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EX-32.1 - CERTIFICATION - Park Place Energy Corp.exhibit32-1.htm
EX-31.1 - CERTIFICATION - Park Place Energy Corp.exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2011

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

For the transition period from _____to _____

Commission File Number: 000-51712

PARK PLACE ENERGY CORP.
(Exact name of registrant as specified in its charter)

Nevada 71-0971567
(State or other jurisdiction of incorporation or (IRS Employer Identification No.)
organization)  
   
Suite 300, 400-5th Avenue SW  
Calgary, AB T2P 0L6
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (403) 537-8710

Securities registered under Section 12(b) of the Exchange Act: None

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

Common Stock, par value $0.00001 per share
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[   ] Yes     [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
[   ] Yes     [X] No

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

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

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[   ]

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

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

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


- 2 -

The aggregate market value of the registrant’s stock held by non-affiliates of the registrant as of June 30, 2011, computed by reference to the price at which such stock was last sold on the OTC Bulletin Board ($0.11) on that date, was approximately $1,220,880.

The registrant had 20,667,581 shares of common stock outstanding as of April 13, 2012.


PARK PLACE ENERGY CORP.
Form 10-K

ITEM 1. BUSINESS 2
     
ITEM 1A. RISK FACTORS 7
     
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
     
ITEM 2. PROPERTIES 15
     
ITEM 3. LEGAL PROCEEDINGS 16
     
ITEM 4. (REMOVED AND RESERVED) 17
     
ITEM 5. MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 17
     
ITEM 6. SELECTED FINANCIAL DATA 19
     
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
     
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
     
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24
     
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE 24
     
ITEM 9A. CONTROLS AND PROCEDURES 24
     
ITEM 9B. OTHER INFORMATION 25
     
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 25
     
ITEM 11. EXECUTIVE COMPENSATION 29
     
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 30
     
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 31
     
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 32
     
ITEM 15. EXHIBITS 33


Forward-Looking Statements

The information in this annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding the market price of oil and gas, availability of funds, government regulations, common share prices, operating costs, capital costs, outcomes of reserve development and other factors. Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology.

Forward-looking statements in this annual report include, but are not limited to, statements with respect to the following:

  • our need for additional financing;

  • our exploration activities may not result in commercially exploitable quantities of oil and gas on our properties;

  • the risks inherent in the exploration for oil and gas such as weather, accidents, equipment failures and governmental restrictions;

  • our limited operating history;

  • our history of operating losses;

  • the potential for environmental damage;

  • our lack of insurance coverage;

  • the competitive environment in which we operate;

  • the level of government regulation, including environmental regulation;

  • changes in governmental regulation and administrative practices;

  • our dependence on key personnel;

  • conflicts of interest of our directors and officers;

  • our ability to fully implement our business plan;

  • our ability to effectively manage our growth; and

  • other regulatory, legislative and judicial developments.

These forward-looking statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including, the risks and uncertainties outlined under the sections titled “Risk Factors”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. If one or more of these risks or uncertainties materialize, or our underlying assumptions prove incorrect, our actual results may vary materially from those expressed or implied by our forward-looking statements anticipated, believed, estimated or expected.

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We caution readers not to place undue reliance on any such forward-looking statements, which speak only to a state of affairs as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this annual report by the foregoing cautionary statements.

Where You Can Find More Information

Statements contained in this annual report as to the contents of any contract, agreement or other document referred to include those terms of such documents that we believe are material. Whenever a reference is made in this annual report to any contract or other document of ours, you should refer to the exhibits that are a part of the annual report for a copy of the contract or document.

You may read and copy all or any portion of the annual report or any other information that we file at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Our SEC filings, including the annual report, are also available to you on the SEC’s website at www.sec.gov.

PART I

ITEM 1.              BUSINESS

Name and Organization

We were incorporated under the laws of the State of Nevada on August 27, 2004 under the name ST Online Corp. On June 22, 2007, we entered into a business combination agreement with Park Place Energy Inc., a private company incorporated under the laws of the Province of Alberta, Canada, and 0794403 B.C. Ltd., a wholly-owned subsidiary of our company incorporated under the laws of British Columbia. Pursuant to this business combination agreement, Park Place Energy Inc. and 0794403 B.C. Ltd. amalgamated under the provisions of the British Columbia Business Corporations Act and continued as Park Place Energy Inc., a company governed by the British Columbia Business Corporations Act.

On July 6, 2007, we completed a forward split of our shares of common stock on the basis of eight new shares of common stock for each one share of common stock outstanding on that date and increased the authorized share capital from 100,000,000 shares of common stock to 800,000,000 shares of common stock. At the same time, we merged with our wholly-owned subsidiary, Park Place Energy Corp. which we incorporated under the laws of the State of Nevada in contemplation of the acquisition of all of the issued and outstanding shares of Park Place Energy Inc. and our name was then changed to Park Place Energy Corp.

On July 23, 2007, we completed a forward split of our shares of common stock on the basis of one and one-half new shares of common stock for each one share of common stock outstanding on that date and increased the authorized share capital from 800,000,000 shares of common stock to 1,200,000,000 shares of common stock.

On July 30, 2007, pursuant to the terms of a business combination agreement, we issued to each shareholder of record of Park Place Energy Inc. one share of our common stock for every two shares they held of Park Place Energy Inc. As a result, we issued 8,995,662 shares of common stock (299,855 shares on a post March 24, 2010 reverse split basis) shares of common stock to the former shareholders of Park Place Energy Inc. Additionally, as part of this transaction, a total of 45,000,000 shares of our common stock (1,500,000 shares on a post March 24, 2010 reverse split basis) held by former principals of our company were surrendered for cancellation. We thereby acquired Park Place Energy Inc. For accounting purposes, the acquisition was treated as a recapitalization with Park Place Energy Inc. being the accounting acquirer and the go-forward financial statements reflect the history of Park Place Energy Inc. from its inception on May 4, 2006. As a result of the acquisition, the business of our company is now the acquisition and exploration of oil and gas properties.

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On August 31, 2009, we completed a forward split of our shares of common stock on the basis of ten new shares of common stock for each one share of common stock outstanding on that date and increased the authorized share capital from 1,200,000,000 shares of common stock to 12,000,000,000 shares of common stock.

On March 24, 2010, we completed a reverse split of our shares of common stock on the basis of one new share of common stock for each three hundred shares of common stock outstanding on that date and decreased our authorized share capital from 12,000,000,000 shares of common stock to 40,000,000 shares of common stock.

General

Park Place Energy Corp. is an exploration stage company engaged in exploring for oil and natural gas. Throughout this Annual Report on Form 10-K, the terms "Park Place" "we" "us," "the Company", "our" and "our company" refer to Park Place Energy Corp. and its subsidiaries.

Today, the operations of our company and its subsidiaries concentrate on CBM and tight gas exploration and development in the Dobrich region in north eastern Bulgaria. Our goal is to become a recognized producer of gas in Bulgaria and in CBM property acquisition, exploration, development and production in Europe. Our principal business offices are located at Suite 300, 4-5th Avenue SW, Calgary, AB, Canada, T2P 0L6 and our telephone number is (403) 537-8710.

We currently have interests in oil and gas properties in the Canadian province of Saskatchewan and in Eastern Bulgaria. See “Properties” for more information about our interests. On October 12, 2010 the Bulgarian Council of Ministers granted to the Company a permit for the exploration and prospecting of oil and natural gas in the Dobroudja Basin. The Permit is for a five year period. On October 25, 2010 an appeal against the Bulgarian Council of Ministers decision was filed with the Supreme Administrative Court of Bulgaria by a competitive bidder.

Park Place believes that good environmental, social, health and safety performance is an integral part of our business success. Our commitment to these principles is demonstrated by the fact that we have had no lost-time accidents in over six years and no major environmental incidents. We conduct our business with respect and care for our employees, contractors, communities, and the environments in which we operate. Our vision is zero harm to people and the environment while creating value for our shareholders as well as for Bulgaria, including the regions and communities within which we operate. We have a commitment to be a good corporate citizen of the countries in which our properties are located, striving to emphasize and utilize very high levels of local personnel, services, and equipment.

Our Website

Our website can be found at www.parkplaceenergy.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed with or furnished to the U.S. Securities and Exchange Commission ("SEC"), pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), can be accessed free of charge by linking directly from our website under the "Investor Relations - SEC Filings" caption to the SEC's Edgar Database.

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Vranino 1-11 exploration block, Bulgaria

In 2010, we revamped our business strategy to focus on obtaining European exploration properties for both conventional and unconventional gas (shale, tight gas and coal bed methane). We retained consultants with specialized technical expertise in unconventional gas exploration to assist us in locating, assessing and planning suitable exploration and development of potential opportunities. In October of 2010, we were awarded an exploration permit for the “Vranino 1-11 block” located in Dobroudja Basin by the Bulgarian Counsel of Ministers, with terms and conditions of the permit as follows:

  • Five year term exploration program;

  • Perforate and re-test the Vranino #1 well previously drilled;

  • Initiate a comprehensive 2-D and 3-D seismic program over the license area,

  • Drill and complete a 5 additional test wells in the eastern up-thrown block within the license area

Our minimum work commitment as required by the permit broken down by year is as follows:

Year Exploration activity Budgeted cost
Year 1 Complete the Vranino #1 well, Identify existing seismic lines that would be good candidates for reprocessing, Purchase and reprocess existing seismic data. $350,000
Year 2 Design and make initial arrangements for acquisition of 2-D seismic, Acquisition of new 2-D high resolution seismic; Process and interpret 2-D seismic; Incorporate data (2-D) into geologic model; Design and make initial arrangements for new 3-D high resolution seismic acquisition $275,000
Year 3 Acquisition of new 3-D high resolution seismic; Process and interpret 3-D seismic; Incorporate data (3-D) into geologic model. $350,000
Year 4 Design drilling program; Drill and complete first of five wells; Test and evaluate production; Design drilling program for remaining four wells of 5-Spot based on results of evaluation of first well. $800,000
Year 5 Drill and complete remaining four wells of 5-Spot; Design gathering system for five wells; Prepare Summary Report of project results. $3,050,000
  Total estimated work program budget $4,825,000

To formulate our work program, we consulted with the previous operator, local geologists and others. The costs of the exploration plan may vary depending on a variety of factors, including, inter alia, the market price and availability of technical services in the local area, taxes, and transportation costs relating to delivering equipment to the exploration area.

Subsequent to the award of this claim, we have engaged in an assessment of drilling services companies in the local area suitable to engage to provide drilling services in the region. We have located several suitable service providers for drilling and other services which we intend to engage at the appropriate time. Local companies in Bulgaria will be used to provide services to the best extent possible. However, as the Bulgarian energy sector is relatively undeveloped, the availability of local drilling services specialized to unconventional gas exploration is limited. Park Place has determined that such expertise, services or equipment is available in Romania, Turkey and other surrounding regions. We have located suitable drilling services companies in Romania and Turkey that we may hire to perform the more difficult drilling involving unconventional gas hydrocarbon structures.

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Our exploration of the Vranino 1-11 block has not yet commenced due to the fact the a competing bidder has disputed the award of the claim to Park Place. The outcome of the appeal is expected to be received in May of 2012. The Company takes the position that the permit was validly issued to it.

Major 2011 Events

On June 5, 2011, the Company entered into two farm-in agreements related to its 25% working interest in an 80 acre oil and gas parcel located in western Saskatchewan. Pursuant to the terms of the agreement, the operator agreed to undertake all costs related to drilling two test wells on the property by September 15, 2011. Once the test wells were drilled, the operator was provided with a 60% working interest in the properties. Subsequent to year end the property ceased producing oil and the management made the decision to fully impair the property as at December 31, 2011.

Effective September 30, 2011, we issued an aggregate of 9,975,000 shares of our common stock pursuant to private placement subscription agreements with nine (9) investors at a purchase price of $0.075 per share for aggregate proceeds of $748,125. We issued the shares to seven (7) non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 and to two (2) U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) relying upon Rule 506 of Regulation D of the Securities Act of 1933.

