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					Financial Statements of




MADISON ENERGY CORP.

For the period ended June 30, 2009




In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the
Company discloses that its auditors have not reviewed the unaudited financial statements for the period
ended June 30, 2009.
MADISON ENERGY CORP.
Balance Sheets
                                                                June 30     December 31
                                                                  2009            2008
                                                             (unaudited)       (audited)

Assets
Current
    Cash                                                 $          601     $      16,304
    Accounts receivable                                         291,644           433,109
    Prepaid expenses                                             40,535            52,713
                                                                332,780           502,126

Property and equipment (note 3)                                5,424,650        5,760,672

                                                         $     5,757,430    $   6,262,798


Liabilities and Shareholders’ Equity
Current
    Bank indebtedness (note 4)                           $     1,210,000    $     304,014
    Accounts payable and accrued liabilities                     225,234        1,702,611
    Current portion of convertible debentures (note 5)            49,719          143,740
                                                               1,484,953        2,150,365

Convertible debentures (note 5)                                 637,429           633,761

Asset retirement obligations (note 6)                            556,527          539,041
                                                               2,678,909        3,323,167

Shareholders’ equity (deficit)
   Equity instruments (note 7)                                 8,642,888         8,780,379
   Equity portion of convertible debentures (note 5)              58,566            66,932
   Contributed surplus (note 7)                                  806,515           699,994
   Deficit                                                    (6,429,448)       (6,607,674)
                                                               3,078,521         2,939,631
Future operations (note 1)
Subsequent event (note 15)

                                                         $     5,757,430    $   6,262,798



See accompanying notes to financial statements


Approved by the board:

___________________
Director

___________________
Director
MADISON ENERGY CORP.
Statements of Operations, Comprehensive Income and Deficit
(unaudited)
                                             Three months ended June 30             Six months ended June 30
                                                    2009          2008                   2009          2008


Revenue:
   Petroleum and natural gas revenue              $     656,152 $     1,069,614 $    1,360,060 $    2,057,278
   Royalties                                            (45,621)       (206,816)      (115,881)      (382,155)

                                                        610,531        862,798       1,244,179      1,675,123

Expenses:
   Lease operating                                      165,710        192,416        352,933        373,147
   Administrative                                       111,365        130,071        236,790        297,201
   Depletion, depreciation and accretion                198,939        258,729        422,530        523,743
   Interest                                              33,217         36,247         61,375         77,197

                                                        509,231        617,463       1,073,628      1,271,288

Income and comprehensive income
    for the period before taxes                         101,300        245,335        170,551        403,835

Interest on share purchase financing                         473            411            991           822

Early redemption of convertible debentures                 6,684              –          6,684              –
Deficit, beginning of period                          (6,537,905)    (7,098,234)    (6,807,674)    (7,257,145)

Deficit, end of period                            $ (6,429,448) $ (6,852,488) $ (6,629,448) $      (6,852,488)

Basic and diluted income per share                $         0.01 $         0.01 $         0.01 $         0.02

Weighted average number of shares                     24,890,651     26,667,433     24,967,170     26,667,058

See accompanying notes to financial statements.
MADISON ENERGY CORP.
Statements of Cash Flows
(unaudited)
                                                   Three months ended June 30        Six months ended June 30
                                                          2009          2008              2009          2008

Operating:
 Net income for the period                         $    101,300 $    245,335     $     170,551 $        403,835
 Non-cash items
   Stock-based compensation                                   –             –                –           42,145
   Depletion and depreciation                           198.939      258,729           422,530          523,743

                                                        300,239      504,064           593,081          969,723
  Change in non-cash working capital items
   (note 10)                                            (26,252)    (190,726)          (70,195)         (76,878)

                                                        273,987      313,338           522,886          892,845
Investing:
  Investment in petroleum and natural gas
    property & equipment                                 (5,161)    (159,274)          (61,058)        (227,691)
  Change in non-cash working capital items
    (note 10)                                            (3,162)    (128,956)        (1,255,961)       (236,380)

