EPWCF Empower Clinics Inc (CE)

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

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

For the month of Sept, 2014

Commission File No. 000-30087

ADIRA ENERGY LTD.
(Translation of registrant's name into English)

120 Adelaide Street West, Suite 800, Toronto, Ontario, Canada M5H 1T1
(Address of principal executive office)

[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F]

Form 20-F [X]      Form 40-F [   ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [   ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) [   ]

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [   ]      No [X]

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

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SUBMITTED HEREWITH

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ADIRA ENERGY LTD.

Date: September 2, 2014

 

/s/ Alan Friedman
Alan Friedman
Executive Vice President, Corporate Development

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	Suite 800 - 120 Adelaide St. W
	Toronto, Ontario
	M5H 1T1
	www.adiraenergy.com
	t. 416.361.2211
	f.416.361.6455
	TSX.V: ADL

News Release

ADIRA ENERGY CLOSES PRIVATE PLACEMENT

TORONTO, July 23, 2014 /CNW/ - ADIRA ENERGY LTD. (TSXV: ADL) (OTCBB: ADENF) (FRANKFURT: 0AM1). Adira Energy Ltd. (“Adira” or the “Company”) is pleased to report that it has closed its previously announced non-brokered private placement (the “Offering”) by issuing 1,200,000 common shares at a price of US$0.05 (CAD$0.0536) per common share for gross proceeds of US$60,000 (CAD$64,320).

The common shares issued at closing are subject to resale restrictions pursuant to applicable securities laws requirements and notably to a hold period of four months plus one day from the closing date, expiring on November 22, 2014. The Offering remains subject to final acceptance by the TSX Venture Exchange.

The securities offered in connection with the Offering have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from the U.S. registration requirements. This news release does not constitute an offer for sale of securities, nor a solicitation for offers to buy any securities. Any public offering of securities in the United States must be made by means of a prospectus containing detailed information about the company and management, as well as financial statements.

About Adira Energy Ltd.

Adira Energy Ltd. is an oil and gas company which is focused in the Eastern Mediterranean. The Company has two petroleum exploration licenses offshore Israel; the Yitzhak license, located 17 km offshore between Hadera and Netanya and the Gabriella license, located 10 km offshore between Netanya and Ashdod. The Company also has an option on the Yam Hadera License, offshore Israel, which is located 30 kilometers offshore Israel, between Hadera and Haifa and North West of Adira’s Yitzhak license.

Forward-Looking Statement Disclaimer

This press release includes certain statements that may be deemed “forward-looking statements”. All statements in this press release, other than statements of historical facts, are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and actual results or developments may differ materially from those in the forward-looking statements. Forward-looking statements are based on the Company’s internal projections, estimated or beliefs, concerning, among other things an outlook on the estimated amounts and timing of exploration work and capital expenditures or other expectation, beliefs, plans, objectives, assumption, intentions or statements about future events or performance, which are considered by management to be reasonable at the time made. Actual events or results may differ materially. Although the Company believes that the expectations reflected in the statements are reasonable, it cannot guarantee future results since such results are inherently subject to significant business, economic, corporate, political and social uncertainties and contingencies. Many factors cause the Company’s actual results to differ materially from those expressed or implied in any forward looking statements made by, or on behalf of, the Company and the foregoing stated factors are not exhaustive. The statements contained herein are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable law. Company shareholders and potential investors should carefully consider the information contained in the Company’s filing with Canadian securities administrators at www.sedar.com before making investment decisions with regard to the Company.

1

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For more information contact:

Canada	Israel
Alan Friedman	Gadi Levin
Exec. Vice President	Chief Financial Officer
afriedman@adiraenergy.com	glevin@adiraenergy.com
+1 416 250 1955	+972 3 373 0166

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

2

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FORM 51-102F3
MATERIAL CHANGE REPORT

ITEM 1 ——	Name and Address of Company
	Adira Energy Ltd. (the “ Company”)
	120 Adelaide Street West
	Suite 800
	Toronto, ON
	M5H 1T1
ITEM 2 ——	Date of Material Change
	July 14, 2014
ITEM 3 ——	News Release
	A news release was disseminated on July 14, 2014 through CNW Group Ltd.
ITEM 4 ——	Summary of Material Change
	The Company issued 270,000 common share purchase warrants (collectively, the “Warrants” and each, a “Warrant”). Each Warrant entitles the holder thereof to acquire one common share of the Company (a “Warrant Share”) at a price of $0.10 for a period of 36 months, expiring on July 14, 2017.
ITEM 5 ——	Full Description of Material Change
	The Company issued the Warrants. Each Warrant entitles the holder thereof to acquire one Warrant Share at a price of $0.10 for a period of 36 months, expiring on July 14, 2017. The Warrants are, and the Warrant Shares issued upon exercise of the Warrants will be, subject to resale restrictions pursuant to applicable securities law requirements and notably to a hold period of four months plus one day from the date that they were issued, expiring on November 15, 2014.
ITEM 6 ——	Reliance on Section 7.1(2) of National Instrument 51-102
	N/A
ITEM 7 ——	Omitted Information
	N/A
ITEM 8 ——	Executive Officer
	For further information, please contact:
	Alan Friedman, Executive Vice-President Corporate Development
	(416) 250- 1955
ITEM 9 ——	Date of Report
	July 30, 2014

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FORM 51-102F3
MATERIAL CHANGE REPORT

ITEM 1 ——	Name and Address of Company
	Adira Energy Ltd. (the “ Company”)
	120 Adelaide Street West
	Suite 800
	Toronto, ON
	M5H 1T1
ITEM 2 ——	Date of Material Change
	July 22, 2014
ITEM 3 ——	News Release
	A news release was disseminated on July 23, 2014 through CNW Group Ltd.
ITEM 4 ——	Summary of Material Change
	The Company closed a non-brokered private placement (the “Offering”) by issuing 1,200,000 common shares at a price of US$0.05 per common share for gross proceeds of US$60,000.
ITEM 5 ——	Full Description of Material Change
	The Company closed the Offering by issuing 1,200,000 common shares at a price of US$0.05 per common share for gross proceeds of US$60,000. The common shares issued at closing are subject to resale restrictions pursuant to applicable securities laws requirements and notably to a hold period of four months plus one day from the closing date, expiring on November 22, 2014. The Offering remains subject to final acceptance by the TSX Venture Exchange.
ITEM 6 ——	Reliance on Section 7.1(2) of National Instrument 51-102
	N/A
ITEM 7 ——	Omitted Information
	N/A
ITEM 8 ——	Executive Officer
	For further information, please contact:
	Alan Friedman, Executive Vice-President Corporate Development
	(416) 250- 1955
ITEM 9 ——	Date of Report
	July 30, 2014

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ADIRA ENERGY LTD.

