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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

[X]

Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended October 31, 2012.

 

 

[  ]

Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _______ to _______.


000-54596

(Commission file number)


[lbye10q_103112apg001.jpg]


LIBERTY ENERGY CORP.

(Exact name of small business issuer as specified in its charter)


Nevada

 

205024859

 

713.353.4700

(State or other jurisdiction

 

(IRS Employer

 

(Registrant’s telephone number)

of incorporation or organization)

 

Identification No.)

 

 


Two Allen Center, Suite 1600, 1200 Smith Street, Houston, TX

(Address of principal executive offices)

 

N/A

(Former name, former address and former fiscal year,

if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X]  YES [   ] NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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).

[X]  YES [   ] NO






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

Large accelerated filer

[   ]

Accelerated filer

[   ]

Non-accelerated filer

[   ]

(Do not check if a smaller reporting company)

Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act

[   ]  YES [X] NO


APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

[   ]  YES [   ] NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

88,428,660 common shares issued and outstanding as of December 14, 2012.






TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

4

Item 1.  Financial Statements

4

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.  Quantitative and Qualitative Disclosures about Market Risks

18

Item 4.  Controls and Procedures

19

PART II - OTHER INFORMATION

20

Item 1.  Legal Proceedings

20

Item 1A.  Risk Factors

20

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 3.  Defaults Upon Senior Securities

20

Item 4.  Mining Safety Disclosures

20

Item 5.  Other Information

20

Item 6.  Exhibits

21

SIGNATURES

23



3





IMPORTANT INFORMATION REGARDING THIS FORM 10-Q

FORWARD-LOOKING STATEMENTS


This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.


Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.


In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common shares" refer to the common shares in our capital stock.


As used in this quarterly report, the terms “we”, “us”, “our” and “our company” refer to Liberty Energy Corp., unless otherwise indicated.





PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements




4



LIBERTY ENERGY CORP.

 (AN EXPLORATION STAGE COMPANY)

BALANCE SHEET

 

 

 

 

As of

 

 

As of

 

 

 

 

October 31,

 

 

July 31,

 

 

 

 

2012

 

 

2012

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

      Cash

 

$

4,518 

 

$

38,880 

 

Total Current Assets

 

 

4,518 

 

 

38,880 

 

 

 

 

 

 

 

 

 

Oil and Gas Properties, full cost method

 

 

363,939 

 

 

363,939 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

368,457 

 

$

402,819 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

      Accounts Payable  

 

 

77,618 

 

 

52,070 

 

      Loan Payable – net of unamortized discount of $18,040 and $0

 

 

59,250 

 

 

75,778 

 

      Derivative Liability

 

 

60,284 

 

 

 

      Payroll Liabilities

 

 

7,000 

 

 

7,000 

 

Total Current Liabilities

 

 

204,152 

 

 

134,848 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

Common stock, $0.001 par value, 150,000,000 shares

 

 

 

 

 

  authorized; 88,552,270 and 88,527,270 shares issued

 

 

 

 

 

  and outstanding as of October 31, 2012 and

 

 

 

 

 

 

 

  July 31, 2012 respectively

 

 

88,552 

 

 

88,527 

 

Additional paid-in capital

 

 

1,600,136 

 

 

1,598,661 

 

Deficit accumulated during exploration stage

 

 

(1,524,383)

 

 

(1,419,217)

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

 

164,305 

 

 

267,971 

 

 

 

 

 

 

 

 

 

       Total Liabilities &

 

 

 

 

 

 

 

             Stockholders' Equity

 

$

368,457 

 

$

402,819 


The accompanying notes are an integral part of these unaudited financial statements




5



LIBERTY ENERGY CORP.

 (AN EXPLORATION STAGE COMPANY)

STATEMENT OF OPERATIONS

(UNAUDITED)



 

 

 

Three Months

 

 

Three Months

 

 

June 6, 2006

(inception)

 

 

 

Ended

 

 

Ended

 

 

through

 

 

 

October 31,

 

 

October 31,

 

 

October 31,

 

 

 

2012

 

 

2011

 

 

2012

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 

$

 

$

26,778 

 

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

6,286 

 

 

42,374 

 

Impairment Expense

 

 

 

 

 

626,536 

Total Operating Expense

 

 

 

(6,286)

 

 

(668,910)

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

(6,286)

 

 

(642,132)

 

 

 

 

 

 

 

 

 

 

General & Administrative Expenses

 

 

 

 

 

 

 

 

 

Professional Fees

 

17,754 

 

 

10,579 

 

 

129,402 

 

General & Administrative

 

43,654 

 

 

54,409 

 

 

708,413 

Total General & Administrative Expenses

(61,408)

 

 

(64,988)

 

 

(837,815)

 

 

 

 

 

 

 

 

 

 

Other Income/(Expense)

 

 

 

 

 

 

 

 

 

Interest expense

 

(25,974)

 

 

 

 

(26,752)

 

Loss on derivative liability

 

(17,784)

 

 

 

 

(17,784)

 

Gain from currency exchange

 

 

 

 

 

100 

Total Other Income (Expense)

 

(43,758)

 

 

 

 

(44,436)

 

 

 

 

 

 

 

 

 

Net Income (Loss)

$

(105,166)

 

$

(71,274)

 

$

(1,524,383)

 

 

 

 

 

 

 

 

 

 

Net Loss per share

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of

 

88,543,574 

 

 

62,083,358 

 

 

 

  common shares outstanding

 

 

 

 

 

 

 

 


The accompanying notes are an integral part of these unaudited financial statements





6



LIBERTY ENERGY CORP.

