On August 15, 2008 we issued a further statement that the Company's oil and gas operations in Georgia remained unaffected by the Russian-Georgian conflict. Oil production from the Ninotsminda Field is sold on a batch basis with the last delivery being in October. Oil production from the Field is generally sold at the Field gate, transported by the buyer via rail and exported through the Black Sea port of Batumi which had not been affected.
On September 19, 2008 we announced that the Company's Board of Directors had designated October 2, 2008 as the record date ("Record Date") to determine those stockholders entitled to receive at no charge transferable subscription rights ("Rights") by way of a dividend to purchase one share of common stock, par value $0.10 per share, for each share of common stock held of record at the close of business on the Record Date at a subscription price of $0.10 per share. Pending effectiveness being declared by the United States Securities and Exchange Commission of a Registration Statement previously filed on Form S-3 by the Company under the U.S. Securities Act of 1933 ("Securities Act") relating to the Rights Offering and the completion of all regulatory reviews by the Oslo Stock Exchange the proposed Rights Offering, which had been previously disclosed by the Company, was scheduled to commence on October 6, 2008 and terminate three weeks later on October 24, 2008 (October 14, 2008 in Norway). Further details regarding the Rights Offering would be contained in a Prospectus and related documents to be mailed to U.S. stockholders and for Norwegian stockholders a separate Circular and related documents to be furnished to such stockholders upon request, promptly upon declaration of the effectiveness of the Registration Statement and receipt of final approval of the Circular by the Oslo Stock Exchange. The Company would notify stockholders of the commencement of the Rights Offering at such time as it received all such required regulatory approvals.
On October 3, 2008 we announced that the United States Securities and Exchange Commission declared effective the Registration Statement filed on Form S-3 by the Company under the Securities Act and the completion of all regulatory reviews by the Oslo Stock Exchange relating to the previously announced Rights Offering. Accordingly, the Rights Offering commenced on October 6, 2008 as scheduled and was scheduled to terminate three weeks later on October 24, 2008; provided, however, stockholders who held their shares through the VPS System in Norway were required to exercise their Rights no later than October 14, 2008 and to pay for their subscriptions by no later than October 17, 2008. Further details regarding the Rights Offering are contained in a Prospectus and related documents mailed to U.S. stockholders and for Norwegian stockholders a separate Circular and related documents furnished to such stockholders upon request.
On October 13, 2008, we announced that the Company was advised by certain of the Standby Underwriters that, in light of current market conditions, those Underwriters were unable or unwilling, or may be unable or unwilling, to fulfill their underwriting obligations. The Company also stated that it was considering its position with respect to the Rights Offering but, due to the situation, it was possible that the Rights Offering would proceed with a reduced or no underwriting in place, subject to compliance with regulatory requirements, in both Norway and the US or just in Norway. In the interim, and particularly in view of the scheduled Norwegian expiration date at 5:30 p.m., CET, on October 14, 2008, the Company extended the scheduled expiration dates and times of the Rights Offering from 4:00 p.m., U.S. Eastern time on October 24, 2008, the scheduled U.S. expiration date, until 4:00 p.m., U.S. Eastern time on October 31, 2008, and from 5:30 p.m., CET, on October 14, 2008, the scheduled Norwegian expiration date, until 5:30 p.m., CET, on October 21, 2008.

On October 15, 2008 the Company released details of notices that it received from the Standby Underwriters in respect of their underwriting obligations as follows:

                                 Reason for
                               withdrawal or
                                 Potential
                              withdrawal from                                               Amount
     Underwriter                 Obligation               # of shares                       (USD),

 Caldwell Associates          Aware that other                100,000,000                     10,000,000
       Limited              underwriters may not
                           be able or willing to
                               fulfill their
                                commitments

Provincial Securities        Unable to fulfill                 50,000,000                      5,000,000
       Limited

  Heritage Cie S.A.           Reserve right to                 42,000,000                      4,200,000
                           withdraw having become
                              aware that other
                            underwriters may not
                           be able or willing to
                               fulfill their
                                commitments

    Salahi Öztürk               Has proposed                   20,000,000                      2,000,000
                               suspension of
                                underwriting
                           obligation on basis of
                           alleged force majeure

 Osman Necdel Turkay            Has proposed                   15,000,000                      1,500,000
                               suspension of
                                underwriting
                           obligation on basis of
                           alleged force majeure