                                                         (8,323)    (288,230)        (1,317,019)       (464,071)
Financing:
  Increase (decrease) in bank indebtedness             (170,120)      89,526           905,986         (220,562)
  Redemption of convertible debentures                 (100,000)                      (100,000)         (50,000)
  Share purchase financing                                15,473         411            15,991               822
  Change in non-cash working capital items
    (note 10)                                              (750)      (13,875)            2,422         (14,760)
  Purchase of common shares                             (10,990)    (101,170)          (45,969)        (144,274)

                                                       (266,387)     (25,108)          778,430          (428,774)

Decrease in cash                                           (723)            –          (15,703)               –

Cash, beginning of period                                 1,324             –          16,304                 –

Cash, end of period                                $        601 $           – $           601      $          –

Supplemental disclosure of cash flow information
Interest paid                                      $     33,967 $     36,247 $         62,125 $          63,322
Taxes paid                                         $          – $           – $              – $              –

See accompanying notes to financial statements
MADISON ENERGY CORP.
Notes to Financial Statements, page 1

June 30, 2009 and 2008



1. Nature of operations:
   Madison Energy Corp. (the “Company”) was incorporated under the Business Corporations Act on
   February 21, 1974 and is listed on the TSX Venture Exchange. Since August 2004, the Company has
   been involved in the exploration, development and production of petroleum and natural gas in
   Canada.

   At June 30, 2009, the Company had a working capital deficiency totaling $1,152,173 (Dec 2008 -
   $1,648,239). During the six month period ended June 30, 2009 the Company generated net income
   and funds from operations totaling $170,551 and $522,886 respectively (six months ended June 30,
   2008 – $403,835 and funds generated of $892,845). These interim financial statements have been
   prepared on a going concern basis, which assumes the Company will be able to realize its assets and
   discharge its liabilities in the normal course of business for the foreseeable future. These financial
   statements do not include any adjustments that would be necessary should the Company be unable
   to continue as a going concern. Continuation as a going concern is dependent upon the Company’s
   ability to generate future profitable operations and obtaining the necessary financing to meets its
   obligations.


2. Significant accounting policies:

   These interim financial statements have been prepared by management, without audit or review by
   the Company’s auditors, in accordance with Canadian generally accepted accounting principles.
   These interim financial statements have been prepared using the same accounting principles as the
   audited financial statements for the year ended December 31, 2008 and do not include all the note
   disclosure required for the annual financial statements. These interim financial statements should be
   read in conjunction with the Company’s audited financial statements for the year ended December
   31, 2008. The preparation of financial statements in conformity with Canadian generally accepted
   accounting principles requires management to make estimates and assumptions that affect the
   amounts reported in the financial statements and accompanying notes. The most significant
   estimates made by management relate to amounts recorded for the depletion and depreciation of
   property and equipment, amounts used for the ceiling test calculation and the determination of stock
   based compensation and the asset retirement obligation. Actual results may differ from these
   estimates. The financial statements, have in management’s opinion, been properly prepared using
   careful judgment within reasonable limits of materiality and within the framework of the significant
   accounting policies.
MADISON ENERGY CORP.
Notes to Financial Statements, page 2

June 30, 2009 and 2008



2. Significant accounting policies (continued):
   (a) Changes in accounting policy:
       The following summarizes accounting changes adopted by the Company January 1, 2009.
       Section 3064 – Goodwill and Intangible Assets replaces Section 3062 – Goodwill and Other
       Intangible Assets and Section 3450 – Research and Development Costs. The new Section 3064
       addresses when an internally developed intangible asset meets the criteria for recognition as an
       asset. The CICA also issued amendments to Section 1000 – Financial Statement Components.
       The adoption of this section did not have a significant impact on the financial statements.

