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EX-31.1 - CEO SECTION 302 CERTIFICATION - LIBERTY ENERGY CORP.ex31-1.txt
EX-32.2 - CFO SECTION 906 CERTIFICATION - LIBERTY ENERGY CORP.ex32-2.txt
EX-32.1 - CEO SECTION 906 CERTIFICATION - LIBERTY ENERGY CORP.ex32-1.txt
EX-31.2 - CFO SECTION 302 CERTIFICATION - LIBERTY ENERGY CORP.ex31-2.txt

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

                                    FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2010

                        Commission file number 333-138107


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

                                     NEVADA
         (State or other jurisdiction of incorporation or organization)

                           Church Barn, 3 Church Lane
                         Barlby, Selby, England YO8 5JG
          (Address of principal executive offices, including zip code)

                                  (775)981-9022
                     (Telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [ ] NO [ ]

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

Large accelerated filer [ ]                        Accelerated filer [ ]

Non-accelerated filer [ ]                          Smaller reporting company [X]

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 60,400,000 shares as of March 20,
2010

ITEM 1. FINANCIAL STATEMENTS The un-audited quarterly financial statements for the period ended January 31, 2010, prepared by the company, immediately follow. 2
GEORGE STEWART, CPA 2301 SOUTH JACKSON STREET, SUITE 101-G SEATTLE, WASHINGTON 98144 (206) 328-8554 FAX (206) 328-0383 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Liberty Energy, Corp. I have reviewed the condensed balance sheet of Liberty Energy, Corp. as of January 31, 2010, and the related condensed statements of operations for the three and six months ended January 31, 2010 and 2009 and for the period from June 6, 2006 (inception) to January 31, 2010, and condensed statements of cash flows for the three months ended January 31, 2010 and 2009 and for the period from June 6, 2006 (inception) to January 31, 2010. These financial statements are the responsibility of the company's management. I conducted my review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, I do not express such an opinion. Based on my review, I am not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with generally accepted accounting principles in the United States of America. I have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the balance sheet of Liberty Energy, Corp. as of July 31, 2009, and the related statements of operations, retained earnings and cash flows for the year then ended (not presented herein); in my report dated October 19, 2009, I expressed a going concern opinion on those financial statements. In my opinion, the information set forth in the accompanying condensed balance sheet as of July 31, 2009, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ George Stewart ------------------------------- Seattle, Washington March 4, 2010 3
LIBERTY ENERGY CORP. (An Exploration Stage Company) Balance Sheet -------------------------------------------------------------------------------- As of As of January 31, July 31, 2010 2009 ---------- ---------- ASSETS CURRENT ASSETS Cash $ 12,266 $ 21,100 ---------- ---------- TOTAL CURRENT ASSETS 12,266 21,100 OIL AND GAS PROPERTIES, FULL COST METHOD Costs subject to amortization 525,000 -- Costs not subject to amortization -- -- ---------- ---------- OIL AND GAS PROPERTIES, NET 525,000 -- ---------- ---------- TOTAL ASSETS $ 537,266 $ 21,100 ========== ========== CURRENT LIABILITIES Accounts Payable 300,000 80 Loan Payable - related party 25,000 -- ---------- ---------- TOTAL CURRENT LIABILITIES 325,000 80 TOTAL LIABILITIES 325,000 80 STOCKHOLDERS' EQUITY Common stock, ($0.001 par value, 150,000,000 shares authorized; 60,400,000 and 60,000,000 shares issued and outstanding as of January 31, 2010 and July 31, 2009 respectively 60,400 60,000 Additional paid-in capital 205,600 6,000 Deficit accumulated during exploration stage (53,734) (44,980) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 212,266 21,020 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 537,266 $ 21,100 ========== ========== See Notes to Financial Statements 4