Effective September 30, 2011, we issued an aggregate of 3,288,600 common shares at a purchase price of Cdn$0.05 per share in accordance with the terms of the Convertible Promissory Note dated April 6, 2011 (as reported in our 10-Q dated May 16, 2011), and as amended August 19, 2011. The full amount owing under the note was converted into shares of our common stock for aggregate proceeds of USD $157,500. We issued the shares to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.

On October 4, 2011, we added two new directors Parvez Tyab and Dr. Art Halleran. Both our new directors have significant experience in international exploration in oil and gas exploration and development and have been actively involved in the Vranino 1-11 project to since appointment. We feel that these additions will contribute significant expertise, knowhow and experience to our project in Bulgaria and other international projects we may undertake.

Patents and Trademarks

We do not own, either legally or beneficially, any patent or trademark.

Research and Development Expenditures

We have not incurred any research or development expenditures since our incorporation.

Government Regulation

General

Our oil and gas operations are subject to various federal, provincial, state and local governmental regulations in Canada, the United States and Bulgaria. Matters subject to regulation include exploration permits, discharge permits for drilling operations, drilling and abandonment bonds, operating practices, reports concerning operations, the spacing of wells, pooling of properties, taxation and environmental protection. These laws and regulations are under constant review for amendment or expansion. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial and local laws and regulations relating primarily to the protection of human health and the environment. To date, expenditures related to complying with these laws, and for remediation of existing environmental contamination, have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. Changes in these regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on us.

5


Oil and Gas Regulation

In Bulgaria, the oil and gas industry is regulated by various federal laws, acts and regulations. These acts are primarily the Underground Resources Act “URA” and the Environment and Water Protection Act. Additionally, in December 2011, the Bulgarian Counsel of Ministers imposed a temporary moratorium on shale gas exploration and hydraulic fracking. This moratorium is presently under review by a commission established by the Counsel of Ministers, which pending recommendations, is likely to result in amendments to the URA and a revocation of the moratorium. The Company will adjust its exploration and development plans as is required depending on the outcome of the final legislation.

In Canada, in addition to federal regulation, each province and state has legislation and regulations which govern land tenure, royalties, production rates, environmental protection and other matters. The royalty regime is a significant factor in the profitability of oil and natural gas production. Royalties payable on production from lands other than government lands are determined by negotiations between the mineral owner and the lessee. Royalties on government land are determined by government regulation and are generally calculated as a percentage of the value of gross production, and the rate of royalties payable generally depends upon prescribed reference prices, well productivity, geographical location, field discovery date and the type or quality of the petroleum product produced.

Management believes that we are in substantial compliance with current applicable environmental laws and regulations in both Canada and Bulgaria at present.

Competition

We operate in highly competitive industries, competing with other oil and gas exploration companies, independent producers and institutional and individual investors, which are actively seeking oil and gas properties throughout the world together with the equipment, labor and materials required to operate such properties. Most of our competitors have financial resources, staffs and facilities substantially greater than our company’s. The principal area of competition is encountered in the financial ability for our company to acquire acreage positions and drill wells to explore for oil and gas, then, if warranted install production equipment. Competition for the acquisition of oil and gas wells is intensifying, especially in Europe, where super majors have increasing interest in acquiring exploration blocks. Therefore, we may not be successful in acquiring additional blocks in the face of this competition. No assurance can be given that we will be successful in its efforts to secure additional properties and or develop its existing oil and properties.

Employees & Directors

As of December 31, 2011, our business is generally conducted through our directors and also through consultants of the company. The following is a description of our Director’s professional experience in Oil and Gas:

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David Johnson, President, Director

David Johnson has served as the company’s president since 2008 during which time the company disposed its North American assets to focus on unconventional gas in Europe. Mr. Johnson has overseen several of Park Place’s exploration and development projects in the past, including the 8 mile interests in northern BC, its Tennessee and Alberta claims.

Parvez Tyab - Director

Parvez Tyab has over 20 years’ experience as a financier and corporate executive, having served as an officer and director of a number of public and private companies. Mr. Tyab has been involved in the acquisition and development of oil and gas properties and natural resource projects in Canada, the US as well as internationally with an emphasis on Africa. In 2006 he co-founded and served as Executive Vice President of a company developing oil and gas in Egypt. More recently Mr. Tyab was involved in the acquisition of, and initial $165 Million private placement financing for, an oil and gas project in the Republic of Chad. Mr. Tyab currently serves as director of a significant potash project in the Republic of Congo. In 2009, Mr. Tyab co-founded Griffiths Energy International Inc. and served as that company’s corporate secretary and director until July 2011.

Dr. Art Halleran - Director

Dr. Halleran is a geologist obtaining his Ph.D. from the University of Calgary, who has 31 years of international petroleum exploration experience. International experience includes countries such as Canada, Colombia, Egypt, India, Guinea, Sierra Leone, Sudan, Suriname, Chile, Brazil, Pakistan, Peru, Tunisia, Trinidad Tobago, Argentina, Ecuador and Guyana. Dr. Halleran's experience includes work with Petro-Canada, Chevron, Rally Energy and Canacol Energy. In 2007, Dr. Halleran founded Canacol Energy Ltd., a company with petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana, where he served as vice president of exploration. Canacol is credited in the largest oil discovery in Colombia over the last fifteen years which is raised over $200,000,000 to develop. Previously Dr. Halleran was a consulting geologist for Rally Energy Corp. (Egypt) which discovered prolific reservoirs in Egypt. Dr. Halleran currently serves as chief executive officer of United Hunter Oil and Gas Corp., a company with oil interests in California, USA. Dr. Halleran was appointed as a director of Park Place Petroleum to provide technical expertise and oversight to the Dobroudja Basin gas project in Bulgaria. We consider his education and technical experience in the energy sector will be valuable to our company.

ITEM 1A.            RISK FACTORS

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution readers of this annual report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”. In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.

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Risks Relating to Our Business

We have a limited operating history and have incurred losses to date, and require financing for continued operations. If we do not continue to receive financing, then we may have to scale back or even cease our ongoing business operations.

We have a limited oil and gas operating history and our success is significantly dependent on a successful acquisition, drilling, completion and production of our properties. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the exploration stage with production, and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

The outcome of our legal dispute regarding the Vranino 1-11 block will materially impact our performance and our ability to raise capital in the future.

As previously noted, the permit granted to us by the Bulgarian Counsel of Ministers is subject to an appeal by a competitive bidder. There are no guarantees that our permit will be upheld by the Courts. If the Courts do not uphold our permit, then Park Place will likely lose the block, and will not be able to explore the property for gas. In that case, Park Place will be required to find additional properties and there is no guarantee that suitable properties will be found. Additionally, if the Permit is cancelled, this will likely have a material impact on our ability to raise capital and the performance of our company.

Most of our properties are in the exploration stage, there can be no assurance that we will establish commercial discoveries on these properties.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. Few properties that are explored are ultimately developed into producing oil or gas wells. Some of our properties are in the exploration stage only and are without proven reserves either of oil and gas. We may not establish commercial discoveries on some of our exploration properties.

Oil and gas exploration involves a high degree of risk and there is no assurance that expenditures for future exploration by us will result in new discoveries in commercial quantities.

Although we have a limited number of specific identified exploration prospects at the present time, we intend to continue to evaluate prospects on an ongoing basis in a manner consistent with industry standards. Our long-term commercial success depends on our ability to find, acquire, develop and commercially produce hydrocarbons. We cannot provide any assurance that we will be able to locate satisfactory properties for acquisition or participation. Moreover, if we do identify such acquisitions or participations, we may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations uneconomic.

We are dependent on discovering new reserves.

Our future oil and natural gas reserves, production, and cash flows, if any, to be derived therefrom are highly dependent upon us successfully acquiring or discovering new reserves. Without the continual addition of new reserves, any existing reserves our company may have at any particular time and the production therefrom will decline over time as they are exploited. A future increase in our reserves will depend not only on our ability to develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects. There can be no assurance that our future exploration and development efforts will result in the discovery and development of additional commercial accumulations of oil and natural gas.

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The production and producing life of wells is uncertain and production will decline.

If any well becomes commercially productive, it will not be possible to predict the life and production of that well. The actual producing lives could differ from those anticipated. Sufficient CBM may not be produced for us to receive a profit or even to recover our initial investment. In addition, production from our CBM gas wells will decline over time, and does not indicate any consistent level of future production.

The unavailability or high cost of drilling rigs, equipment, supplies, personnel and oil field services could adversely affect our ability to execute our exploration and exploitation plans on a timely basis and within our budget.

Shortages or the high costs of drilling rigs, equipment, supplies or personnel could delay or adversely affect our exploration and development operations, which could have a material adverse effect on our business, financial condition or results of operations. If the unavailability or high cost of rigs, equipment, supplies or personnel were particularly severe in Bulgaria, we could be materially and adversely affected.

We will require significant additional financing in order to continue our exploration activities and our assessment of the commercial viability of our oil and gas and oil sands properties.

We will require additional financing in order to carry out our acquisition and exploration activities. Failure to obtain such financing on a timely basis could cause us to forfeit our interest in certain properties, miss certain acquisition opportunities, or delay or indefinitely postpone further exploration of our projects. This could result in the possible loss of such properties or the reduction or termination of our operations.

Our operations require significant additional capital, which may not be available to us on acceptable terms, or at all.

Our cash flow from our reserves, if any, may not be sufficient to fund our ongoing activities in the future. We will be required to raise additional financing for the Vranino 1-11 property. From time to time, we may require additional financing in order to carry out our oil and gas acquisitions, exploration and development activities, if any. Failure to obtain such financing on a timely basis could cause us to forfeit our interest in certain properties, miss certain acquisition opportunities and reduce or terminate our operations. If our revenues from our reserves, if any, decrease as a result of lower oil and natural gas prices or otherwise, it will affect our ability to expend the necessary capital to replace our reserves, if any, or to maintain production. If our Company’s cash flow from operations is not sufficient to satisfy our capital expenditure requirements, there can be no assurance that additional debt or equity financing will be available to meet these requirements or available to us on favourable terms.

If we lose the services of our management and key consultants, or fail to acquire additional consultants in the future, then our plan of operations may be delayed or be more expensive to undertake than anticipated.

Our success depends to a significant extent upon the continued service of our Directors and consultants and the addition of suitable consultants, employees and subcontractors to undertake the exploration of our oil and gas properties. Losing the services of key individuals, such as Mr. Johnson, Parvez Tyab, or Art Halloran could have a material adverse effect on the Company’s prospective business until a replacement is found. The Company does not have any key man insurance policies, and therefore there is a risk that the death or departure of any member of management or any key consultants could have a material adverse effect on the Company.

9


Our interests are held in the form of farmout agreements, licenses and leases that may terminate.

Our properties are held in the form of permits, leases and license agreements. If we fail to meet the specific requirements of the work programs, the license, permit or lease may terminate or expire. The termination or expiration of our permits, licenses or leases or the working interests relating may have a material adverse effect on our results of operation and business.

The operations of our Company may require licenses and permits from various governmental authorities. There can be no assurance that we will be able to obtain all necessary licenses and permits that may be required to carry out exploration and development on our projects.

Our acquisitions may not be successful.

As part of our growth strategy, we intend to acquire additional interests in oil and gas properties. Such acquisitions may pose substantial risks to our business, financial condition, and results of operations. In pursuing acquisitions, we will compete with other companies, many of which have greater financial and other resources to acquire attractive properties.

We are subject to foreign currency risks.

Oil and gas operations in the United States generate revenues in United States dollars, while expenses are incurred in Canadian dollars. As a result, an upward adjustment of Canadian currencies against the United States dollar would result in a reduction of profits, if any, that our projects would generate if they commence production. Accordingly, the value of our projects is subject to risk based on changes to foreign currency rates.

Risks Relating to Our Industry

The oil and gas industry is subject to significant competition, which may increase costs or otherwise adversely affect our ability to compete.

Oil and gas exploration is intensely competitive and involves a high degree of risk. There can be no assurance that commercial production of oil and gas can be obtained from any of our properties, nor are there any assurances that production, if obtained, will be in sufficient quantities to be profitable. In our efforts to acquire properties, we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and gas, but also conduct refining and petroleum marketing operations on a worldwide basis.