       Section 1582 – Business Combinations replaces former guidance on business combinations and
       establishes principles and requirements of the acquisition method for business combinations and
       related disclosures. The statement applies prospectively to business combinations for which the
       acquisition date is on or after the first annual reporting period beginning on or after January,
       2011.
   (b) Future accounting policies (continued):

       In February 2008, the Accounting Standards Board of the CICA confirmed the changeover to
       International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January
       1, 2011. The Company is currently evaluating the impact of the change on its financial
       statements.
MADISON ENERGY CORP.
Notes to Financial Statements, page 3

June 30, 2009 and 2008



3. Property and equipment:

                                                                 Accumulated
                                                                depletion and           Net book
   June 30, 2009                                       Cost      depreciation              value

   Petroleum and natural gas properties         $ 9,241,170       $ 3,829,021        $ 5,412,149
   Office furniture and equipment                    19,898            13,982              5,916
   Computer equipment                                22,192            16,585              5,607
   Computer software                                  3,552             2,574                978

                                                $ 9,286,812       $ 3,862,162        $ 5,424,650

   December 31, 2008

   Petroleum and natural gas properties         $ 9,183,147       $ 3,437,182        $ 5,745,965
   Office furniture and equipment                    19,898            12,939              6,959
   Computer equipment                                22,192            15,595              6,597
   Computer software                                  3,552             2,401              1,151

                                                $ 9,228,789       $ 3,468,117        $ 5,760,672


   No administrative expenses have been capitalized to property and equipment. At June 30, 2009 costs
   of acquiring unevaluated properties in the amount of $147,444 were excluded from depletable costs.
MADISON ENERGY CORP.
Notes to Financial Statements, page 4

June 30, 2009 and 2008



4. Bank indebtedness:
    The Company has a $2,000,000 revolving operating demand loan from a Canadian chartered bank.
    The loan bears interest at the Bank’s prime rate of interest plus 1.25% per annum. Interest is payable
    monthly. The credit facility is secured by a general assignment of book debts and a $5,000,000
    floating charge debenture over the Company’s assets. At June 30, 2009, the Company has drawn
    $1,210,000 on this credit facility.
    The credit facility is subject to covenants requiring the Company to maintain certain asset and
    revenue ratios, all of which were met at June 30, 2009.


5. Convertible debentures:
   In August, 2007 the Company issued an aggregate principal amount of $575,000 of 12% and
   $275,000 of 9% unsecured convertible debentures, maturing August 2009. Interest on the debentures
   is payable quarterly. The 9% debentures are convertible at any time into common shares of the
   Company at the option of the debenture holder at a conversion rate of $0.20 per common share. The
   12% debentures are convertible at any time at the option of the debenture holder into common shares
   of the Company at a conversion rate of $0.25 per common share. The Company has the option to
   repay the debentures at any time upon 30 days notice and the payment of one month’s additional
   interest. Certain officers and directors purchased an aggregate $150,000 of the 12% debentures.
   In February 2008 $50,000 of the 12% debentures held by a director was redeemed for cash.
   In December, 2008 debenture holders of $525,000 of the 12% debentures and $125,000 of the 9%
   debentures (total of $650,000) agreed to extend the maturity date to August 2011. The modification
   was not considered to be a substantial change in the terms of the debenture and therefore no gain or
   loss was recognized.

   In May 2009, $100,000 of the 9% debentures was redeemed for cash. The principal amount at June
   30, 2009 is $700,000.
   The debt component is classified as a liability and recorded as the present value of the obligation to
   make future interest payments in cash. The carrying value of the debt is accreted to the original face
   value of the instruments over their useful life.