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENT

AS OF JUNE 30, 2014

 

UNAUDITED

U.S. DOLLARS IN THOUSANDS

 

INDEX

	Page
Consolidated Statements of Financial Position	3
Consolidated Statements of Comprehensive Loss	4
Consolidated Statements of Changes in Equity	5
Consolidated Statements of Cash Flows	6
Notes to Interim Consolidated Financial Statements	7 - 10

- - - - - - - - - - - - - - - -

1

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NOTICE TO SHAREHOLDERS

The accompanying unaudited condensed consolidated interim financial statements of Adira Energy Ltd. for the three month period ended June 30, 2014 have been prepared by management in accordance with International Financial Reporting Standards applicable to consolidated interim financial statements (see note 2 to the unaudited condensed consolidated interim financial statements). Recognizing that the Company is responsible for both the integrity and objectivity of the unaudited condensed consolidated interim financial statements, management is satisfied that these unaudited condensed consolidated interim financial statements have been fairly presented.

Under National Instrument 51-102, part 4, sub-section 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

2

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ADIRA ENERGY LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

U.S. dollars in thousands

		June 30,			December 31,
		2014			2013
		Unaudited			Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	428		$	617
Restricted deposits		20			35
Other receivables and prepaid expenses		72			2,513
Total current assets		520			3,165
NON-CURRENT ASSETS:
Property and equipment, net		30			61
Total non-current assets		30			61
Total assets	$	550		$	3,226
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables	$	186		$	2,817
Other accounts payable and accrued liabilities		27			986
Total current liabilities		213			3,803
EQUITY:
Share capital		-			-
Additional paid-in capital		33,975			34,023
Accumulated deficit		(33,638	)		(34,600	)
Total equity (deficit)		337			(577	)
Total liabilities and equity	$	550		$	3,226

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

3

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ADIRA ENERGY LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE PROFIT AND LOSS

U.S. dollars in thousands, except share and per share data

		Six months ended						Three months ended
		June 30,						June 30,
		2014			2013			2014			2013
		Unaudited
Revenues and other income	$	-		$	17		$	-		$	4
Expenses:
Exploration expenses		-			1,729			-			(164	)
General and administrative expenses *)		157			1,878			172			406
Impairment charge (reversal)		(1,126	)		2,486			(695	)		243
Total expenses		(969	)		6,093			(523	)		485
Operating profit (loss)		969			(6,076	)		523			(481	)
Finance income		-			3,021			33			541
Finance expense		(7	)		(41	)		-			(28	)
Profit (loss) before income tax expense		962			(3,096	)		556			32
Income tax expense		-			-			-			-
Net comprehensive profit (loss)	$	962		$	(3,096	)		556			32
Net comprehensive profit (loss) attributed to:
Equity holders of the parent	$	962		$	(3,096	)		556			32
Non-controlling interests		-			-			-			-
	$	962		$	(3,096	)		556			32
Basic and diluted net earnings (loss) per share    attributable to equity holders of the parent	$	0.02		$	(0.05	)	$	0.01		$	0.01
Weighted average number of ordinary shares used    in computing basic and diluted net earnings    (loss) per share		60,260,318			60,260,318			60,260,318			60,260,318
*) Includes share-based compensation	$	(48	)	$	181		$	21		$	106

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

4

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ADIRA ENERGY LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

U.S. dollars in thousands, except share data

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

5

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ADIRA ENERGY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands, except share data

		Six months ended						Three months ended
		June 30,						June 30,
		2014			2013			2014			2013
		Unaudited
Cash flows from operating activities:
Net profit (loss)	$	962		$	(3,096	)	$	556		$	32
Adjustments to reconcile net profit (loss) to net    cash used in operating activities:
Adjustments to the profit or loss items:
Exchange differences on balances of cash and    cash equivalents		4			10			1			5
Depreciation		31			94			12			68
Impairment charge (reversal) from exploration    and evaluation assets		(1,126	)		2,870			(695	)		627
Revaluation of warrants		-			(3,013	)		-			(543	)
Share-based payment		(48	)		181			21			106
		(1,139	)		142			(661	)		263
Changes in asset and liability items:
Decrease in accounts receivable, other receivables    and prepaid expenses		2,441			3,911			306			256
Increase (decrease) in trade payables		(1,505	)		(721	)		214			(1,391	)
Increase (decrease) in other accounts payable and    accrued liabilities		(959	)		78			(778	)		(85	)
		(23	)		3,268			(258	)		(1,220	)
Net cash provided by (used in) operating activities		(200	)		314			(363	)		(925	)
Cash flows from investing activities:
Expenditure on exploration and evaluation assets		-			(2,638	)		-			(122	)
Proceeds from sale of equipment and other assets		-			1,028			-			1,028
Decrease in restricted deposits		15			1,022			-			1,007
Net cash provided by (used in) investing activities		15			(588	)		-			1,913
Exchange differences on balances of cash and    cash equivalents		(4	)		(10	)		(1	)		(5	)
Increase (decrease) in cash and cash equivalents		(189	)		(284	)		(364	)		983
Cash and cash equivalents at the beginning of the    period		617			2,394			792			1,127
Cash and cash equivalents at the end of the period	$	428		$	2,110		$	428		$	2,110

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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ADIRA ENERGY LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 1:-