Competition for producing properties will be affected by the amount of funds available to us, information available to us and any standards established by us for the minimum projected return on investment. Competition may also be presented by alternative fuel sources and technologies.

A substantial or extended decline in oil and natural gas prices could reduce our future revenue and earnings.

As with most other companies involved in resource exploration, we may be adversely affected by future increases in the costs of conducting exploration, development and resource extraction that may not be fully offset by increases in the price received on sale of the petroleum or natural gas.

Our future revenues, if any, profitability and growth and the carrying value of our oil and gas and oil sands properties will be substantially dependent on prevailing prices of oil and gas. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and gas prices. Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors beyond our control. These factors include economic conditions in the United States and Canada, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political stability in the Middle East and elsewhere, the foreign supply of oil and gas, the price of foreign imports and the availability of alternate fuel sources. Any substantial and extended decline in the price of oil and gas would have an adverse effect on the carrying value of our properties and borrowing capacity.

10


Industry activities are dependent on availability of drilling equipment and access restrictions.

Oil and natural gas exploration and development activities are dependent on the availability of drilling and related equipment in the particular areas where such activities will be conducted. Demand for such limited equipment or access restrictions may affect the availability of such equipment to our company and may delay exploration and development activities.

Prices, markets and marketing of crude oil and natural gas may result in a reduction in volume of our oil and gas reserves.

Oil and natural gas are commodities whose prices are determined based on world demand, supply and other factors, all of which are beyond the control of our company. World prices for oil and natural gas have fluctuated in recent years. Any material decline in prices could result in a reduction of net production revenue. Certain wells or other projects may become uneconomic as a result of a decline in world oil prices and natural gas prices, leading to a reduction in the volume of our company’s oil and gas reserves, if any. All of these factors could result in a material decrease in our future net production revenue, if any, causing a reduction in our oil and gas acquisition and development activities. A sustained material decline in prices from historical average prices could limit or reduce our borrowing base, therefore reducing the bank credit available to our company, and could require that a portion of any existing bank debt of our company be repaid.

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

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

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

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

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

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

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labor, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

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

The potential profitability of oil and gas and oil sands properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. In addition, adverse weather conditions can also hinder drilling operations. Further, our operating costs will be dependent upon the availability of required services and personnel. These changes and events may materially affect our financial performance. These factors cannot be accurately predicted and the combination of these factors may result in our Company not receiving an adequate return on invested capital.

We are subject to complex laws that can affect the cost, manner and feasibility of doing business thereby increasing our costs and reducing our profitability.

Failure to comply with these laws may also result in the suspension or termination of operations and liabilities under administrative, civil and criminal penalties. Moreover, these laws could change in ways that substantially increase the costs of doing business. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially and adversely affect our financial condition and results of operations.

The establishment of proved reserves is subjective and subject to numerous uncertainties.

We have established proved reserves on certain of our properties. There are numerous uncertainties inherent in estimating quantities of natural resources, including many factors beyond our control, and no assurance can be given that the recovery of bitumen will be realized. In general, estimates of recoverable natural resources are based upon a number of factors and assumptions made as of the date on which the resource estimates were determined, such as geological and engineering estimates which have inherent uncertainties and the assumed effects of regulation by governmental agencies and estimates of future commodity prices and operating costs, all of which may vary considerably from actual results. All such estimates are, to some degree, uncertain and classifications of resources are only attempts to define the degree of uncertainty involved. For these reasons, estimates of the recoverable natural resources, the classification of such resources based on risk of recovery, prepared by different engineers or by the same engineers at different times, may vary substantially.

12


Environmental and regulatory compliance may impose substantial costs on us.

Our operations are or will be subject to stringent laws and regulations relating to improving or maintaining environmental quality. Environmental laws often require parties to pay for remedial action or to pay damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested many years ago.

Our exploration activities and drilling programs are or will be subject to extensive laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. Exploration and drilling is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products. Compliance with these laws and regulations will impose substantial costs on us and will subject us to significant potential liabilities.

Costs associated with environmental liabilities and compliance have increased over time, and we expect these costs to continue to increase in the future. We will be required to book reserves for the costs of environmental obligations on our financial statements for such liabilities as our exploration operations proceed.

The current regulatory regime may change.

The current regulatory regime governing oil and gas exploration in Bulgaria and Canada is subject to change. We cannot predict if, when or how any aspect of the regulatory regimes governing our activities may change. As a result, our business may be affected in ways that we cannot predict.

Risks Relating to Our Common Stock

Investment in our common stock is speculative due to the nature of our business.

An investment in our common stock is speculative due to the nature of our involvement in the acquisition and exploration of oil and gas and oil sands properties in Canada.

Our shareholders may experience dilution as a result of our issuance of additional common stock or the exercise of outstanding options and warrants.

We may enter into commitments in the future which would require the issuance of additional common stock. We may also grant additional share purchase warrants and stock options. The exercise of share purchase warrants or options and the subsequent resale of common stock in the public market could adversely affect the prevailing market price and our ability to raise equity capital in the future. Any share issuances from our treasury will result in immediate dilution to existing shareholders.

We have never declared or paid cash dividends on our common stock.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our board of directors considers relevant. Accordingly, investors may only see a return on their investment if the value of our securities appreciates.

13


Our stock price can be extremely volatile.

Our common stock is traded dually on the OTC Bulletin Board and the Frankfurt Stock Exchange. There can be no assurance that an active public market will continue for our common stock, or that the market price for our common stock will not decline below its current price. Such price may be influenced by many factors, including, but not limited to, investor perception of us and our industry and general economic and market conditions. The trading price of our common stock could be subject to wide fluctuations in response to announcements of our business developments or those of our competitors, quarterly variations in operating results, technological innovations, additions or departures of key personnel, industry developments and other events or factors. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of companies, at times for reasons unrelated to their operating performance. Such broad market fluctuations may adversely affect the price of our common stock.

Our common stock will be subject to the “Penny Stock” Rules of the SEC, which will make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.

Our securities will be subject to the “penny stock rules” adopted pursuant to Section 15(g) of the Exchange Act. The penny stock rules apply generally to companies whose common stock trades at less than $5.00 per share, subject to certain limited exemptions. Such rules require, among other things, that brokers who trade “penny stock” to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade “penny stock” because of the requirements of the “penny stock rules” and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. In the event that we remain subject to the “penny stock rules” for any significant period, there may develop an adverse impact on the market, if any, for our securities. Because our securities are subject to the “penny stock rules”, investors will find it more difficult to dispose of our securities.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Our Company’s consolidated financial statements include a statement that our financial statements are prepared on a going concern basis, and therefore that certain reported carrying values are subject to our Company receiving the future continued support of our shareholders, obtaining additional financing and attaining profitable operations. The going concern assumption is only appropriate provided that additional financing continues to become available.

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

A decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise additional capital for our operations. Because our operations to date have been principally financed through the sale of equity securities, a decline in the price of our common stock could have an adverse effect upon our liquidity and our continued operations. A reduction in our ability to raise equity capital in the future would have a material adverse effect upon our business plan and operations, including our ability to continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

We may issue debt to acquire assets.

From time to time our Company may enter into transactions to acquire assets or the shares of other corporations. These transactions may be financed partially or wholly with debt, which may increase our debt levels above industry standards. Our articles and by-laws do not limit the amount of indebtedness that our Company may incur. The level of our indebtedness from time to time could impair our ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise.

14


We may issue additional equity securities without the consent of stockholders. The issuance of any additional equity securities would further dilute our stockholders.

Our board of directors has the authority, without further action by the stockholders, to issue up to 40 million shares of common stock authorized under our charter documents, of which approximately 21 million shares were issued and outstanding as of March 31, 2012. The issuance of preferred stock could have the effect of restricting dividends on the common stock or delaying or preventing our change in control without further action by the stockholders. While we have no present plans to issue any shares of preferred stock, we may need to do so in the future in connection with capital raising transactions. In addition, we may issue additional shares of common stock or other equity securities, including securities convertible into shares of common stock, in connection with capital raising activities. The issuance of additional common stock would also have a dilutive impact on our stockholders’ ownership interest in our company.

ITEM 1B.            UNRESOLVED STAFF COMMENTS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 2.              PROPERTIES

Our Properties

Canadian Property

Saskatchewan Property

Effective January 15, 2010, we received a 50% working interest in an exploration oil and gas property in Saskatchewan, Canada. On May 11, 2010, we assigned one-half of our 50% working interest to a third party for consideration of $75,000. This working interest covers 80 acres in Western Saskatchewan. On June 5, 2011, the Company entered into two farm-in agreements related to its 25% working interest in an 80 acre oil and gas parcel located in western Saskatchewan. Pursuant to the terms of the agreement, the operator agreed to undertake all costs related to drilling two test wells on the property by September 15, 2011. Once the test wells were drilled, the operator was provided with a 60% working interest in the properties. Subsequent to year end the property ceased producing oil and the management made the decision to fully impair the property as at December 31, 2011.

Bulgarian Property

Dobroudja Basin

On October 12, 2010, the Bulgarian Council of Ministers granted to the Company a permit for the exploration and prospecting of crude oil and natural gas in Plot 1-11 Vranino. The permit covers approximately 98,204 acres in the Dobroudja Basin in Eastern Bulgaria and was granted after the completion of the competitive bid process. On October 25, 2010 as allowed by the competitive bid process an appeal against the Bulgarian Council of Ministers decision was filed by Overgas Inc, a competing bidder on the Vranino Block, with the Supreme Administrative Court of Bulgaria.

Reserves Reported to Other Agencies

We have filed no estimates of total, proved net oil or gas reserves with any other federal authority or agency in the United States. We have filed a reserves assessment and evaluation with certain Canadian securities regulators pursuant to applicable rules in Canada.

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Productive Wells and Acreage

The following tables set forth our leasehold interest in productive oil wells, as of December 31, 2011:

Area Gross (1) Net (2)
Canada(3) 1 .1
Total: 1 .1
(1)

A gross well is a well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned.

(2)

A net well is deemed to exist when the sum of fractional ownership working interest in gross wells equals one. The number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.

(3)

The Company’s Edam well was shut in after the year end.

The following table sets forth the amounts of our net and gross productive wells and acreage(1) as of December 31, 2011:

Area Gross (2) Net (3)
Edam 80 8
Total: 80 8
(1)

Consists of acres spaced or assignable to productive wells.

(2)

A gross acre is an acre in which a working interest is owned. The number of gross acres is the total number of acres in which a working interest is owned.

(3)

A net acre is deemed to exist when the sum of fractional ownership working interests in gross acres equals one. The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.

Undeveloped Acreage

The following table sets forth the amounts of our undeveloped acreage as of December 31, 2011:

Area Undeveloped Acreage(1)  
  Gross Net
Bulgaria(2) 98,204 98,204
Total: 98,204 98,204
(1)

Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether or not such acreage contains proved reserves.

(2)

The Company’s Bulgarian exploration permit is currently under contest by a competitor before the Bulgarian Supreme Administrative Court

Drilling Activity

During 2011, two wells were drilled on the Edam property in Saskatchewan, Canada of which we have a 10% interest in.

Present Activities

The Company awaits the decision of the Supreme Administrative Court in Bulgaria regarding the Permit issued to the Company in the Dobroudja Basin.

In addition the Company is evaluating several international blue-sky acquisition opportunities.

ITEM 3.              LEGAL PROCEEDINGS

We currently are party to legal proceedings in Bulgaria relating to the exploration permit involving Vranino 1-11 as described herein.

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We are not party to any other material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.

ITEM 4.              (REMOVED AND RESERVED)

PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Shares of our common stock have been quoted on the OTC Bulletin Board since June 20, 2006. From June 20, 2006 to July 25, 2007 shares of our common stock were quoted on the OTC Bulletin Board under the symbol “STOI”, from July 26, 2007 to December 11, 2008 under the symbol “PRPL”, and from December 12, 2008 to March 25, 2010 under the symbol “PKPL”. In connection with our March 24, 2010 reverse stock split, from March 26, 2010 to April 26, 2010 under the symbol “PKPLD”. Since April 27, 2010 shares in our common stock have traded again under the symbol “PKPL” on the OTC Bulletin Board. Shares of our common stock have also been listed on the Frankfurt Stock Exchange since August 13, 2007 under the symbol “3P2”.