   Accretion expense of $7,964 has been recorded during the six month period ended June 30, 2009.
MADISON ENERGY CORP.
Notes to Financial Statements, page 5

June 30, 2009 and 2008


6. Asset retirement obligations:



   The following table presents the reconciliation of the carrying amount of the obligation associated with
   the retirement of the Company’s oil and gas property and equipment:
                                                                              June 30          December 31
                                                                                 2009                 2008

   Asset retirement obligation, beginning of period                     $   539,041          $   481,915
   Liabilities incurred                                                           –               20,431
   Revisions                                                                 (3,035)                   –
   Accretion                                                                 20,521               36,695


   Asset retirement obligation, end of period                           $   556,527          $   539,041


   The following assumptions were used to estimate the asset retirement obligation:


                                                                            June 30          December 31
                                                                              2009                2008

   Undiscounted cash flows                                                 994,857            1,000,032
   Risk free interest rate                                                   7.5-9%              7.5-9%
   Inflation rate                                                              1.5%                1.5%
   Abandonment date                                                    2015 to 2026        2015 to 2026


7. Equity instruments:

   (a) Authorized
       Unlimited number of common voting shares without nominal or par value
   (b) Issued and outstanding

       Common Shares                                                     Number             Amounts

       Balance, December 31, 2008                                     25,599,516         $ 8,780,379
       Purchase and cancellation of shares
       under Normal Course Issuer Bid (note i)                          (428,500)           (152,491)
       Share purchase financing repayment (note ii)                                           15,000

       Balance, June 30, 2009                                         25,171,016         $ 8,642,888
MADISON ENERGY CORP.
Notes to Financial Statements, page 6

June 30, 2009 and 2008


7. Equity instruments (continued):
   (i) In December, 2008 the Company continued the Normal Course Issuer Bid to purchase up to
       2,053,647 common shares or approximately 10% of the common shares outstanding on the date
       of the announcement, during the twelve month period commencing December 1, 2008 and
       ending November 30, 2009. During the six month period ended June 30, 2009 the Company
       purchased 442,000 common shares at an average price of $0.11 and a total cost of $45,970. It is
       the intention of the Company to cancel all shares purchased in 2009.
   (ii) The Company provided a loan to the President of the Company. The loan is secured by 278,708
        common shares of the Company purchased with the loan, bears interest at the rate of 3% per
        annum and is repayable on or before May 1, 2010. During the six month period ended June 30,
        2009, $15,000 of the loan was repaid. The balance of the loan at June 30, 2009 is $55,000 and
        is shown as a reduction of share capital. Interest of $991 was charged by the Company during
        the period.

   c) Stock options

                                                                        Number         Exercise price

       Outstanding, December 31, 2008                                 1,840,000
       Expired                                                         (150,000)             $ 0.15

       Exercisable June 30, 2009                                      1,690,000

       The Company has a stock option plan under which employees, directors and consultants are
       eligible to receive grants of up to 10% of the shares issued. Options granted under the plan have
       varying vesting periods and are determined by the Board at the grant date.

       On June 30, 2009, 150,000 stock options exercisable at $0.15 expired.
       The following table summarizes information about the options outstanding at June 30, 2009:
                                                                                           Number of
                                                                          Weighted            options
           Options                                                      average life        currently
       outstanding                        Exercise price                 remaining        exercisable

         325,000                      $      0.20                        0.60 years          325,000
         575,000                      $      0.22                        1.17 years          575,000
         380,000                      $      0.29                        2.21 years          380,000
         410,000                      $      0.15                        3.56 years          410,000


       1,690,000                                                         1.88 years        1,690,000
MADISON ENERGY CORP.
Notes to Financial Statements, page 7

June 30, 2009 and 2008


7. Equity instruments (continued):


       The Black Scholes Model was used to calculate the fair value of the options granted. No stock
       options have been granted in 2009.
       The following assumptions were used in the calculation:

       Expected life of options                                                              5 years
       Risk free interest rate                                                                4%
       Expected volatility                                                                    96%
       Forfeiture rate                                                                        nil


   d) Contributed surplus

                                                                         June 30        December 31
                                                                           2009               2008

