd	 	As
    of December, 2014	 	 	 	 	 	 
	 	100%
    W.I.,75% N.R.I.	 	CONSTANT
    PRICES	 	 	 	 	 	 
	 	All
    amounts in $US	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Gross
    Gas	Net
    Gas to company	 	 	 	 	 	 	 	 	 	 
	 	Year	Prod	Price	Revenue	Royalty	Net	Cumulative	Op
    Costs	Future
    

    Btax	Taxes	Future
    Atax	Cumulative
	 	 	Mcf	Mcf	$/Mcf	$000s	$000s	Revenue	Total	 	Cash
    Flow	0.2	Cash
    Flow	Cash
    Flow
	 	 	(100%
    WI)	(75%
    NRI.)	 	(100%
    WI)	(25%)	$000s	$000s	000$	000$	000$	$000s	$000s
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2015	1	24,281	18,211	$10.97	$266	$67	$200	$200	$6	$194	$0	$194	$194
	2016	2	20,639	15,479	$10.97	$226	$57	$170	$370	$6	$164	$0	$164	$358
	2017	3	15,479	15,479	$10.97	$170	$42	$127	$497	$6	$121	$0	$121	$479
	2018	4	11,609	11,609	$10.97	$127	$32	$96	$592	$6	$90	$0	$90	$568
	2019	5	8,707	8,707	$10.97	$96	$24	$72	$664	$6	$66	$0	$66	$634
	2020	6	6,530	6,530	$10.97	$72	$18	$54	$718	$6	$48	$10	$38	$672
	2021	7	4,898	4,898	$10.97	$54	$13	$40	$758	$6	$34	$7	$27	$700
	2022	8	3,673	3,673	$10.97	$40	$10	$30	$788	$6	$24	$5	$19	$719
	2023	9	2,755	2,755	$10.97	$30	$8	$23	$811	$6	$17	$3	$13	$732
	2024	10	2,066	2,066	$10.97	$23	$6	$17	$828	$6	$11	$2	$9	$741
	2025	11	1,550	1,550	$10.97	$17	$4	$13	$841	$6	$7	$1	$5	$747
	2026	12	1,162	1,162	$10.97	$13	$3	$10	$850	$6	$4	$1	$3	$749
	 	 	103,351	92,121	 	$1,134	$283	$850	 	$72	$778	$29	$749	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	BT($000s)	tax($000s)	AT($000s)	 	 	 	 	 	 
	 	 	Net
    present Value @ 0%	$778	$23	$749	 	 	 	 	 	 
	 	 	Net
    present Value @ 5%	$663	$20	$643	 	 	 	 	 	 
	 	 	Net
    Present Value @ 10%	$575	$14	$561	 	 	 	 	 	 
	 	 	Net
    Present Value @ 15%	$507	$10	$497	 	 	 	 	 	 
	 	 	Net
    Present Value @ 20%	$453	$8	$445	 	 	 	 	 	 

  

    	37

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
21, Forecast cash flow, current production 11K

 

