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EXCEL - IDEA: XBRL DOCUMENT - LIBERTY ENERGY CORP.Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - LIBERTY ENERGY CORP.ex32_2apg.htm
EX-32.1 - EXHIBIT 32.1 - LIBERTY ENERGY CORP.ex32_1apg.htm
EX-31.2 - EXHIBIT 31.2 - LIBERTY ENERGY CORP.ex31_2apg.htm
EX-31.1 - EXHIBIT 31.1 - LIBERTY ENERGY CORP.ex31_1apg.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark One)


[X]

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

 

For the fiscal year ended July 31, 2013.

 

 

[   ]

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)


[lbye10k_073113apg001.jpg]


LIBERTY ENERGY CORP

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


Nevada

 

205024859

 

(832) 649-2652

(State or other jurisdiction

 

(IRS Employer

 

(Registrant’s tel. number)

of incorporation or organization)

 

Identification No.)

 

 


 

2425 Fountain View Drive, Suite 300, Houston, TX 77057

(Address of principal executive offices)

 

N/A

(Former name, former address and former fiscal year,

if changed since last report)







Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of Each Class

 

Name of Each Exchange On Which Registered

N/A

 

N/A

 


 

 

 

 

 

 

 

Securities registered pursuant to Section 12(g) of the Act:

 

 

 

 

 

 

 

Common Stock, par value of $0.001

(Title of class)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. 

 

[   ] Yes    [X] No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

[   ] Yes    [X] No

 

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

 




2




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)  is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

[   ]


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

 

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.


The aggregate market value of Common Stock held by non-affiliates of the Registrant on January 31, 2013 was $411,883 based on a $0.01 average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Indicate by check mark 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.

99,141,334 shares of common stock issued & outstanding as of November 8, 2013

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None



3



LIBERTY ENERGY CORP.

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

Page

PART I

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Business

 

5

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

11

 

 

 

 

 

 

 

 

 

Item 1B.  

 

Unresolved S

Staff Comments

 

11

 

 

 

 

 

 

 

 

 

Item 2.

 

Properties

 

11

 

 

 

 

 

 

 

 

 

Item 3.

 

Legal Proceedings

 

13

 

 

 

 

 

 

 

 

 

Item 4.

 

(Removed and Reserved)

 

13

 

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

14

 

 

 

 

 

 

 

 

 

Item 6.

 

Selected Financial Data

 

15

 

 

 

 

 

 

 

 

 

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

 

 

 

 

 

 

 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

21

 

 

 

 

 

 

 

 

 

Item 8.

 

Financial Statements and Supplementary Data

 

21

 

 

 

 

 

 

 

 

 

Item 9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

 

36

 

 

 

 

 

 

 

 

 

Item 9A.

 

Controls and Procedures

 

36

 

 

 

 

 

 

 

 

 

Item 9B.

 

Other Information

 

37

 

 

 

 

 

 

 

PART III

 

 

 

38

 

 

 

 

 

 

 

 

 

Item 10.

 

Directors, Executive Officers, and Corporate Governance

 

38

 

 

 

 

 

 

 

 

 

Item 11.

 

Executive Compensation

 

42

 

 

 

 

 

 

 

 

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

45

 

 

 

 

 

 

 

 

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

46

 

 

 

 

 

 

 

 

 

Item 14.

 

Principal Accountant Fees and Services

 

47

 

 

 

 

 

 

 

PART IV

 

 

 

48

 

 

 

 

 

 

 

 

 

Item 15.

 

Exhibits, Financial Statement Schedules

 

48

 

 

 

 

 

 

 

SIGNATURES

 

 

 

49


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PART I


CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION


This annual 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, including the risks in the section entitled “Risk 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 financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.


In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to “common shares” refer to the common shares in our capital stock.


As used in this annual report, the terms “we”, “us”, “our company”, mean Liberty Energy Corp, a Nevada corporation, unless otherwise indicated.


ITEM 1.  BUSINESS


SUMMARY


We are an exploration stage company with nominal or no 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 2425 Fountain View Drive, Suite 300, Houston, TX 77057. The U.S. telephone and fax numbers are (832) 649-2652 and (832) 575-1051 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.


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





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On September 27, 2006, our 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 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.


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 ORRI (over riding royalty interest) interest in the A-Lovech exploration block in Bulgaria. 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.  


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.


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 Asia Pacific units. Each unit shall consist of one share of the common stock of the Company and one and a half share purchase warrants. 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 (5) 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 July 31, 2013 we have issued a total of 3,998,048 shares of our company to Asia Pacific for a total cash amount of $1,055,000 under the terms of the above mentioned agreement.  In addition, as of July 31, 2013, the Company had issued 5,807,752 warrants to Asia-Pacific Capital Ltd. The warrants issued have an exercise price of $1.25 and are fully vested at the date of grant. The warrants have a term of three years and none of these warrants have been exercised.


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



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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, we entered into and closed a 3 year lease assignment agreement with Langold Enterprises Limited (an entity with some cross ownership and common principal manager with 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 us 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 we issued 24,155,435 restricted shares of our common stock to Langold, a non-US shareholder.  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 and the shares issued and the leasehold costs recorded were valued at the price paid by Langold on their original 3-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.


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 in arrears on a quarterly basis during the term of the agreement.  For the three months ending May 31, 2012 and August 31, 2012, we issued 25,000 shares of common stock for the services provided for the two quarters. The shares were issued on June 1, 2012 and September 1, 2012, respectively.  Mr. Gawith resigned on December 2, 2012 and the consulting agreement has been terminated.  As of July 31, 2013, 75,000 shares had been issued to Mr. Gawith.


Notes with Asher Enterprises, Inc.


On May 23, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc (“Asher”).  Pursuant to the Agreement, Asher has agreed to purchase an 8% convertible note (the “May 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



7



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 May 23, 2012, was due on February 25, 2013 at an interest rate of 8% per annum. During the quarter ended April 30, 2013, Asher converted $42,500 of note payable along with the interest of $1,700. On December 3, 2012, Asher converted $15,000 of May Note principal into 842,697 shares of common stock. On December 11, 2012, Asher converted $12,000 of May Note principal into 800,000 shares of common stock. On January 7, 2013, Asher converted the remaining $15,500 of principal and $1,700 accrued interest on the May Note into 1,977,011 shares of common stock.

  

On July 12, 2012, the Company entered into a Securities Purchase Agreement with Asher. Pursuant to the Agreement, Asher purchased an 8% convertible note (“The July Note”) in the aggregate principal amount of $32,500. $30,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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, was due on April 16, 2013 at an interest rate of 8% per annum.  On January 29, 2013, Asher converted $15,000 of July Note principal into 1,744,186 shares of common stock. On February 6, 2013, Asher converted $15,000 of July Note principal into 1,875,000 shares of common stock. On February 19, 2013, Asher converted $3,800 of July Note principal and $1,300 of interest into 426,966 shares of common stock.


On November 19, 2012, the Company entered into a Securities Purchase Agreement with Asher.  Pursuant to the Agreement, Asher has agreed to purchase an 8% convertible note (the “November Note”) in the aggregate principal amount of $27,500, $25,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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 November Note was due on August 21, 2013 at an interest rate of 8% per annum.  The Company paid the debt in full in May 2013 before the completion of 180 days from the date of funding.


On April 10, 2013, the Company entered into a Securities Purchase Agreement with Asher.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note (the “April Note”) in the aggregate principal amount of $32,500, $30,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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 61% 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 April Note was due on January 15, 2014 at an interest rate of 8% per annum.  In October 2013, the Company issued 898,204 shares of Company Common Stock and repaid the remaining $31,118 balance of the April Note.  The Company recorded an additional liability of $25,564 as of July 31, 2013 related to the actual repayment of the April note prior to the filing of this document.





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As of November 19, 2013, all amounts due by the Company to Asher have been fully paid.