The range of high and low bid information for each quarter in the past two years is set forth below. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. This information has been adjusted to reflect forward stock splits of 8 for 1 and 1.5 for 1 completed in July 2007, a 10:1 forward stock split completed in August 2009 and a 1 for 300 reverse stock split completed in March 2010.

2010 High Bid Low Bid
4th Quarter $0.60 $0.10
3rd Quarter $0.23 $0.10
2nd Quarter $0.28 $0.11
1st Quarter $1.05 $0.05
2011    
4th Quarter $0.13 $0.02
3rd Quarter $0.35 $0.08
2nd Quarter $0.21 $0.05
1st Quarter $0.20 $0.07

Holders

The number of record holders of our common stock, $0.00001 par value, as of March 30, 2011 was approximately 124.

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Dividends

We have not, since the date of our incorporation, declared or paid any dividends on our common shares. We anticipate that we will retain future earnings and other cash resources for the operation and development of our business for the foreseeable future. The payment of dividends in the future will depend on our earnings, if any, and our financial condition and such other factors as our board of directors considers appropriate.

Equity Compensation Plans

On October 11, 2007 we adopted our 2007 Stock Option Plan, which allowed for the issuance of options to purchase up to 200,000 shares of our common stock. A copy of our 2007 Stock Option Plan was filed with our Annual Report on Form 10-KSB for the year ended December 31, 2007. On June 24, 2009, we amended our 2007 Stock Option Plan to allow for the issuance of options to purchase up to 216,667 shares of our common stock. On January 25, 2010 the Company amended and restated its 2007 Stock Option Plan to increase the maximum number of common shares that may be reserved for issuance to 533,333.

On November 21, 2011 the Company replaced the previous 2007 Stock Option Plan and adopted our 2011 Stock Option Plan, which allows for the issuance of options to purchase up to 2,000,000 shares of our common stock. A copy of our 2011 Stock Option Plan was filed on November 25, 2011 on a Form 8K. The following table provides a summary of the number of stock options outstanding as at December 31, 2011 under our equity compensation plan:









Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
(a)

Weighted
average exercise
price of
outstanding
options,
warrants and
rights
(b)

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity compensation plans approved by security holders Nil Nil Nil
Equity compensation plans not approved by security holders 594,881(1) $0.30 1,700,000

  (1)

294,881 options issued under a 2007 Stock Option Plan expired January 25, 2011

Recent Sales of Unregistered Securities

We have reported sales of securities without registration under the Securities Act during our fiscal year ended December 31, 2011 on the following reports, as filed with the Securities and Exchange Commission.

Report Date of Filing with SEC
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 November 21, 2011
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 August 22, 2011
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011 May 16, 2011

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During the year ended December 31, 2011, we did not issue any securities without registration under the Securities Act which were not reported in the Quarterly Reports on Form 10-Q described above.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2011.

ITEM 6.              SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition, changes in financial condition and results of operations for the years ended December 31, 2011 and 2010 should be read in conjunction with our most recent audited consolidated financial statements for the years ended December 31, 2011 and 2010, which are included in this annual report, and the related notes to the financial statements, as well as “Item 1 - Business.” This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Risk Factors” and elsewhere in this annual report.

Our Plan of Operations

Our initial Plan of Operations for the next 12 months is to resolve our permit issue in Bulgaria and additionally obtain new permits for gas in Europe.

Once our permit issue is resolved, the first year work program includes procurement of a seismic program of the license area which will cost approximately $350,000, part of which will be incurred over the next 12 months.

Based on our current plan of operations as set forth above, we estimate that we will require approximately $500,000 to pursue our plan of operations over the next 12 months. As at December 31, 2011, we had cash of $432,535 and working capital of $407,611. Consequently, we will require additional financing to pursue our plan of operations over the next 12 months.

We anticipate that additional funding will be in the form of equity financing from the sale of our common stock, grants, and loans from the European Recovery and Development Bank.

Results of Operations – Years Ended December 31, 2011 and 2010

The table below sets out the operating expenses in the Consolidated Statements of Operations:

    Year Ended     Year Ended  
    December 31, 2011     December 31, 2010  
             
Oil and Gas Revenue $  30,135   $ -  
             
Direct Costs            
             
     Depletion   20,492     -  
             
     Operating expenses   23,532     -  
             
Expenses            

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    Year Ended     Year Ended  
    December 31, 2011     December 31, 2010  
             
     Office and general   14,929     92.445  
             
     Depreciation   2,191     1,514  
             
     Exploration expenses   -     -  
             
     Foreign exchange gain (loss)   13,462     4,987  
             
     Professional fees   98,951     126,362  
             
     Consulting   87,946     326,231  
             
     Investor relations   24,609     20,777  
             
     Management fees   45,865     -  
             
     Travel   10,980     26,368  
             
     Stock-based compensation   10,023     59,129  
             
Other Items            
             
     Interest revenue   -     67,356  
             
     Gain on sale of oil and gas properties   -     -  
             
     Loss on disposal of properties   -     4,635  
             
     Write-off oil and gas costs   (59,589 )   (37,558 )
             
     Gain on settlement of debt   4,886     341,777  
             
Net Loss $ (531,615 ) $ (281,603 )

Oil and Gas Revenue

Our oil and gas revenue for the year ended December 31, 2011 was $ 30,135, compared to $nil for 2010. For the year ended 2011 the company incurred depletion costs of $20,492 and $23,532 in operating costs. The company incurred no depletion or operating costs during 2010 as a result of having no revenue.

Office and General Expenses

Our office and general expenses decreased to $14,929 for the year ended December 31, 2011 from $92,445 for 2010.

Professional Fees

Our professional fees decreased to $98,951 for the year ended December 31, 2011 from $126,362 for 2010.

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Consulting Expenses

Our consulting expenses decreased to $87,946 for the year ended December 31, 2011 from $326,321 for 2010.

Investor Relations Expenses

Our investor relations expense for the year ended December 31, 2011 increased to $24,609 compared to $20,777 for 2010.

Management Fees

Our management fees increased to $45,865 for the year ended December 31, 2011 from $nil for 2010.

Travel Expenses

Our travel expenses decreased to $10,980 for the year ended December 31, 2011 from $26,368 for 2010.

Stock-Based Compensation Expenses

Our stock-based compensation expenses decreased to $10,023 for the year ended December 31, 2011 from $59,129 for 2010.

Net Loss

As a result of the above, our net loss before other items for the year ended December 31, 2011 was $382,434, compared to $657,813 for 2010.

Liquidity and Capital Resources

    As at     As at  
    December 31, 2011     December 31, 2010  
Cash $ 432,535   $ 22  
Working capital (deficit)   407,611     (161,929 )
Total assets   659,256     92,595  
Total liabilities   61,328     169,835  
Shareholders’ equity (deficit)   597,928     (77,240 )

We anticipate that we will require approximately $500,000 to pursue our plan of operations over the next 12 months. As at December 31, 2011, we had cash of $432,535 and working capital of $407,611. Consequently, we will require additional financing to pursue our plan of operations over the next 12 months.

Cash Used in Operating Activities

Net cash used in operating activities in the year ended December 31, 2011 increased to $311,831 from $219,803 in 2010.

Cash Used In Investing Activities

Net cash used for investing activities in the year ended December 31, 2011 was $187,900, compared to net cash from investing activities of $85,713 in 2010.

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Cash Provided By Financing Activities

We have funded our business to date primarily from sales of our common stock. In the year ended December 31, 2011, we received cash of $953,474 as a result of proceeds from the sale of our capital stock and proceeds from loans payable, compared to $120,487 in 2010.

Critical Accounting Policies

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe that our critical accounting policies and estimates include the following:

Oil and gas properties

The Company follows the full cost method of accounting for oil and natural gas operations, whereby all costs of exploring for and developing oil and natural gas reserves are capitalized and accumulated in cost centres on a country-by-country basis. Costs include land acquisition costs, geological and geophysical charges, carrying charges on non-productive properties and costs of drilling both productive and non-productive wells. General and administrative costs are not capitalized other than to the extent of the Company’s working interest in operated capital expenditure programs on which operator’s fees have been charged equivalent to standard industry operating agreements. At December 31, 2011, the Company has not capitalized any interest, general or administrative costs.

The costs in each cost centre, including the costs of well equipment, are depleted and depreciated using the unit-of-production method based on the estimated proved reserves before royalties. Natural gas reserves and production are converted to equivalent barrels of crude oil based on relative energy content. The costs of acquiring and evaluating significant unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion.

The capitalized costs less accumulated depletion and depreciation in each cost centre are limited to an amount equal to the estimated future net revenue from proved reserves (based on prices and costs at the balance sheet date) plus the cost (net of impairments) of unproved properties. The total capitalized costs less accumulated depletion and depreciation, site restoration provision and future income taxes of all cost centres is further limited to an amount equal to the future net revenue from proved reserves plus the cost (net of impairments) of unproved properties of all cost centres less estimated future site restoration costs, general and administrative expenses, financing costs and income taxes.

Proceeds from the sale of oil and natural gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would significantly alter the rate of depletion and deprecation.

22


Asset retirement obligations

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). The Company does not have any significant asset retirement obligations.

Long-lived assets

The carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Revenue recognition

The Company recognizes oil and gas revenue when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable.

Stock-based compensation

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

Recent accounting pronouncements

In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosures”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of the applicable standard on January 1, 2011 did not have a material effect on the Company’s consolidated financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

23


Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 7A.            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 8.              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our audited consolidated financial statements as of December 31, 2011 and 2010 and for the each of the three years in the period ended December 31, 2011, and the related notes to the financial statements, are filed as part of this annual report beginning on page F-1 below, and are incorporated by reference in this Item 8.

ITEM 9.              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE

None.

ITEM 9A.            CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

David Johnson, our principal executive and financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2011. Based on this evaluation, our principal executive and financial officer has concluded that our disclosure controls and procedures were not effective as of December 31, 2011 as a result of material weaknesses in internal control over financial reporting discussed below.

Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act.

Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

24


A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Management (under the supervision and with the participation of our principal executive officer and principal financial officer), assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the framework set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management concluded that our internal control was not effective as of December 31, 2011.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 and identified the following material weaknesses:

Inadequate Segregation of Duties: We have an inadequate number of personnel to properly implement certain control procedures including the absence of sufficient management review controls and separation of duties.

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only the management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the last quarter of our fiscal year ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.            OTHER INFORMATION

Not applicable.

PART III

ITEM 10.            DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table and information that follows sets forth the names and positions of our directors and executive officers:

Name and Municipality of    
Residence Current Office with Park Place Energy Corp. Director Since
     
David Johnson President, Chief Executive Officer and Director June 13, 2008
Vancouver, British Columbia    

25



Name and Municipality of    
Residence Current Office with Park Place Energy Corp. Director Since
Parvez Tyab
West Vancouver, British
Columbia
Director

October 4, 2011

     
Art Halleran
Calgary, Alberta
Director
October 4, 2011

The following is a description of the business background of the directors, director nominees and executive officers of our company.

David Johnson was appointed to our board on June 13, 2008. Prior to his appointment, in the past six years he was licensed with the Investor Dealers Association while employed with Odlum Brown Limited, a financial services firm (2005 – 2006). He also consulted to both private as well as public companies (2007 – 2012). The Board of Directors has concluded that Mr. Johnson should serve as a director given his experience with private and public companies, particularly those involved in the resources field.

Parvez Tyab was appointed to our board on October 4, 2011. Mr. Tyab has over 20 years’ experience as a financier and corporate executive, having served as an officer and director of a number of public and private companies. Mr. Tyab has been involved in the acquisition and development of oil and gas properties and natural resource projects in Canada, the US as well as internationally with an emphasis on Africa. In 2006 he co-founded and served as Executive Vice President of a company developing oil and gas in Egypt. More recently Mr. Tyab was involved in the acquisition of, and initial $165 Million private placement financing for, an oil and gas project in the Republic of Chad. Mr. Tyab currently serves as director of a significant potash project in the Republic of Congo. In 2009, Mr. Tyab co-founded Griffiths Energy International Inc. and served as that company’s corporate secretary and director until July 2011.