 (AN EXPLORATION STAGE COMPANY)

STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

June 6, 2006

 

 

 Three Months

 

 

 Three Months

 

 

(inception)

 

 

 Ended

 

 

 Ended

 

 

through

 

 

October 31,

 

 

October 31,

 

 

October 31,

 

 

2012

 

 

2011

 

 

2012

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

    Net income (loss)

$

(105,166)

 

$

(71,274)

 

$

(1,524,383)

    Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

       provided by (used in) operating activities:

 

 

 

 

 

 

 

 

        Impairment Expense

 

 

 

 

 

626,536 

        Write off of ARO liability

 

 

 

 

 

33,048 

        Amortization of debt discount

 

24,460 

 

 

 

 

24,460 

        Loss on derivative liability

 

17,784 

 

 

 

 

17,784 

        Stock compensation

 

1,500 

 

 

 

 

3,750 

    Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

        Accounts Payable

 

27,060 

 

 

(108,291)

 

 

64,904 

 

 

 

 

 

 

 

 

 

     Net cash used in  operating activities

 

(34,362)

 

 

(179,565)

 

 

(753,901)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

    (Addition) Disposal of Oil and Gas Properties

 

 

 

10,946 

 

 

(737,581)

     Net cash provided by (used in) investing activities

 

 

 

10,946 

 

   

(737,581)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

    Proceeds from sale of common stock

 

 

 

25,000 

 

 

1,396,000 

    Loan Payable - related party

 

 

 

 

 

25,000 

    Loan Payable

 

 

 

 

 

75,000 

     Net cash provided by (used in) financing activities

 

 

 

25,000 

 

 

1,496,000 

 

 

 

 

 

 

 

 

 

    Net increase (decrease) in cash

 

(34,362)

 

 

(143,619)

 

 

4,518 

 

 

 

 

 

 

 

 

 

    Cash at beginning of period

 

38,880 

 

 

154,557 

 

 

 

 

 

 

 

 

 

 

 

    Cash at end of period

$

4,518 

 

$

10,938 

 

$

4,518 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during year for :

 

 

 

 

 

 

 

 

     Interest

$

-

 

$

 

$

     Income Taxes

$

-

 

$

 

$

 

 

 

 

 

 

 

 

 

Non Cash Activity

 

 

 

 

 

 

 

 

Related Party Debt Forgiven

 

-

 

 

 

$

25,000 

Lease acquired through issuance of stock

 

-

 

 

 

 

263,938 

Debt discount associated with derivative liability

 

-

 

 

 

 

42,500 

Reversal of Oil and Gas Assets through Notes

 

-

 

 

 

$

(300,000)


The accompanying notes are an integral part of these unaudited financial statements

 

7



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)



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 is currently an exploration stage company under the provisions of Accounting Standards Codification (ASC) No. 915, Development Stage Entities. Since inception, the Company has produced almost no revenues and will continue to report as an exploration stage company until significant revenues are produced. The Company’s principal activity is the exploration and development of oil and gas properties. Properties are located in the United States of America and Bulgaria.


The Company’s success will depend in large part on its ability to obtain and develop oil and gas interests within the United States. There can be no assurance that oil and gas properties obtained by the Company will contain reserves or that properties with reserves will be profitable to extract. The Company will be subject to local and national laws and regulations which could impact the Company’s ability to execute its business plan.


NOTE 2 – GOING CONCERN


The financial statements of the Company have been prepared assuming that 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. Continuing as a going concern, the Company 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 since its inception and requires capital for its future operational activities. 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 plan of operations, and its transition to profitable operations is 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 financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation


The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended October 31, 2012 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the periods ended  July 31, 2012 filed in our Annual Report on Form 10K filed on November  13, 2012.


Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

 

Recent Accounting Pronouncements

 

Recently issued accounting pronouncements will have no significant impact on the Company and its reporting methods.

 

Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.




8



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)




Net Loss per Share


Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. As the Company is in a net loss position, there are no outstanding potentially dilutive securities that would cause diluted earnings per share to differ from basic earnings per share.


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 unit 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.  A 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.


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.  


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.


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.


The Company’s federal tax returns for the years ended 2006 through 2011 are open to examination. At October 31, 2012, the Company evaluated its open tax years in all known jurisdictions. Based on this evaluation, the Company did not identify any uncertain tax positions. The Company accounts for interest and penalties relating to uncertain tax positions in the current period statement of operations as necessary.