   Contributed surplus:
      Opening balance                                                $   699,994        $     322,295
      Stock based compensation expense                                         _               42,145
      Normal course issuer bid                                           106,521              340,982
      Options exercised in the year                                            _               (5,428)

   Closing balance                                                   $   806,515        $     699,994

8. Income Taxes:

   (a) The components of the Company’s future income tax asset are a result of the origination
       and reversal of temporary and long-term differences and are comprised of the following:

                                                                         June 30       December 31
                                                                           2009              2008

       Property and equipment                                        $   875,076        $ 1,123,263
       Non capital losses                                                 58,108             58,108
       Share issue costs                                                   1,238              2,476
                                                                         934,422          1,183,847

       Valuation allowance                                               (934,422)          (1,183,847)
                                                                     $          _       $            _


       No future tax asset has been recognized as the test of realization being more likely than not, has
       not been met.
MADISON ENERGY CORP.
Notes to Financial Statements, page 8

June 30, 2009 and 2008



9. Commodity contract:
   At June 30, 2009, the Company had a fixed price physical contract in place to sell 1,000 barrels of oil
   per month to a third party at a floor price of $100.00 and a ceiling price of $175.50 Canadian per
   barrel. The contract expires August 31, 2009. During the six month period, a gain of $231,140 was
   recorded on this contract.

10. Change in non-cash working capital:


                                              Three months ended June 30       Six months ended June 30
                                                   2009         2008                2009         2008


     Accounts receivable                      $ 156,687       $ (220,740)      $ 141,465 $ (85,267)
     Prepaid expenses                              9,280         (26,234)          12,178   ( 22,914)
     Accounts payable & accrued liabilities     (196,131)         (86,583)     (1,477,377) (219,837)

                                              $   (30,164)    $ (333,557)      $(1,323,734) $ (328,018)

     The change in non-cash working capital has been allocated to the following activities:

     Operating                                $   (26,252)    $ (190,726)      $   (70,195) $ (76,878)
     Financing                                        (750)      (13,875)            2,422     (14,760)
     Investing                                      (3,162)     (128,956)       (1,255,961) (236,380)

                                              $   (30,164)    $ (333,557)      $(1,323,734) $ (328,018)



11. Related Party Transactions:
   Except as disclosed elsewhere, the Company was involved in the following related party transactions
   during the six month period ended June 30, 2009:
   (i) The Company paid $48,975 (2008 - $61,975) which is included in administrative expenses to a
   company controlled by an officer for professional services.

   (ii)The Company paid $2,138 (2008 - $2,483) in legal fees, related to professional fees to a law firm
   where a director of the Company is a partner.
   All related party transactions occurred in the normal course of operations, have been measured at the
   agreed to exchange amount, which is the amount of consideration established and agreed to by the
   related parties and are similar to those negotiable with third parties.
MADISON ENERGY CORP.
Notes to Financial Statements, page 9

June 30, 2009 and 2008



12. Capital structure:
   The Company’s objective is to maintain a strong capital base and financial flexibility to maintain
   investor, creditor and market confidence while sustaining the future development of the business.
   The Company manages its capital structure and makes adjustments to it in light of economic
   conditions and the risk characteristics of the underlying petroleum and natural gas assets. The
   Company considers its capital structure to include shareholders equity, bank indebtedness,
   convertible debentures and working capital. In order to maintain or adjust the capital structure, the
   Company may from time to time purchase shares for cancellation pursuant to normal course issuer
   bids, issue shares, seek additional bank indebtedness, issue additional convertible debentures or
   adjust its capital spending to manage current and projected debt levels.
   To assess capital and operating efficiency and financial strength, the Company monitors its net debt
   and working capital which is a non-GAAP measure and calculated as follows:


                                                                        June 30        December 31
                                                                          2009               2008

       Current assets                                            $      332,780         $    502,126
       Bank debt                                                     (1,210,000)            (304,014)
       Accounts payable and accrued liabilities                        (225,234)          (1,702,611)
       Current portion of convertible debentures (note i)               (49,719)            (143,740)
       Net debt and working capital deficiency                   $   (1,152.173)        $ (1,648,239)