	 	Great
    Eastern	 	 	 	 	 	 	 	 	 	 	 
	 	Constant
    Prices	 	 	Well 11K	 	 	 	 	 	 
	 	Ukraine	 	 	SUMMARY	 	 	 	 	 	 
	 	Initial
    flow rate 12 Mcfd	 	RESERVES
    AND ECONOMICS	 	 	 	 	 	 
	 	100%
    W.I.,75% N.R.I.	 	As
    of December, 2014	 	 	 	 	 	 
	 	All
    amounts in $US	 	CONSTANT
    PRICES	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Gross
    Gas	Net
    Gas to company	 	 	 	 	 	 	 	 	 	 
	 	Year	Prod	Price	Revenue	Royalty	Net	Cumulative	Op
    Costs	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	 	Mcf	Mcf	$/Mcf	$000s	$000s	Revenue	Total	 	Cash
    Flow	0.2	Cash
    Flow	Cash
    Flow
	 	 	(100%
    WI)	(75%
    NRI.)	 	(100%
    WI)	(25%)	$000s	$000s	000$	000$	000$	$000s	$000s
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2015	1	15,313	11,484	$10.97	$168	$42	$126	$126	$6	$120	$0	$120	$120
	2016	2	11,484	8,613	$10.97	$126	$25	$101	$227	$6	$95	$0	$95	$215
	2017	3	8,613	6,460	$10.97	$94	$19	$76	$302	$6	$69	$0	$69	$284
	2018	4	6,460	4,845	$10.97	$71	$14	$57	$359	$6	$50	$0	$50	$335
	2019	5	4,845	3,634	$10.97	$53	$11	$43	$402	$6	$36	$0	$36	$371
	2020	6	3,634	2,725	$10.97	$40	$8	$32	$433	$6	$25	$5	$20	$391
	2021	7	2,725	2,044	$10.97	$30	$6	$24	$457	$7	$17	$3	$14	$405
	2022	8	2,044	1,533	$10.97	$22	$4	$18	$475	$7	$11	$2	$9	$414
	2023	9	1,533	1,150	$10.97	$17	$3	$13	$489	$7	$7	$1	$5	$419
	 	 	56,651	42,488	 	$621	$133	$489	 	$57	$431	$12	$419	 
	 	 	 	Combined
    A3335a and 11K	 	 	 	 	 	 	 
	 	 	 	 	 	BT($000s)	tax($000s)	AT($000s)	 	 	 	 	 	 
	 	 	Net
    present Value @ 0%	$431	$12	$419	 	 	 	 	 	 
	 	 	Net
    present Value @ 5%	$373	$9	$365	 	 	 	 	 	 
	 	 	Net
    Present Value @ 10%	$328	$6	$321	 	 	 	 	 	 
	 	 	Net
    Present Value @ 15%	$291	$5	$287	 	 	 	 	 	 
	 	 	Net
    Present Value @ 20%	$262	$3	$259	 	 	 	 	 	 

 

    	38

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
22, Forecast cash flow, combined current production

 

	 	Great
    East	 	 	Combined
    A3335a and 11K	 	 	 	 	 	 
	 	Constant