Fair Value of Financial Instruments


U.S. GAAP establishes a fair value hierarchy which has three levels based on the reliability of the inputs to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s financial instruments consist primarily of cash, oil and gas properties, accounts payables and notes payable. The carrying values of these financial instruments approximate their respective fair values as they are either short-term in nature or carry interest rates that approximate market rates. The Company evaluates its embedded conversion




9



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)



features contained within their convertible notes for derivative treatment. The Company’s derivative liabilities at October 31, 2012 are considered Level 2 financial instruments.


NOTE 4 - UNEVALUATED OIL AND GAS PROPERTIES


On October 1, 2009, the Company entered into a lease purchase and sale agreement with Trius Energy LLC, a Texas corporation, to acquire four oil and gas leases in Texas for $125,000. The interests consist of a 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 two leases, the Anton Lease (1 tract) and Alexander Lease (3 tracts).


The Anton Lease lapsed on January 9, 2011 this tract had 1 shut-in well. It was determined by the Company after discussions with their operators, geologists and based on historical data, that it would not be cost effective to pursue the well therefore the lease was allowed to lapse.  In connection with the lapse $3,512 of leasehold cost were written off as of July 31, 2012.


The remaining leases lapsed on July 25, 2012. It was determined by the Company after discussions with their operators, geologists and based on historical data that it would not be cost effective to pursue the leases and existing wells therefore the lease was allowed to lapse.  In connection with the lapse, $690,397 of leasehold cost was written off. The Company also accrued payable for $23,280 for the plugging and abandonment of wells associated with these properties as of July 31, 2012.


Bulgaria


On September 22, 2009, the Company entered into a purchase and sales agreement with William C. Athens, of Tulsa, Oklahoma. The Company agreed to acquire a total of 1/16th of 1% of 8/8ths ORRI (overriding royalty interest) in the A-Lovech exploration block in Bulgaria for a total price of $400,000. The payments and assignments are payable in four separate $100,000 closings to take place approximately 30 days apart, from the date of execution of the agreement.


Mr. Athens passed away between the date the contract was executed and full payment was made, completion of the contract was delayed pending notification from his estate. On April 28, 2011, Ms. Susan W. Athens, the executor for the estate of Mr. William C. Athens, executed an agreement to terminate the purchase and sale agreement between Liberty Energy Corp. and William C. Athens. Under the terms of the agreement Liberty Energy Corp. shall retain the 1/64th of the 1% interest in the A-Lovech exploration block and Mr. Athens’ estate shall retain the $100,000 which was forwarded to Mr. Athens for this acquisition. Oil and gas properties and notes payable were both reduced by $300,000 in accordance with the revised agreement.


Langold Acquisition


On February 22, 2012, the Company entered into and closed a three year lease assignment agreement with Langold Enterprises Limited (an entity with some cross ownership and common principal manager of Asia-Pacific, the Company’s primary source of capital)  pertaining to certain interests in oil and gas properties in Bastrop, Caldwell and Eastland Counties, Texas. The interests which were assigned to the Company are three year leases to the following properties:


A 100% working interest in 2 separate properties equaling approximately 300 acres of exploration property located in Bastrop Town Tract, Abstract No. 11, Bastrop County, TX and the T. J. Hardeman Survey A 203, in Bastrop County, Texas.


A 100% working interest in 5 separate properties equaling approximately 622 acres of exploration property located in Sampson Connell Survey, A-63, Caldwell County, TX, the G. W. James Survey, Caldwell County, TX, the Jasper Gilbert Survey, Caldwell County, TX and the A100 Evans, Wistar, Caldwell County, TX.


A 100% working interest in an approximately 5 acre oil and gas property called the Dillon Hall property located in the Gerron Hinds League in Caldwell County, Texas. The Dillon Hall property is not currently producing, and though it holds an existing well, that well requires a work-over to be put back into production.


A 100% working interest in a property equaling approximately 112 acres of exploration property located in the N. W. 1/4 of Section 24, Block 2, H & C. R. R. Co., Survey, Eastland County, TX.


In consideration for the above leases the Company issued 24,155,435 restricted shares of our common stock to Langold, a non-US shareholder as of July 31, 2012.  The restricted shares were valued equal the volume weighted average of the closing price (the




10



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)



“VWAP”) of Common Stock for the ten (10) Banking Days immediately preceding the execution of the assignment, as quoted on Google Finance or other source of stock quotes as agreed to by the parties. The original value assigned these shares and the leaseholds was $3.3 million. It was determined that due to the relationship between Langold and Asia-Pacific this transaction was not arms length but rather was related party. The Company corrected the error in its July 31, 2012 financial statements and the shares issued and the leasehold costs were recorded at the price paid by Langold on their original three year lease acquisition from the land owners. That price paid was $20,000 cash plus 1,800,000 shares of restricted Liberty Energy stock which was valued at $243,932 for a total consideration of $263,932.


NOTE 5 - COMMITMENTS AND CONTINGENCIES


The Company may from time to time be involved in legal proceedings arising from the normal course of business. There are no pending or threatened legal proceedings as of October 31, 2012.