GENERAL

	a.	Nature of operations:
		Adira Energy Ltd. and its subsidiaries (individually and collectively, as the context requires, "Adira" or "the Company"), is an oil and gas early-stage exploration company. Through its subsidiary, Adira Energy Israel Ltd. (“Adira Israel”), the Company holds two petroleum licenses in the State of Israel, being license No. 378 (“Gabriella”) and license No. 380 (“Yitzhak” and together with the Gabriella license, the “Licenses”). These financial statements have been prepared in a condensed format as of June 30, 2014, for the six months then ended ("interim consolidated financial statements"). These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2013, and for the year then ended and the accompanying notes.
	b.	Significant events during the period
		In 2013, as a result of challenging markets and difficulty in raising funds to drill multi well program, the Company significantly reduced its activity, relinquished license No. 388 ( “Samuel”) to the Ministry of Energy and Water of the State of Israel (“Ministry”), and ceased operations on the Gabriella license. Furthermore, there was nominal exploration activity in the Yitzhak license. During the first half of 2014 the Company focused on further reducing its liabilities and seeking additional financing opportunities
		On February 16, 2014, the Ministry published new guidelines in respect of security guarantee payments (“Security Deposits”) for all offshore petroleum licenses, requiring each license consortium to deposit $2,500 per offshore license with the Ministry by March 31, 2014. On June 26, 2014, the Ministry extended the implementation of the Guidelines to September 15, 2014. As of the date of the approval of these financial statements, the Company does not have sufficient funds to make its pro rata share of the Security Deposits. The Company is currently examining the consequences of the above mentioned guidelines on the Company’s operations. Should the consortium on each of the License fail to meet these requirements, the Ministry will view such failure as a default and will have the right to retract the Licenses that are in default.
	c.	Financial position:
		As reflected in the consolidated financial statements, as of June 30, 2014, the Company had an accumulated deficit of $33,638. The Company is an early-exploration stage company and its operating revenues are currently insufficient to finance its future operating expenses and exploration funding commitments.
		The ability of the Company to continue as a going concern depends upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development, and upon future profitable operations from the properties or proceeds from their disposition. There can be no assurance that the Company will be able to continue to raise funds from the aforementioned sources in which case the Company may be unable to meet its obligations. These factors raise substantial doubts about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern.

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ADIRA ENERGY LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 2:-	SIGNIFICANT ACCOUNTING POLICIES
	The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting".
	The significant accounting policies and methods of computation adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements.
NOTE 3:-	EXPLORATION AND EVALUATION ASSETS
	The Company's accounts reflect only its proportionate interests in its oil and gas activities. The following is a summary of the Company’s exploration and evaluation assets:

NOTE 4: -

EQUITY

	a.	Stock Option Plan:
		The movement in stock options during the six months ended June 30, 2014, was as follows:

			Number of
			options			Weighted average
			outstanding			exercise price
	Balance at December 31, 2013 (audited)		3,292,665			1.09
	Options forfeited		(510,000	)		1.23
	Balance at June 30, 2014 (unaudited)		2,782,665			1.08

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ADIRA ENERGY LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 5: -

EQUITY (Cont.)

The following table summarizes information about stock options outstanding and exercisable as of June 30, 214 (unaudited):

*)

The exercise price of all options granted from 2011 is denominated in Canadian Dollars and was translated to USD in the table above using the exchange rate as of June 30, 2014.

	b.	Share purchase warrants:
		The following table summarizes information applicable to warrants and broker warrants entitling the holders to acquire common share outstanding as of June 30, 2014 (unaudited):

Grant date

Exercise

Number of

Issue date

Expiry date

fair value

price

warrants *)

August 9, 2012

August 9, 2015

$

0.07

$

0.20**)

79,012,640

August 9, 2012

August 9, 2014**)

$

0.07

$

0.14**)

3,353,000

82,365,640

	*)	Following the share consolidation in 2013, every three previously issued warrants will be convertible into one Common Share of the Company (see Note 14b(iii) of the annual financial statements).
	**)	The exercise price of warrants granted in 2012 is denominated in Canadian Dollars and was translated to USD in the table above using the exchange rate as of June 30, 2014.

The weighted average exercise price of the outstanding warrants as of June 30, 2014, is $0.19.

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ADIRA ENERGY LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 6:-	RELATED PARTY TRANSACTIONS
	During the six month period ended June 30, 2014, the Company incurred $119 in consulting fees and operating expenses to private companies which are controlled by directors or officers of the Company, as compared to $172 thousand during the six month period ended June 30, 2013.
	These transactions are in the ordinary course of business and are measured at the amount of consideration set and agreed by the related parties.
NOTE 7:-	SUBSEQUNET EVENTS
	On July 23, 2013, the Company completed a non-brokered private placement by issuing 1,200,000 common shares at a price of US$0.05 per common share for gross proceeds of $60.

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Adira Energy Ltd.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2014

The following is a discussion and analysis of the activities, consolidated results of operations and financial condition of Adira Energy Ltd. (“Adira”, “we”, “our”, “us”, or the “Company”) for the three and six month periods ended June 30, 2014, which has been prepared on the basis of information available up until August 29, 2014. This Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the Company’s interim consolidated financial statements for the three and six month periods ended June 30, 2014, as well as the annual consolidated financial statements for the year ended December 31, 2013, together with the notes thereto, available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com.

All monetary amounts are reported in United States dollars and in accordance with International Financial Reporting Standards (‘IFRS”) unless otherwise noted. This MD&A is dated August 29, 2014.

Forward-Looking Statements

This MD&A (including, without limitation, the sections discussing Adira’s Financial Conditions and Results of Operations) contains certain forward-looking statements. All statements other than statements of historical fact that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “contemplate”, “target”, “believe”, “plan”, “estimate”, “expect” and “intend” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. These statements are based upon certain assumptions and analyses made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. However, whether actual results and developments will conform with management’s expectations is subject to a number of risks and uncertainties, including the considerations discussed herein and in other documents filed from time to time by the Company with Canadian security regulatory authorities, general economic, market or business conditions, the opportunities (or lack thereof) that may be presented to and pursued by management, competitive actions by other companies, changes in laws or regulations and other factors, many of which are beyond the Company’s control. These factors may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements and there can be no assurance that the actual results or developments anticipated by management will be realized or, even if substantially realized, that they will have the expected results on Adira. All of the forward-looking statements made herein are qualified by the foregoing cautionary statements. The Company expressly disclaims any obligation to update or revise any such forward-looking statements.

Information on the Company

Adira is an early-stage oil and gas exploration company.

Through its subsidiary, Adira Energy Israel Ltd. (“Adira Israel”), the Company holds two petroleum licenses in the State of Israel, being license No. 378 (the “Gabriella License”) and license No. 380 (the “Yitzhak License” and together with the Gabriella License, the “Licenses”).

The Company’s current trading symbol on the TSX Venture Exchange (the “Exchange”) is “ADL”. The Company also trades on the OTC Bulletin Board with the trading symbol “ADENF” and on the Frankfurt Stock Exchange with the trading symbol “OAM1”.

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Significant Developments

In 2013, as a result of challenging markets and difficulty in raising funds to drill multi well program, the Company significantly reduced its activity, relinquished license No. 388 (the “Samuel license”), and ceased operation on the Gabriella License. Furthermore, there was nominal exploration activity completed on the Yitzhak License. During the first and second quarters of 2014, the Company focused on further reducing its liabilities and seeking additional financing opportunities. In order to maintain the Licenses, the Company will be required to expend amounts in respect of exploration expenditures for certain milestones on each of the Licenses. As of the date hereof, the Company does not believe that it will be able to meet all of the milestones as they become due.