On April 11, 2013, we entered into a stock purchase agreement with Petro Fund 1 (“PF1”), a Houston, Texas-based upstream oil and gas fund, pursuant to which PF1 agreed to advance up to $3,650,000 to the Company in multiple installments until April 2016 in exchange for units of the Company (comprising Company common stock) at a price equal to the higher of either $ 0.05, or 95% of the volume-weighted average of the closing price of common stock, for the 10 days immediately preceding the date of receipt of notice from the Company for the advance of funds from PF1. The Company agreed to use up to $150,000 of Advances to extinguish existing debts, fund operating expenses, working capital and general corporate activities. Subject to the foregoing, the Company may use any balance of the Advances (up to $3,500,000) to fund mergers and acquisitions (including related legal and, accounting expenses) or the purchase of capital assets, with any such Advances to be subject to the approval of PF1. Pursuant to the stock purchase agreement, we agreed to issue PF1 548,921 shares of common stock for $43,000 cash on May 23, 2013.


Thereafter, in October 2013, the Company received a further Advance from PF1 in the amount of $31,118 in exchange for the issuance of 898,204 shares of Company Common Stock.  Proceeds of the Advances were used to fund the pay-off of all outstanding indebtedness to Asher Enterprises, Inc.


Effective August 20, 2013, we executed a Letter Of Intent (“LOI”) to acquire 1,100 Acres with 17 oil wells, 4 injection wells, current production of 8 Barrels of Per Day (BOPD) from operating wells with Working Interest 75% / Net Revenue Interest 80% in Baylor County, Texas.  The consideration for this transaction is all stock. Phase 1 development on the leases includes a workover of each of the 17 wells with expectations of 2.5-4 BOPD per well after workover. This is based on recent activity, local area results and our operating partner’s expertise. There are 4 phases planned to increase the leases’ current production through workovers, radial jet horizontal drilling, recompletions and new infill drilling. Completion of this transaction is subject to the execution of a Purchase And Sale Agreement, which is presently in negotiation and is subject to final due diligence and legal review. This acquisition would be the first of several that the Company intends to pursue within the North Central Texas / Fort Worth Basin which contains numerous oil and gas producing formations consisting of both conventional and unconventional reservoirs. Some of the production trends in the area include the Strawn, Bend, Marble Falls, Barnett Shale, Chappel and Viola formations.  As of the date of this Report, the transaction has not been completed.


OUR CURRENT BUSINESS


We are an oil and gas exploration company with interests in properties in Texas and Bulgaria.  Our business plan is to acquire oil and gas properties for exploration, appraisal and development exclusively in Texas 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.


COMPETITION


We compete with other exploration-stage companies for financing from a limited number of investors that are prepared to make investments in exploration-stage oil and gas companies. The presence of competing exploration-stage oil and gas companies may impact on our ability to raise additional capital in order to fund our property acquisitions and exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the



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properties under investigation and the price of the investment offered to investors.


We also compete for oil and gas properties of merit with other exploration-stage companies. Competition could reduce the availability of properties of merit or increase the cost of acquiring additional oil and gas properties.


Many of the oil and gas exploration companies with whom we compete have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of properties of merit and on exploration of their properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of resource properties.  This could result in our competitors having resource properties of greater quality and interest to prospective investors who may finance additional exploration and to established exploration companies that may purchase resource properties or enter into joint venture agreements with exploration-stage companies. This competition could adversely impact our ability to finance property acquisitions and further exploration.


COMPLIANCE WITH GOVERNMENT REGULATION


Our oil and gas operations are subject to various United States and International federal, state/provincial and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial and local laws and regulations relating primarily to the protection of human health and the environment. To date, expenditures related to complying with these laws have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.


RESEARCH AND DEVELOPMENT


We have not spent any amounts on which have been classified as research and development activities in our financial statements since our inception.


INTELLECTUAL PROPERTY


We do not presently own any copyrights, patents or trademarks.


EMPLOYEES


As of November 19, 2013, we have no employees, with no significant employees other than our officers and directors. We plan to outsource independent consultant engineers and geologists on a part time basis to conduct the work programs on our mineral properties in order to carry out our plan of operations. Our officers and directors do not currently work for cash compensation and presently receive only stock compensation.  The Company intends to revisit executive compensation when the situation warrants.


REPORTS TO SECURITIES HOLDERS


We are not required to deliver an annual report to our stockholders but will voluntarily send an



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annual report, together with our annual audited financial statements upon request.  We are required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission.  Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.  The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC  20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  We are an electronic filer.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The Internet address of the site is http://www.sec.gov.


ITEM 1A.  RISK FACTORS


Not required as the Company is a “smaller reporting company”.


ITEM 1B.  UNRESOLVED STAFF COMMENTS


None


ITEM 2.  PROPERTIES


Our executive offices are located at 2425 Fountain View Drive, Suite 300, Houston, TX 77057. We believe that our current premises are sufficient to meet our present needs and do not anticipate the need to secure any additional space.  We currently have no investment policies as they pertain to real estate, real estate interests or real estate mortgages.


RESOURCE PROPERTIES


BULGARIA PROJECT


On September 22, 2009, we entered into a purchase and sales agreement with William C. Athens, of Tulsa, Oklahoma. We agreed to acquire a total of 1/16th of 1% of 8/8ths ORRI (over riding royalty interest) in the A-Lovech exploration black 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 funds which were forwarded to Mr. Athens for this acquisition.


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.).




11



As this ORRI is operated by Direct Petroleum Bulgaria EOOD, a 100% subsidiary of TransAtlantic Petroleum Ltd a TSX and NYSE listed, vertically integrated, international energy company engaged in the acquisition, exploration, development and production of crude oil and natural gas. Our company is currently not involved in any ongoing development operations or exploration of the block. That being said, our ORRI does entitle our company to royalty interest on all future revenues and reserves located on the block, at no further cost to our company. It is anticipated that the Deventci development will be tied into the Aglen field, 21km away. As at November 13, 2012 the Deventci discovery well is producing as an extended production test into a CNG facility.  Initial results show that gas and natural gas condensate are of a very high quality with low sulphur content.


TransAtlantic Petroleum confirmed the Peshtene R-11 well ("Peshtene"), located on the A-Lovech exploration license, targeted the Middle Jurassic age Etropole formation. Peshtene was successfully drilled in a total of 56 days to a depth of 3190 meters, including 354 meters of Etropole argillite. Numerous gas shows were recorded in the argillite, consisting of methane, ethane and propane (C1, C2, and C3). Over 289 metres of the Jurassic age Etropole and Ozirovo whole core has been taken from the well. The Ozirovo formation produces nearby in the Chiren Gas Field and in TransAtlantic's Deventci R1 discovery well, 36 kilometers to the east.


Transatlantic Petroleum have confirmed that petrophysical analysis of the Etropole formation indicates net pay of 114 meters, with an average porosity of 6% and water saturation of 48%. Comprehensive core analysis by Core Laboratories was completed in the first quarter of 2012. The core data from the Etropole argillite and Ozirovo carbonate will be evaluated for reservoir rock properties, geochemical analysis, and rock mechanics. The results of the core and well log analysis will help to design and plan the future completion procedure for the well.2 Peshtene was completed and tested in Q2, 2012. Based on the data recovered to date, Direct Petroleum Bulgaria EOOD ("Direct Bulgaria"), has applied to the government of Bulgaria for a Production Concession (the "Stefanetz Concession"). The Stefanetz Concession is expected to cover an area up to 1,600 square kilometers (395,000 acres) for a term of up to 35 years.  TransAtlantic also plans to complete the Deventci R-2 well later this year.


Further to the completion of the transactions in the purchase and sale agreement, we have begun a thorough search and review of other assets in this part of Europe, with a view to engaging in similar low risk opportunities.


TEXAS PROJECTS


On October 1, 2009, we 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.  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 $623,124 of leasehold cost were written off.




12



Langold Acquisition


On February 22, 2012, the Company entered into and closed a 3 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.  The restricted shares were valued equal the volume weighted average of the closing price (the “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 and the shares issued and the leasehold costs recorded were valued at the price paid by Langold on their original 3 year lease acquisition from the land owners. That price paid was $20,000 cash plus 1,800,000 shares of restricted Company common stock which was valued at $243,932 for a total consideration of $263,932.


ITEM 3.


LEGAL PROCEEDINGS


We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.