On March 1, 2012, we entered into a consulting agreement with Peter Gawith for a period of three years, ending February 28, 2015.  Mr. Gawith will provide consulting services in regards to our Company’s management and operations. Pursuant to the agreement, Mr. Gawith will receive a share remuneration of 25,000 shares on a quarterly basis during the term of the agreement. Effective September 1, 2012, we issued 25,000 shares of common stock for the services provided for the three month quarter. The Company recorded the shares at the market price on the issue date of $0.06 for a total consulting expense of $1,500. Mr. Gawith is also entitled to $500 per day that he works on the Company’s business, none of which has been earned or paid pursuant to this contract.


NOTE 6 – RELATED PARTY TRANSACTIONS


Our Company has entered into Consulting Agreements with Daniel Martinez-Atkinson and Ian Spowart on an ongoing basis, dated the 12th day of February, 2010, whereby the Company has agreed to retain Daniel Martinez-Atkinson to the position of Chief Financial Officer and Ian Spowart to the position of Chief Executive Officer of our Company. The agreements may be terminated with 30 days notice. As compensation, the agreements provide for monthly payments of US$5,000 to Daniel Martinez-Atkinson and US$6,500 to Ian Spowart. On July 1, 2011 the directors thought it to be in the best interest of the Company to enter into an Amended Consulting Agreement with Daniel Martinez-Atkinson to increase the consulting fee to $5,500 from July 1, 2011. On June 1, 2012 the directors thought it to be in the best interest of the Company to enter into an Amended Consulting Agreement with Ian Spowart to decrease the consulting fee to $3,500 from June 1, 2012.


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.


NOTE 7 – CONVERTIBLE NOTES PAYABLE


On May 23, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note in the aggregate principal amount of $42,500. $40,000 was funded to the Company with the remaining $2,500 recorded as legal expenses charged by Asher’s legal counsel. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as 58% of the market price defined as the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature. The convertible note, issued on May 23, 2012, is due on February 25, 2013 at an interest rate of 8% per annum. The derivative treatment would not become applicable until the Note becomes convertible on November 19, 2012. As the liability was known before the issuance of the financials the Company decided to record the derivative liability as of October 31, 2012.


Pursuant to ASC 815, “Derivatives and Hedging ," the Company recognized the fair value of the embedded conversion feature of $60,284 as a derivative liability and a loss on the derivative liability of $17,784. The initial fair value of the derivative liability was determined using the Black Scholes option pricing model with a quoted market price of $0.04, a conversion price of $0.0174, expected volatility of 172%, no expected dividends, an expected term of 0.27 years and a risk-free interest rate of 0.16%. The discount on the convertible loan of $42,500 is accreted over the term of the convertible loan with $24,460 recorded as interest expense as of October 31, 2012.




11



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)



  

On July 12, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note in the aggregate principal amount of $32,500. $30,000 was funded to the Company with the remaining $2,500 recorded as legal expenses charged by Asher’s legal counsel. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as 58% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature. The convertible note, issued on July 12, 2012, is due on April 16, 2013 at an interest rate of 8% per annum.  The Company will analyze whether the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value on the date the contingency of the conversion feature is settled which is 180 days from inception of the note.


NOTE 8 – STOCK TRANSACTIONS


On July 19, 2010, the Company entered into a stock and warrant purchase agreement with Asia-Pacific Capital Ltd. Pursuant to which the investor agreed to lend up to $4,000,000 to the Company in multiple installments in exchange for units of the Company at unit price. The unit price means a price equal to the higher of either $ 0.50, or 90% of the volume-weighted average of the closing price of common stock, for the five days immediately preceding the date of receipt of notice from the Company for the advance of funds from Asia-Pacific Capital Ltd. Each unit shall consist of one share (restricted) of the common stock of the Company and one and a half share purchase warrant. Each warrant shall entitle Asia-Pacific Capital Ltd. to purchase one additional share of common stock, at an exercise price equal to 125% of the unit price at which the unit containing the warrant being exercised was issued, for a period of three (3) years from the date such warrant is issued.


On March 8, 2011, the Company entered into a letter agreement to amend the share issuance agreement entered into with Asia-Pacific Capital Ltd. on July 19, 2010. Pursuant to the terms of the share issuance agreement Asia-Pacific agreed to advance $4,000,000 to the Company and had the option to advance a further $4,000,000 once the initial amount had been exhausted. Pursuant to the terms of the letter agreement amending the original share issuance agreement Asia-Pacific has now committed to providing the Company with a total of $8,000,000 in advances despite the fact that the initial $4,000,000 has not yet been fully advanced. As of July 31, 2012 the Company has issued a total of 3,871,835 shares to Asia-Pacific for a total cash amount of $1,055,000 under the terms of the above mentioned agreement.


On September 27, 2011 the Company issued a total of 50,000 shares of common stock to Asia-Pacific for cash in the amount of $0.50 per share for a total of $25,000.