    (i) The face value of the debentures due on August 7, 2009 is $ 50,000.
    The net debt and working capital deficiency is a result of normal operating conditions from periods
    when the Company incurs significant capital expenditures relative to revenue.
    The Company’s share capital is not subject to external restrictions. The Company has not paid or
    declared any dividends since the date of incorporation nor are any contemplated in the foreseeable
    future. The amount of the credit facility is based on the value of petroleum and natural gas reserves
    and contains covenants related to net asset and net revenue coverage and the absence of material
    adverse change as determined by the lender. The covenants require that the net present value
    discounted at a rate of 15% of the proved producing reserves must not be less than 150% of the
    availability and the estimated net revenue of those proved producing reserves for the next
    succeeding twelve months must exceed 125% of the principal plus interest for the corresponding
    period. All covenants have been met at June 30, 2009.
MADISON ENERGY CORP.
Notes to Financial Statements, page 10

June 30, 2009 and 2008



13. Financial instruments:
   The Company’s financial instruments include cash, accounts receivable, accounts payable and
   accrued liabilities, bank indebtedness and convertible debentures. The fair value of cash, accounts
   receivable, accounts payable and accrued liabilities approximate their carrying value due to their
   short term to maturity. The bank indebtedness bears interest at a floating market rate and
   accordingly the fair market value approximates the carrying value.
   The fair value of the conversion feature of the convertible debentures is determined using an effective
   interest method and classified as equity. The debt component is classified as a liability and recorded
   as the present value of the obligation to make future interest payments in cash. The carrying value of
   the liability is accreted to the original face value of the instruments over their useful life.


14. Financial risk management:
   The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of
   financial instruments. This note presents information about the Company’s exposure to these risks
   and the Company’s objectives, policies and procedures for measuring and managing the risks.
   Further quantitative disclosures are included throughout these financial statements.
   The Board of Directors has overall responsibility for the establishment and oversight of the
   Company’s risk management framework.
   Credit risk
   Substantially all the Company’s accounts receivable are with joint venture partners and petroleum
   and natural gas marketers and are subject to normal industry credit risks. Credit risk arises with the
   risk of financial loss if a customer, partner or counterparty to a financial instrument fails to meet its
   contractual obligations.

   Receivables from petroleum and natural gas marketers are normally collected on the 25th day of the
   month following production. The Company sells the majority of its production to three petroleum and
   natural gas marketers and therefore is subject to concentration risk. The Company assesses the
   financial strength of the petroleum and natural gas marketers prior to entering into sales contracts
   and historically has not experienced any collection issues with these marketers. Joint venture
   receivables are typically collected within one to three months of the joint venture bill being issued to
   partners. The receivables are from participants in the petroleum and natural gas industry and
   collection is dependent on industry factors such as commodity price fluctuations, escalating costs,
   risk of unsuccessful drilling and occasional disagreements between parties. The risk is mitigated by
   the Company by obtaining partner approval before significant capital expenditures are incurred. The
   Company has the ability to withhold production from joint venture partners in the event of non-
   payment.

   The Company establishes an allowance for doubtful accounts based on management’s assessment
   of collection, therefore the carrying amount of accounts receivable represents the maximum credit
MADISON ENERGY CORP.
Notes to Financial Statements, page 11

June 30, 2009 and 2008


   exposure. At June 30, 2009, the accounts receivable balance was $291,644, of which $10,401 was
   greater than 90 days past due. These past due accounts are considered to be collectible. No
   allowance was provided at June 30, 2009.
   Liquidity risk
   Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are
   due. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to
   meet its liabilities when due without incurring unacceptable losses or risking harm to the Company’s
   reputation.