LIBERTY ENERGY CORP. (An Exploration Stage Company) Statement of Operations -------------------------------------------------------------------------------- June 6, 2006 Three Months Three Months Six Months Six Months (inception) Ended Ended Ended Ended through January 31, January 31, January 31, January 31, January 31, 2010 2009 2010 2009 2010 ------------ ------------ ------------ ------------ ------------ REVENUES Revenues $ -- $ -- $ -- $ -- $ 100 ------------ ------------ ------------ ------------ ------------ TOTAL REVENUES -- -- -- -- 100 PROFESSIONAL FEES 3,185 1,400 6,492 5,200 28,589 GENERAL & ADMINISTRATIVE EXPENSES 1,255 920 2,262 3,858 25,245 ------------ ------------ ------------ ------------ ------------ TOTAL GENERAL & ADMINISTRATIVE EXPENSES (4,440) (2,320) (8,754) (9,058) (53,834) ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (4,440) $ (2,320) $ (8,754) $ (9,058) $ (53,734) ============ ============ ============ ============ ============ BASIC EARNINGS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 60,400,000 60,000,000 60,317,391 60,000,000 ============ ============ ============ ============ See Notes to Financial Statements 5
LIBERTY ENERGY CORP. (An Exploration Stage Company) Statement of Cash Flows -------------------------------------------------------------------------------- June 6, 2006 Six Months Six Months (inception) Ended Ended through January 31, January 31, January 31, 2010 2009 2010 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (8,754) $ (9,058) $ (53,734) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Changes in operating assets and liabilities: Accounts Payable 299,920 -- 300,000 ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 291,166 (9,058) 246,266 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Oil and Gas Properties (525,000) -- (525,000) ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (525,000) -- (525,000) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 400 -- 60,400 Additional paid-in capital 199,600 -- 205,600 Loan Payable - related party 25,000 -- 25,000 ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 225,000 -- 291,000 ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH (8,834) (9,058) 12,266 CASH AT BEGINNING OF PERIOD 21,100 39,033 -- ---------- ---------- ---------- CASH AT END OF YEAR $ 12,266 $ 29,975 $ 12,266 ========== ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during year for: Interest $ -- $ -- $ -- ========== ========== ========== Income Taxes $ -- $ -- $ -- ========== ========== ========== See Notes to Financial Statements 6
LIBERTY ENERGY CORP. (An Exploration Stage Company) Notes to Financial Statements January 31, 2010 -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Liberty Energy Corp. (f/k/a DMA Minerals Inc., the "Company") was incorporated on June 6, 2006 under the laws of the State of Nevada. The Company carried out exploration on a mineral claim known as the TG Mineral Claim. The initial phase of exploration included detailed prospecting and mineralization mapping, followed by hand trenching to obtain clean, fresh samples. Based on the information available to it from its Phase I exploration program, it was determined that the TG Mineral Claim did not, in all likelihood, contain a commercially viable mineral deposit, and it therefore abandoned any further exploration on the property. As a result, the Company has acquired several oil and gas properties and interests and is now focusing on raising additional funding for the exploration and development of those properties. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The Company reports revenue and expenses using the accrual method of accounting for financial and tax reporting purposes. The Company has elected a July 31, year-end. USE OF ESTIMATES Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. PRO FORMA COMPENSATION EXPENSE No stock options have been issued by Liberty Energy Corp. Accordingly, no pro forma compensation expense is reported in these financial statements. MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS The Company expenses all costs related to the acquisition and exploration of mineral properties in which it has secured exploration rights prior to establishment of proven and probable reserves. To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all costs are being expensed. 7
LIBERTY ENERGY CORP. (An Exploration Stage Company) Notes to Financial Statements January 31, 2010 -------------------------------------------------------------------------------- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DEPRECIATION, AMORTIZATION AND CAPITALIZATION The Company records depreciation and amortization when appropriate using both straight-line and declining balance methods over the estimated useful life of the assets (five to seven years). Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related accumulated depreciation, is removed from the appropriate accounts and the resultant gain or loss is included in net income. OIL AND GAS PROPERTIES The Company follows the full-cost method of accounting for oil and natural gas properties. Under this method, all costs incurred in the exploration, acquisition, and development, including unproductive wells, are capitalized in separate cost centers for each country. Such capitalized costs include contract and concessions acquisition, geological, geophysical, and other exploration work, drilling, completing and equipping oil and gas wells, constructing production facilities and pipelines, and other related costs. The capitalized costs of oil and gas properties in each cost center are amortized on a composite units of production method based on future gross revenues from proved reserves. Sales or other dispositions of oil and gas properties are normally accounted for as adjustments of capitalized costs. Gain or loss is not recognized in income unless a significant portion of a cost center's reserves is involved. Capitalized costs associated with acquisition and evaluation of unproved properties are excluded from amortization until it is determined whether proved reserves can be assigned to such properties or until the value of the properties is impaired. If the net capitalized costs of oil and gas properties in a cost center exceed an amount equal to the sum of the present value of estimated future net revenues from proved oil and gas reserves in the cost center and the lower of cost or fair value of properties not being amortized, both adjusted for income tax effects, such excess is charged to expense. Since the Company has not produced any oil or gas, a provision for depletion has not been made. REVENUE AND COST RECOGNITION The Company uses the sales method of accounting for natural gas and oil revenues. Under this method, revenues are recognized based on the actual volumes of gas and oil sold to purchasers. The volume sold may differ from the volumes to which the Company is entitled based on our interest in the properties. Costs associated with production are expensed in the period incurred. 8
LIBERTY ENERGY CORP. (An Exploration Stage Company) Notes to Financial Statements January 31, 2010 -------------------------------------------------------------------------------- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED INCOME TAXES The Company accounts for its income taxes in accordance with ASC No. 740, "Income Taxes". Under Statement 740, a liability method is used whereby deferred tax assets and liabilities are determined based on temporary differences between basis used for financial reporting and income tax reporting purposes. Income taxes are provided based on tax rates in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not, that the Company will not realize the tax assets through future operations. FAIR VALUE OF FINANCIAL INSTRUMENTS ASC No. 825-50-10-1, "Financial Instruments - Overall Disclosure", requires the Company to disclose, when reasonably attainable, the fair market values of its assets and liabilities which are deemed to be financial instruments. The Company's financial instruments consist primarily of cash and certain investments. INVESTMENTS Investments that are purchased in other companies are valued at cost less any impairment in the value that is other than temporary in nature. PER SHARE INFORMATION The Company computes per share information by dividing the net loss for the period presented by the weighted average number of shares outstanding during such period. ADVERTISING The Company will expense its advertising when incurred. There has been no advertising since inception. NOTE 3 - PROVISION FOR INCOME TAXES The provision for income taxes for the period ended January 31, 2010 represents the minimum state income tax expense of the Company, which is not considered significant. 9
LIBERTY ENERGY CORP. (An Exploration Stage Company) Notes to Financial Statements January 31, 2010 -------------------------------------------------------------------------------- NOTE 4 - COMMITMENTS AND CONTINGENCIES LITIGATION The Company is not presently involved in any litigation. NOTE 5 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Recently issued accounting pronouncements will have no significant impact on the Company and its reporting methods. NOTE 6 - GOING CONCERN Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses. The consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $53,734 since its inception and requires capital for its contemplated operational activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties. NOTE 7 - RELATED PARTY TRANSACTIONS At of January 31, 2010, a loan payable in the amount of $25,000 was due Ian A. Spowart (a director) of which the loan is non-interest bearing with no specific repayment terms. Daniel Martinez-Atkinson and Ian A. Spowart, the officers and directors of the Company may, in the future, become involved in other business opportunities as they become available, thus they may face a conflict in selecting between the Company and their other business opportunities. The Company has not formulated a policy for the resolution of such conflicts. 10