 Hasan Gürhan Berker            Has proposed                    5,000,000                        500,000
                               suspension of
                                underwriting
                           obligation on basis of
                           alleged force majeure

     Fevzi Bozer                Has proposed                    5,000,000                        500,000
                               suspension of
                                underwriting
                           obligation on basis of
                           alleged force majeure

 Hasip Buldanlioglu             Has proposed                    5,000,000                        500,000
                               suspension of
                                Underwriting
                           obligation on basis of
                           alleged force Majeure
        Total                                                 242,000,000                     24,200,000

The Company also stated that after the new expiration dates, unexercised Rights would expire and have no value. In the event that the Offering generates fewer proceeds than expected, the Company would focus on production enhancement work at the Ninotsminda Field and the continuation of well testing operations at Manavi at the expense of repaying debt and its other planned use of proceeds. However, as previously indicated in the Prospectus, further unforeseen or changing circumstances may alter the amount, use and allocation of such proceeds.
The extension of the expiration dates of the Rights Offering was intended to provide additional time to enable the Company (1) to continue discussions with the Standby Underwriters and (2) to advance discussions which it commenced with other parties who had expressed an interest in providing a possible alternative underwriting of the Rights Offering.

In light of these developments the Company amended the terms of the Rights Offering to permit those U.S. Rights Holders and foreign stockholders who have received Subscription Rights Certificates and have exercised their Rights and paid the Subscription Price to the U.S. Subscription Agent to withdraw their subscriptions and request a return of their payments, without interest. Rights Holders who held their Shares and/or Rights in the VPS System were also offered withdrawal rights which had to be exercised in accordance with the provisions of the Supplement to the Norwegian Offering Circular dated 14 October 2008 on file with the Oslo Stock Exchange.
On October 20, 2008, the Company entered into eight separate amendment agreements (each an "Amendment Agreement") in terms of which the Company and the Standby Underwriters agreed to amend the terms of the eight Standby Underwriting Agreements. In terms of the Amendment Agreements, each of which is in substantially similar form, the parties agreed that the subscription period for the Rights Offering would be extended from a maximum of four weeks to a maximum of seven weeks. Save as thereby amended, the Company and the Standby Underwriters agreed that the original Standby Underwriting Agreements remain in full force and effect in accordance with their terms. In accordance with the terms of the Amendment Agreements, the Company further extended the expiration dates of the Rights Offering to November 11, 2008 in Norway and November 21, 2008 in the United States and extended withdrawal rights to U.S. Rights holders to expire on November 20, 2008.
Effective October 24, 2008, in connection with the purchase of Glitnir Securities AS, the Manager of the Rights Offering, from its Icelandic parent, the firm changed its name to RS Platou Markets AS. Georgia
Our share of the 114,162 barrels of gross oil production (417 barrels of oil per day (bopd) ) from the Ninotsminda Field in Georgia for the nine month period ended September 30, 2008 was 74,205 barrels (271 bopd). For the nine month period ended September 30, 2007 our share of the 124,144 of gross oil production (455 bopd) from the Ninotsminda Field was 80,694 barrels (296 bopd).
During the third quarter of 2008, we continued to progress our exploration, appraisal and development plans in our core area of operation in Georgia.
Ninotsminda:
Technical work has continued on a production enhancement program at the Ninotsminda Field aimed at increasing the level of production from the field on the basis of a number of low to medium risk operations. This work is scheduled to commence later in the year subject to financing being available from the Rights Offering. The planned program may include a number of low cost, low risk workover operations with a risked production potential capacity in the region of 100 to 150 bopd to much higher potential but higher cost operations aimed at developing hitherto unproduced parts of the field. These operations may include the drilling of a new well with dual horizontal completions in the undeveloped eastern part of the field, and drilling a new vertical well to exploit potential oil reserves in the Oligocene interval over the northern flank of the field. Effort is also being expended on methods to access isolated oil accumulations in shallower reservoirs overlying the main field area.
Gas Market:
On October 3, 2008 we announced that Government sources in Georgia had confirmed that, as part of the ongoing deregulation and privatization process within the gas sector, the State Oil Company of Azerbaijan Republic (SOCAR), a state-owned oil and natural gas corporation, had acquired the shares of a number of local gas distribution network companies in Georgia. These companies include Sagaredjo Gas Company, the gas distribution company in eastern Georgia where the Ninotsminda Field is located. SOCAR is expected to assume ownership of the network later this year. In the meantime, Ninotsminda Oil Company Limited (NOC), a wholly owned subsidiary company of CanArgo, together with Georgian Oil & Gas Corporation (GOGC), the State partner in the Ninotsminda production sharing contract, has executed a gas sales agreement with Sagaredjo Gas Company for a contract term of one year with a price of $2.83 per thousand cubic feet (Mcf) ($110 per thousand cubic metres (MCM ) up to May 2009 when it would rise to $4.73 per Mcf ($167 per MCM). We expect to see a significant improvement in the buyer's performance under this agreement once it has been incorporated into SOCAR.
As a result of market liberalization, NOC has seen a significant improvement in receipts for gas sales over the past quarter. Mainly through spot sales of a portion of its gas production to ITERA Georgia (a non-State gas distribution company), NOC realized a gas revenue of $219,476 in the third quarter 2008.