    Prices	 	 	SUMMARY	 	 	 	 	 	 
	 	Ukraine	 	 	RESERVES
    AND ECONOMICS	 	 	 	 	 	 
	 	Initial
    flow rate 87 Mcfd	 	As
    of December, 2014	 	 	 	 	 	 
	 	100%
    W.I.,75% N.R.I.	 	CONSTANT
    PRICES	 	 	 	 	 	 
	 	All
    amounts in $US	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Gross
    Gas	Net
    Gas to company	 	 	 	 	 	 	 	 	 	 
	 	Year	Prod	Price	Revenue	Royalty	Net	Cumulative	Op
    Costs	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	 	Mcf	Mcf	$/Mcf	$000s	$000s	Revenue	Total	 	Cash
    Flow	0.2	Cash
    Flow	Cash
    Flow
	 	 	(100%
    WI)	(75%
    NRI.)	 	(100%
    WI)	(25%)	$000s	$000s	000$	000$	000$	$000s	$000s
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	2015	1	39,594	29,695	$10.97	$434	$109	$326	$326	$6	$320	$0	$320	$320
	2016	2	33,655	25,241	$10.97	$369	$92	$277	$603	$6	$271	$0	$271	$591
	2017	3	25,241	25,241	$10.97	$277	$69	$208	$810	$6	$202	$0	$202	$792
	2018	4	18,931	18,931	$10.97	$208	$52	$156	$966	$6	$150	$0	$150	$942
	2019	5	14,198	14,198	$10.97	$156	$39	$117	$1,083	$6	$111	$0	$111	$1,053
	2020	6	10,649	10,649	$10.97	$117	$29	$88	$1,171	$6	$82	$16	$65	$1,118
	2021	7	7,986	7,986	$10.97	$88	$22	$66	$1,236	$6	$60	$12	$48	$1,166
	2022	8	5,990	5,990	$10.97	$66	$16	$49	$1,285	$6	$43	$9	$35	$1,201
	2023	9	4,492	4,492	$10.97	$49	$12	$37	$1,322	$6	$31	$6	$25	$1,225
	2024	10	3,369	3,369	$10.97	$37	$9	$28	$1,350	$6	$22	$4	$17	$1,243
	2025	11	2,527	2,527	$10.97	$28	$7	$21	$1,371	$6	$15	$3	$12	$1,255
	2026	12	1,895	1,895	$10.97	$21	$5	$16	$1,387	$6	$10	$2	$8	$1,262
	 	 	168,527	150,215	 	$1,849	$462	$1,387	 	$72	$1,315	$52	$1,262	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	BT($000s)	tax($000s)	AT($000s)	 	 	 	 	 	 
	 	 	Net
    present Value @ 0%	$1,315	$52	$1,262	 	 	 	 	 	 
	 	 	Net
    present Value @ 5%	$1,114	$36	$1,078	 	 	 	 	 	 
	 	 	Net
    Present Value @ 10%	$964	$25	$938	 	 	 	 	 	 
	 	 	Net
    Present Value @ 15%	$847	$18	$829	 	 	 	 	 	 
	 	 	Net
    Present Value @ 20%	$755	$13	$741	 	 	 	 	 	 

