UNITED
STATES SECURITIES


AND


EXCHANGE
COMMISSION


Washington,
D.C.  20549





FORM
20-F





[
]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934





OR





[X]  ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE   ACT
OF 1934





For the
fiscal year ended ________December 31,
2007________




OR


[
]           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from _________ to __________





OR





[
]  SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934





Date of
event requiring this shell company report: ______





Commission
File Number: 333-137571





LIBERTY PETROLEUM
INC.


(Exact
name of Registrant as specified in its charter)





Alberta,
Canada


(Jurisdiction
of incorporation or organization)





4620 Manilla Road S.E.,
Calgary, Alberta, Canada T2G 4B7


(Address
of principal executive offices)





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





None





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





Common Stock, Fully Paid and
Non-Assessable Common Shares Without Par Value


(Title of
Class)





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None


1


Indicate
the number of outstanding shares of each of the issuer's classes of capital or
common stock as of the close of the period covered by the annual
report:  41,709,750 common shares as of December 31, 2007 and May 21,
2008.  No preferred shares issued and outstanding.





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act:Yes [  ] No [X]





If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. Yes [  ] No [X]


Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.





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 ninety days.  Yes [X]   No
[  ]





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





Large
accelerated filer
[  ]                                                      Accelerated
filer
[  ]                                           Non-accelerated
filer [X]





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S.
      GAAP [  ]
            International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board [  ]
            Other
      [ X]





If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.


Item 17 [
X] Item 18 [  ]





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





Index to
Exhibits on Page 51


2


LIBERTY
PETROLEUM INC.





FORM
20-F ANNUAL REPORT 2007





TABLE
OF CONTENTS








Oil
      and Gas Glossary
            4Introduction
            5Part
      IItem
      1.
            Identity
      of Directors, Senior Management and Advisors
            7Item
      2.
            Offer
      Statistics and Expected Timetable
            7Item
      3.
            Key
      Information
            7Item
      4.
            Information
      on the Company
            20Item
      4A.
            Unresolved
      Staff Comments
            27Item
      5.
            Operating
      and Financial Review and Prospects
            28Item
      6.
            Directors,
      Senior Management and Employees
            34Item
      7.
            Major
      Shareholders and Related Party Transactions
            38Item
      8.
            Financial
      Information
            40Item
      9.
            The
      Offer and Listing
            41Item
      10.
            Additional
      Information
            41Item
      11.
            Quantitative
      and Qualitative Disclosures About Market Risk
            45Item
      12.
            Description
      of Other Securities Other Than Equity Securities
            46Part
      IIItem
      13.
            Defaults,
      Dividend Arrearages and Delinquencies
            47Item
      14.
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
            47Item
      15.
            Controls
      and Procedures
            47Item
      16.
            Reserved
            48Part
      IIIItem
      17.
            Financial
      Statements
            50Item
      18.
            Financial
      Statements
            50Item
      19.
            Exhibits
            51Financial
      Statements
            52Signature
      Page
            71





3


GLOSSARY





Term
            DefinitionAdsorption
            The
      accumulation of gases, liquids, or solutes on the surface of a solid or
      liquid.Basin
            A
      depressed area where sediments have accumulated during geologic time and
      considered to be prospective for oil and gas deposits.Coal
            A
      carbon-rich rock derived from plant material (peat)Development
            The
      phase in which a proven oil or gas field is brought into production by
      drilling production (development) wells.Drilling
            The
      using of a rig and crew for the drilling, suspension, production testing,
      capping, plugging and abandoning, deepening, plugging back, sidetracking,
      re-drilling or reconditioning of a well.Drilling
      logs
            Recorded
      observations made of rock chips cut from the formation by the drill bit,
      and brought to the surface with the mud, as well as rate of penetration of
      the drill bit through rock formations. Used by geologists to obtain
      formation data.Exploration
            The
      phase of operations which covers the search for oil or gas by carrying out
      detailed geological and geophysical surveys followed up where appropriate
      by exploratory drilling. Compare to "Development"
phase.Fracturing
            The
      application of hydraulic pressure to the reservoir formation to create
      fractures through which oil or gas may move to the
    wellbore.Methane
            The
      simplest of the various hydrocarbons and is the major hydrocarbon
      component of natural gas, and in fact is commonly known as natural gas. It
      is colorless, odorless, and burns efficiently without many
      byproductsMineral
      Lease
            A
      legal instrument executed by a mineral owner granting exclusive right to
      another to explore, drill, and produce oil and gas from a piece of
      landPermeability
            A
      measure of the ability of a rock to transmit fluid through pore
      spaces.Reserves
            Generally
      the amount of oil or gas in a particular reservoir that is available for
      production.Reservoir
            The
      underground rock formation where oil and gas has accumulated. It consists
      of a porous rock to hold the oil or gas, and a cap rock that prevents its
      escape