Dr. Arthur Halleran was appointed to our board on October 4, 2011. Dr. Halleran is a geologist obtaining his Ph.D. from the University of Calgary, who has 31 years of international petroleum exploration experience. International experience includes countries such as Canada, Colombia, Egypt, India, Guinea, Sierra Leone, Sudan, Suriname, Chile, Brazil, Pakistan, Peru, Tunisia, Trinidad Tobago, Argentina, Ecuador and Guyana. Dr. Halleran's experience includes work with Petro-Canada, Chevron, Rally Energy and Canacol Energy. In 2007, Dr. Halleran founded Canacol Energy Ltd., a company with petroleum and natural gas exploration and development activities in Colombia, Brazil and Guyana, where he served as vice president of exploration. Canacol is credited in the largest oil discovery in Colombia over the last fifteen years which is raised over $200,000,000 to develop. Previously Dr. Halleran was a consulting geologist for Rally Energy Corp. (Egypt) which discovered prolific reservoirs in Egypt. Dr. Halleran currently serves as chief executive officer of United Hunter Oil and Gas Corp., a company with oil interests in California, USA.

Term of Office

All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.

Significant Employees

There are no significant employees other than our executive officers.

26


Family Relationships

There are currently no family relationships between any of the members of our board of directors or our executive officers.

Board Independence

Two of our directors are considered independent directors under SEC rules as they are not officers of our company.

Committees of the Board of Directors

Our company does not currently have any committees of our board of directors.

Involvement in Certain Legal Proceedings

Except as disclosed in this annual report, during the past ten years none of the following events have occurred with respect to any of our directors or executive officers:

  1.

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

     
  2.

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

     
  3.

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:


  i.

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

     
  ii.

Engaging in any type of business practice; or

     
  iii.

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;


  4.

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) above, or to be associated with persons engaged in any such activity;

     
  5.

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

     
  6.

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

27



  7.

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:


  i.

Any Federal or State securities or commodities law or regulation; or

     
  ii.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

     
  iii.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or


  8.

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

There are currently no legal proceedings to which any of our directors or officers is a party adverse to us or in which any of our directors or officers has a material interest adverse to us.

Compliance with Section 16 of the Securities Exchange Act

Section 16(a) of the Exchange Act requires the executive officers and directors, and persons who beneficially own more than ten percent of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. We have received copies of such forms from our executive officers and directors. During the fiscal year ended December 31, 2011, except as disclosed below, these filings were made on a timely basis:


Reporting Person
No. of Late Reports During the Fiscal
Year Ended December 31, 2011
No. of Late Reports During the Fiscal
Year Ended December 31, 2010
David Johnson Zero Zero
Tom Mayenknecht(1) - Zero
Parvez Tyab(2) Zero -
Arthur Halleran(3) Zero -

Notes

  (1)

Mr. Mayenknecht was appointed Secretary and Treasurer on June 27, 2008 and resigned on October 31, 2010.

  (2)

Mr. Parvez was appointed as a Director on October 4, 2011

  (3)

Dr. Hallaren was appointed as a Director on October 4, 2011

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

28


We will provide a copy of the Code of Ethics to any person without charge, upon request. Requests can be sent to: Park Place Energy Corp., at Suite 300, 400-5 Avenue SW, Calgary, AB, T2P 0L6.

ITEM 11.            EXECUTIVE COMPENSATION

Summary Compensation Table

Particulars of compensation awarded to, earned by or paid during the last two fiscal years to:

  (a)

the person(s) serving as our company’s principal executive officer during the year ended December 31, 2011;

     
  (b)

each of our company’s two most highly compensated executive officers, other than the principal executive officer, who were serving as executive officers at the end of the year ended December 31, 2011, and whose total compensation exceeds $100,000 per; and

     
  (c)

up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as an executive officer of our Company at the end of the year ended December 31, 2011;

(individually a “Named Executive Officer” and collectively the “Named Executive Officers”) are set out in the summary compensation table below.

Name and
Principal
Position



Year






Salary
($)





Bonus
($)





Stock
Awards
($)



Option Awards (1) ($) Non-Equity Incentive
Plan
Compen-
sation ($)
Non-
qualified
Deferred
Compen-
sation
Earnings
($)
All Other
Compen-sation
Compen-sation
($)


Total
($)





David Johnson
President &
CEO(2)
2010
2011
33,768
53,873
-
-
-
-
13,060
-
-
-
-
-
-
-
36,928
53,873
Tom
Mayenknecht
Secretary &
Treasurer(3)
2010
2011

2,000
-

-
-

-
-

-
-

-
-

-
-

-
-

2,000
-

Notes

(1)

This column represents the grant date fair value of stock options granted.

(2)

Mr. Johnson was appointed President and CEO on June 12, 2008.

(3)

Mr. Mayenknecht was appointed Secretary and Treasurer on June 27, 2008 and resigned on October 31, 2010.

Outstanding Equity Awards as of December 31, 2010

The following table summarizes the outstanding equity awards as of December 31, 2011 for each of our named executive officers:

29



Option Awards Stock Awards















Name









Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable









Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable





Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)













Option
Exercise Price
($)













Option
Expiration
Date






Number
of
Shares
or Units
of Stock
That
Have
Not
Vested
(#)



Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)

Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
David
Johnson
30,000(1) - - 0.51 1/25/12 - - - -
- - - - - - - - -
Tom
Mayenknecht
- - - - - - - - -
- - - - - - - - -

Notes

(1)

Options were issued under the now defunct 2007 Stock Option Plan and expired January 25, 2012.

(2)

Mr. Mayenknecht was appointed Secretary and Treasurer on June 27, 2008 and resigned on October 31, 2010.

Compensation of Directors

All compensation of our directors is disclosed under “Executive Compensation”, above.

Employment Contracts and Termination of Employment and Change-In-Control Arrangements

There are no employment contracts or related arrangements with our executive officers.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of April 13, 2012 regarding the beneficial ownership of our common stock by:

  • each person who is known by us to beneficially own more than 5% of our shares of common stock; and

  • each named executive officer, each director and all of our directors and executive officers as a group.

The number of shares beneficially owned and the percentage of shares beneficially owned are based on 20,667,581 shares of common stock outstanding as of April 13, 2012.

For the purposes of the information provided below, shares that may be issued upon the exercise or conversion of options, warrants and other rights to acquire shares of our common stock that are exercisable or convertible within 60 days following April 13, 2012, are deemed to be outstanding and beneficially owned by the holder for the purpose of computing the number of shares and percentage ownership of that holder, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

30



  As of April 6, 2011
Name and Address of Beneficial Owner(1) Shares Percent
Named Executive Officers and Directors(2)    
     
Parvez Tyab
Director
2,850,000
13.79
     
Arthur Halleran
Director
300,000 (3) 1.45
     
David Johnson
President, Chief Executive Officer and Director
317,003
1.53
     
Directors and Executive Officers as a Group 3,467,003(4) 16.77

Notes

(1)

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of common shares actually outstanding on April 13, 2012.

   
(2)

The address of the executive officers and directors is c/o Park Place Energy Corp., Suite 300, 400-5 Avenue SW, Calgary, AB, T2P 0L6.

   
(3)

Includes options to acquire up to 300,000 shares of common stock exercisable within 60 days.

   
(4)

Includes 300,000 shares of common stock that may be acquired pursuant to options exercisable within 60 days.

ITEM 13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Except for the transactions described below, since the beginning of our last two fiscal years, none of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any material interest, direct or indirect, in any transaction, or in any proposed transaction, in which our company was or is to be a participant and in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years.

(a)            During the year ended December 31, 2011, the Company incurred consulting fees of $3,751 (2010 - $nil) to the President of the Company.

(b)            During the year ended December 31, 2011, the Company incurred management fees of $45,865 (US$46,371) (2010 – $nil) and consulting fees of $3,751 (2010 – $35,768) to a company controlled by the President of the Company.

(c)            During the year ended December 31, 2011, the Company incurred consulting fees of $12,621 (US$12,760) (2010 - $nil) to a company controlled by a director of the Company.

(d)            During the year ended December 31, 2011, the Company issued 160,000 (2010 - 107,004) shares of common stock to a company controlled by the President of the Company for settlement of $16,522 (US$16,000) (2010 - $34,085 (US$32,101)).

(e)            As at December 31, 2011, the amount of $3,200 (2010 - $nil) is due from a company controlled by the President of the Company which is non-interest bearing, unsecured, and due on demand.

31


(f)            As at December 31, 2011, the Company owed $5,308 (US$5,398) (2010 - $nil) to a company controlled by a director of the Company which is included in accounts payable and accrued liabilities. This amount owing is non-interest bearing, unsecured, and due on demand.

(g)            As at December 31, 2011, the Company owed $1,967 (US$2,000) (2010 - $nil) to a company controlled by the President of the Company which is included in accounts payable and accrued liabilities. This amount owing is non-interest bearing, unsecured, and due on demand.

Compensatory Arrangements

Other than compensatory arrangements described under “Executive Compensation,” we have no other transactions, directly or indirectly, with our promoters, directors, senior officers or principal stockholders, which have materially affected or will materially affect us.

ITEM 14.            PRINCIPAL ACCOUNTING FEES AND SERVICES

We appointed Saturna Group Chartered Accountants LLP to act as our independent auditors for the year ended December 31, 2011. Davidson & Company LLP served as our independent auditors for the year ended December 31, 2010. We have not retained the services of any other independent auditors. Saturna Group and Davidson & Company LLP performed the services listed below and was paid the fees listed below for the fiscal years ended December 31, 2011 and December 31, 2010:

Audit Fees

2011 2010
$27,750 $34,750

Audit Related Fees

2011 2010
None None

Audit Fees consist of fees billed for professional services rendered for the audits of our financial statements, reviews of interim financial statements included in quarterly reports, services performed in connection with filings with the Securities and Exchange Commission and related comfort letters and other services that are normally provided by Davidson & Company LLP in connection with statutory and regulatory filings or engagements.

Tax Fees

2011 2010
None None

Tax Fees consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

All Other Fees

2011 2010
None None

32


Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

Our entire board of directors acts as our audit committee, and has assumed responsibility for the pre-approval of audit and permitted non-audit services to be performed by our company’s independent auditor. The audit committee will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by Davidson & Company LLP. Thereafter, the audit committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by Davidson & Company LLP. which are not encompassed by the audit committee’s annual pre-approval and are not prohibited by law.