ITEM 4.


MINE SAFETY DISCLOSURES


Not applicable.




13





PART II


ITEM 5.


MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Our authorized capital stock consists of 150,000,000 common shares, par value $.001 per share.  On July 31, 2013, there were 98,243,130 common shares issued and outstanding.


Our common stock was listed for trading on the Over the Counter Bulletin Board under the symbol "LBYE". Our shares have only experienced trading activity since March 2010. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.



Quarter Ended

High ($)

Low ($)

July 31, 2013

$0.10

$0.02

April 30, 2013

$0.12

$0.01

January 31, 2013

$0.07

$0.01

October 31, 2012

$0.08

$0.04

July 31, 2012

$0.09

$0.07

April 30, 2012

$0.14

$0.11

January 31, 2012

$0.06

$0.05

October 31, 2011

$0.09

$0.08



As of November 8, 2013, we have 18 shareholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of our common stock is Empire Stock Transfer Inc., 1859 Whitney Mesa Dr. Henderson, NV 89014.


Recent Sales of Unregistered Securities


Below is a list of securities sold by us from August 1, 2012 to the present date which were not registered under the Securities Act.



14




Name of Purchaser

Date of Sale

Title of

Security

Amount of Securities

Sold

Consideration

Peter Gawith

September 11, 2012

Common

25,000

Advisory Board Services

Peter Gawith

December 4, 2012

Common

25,000

Advisory Board Services

Asia-Pacific Capital Ltd.

January 31, 2013

Common

126,213

Share Issuance Agreement

Asher Enterprises, Inc.

Various

Common

8,564,064

Debt Conversion

Miles D. Bender

August 1 & 7, 2013

Common

1,000,000

Officer compensation

William Jones

August 1 & 7, 2013

Common

1,000,000

Officer compensation



ITEM 6.


SELECTED FINANCIAL DATA


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


ITEM 7.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FORWARD-LOOKING STATEMENTS


This annual 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.


Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future



15



results may vary materially as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" in our prior filings with the Securities and Exchange Commission. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.


Our 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 annual 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 annual 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 annual report, the terms “we”, “us”, “our” and “our company” refer to Liberty Energy Corp., unless otherwise indicated.


We are an exploration stage company and have generated nominal revenues since inception and have incurred $1,113,505 in expenses through July 31, 2013. Our financial statements from inception (June 6, 2006) through the year ended July 31, 2013 report revenues of $26,778 and a net loss of $1,918,717. Those revenues were generated from our interest in the Dahlstrom and Lockhart leases in Texas, which have now lapsed and are not recurring. We had expected to generate greater revenues from the Dahlstrom lease. However, the well underwent a significant work-over resulting in significant production downtime and decreased lease revenues for the year ended July 31, 2012. On July 25, 2012, it was determined by our company after discussions with our 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.


To implement our business plan during the next twelve months, we need to develop and/or acquire additional oil interests which will be revenue-generating. Our failure to do so will hinder our ability to increase the size of our operations and to generate revenues. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations and may need to curtail our existing operations.


For the period of inception (June 6, 2006) through July 31, 2013, our total operating expenses were $679,724, which is comprised of operating costs of $53,188 and impairment expense of $626,536. We expect that we will continue to generate operating losses for the foreseeable future.


While our operating expenses for 2013 were reduced from 2012, with the addition of acquisitions

and other business, we expect that our future monthly operating expenses for 2014 will be increased in comparison with our current expense levels.  We will continue to incur significant general and administrative expenses.


The following table provides selected financial data about our company for the periods ended July 31, 2013 and 2012.



16




 

Year Ended

July 31

 

2013

 

2012

Revenue

$

 

$

Total Operating and G&A Expenses

$

347,912 

 

$

935,393 

Other Income (Expenses)

$

(151,588)

 

$

(778)

Net Loss

$

499,500 

 

$

936,171 



Revenues


We earned no revenues during the years ended July 31, 2013 and 2012.


General Administrative Expenses


Our general administrative expenses for the year ended July 31, 2013 ($337,098) increased by approximately 18% from the year ended July 31, 2012 ($285,929) due to higher executive compensation, most of which was either accrued or paid in stock.


Liquidity and Financial Condition


As of July 31, 2013, our total current assets were $1,894 and our total current liabilities were $260,292 and we had a working capital deficit of $258,398. Our financial statements report a net loss of $499,500 for the year ended July 31, 2013, and a net loss of $1,918,717 for the period from June 6, 2006 (date of inception) to July 31, 2013.


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 equity offerings and loan transactions.


Cash Flows

 

For the year ended

July 31, 2013

 

For the year ended

July 31, 2012

Net Cash (Used in) Provided by Operating Activities

$

(107,486)

$

(395,677)

Net Cash (Used In) Investing Activities

$

$

Net Cash Provided by Financing Activities

$

70,500

$

280,000 

Cash (decrease) increase during the year

$

(36,986)

$

(115,677)



We had cash in the amount of $1,894 as of July 31, 2013 as compared to $38,880 as of July 31, 2012. We had a working capital deficit of $258,398 as of July 31, 2013 compared to working capital deficit of $95,968 as of July 31, 2012.




17



 For the year ended July 31, 2013, our net cash received from financing activities was $70,500, of which $43,000 came from the sale of common stock, compared to $280,000 in 2012, all of which came from the sale of common stock.


To date, our principal sources of funds have been from sales of our common stock and other securities.


Cash provided by financing activities since inception through July 31, 2013 was $1,566,500.


PLAN OF OPERATION AND CASH REQUIREMENTS


Over the next 12-month period we intend to focus our efforts on our oil and gas acquisition program and aggressive exploration and appraisal programs on our leased properties. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock and issuance of convertible debt.  In the foreseeable future, we intend to utilize our stock purchase agreement with Petro Fund 1 to raise additional funding, as well as private placements of equity and judicious debt incurrence. 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.


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.


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. 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


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

$

208,000

Operating Expenses

$

400,000

Acquisitions & Exploration

$

5,000,000

Development

$

1,000,000

TOTAL

$

6,608,000



18



 


CONTRACTUAL OBLIGATIONS


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


OFF-BALANCE SHEET ARRANGEMENTS


We have no off-balance sheet arrangements.


SIGNIFICANT ACCOUNTING POLICIES


Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, our accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Annual Report.


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 (“US GAAP”).  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.


Use of Estimates


The preparation of financial statements in conformity with US GAAP 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.



19




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.   Our policy is consistent with ASC 932.


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 2009 through 2012 are open to examination. At July 31, 2013, our company evaluated our open tax years in all known jurisdictions. Based on this evaluation, the 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


US 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. Our 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. Our company evaluates its embedded conversion features contained within their convertible notes



20



for derivative treatment. Our company’s derivative liabilities recognized since August 1, 2012 were considered Level 3 financial instruments. There were no derivatives at July 31, 2013.


Recent Accounting Pronouncements


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


ITEM 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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


ITEM 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



INDEX TO AUDITED FINANCIAL STATEMENTS


JULY 31, 2013



 

 

Report of Independent Registered Public Accounting Firm

22

 

 

Balance Sheets as of July 31, 2013 and July 31, 2012

23

  

 

Statements of Operations for the Years Ended July 31, 2013 and 2012, and Inception (June 6, 2006 ) to July 31, 2013

24

 

 

Statement of Changes in Shareholders’ Equity for the Period from June 6, 2006 (Inception) through July 31, 2013

25

  

 

Statements of Cash Flows for the Years Ended July 31, 2013 and 2012, and Inception (June 6, 2006 ) to July 31, 2013

26

  

 

Notes to the Financial Statements

27




21




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

Liberty Energy Corp.

Houston, Texas


We have audited the accompanying balance sheet of Liberty Energy Corp. (the “Company") as of July 31, 2013 and 2012, and the related statements of operations, shareholders' equity, and cash flows for each of the years then ended and the period from June 6, 2006 (inception) to July 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Liberty Energy Corp. as of July 31, 2013 and 2012 and the results of its operations and its cash flows for each of the years the ended and the period from June 6, 2006 (inception) to July 31, 2013, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has incurred losses, has had negative operating cash flows since inception, and minimal revenues. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ McConnell & Jones, LLP

Houston, Texas

November 19, 2013



22




LIBERTY ENERGY CORP.