On February 16, 2014, the Ministry (as defined below) published new guidelines (the “Guidelines”) in respect of security guarantee payments (the “Security Deposits”) for all offshore petroleum licenses, requiring each license consortium to deposit $2.5 million per offshore license with the Ministry by March 31, 2014. On June 26, 2014, the Ministry extended the implementation of the Guidelines to September 15, 2014. As of the date hereof, the Company does not have sufficient funds to make its pro rata share of the Security Deposits. The Company is currently examining the consequences of the Guidelines on its operations. Should the consortiums on any of the Licenses fail to pay the Security Deposits, the Ministry will view such failure as a default on that license and will have the right to retract the Licenses that are in default.

On July 23, 2013, the Company completed a non-brokered private placement (the “Private Placement”) by issuing 1,200,000 common shares at a price of US$0.05 per common share for gross proceeds of US$60,000.

Overall Performance

Business Overview

Gabriella License

The Gabriella License covers 97,000 acres (392 square kilometers) and is approximately 10 kilometers offshore Israel between Netanya and Ashdod. The Gabriella License was issued to the Company on July 15, 2009 for an initial three year exploration period, subject to renewal for an additional period of four years and a second additional period of two years in the case of a discovery. Thereafter, a 30-50 year lease maybe granted if a “discovery” (as defined in the Israeli Petroleum Law 5712 & 1952 and the regulations promulgated thereunder (“Israeli Petroleum Law”)) is made. On October 16, 2013, the Ministry of Energy and Water of the State of Israel (the “Ministry”) granted an extension of the expiration of the Gabriella License until September 1, 2014, with a corresponding extension of certain milestones.

Subject to the terms of the Settlement Agreement (as defined below), Adira Israel has a 15% working interest in the Gabriella License, Modi’in Energy Limited Partnership (“MELP”) has a 70% working interests, and Brownstone Energy Inc. (“Brownstone”) has a 15% working interest.

The following table sets out the current work program that must be completed in order to maintain the Gabriella License:

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Adira Israel and the other Gabriella License participants have missed several of the work program milestones. Until such defaults are rectified, the consortium is at risk of the Ministry retracting the Gabriella License.

The relationship of the Gabriella License participants is governed by a joint operating agreement or “JOA” (the “Gabriella JOA”). Pursuant to the Gabriella JOA, Adira Israel is the operator of the Gabriella License. However, in connection with the extension of the Gabriella License, Adira Israel agreed to resign as the operator of the Gabriella License. As discussed above, the Gabriella License participants had until February 28, 2014, to name an alternative operator for Ministry approval, but have failed to meet this deadline.

Between July 2012 and January 2013, Adira Israel, MELP and Brownstone entered into various agreements for the purpose of drilling an exploration well on the Gabriella License. The drilling, however, was not accomplished and Adira Israel and MELP similarly alleged that the other was in default of various obligations under the Gabriella JOA and other agreements entered into on behalf of the Gabriella License participants. Accordingly, on February 11, 2013, Adira Israel, in its capacity as operator under the Gabriella JOA, suspended operations on the Gabriella License due to lack of funding and lack of reasonable expectation of funding to meet certain work program obligations.

Effective July 8, 2013 (the “Settlement Agreement Effective Date”), Adira Israel entered into a settlement and release agreement (the “Settlement Agreement”) with MELP and Brownstone to resolve the abovementioned disputes and the related suspension of operations. Pursuant to the Settlement Agreement, the Gabriella License participants released each other from any claims and demands that they had against each other with respect to the Gabriella License. The Settlement Agreement further provides that the Gabriella License participants will fund their proportionate share of costs incurred in connection with the attempted drilling of the exploration well. Adira Israel’s net share of the costs totals approximately $3.3 million (the “Settlement Costs”) and was payable in full within 90 days from the Settlement Agreement Effective Date. To date, Adira Israel has not paid the Settlement Costs. Consequently, at MELP’s request, Adira Israel may be required to withdraw from the Gabriella JOA and assign its participating interest in the Gabriella License to the remaining Gabriella License participants for no consideration. Although MELP has yet to make the forgoing request, Adira Israel remains at risk of being required to withdraw from the Gabriella License.

Yitzhak License

The Yitzhak License covers 31,555 acres (127.7 sq. km) and is located approximately 9 km offshore and is contiguous to the Gabriella License. The Yitzhak License was issued in October 2009 to Adira Israel for an initial three year exploration period and may be renewed upon fulfillment of certain conditions for an additional four year period plus an additional two year renewal option in the case of a reserve discovery. Thereafter, a 30-50 year lease may be pursued if a “discovery” (as defined in the Israeli Petroleum Law) is made. On October 16, 2013, the Ministry granted an extension of the expiration of the Yitzhak License until October 15, 2014, with a corresponding extension of certain milestones.

Adira Israel has a 70% working interest in the Ytizhak License. Brownstone has a 15% interest, AGR Group ASA (“AGR”) has a 5% interest and Ellomay Oil and Gas 2011 LP a 10% interest.

The following table sets out the current work program that must be completed to maintain the Yitzhak License:

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The relationship of the Yitzhak License participants is governed by a JOA (the “Yitzhak JOA”). Pursuant to the Yitzhak JOA, AGR is designated lead operator in accordance with Israeli regulations definition of “Operator”, with the continued involvement of Adira Israel as “Co-Operator.”

On June 13, 2012, Adira Israel granted to MELP an option (“MELP Yitzhak Option”) to purchase from Adira Israel a 15% participating interest in the Yitzhak License (the “MELP Yitzhak Option Interest”). The MELP Yitzhak Option may be exercised until 14 days before signing of the rig contract for the Yitzhak License.

Yam Hadera Option

Pursuant to the Gabriella 2012 Agreement, Adira Israel has an option (the “Yam Hadera Option”) to acquire up to a 15% participating interest in the Yam Hadera License, located 30 kilometers offshore Israel, between Hadera and Haifa and North West of Adira’s Yitzhak license. The Yam Hadera Option is exercisable until 14 days prior to the signing of a rig contract for the Yam Hadera License.