PART IV

ITEM 15.            EXHIBITS

Articles of Incorporation and By-laws
3.1

Articles of Incorporation(1)

3.2

Bylaws(2)

3.3

Certificate of Change Effective August 31, 2009(7)

3.4

Certificate of Change Effective March 24, 2010(8)

Material Contracts
10.1

Amalgamation agreement dated July 30, 2007 among the Company, Park Place Energy Inc., and 0794403 B.C. Ltd. (1)

10.2

Farmout Agreement dated May 30, 2006 between Bounty Developments Ltd. and the Company(1)

10.3

Oil Sands Lease No. 7406080083 dated August 10, 2006 (1)

10.4

Oil Sands Lease No. 7406080084 dated August 10, 2006 (1)

10.5

Seismic Option Agreement dated September 22, 2006 among the Company, Bounty Developments Ltd. and Damascus Energy Inc. (1)

10.6

Farmout and Option Agreement dated September 25, 2006 between the Company and Patch Energy Inc. (1)

10.7

Farmout Participation and Option Agreement dated October 12, 2006 among the Company, Terra Energy Corp., Regal Energy Ltd. and Patch Energy Inc. (1)

10.8

Amendment Agreement dated November 2, 2006 among Pine Petroleum Limited, Tidewater Resources Inc. and the Company (1)

10.9

Letter Agreement dated March 27, 2007 between the Company and Great Northern Oilsands, Inc. (1)

10.10

Letter Agreement dated April 4, 2007 between the Company and Great Northern Oilsands, Inc. (1)

10.11

Letter Agreement dated April 30, 2007 between the Company and Great Northern Oilsands, Inc. (1)

10.12

Earning Agreement dated June 1, 2007 among the Company, Great Northern Oilsands Inc. and Tidewater Resources Inc. (1)

10.13

Letter Agreement dated July 6, 2007 between Britcana Energy Ltd. and the Company (1)

10.14

Letter Agreement dated November 30, 2007 between Great Northern Oilsands, Inc. and the Company (5)

10.15

Participation Agreement dated August 8, 2007 between Montello Resources Ltd. and Great Northern Oilsands, Inc. (5)

10.16

Consulting Agreement dated January 1, 2007 between the Company and David Stadnyk(1)

10.17

Change of Control Agreement dated December 1, 2007 between the Company and Merchant Equities Capital Corp. (5)

10.18

Park Place Energy Corp. 2007 Stock Option Plan (5)

10.19

Park Place Energy Corp. 2007 Stock Option Plan, as amended June 2009(10)

10.20

Purchase and Sale Agreement dated February 15, 2008 among the Company, Panther Minerals Inc. and Brasam Extracao Ltda.(3)

10.21

Amended Management Services Agreement dated April 10, 2008 between the Company and David Stadnyk (5)

10.22

Termination Agreement regarding the Worsley Area Properties between the Company and Bounty Developments Ltd. dated June 25, 2008(6)

10.23

Termination Agreement regarding the Atlee Buffalo Area Properties between the Company and Bounty Developments Ltd. dated June 25, 2008(6)

10.24

Offer to Purchase Agreement regarding the Kerrobert Area Properties between the Company and True Energy Inc. dated June 25, 2008(6)

10.25

Purchase and Sale Agreement between the Company and Brasam Extracao Minerals Ltda. dated June

33



 

26, 2008(6)

10.26

Petroleum and Natural Gas Lease dated July 24, 2008(6)

10.27

Termination Agreement regarding the Cecil (Eureka) Area Properties between the Company and Bounty Developments Ltd. dated March 30, 2009(6)

10.28

Seismic Earning Agreement dated August 19, 2009(7)

10.29

Purchase and Sale Agreement dated September 16, 2009(9)

10.30

Notice of Assignment(9)

14.1

Code of Ethics (4)

Subsidiaries of the Small Business Issuer
21.1

Subsidiaries of Small Business Issuer:

 

Name of Subsidiary                                                        Jurisdiction of Incorporation

 

Park Place Energy (Canada) Inc.                                  British Columbia

 

Park Place Energy (International) Inc.                         British Columbia

Certifications
31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended(10)

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(10)

Notes

(1)

Incorporated by reference from our Current Report on Form 8-K/A, filed with the SEC on August 8, 2007.

(2)

Incorporated by reference from our registration statement on Form SB-2, filed with the SEC on December 9, 2004.

(3)

Filed with our Current Report on Form 8-K, filed with the SEC on March 6, 2008.

(4)

Incorporated by reference from our Annual Report of Form 10-KSB, filed with the SEC on October 11, 2006.

(5)

Incorporated by reference from our Annual Report on Form 10-KSB, filed with the SEC on April 15, 2008.

(6)

Incorporated by reference from our Annual Report on Form 10-K, filed with the SEC on March 31, 2009.

(7)

Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on September 3, 2009

(8)

Incorporated by reference form our Current Report on Form 8-K, filed with the SEC on March 29, 2010

(9)

Incorporated by reference form our Current Report on Form 8-K, filed with the SEC on November 11, 2009

(10)

Filed herewith

34



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated financial statements
December 31, 2011
(Expressed in Canadian dollars)

  Index
Report of independent registered public accounting firm F–1
Report of independent registered public accounting firm F–2
Consolidated balance sheets F–3
Consolidated statements of operations F–4
Consolidated statements of stockholders’ equity (deficit) F–5
Consolidated statements of cash flows F–7
Notes to the consolidated financial statements F–8


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Park Place Energy Corp. (An exploration stage company)

We have audited the accompanying consolidated balance sheet of Park Place Energy Corp. (an exploration stage company) as of December 31, 2011, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended and accumulated from May 4, 2006 (date of inception) to December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Park Place Energy Corp. as at December 31, 2010 and 2009 and for the years then ended and accumulated from May 4, 2006 (date of inception) to December 31, 2010 were audited by other auditors whose report dated March 29, 2011 included an explanatory paragraph regarding the Company’s ability to continue as a going concern. The financial statements for the period from May 6, 2006 (date of inception) to December 31, 2010 reflect a net loss of $11,877,700 of the related cumulative totals. The auditors’ report has been furnished to us, and our opinion, insofar as it related to amounts included for such periods, is based solely on the report of such auditors.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011, and the results of its operations and its cash flows for the year then ended and accumulated from May 4, 2006 (date of inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company generated negative cash flows from operating activities during the year and has incurred operating losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Saturna Group Chartered Accountants LLP

Vancouver, Canada

March 28, 2012


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors
Park Place Energy Corp.

We have audited the accompanying consolidated balance sheet of Park Place Energy Corp. as of December 31, 2010, and the related consolidated statements of operations, stockholders’ equity (deficiency), and cash flows for the year then ended and for the period from inception at May 4, 2006 to December 31, 2010. The Company’s management is responsible for these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010, and the results of its operations and its cash flows for the year then ended and for the period from inception at May 4, 2006 to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company generated negative cash flows from operating activities during the past year. The Company has an accumulated deficit of $11,877,700 as at December 31, 2010. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

“DAVIDSON & COMPANY LLP”

     Chartered Accountants

Vancouver, Canada

March 29, 2011



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated balance sheets
(Expressed in Canadian dollars)

    December 31,     December 31,  
    2011     2010  
     
ASSETS            
Current assets            
   Cash   432,535     22  
   Amounts receivable   15,646     5,680  
   Prepaid expenses and deposits   17,558     2,204  
   Due from related party (Note 9)   3,200      
Total current assets   468,939     7,906  
   Property and equipment (Note 3)   6,768     7,829  
   Oil and gas properties (Note 4)   183,549     76,860  
Total assets   659,256     92,595  
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)            
Current liabilities            
   Accounts payable and accrued liabilities   61,328     169,835  
Total liabilities   61,328     169,835  
Nature of operations and continuance of business (Note 1)            
Commitments and contingencies (Note 10)            
Stockholders’ equity (deficit)            
   Common stock
   Authorized: 40,000,000 shares, par value US$0.00001
 
   
 
   Issued and outstanding: 20,667,581 shares (2010 – 5,598,909 shares)   212     56  
   Additional paid-in capital   12,811,461     11,571,924  
   Accumulated other comprehensive income   195,570     228,480  
   Deficit accumulated during the exploration stage   (12,409,315 )   (11,877,700 )
Total stockholders’ equity (deficit)   597,928     (77,240 )
Total liabilities and stockholders’ equity (deficit)   659,256     92,595  

(The accompanying notes are an integral part of these consolidated financial statements)

F-3



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated statements of operations
(Expressed in Canadian dollars)

                Accumulated from  
                May 4, 2006  
    Year ended     Year ended     (date of inception)  
    December 31,     December 31,     to December 31,  
    2011     2010     2011  
       
                   
Oil and gas revenue   30,135         1,649,182  
                   
Direct costs                  
   Depletion   20,492         1,256,066  
   Production costs   23,532         1,163,582  
                   
Total direct costs   44,024         2,419,648  
               
    (13,889 )       (770,466 )
                   
Expenses                  
                   
   Consulting   87,946     326,231     1,953,637  
   Depreciation   2,191     1,514     6,240  
   Exploration costs           308,534  
   Foreign exchange loss   13,462     4,987     134,648  
   Impairment of oil and gas costs   59,589     37,558     4,304,265  
   Investor relations   24,609     20,777     908,647  
   Management fees   45,865         677,503  
   Office and general   14,929     92,445     737,520  
   Professional fees   98,951     126,362     1,019,197  
   Stock-based compensation   10,023     59,129     2,014,106  
   Travel   10,980     26,368     203,699  
                   
Total expenses   368,545     695,371     12,267,996  
                   
Loss before other income (expense)   (382,434 )   (695,371 )   (13,038,462 )
                   
Other income (expense)                  
                   
   Accretion of discount on convertible note payable   (146,205 )       (146,205 )
   Gain on marketable securities       4,635     4,635  
   Gain on sale of oil and gas properties           381,166  
   Gain on settlement of debt   4,886     341,777     346,663  
   Interest   (7,862 )       (7,862 )
   Other revenue (expense)       67,356     109,705  
   Loss on sale of oil and gas properties           (53,869 )
   Loss on write-down of promissory note           (254,997 )
                   
Total other income (expense)   (149,181 )   413,768     379,236  
                   
Loss before income taxes   (531,615 )   (281,603 )   (12,659,226 )
                   
Deferred income tax recovery           291,060  
                   
Net loss for the period   (531,615 )   (281,603 )   (12,368,166 )
                   
Other comprehensive income (loss)                  
                   
   Foreign currency translation adjustment   (32,910 )   (964 )   205,006  
                   
Comprehensive loss   (564,525 )   (282,567 )   (12,163,160 )
                   
Loss per share, basic and diluted   (0.06 )   (0.07 )      
                   
Weighted average number of shares outstanding   9,676,576     4,190,989        

F-4



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated statements of stockholders’ equity (deficit)
(Expressed in Canadian dollars)

                            Deficit        
                      Accumulated     accumulated        
                Additional     other     during the        
    Common Stock     paid-in     comprehensive     exploration        
          Amount     capital     Income (loss)     stage     Total  
    #    $          
Balance, May 4, 2006 (date of inception)                        
Issuance of common stock for cash   193,387     1,592,010                 1,592,010  
Net loss for the period                   (218,442 )   (218,442 )
Balance, December 31, 2006   193,387     1,592,010             (218,442 )   1,373,568  
Issuance of common stock for cash   106,467     1,492,000                 1,492,000  
Recapitalization   2,048,260     (2,792,659 )   2,792,658         (26,121 )   (26,122 )
Renunciation of flow-through shares       (291,060 )               (291,060 )
Common stock surrendered for cancellation   (1,500,000 )   (37 )   23         (15,028 )   (15,042 )
Issuance of common stock for cash   173,333     52     2,553,148             2,553,200  
Issuance of common stock for cash   46,740     14     688,465             688,479  
Issuance of common stock in settlement of debt   25,157     8     399,992             400,000  
Issuance of common stock for consulting agreement   6,667     2     139,443             139,445  
Stock-based compensation           1,524,704             1,524,704  
Stock issuance costs           (166,070 )           (166,070 )
Foreign currency translation adjustment               114,837         114,837  
Net loss for the year                   (4,335,207 )   (4,335,207 )
Balance, December 31, 2007   1,100,011     330     7,932,363     114,837     (4,594,798 )   3,452,732  
Issuance of common stock for cash   784,071     235     1,983,713             1,983,948  
Issuance of common stock in settlement of debt   71,429     21     149,979             150,000  
Issuance of common stock for consulting   183,333     56     560,702             560,758  
Stock-based compensation           310,444             310,444  
Stock issuance costs           (69,465 )           (69,465 )
Foreign currency translation adjustment               79,005         79,005  
Net loss for the year                   (5,195,292 )   (5,195,292 )
Balance, December 31, 2008   2,138,844     642     10,867,736     193,842     (9,790,090 )   1,272,130  

(The accompanying notes are an integral part of these consolidated financial statements)

F-5



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated statements of stockholders’ equity (deficit)
(Expressed in Canadian dollars)