(An Exploration Stage Company)

Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

As of

 

 

 

July 31,

 

 

July 31,

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

      Cash

 

$

1,894 

 

$

38,880 

 

 

 

 

 

 

 

Total Current Assets

 

 

1,894 

 

 

38,880 

 

 

 

 

 

 

 

Oil and Gas Properties, full cost method

 

 

363,939 

 

 

363,939 

 

 

 

 

 

 

 

Total Assets

 

$

365,833 

 

$

402,819 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

      Accounts Payable  

 

$

87,928 

 

$

52,070 

      Loan Payable

 

 

32,500 

 

 

75,000 

      Accrued interest

 

 

25,564 

 

 

778 

      Accounts Payable - Related Parties

 

 

114,300 

 

 

7,000 

Total Current Liabilities

 

 

260,292 

 

 

134,848 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

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

 

 

 

 

 

 

  authorized; 98,243,130 and 88,527,270 shares issued

 

 

 

 

 

 

  and outstanding as of July 31, 2013 and

 

 

 

 

 

 

  July 31, 2012, respectively

 

 

98,243 

 

 

88,527 

Additional paid-in capital

 

 

1,926,015 

 

 

1,598,661 

Deficit accumulated during exploration stage

 

 

(1,918,717)

 

 

(1,419,217)

Total Stockholders' Equity

 

 

105,541 

 

 

267,971 

 

 

 

 

 

 

 

       Total Liabilities &

 

 

 

 

 

 

             Stockholders' Equity

 

$

365,833 

 

$

402,819 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these audited financial statements.




23




LIBERTY ENERGY CORP.

(An Exploration Stage Company)

Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 6, 2006

 

 

 

 

 

 Year

 

 

Year

 

 

 (inception)

 

 

 

 

 

 Ended

 

 

 Ended

 

 

 through

 

 

 

 

 

July 31,

 

 

July 31,

 

 

July 31,

 

 

 

 

 

2013

 

 

2012

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

 

$

 

$

26,778 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Costs

 

10,814 

 

 

26,340 

 

 

53,188 

 

 

 

Impairment Expense

 

 

 

623,124 

 

 

626,536 

 

 

Total Operating Expense

 

10,814 

 

 

649,464 

 

 

679,724 

 

 

Gross Profit

 

(10,814)

 

 

(649,464 )

 

 

(652,946)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General & Administrative Expenses

 

 

 

 

 

 

 

 

 

 

 

Professional Fees

 

40,827 

 

 

41,874 

 

 

152,475 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General & Administrative

 

296,271 

 

 

244,058 

 

 

961,030 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total General & Administrative Expenses

 

(337,098)

 

 

(285,929)

 

 

(1,113,505)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income/(Expense)

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(122,614)

 

 

(778)

 

 

(123,392)

 

 

 

Loss on derivative liability

 

(28,974)

 

 

 

 

(28,974)

 

 

 

Gain from currency exchange

 

 

 

 

 

100 

 

 

 

 

 

(151,588)

 

 

(778)

 

 

(152,266)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(499,500)

 

$

(936,171)

 

$

(1,918,717)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss per share

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

(0.01)

 

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of

 

92,745,896 

 

 

73,785,864 

 

 

 

 

 

  common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these audited financial statements.




24




LIBERTY ENERGY CORP.

(An Exploration Stage Company)

Statement of Changes in Shareholders’ Equity

 

 

Common Stock

Common Stock Amount

Additional Capital Paid-in Capital

Deficit Accumulated During Exploration Stage

Total

Balance, June 6, 2006

Stock issued for cash on June 6, 2006

 

 

 

 

 

@ $0.001 per share

30,000,000 

$

30,000 

$

(24,000)

 

$

6,000 

Net Loss, July 31, 2006

 

 

 

$

(615)

(615)

Balance, July 31, 2006

30,000,000 

30,000 

(24,000)

(615)

5,385 

 

 

 

 

 

 

Stock Issued for cash on December 4, 2006

 

 

 

 

 

@ $0.002 per share

30,000,000 

30,000 

30,000 

 

60,000 

Net Loss, July 31, 2007

 

 

 

(14,239)

(14,239)

Balance, July 31, 2007

60,000,000 

60,000 

6,000 

(14,854)

51,146 

 

 

 

 

 

 

Net Loss, July 31, 2008

 

 

 

(17,113)

(17,113)

Balance, July 31, 2008

60,000,000 

60,000 

6,000 

(31,967)

34,033 

 

 

 

 

 

 

Net Loss, July 31, 2009

 

 

 

(13,013)

(13,013)

Balance, July 31, 2009

60,000,000 

60,000 

6,000 

(44,980)

21,020 

 

 

 

 

 

 

Stock issued for cash on September 8, 2009

400,000 

400 

199,600 

 

200,000 

@ $0.50 per share

 

 

 

 

 

Stock issued for cash on April 8, 2010

75,000 

75 

74,925 

 

75,000 

@ $1.000 per share

 

 

 

 

 

Stock issued for cash on July 22, 2010

200,000 

200 

99,800 

 

100,000 

@ $0.50 per share

 

 

 

 

 

Net Loss, July 31, 2010

 

 

 

(108,375)

(108,375)

Balance, July 31, 2010

60,675,000 

60,675 

380,325 

(153,355)

287,645 

 

 

 

 

 

 

Stock Issued for cash on August 27, 2010

211,864 

212 

124,788 

 

125,000 

@ $0.59 per share

 

 

 

 

 

Stock Issued for cash on September 28, 2010

115,384 

115 

74,885 

 

75,000 

@ $0.65 per share

 

 

 

 

 

Stock Issued for cash on October 29, 2010

94,340 

94 

49,906 

 

50,000 

@ $0.53 per share

 

 

 

 

 

Stock Issued for cash on December 8, 2010

169,492 

169 

99,831 

 

100,000 

@ $0.53 per share

 

 

 

 

 

Stock Issued for cash on February 14, 2011

150,000 

150 

74,850 

 

75,000 

@ $0.50 per share

 

 

 

 

 

Stock Issued for cash on March 3, 2011

200,000 

200 

99,800 

 

100,000 

@ $0.50 per share

 

 

 

 

 

Stock Issued for cash on April 25, 2011

150,000 

150 

74,850 

 

75,000 

@ $0.50 per share

 

 

 

 

 

Stock Issued for cash on July 26, 2011

300,000 

300 

149,700 

 

150,000 

@ $0.50 per share

 

 

 

 

 

Net Loss, July 31, 2011

 

 

 

(329,691)

(329,691)

Adjustment of share to AP

(1,403)

(1)

 

Balance, July 31, 2011

62,064,677 

62,064 

1,128,936 

(483,046)

707,954 


(continued on next page)



25





(continued from previous page)

 

Common

Stock

Common Stock Amount

Additional Capital Paid-in Capital

Deficit Accumulated During Exploration

Stage

Total

Balance, July 31, 2011

62,064,677

$

62,064

$

1,128,936

$

(483,046)

707,954 

 

 

 

 

 

 

Stock Issued for cash on September 27, 2011

50,000

50

24,950

 

25,000 

@ $0.50 per share

 

 

 

 

 

 

 

 

 

 

 

Forgiveness of debt by Director

 

 

25,000

 

25,000 

 

 

 

 

 

 

Stock Issued for cash on November 28, 2011

830,722

831

44,169

 

45,000 

@ $0.05 per share

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for cash on January 24, 2012

417,986

418

24,582

 

25,000 

@ $0.06 per share

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for cash on February 15, 2012

200,011

200

24,800

 

25,000 

@ $0.12 per share

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for oil and gas property

24,155,435

24,156

239,782

 

263,938 

 

 

 

 

 

 

Stock Issued for cash on March 21, 2012

401,035

401

49,599

 

50,000 

@ $0.12 per share

 

 

 

 

 

 

 

 

 

 

 

Stock Issued for cash on May 22, 2012

382,404

382

34,618

 

35,000 

@ $0.09 per share

 

 

 

 

 

 

 

 

 

 

 

 Shares issued for advisory board services

25,000

25

2,225

 

2,250 

 

 

 

 

 

 

Net Loss, July 31, 2012

 

 

 

(936,171)

(936,171)

Balance, July 31, 2012

88,527,270

88,527

1,598,661

(1,419,217)

267,971 

 

 

 

 

 

 

 Shares issued for advisory board services

50,000

50

2,450

 

2,500 

 Converted debt

7,665,860

7,666

173,904

 

181,570 

 Stock to be issued to Petro Fund 1

 

 

43,000

 

43,000 

 Stock issued to officers

2,000,000

2,000

108,000

 

110,000 

 

 

 

 

 

 

Net Loss, July 31, 2013

 

 

 

(499,500)

(499,500)

Balance, July 31, 2013

98,243,130

$

98,243

$

1,926,015

$

(1,918,717)

$

105,541 

 

 

 

 

 

 

The accompanying notes are an integral part of these audited financial statements.