LIBERTY ENERGY CORP. (An Exploration Stage Company) Notes to Financial Statements January 31, 2010 -------------------------------------------------------------------------------- NOTE 8 - STOCK TRANSACTIONS Transactions, other than employees' stock issuance, are in accordance with ASC No. 505. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees' stock issuance are in accordance with ASC No. 718. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable. On June 6, 2006 the Company issued a total of 30,000,000 shares of common stock to one director for cash in the amount of $0.0002 per share for a total of $6,000. 30,000,000 common shares were issued to 26 investors in the Company's SB-2 offering for the aggregate sum of $60,000 in cash. The Regulation SB-2 offering was declared effective by the Securities and Exchange Commission on November 8, 2006 and completed on December 4, 2006. Effective June 11, 2008 the Company effected a forward stock spilt of the authorized, issued and outstanding shares of common stock on a twenty five new for one old basis. Authorized capital increased from 75,000,000 common shares to 150,000,000 common shares and par value remained at $.001 per share. These financial statements have been retroactively restated to reflect these changes. On September 8, 2009 the Company issued a total of 400,000 shares of common stock to one director for cash in the amount of $0.50 per share for a total of $200,000. As of January 31, 2010 the Company had 60,400,000 shares of common stock issued and outstanding. NOTE 9 - STOCKHOLDERS' EQUITY The stockholders' equity section of the Company contains the following classes of capital stock as of January 31, 2010: Common stock, $0.001 par value: 150,000,000 shares authorized; 60,400,000 shares issued and outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION FORWARD LOOKING STATEMENTS This report contains forward-looking statements that involve risk and uncertainties. We use words such as "anticipate", "believe", "plan", "expect", "future", "intend", and similar expressions to identify such forward-looking statements. Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management as of the date of this filing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. RESULTS OF OPERATIONS We are an exploration stage company and have generated $100 in revenues since inception and have incurred $53,834 in expenses through January 31, 2010. For the three months ended January 31, 2010 and 2009 we incurred $4,440 and $2,320 in expenses, respectively. These expenses consisted of professional fees and general and administrative expenses. The following table provides selected financial data about our company for the periods ended January 31, 2010 and 2009. Balance Sheet Data: 1/31/10 1/31/09 ------------------- ------- ------- Cash $ 12,266 29,975 Total assets $537,266 29,975 Total liabilities $325,000 5,000 Shareholders' equity $212,266 24,975 Cash provided by financing activities since inception through January 31, 2010 was $66,000, $6,000 from the sale of shares to our officer and director in June 2006 and $60,000 resulting from the sale of our common stock in our initial public offering to 26 independent investors in December 2006. On September 8, 2009 the Company issued a total of 400,000 shares of common stock to one director for cash in the amount of $0.50 per share for a total of $200,000. As of January 31, 2010 the Company had 60,400,000 shares of common stock issued and outstanding. LIQUIDITY AND CAPITAL RESOURCES Our cash balance at January 31, 2010 was $12,266, with $325,000 in outstanding liabilities. If we experience a shortfall of cash our director has agreed to loan us additional funds for operating expenses, however he has no legal obligation to do so. Total estimated net expenditures over the next 12 months are expected to be approximately $2,850,000. We are an exploration stage company and have generated no revenue to date. 11