  

    	39

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
23, Forecast Cash Flow, Constant Price, Sequential Drill Program, Cost Recovery

 

	Great
    East	 	 	 	 	 	 	 	 	BT($000s)	 
	Constant
    Prices	 	 	 	SUMMARY	 	 	Net
    present Value @ 0%	$85,354	 
	Ukraine	 	 	 	RESERVES
    AND ECONOMICS	 	 	Net
    present Value @ 5%	$41,426	 
	Initial
    flow rate 250 Mcfd/w ell	 	As
    of December, 2014	 	 	Net
    Present Value @ 10%	$19,500	 
	100%
    W.I.,75% N.R.I.	 	 	CONSTANT
    PRICES	 	 	Net
    Present Value @ 15%	$7,970	 
	All
    amounts in $US	 	 	with
    cost recovery	 	 	Net
    Present Value @ 20%	$1,673	 
	decline
    25% year 1, 10% thereafter	 	 	 	 	 	 	 	 	 	 
	 	 	 	Gross
    Gas	 	 	 	 	 	 	 	 	 	 
	Year	new	total	Prod	Price	revenue	Royalty	Net	Op
    Costs*	Capital	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	wells	#
    of wells	Mcf	 	$000s	$000s	Revenue	 	Expense	Cash
    Flow	18%	Cash
    Flow	Cash
    Flow
	 	 	 	(100%
    WI)	$/Mcf	(100%
    WI)	(25%)	$000s	$000s	$000s	$000s	$000s	$000s	$000s
	2014	0	2	23,942	$10.97	$263	$66	$197	$36	$0	$161	$29	$132	$132
	2015	7	9	689,063	$10.97	$7,559	$1,890	$5,669	$54	$11,150	-$5,535	$0	-$5,535	-$5,403
	2016	7	16	1,156,094	$10.97	$12,682	$3,171	$9,512	$96	$17,700	-$8,284	$0	-$8,284	-$13,687
	2017	4	20	1,346,734	$10.97	$14,774	$3,693	$11,080	$120	$11,800	-$840	$0	-$840	-$14,527
	2018	4	24	1,518,311	$10.97	$16,656	$4,164	$12,492	$144	$11,800	$548	$99	$449	-$14,077
	2019	4	28	1,672,730	$10.97	$18,350	$4,587	$13,762	$168	$11,800	$1,794	$323	$1,471	-$12,606
	2020	4	32	1,811,707	$10.97	$19,874	$4,969	$14,906	$192	$11,800	$2,914	$524	$2,389	-$10,217
	2021	4	36	1,936,786	$10.97	$21,247	$5,312	$15,935	$216	$11,800	$3,919	$705	$3,214	-$7,003
	2022	4	40	2,049,358	$10.97	$22,481	$5,620	$16,861	$240	$11,800	$4,821	$868	$3,953	-$3,050
	2023	1	41	1,920,984	$10.97	$21,073	$5,268	$15,805	$246	$2,650	$12,909	$2,324	$10,585	$7,535
	2024	 	41	1,728,886	$10.97	$18,966	$4,741	$14,224	$246	 	$13,978	$2,516	$11,462	$18,998
	2025	 	41	1,555,997	$10.97	$17,069	$4,267	$12,802	$246	 	$12,556	$2,260	$10,296	$29,294
	2026	 	41	1,400,398	$10.97	$15,362	$3,841	$11,522	$246	 	$11,276	$2,030	$9,246	$38,540
	2027	 	41	1,260,358	$10.97	$13,826	$3,457	$10,370	$246	 	$10,124	$1,822	$8,301	$46,841
	2028	 	41	1,134,322	$10.97	$12,444	$3,111	$9,333	$246	 	$9,087	$1,636	$7,451	$54,292
	2029	 	41	1,020,890	$10.97	$11,199	$2,800	$8,399	$246	 	$8,153	$1,468	$6,686	$60,978
	2030	 	41	918,801	$10.97	$10,079	$2,520	$7,559	$246	 	$7,313	$1,316	$5,997	$66,975
	2031	 	41	826,921	$10.97	$9,071	$2,268	$6,803	$246	 	$6,557	$1,180	$5,377	$72,352
	2032	 	41	744,229	$10.97	$8,164	$2,041	$6,123	$246	 	$5,877	$1,058	$4,819	$77,171
	2033	 	41	669,806	$10.97	$7,348	$1,837	$5,511	$246	 	$5,265	$948	$4,317	$81,488
	2034	 	41	602,825	$10.97	$6,613	$1,653	$4,960	$246	 	$4,714	$848	$3,865	$85,354
	 	 	 	25,989,140	 	285,101	71,275	213,826	4,218	102,300	107,308	21,954	85,354	 