26




LIBERTY ENERGY CORP.

(An Exploration Stage Company)

Statements of Cash Flows

 

 

 

 

 

 

 

 

 

June 6, 2006

 

 

 

 Year

 

 

 Year

 

 

 (inception)  

 

 

 

 Ended

 

 

 Ended

 

 

 through

 

 

 

Jul-31

 

 

Jul-31

 

 

Jul-31

 

 

 

2013

 

 

2012

 

 

2013

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

    Net loss

$

(499,500)

 

$

(936,171)

 

$

(1,918,717)

 

    Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

 

       provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

        Impairment Expense

 

 

 

690,397 

 

 

693,909 

 

        Write off of ARO liability

 

 

 

(33,048) 

 

 

(33,048)

 

        Amortization of debt discount

 

75,000 

 

 

 

 

75,000 

 

        Amortization of deferred financing costs

 

5,000 

 

 

 

 

5,000 

 

        Loss on derivative liability

 

28,974 

 

 

 

 

28,974 

 

        Stock compensation

 

112,500 

 

 

2,250 

 

 

114,750 

 

    Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

        Accounts Receivable

 

 

 

 

 

 

        Accounts Payable

 

170,540 

 

 

(119,105)

 

 

207,107 

 

     Net cash used in operating activities

 

(107,486)

 

 

(395,677)

 

 

(827,025)

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

    Addition of Oil and Gas Properties

 

 

 

 

 

(737,581)

 

     Net cash provided by (used in) investing activities

 

 

 

 

 

(737,581)

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

    Proceeds from sale of common stock

 

43,000 

 

 

205,000 

 

 

1,439,000 

 

    Loan payable - related party

 

 

 

 

 

25,000 

 

    Repayment of loan payable

 

(27,500)

 

 

 

 

(27,500)

 

    Proceeds from Loan Payable

 

55,000 

 

 

75,000 

 

 

130,000 

 

     Net cash provided by financing activities

 

70,500 

 

 

280,000 

 

 

1,566,500 

 

    Net increase (decrease) in cash

 

(36,986)

 

 

(115,677)

 

 

1,894 

 

    Cash at beginning of period

 

38,880 

 

 

154,557 

 

 

 

    Cash at end of period

$

1,894 

 

$

38,880 

 

$

1,894 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

     Interest Expense Paid

$

14,835

 

$

 

 

14,835

 

     Income Taxes

$

-

 

$

 

 

 

Non Cash Activity

 

 

 

 

 

 

 

 

 

Related Party Debt Forgiven

$

-

 

$

25,000 

 

 

25,000 

 

Lease acquired through issuance of stock

 

-

 

 

263,938 

 

 

263,938 

 

ARO Assets

 

-

 

 

 

 

56,328 

 

Debt discount associated with derivative liability

 

-

 

 

 

 

 

Reversal of Oil and Gas Assets through Notes

 

-

 

 

 

 

(300,000)

 

Write-off of Discount on Oil and Gas Properties

 

103,750

 

 

 

 

103,750 

 

Shares issued for conversion of note payable issued on May 23, 2012 and interest of $1,700

 

44,200

 

 

 

 

44,200 

 

Shares issued for conversion of note payable issued on July 11,2012 and interest of $1,300

 

28,800

 

 

 

 

15,000 

 

The accompanying notes are an integral part of these audited financial statements.



27




LIBERTY ENERGY CORP.

(An Exploration Stage Company)

Notes to Financial Statements



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.


The Company’s success will depend in large part on its ability to obtain funds to explore, acquire 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 has no revenues or cash flow to meet operating expenses. 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 financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).


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 GAAP 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 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.



28




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 that for the 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.  Our policy is consistent with ASC 932. 


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 2009 through 2012 are open to examination. At July 31, 2013, 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


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 recognized since August 1, 2012 were considered Level 3 financial instruments.



29




Reclassifications


Certain prior period amounts have been reclassified to conform to current period presentation.  No reclassification had any impact on the Company’s previously reported net income (loss).


NOTE 4 - UNEVALUATED OIL AND GAS PROPERTIES


Trius Acquisition

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. The tract had 1 shut-in well and based on historical data, discussions with their operators and geologists the Company determined that it would not be cost effective to pursue the well, therefore the lease was allowed to lapse and $3,512 of leasehold cost were written off.


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 payables for $23,280 for the plugging and abandonment of wells associated with these properties which are recorded under accounts payable.


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. retained the 1/64th of the 1% interest in the A-Lovech exploration block, which is recorded in our financial statements as part of oil and gas properties with a value of $100,000.


Langold Acquisition

On February 22, 2012, the Company entered into and closed a 3 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 to date)  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 County, Texas. A 100% working interest in 5 separate properties equaling approximately 622 acres of exploration property located in 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 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.  The restricted shares were valued equal to the volume weighted average of the closing price (the “VWAP”) of Common Stock for the ten (10) Banking Days immediately preceding the execution of the assignment, as quoted on Google Finance or other sources of stock quotes as agreed to by the parties. The original value assigned these shares and the leaseholds was $3.3 million. It



30



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 and the shares issued and the leasehold costs recorded were valued at the price paid by Langold on their original 3 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 which is recorded as oil and gas properties in the accompanying balance sheets as of July 31, 2013 and 2012.


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 July 31, 2013.


NOTE 6 – RELATED PARTY TRANSACTIONS


On October 27, 2011, Mr. Spowart, CEO converted a debt outstanding totaling $25,000, to contributed capital.


On February 22, 2012, the Company entered into and closed a 3-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 to date) pertaining to certain interests in oil and gas properties in Bastrop, Caldwell and Eastland Counties, Texas, which the Company recorded at the value of the stock and cash contributed, $263,932.


Effective March 27, 2013, James William Anderson resigned as a member of our Company’s board of directors.


At April 30, 2013, the Company owed $24,300 to current officers and directors and $90,000 to two former officers and directors in non-interest bearing notes. Because the former officers each own approximately 16% of the Company’s outstanding stock, we have reported the liability as owing to related parties. All amounts owing to related parties relate to fees related to services provided.


On July 31, 2013, the day of their resignation the Company issued 2,000,000 shares of common stock to Miles Bender, the former Chief Executive Officer, and William Jones, the former Chief Operating Officer, which is valued at $110,000, per its agreement with the two of them when they were hired.


NOTE 7 – CONVERTIBLE NOTES PAYABLE


The May 23, 2012 Convertible Note

On May 23, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises Inc. (“Asher”). Pursuant to the Agreement, Asher purchased an 8% convertible note (the “May Note”) in the aggregate principal amount of $42,500 due on February 25, 2013. $40,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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 May 23, 2012, is due on February 25, 2013 at an interest rate of 8% per annum. On November 19, 2012, the note had not been repaid and became eligible for treatment as a derivative.


On November 19, 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 original discount on the convertible loan was $42,500, all of which had been fully accreted by July 31, 2013.