                            Deficit        
                      Accumulated     accumulated        
                Additional     other     during the        
    Common Stock     paid-in     comprehensive     exploration        
          Amount     capital     Income (loss)     stage     Total  
    #            
Balance, December 31, 2008   2,138,844     642     10,867,736     193,842     (9,790,090 )   1,272,130  
Issuance of common stock for cash   155,000     46     92,390             92,436  
Stock-based compensation           109,806             109,806  
Foreign exchange translation adjustment               35,602         35,602  
Net loss for the year                   (1,806,007 )   (1,806,007 )
Balance, December 31, 2009   2,293,844     688     11,069,932     229,444     (11,596,097 )   (296,033 )
Issuance of common stock for cash   1,296,311     399     120,088             120,487  
Issuance of common stock for settlement of debt   1,638,754     518     125,670             126,188  
Issuance of common stock for consulting services   370,000     111     184,519             184,630  
Warrants           10,926             10,926  
Adjustment for par value       (1,660 )   1,660              
Stock-based compensation           59,129             59,129  
Foreign exchange translation adjustment               (964 )       (964 )
Net loss for the year                   (281,603 )   (281,603 )
Balance, December 31, 2010   5,598,909     56     11,571,924     228,480     (11,877,700 )   (77,240 )
Issuance of common stock for cash   10,447,917     108     807,816             807,924  
Issuance of common stock for settlement of debt   1,332,300     14     110,436             110,450  
Issuance of common stock for conversion of note payable   3,288,600     34     165,057             165,091  
Intrinsic value of beneficial conversion feature           146,205             146,205  
Stock-based compensation           10,023             10,023  
Foreign exchange translation adjustment               (32,910 )       (34,542 )
Rounding difference related to stock splits   (145 )                      
Net loss for the year                   (531,615 )   (531,615 )
Balance, December 31, 2011   20,667,581     212     12,811,461     195,570     (12,409,315 )   597,928  

(The accompanying notes are an integral part of these consolidated financial statements)

F-6



PARK PLACE ENERGY CORP.
(An exploration stage company)
Consolidated statements of cash flows
(Expressed in Canadian dollars)

                Accumulated from  
                May 4, 2006  
    Year ended     Year ended     (date of inception)  
    December 31,     December 31,     to December 31,  
    2011     2010     2011  
       
                   
Operating activities                  
                   
   Net loss for the period   (531,615 )   (281,603 )   (12,368,166 )
                   
   Adjustments to reconcile net loss to net cash used in operating activities:            
       Accretion of discount on convertible note payable   146,205         146,205  
       Deferred income tax recovery           (291,060 )
       Depletion   20,492         1,256,066  
       Depreciation   2,191     1,514     6,240  
       Gain on sale of marketable securities       (4,635 )   (4,635 )
       Gain on sale of oil and gas properties           (381,166 )
       Gain loss on settlement of debt   (4,886 )   (341,777 )   (346,663 )
       Impairment of oil and gas costs   59,589         2,984,236  
       Interest accrued on notes payable   7,862         20,392  
       Stock-based compensation   10,023     59,129     2,014,106  
       Write-off of exploration advances       37,558     37,558  
                   
   Changes in operating assets and liabilities                  
       Amounts receivable   (9,966 )   (1,638 )   (15,646 )
       Prepaid expenses and deposits   (15,354 )   1,694     (17,598 )
       Accounts payable and accrued liabilities   6,828     114,918     1,021,280  
       Shares and warrants issued for services       10,926     386,975  
       Shares issued for consulting services       184,630     508,785  
       Due from related parties   (3,200 )   (519 )   62,249  
                   
Net cash used in operating activities   (311,831 )   (219,803 )   (4,980,842 )
                   
Investing activities                  
                   
   Cash acquired through recapitalization           320  
   Exploration advances       (37,558 )   (270,919 )
   Loan receivable           (572,000 )
   Proceeds from sale of oil and gas properties       50,000     50,000  
   Proceeds from sale of marketable securities       79,635     79,635  
   Oil and gas properties expenditures   (186,770 )       (3,928,531 )
   Purchase of property and equipment   (1,130 )   (6,364 )   (13,008 )
                   
Net cash used in investing activities   (187,900 )   85,713     (4,654,503 )
                   
Financing activities                  
                   
   Proceeds from loans payable   145,550         770,550  
   Proceeds from issuance of common stock/ subscriptions received   807,924     120,487     9,094,933  
   Repurchase of common stock           (15,028 )
                   
Net cash provided by financing activities   953,474     120,487     9,850,455  
                   
Effect of exchange rate changes on cash   (21,230 )   9,211     217,425  
                   
Change in cash   432,513     (4,392 )   432,535  
                   
Cash, beginning of period   22     4,414      
                   
Cash, end of period   432,535     22     432,535  

Supplementary cash flow information (Note 11)

(The accompanying notes are an integral part of these consolidated financial statements)

F-7



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

1.

Nature of Business and Continuance of Operations

     

Park Place Energy Corp., formerly ST Online Corp. (the “Company”), was incorporated under the laws of the State of Nevada on August 27, 2004. On July 30, 2007, the Company acquired Park Place Energy (Canada) Inc. The acquisition was a capital transaction in substance and therefore was accounted for as a recapitalization. Under recapitalization accounting, Park Place Energy (Canada) Inc. was considered the acquirer for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of the Company. These consolidated financial statements include the accounts of the Company since the effective date of the recapitalization and the historical accounts of the business of Park Place Energy (Canada) Inc. since inception. The Company is in the business of acquiring and exploring oil and gas properties.

     

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has a history of negative cash flows from operating activities and the continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at December 31, 2011, the Company has accumulated losses of $12,409,315 since inception. These factors raise doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

     
2.

Summary of Significant Accounting Policies

     
(a)

Basis of Presentation

     

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in Canadian dollars. The Company has not produced significant revenue from its principal business and is an exploration stage company as defined by ASC 915, “Development Stage Entities”. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Park Place Energy (Canada) Inc., which is incorporated under the laws of British Columbia, Canada; Park Place (International) Inc. which is incorporated under the laws of British Columbia, Canada, and 0794403 B.C. Ltd., a company incorporated under the laws of British Columbia, Canada. All inter- company transactions and balances have been eliminated upon consolidation.

     
(b)

Use of Estimates

     

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the estimated useful lives and recoverability of long-lived assets, impairment of oil and gas properties, asset retirement obligations, valuation of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

     
(c)

Cash and Cash Equivalents

     

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

F-8



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(d)

Long-lived Assets

     

In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

     
(e)

Oil and Gas Properties

     

The Company follows the full cost method of accounting for oil and natural gas operations, whereby all costs of exploring for and developing oil and natural gas reserves are capitalized and accumulated in cost centres on a country-by-country basis. Costs include land acquisition costs, geological and geophysical charges, carrying charges on non-productive properties and costs of drilling both productive and non-productive wells. General and administrative costs which are associated with acquisition, exploration and development activities are capitalized. General and administrative costs are capitalized other than to the extent of the Company’s working interest in operated capital expenditure programs on which operator’s fees have been charged equivalent to standard industry operating agreements.

     

The costs in each cost centre, including the costs of well equipment, are depleted and depreciated using the unit-of- production method based on the estimated proved reserves before royalties. Natural gas reserves and production are converted to equivalent barrels of crude oil based on relative energy content. The costs of acquiring and evaluating significant unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion.

     

The capitalized costs less accumulated depletion and depreciation in each cost centre are limited to an amount equal to the estimated future net revenue from proved reserves (based on prices and costs at the balance sheet date) plus the cost (net of impairments) of unproved properties. The total capitalized costs less accumulated depletion and depreciation, site restoration provision and future income taxes of all cost centres is further limited to an amount equal to the future net revenue from proved reserves plus the cost (net of impairments) of unproved properties of all cost centres less estimated future site restoration costs, general and administrative expenses, financing costs and income taxes.

     

Proceeds from the sale of oil and natural gas properties are applied against capitalized costs, with no gain or loss recognized, unless such a sale would significantly alter the rate of depletion and depreciation.

     
(f)

Asset Retirement Obligations

     

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). The Company does not have any significant asset retirement obligations.

F-9



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(g)

Financial Instruments and Fair Value Measures

     

ASC 820, “Fair Value Measurements and Disclosures” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, accrued liabilities, convertible debt, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

     
  (h)

Revenue Recognition

     
 

The Company recognizes oil and gas revenue when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is reasonably assured.

     
  (i)

Income Taxes

     
 

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

     
 

As of December 31, 2011 and 2010, the Company did not have any amounts recorded pertaining to uncertain tax positions.

     
 

The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the U.S., as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2004 to 2010. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.

     
 

The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the years ended December 31, 2011 and 2010, there were no charges for interest or penalties.

F-10



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(j)

Foreign Currency Translation

     

The Company’s functional and reporting currency is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

     

The parent company follows the current rate method of translation. Accordingly, assets and liabilities are translated into Canadian dollars at the period–end exchange rate while revenue and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income.

     
(k)

Stock-based Compensation

     

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation”, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

     

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

     
(l)

Loss Per Share

     

The Company computes loss per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if- converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

     
(m)

Comprehensive Loss

     

Comprehensive loss consists of net loss and other related gains and losses affecting stockholders’ equity that are excluded from net income or loss. As at December 31, 2011, comprehensive loss includes cumulative translation adjustments for changes in foreign currency exchange rates during the period.

     
(n)

Reclassifications

     

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

F-11



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

2.

Summary of Significant Accounting Policies (continued)

     
(o)

Recent Accounting Pronouncements

     

In January 2010, the FASB issued an amendment to ASC 820, “Fair Value Measurements and Disclosures”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of the applicable standard on January 1, 2011 did not have a material effect on the Company’s consolidated financial statements.

     

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

     
3.

Property and Equipment


                  2011     2010  
            Accumulated     Net carrying     Net carrying  
      Cost     depreciation     value     value  
         $    
                           
  Computer equipment   6,644     4,713     1,931     1,783  
  Office furniture and equipment   6,364     1,527     4,837     6,046  
                           
      13,008     6,240     6,768     7,829  

4.

Oil and Gas Properties


      2011     2010  
       
  Unproven Properties            
     Canada       76,860  
     Bulgaria   183,549      
  Proven Properties            
     Canada   80,082      
  Depletion   (20,492 )    
  Impairment   (59,590 )    
      183,549     76,860  

On January 28, 2010, the Company purchased a 50% interest in an oil and gas property located in Saskatchewan, Canada by issuing a US$150,000 note payable. This note payable was later settled by issuing 500,000 shares of common stock. On May 11, 2010, the Company assigned one-half of its 50% working interest in this property to a privately held exploration company. As consideration of the assignment, the Company received 750,000 shares of the private company. As the shares had no active market they were valued based on the consideration give up, being US$750,000.

On April 6, 2010, the Company sold all of its oil and gas properties located in Alberta, Canada for consideration of $50,000.

On June 5, 2011, the Company entered into two farm-in agreements related to its 25% interest in an 80 acre oil and gas parcel located in western Saskatchewan. Pursuant to the terms of the agreement, the operator has agreed to undertake all costs related to drilling two test wells on the property by September 15, 2011. Once the test wells were drilled, the operator was provided with a 60% working interest in the properties. Subsequent to year end the property ceased producing oil and the management made the decision to fully impair the property as at December 31, 2011.

F-12



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

4.

Oil and Gas Properties (continued)

   

The Company presently holds a 98,000 square kilometer exploration claim in the Dobroudja Basin located in northeast Bulgaria (the “Vranino Block”). The Company intends to conduct exploration activities over a 5 year period including seismic processing and the drilling of, at minimum, six test wells for a minimum cost of approximately US$5,000,000. On October 25, 2010, an appeal against the Bulgarian Council of Ministers decision to award the Vranino Block to the Company was filed with the Supreme Administrative Court of Bulgaria and is presently pending. The Company awaits the result of this appeal process prior commencing the exploration program.

   
5.

Note Payable

   

On March 29, 2011, the Company issued a convertible promissory note for $145,500 (US$150,000). The note was secured by the issuance of 5,000,000 common shares of the Company, bearing interest at 10% per annum. The note was convertible into share of common stock of the Company at US$0.04 per share. In accordance with ASC 470, “Debt - Debt with Conversions and Other Options”, the Company determined that the note contained a beneficial conversion feature. Accordingly, the Company recognized $146,205 (US$150,000) as additional paid-in capital with an equivalent discount against the note.

   

On August 19, 2011, the agreement was amended to modify the conversion price to $0.05 per share of common stock.

   

On September 30, 2011, the note was converted into 3,288,600 shares of common stock for the balance of the note plus accrued interest. At this time the remaining balance of the discount was recorded to accretion expense for a total of Cdn$146,205 (US$150,000) for the year ended December 31, 2011.