Manavi:
Analysis of the data collected from the Manavi 12 (M12) well during the acid fracture stimulation and subsequent flow testing and logging indicates a potential oil water contact has been detected in the well. As the oil inflow has been logged within a uniform carbonate section which extends upwards to the top of the Cretaceous interval, it is very reasonable to assume that there is a potential oil column of 551 feet (168 metres) within the M12 well. The majority of this oil leg sits behind the 7" liner and has not been tested. The water incursion into the well bore, observed during the testing, appears to be coming from below the level of this contact. The M12 well is located down-dip on the structure, and there is potential for an increased hydrocarbon column towards the crest of the structure with a potential oil column in the region of 1,076 feet (328 metres) at the M11Z well location.
Once financing is available from the Rights Offering, plans are in place to progress with the testing operation. This may include the acquisition of an offset vertical seismic profile which would be correlated with surface seismic data with the objective of improving the seismic imaging away from the wellbore. This would then be used to determine the next step in the testing process which does not preclude drilling a horizontal sidetrack through the reservoir above the indicated oil water contact. A horizontal well would increase the surface area exposed to the low matrix porosity chalk (which we believe now to be at the M12 location) and increase the probability of intersecting naturally occurring fractures thereby substantially improving the chances of getting a sustainable and high flow rate from the well. The introduction of horizontal drilling technology in the Austin Chalk in Texas massively increased the production rates and sustainability of production from the chalk reservoir (similar age to Manavi) and transformed the economics of the project. We believe horizontal drilling could have a similar beneficial impact on Manavi. Prior to proceeding with any further testing operations, we would aim to set a cement plug in the current test interval to plug back the well and isolate the underlying aquifer to prevent the invasion of extraneous water from below the target reservoir.
Norio:
The MK72 exploration well which we completed in 2005 to evaluate the potentially large Norio-Martkopi structure in the Norio Production Sharing Agreement area (our largest contract area at 265,122 acres (1,061 Km2)) encountered encouraging hydrocarbon shows in the Middle Eocene (the primary objective) and flowed light sweet oil to surface from a shallower reservoir horizon in the Oligocene., but was never fully tested for operational reasons. In order to finance an appraisal well, we have been actively pursuing a farm-out strategy for this acreage. . On October 3, 2008 we announced that we have signed a non-binding Letter of Intent with a Swedish oil company to enter into a farm-out and option agreement covering the Norio production sharing agreement ("Norio PSA") subject to execution of a formal agreement and to governmental and other approvals. The farming in party would earn an initial 5% interest in the Norio PSA in return for funding the acquisition and processing costs of a seismic data survey over the Norio-Martkopi prospect. The objective of the seismic program is to firm up an appraisal well location to the MK-72 well. The farminee would have an option to earn an additional working interest of 45%, thereby increasing its contractor interest in the Norio PSA to 50%, by paying 100% of the costs of an appraisal well to test both the Middle Eocene and Oligocene target horizons.
The Norio-Martkopi prospect is located in the eastern part of Georgia approximately 9 miles (15 Km) northeast of Tbilisi and 6 miles (10 Km) to the north of Georgia's largest oil fields discovered to date, the Samgori-Patardzeuli-Ninotsminda complex of fields which collectively have produced over 200 million barrels of oil and are still in production. The structure lies wholly within the Norio PSA and is comprised of two stacked potential reservoir intervals at the Middle Eocene and Oligocene levels with mapped closures of approximately 28,000 acres and 16,000 acres respectively. At the Middle Eocene level alone, the structure appears comparable in size to the large Samgori Field, Georgia's largest producing oil field.