 

    	40

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
24, Forecast Cash Flow, Constant Price, No Cost Recovery

 

	Great
    East	 	 	 	 	 	 	 	BT($000s)	 
	Constant
    Prices	 	 	 	SUMMARY	 	 	Net
    present Value @ 0%	$171,878	 
	Ukraine	 	 	 	RESERVES
    AND ECONOMICS	 	Net
    present Value @ 5%	$111,677	 
	Initial
    flow rate 250 Mcfd/w ell	 	As
    of December, 2014	 	Net
    Present Value @ 10%	$77,808	 
	100%
    W.I.,75% N.R.I.	 	 	CONSTANT
    PRICES	 	Net
    Present Value @ 15%	$57,295	 
	All
    amounts in $US	 	 	no
    cost recovery	 	Net
    Present Value @ 20%	$44,091	 
	decline
    25% year 1, 10% thereafter	 	 	 	 	 	 	 	 	 
	 	 	 	Gross
    Gas	 	 	 	 	 	 	 	 	 
	Year	new	total	Prod	Price	revenue	Royalty	Net	Op
    Costs	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	wells	#
    of wells	Mcf	 	$000s	$000s	Revenue	 	Cash
    Flow	18%	Cash
    Flow	Cash
    Flow
	 	 	 	(100%
    WI)	$/Mcf*	(100%
    WI)	(25%)	$000s	$000s	$000s	$000s	$000s	$000s
	2014	0	2	23,942	$10.97	$263	$66	$197	$36	$161	$29	$132	$132
	2015	7	9	689,063	$10.97	$7,559	$1,890	$5,669	$54	$5,615	$1,011	$4,605	$4,737
	2016	7	16	1,156,094	$10.97	$12,682	$3,171	$9,512	$96	$9,416	$1,695	$7,721	$12,457
	2017	4	20	1,346,734	$10.97	$14,774	$3,693	$11,080	$120	$10,960	$1,973	$8,987	$21,445
	2018	4	24	1,518,311	$10.97	$16,656	$4,164	$12,492	$144	$12,348	$2,223	$10,125	$31,570
	2019	4	28	1,672,730	$10.97	$18,350	$4,587	$13,762	$168	$13,594	$2,447	$11,147	$42,718
	2020	4	32	1,811,707	$10.97	$19,874	$4,969	$14,906	$192	$14,714	$2,648	$12,065	$54,783
	2021	4	36	1,936,786	$10.97	$21,247	$5,312	$15,935	$216	$15,719	$2,829	$12,890	$67,672
	2022	4	40	2,049,358	$10.97	$22,481	$5,620	$16,861	$240	$16,621	$2,992	$13,629	$81,302
	2023	1	41	1,920,984	$10.97	$21,073	$5,268	$15,805	$246	$15,559	$2,801	$12,758	$94,060
	2024	 	41	1,728,886	$10.97	$18,966	$4,741	$14,224	$246	$13,978	$2,516	$11,462	$105,522
	2025	 	41	1,555,997	$10.97	$17,069	$4,267	$12,802	$246	$12,556	$2,260	$10,296	$115,818
	2026	 	41	1,400,398	$10.97	$15,362	$3,841	$11,522	$246	$11,276	$2,030	$9,246	$125,064
	2027	 	41	1,260,358	$10.97	$13,826	$3,457	$10,370	$246	$10,124	$1,822	$8,301	$133,366
	2028	 	41	1,134,322	$10.97	$12,444	$3,111	$9,333	$246	$9,087	$1,636	$7,451	$140,817
	2029	 	41	1,020,890	$10.97	$11,199	$2,800	$8,399	$246	$8,153	$1,468	$6,686	$147,502
	2030	 	41	918,801	$10.97	$10,079	$2,520	$7,559	$246	$7,313	$1,316	$5,997	$153,499
	2031	 	41	826,921	$10.97	$9,071	$2,268	$6,803	$246	$6,557	$1,180	$5,377	$158,877
	2032	 	41	744,229	$10.97	$8,164	$2,041	$6,123	$246	$5,877	$1,058	$4,819	$163,696
	2033	 	41	669,806	$10.97	$7,348	$1,837	$5,511	$246	$5,265	$948	$4,317	$168,013
	2034	 	41	602,825	$10.97	$6,613	$1,653	$4,960	$246	$4,714	$848	$3,865	$171,878
	 	 	 	25,989,140	 	285,101	71,275	213,826	$4,218	209,608	37,729	171,878	 

  

    	41

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
25, Forecast Cash Flow, Escalated Price, Staggered Drill Program, Cost Recovery

 