31



During the 2nd Quarter of 2013, Asher converted $42,500 of note payable along with the interest of $1,700. The fair value of the derivative liability was determined using the Black-Scholes option pricing model with a quoted market price of $0.020-$0.040, a conversion price of $0.0115-$0.0179, expected volatility of 141.25%-289.31%, no expected dividends, an expected term of 0.13-0.23 years and a risk-free interest rate of 0.12%-0.18%. On December 3, 2012, Asher converted $15,000 of May Note principal into 842,697 shares of common stock. The Company revalued the derivative liability as of that date and recorded a gain of $5,230. On December 11, 2012, Asher converted $12,000 of May Note principal into 800,000 shares of common stock. The Company revalued the derivative liability as of that date and recorded a gain of $11,973. On January 7, 2013, Asher converted the remaining $15,500 of principal and $1,700 accrued interest on the May Note into 1,977,011 shares of common stock. The Company recorded a loss of $3,739 on the final conversion of the derivative liability.  


In aggregate, the Company recorded a total loss of $4,320 on the conversion of the May note payable to Asher which is included as part of Loss on Derivative in the accompanying statement of operations for the year ended July 31, 2013.


The July 12, 2012 Convertible Note

On July 12, 2012, the Company entered into a Securities Purchase Agreement with Asher. Pursuant to the Agreement, Asher purchased an 8% convertible note (“The July Note”) in the aggregate principal amount of $32,500. $30,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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. On January 7, 2013, the note had not been repaid and became eligible for treatment as a derivative.  


Pursuant to ASC 815, “Derivatives and Hedging,” the Company recognized the fair value of the embedded conversion feature of $31,776. The initial fair value of the derivative liability was determined using the Black-Scholes option pricing model with a quoted market price of $0.02, a conversion price of $0.0116, expected volatility of 205%, no expected dividends, an expected term of 0.27 years and a risk-free interest rate of 0.15%. The discount on the convertible loan was $32,500 which was recorded on January 31, 2013, all of which had been fully accreted by July 31, 2013.


On January 29, 2013, Asher converted $15,000 of July Note principal into 1,774,186 shares of common stock. The Company revalued the derivative liability as of that date and recorded a gain of $724. On February 6, 2013, Asher converted $15,000 of July Note principal into 1,875,000 shares of common stock. The Company revalued the derivative liability as of that date and recorded a loss of $16,444. On February 19, 2013, Asher converted $3,800 of July Note principal and $1,300 of interest into 426,966 shares of common stock. The Company revalued the derivative liability as of that date and recorded a loss of $8,934. The fair value of the derivative liability was determined using the Black-Scholes option pricing model with a quoted market price of $0.015-$0.045, a conversion price of $0.08-$0.0089, expected volatility of 204.78%-257.65%, no expected dividends, an expected term of 0.13-0.27 years and a risk-free interest rate of 0.15%-0.17%.


In aggregate, the Company recorded a total loss of $24,654 on the conversion of the July notes payable to Asher which is included as part of Loss on Derivative in the accompanying statement of operations for the year ended July 31, 2013.


The November 19, 2012 Convertible Note

On November 19, 2012, the Company entered into a Securities Purchase Agreement with Asher.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note (the “November Note”) in the aggregate principal amount of $27,500, $25,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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



32



convertible note, issued on November 19, 2012, is due on August 21, 2013 at an interest rate of 8% per annum.  The Company paid the debt in full in May 2013 before the completion of 180 days from the date of funding.


The April 10, 2013 Convertible Note

On April 10, 2013, the Company entered into a Securities Purchase Agreement with Asher.  Pursuant to the Agreement, Asher Enterprises has agreed to purchase an 8% convertible note (the “April Note”) in the aggregate principal amount of $32,500, $30,000 was funded to the Company with the remaining $2,500 recorded as interest expense for financing costs 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 61% 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 April 16, 2013, is due on January 15, 2014 at an interest rate of 8% per annum.  


In light of the fact that some of the debt would be converted before it was extinguished and that there would be a high prepayment penalty, the Company recorded the cost of the discount on conversion and the prepayment penalty at July 31, 2013, resulting in a liability of $58,064 and total related interest of $25,564.


On October 16, 2013, Asher converted $15,000 of April Note principal into 898,204 shares of common stock.


On October 28, 2013, the Company settled the note in full for $31,118, which included all accrued interest and prepayment penalties.


NOTE 8 – STOCK AND WARRANT 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. 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 (an entity with some cross ownership and common principal manager of Asia-Pacific, the Company’s primary source of capital to date)  pertaining to certain interests in oil and gas properties in



33



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 were valued equal the volume weighted average of the closing price (the “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.


On March 21, 2012 the Company issued a total of 401,035 shares of common stock to a Asia-Pacific for cash in the amount of $0.12 per share for a total of $50,000.


On May 22, 2012 the Company received an advance from to Asia-Pacific Capital Ltd. of $35,000. However, the company has not received the funds as of the report date. The Company issued 382,404 units consisting of (i) one share of the Company’s common stock and (ii) one and a half share purchase warrant that entitles the Asia-Pacific Capital Ltd. to purchase one additional share of common stock exercisable at 125% of the unit per share expiring three (3) years from the date such warrant is issued.


As of July 31, 2012 and as part of the agreement with its primary 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 have a term of three years and have an average remaining contractual life of 0.839 years as of July 31, 2012. As these warrants are so far out of the money no value was allocated to them. As of July 31, 2013 no warrants had been exercised.


On April 11, 2013, the Company entered into a stock purchase agreement with Petro Fund 1 (“PF1”), a Houston, Texas-based upstream oil and gas fund, pursuant to which the investor agreed to advance up to $3,650,000  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 $0.05, or 95% of the volume-weighted average of the closing price of common stock, for the 10 days immediately preceding the date of receipt of notice from the Company for the advance of funds from the investor. Each unit shall consist of one share (restricted) of the common stock of the Company. The Company shall use up to $150,000 of Advances to extinguish existing debts, fund operating expenses, working capital and general corporate activities. Subject to the foregoing, the Company may use any balance of the Advances up to$3,500,000 to fund mergers and acquisitions (including related legal and, accounting expenses) or the purchase of capital assets, with any such Advances to be approved by PF1.


The Company agreed to issue Petro Fund 548,921 shares of common stock for $43,000 cash on May 23, 2013. The Company received the cash on May 24, 2013, but had not issued those shares as of November 19, 2013.


On July 31, 2013, the day of their resignation, the Company issued the former officers 2,000,000 shares of common stock, which it valued at $110,000. As part of the separation agreement, the Company accelerated the 500,000 shares that each were to have earned over the first six months (including 150,000 that each had not yet earned) and further awarded each an additional 500,000 shares when they left the Company.


NOTE 9 – INCOME TAXES


As of July 31, 2013, the Company had federal net operating loss carryforwards of approximately $2,000,000, which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2030. Deferred tax assets resulting from the net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured.


A summary of the Company’s deferred tax assets as of July 31, 2013 are approximately as follows:


Federal net operating loss (@ 34%)

$

650,000 

 

Less: valuation allowance

 

(650,000)

 

Net deferred tax asset

$

--- 

 




34




NOTE 10 – SUBSEQUENT EVENTS


On October 16, 2013, Asher converted $15,000 of the $32,500 owing on the April Note principal into 898,204 shares of free trading common stock per their rights under the agreement.


On October 28, 2013, the Company settled the April Note in full for $31,118, which included all accrued interest.


Per the Company’s April 11, 2013 agreement with Petro Fund 1 (See Note 8.), the Company agreed to issue Petro Fund 548,921 shares of common stock for $43,000 cash on May 23, 2013. The Company received cash on May 24, 2013, but had not issued those shares as of November 19, 2013.


Effective July 31, 2013 the Company appointed Mr. Arthur ("Terry") Roy as Chief Executive Officer, President, Secretary and Chairman of the Board of Directors.


Effective July 31, 2013, Mr. Dennis Irwin resigned as Chief Financial Officer, Secretary, Treasurer, and as a Director of our Company. Mr. Irwin's resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.


Effective July 31, 2013, Mr. Miles D. Bender resigned as Chief Executive Officer, President, and as a Director of our Company. Mr. Bender's resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.


Effective July 31, 2013, Mr. William T. Jones resigned as Chief Operating Officer of our Company. Mr. Jones's resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.