4


INTRODUCTION





We were
formed as a corporation under the federal laws of Canada pursuant to the Canada
Business Corporations Act on April 25, 2005 under the name Liberty Gold
Corp.  On June 23, 2006, at an annual general and special meeting of
shareholders, a majority of the shareholders of the Company approved a change in
business of the Company from mineral exploration to oil and gas exploration and
extraction.  At the same meeting, a majority of the shareholders of
the Company approved a change in name of the Company to Liberty Petroleum
Inc.





We are
currently an oil and gas exploration stage company and anticipate acquiring,
exploring, and if warranted and feasible, developing oil and gas
properties.





In this
Annual Report, the “Company”, “Liberty Petroleum Inc.”, “Liberty”, "we", "our",
and "us", refer to Liberty Petroleum Inc. (unless the context otherwise
requires).  Summary discussions of documents referred to in this 20-F
may not be complete, and we refer you to the actual documents for more complete
information.  Our principal corporate offices are located at 4620
Manilla Road S.E., Calgary, Alberta, T2G 4B7.





BUSINESS
OF LIBERTY PETROLEUM INC.





Liberty
Petroleum Inc. (formerly Liberty Gold Corp.)(the “Company") is principally a
company engaged in the acquisition and exploration of oil and gas
properties.  On March 15, 2006, the Company entered into an agreement
giving it the exclusive right and option to acquire a 100% interest in a mineral
exploration property known as the GQ Property located in the Kamloops Mining
District of British Columbia, Canada.  In relation to the Company’s
decision to pursue opportunities in the oil and gas industry, it terminated the
GQ Property option on May 31, 2006.





The
Company currently has a coal bed methane property in the Milk River area of
Alberta, Canada.  On June 14, 2006, the Company entered into a
Petroleum, Natural Gas and General Rights Conveyance (the “Agreement”) with
Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland
Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a
petroleum and natural gas (“PN&G”) lease with the government of
Alberta.  The underlying lease acquired by the Company is Alberta
PN&G lease 0405070015 (the “Lease”), and the property to which the Lease
pertains is located in the Milk River area of Alberta. Upon signing the
Agreement, the Company paid the Vendor $7,500 and paid closing costs of $938 and
agreed to assume the underlying lease payments to the province of
Alberta.  In addition, the Vendor is entitled to an overriding 5%
royalty on all petroleum substances produced from the Milk River Property, if
any.  The Vendor is entitled to a first and paramount lien upon all of
the petroleum substances produced or allocated to the Property to secure the
payment of any amounts due and payable to the Vendor relating to the
royalty.








FINANCIAL
AND OTHER INFORMATION





In this
Annual Report, unless otherwise specified, all dollar amounts are expressed in
Canadian Dollars (“CDN$” or “$”).  The Government of Canada permits a
floating exchange rate to determine the value of the Canadian Dollar against the
U.S. Dollar (US$).





5


FORWARD-LOOKING
STATEMENTS





This
Annual Report includes forward-looking statements, principally in ITEM #4,
“Information on the Company” and ITEM #5, “Operating and Financial Review and
Prospects".  We have based these forward-looking statements largely on
our current expectations and projections about future events and financial
trends affecting our business.  These forward-looking statements are
subject to risks, uncertainties and assumptions including, among other things,
the factors discussed in this Annual Report under ITEM #3, “Key Information,
Risk Factors" and factors described in documents that we may furnish from time
to time to the Securities and Exchange Commission.





The words
"believe", "may", "estimate", "continue", "anticipate", "intend", "expect", and
similar words are intended to identify forward-looking statements.  In
light of these risks and uncertainties, the forward-looking information, events
and circumstances discussed in this Annual Report might not
occur.  Our actual results and performance could differ substantially
from those anticipated in our forward-looking statements.  We
undertake no obligation to update publicly or revise any forward-looking
statements because of new information, future events or otherwise.