Myra and Sara Option

The Company has an option to acquire up to a 5% participating interest in two licenses called the Myra License and Sara License (the “M&S Option”). The Company obtained the M&S Option from Adira Barbados prior to its dissolution. The Company currently ascribes no value to the Myra and Sara Licenses and as such it does not consider it to be material to its operations.

Capital Expenditures and Divestitures

During the six month period ended June 30, 2014, the Company incurred no capital expenditures or disposition of property and equipment.

The Company's currently has no planned capital expenditures for the next twelve months.

Additional Disclosure for Venture Issuers without Significant Revenues:

		Six Month Period Ended						Three Month Period Ended
		June 30,						June 30,
		2014			2013			2014			2013
		U.S. dollars in thousands
Capitalized and expensed Exploration costs	$	-		$	4,367		$	-		$	1,259
General and administrative expenses (including share based compensation)	$	157		$	1,878		$	161		$	406

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Discussion of Operations

The following is a discussion of the results of operations which have been derived from the interim consolidated financial statements of the Company for the six and three month periods ended June 30, 2014:

		Six months ended						Three months ended
		June 30,						June 30,
		2014			2013			2014			2013
		Unaudited
Revenues and other income	$	-		$	17		$	-		$	4
Expenses:
Exploration expenses		-			1,729			-			(164	)
General and administrative expenses *)		157			1,878			172			406
Impairment charge (reversal)		(1,126	)		2,486			(695	)		243
Total expenses		(969	)		6,093			(523	)		485
Operating profit (loss)		969			(6,076	)		523			(481	)
Finance income		-			3,021			33			541
Finance expense		(7	)		(41	)		-			(28	)
Profit (loss) before income tax expense		962			(3,096	)		556			32
Income tax expense		-			-			-			-
Net comprehensive profit (loss)	$	962		$	(3,096	)		556			32
Net comprehensive profit (loss) attributed to:
Equity holders of the parent	$	962		$	(3,096	)		556			32
Non-controlling interests		-			-			-			-
	$	962		$	(3,096	)		556			32
Basic and diluted net earnings (loss) per share    attributable to equity holders of the parent	$	0.02		$	(0.05	)	$	0.01		$	0.01
Weighted average number of ordinary shares used in    computing basic and diluted net earnings (loss) per    share		60,260,318			60,260,318			60,260,318			60,260,318

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Three month period ended June 30, 2014, compared to the three month period ended June 30, 2013

Revenues and Other Income

For the three month period ended June 30, 2014, revenues and other income amounted to nil as compared to $4 thousand for the three month period ended June 30, 2013. The decrease in revenues in 2014 is due to the fact that there were no exploration activities on the license during 2014. In early 2013 the Company ceased the planned drilling operations on the Gabriella License, and there were minimal activities on the Yitzhak License and Samuel License (which was returned to the Ministry during 2013).

Expenses

Exploration Expenses

For the three month period ended June 30, 2014, exploration expenses amounted to nil as compared to a recovery of $164 thousand recorded for the three months ended June 30, 2013. This recovery is in respect of an adjustment to an accrual for exploration expenses in connection with the suspension of operations on the Gabriella License, made during the first quarter of 2013.

General and Administrative Expenses

For the three month period ended June 30, 2014, general and administrative expenses amounted to $172 thousand as compared to $406 thousand for the three month period ended June 30, 2013. The decrease in general and administrative expenses resulted primarily from the decrease of the Company’s exploration activities since its suspended operations on the Gabriella License, a significant reduction in the number of people that it employed and a reduction in rental and other related expenses.

Impairment Charge (Reversal)

For the three month period ended June 30, 2014, the Company recorded an impairment charge reversal of $695 thousand as compared to a charge of $243 thousand for the three month period ended June 30, 2013. The reversal of the impairment relates to discounts that the Company negotiated with suppliers, in respect of outstanding obligations on the Licenses. The expense recorded in 2013 relates primarily to costs that had been capitalized to exploration and evaluation assets prior to the suspension of operations on the Gabriella License, and which have subsequently been written–off, and the Company’s decision to write off expenses on the Yitzhak License due to the low probability of realization of the asset from either the successful development or sale of the Yitzhak License in the near future.

Financing Income/Expense

For the three month period ended June 30, 2014, financing income amounted to $33 thousand as compared to $541 thousand for the three month period ended June 30, 2013, and financing expenses of nil for the three month period ended June 30, 2014, as compared to $28 thousand for the three month period ended June 30, 2013.

The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Israel, most of its monetary assets are held in U.S. dollars and most of its expenditures are made in U.S. dollars. However, it also has expenditures in NIS and Canadian dollars. The Company has not hedged its exposure to currency fluctuations.

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Net Profit/Loss

The Company reported a net profit and comprehensive profit for the three month period ended June 30, 2014, of $556 thousand as compared to a net profit and comprehensive profit of $32 thousand for the three month period ended June 30, 2013. The primary reason for the profit in 2014 is due to the reversal of impairment charges made in prior years which are related to discounts that Adira negotiated with suppliers in respect of outstanding obligations on the Licenses.

Inflation

During the three month periods ended June 30, 2014, and June 30, 2013, inflation has not had a material impact on the Company’s operations.

Six month period ended June 30, 2014, compared to the Six month period ended June 30, 2013

Revenues and Other Income

For the six month period ended June 30, 2014, revenues and other income amounted to nil as compared to $17 thousand for the six month period ended June 30, 2013. The decrease in revenues in 2014 is due to the fact that there were no exploration activities on the license during 2014. In early 2013 the Company ceased the planned drilling operations on the Gabriella License, and there were minimal activities on the Yitzhak License and Samuel License (which was returned to the Ministry during 2013).

Expenses

Exploration Expenses

For the six month period ended June 30, 2014, exploration expenses amounted to nil as compared to $1.7 million for six month period ended June 30, 2013. The decrease in exploration expenses is due to the reduced operations on the Licenses in 2014.

General and Administrative Expenses

For the six month period ended June 30, 2014, general and administrative expenses amounted to $157 thousand as compared to $1.9 million for the six month period ended June 30, 2013. The decrease in general and administrative expenses resulted primarily from the decrease of the Company’s exploration activities since its suspended operations on the Gabriella License, a significant reduction in the number of people that it employed and a reduction in rental and other related expenses.

Impairment Charge (Reversal)

For the six month period ended June 30, 2014, the Company recorded an impairment charge reversal of $1.1 million as compared to a charge of $2.5 million for the six month period ended June 30, 2013. The reversal of the impairment relates to discounts that the Adira negotiated with suppliers in respect of outstanding obligations on the Licenses. The amount in 2013 relates primarily to costs that had been capitalized to exploration and evaluation assets prior to the suspension of operations on the Gabriella License, and which have subsequently been written–off, and the Company’s decision to write off expenses on the Yitzhak License due to the low probability of realization of the asset from either the successful development or sale of the Yitzhak License in the near future.