Also effective July 31, 2013, the Company issued Mr. Bender and Mr. Jones 1,000,000 shares of common stock each as compensation for their services.


Effective October 21, 2013 the Company appointed Mr. Robert Steven Williamson as Chief Operating Officer.


Effective November 7, 2013 the Company appointed Mr. Armando Rafael Buchanan as Chief Financial Officer and Senior Vice President.


Management has evaluated subsequent events through November 19, 2013, the date which the financial statements were available to be issued.




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ITEM 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.


ITEM 9A.


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 not effective such that the material information required to be included in our Securities and Exchange Commission reports may not be accumulated and communicated to our management, including our principal executive and financial officer so to 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. Management is committed to improving its disclosure controls and in the interim will continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and disclosure responsibilities,


MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.


Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.


A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.




36



Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date, based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation Date.


Management assessed the effectiveness of the Company's internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:


SIGNIFICANT CHANGES IN MANAGEMENT TEAM AND TURNOVER:  We have suffered a number of changes in the management team and turnover which could affect our internal controls over financial reporting.  


INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.


INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to properly implement control procedures.


LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF DIRECTORS: We do not have a functioning audit committee and outside directors on the Company's Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.


Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.


Management, including our Chief Executive Officer and Chief Financial Officer, has discussed the material weakness noted above with our independent registered public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.


This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING


There have been no changes in the status of our internal control over financial reporting that occurred during the last fiscal year ended July 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.


OTHER INFORMATION


None.



37



PART III


ITEM 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:


Name

Position Held

with the Company

Age

Date First Elected or Appointed

Arthur Roy

President, Secretary, Treasurer, Chief Executive Officer and Chairman of the Board of Directors

51

July 31, 2013

Richard C. Webb

Director

80

February 25, 2013

Robert Steven Williamson

Chief Operating Officer

62

October 21, 2013

Armando Rafael Buchanan

Chief Financial Officer

37

November 7, 2013


Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the board of directors following the next annual meeting of stockholders and until their successors have been elected and qualified.


Messrs. Roy, Webb, Williamson and Buchanan currently devote approximately 10 hours per week to company matters. In the future they will devote as much time as the board of directors deems necessary to manage the affairs of our company.


The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.


Arthur Roy - President, Secretary, Treasurer, CEO and Chairman of the Board of Directors


Mr. Roy has been President, Secretary, Treasurer, CEO and Chairman of the Board of Directors of the Company since July 31, 2013.  He has 27 years experience in commercial and residential real estate investment, acquisitions and development. He started as licensed real estate agent for Hartley Realty Group and continued as a marketing representative for American Real Estate Group. He continued as project manager for Gateway Homes, Inc. focused on financing and building homes.  In 1995 he formed G. H. Riley Homes, Inc. and in 2000 he formed Owner-Builder Systems, Inc., both located in Houston, Texas.  These entities completed homes and developments valued in excess of $23 million dollars since their inception. In the last ten years his activities have expanded to include small cap investments and raising capital for oil & gas transactions, including the acquisition and redevelopment of distressed properties. Mr. Roy is currently serving as elected president and director of Fort Bend Municipal Utility District # 19. Mr. Roy received a BBA degree in Marketing from The University of Texas, Austin.




38



Richard C. Webb--Director


Mr. Webb has been a Director of the Company since February 2013.  Mr. Webb is a Managing Director, and founding partner of AWDB Capital, LLC, Investment Bankers, with an extensive background in the Houston, Texas investment and banking communities. He founded AWDB Capital, LLC, in January, 2005. Prior to the creation of AWDB Capital, he was the Vice-Chairman of Sanders Morris Harris (SMH) in Houston, Texas. SMH was the result of a merger between Harris Webb & Garrison and Sanders Morris Munday in 1999.  Mr. Webb holds licenses with FINRA including being a Registered Securities & Options Principal and Investment Banker. He received a BBA in Finance from the University of Texas and has completed the Wharton Institute of Investment Banking in Philadelphia, Pennsylvania. Mr. Webb currently holds directorships with Bellville General Hospital Foundation and the Houston Museum of Natural Science.


Robert Steven Williamson—Chief Operating Officer


Mr. Williamson has been Chief Operating Officer of the Company since October 2013.  Mr. Williamson received his honorable discharge from the U.S. Navy in 1974 and began his oil and gas career with Petty Ray Geophysical acquiring and processing geophysical data for evaluation and later with Exxon Company U.S.A. During the late 80s and early 90s he was a Principal of Petroleum Listing Service, a major oil and gas acquisition and divestiture company. Through this company, he was a part of a team of professionals that provided land, legal, geological, engineering and marketing services to oil and gas companies resulting in over one billion dollars of transactions.  Currently Mr. Williamson is the President of Domestic Energy Development, where he manages a team of professionals consisting of land, engineers and geologists with a proven track record of finding and producing oil and gas. Mr. Williamson has over 20 years operating experience in the state of Texas and participated in the development of wells in Louisiana, Kentucky, Tennessee and Oklahoma.


Armando Rafael Buchanan—Chief Financial Officer


Mr. Buchanan has been Chief Financial Officer of the Company since November 2013. He is a seasoned financial executive with nearly 14 years combined experience in Corporate Finance, Oil & Gas Accounting, Investment Management, and Business Development.  He has a diverse professional background inclusive of Upstream Energy Operations, Public Securities, and Information Technology Management.


Mr. Buchanan is also serving as Chief Financial Officer for Eagle Ford Oil Co., Inc. a Houston based Oil & Gas operating company. Eagle Ford’s operations are primarily focused in the Eagle Ford Shale trend, with shallow production in the Luling Branyon and Salt Flat Fields.  His duties there include policy making and governance of the company’s financial activities.  In addition he has direct operations oversight responsibility.  His efforts have brought continuous improvement to field cost control, resource planning, and executive reporting.


Mr. Buchanan has served in the office of Vice President of Investments with JP Morgan Chase and as a Wealth Manager at UBS. Mr. Buchanan held several consulting executive positions as a project manager for Buchanan Ventures, Inc.  In that role he served as interim CFO for Environmental Packaging Technologies, a global manufacturer of disposable tanks used in food, oil, and mineral transportation.  He also acted as Vice President for Fortune Exploration an Upstream Exploration company.



Mr. Buchanan is a graduate of the University of Houston, Bauer College of Business class of 2002 with a Bachelor’s of Business Administration in Entrepreneurship & Finance from the



39



renowned Wolff Center for Entrepreneurship which is nationally ranked by the Princeton Review.


CODE OF ETHICS


Our board of directors adopted our code of ethical conduct that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.


We believe the adoption of our Code of Ethical Conduct is consistent with the requirements of the Sarbanes-Oxley Act of 2002.


Our Code of Ethical Conduct is designed to deter wrongdoing and to promote:


·  Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;


·  Full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities & Exchange Commission and in other public communications made by us;


·  Compliance with applicable governmental laws, rules and regulations;


·  The prompt internal reporting to an appropriate person or persons identified in the code of violations of our Code of Ethical Conduct; and


·  Accountability for adherence to the Code.


FAMILY RELATIONSHIPS


There are no family relationships between any of our directors, executive officers and proposed directors or executive officers.


INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS


To the best of our knowledge, none of our directors or executive officers has, during the past ten years:


1.  been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);


2.  had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;


3.  been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;


4.  been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;



40




5.  been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or


6.  been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934


Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.


Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended July 31, 2013, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with, with the exception of the following:


Name

Number of Late

Reports

Number of Transactions Not Reported on

a Timely Basis

Failure to File

Required

Forms

Arthur Roy

-

-

One (1)

Langold Enterprises Limited

-

-

One (1)


(1)  The executive officer, director or holder of 10% or more of our common stock has

not timely filed Form 3 –Initial Statement of Beneficial Ownership of Securities.


BOARD AND COMMITTEE MEETINGS


Our board of directors held no formal meetings during the year ended July 31, 2013. All proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada General Corporate Law and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.


Our company currently does not have standing nominating, compensation or audit committees or



41



committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our directors.