   The Company prepares capital expenditure budgets which are monitored and updated as considered
   necessary. The Company uses authorizations for expenditures on both operated and non-operated
   properties to further manage capital expenditures. To facilitate the capital expenditure program, the
   Company has a revolving credit facility that is reviewed annually by the lender. The Company
   monitors its debt position monthly.
   The Company has convertible debentures outstanding that mature in 2009 and 2011. Interest
   payments are made quarterly with cash provided by operating activities. As the debentures become
   due, the Company can satisfy the obligations in cash or the principal amount can be converted into
   common shares at a price determined by the debenture agreements. This settlement alternative
   allows the Company to adequately manage liquidity, plan available cash resources and implement an
   optimal capital structure.
   Market risk

   Market risk is the risk that changes in market prices, such as commodity prices, interest rates and
   currency risk will affect the Company’s net earnings or the value of its financial instruments. The
   objective of market risk management is to mitigate exposure within acceptable limits, while
   maximizing returns.
   The Company may use commodity price contracts or physical delivery sales contracts to manage
   market risks. All such transactions are conducted in accordance with a risk management policy
   approved by the Board of Directors.
   Foreign currency exchange risk
   Foreign currency exchange risk is the risk that the fair value of financial instruments or future cash
   flows will fluctuate as a result of changes in foreign exchange rates. Substantially all of the
   Company’s petroleum and natural gas sales are denominated in Canadian dollars however, the
   underlying market prices in Canada for petroleum and natural gas are impacted by changes in the
   exchange rate between the Canadian and United States dollar. The Company had no forward
   exchange rate contracts in place at June 30, 2009.
MADISON ENERGY CORP.
Notes to Financial Statements, page 12

June 30, 2009 and 2008



   Commodity price risk
   Commodity price risk is the risk that the fair value of financial instruments or future cash flows will
   fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural
   gas are impacted by world economic events that dictate the levels of supply and demand. The
   Company has attempted to mitigate the risk through the use of fixed price physical sales contracts.

   At June 30, 2009, the Company had a fixed price physical contract in place to sell 1,000 barrels of oil
   per month to a third party at a floor price of $100.00 and a ceiling price of $175.50 Canadian per
   barrel. The contract expires August 31, 2009 (see note 9). During the six month period ended June
   30, 2009 the Company recorded a gain of $231,140 on this contract.
   For the six month period ended June 30, 2009 the sensitivity of changes in the Company’s realized
   crude oil and liquids prices and natural gas prices on cash flow from operations would have been as
   follows. An increase of $1.00 per barrel in the realized price for crude oil and liquids would have
   resulted in approximately $16,800 additional cash flow form operations. An increase of $0.10 per
   thousand cubic feet in the realized price for natural gas would have resulted in approximately $4,700
   additional cash flow from operations. The above sensitivity should not be extrapolated further without
   considering Madison’s commodity price contracts, royalty parameters and other potential price-
   related effects on the results of the period.

   Interest rate risk
   Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market
   interest rates. The Company is exposed to interest rate fluctuations on its credit facility which bears
   interest at a floating rate. The Company had no interest rate swaps or financial contracts in place at
   June 30, 2009. For the six months ended June 30, 2009, a difference in the interest rate of one
   percent would change net earnings by approximately $10,000, assuming all other variables are
   constant.


15. Subsequent events:
   In August 2009, two debentures matured without conversion into common shares. The principal
   amount of $50,000 was returned to the holders of these debentures. The principal amount of
   debentures outstanding is currently $650,000.

   The Company continued its Normal Course Issuer Bid and subsequent to June 30, 2009, purchased
   15,000 common shares at an average price of $0.07 for a total cost of $1,150. It is the intention of
   the Company to cancel all shares purchased under the Normal Course Issuer Bid.

   The Company has entered into a fixed price physical contract to sell 800 barrels of oil per month to a
   third party at a floor price of $70.00 and a ceiling price of $93.00 Canadian per barrel. The contract
   term is September 2009 to August 2010.

				
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