	Great
    East	 	 	 	 	 	 	 	 	BT($000s)	 
	Escalated
    Prices	 	 	 	SUMMARY	 	 	Net
    present Value @ 0%	$132,289	 
	Ukraine	 	 	 	RESERVES
    AND ECONOMICS	 	 	Net
    present Value @ 5%	$62,534	 
	Initial
    flow rate 250 Mcfd/w ell	 	As
    of December, 2014	 	 	Net
    Present Value @ 10%	$33,068	 
	100%
    W.I.,75% N.R.I.	 	 	ESCALATED
    PRICES	 	 	Net
    Present Value @ 15%	$16,293	 
	All
    amounts in $US	 	 	with
    cost recovery	 	 	Net
    Present Value @ 20%	$7,179	 
	decline
    25% year 1, 10% thereafter	 	 	 	 	 	 	 	 	 	 
	 	 	 	Gross
    Gas	 	 	 	 	 	 	 	 	 	 
	Year	new	total	Prod	Price	revenue	Royalty	Net	Op
    Cost	Capital	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	wells	#
    of wells	Mcf	 	$000s	$000s	Revenue	 	Expense	Cash
    Flow	18%	Cash
    Flow	Cash
    Flow
	 	 	 	(100%
    WI)	$/Mcf*	(100%
    WI)	(25%)	$000s	000$	000$	000$	000$	$000s	$000s
	2014	0	2	23,942	$10.97	$263	$66	$197	$36	$0	$161	$29	$132	$132
	2015	7	9	689,063	$10.97	$7,559	$1,890	$5,669	$54	$11,150	-$5,535	$0	-$5,535	-$5,403
	2016	7	16	1,156,094	$11.19	$12,936	$3,234	$9,702	$96	$17,700	-$8,094	$0	-$8,094	-$13,497
	2017	4	20	1,346,734	$11.41	$15,371	$3,843	$11,528	$120	$11,800	-$392	$0	-$392	-$13,889
	2018	4	24	1,457,061	$11.64	$16,962	$4,241	$12,722	$144	$11,800	$778	$140	$638	-$13,251
	2019	4	28	1,617,605	$11.87	$19,208	$4,802	$14,406	$168	$11,800	$2,438	$439	$1,999	-$11,252
	2020	 	28	1,455,844	$12.11	$17,633	$4,408	$13,225	$168	 	$13,057	$2,350	$10,706	-$546
	2021	4	32	1,616,510	$12.35	$19,970	$4,993	$14,978	$192	$11,800	$2,986	$537	$2,448	$1,903
	2022	 	32	1,454,859	$12.60	$18,333	$4,583	$13,750	$192	 	$13,558	$2,440	$11,117	$13,020
	2023	4	36	1,615,623	$12.85	$20,766	$5,191	$15,574	$216	$11,800	$3,558	$640	$2,918	$15,938
	2024	 	36	1,454,061	$13.11	$19,063	$4,766	$14,297	$216	 	$14,081	$2,535	$11,547	$27,484
	2025	4	40	1,921,155	$13.37	$25,690	$6,423	$19,268	$240	$11,800	$7,228	$1,301	$5,927	$33,411
	2026	 	40	1,729,039	$13.64	$23,584	$5,896	$17,688	$240	 	$17,448	$3,141	$14,307	$47,718
	2027	1	41	1,709,260	$13.91	$23,780	$5,945	$17,835	$246	$2,700	$14,889	$2,680	$12,209	$59,928
	2028	 	41	1,538,334	$14.19	$21,830	$5,458	$16,373	$246	 	$16,127	$2,903	$13,224	$73,152
	2029	 	41	1,384,501	$14.47	$20,040	$5,010	$15,030	$246	 	$14,784	$2,661	$12,123	$85,275
	2030	 	41	1,246,051	$14.76	$18,397	$4,599	$13,798	$246	 	$13,552	$2,439	$11,112	$96,387
	2031	 	41	1,121,446	$15.06	$16,888	$4,222	$12,666	$246	 	$12,420	$2,236	$10,185	$106,572
	2032	 	41	1,009,301	$15.36	$15,504	$3,876	$11,628	$246	 	$11,382	$2,049	$9,333	$115,904
	2033	 	41	908,371	$15.67	$14,232	$3,558	$10,674	$246	 	$10,428	$1,877	$8,551	$124,456
	2034	 	41	817,534	$15.98	$13,065	$3,266	$9,799	$246	 	$9,553	$1,720	$7,833	$132,289
	 	 	 	27,272,387	 	361,074	90,269	270,806	4,050	102,350	164,406	32,117	132,289	 

 

    	42

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

Table
26, Forecast Cash Flow, Escalated Price, Staggered Drill Program, No Cost Recove

 