DIRECTOR INDEPENDENCE


None of our directors are deemed independent. Our directors also hold positions as officers.


AUDIT COMMITTEE


Currently our audit committee consists of our entire board of directors. During the next six to twelve months, we hope to establish a formal audit committee, which will be responsible for: (1) selecting and overseeing our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the independent accountant and any outside advisors engaged by the audit committee. We will adopt an audit committee charter when we establish the audit committee.


AUDIT COMMITTEE FINANCIAL EXPERT


Our board of directors has determined that none of the members of our audit committee qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.


We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nomination, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.


ITEM 11.


EXECUTIVE COMPENSATION


The following table reflects the compensation paid to the following persons:


(a)

our principal executive officer;


            (b) each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended July 31, 2013 and 2012; and


            (c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended July 31, 2013 and 2012, who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no



42



disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed $100,000 for the respective fiscal year:


SUMMARY COMPENSATION TABLE

Name
and Principal Position

Year

Salary
($)

Bonus
($)

Stock Awards
($)

Option Awards
($)

Non-Equity Incentive Plan Compensa-tion
($)

Change in Pension
Value and Nonqualified Deferred Compensation Earnings
($)

All
Other Compensa-tion
($)

Total
($)

Ian Spowart, President, Chief Executive Officer and Director(1)

2013
2012

11,000
72,000

nil
nil

nil
nil

nil
nil

nil
nil

nil
nil

nil
nil

11,000
72,000

Daniel Martinez-Atkinson,Chief Financial Officer, Treasurer, Secretary and

Director(2)

2013
2012

10,500
66,000

nil
nil

nil
nil

nil
nil

nil
nil

nil
nil

nil
nil

10,500
66,000

Miles Bender, Chief Executive Officer and Director(3)

2013
2012

nil
nil

nil
nil

55,000
nil

nil
nil

nil
nil

nil
nil

nil
nil

55,000
nil

William Jones, Chief Operating Officer

 (4)

2013
2012

nil
nil

nil
nil

55,000
nil

nil
nil

nil
nil

nil
nil

nil
nil

55,000
nil


(1)  Mr. Spowart was appointed as the President, Chief Executive Officer and a director of our company on September 8, 2009.  He was appointed as Secretary, Treasurer and Chief Financial Officer on February 19, 2013.  He stepped down as Chief Financial Officer and Treasurer on March 27, 2013. He resigned from all remaining positions on May 1, 2013.

(2)   Mr. Martinez-Atkinson was appointed the President, Chief Executive Officer, Treasurer, Secretary and a director of our company on June 6, 2006.  Mr. Martinez-Atkinson resigned as our President and Chief Executive Officer on September 8, 2009.  He resigned from his remaining positions on February 19, 2013.

(3)  Mr. Bender was appointed Chief Executive Officer, President, Secretary and Chairman of the Board of Directors on May 1, 2013.  He resigned from all positions on July 31, 2013.  

(4)  Mr. Jones was appointed Chief Operating Officer on May 1, 2013.  He resigned from all positions on July 31, 2013.


Other than as disclosed below, there are no compensatory plans or arrangements with respect to our executive officers resulting from their resignation, retirement or other termination of employment or from a change of control.


Our company had entered into Consulting Agreements with Daniel Martinez-Atkinson and Ian Spowart on an ongoing basis, dated February 12, 2010, and effective as of February 1, 2010, whereby our company 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, subject to termination on 30 days notice. As compensation, the agreements provided 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



43



Company to enter into an Amended Consulting Agreement with Ian Spowart to decrease the consulting fee to $3,500 from June 1, 2012. The contracts were both cancelled by mutual agreement on May 31, 2013.


On August 1, 2013, the Company agreed to issue an aggregate of 1,500,000 shares of common stock to Arthur Roy as compensation for his services as President, Secretary, Treasurer Chief Executive Officer and Chairman of the Board.  It was further agreed that the stock grant would vest in equal monthly installments over a twelve-month period and that Mr. Roy would have the option of deferring all or any portion of said compensation.


GRANTS OF PLAN-BASED AWARDS


There were no equity or non-equity awards granted to the named executive officers during the year ended July 31, 2013.


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END


There were no unexercised options, stock that has not vested or equity incentive plan awards for our named executive officers as at July 31, 2013.


OPTION EXERCISES


During our Fiscal year ended July 31, 2013 there were no options exercised by our named officers.


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END


We do not have any outstanding equity awards.


STOCK OPTIONS/SAR GRANTS


During the period from inception (June 6, 2006) to July 31, 2013, we did not grant any stock options to our executive officers.


AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES


There were no options exercised during our fiscal year ended July 31, 2013 or July 31, 2012 by any officer or director of our company.


Outstanding Equity Awards at Fiscal Year End


No equity awards were outstanding as of the year ended July 31, 2013.


COMPENSATION OF DIRECTORS


We reimburse our directors for expenses incurred in connection with attending board meetings.  We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established.  Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors.  Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required



44



of a director.  No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.


EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS


None.


There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.


We have no plans or arrangements with respect to remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.


ITEM 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth, as of November 8, 2013, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated:


Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership

Percentage

of Class(1)

Arthur Roy (officer and director)

2425 Fountain View Drive, Suite 300, Houston, TX 77057

-

-

Richard C. Webb (director)

2425 Fountain View Drive, Suite 300, Houston, TX 77057

-

-

Langold Enterprises Limited

Dekk House, Rue de Zippora, Providence

Mahe Sechelles

24,806,103

25.02%

Ian Spowart

34 Hampton Road, Town Moor Doncaster, UK, DN2 5DG,

15,400,000

15.53%

Daniel Martinez-Atkinson

Mill House, Thornton Le Clay, York, UK

YO60 7TJ

15,000,000

15.13%

Directors and Executive Officers as a Group (2 persons)

-

-




45





(1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.  Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on November 8, 2013.  As of November 8, 2013, there were 99,141,334 shares of our company’s common stock issued and outstanding.


CHANGES IN CONTROL


We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.


ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


Except as disclosed herein, there have been no transactions or proposed transactions in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of our common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest.


The promoters of our company are our directors and officers.


DIRECTOR INDEPENDENCE


We currently act with two (2) directors. We have determined that none of our directors is an "independent director" as defined in NASDAQ Marketplace Rule 4200(a)(15).  Currently our audit committee consists of our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.


Our board of directors has determined that it does not have a member of its audit committee who qualifies as an "audit committee financial expert" as defined in as defined in Item 407(d)(5)(ii) of Regulation S-K.


From inception to present date, we believe that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.






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ITEM 14.


PRINCIPAL ACCOUNTING FEES AND SERVICES


The aggregate fees billed for the most recently completed fiscal year ended July 31, 2013 and for fiscal year ended July 31, 2012 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:


  

Year Ended July 31

  

2013 ($)

2012 ($)

Audit Fees

10,000

18,000

Audit Related Fees

-

-

Tax Fees

-

-

All Other Fees

9,000

9,000

Total

19,000

27,000



Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.  Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence.




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PART IV



ITEM 15.


EXHIBITS, FINANCIAL STATEMENT SCHEDULES


Exhibits required by Item 601 of Regulation S-K


 

 

 

 

 

 

 

Exhibit Number

Description

31.1

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

31.2

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

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

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.




48



SIGNATURES


In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 

 

 

LIBERTY ENERGY CORP.

Date:  November 21, 2013

/s/ Arthur Roy

 

Arthur Roy

 

President, Secretary, Treasurer and Chairman of the Board of Directors

(Principal Executive Officer)

 

 

 

 

Date:  November 21, 2013

/s/ Armando Rafael Buchanan

 

Armando Rafael Buchanan

 

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature

Title

Date

 

 

 

/s/ Arthur Roy

President, Secretary, Treasurer and Chairman of the Board of Directors

 

 

Date:  November 21, 2013

Arthur Roy

 

 

 

 

 

 

 

 

 

 

 

/s/ Armando Rafael Buchanan

Chief Financial Officer

Date:  November 21, 2013

Armando Rafael Buchanan



 

 

/s/ Richard C. Webb

Director

Date:  November 21, 2013

Richard C. Webb

 

 




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