Liquidity and Capital Resources
As of September 30, 2008 we had negative working capital of $7,408,000 compared to working capital of $715,000 as of December 31, 2007.
In order to continue with all of our currently planned development activities in Georgia on our Ninotsminda Field and the appraisal of our Manavi oil discovery, in addition to our planned Rights Offering we are currently investigating further fundraising proposals. Going Concern
The interim consolidated condensed financial statements have been prepared in accordance with U.S. GAAP, which contemplates continuation of the Company as a going concern. The items listed below raise substantial doubt about our ability to continue as a going concern. The interim consolidated condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
• We incurred net losses from continuing operations to common stockholders of approximately $3,072,000 for the period ended September 30, 2008 and $65,315,000, $54,432,000 and $12,522,000 for the years ended December 31, 2007, 2006 and 2005, respectively. These net losses included non-cash charges related to depreciation and depletion, impairments, loan interest, amortization of debt discount and stock-based compensation of approximately $4,177,000 for the period ended September 30, 2008 and $61,936,000, $48,213,000 and $7,175,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

• At September 30, 2008 we had negative working capital of $7,408,000.

• In the nine month period ended September 30, 2008 and years ended December 31, 2007 and 2006 our revenues from operations did not cover the costs of its operations.

• At September 30, 2008 we had cash and cash equivalents available for general corporate use or for use in operations of approximately $2,449,000.

• We have a planned capital expenditure budget for the near future of approximately $12,000,000.

• Our ability to continue as a going concern is dependent upon raising capital through debt and / or equity financing on terms acceptable to the Company in the immediate short-term.

• The covenants contained in the Note Purchase Agreements to which we are a party restrict us from incurring additional debt obligations in excess of $2.5 million unless we receive consent from Noteholders holding at least 51% in aggregate outstanding principal amount of the of the Notes covered by such Agreements (see the discussion below regarding the limitations on the incurrence of additional debt set forth in such Agreements).

• We currently have sufficient cash in hand to support our current operations through to the end of November 2008.

If we are unable to obtain additional funds when they are required or if the funds cannot be obtained on terms favourable to us, we may be required to delay, scale back or eliminate our exploration, development and completion program or enter into contractual arrangements with third parties to develop or market products that the Company would otherwise seek to develop or market itself, or even be required to relinquish our interest in our properties or in the extreme situation, cease operations altogether.
Management's Plan
We require additional funding immediately to continue with our Georgian operations as planned. We are in the process of addressing this by exploring available financing alternatives sufficient to cover at least our short-term working capital needs. On April 23, 2008, we announced that our Board of Directors had given approval to conducting a proposed offering to common stockholders (the "Rights Offering") of rights to purchase one share of common stock for each share of common stock held of record on a date to be announced later. On July 24, 2008 we announced that a group of eight separate foreign private investors severally entered into substantially identical firm commitment underwriting agreements with the Company to purchase up to $24.2 million in unsubscribed for shares in the Company's planned Rights Offering. The Rights Offering, if successful, would provide the capital needed to meet at least near term planned capital expenditures. On September 19, 2008 we announced October 2, 2008 as the record date ("Record Date") to determine those stockholders entitled to receive at no charge transferable subscription rights ("Rights") by way of a dividend to purchase one share of common stock, par value $0.10 per share, for each share of common stock held of record at the close of business on the Record Date at a subscription price of $0.10 per share. On October 13, 2008, we announced that the Company had been advised by certain of the

underwriters of the Company's Rights Offering that, in light of current market conditions, those underwriters were unable or unwilling, or may be unable or unwilling, to fulfill their underwriting obligations. The Company also announced that it was considering its position. In the interim, the Company extended the scheduled expiration dates and times of the Rights Offering from October 21, 2008 to October 31, 2008 in the U.S. and from October 14, 2008 to October 24, 2008 in Norway. We also granted withdrawal rights to Rights holders who had exercised their Rights. On October 20, 2008, the Company entered into eight separate Amendment Agreements in terms of which the Company and the Standby Underwriters to the Company's Rights Offering agreed to amend the terms of the eight Standby Underwriting Agreements. In terms of the Amendment Agreements, each of which is in substantially similar form, the parties agreed that the subscription period for the Rights Offering would be extended from a maximum of four weeks to a maximum of seven weeks. In accordance with the terms of the Amendment Agreements, the Company further extended the expiration dates of the . . .