PLAN OF OPERATION The company carried out exploration on a mineral claim known as the TG Mineral Claim. The initial phase of exploration included detailed prospecting and mineralization mapping, followed by hand trenching to obtain clean, fresh samples at a cost of $4,950. Based on the information available to us from our Phase I exploration program, we determined that the TG Mineral Claim did not, in all likelihood, contain a commercially viable mineral deposit, and we therefore abandoned any further exploration on the property. As a result, we began investigating several other business opportunities to enhance shareholder value in the oil and gas industry with the acquisition of oil and natural gas assets both in Bulgaria and the United States. Subject to completing due diligence and funding sources being available we intend to pursue business opportunities in the oil and gas business. We may require additional funding to proceed. We cannot provide investors with any assurance that we will be able to raise sufficient funds to fund continued work in the oil and gas business. BULGARIA PROJECT On September 22, 2009, we entered into a Purchase and Sales Agreement with William C Athens, Located at 1924 S. Utica Avenue Suite 1201, Tulsa, Oklahoma, 74104. We agreed to acquire from him, in 4 equal transactions, a total of 1/16th of 1% of 8/8ths ORRI (over riding royalty interest) for a total price of $400,000 (4 x $100,000). The interest is the A-Lovech exploration block in Bulgaria. Aforementioned payments and Assignments are able to be made in four separate $100,000 closings spaced roughly 30 days apart, from the date we signed the agreement. As at the date hereof we have made one payment totaling $100,000 and carry the remaining $300,000 as an account payable. The A-Lovech exploration block covers 1,830 square miles or 1,171,200 acres. On the block, there was a primary well (Deventci-R1) drilled and logged in 2008. Total depth is 5,888 meters (19,313 ft.) in the Lower Triassic Alexandrovo formation. The well is on a geological feature known as the West Koynare structure, which covers around 15-20 sq km. The Deventci-R1 is the deepest well drilled in Bulgaria in the last 30 years and testing was planned in the Lower Jurassic sandstones of the Bachiishte and Ozirovo formations. During a 12-hour shut-in period, the indicated bottom hole pressure was about 11,500 psi. The well encountered gas saturated reservoirs in the Dolni Dabnik member of the Middle Triassic Doirentsi formation. Other potential reservoirs are in the Upper Triassic Rusinovdel and the Lower Jurassic Ozirovo formations. Casing was run to 5,876 meters (19,280 ft.). As this ORRI is operated by DPE, Liberty is currently uninvolved in any ongoing development operations or exploration of the block. That being said, Liberty's ORRI does entitle the company to its royalty interest on all future revenues and reserves located on the block, at no further cost to the company. It is anticipated that the Deventci development will be tied into the Aglen field, 21km away. First sales are expected after the completion of the pipeline in 2011. 12
Initial results show that gas and natural gas condensate are of a very high quality with low sulphur content. Upon completion of the transactions in the purchase and sale agreement, we plan to commence a thorough search and review of other assets in this part of Europe, with a view to engaging in similar low risk opportunities. TEXAS PROJECT On October 1, 2009, we entered into the Lease Purchase and Sale Agreement with Trius Energy LLC, a Texas company, to acquire 4 oil and gas leases in Texas for $125,000. 100% WI (Working Interest) at a 75% NRI (Net revenue Interest) in the Dahlstrom Lease, 2% WI at 75% NRI in the Ratliff lease and 100% WI at a 70% NRI in the Lockhart Project, consisting of 2 leases, the Anton lease (1 tract) and Alexander Lease (3 tracts). Upon completion of the transactions described under this Lease Purchase and Sale Agreement, we intend to continue existing production, and also to conduct an aggressive exploration and appraisal program on the leases acquired over the next 12 months. The Dahlstrom lease in Jackson County, Texas has one existing well. This is a productive gas well, which will provide the company with small but sustainable quantities of natural gas sales. The lease does not currently have any further spacing for more wells to be drilled, but it holds the Master Meter where all wells in the area tie into (to sell their gas) which would give us possible revenue with future wells drilled and/or re-entered. Liberty may also look to re-enter the current well, and perform workover operations, once it has been determined whether production could be reasonably increased, and a decent upside achieved. The Ratliff lease in Jackson County, Texas currently has 4 wells on it, and also has spacing to drill another well. We will conduct geological studies to ascertain the risk and worth of such expenditure. We are also interested in the redevelopment of the 4 existing wells. 