	Great
    East	 	 	 	 	 	 	 	BT($000s)	 
	Escalated
    Prices	 	 	 	SUMMARY	 	 	Net
    present Value @ 0%	$218,740	 
	Ukraine	 	 	 	RESERVES
    AND ECONOMICS	 	Net
    present Value @ 5%	$133,578	 
	Initial
    flow rate 250 Mcfd/w ell	 	As
    of December, 2014	 	Net
    Present Value @ 10%	$88,526	 
	100%
    W.I.,75% N.R.I.	 	 	ESCALATED
    PRICES	 	Net
    Present Value @ 15%	$62,766	 
	All
    amounts in $US	 	 	no
    cost recovery	 	Net
    Present Value @ 20%	$46,999	 
	decline
    25% year 1, 10% thereafter	 	 	 	 	 	 	 	 	 
	 	 	 	Gross
    Gas	 	 	 	 	 	 	 	 	 
	Year	new	total	Prod	Price	revenue	Royalty	Net	Op
    Costs	Future
    Btax	Taxes	Future
    Atax	Cumulative
	 	wells	#
    of wells	Mcf	2%
    escalation	$000s	$000s	Revenue	 	Cash
    Flow	18%	Cash
    Flow	Cash
    Flow
	 	 	 	(100%
    WI)	$/Mcf	(100%
    WI)	(25%)	$000s	000$	000$	000$	$000s	$000s
	2014	0	2	23,942	$10.97	$263	$66	$197	$36	$161	$29	$132	$132
	2015	7	9	689,063	$10.97	$7,559	$1,890	$5,669	$54	$5,615	$1,011	$4,605	$4,737
	2016	7	16	1,156,094	$11.19	$12,936	$3,234	$9,702	$96	$9,606	$1,729	$7,877	$12,613
	2017	4	20	1,346,734	$11.41	$15,371	$3,843	$11,528	$120	$11,408	$2,053	$9,354	$21,968
	2018	4	24	1,457,061	$11.64	$16,962	$4,241	$12,722	$144	$12,578	$2,264	$10,314	$32,282
	2019	4	28	1,617,605	$11.87	$19,208	$4,802	$14,406	$168	$14,238	$2,563	$11,675	$43,957
	2020	 	28	1,455,844	$12.11	$17,633	$4,408	$13,225	$168	$13,057	$2,350	$10,706	$54,663
	2021	4	32	1,616,510	$12.35	$19,970	$4,993	$14,978	$192	$14,786	$2,661	$12,124	$66,788
	2022	 	32	1,454,859	$12.60	$18,333	$4,583	$13,750	$192	$13,558	$2,440	$11,117	$77,905
	2023	4	36	1,615,623	$12.85	$20,766	$5,191	$15,574	$216	$15,358	$2,764	$12,594	$90,499
	2024	 	36	1,454,061	$13.11	$19,063	$4,766	$14,297	$216	$14,081	$2,535	$11,547	$102,045
	2025	4	40	1,921,155	$13.37	$25,690	$6,423	$19,268	$240	$19,028	$3,425	$15,603	$117,648
	2026	 	40	1,729,039	$13.64	$23,584	$5,896	$17,688	$240	$17,448	$3,141	$14,307	$131,955
	2027	1	41	1,709,260	$13.91	$23,780	$5,945	$17,835	$246	$17,589	$3,166	$14,423	$146,378
	2028	 	41	1,538,334	$14.19	$21,830	$5,458	$16,373	$246	$16,127	$2,903	$13,224	$159,602
	2029	 	41	1,384,501	$14.47	$20,040	$5,010	$15,030	$246	$14,784	$2,661	$12,123	$171,725
	2030	 	41	1,246,051	$14.76	$18,397	$4,599	$13,798	$246	$13,552	$2,439	$11,112	$182,838
	2031	 	41	1,121,446	$15.06	$16,888	$4,222	$12,666	$246	$12,420	$2,236	$10,185	$193,022
	2032	 	41	1,009,301	$15.36	$15,504	$3,876	$11,628	$246	$11,382	$2,049	$9,333	$202,355
	2033	 	41	908,371	$15.67	$14,232	$3,558	$10,674	$246	$10,428	$1,877	$8,551	$210,906
	2034	 	41	817,534	$15.98	$13,065	$3,266	$9,799	$246	$9,553	$1,720	$7,833	$218,740
	 	 	 	27,272,387	 	361,074	90,269	270,806	$4,050	266,756	48,016	218,740	 

 

    	43

    	 

    

Great
East, Lysychansko-Toshkivskay, Ukraine, N151-101, 2014

 

 

 

44

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