On November 23, 2011, the Company amended the share issuance agreement to modify the share issuance agreement originally entered into with Asia-Pacific Capital Ltd. on July 19, 2010. The parties have agreed to amend the pricing mechanisms (the “Unit Price”) within the original agreement. The definition of the Unit Price in of the original agreement is deleted and replaced with  “Unit Price means a price equal 95% of the volume weighted average of the closing price (the “VWAP”) of Common Stock for the ten (10) Banking Days immediately preceding the date of the Notice, as quoted on Google Finance or other source of stock quotes as agreed to by the parties, but at no time less than $0.05 per share”. Excluding the modifications to the Unit Price, the original agreement remains in full force and effect.


On February 22, 2012, the Company entered into and closed a lease assignment agreement with Langold Enterprises Limited pertaining to certain interests in oil and gas properties in Bastrop, Caldwell and Eastland Counties, Texas. In consideration for the above leases the Company issued 24,155,435 restricted shares of its common stock to Langold, a non-US shareholder.  The restricted shares issued and the leasehold costs were each recorded at the price paid by Langold on their original three year lease acquisition from the land owners. That price paid was $20,000 cash plus 1,800,000 shares of restricted Liberty Energy stock which was valued at $243,932 for a total consideration of $263,932.. These shares were issued without a prospectus, in reliance on exemptions from registration found in Regulation S of the Securities Act of 1933, as amended.  


On September 1, 2012, we issued 25,000 shares of common stock for the services provided for the three month quarter. The Company recorded the shares at the market price on the issue date of $0.06 for a total consulting expense of $1,500.


As of October 31, 2012 and as part of the agreement with its main investor, Asia-Pacific Capital Ltd., the Company issued 5,807,752 warrants. The warrants issued have an exercise price of $1.25 and are fully vested at the date of grant. The warrants




12



LIBERTY ENERGY CORP.

(f/k/a DMA MINERALS INC.)

 (AN EXPLORATION STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

October 31, 2012

(UNAUDITED)



have a term of three years and have an average remaining contractual life of 1.587 years as of October 31, 2012. As these warrants are so far out of the money no value was allocated to them. As of October 31, 2012 no warrants had been exercised.


NOTE 9 – SUBSEQUENT EVENTS


The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.  The management of the Company determined that the following were certain reportable subsequent events to be disclosed as follows:


On November 19, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note in the aggregate principal amount of $27,500, $25,000 was funded to the Company with the remaining $2,500 recorded as legal expenses charged by Asher’s legal counsel. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as 58% of the market price defined as the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature. The convertible note, issued on November 19, 2012, is due on August 21, 2013 at an interest rate of 8% per annum.  The Company will analyze whether the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value on the date the contingency of the conversion feature is settled which is 180 days from inception of the note.


On December 3, 2012 Asher Enterprises elected to convert $15,000 of the principal Convertible Note of May 23, 2012 of $42,500 into 842,697 of shares of common stock at a conversion price of $0.0178 per share. The Company has a balance due of $27,500 remaining under the convertible note.


On December 11, 2012 Asher Enterprises elected to convert $12,000 of the principal Convertible Note of May 23, 2012 of $42,500 into 800,000 of shares of common stock at a conversion price of $0.0150 per share. The Company has a balance due of $15,500 remaining under the convertible note.





13





Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations


General Overview


We are an exploration stage company with nominal revenues and a limited operating history.


Our Company was incorporated in the State of Nevada on June 6, 2006 under the name “DMA Minerals Inc.” to engage in the acquisition, exploration and development of natural resource properties. Our principal executive offices are located at Two Allen Center, Suite 1600, 1200 Smith Street, Houston, TX 77002. The U.S. telephone and fax numbers are (713) 353-4700 and (713) 353-4701 respectively.


On June 11, 2008, we effected a 25 for one forward stock split of our issued and outstanding common stock. As a result, our authorized capital increased to 1,875,000,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares increased from 2,400,000 shares of common stock to 60,000,000 shares of common stock. Effective June 11, 2008, as approved by our board of directors and a majority of our shareholders, we reduced our authorized capital from 1,875,000,000 shares of common stock to 150,000,000 shares of common stock. Also effective June 11, 2008, we have changed our name from “DMA Minerals Inc.” to “Liberty Energy Corp.”. The change of name was approved by our directors and a majority of our shareholders.


Our stock is listed on the OTC Bulletin Board under the symbol "LBYE", and active trading of the stock began on March 15, 2010.


Our Current Business


We are an oil and gas exploration company with interests in properties in Bulgaria and Texas.


Our business plan is to acquire oil and gas properties for exploration, appraisal and development with the intent to bring the projects to feasibility at which time we will either contract out the operations or joint venture the project to qualified interested parties. Our main priority will be given to projects with near term cash flow potential, although consideration will be given to projects that may not be as advanced from a technical standpoint but demonstrate the potential for significant upside.

On September 22, 2009 we entered into a purchase and sales agreement with William C. Athens pursuant to which we agreed to acquire a total of 1/16th of 1% of 8/8ths overriding royalty interest interest in the A-Lovech exploration block in Bulgaria. Mr. Athens passed away between the date the contract was executed and full payment was made. On April 28, 2011, Ms. Susan W. Athens, the executor for the estate of Mr. William C. Athens, executed an agreement to terminate the purchase and sale agreement between our company and William C. Athens. Under the terms of the agreement our company shall retain the 1/64th of the 1% interest in the A-Lovech exploration block and Mr. Athens’ estate shall retain the $100,000 which was forwarded to Mr. Athens for this acquisition. Oil and gas properties and notes payable were both reduced by $300,000 in accordance with the revised agreement.