6


PART
I





ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS





--- Not
applicable ---





ITEM 2.  OFFER STATISTICS
AND EXPECTED TIMETABLE.





--- Not
applicable ---





ITEM 3.  KEY
INFORMATION.





3.A. Selected Financial Data





The
selected financial data of the Company for the fiscal years ended December 31,
2007 and 2006 and for the fiscal period from April 25, 2005 (inception) to
December 31, 2005 were derived from the financial statements of the Company that
have been audited by Smythe Ratcliffe LLP, independent Chartered Accountants, as
indicated in their audit reports, which are included elsewhere in this Annual
Report.  The selected financial data should be read in conjunction
with the financial statements and other financial information included elsewhere
in this 20-F.





The
Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future.  The present
policy of the Company is to retain all available funds for use in its operations
and the expansion of its business.





The
selected financial information disclosed below has been derived from financial
statements of the Company, which have been prepared in accordance with Canadian
Generally Accepted Accounting Principles (GAAP).  There are no
material numerical differences between Canadian GAAP and US GAAP, as applicable
to the Company.





7


Selected
Financial Information




All
      in Canadian $ except Common Shares issued
            
            For
      Year Ended December 31, 2007
            
            
            For
      Year Ended December 31, 2006
            
            
            For
      the Period April 25, 2005 (Inception) to December 31, 2005Operating
      Revenues
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      Income
            
            $
            2,451
            
            
            $
            2,673
            
            
            
            -Loss
      from Operations
            
            $
            (61,618
            )
            
            $
            (34,692
            )
            
            $
            (8,950
            )Net
      Loss
            
            $
            (61,618
            )
            
            $
            (34,692
            )
            
            $
            (8,950
            )Loss
      per Share – Basic and Diluted
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )As
      of December 31, 2007
            
            
            As
      of December 31, 2006
            
            
            As
      of December 31, 2005Total
      Assets
            
            $
            38,676
            
            
            $
            105,248
            
            
            $
            130,525Net
      Assets
            
            $
            29,215
            
            
            $
            90,833
            
            
            $
            125,525Total
      Liabilities
            
            $
            9,461
            
            
            $
            14,415
            
            
            $
            5,000Working
      Capital
            
            $
            19,881
            
            
            $
            82,395
            
            
            $
            125,525Share
      Capital
            
            $
            134,475
            
            
            $
            134,475
            
            
            $
            134,475Common
      Shares Issued
            
            
            41,709,750
            
            
            
            41,709,750
            
            
            
            41,709,750Dividends
      Declared
            
            
            -
            
            
            
            -





3.A.3. Exchange Rates





In this
Annual Report, unless otherwise specified, all dollar amounts are expressed in
Canadian Dollars (CDN$).  The Government of Canada permits a floating
exchange rate to determine the value of the Canadian Dollar against the U.S.
Dollar (US$).





Set forth
below are the exchange rates for the Canadian Dollar at the end of three periods
ended December 31st since the Company’s inception on April 25, 2005, the average
rates for the period and the range of high and low rates for the
period.  The data for April 2008 and for each month during the most
recent six months is also provided.





For
purposes of this table, the rate of exchange means the noon buying rate in New
York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York.  The table sets
forth the number of Canadian Dollars required under that formula to buy one U.S.
Dollar.  The average rate means the average of the exchange rates on
the last day of each month during the period.


8





Period
              
              Average
              
              
              High
              
              
              Low
              
              
              CloseApril
      2008
              
              
              1.01
              
              
              
              1.00
              
              
              
              1.03
              
              
              
              1.01March
      2008
              
              
              1.00
              
              
              
              0.98
              
              
              
              1.03
              
              
              
              1.03February
      2008
              
              
              1.00
              
              
              
              0.97
              
              
              
              1.02
              
              
              
              0.98January
      2008
              
              
              1.01
              
              
              
              0.99
              
              
              
              1.03
              
              
              
              1.00December
      2007
              
              
              1.00
              
              
              
              0.98
              
              
              
              1.02
              
              
              
              0.99November
      2007
              
              
              0.97
              
              
              