Financing Income/Expense

For the six month period ended June 30, 2014, financing income amounted to nil as compared to $3 million for the six month period ended June 30, 2013, and financing expenses of $7 thousand for the six month period ended June 30, 2014, as compared to $41 thousand for the six month period ended June 30, 2013.

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The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Israel, most of its monetary assets are held in U.S. dollars and most of its expenditures are made in U.S. dollars. However, it also has expenditures in NIS and Canadian dollars. The Company has not hedged its exposure to currency fluctuations.

Net Profit/Loss

The Company reported a net profit and comprehensive profit for the six month period ended June 30, 2014, of $962 thousand as compared to a net loss and comprehensive loss of $3.1 million for the six month period ended June 30, 2013. The primary reason for the profit in 2014 is due to the reversal of impairment charges made in prior years which are relating to discounts that Adira negotiated with suppliers in respect of outstanding obligations on the Licenses.

Inflation

During the six month periods ended June 30, 2014, and June 30, 2013, inflation has not had a material impact on the Company’s operations.

Government Regulation

The Licenses have been granted to us, through various subsidiaries, by the State of Israel under the Israeli Petroleum Law, and our evaluation and exploration activities in the areas covered by the Licenses must be undertaken in compliance with work plans approved by the Commissioner.

Summary of Quarterly Results

		Quarter ended
		June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
		U.S dollars in thousands, except per share data
Revenues	$	-			-			-			-
Net Profit (loss)	$	516			446			(70	)		(2,478	)
Net Profit (loss) per share*	$	0.01			0.01			(0.01	)		(0.04	)

*Attributable to equity holders of the Company, post Consolidation

		Quarter ended
		June 30, 2013			March 31, 2013			December 31, 2012			September 30, 2012
		U.S dollars in thousands, except per share data
Revenues	$	4			13			318			422
Net Profit (loss)	$	32			(3,128	)		(7,264	)		(1,460	)
Net Profit (loss) per share*	$	0.01			(0.05	)		(0.12	)		(0.03	)

*Attributable to equity holders of the Company, post Consolidation

Net profit (loss) per quarter is a function of the exploration and operational activity during that quarter. There is no seasonal trend. Net losses in the quarter ended December 31, 2012, were significantly higher than the preceding periods due to an impairment charge in respect of the Samuel license. The net loss for the quarter ended March 31, 2013, resulted primarily from an impairment charge in respect of the Gabriella License and the net profit for the quarter ended June 30, 2013, is due to reduced general and administrative expenses and finance income recorded in respect of the re-measurement of the warrants issued in August 2012. The net loss for the quarter ended September 30, 2013, resulted primarily from an impairment charge in respect of the Yitzhak license and the net loss for the quarter ended December 31, 2013, was significantly reduced in line with the reduced activities of the Company. The profit during the first and second quarters of 2014 is due primarily to the reversal of impairment write-offs made in previous years.

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Liquidity

Liquidity is a measure of a company’s ability to meet potential cash requirements. The Company has historically met its capital requirements through the issuance of common shares.

The Company has an accumulated deficit of $33.6 million as of June 30, 2014 ($32 million as of June 30, 2013), and the Company had negative cash flows from operations of $200 thousand during the six month period ended June 30, 2014 (positive cash flows of $314 million during the six month period ended June 30, 2013). The ability of the Company to continue a going concern depends upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development, and upon future profitable operations from the properties or proceeds from their disposition. The Company is an exploration stage company and has not earned any revenues from its oil and gas properties to date.

There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. The Company is considering various alternatives with respect to raising additional capital to remedy any future shortfall in capital, but to date has made no specific plans or arrangements. Because of the early stage of the Company's operations and the Company's absence of any material oil and natural gas reserves, there can be no assurance this capital will be available and if it is not, the Company may be forced to substantially curtail or cease exploration, appraisal and development expenditures.

In 2013, as a result of challenging markets and difficulty in raising funds to drill multi well program, the Company significantly reduced its activity, relinquished the Samuel license, and ceased operations in Gabriella. Furthermore, there was nominal exploration activity in the Yitzhak License. During the first quarter of 2014 there was no operational activity on the Licenses.

Three month period ended June 30, 2014, compared to the three month period ended June 30, 2013

During the three month period ended June 30, 2014, the Company’s overall position of cash and cash equivalents decreased by $363 thousand. This decrease in cash can be attributed to the following:

The Company’s net cash used in operating activities during the three month period ended June 30, 2014, was $363 thousand as compared to $925 thousand for the three month period ended June 30, 2013. This decrease is due to the reduced activities during the period.

Cash provided from investing activities during the three month period ended June 30, 2014, was nil as compared to cash provided from investing activities of $1.9 million during the three month period ended June 30, 2013. The generation of cash from investment activities in 2013 relates primarily to the decrease in restricted cash and sale of equipment.

Cash provided by financing activities for the three month periods ended June 30, 2014, and June 30, 2013, was nil. There are no legal restrictions on transferring funds between Canada and Israel.

Six month period ended June 30, 2014, compared to the Six month period ended June 30, 2013

During the six month period ended June 30, 2014, the Company’s overall position of cash and cash equivalents decreased by $189 thousand. This increase in cash can be attributed to the following:

The Company’s net cash used from operating activities during the six month period ended June 30, 2014, was $200 thousand as compared to net cash generated of $314 thousand for the six month period ended June 30, 2013. This decrease is due to the reduced activities during the period.

Cash generated from investing activities during the six month period ended June 30, 2014, was $15 thousand as compared to cash used in investing activities of $588 thousand during the six month period ended June 30, 2013. The generation of cash from investment activities in 2014 relates to the decreased in restricted cash. In 2013, the case used in operating activities related primarily to investment in exploration and evaluation activities, offset by the sale of equipment and the decreased in restricted deposits.

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Cash provided by financing activities for the six month periods ended June 30, 2014, and June 30, 2013, was nil. There are no legal restrictions on transferring funds between Canada and Israel.

Capital Resources

At June 30, 2014, the Company’s cash and cash equivalents were $428 thousand (June 30, 2013 - $2.1 million). The majority of this balance is being held in US Dollars. Our working capital at June 30, 2014, was $307 thousand as compared to $1.2 million at June 30, 2013.