On October 1, 2009, we entered into an asset purchase and sale agreement with Trius Energy LLC, pursuant to which we acquired certain oil and gas assets from Trius Energy LLC in Jackson County, Texas to acquire four oil and gas leases in Texas for $125,000. The interests consist of a 100% working interest at a 75% net revenue interest in the Dahlstrom Lease, 2% working interest at 75% net revenue interest in the Ratliff Lease and 100% WI at a 70% net revenue interest in the Lockhart Project, consisting of two leases, the Anton Lease (1 tract) and Alexander Lease (3 tracts).


In concurrence with these agreements, we changed management, entered the oil and gas business, and ceased all activity in our former business of mineral exploration. Our focus is now on the exploration, acquisition, development, production and sale of crude oil and natural gas. We are qualified to do business in the State of Texas under the name “Liberty Energy Corp.”. We have not undergone bankruptcy, receivership, or any similar proceeding.


The Ratliff Lease in Jackson County, Texas, currently has four wells, and has spacing to drill another well. Our company will conduct geological studies to ascertain the risk and worth of such expenditure. Our company is also interested in the redevelopment of the four existing wells. Three of the wells are expected to be viable for economic production of oil and gas and the fourth is also permitted to facilitate a commercial disposal facility. The three wells expected to produce oil and gas and the disposal well require various work to be completed.





14





Lockhart Northeast Project in Caldwell County, Texas (two leases), consists of four land tracts containing eight wells spread over roughly 848 acres. Five of the wells are re-entry wells and there are three shut-in wells. With the amount of acreage held, the operator has informed our company that we are able to space a further 282 new wells.


On July 19, 2010, we entered into a share issuance agreement with Asia-Pacific Capital Ltd. whereby Asia-Pacific shall make available of up to $4,000,000 by way of advances until July 18, 2014, in accordance with the terms of the agreement. The completion date may be extended for an additional term of up to twelve months at the option of our company or Asia-Pacific upon written notice on or before the completion date in accordance with the notice provisions of the agreement. Upon receipt of an advance from Asia-Pacific under the terms of the agreement, we will issue to units of our securities to Asia-Pacific. Each unit shall consist of one share of the common stock of our company and one and a half share purchase warrant. The number of units of our company are determined at a price that is the higher of either: (a) $0.50, or (b) 90% of the volume weighted average of the closing price of our company’s common stock, for the five banking days immediately preceding the date of the advance, as quoted on Google Finance, or other source of stock quotes as agreed to by our company and Asia-Pacific. Each warrant shall entitle the holder to purchase one additional share of common stock at an exercise price of 125% of the unit price upon issue and for a period of three years.


On March 8, 2011, we entered into a letter agreement to amend the share issuance agreement we entered into with Asia-Pacific Capital Ltd. on July 19, 2010. Pursuant to the terms of the share issuance agreement Asia-Pacific agreed to advance $4,000,000 to us and had the option to advance a further $4,000,000 once the initial amount had been exhausted. Pursuant to the terms of the letter agreement amending the original share issuance agreement Asia-Pacific has now committed to providing us with a total of $8,000,000 in advances despite the fact that the initial $4,000,000 has not yet been fully advanced. As of October 31, 2012 our company has issued a total of 3,871,835 shares to Asia-Pacific for a total cash amount of $1,055,000 under the terms of the above mentioned agreement.


On November 23, 2011, we entered into an amending agreement to the share issuance agreement to modify the share issuance agreement originally entered into with Asia-Pacific Capital Ltd. on July 19, 2010. The parties have agreed to amend the pricing mechanisms of the unit price within the original agreement.  Accordingly, the unit price has been amended to mean a price equal 95% of the volume weighted average of the closing price of common stock for the 10 banking days immediately preceding the date of the advance notice, as quoted on Google Finance or other source of stock quotes as agreed to by the parties, but at no time less than $0.05 per share.


On February 22, 2012, we entered into and closed a lease acquisition agreement with Langold Enterprises Limited pertaining to certain interests in oil and gas properties in Bastrop, Caldwell and Eastland Counties, Texas. The interests which were assigned to our company are three-year leases to the following properties:

·

A 100% working interest in 2 separate properties equaling approximately 300 acres of exploration property located in Bastrop Town Tract, Abstract No. 11, Bastrop County, TX and the T. J. Hardeman Survey A 203, in Bastrop County, Texas.

·

A 100% working interest in 5 separate properties equaling approximately 622 acres of exploration property located in Sampson Connell Survey, A-63, Caldwell County, TX, the G. W. James Survey, Caldwell County, TX, the Jasper Gilbert Survey, Caldwell County, TX and the A100 Evans, Wistar, Caldwell County, TX.

·

A 100% working interest in a property equaling approximately 112 acres of exploration property located in the N. W. 1/4 of Section 24, Block 2, H & C. R. R. Co., Survey, Eastland County, TX.