3 of them are expected to be viable for economic production of oil and gas, and the 4th is also permitted to facilitate a commercial disposal facility. This salt water disposal well could provide a significant monthly revenue stream from companies disposing of their salt water that their wells produce around us, plus in addition, gives us monthly oil revenue by "skimming" the oil from the salt water that we dispose. The three wells expected to produce oil and gas, and the disposal well need various works as detailed below. One of the wells needs a sand-lock and tubing tested, another well needs additional perforations and tubing tested, another well needs tubing tested and the last well needs tubing tested, which is planned to be a salt water disposal well. Lockhart Northeast Project in Caldwell County, Texas (2 leases) consists of 4 land tracts containing 8 wells, spread over roughly 848 acres. 5 of the wells are re-entry wells, and there are 3 shut in wells. With the amount of acreage held, the operator has informed the company that we are able to space a further 282 new wells. 13
The following proposed plan of action is made based on a best efforts study of geological and production data that have been acquired, but do not represent a thorough study of the area by petroleum engineers, geologists, or geophysicist. 1. Schedule an inspection on entire leased acreage; gather equipment list & survey 2. Carry out extensive geological study examining both risk and reward of proposed works 3. Increase operator bond to operate wells 4. Schedule swabbing to be performed on shut-in wells for oil production 5. Put AFE (Authorization For Expenditure) together for equipping/re-working (3) shut-in wells 6. Put AFE together for re-entering (5) wells 7. Perform complete evaluation on drilling program 8. Put AFE together for new well locations 9. Drill & Complete new wells 10. Develop Field up to 282 newly drilled wells There are (4) main geological pay zones in this area that our wells could produce from - the Serpentine, Dale Lime, Austin Chalk & Buda. That being said, new field discoveries are possible in the Buda, Serpentine and Dale Lime on these leases based on logged but undeveloped shows. We feel that these leases could potentially be extremely profitable, if we develop each lease and well correctly. With new technology and countless new ways to complete/produce wells we are excited for what lies ahead. Presently, we feel that we should be able to get a considerable amount of (flush) production from the (3) shut-in wells by swabbing each well a few times a month. This will enable us to use revenue to proceed with developing the field. With the application of acid/fracture jobs and/or far-out perforating (new completion technology) it is believed that we would be able to increase production and possibly access undeveloped reservoirs that could produce at significantly higher daily rates and overall total production. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we are uncertain about our continued ability to raise funds privately. If we are unable to secure adequate capital to continue our oil and gas exploration and development business our shareholders will lose some or all of their investment and our business will likely fail. Over the next twelve months we expect to expend funds as follows: ESTIMATED NET EXPENDITURES DURING THE NEXT TWELVE MONTHS General, Administrative, and Corporate Expenses $ 100,000 Operating Expenses $ 250,000 Exploration $1,500,000 Redevelopment $1,000,000 ---------- TOTAL $2,850,000 ========== 14
We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through the equity offerings noted above. The continuation of our business is dependent upon obtaining further financing, a successful program of exploration and/or development, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer so that it may be recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared. 15
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter ended January 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 6. EXHIBITS The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our original Form SB-2 Registration Statement, filed under SEC File Number 333-138107, at the SEC website at www.sec.gov: Exhibit No. Description ----------- ----------- 3.1 Articles of Incorporation* 3.2 Bylaws* 31.1 Sec. 302 Certification of Principal Executive Officer 31.2 Sec. 302 Certification of Principal Financial Officer 32.1 Sec. 906 Certification of Principal Executive Officer 32.2 Sec. 906 Certification of Principal Financial Officer SIGNATURES Pursuant to the requirements of Section 13(a) or 15(d) 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. /s/ Ian Spowart March 20, 2010 ------------------------------------ ------------- Ian Spowart, President Date (Chief Executive Officer & Director) /s/ Daniel Martinez-Atkinson March 20, 2010 ------------------------------------ -------------- Daniel Martinez-Atkinson Date (Chief Financial Officer, Principal Accounting Officer & Director) 1