Commitments

Adira Israel has Ministry mandated commitments to complete work programs for each of the Licenses. Please see “Business Overview” above for information on the Company’s commitments on the Licenses.

As discussed above, in order to maintain the Licenses, the Company will be required to expend amounts in respect of exploration expenditures for certain milestones on each of the Licenses. As of the date hereof, the Company does not believe that it will be able to meet all of the milestones as they become due.

As of June 30, 2014, the Company’s share of the remaining contractual commitments for the Licenses was nil.

As discussed above, on February 16, 2014, the Ministry published the Guidelines in respect of the Security Deposits for all offshore petroleum licenses, requiring each license consortium to deposit $2.5 million per offshore license with the Ministry by March 31, 2014. On June 26, 2014, the Ministry extended the implementation of the Guidelines to September 15, 2014. As of the date hereof, the Company does not have sufficient funds to make its pro rata share of the Security Deposits. The Company is currently examining the consequences of the Guidelines on its operations. Should the consortiums on any of the Licenses fail to pay the Security Deposits, the Ministry will view such failure as a default on that license and will have the right to retract the Licenses that are in default.

Approved Expenditures Relating to the Gabriella and Yitzhak

As of June 30, 2014, all budgeted and planned expenses for the advancement of the drilling programs on the Licenses have been suspended until the Company receives the extensions for its Licenses.

As discussed above, in order to maintain the Licenses the Company, through Adira Israel, is required to expend additional amounts in respect of exploration expenditure for certain milestones on each of the Licenses. As of the date hereof, the Company does not believe that it can meet all of its drilling and related expenditures as they become due to maintain its interests in its oil and gas properties. These oil and gas expenditure obligations are not fixed and cannot be pre-determined with certainty. Failure to meet the obligations may result in the loss of Adira Israel’s participating interests in the Licenses.

Disclosure of Outstanding Share Data

As of the date hereof, the Company has 61,460,318 common shares outstanding, 79,012,640 warrants outstanding (each three warrants are convertible into one common share) and 2,213,332 stock options granted to directors, officers and employees.

Management of Capital

The Company is an early-stage exploration company and currently does not generate significant cash flows from operations. The Company’s primary source of funds comes from the issuance of share capital. The Company does not use other sources of financing that require fixed payments of interest and principal and is not subject to any externally imposed capital requirements.

The Company defines its capital as share capital plus warrants. To effectively manage the Company’s capital requirements, the Company has a planning and budgeting process in place to ensure that adequate funds are available to meet its strategic goals. The Company monitors actual expenses to budget to manage its costs and commitments.

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The Company’s capital management objective is to maximize investment returns to its equity-linked stakeholders within the context of relevant opportunities and risks associated with the Company’s operations. Achieving this objective requires management to consider the underlying nature of exploration activities, the availability of capital, the cost of various capital alternatives and other factors. Establishing and adjusting capital requirements is a continuous management process.

Although the Company has been successful at raising funds in the past through the issuance of share capital, there can be no assurance that future financings will be successful.

Off-Balance Sheet arrangements

See “Commitments” above.

Transactions with Related Parties

No director or senior officer of the Company, and no associate or affiliate of the foregoing persons, and no insider has or has had any material interest, direct or indirect, in any transactions, or in any proposed transactions, which in either such case has materially affected or will materially affect the Company or the Company's predecessors since the beginning of the Company's last completed fiscal year except as follows:

During the six month period ended June 30, 2014, the Company incurred $119 thousand in consulting fees and operating expenses to private companies which are controlled by directors or officers of the Company, as compared to $172 thousand during the six month period ended June 30, 2013.

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Proposed Transactions

There are currently no proposed transactions that are expected to affect the financial condition, results of operations and cash flows of the Company.

Critical Accounting Policies and Estimates

The Company’s results of operation and financial condition are based on its consolidated financial statements, which are presented in accordance with IFRS. Certain accounting principles require it to make certain estimates, judgments and assumptions. Management believes that the estimates, judgments and assumptions upon which it relies are reasonable based upon information available to it at that time. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, the Company’s financial statements will be affected. The significant accounting policies and estimates that Management believes are the most critical to aid in fully understanding and evaluating the Company’s reported financial results include the following:

• Exploration and evaluation assets;
• Share-based payment transactions;
• Joint oil and gas ventures;
• Farm out arrangements in the exploration and evaluation phase;
• Impairment of financial assets; and
• Revenue recognition.

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The key assumptions made in the financial statements concerning uncertainties at the end of the reporting period and the critical estimates computed by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Exploration and evaluation assets

Pre-license costs

Pre-license costs are expensed in the period in which they are incurred.

Exploration and evaluation costs

Oil and natural gas exploration and development expenditure is accounted for using the successful efforts method of accounting.

During the geological and geophysical exploration phase, costs are charged against income as incurred. Costs directly associated with an exploration well in its drilling phase, for which it has not yet been determined whether there are proved reserves or it is not commercially viable, are capitalized as exploration and evaluation intangible assets until the drilling of the well is complete and the results have been evaluated. These costs include employee remuneration, materials and fuel used, rig costs and payments made to contractors. If no reserves are found, the exploration asset is tested for impairment. If extractable hydrocarbons are found and, subject to further appraisal activity (e.g., by drilling further wells), are likely to be developed commercially, the costs continue to be carried as an intangible assets while sufficient and continued progress is made in assessing the commerciality of the hydrocarbons. All such costs are subject to technical, commercial and management review as well as review for impairment at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off. When proved reserves of oil are determined and development sanctioned, the relevant expenditure is transferred to oil and gas properties after impairment is assessed and any resulting impairment loss is recognized.

Share-based payment transactions

The Company's employees and other service providers are entitled to remuneration in the form of equity-settled share-based payment transactions.

The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an appropriate pricing model. As for other service providers, the cost of the transactions is measured at the fair value of the goods or services received as consideration for equity instruments. In cases where the fair value of the goods or services received as consideration of equity instruments cannot be measured, they are measured by reference to the fair value of the equity instruments granted.

The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period which the performance and service conditions are to be satisfied, ending on the date on which the relevant employees become fully entitled to the award (the “vesting period”). The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The expense or income recognized in profit or loss represents the movement in the cumulative expense recognized at the end of the reporting period.

If the Company modifies the conditions on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee/other service provider at the modification date. If a grant of an equity instrument is cancelled, it is accounted for as if it had vested on the cancellation date, and any expense not yet recognized for the grant is recognized immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the cancelled and new grants are accounted for as a modification of the original grant, as described above.