·

A 100% working interest in an approximately 5 acre oil and gas property called the Dillon Hall property located in the Gerron Hinds League in Caldwell County, Texas. The Dillon Hall property is not currently producing, and though it holds an existing well, that well requires a work-over to be put back into production.


In consideration for the above leases our company issued 24,155,435 restricted shares of our common stock to Langold, a non-US shareholder.  The restricted shares issued and the leasehold costs were each recorded at the price paid by Langold on their original three year lease acquisition from the land owners. That price paid was $20,000 cash plus 1,800,000 shares of restricted Liberty Energy stock which was valued at $243,932 for a total consideration of $263,932.


Results of Operations


The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended October 31, 2012 which are included herein.





15








 

 

Three Months

Ended October 31,

 

 

Three Months

Ended October 31,

 

 

June 6, 2006

(Inception)

through

October 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

 

2011

 

 

 

Revenues

$

-

 

$

-

 

$

26,778

 

Total Operating and G&A Expenses

$

(61,408

)

$

(71,274

)

$

(1,506,725

)

Other Income (Expenses)

$

(43,758

)

$

-

 

$

(44,436

)

Net Loss

$

 (105,166

)

$

(71,274

)

$

(1,524,383

)

Three month period ending October 31, 2012 and 2011 and from June 6, 2006 (inception) to October 31, 2012

Expenses

Our total expenses for the three month period ended October 31, 2012 and 2011 and June 6, 2006 (inception) to October 31, 2012 are outlined in the table below:

  

 

Three

 

 

Three

 

 

June 6, 2006

  

 

Months

 

 

Months

 

 

(Inception)

  

 

Ended

 

 

Ended

 

 

through

  

 

October 31,

 

 

October 31,

 

 

October 31,

  

 

2012

 

 

2011

 

 

2012

Operating Costs

$

-

 

$

6,286

 

$

42,374

Impairment Expense

$

-

 

$

-

 

$

626,536

Professional fees

$

17,754

 

$

10,579

 

$

129,402

General and administrative

$

43,654

 

$

54,409

 

$

708,413


Total expenses for the three month ended October 31, 2012, decreased by $9,866, respectively, as compared to the three months ended October 31, 2012. The decrease was primarily as a result of a decrease in operating costs and general and administrative expenses as a result of decreased operations through the relinquishing of interests in certain leases.


Equity Compensation


We currently have recorded $1,500 of equity compensation as of October 31, 2012.


Liquidity and Financial Condition


Working Capital

 

  

 

 

  

 

 

  

 

  

 

At October 31,

 

 

At July 31,

 

 

Percentage

 

  

 

2012

 

 

2012

 

 

Increase/Decrease

 

Current Assets

$

4,518

 

$

38,880

 

 

(88)%

 

Current Liabilities

$

204,152

 

$

134,848

 

 

51%

 

Working Capital Deficit

$

(199,634

)

$

(95,968

)

 

108%

 



Cash Flows

 

 Three Month

 

 

 Three Month

 

  

 

Ended

 

 

Ended

 

  

 

October 31,

 

 

October 31,

 

  

 

2012

 

 

2011

 

Net Cash (Used in) Operating Activities

$

(34,362)

 

$

(179,565

Net Cash provided by Investing Activities

$

Nil

 

$

10,946

 

Net Cash provided by Financing Activities

$

Nil

 

$

25,000

 

Net Decrease In Cash During The Period

$

(34,362)

 

$

(143,619

)





16






Changes in cash flows reflect an increase in accounts payable and stock compensation, a decrease in net loss, no current capital outlays this fiscal year and a decrease in the amount of capital raised. Total cashflow for the three month ended October 31, 2012, decreased by $143,619 for the three months ended October 31, 2011. This was primarily a result of changes in accounts payable. There was no investing in investing or financing activities for the three months to October 31, 2012 due to economic financial restraints and management time being used elsewhere.

 

We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.


Off-Balance Sheet Arrangements


We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.


Contractual Obligations


As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.


Critical Accounting Policies


The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management’s application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.


Basis of Presentation


The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended October 31, 2012 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the periods ended  July 31, 2012 filed in our Annual Report on Form 10K filed on November  13, 2012.

 

Reclassification

 

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

 

Recent Accounting Pronouncements

 

Recently issued accounting pronouncements will have no significant impact on the Company and its reporting methods.

 

Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


Net Loss per Share


Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. As our company is in a net loss position, there are no outstanding potentially dilutive securities that would cause diluted earnings per share to differ from basic earnings per share.

 

 

17





Oil and Gas Properties


Our 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 unit 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.  A 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.


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.


Revenue and Cost Recognition


Our 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 our company is entitled based on our interest in the properties. Costs associated with production are expensed in the period incurred.


Income Taxes


Our 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 our company will not realize the tax assets through future operations. Our company’s federal tax returns for the years ended 2006 through 2011 are open to examination. At July 31, 2012, and 2011, our company evaluated its open tax years in all known jurisdictions. Based on this evaluation, our company did not identify any uncertain tax positions. Our company accounts for interest and penalties relating to uncertain tax positions in the current period statement of operations as necessary.