   
6.

Common Stock

   

Stock transactions during the year ended December 31, 2011:


(a)

On May 4, 2011, the Company issued 5,000,000 shares of common stock as collateral for the note payable described in Note 5. On September 30, 2011, the shares were cancelled upon conversion of the note payable to shares of common stock.

   

(b)

On May 27, 2011, the Company issued 500,000 shares of common stock with a fair value of $24,433 (US$25,000) per share to settle accounts payable of $29,319 (US$30,000). The issuance resulted in a gain on settlement of debt of $4,886 (US$5,000).

   

(c)

On August 11, 2011, the Company issued 266,667 shares of common stock at a price of US$0.075 per share for proceeds of $19,767 (US$20,000).

   

(d)

On August 12, 2011 the Company issued 206,250 shares of common stock at a price of US$0.08 per share for proceeds of $15,746 (US$16,500).

   

(e)

On September 28, 2011 the Company issued 648,300 shares of common stock with a fair value of $66,943 (US$64,830) to settle accounts payable.

   

(f)

On September 29, 2011, the Company issued 184,000 shares of common stock with a fair value of $19,074 (US$18,400) to settle accounts payable.

   

(g)

On September 30, 2011 the Company issued 9,975,000 shares of common stock at a price of US$0.075 per share for proceeds of $772,411 (US$748,025).

   

(h)

On September 30, 2011 the Company issued 3,288,600 shares of common stock at a price of $0.05 per share for the conversion of the $157,229 (US$150,000) note payable plus accrued interest of $7,862 (US$7,500).

   

  Stock transactions during the year ended December 31, 2010:
   

(a)

On January 15, 2010, the Company issued 21,667 common shares at a price of US$0.30 for gross proceeds of $6,694 (US$6,500).

   

(b)

On January 25, 2010, the Company issued 8,424 common shares at a price of US$0.45 for gross proceeds of Cdn$4,018 (US$3,791).

F-13



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

6.

Common Stock (continued)

     

Stock transactions during the year ended December 31, 2010 (continued):

     
(c)

On January 28, 2010 the Company issued a total of 1,248,163 shares of common stock with a fair value of $64,870 (US$87,371) for settlement of outstanding payables of $169,235 (US$154,553), loans payable of $37,795 (US$35,000), amounts due to related parties of $34,085 (US$32,101) and a note payable of $159,270 ($US150,000). A gain of $304,819 (US$287,078) was recorded.

     
(d)

On February 16, 2010, the Company issued 6,576 common shares at a price of US$0.45 for gross proceeds of $3,088 (US$2,959).

     
(e)

On February 16, 2010, the Company issued 21,786 common shares at a price of US$0.51 for gross proceeds of $11,622 (US$11,111).

     
(f)

On February 16, 2010, the Company issued 187,857 units at US$0.21 per unit for proceeds of $41,265 (US$39,450). Each unit consisted of one share of common stock and one share purchase warrant exercisable at US$0.255.

     
(g)

On March 11, 2010, the Company issued 150,000 shares of common stock with a value of $9,219 (US$9,000) per share to settle accounts payable of $46,197 (US$45,000). A gain of $36,958 (US$36,000) was reported as the difference in accounts payable settled and the fair market value of shares issued.

     
(h)

On March 24, 2010 the Company affected a reverse stock split of its common shares on a three hundred old shares for one new share basis and decreased the authorized share capital from 12,000,000,000 common shares to 40,000,000 common shares.

     
(i)

On August 19, 2010, the Company completed a private placement issuing 850,000 shares of common stock at a price of US$0.05 per share for proceeds of $43,605 (US$42,500).

     
(j)

On August 19, 2010, the Company issued 169,163 shares of common stock with a fair value of $36,639 (US$35,524) for the settlement of accounts payable of 36,639 (US$35,524).

     
(k)

On August 19, 2010, the Company issued 71,428 shares of common stock with a fair value of $15,460 (US$15,000) for settlement of accounts payable of $15,460 (US$15,000).

     
(l)

On November 10, 2010, the Company issued 200,000 shares of common stock at a price of US$0.50 per share, $99,800 (US$100,000), to a consultant pursuant to the terms of a consulting agreement.

     
(m)

On November 10, 2010, the Company issued 170,000 shares of common stock at a price of US$0.50 per share, $84,830 (US$85,000) to a consultant pursuant to the terms of a consulting agreement.

     
(n)

On November 29, 2010, the Company issued 200,000 common shares at a price of US$0.05 for gross proceeds of $10,195 (US$10,000).

     
7.

Stock Options

     

The Company adopted an official incentive stock option plan as at October 11, 2007 whereby the total number of authorized options to be granted is up to a total of 200,000 Common Shares. Under the plan the exercise price of each option shall not be less than the market price of the Company’s stock as calculated immediately preceding the day of the grant. The vesting schedule for each option shall be specified by the Company at the time of grant. The maximum term of options granted is 10 years.

     

On June 24, 2009 the Company amended the stock option plan to increase common shares approved to 216,667.

     

On January 25, 2010 the Company amended and restated its 2007 Stock Option Plan to increase the maximum number of common shares that may be reserved for issuance under the Plan from 216,667 common shares to 533,333 common shares.

F-14



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

7.

Stock Options (continued)

   

The following table summarizes the continuity of the Company’s stock options:


            Weighted     Weighted        
            average     average     Aggregate  
            exercise     remaining     intrinsic  
      Number     price     contractual life     value  
      of options     US$     (years)    
                           
  Outstanding, December 31, 2009   46,665     1.20              
                           
     Granted   331,667     0.51              
     Cancelled   (58,453 )   0.42              
     Expired   (24,998 )   1.78              
                           
  Outstanding, December 31, 2010   294,881     0.51              
                           
     Granted   300,000     0.10              
                           
  Outstanding and exercisable, December 31, 2011   594,881     0.30     2.50      

Additional information regarding stock options as of December 31, 2011, is as follows:

    Exercise        
Number of   price        
 options   US$     Expiry date  
             
 294,881   0.51     January 25, 2012  
 300,000   0.10     November 21, 2016  
             
 594,881            

As of December 31, 2011 and December 31, 2010, the Company had no unrecognized compensation expense relating to unvested options.

The fair value for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:

    2011     2010  
             
Risk-free interest rate   1.11%     1.18%  
Expected life (in years)   1.0     2.0  
Expected volatility   148%     272%  

The weighted average fair value of stock options granted during the year ended December 31, 2011 is $0.03 (2010 - $0.10) per option.

   
8.

Share Purchase Warrants

   

The following table summarizes the continuity of share purchase warrants:


            Weighted  
            average  
            exercise  
      Number of     price  
      warrants     US$  
               
  Balance, December 31, 2009   537,167     4.20  
               
     Issued   254,523     0.27  
     Expired   (503,834 )   4.50  
               
  Balance, December 31, 2010   287,856     0.31  
               
     Expired   (33,333 )   0.60  
               
  Balance December 31, 2011   254,523     0.27  

F-15



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

8.

Share Purchase Warrants (continued)

   

As at December 31, 2011, the following share purchase warrants were outstanding:


    Exercise        
Number of   price        
warrants   US$     Expiry date  
             
187,857   0.26     January 16, 2012  
66,666   0.30     May 19, 2012  
             
254,523            

During the year ended December 31, 2010, the Company issued 66,666 share purchase warrants as compensation for consulting fees. The fair value of these share purchase warrants were estimated using the Black-Scholes option pricing model assuming no expected dividends, risk-free interest rate of 1.83%, expected life of 2 years, and expected volatility of 280%.

     
9.

Related Party Transactions

     
(a)

During the year ended December 31, 2011, the Company incurred consulting fees of $3,751 (2010 - $nil) to the President of the Company.

     
(b)

During the year ended December 31, 2011, the Company incurred management fees of $45,865 (US$46,371) (2010 – $nil) and consulting fees of $3,751 (2010 – $35,768) to a company controlled by the President of the Company.

     
(c)

During the year ended December 31, 2011, the Company incurred consulting fees of $12,621 (US$12,760) (2010 - $nil) to a company controlled by a director of the Company.

     
(d)

During the year ended December 31, 2011, the Company issued 160,000 (2010 - 107,004) shares of common stock to a company controlled by the President of the Company for settlement of $16,522 (US$16,000) (2010 - $34,085 (US$32,101)).

     
(e)

As at December 31, 2011, the amount of $3,200 (2010 - $nil) is due from a company controlled by the President of the Company which is non-interest bearing, unsecured, and due on demand.

     
(f)

As at December 31, 2011, the Company owed $5,308 (US$5,398) (2010 - $nil) to a company controlled by a director of the Company. This amount owing is non-interest bearing, unsecured, and due on demand.

     
(g)

As at December 31, 2011, the Company owed $1,967 (US$2,000) (2010 - $nil) to a company controlled by the President of the Company. This amount owing is non-interest bearing, unsecured, and due on demand.

     
10.

Commitments and Contingencies

     
(a)

The Company’s Vranino 1-11 oil and gas exploration claim in Bulgaria is the subject of an appeal before the Supreme Administrative Court of Bulgaria whereas a competitive bidder seeks to overturn the award. The matter is ongoing and is awaiting trial.

     
(b)

The Company is obligated to perform a five year work program on the Vranino 1-11 block of North East Bulgaria which total cost is estimated at US$5,000,000, subject to the finalization of the permit award in favor of the Company.

F-16



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

11. Supplementary Cash Flow Information

                  Accumulated from  
                  May 4, 2006 (date 
                  of inception) to  
                  December 31.  
      2011     2010     2011  
         
                     
  Non-cash investing and financing activities:                  
     Common stock issued for consulting services           376,049  
     Common stock issued for investor services       184,630     508,785  
     Common stock issued to settle debt   110,450     126,188     636,638  
     Common stock issued for conversion of note payable and interest   165,091         315,091  
     Marketable securities received for assignment of oil and gas interest       75,000     75,000  
                     
  Supplemental disclosures:                  
     Interest paid            
     Income taxes paid            

12.

Segmented Information

   

The Company’s operations are in the resource industry in Canada and Bulgaria. Geographical information is as follows:


  2011   Canada     Bulgaria     Total  
         
     Revenue   30,135         30,135  
     Property and equipment   6,768         6,768  
     Oil and gas properties       183,549     183,549  

  2010   Canada     Bulgaria     Total  
         
     Revenue            
     Property and equipment   7,829         7,829  
     Oil and gas properties   76,860         76,860  

13.

Income Taxes

   

The Company has net operating losses carried forward of $ ________ available to offset taxable income in future years which expires in beginning in fiscal 2027.

   

The Company is subject to United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:


    2011       2010  
  $      
               
  Income tax recovery at statutory rate         (95,745 )
               
  Permanent differences and other         (112,390 )
  Valuation allowance change         208,135  
   Provision for income taxes   -      

F-17



PARK PLACE ENERGY CORP.
(An exploration stage company)
Notes to the consolidated financial statements
Year ended December 31, 2011
(Expressed in Canadian dollars)

13. Income Taxes (continued)

The significant components of deferred income taxes and assets as at December 31, 2011 and 2010 are as follows:

    2011     2010  
     
               
  Net operating losses carried forward         2,532,800  
  Oil and gas properties         1,951,700  
  Property and equipment         20,700  
  Share issuance costs         800  
               
            4,506,000  
               
  Valuation allowance         (4,506,000 )
               
  Net deferred income tax asset        

As at December 31, 2011, the Company is in arrears on filing its statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.

F-18


SIGNATURES

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

PARK PLACE ENERGY CORP.

By: /s/ David Johnson  
  David Johnson  
  President, Chief Executive Officer and a Director  
  Date: April 13, 2012  

In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ David Johnson  
  David Johnson  
  President, Chief Executive Officer and a Director  
  Date: April 13, 2012  
     
     
By: /s/ Parvez Tyab  
  Parvez Tyab  
  Director  
  Date: April 13, 2012  
     
     
By: /s/ Arthur Halleran  
  Arthur Halleran  
  Director  
  Date: April 13, 2012