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Joint oil and gas ventures

The Company, through certain subsidiaries, conducts petroleum and natural gas exploration activities jointly with other participants who each have direct interests in the assets and each are directly obligated for the liabilities of the ventures. Consequently, these financial statements reflect only the Company's proportionate interest in such activities.

The Company accounts for its share of the joint venture's assets, liabilities it has incurred, income from the sale or use of its share of the joint venture's output, together with its share of the expenses incurred by the joint venture and any expenses it incurs in relation to its interest in the joint venture.

Farm-out arrangements in the exploration and evaluation phase

A “farm-out” is the transfer of an oil and gas interest in consideration for an agreement by the transferee (the “farmee”) to meet, absolutely, certain expenditures which would otherwise have to be undertaken by the original interest holder (the “farmor”). Farm-out transactions generally occur in the exploration or development phase and are characterized by the transferor (i.e. farmor) giving up future economic benefits, in the form of reserves, in exchange for a reduction in future funding obligations.

Accordingly, the farmee recognizes its expenditure under the arrangement in respect of its interest and that retained by the farmor, as and when the costs are incurred.

The Company, as the farmor, accounts for the farm-out arrangement as follows:

• the Company does not record any expenditure made by the farmee on its behalf;
• the Company does not recognize a gain or loss on the farm out arrangement, but rather designates any costs capitalized in relation to the whole interest as relating to the partial interest retained; and
• any cash consideration received is credited against costs previously capitalized in relation to the whole interest with any excess accounted for by the farmor as a gain on disposal.

Impairment of financial assets

At the end of each reporting period, the Company assesses whether there is objective evidence of impairment of a financial asset or group of financial assets carried at amortized cost.

As of the date hereof, there is objective evidence of impairment of debt instruments and receivables as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows. Evidence of impairment may include indications that the debtor is experiencing financial difficulties, including liquidity difficulty and default in interest or principal payments. The amount of the loss recorded in profit or loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate (the effective interest rate computed at initial recognition). If the financial asset has a variable interest rate, the discount rate is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account (see allowance for doubtful accounts above). In a subsequent period, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, up to the amount of any previous impairment, is recorded in profit or loss.

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Revenue recognition

Revenues are recognized in the statement of comprehensive loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company’s revenues are mainly derived from:

1. Operator fees - The Company acts as the operator or joint operator on the Licenses and is entitled to operator fees and revenues are recognized in accordance with the terms of the JOAs, as exploration expenses are incurred in the UJV’s.

2. Consulting fees – The Company provides consulting services in respect of the Licenses on a “time and materials” basis. Consulting fees are recognized as revenues as the services are rendered to the respective UJV’s.

Disclosure Controls and Procedures and Internal Controls over Financial Reporting

There were no changes to the Company’s internal controls over financial reporting in the six month period ended June 30, 2014, which have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

As of June 30, 2014, the Company evaluated its disclosure controls and procedures and internal control over financial reporting, as defined by the Canadian Securities Administrators. These evaluations were carried out under the supervision of and with the participation of management, including the Company’s chief financial officer. Based on these evaluations, the chief financial officer concluded that the design of these disclosure controls and procedures and internal control over financial reporting were effective.

Financial Instruments and Other Instruments

The Company’s financial instruments have been designated as follows:

Cash and cash equivalents	- Held-for-trading;
Restricted Cash	- Held-for-trading;
Accounts receivable	- Receivables;
Accounts payable and accrued liabilities	- Other financial liabilities;

The carrying values of cash and cash equivalents, restricted cash and accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these financial instruments.

Risks and Uncertainties

Credit risk

The Company manages credit risk, in respect of cash and cash equivalents, and restricted cash, by holding them at major Canadian and Israeli financial institutions in accordance with the Company’s investment policy. The Company places its cash and cash equivalents with high credit quality Israeli and Canadian financial institutions. Concentration of credit risk exists with respect to the Company’s cash and cash equivalents and accounts receivable. As at June 30, 2014, the Company’s exposure is for cash held in bank accounts, including restricted deposit, in the amount of $428 thousand and on accounts and other receivable of $72 thousand. None of the Company’s accounts receivable is overdue as at June 30, 2014.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in obtaining funds to meet current obligations and future commitments. The Company's approach to managing liquidity risk is to forecast cash requirements to provide reasonable assurance that it will have sufficient funds to meet its liabilities when due. As at June 30, 2014, the Company had cash and cash equivalents of $428 thousand, restricted deposits of $20 thousand and accounts and other receivables of $72 against current trade and other payables in the amount of $213 thousand.

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Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of two types of risk: interest rate risk, and foreign currency risk.

	(i)	Interest rate risk
		The Company is not exposed to significant interest rate risk due to the short-term maturity of its cash equivalents.
	(ii)	Foreign currency risk
		The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Israel. Most of the Company’s monetary assets are held in US dollars and most of the Company’s expenditures are made in US dollars. However, the Company also has expenditures in NIS and Canadian dollars. The Company has not hedged its exposure to currency fluctuations. An increase or decrease of 5% of the NIS or the Canadian Dollar relative to the U.S dollar would not have a significant effect on the Company.

Environmental Risk

Environmental regulations affect the cost of exploration and development, as well as future development operations; however, management does not believe that any provision against environmental regulations is currently required.

For a complete discussion on risk factors, please refer to the Company’s Form 20-F dated April 30, 2014, filed on www.sedar.com.

Other Information

Additional information about the Company, the Company’s quarterly and annual consolidated financial statements, annual information form, technical reports and other disclosure documents, is accessible at the Company’s website www.adiraenergy.com or through the Company’s public filings at www.sedar.com.

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FORM 52-109FV2
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE

I, Gadi Levin, Chief Financial Officer of Adira Energy Ltd., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Adira Energy Ltd. (the “issuer”) for the interim period ended June 30, 2014.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: August 29, 2014

/s/ Gadi Levin
_____________________
Gadi Levin
Chief Financial Officer

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FORM 52-109FV2
CERTIFICATION OF INTERIM FILINGS
VENTURE ISSUER BASIC CERTIFICATE

I, Alan Friedman, Executive Vice President - Corporate Development of Adira Energy Ltd., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Adira Energy Ltd. (the “issuer”) for the interim period ended June 30, 2014.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: August 29, 2014

/s/ Alan Friedman
____________________
Alan Friedman
Executive Vice President - Corporate Development

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