Fair Value of Financial Instruments


U.S. GAAP establishes a fair value hierarchy which has three levels based on the reliability of the inputs to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivables and payables, accrued liabilities and notes payable. The carrying values of these financial instruments approximate their respective fair values as they are either short-term in nature or carry interest rates that approximate market rates. The Company evaluates its embedded conversion features contained within their convertible notes for derivative treatment. The Company’s derivative liabilities at October 31, 2012 are considered Level 2 financial instruments.


Recent Accounting Pronouncements


Recently issued accounting pronouncements will have no significant impact on our company and its reporting methods.


Item 3.  Quantitative and Qualitative Disclosures about Market Risks


As a “smaller reporting company”, we are not required to provide the information required by this Item.





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Item 4.  Controls and Procedures


Management’s Report on Disclosure Controls and Procedures


We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.


As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.


Changes in Internal Control over Financial Reporting


There have been no changes in our internal controls over financial reporting that occurred during our quarter ended October 31, 2012 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.




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PART II - OTHER INFORMATION


Item 1.  Legal Proceedings


We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.


Item 1A.  Risk Factors


As a “smaller reporting company”, we are not required to provide the information required by this Item.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds


None.

 

Item 3.  Defaults Upon Senior Securities


None.


Item 4.  Mining Safety Disclosures


Not applicable.


Item 5.  Other Information


None.




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Item 6.  Exhibits

Exhibit No.

Description

(3)

Articles of Incorporation and Bylaws

3.1

Articles of Incorporation (Incorporated by reference from our Registration Statement on Form SB-2 filed on October 20, 2006).

3.2

By-laws (Incorporated by reference from our Registration Statement on Form SB-2 filed on October 20, 2006).

3.3

Certificate of Change with respect to the forward stock split (Incorporated by reference from our Current Report on Form 8-K filed on June 11, 2008).

3.4

Certificate of Amendment with respect to the change of name (Incorporated by reference from our Current Report on Form 8-K filed on June 11, 2008).

3.5

Certificate of Change with respect to the reduction of authorized capital (Incorporated by reference from our Current Report on Form 8-K filed on June 11, 2008).

(10)

Material Contracts

10.1

Consulting Agreement between our company and Daniel Martinez-Atkinson dated February 11, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on February 16, 2010).

10.2

Consulting Agreement between our company and Ian Spowart, dated February 11, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on February 16, 2010).

10.3

Assignment and Bill of Sale between our company and Phoenix Oil & Gas LLC dated March 30, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on April 14, 2010).

10.4

Assignment and Bill of Sale between our company and Trius Operations LLC dated March 30, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on April 14, 2010).

10.5

Assignment and Bill of Sale between our company and Trius Energy LLC dated March 30, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on April 14, 2010).

10.6

Purchase and Sale Agreement between our company and William C. Athens dated March 30, 2010. (Incorporated by reference from our Current Report on Form 8-K filed on April 14, 2010).

10.7

Share Issuance Agreement between Asia-Pacific Capital Ltd. and our company dated July 19, 2010 (Incorporated by reference from our Current Report on Form 8-K filed on August 18, 2010).

10.8

Letter Agreement to amend Share Issuance Agreement between our company and Asia-Pacific Capital Ltd. dated March 8, 2011 (Incorporated by reference from our Current Report on Form 8-K filed on March 11, 2011).

10.9

Amending Agreement between our company and Asia-Pacific Capital Ltd. dated November 23, 2011 (Incorporated by reference from our Current Report on Form 8-K filed on November 25, 2011).

10.10

Asset Purchase Agreement between our company and Langold Enterprises Limited dated February 22, 2012 (Incorporated by reference from our Current Report on Form 8-K filed on February 24, 2012)

10.11

Consulting Agreement between our company and Peter Gawith dated March 1, 2012. (Incorporated by reference from our Annual Report on Form 10-K filed on November 13, 2012).

10.12*

Securities Purchase Agreement between our company and Asher Enterprises Inc. dated November 19, 2012.

(31)

Rule 13a-14(a) / 15d-14(a) Certifications

31.1*

Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.

31.2*

Certification filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.

(32)

Section 1350 Certifications

32.1*

Certification filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.

32.2*

Certification filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer and Principal Accounting Officer.




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101**

Interactive Data File (Form 10-Q for the quarterly period ended October 31, 2012 furnished in XBRL).

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

*

Filed herewith


**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.




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SIGNATURES


Pursuant to the requirements of Section 13 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.



 

LIBERTY ENERGY CORP.

 

(Registrant)

 

 

 

 

Dated:  November 14, 2012

/s/ Ian A. Spowart

 

Ian A. Spowart

 

President, Chief Executive Officer and Director

 

(Principal Executive Officer)

 

 

 

 

Dated:  November 14, 2012

/s/ Daniel Martinez-Atkinson

 

Daniel Martinez-Atkinson

 

Chief Financial Officer, Secretary, Treasurer and Director

 

(Principal Financial Officer and Principal Accounting Officer )





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