              0.92
              
              
              
              1.00
              
              
              
              1.00Fiscal
      Year Ended December 31, 2007
              
              
              1.07
              
              
              
              0.92
              
              
              
              1.19
              
              
              
              0.99Fiscal
      Year Ended December 31, 2006
              
              
              1.13
              
              
              
              1.10
              
              
              
              1.17
              
              
              
              1.17April
      25, 2005 to December 31, 2005
              
              
              1.20
              
              
              
              1.15
              
              
              
              1.27
              
              
              
              1.17





3.B. Capitalization and Indebtedness





--- Not
applicable ---





3.C. Reasons for the Offer and Use of
Proceeds





--- Not
applicable ---





3.D. Risk Factors





This
investment has a high degree of risk.  Before you invest you should
carefully consider the risks and uncertainties described below and the other
information in this prospectus.  If any of the following risks
actually occur, our business, operating results and financial condition could be
harmed and the value of our stock could go down.  This means you could
lose all or a part of your investment.








RISKS
RELATING TO OUR COMPANY





1.
            We
      are an exploration stage company, with limited operating history in oil
      and gas exploration and we have focused primarily on establishing our
      operations, all of which raises substantial doubt as to our ability to
      successfully develop profitable business operations and makes an
      investment in our common shares very
risky.





On June
23, 2006 at an annual general and special meeting of shareholders, a majority of
the shareholders of the Company approved the change in the name of the Company
from Liberty Gold Corp. to Liberty Petroleum Inc.  At the same
meeting, a majority of the Company’s shareholders also approved the change in
business of the Company from mineral exploration to oil and gas
exploration.  As a result we have only recently commenced oil and gas
exploration operations.





9


Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in establishing a business in the oil and natural gas
industries. We have yet to generate any revenues from operations and have been
focused on organizational, start-up, property acquisition, and fund raising
activities. Since we have not generated any revenues, we will have to raise
additional capital to fund our operations for the next twelve months, which we
may do through loans from existing shareholders, the sale of our equity
securities or strategic arrangement with a third party in order to continue our
business operations.  There is nothing at this time on which to base
an assumption that our business operations will prove to be successful or that
we will ever be able to operate profitably. Our future operating results will
depend on many factors, including:





•
      our ability to raise adequate working
capital;


•
      success of our development and
exploration;


•
      demand for natural gas and oil;


•
      the level of our competition;


•
      our ability to attract and maintain key management and employees;
      and


•
      our ability to efficiently explore, develop and produce sufficient
      quantities of marketable natural gas or oil in a highly competitive and
      speculative environment while maintaining quality and controlling
      costs.





To
achieve profitable operations, we must, alone or with others, successfully
execute on the factors stated above.  If we are not successful in
executing any of the above stated factors, our business will not be profitable
and may never even generate any revenue, which make our common shares a less
attractive investment and may harm the trading of our common shares, if a market
ever develops.





2.
            The
      field of oil and gas exploration is difficult to predict because of
      technological advancements and market factors, which factors our
      management may not correctly assess and it may make it difficult for
      investors to sell their our common
shares.





Because
the nature of our business is expected to change as a result of shifts in the
market price of oil and natural gas, competition, and the development of new and
improved technology, management forecasts are not necessarily indicative of
future operations and should not be relied upon as an indication of future
performance.





Our
Management may incorrectly estimate projected occurrences and events within the
timetable of our business plan, which would have an adverse effect on our
results of operations and, consequently, make our common shares a less
attractive investment and harm the future trading of our common shares trading
on the OTC Bulletin Board.  Investors may find it difficult to sell
their shares on the OTC Bulletin Board should a market ever develop for our
shares.





3.
            Because
      we have no plan to generate revenue unless and until our exploration
      program is successful in finding productive wells, we will need to raise a
      substantial amount of additional capital in order to fund our operations
      for the next twelve months and in order to develop our property and
      acquire and develop new properties.  If the prospects for our
      property are not favorable or the capital markets are tight, we would not
      be able to raise the necessary capital and we will not be able to pursue
      our business plan, which would likely cause our common shares to become
      worthless.





10


Cash on
hand is insufficient to fund our anticipated operating needs of approximately
$155,000 for the next twelve months. As we have no plan to generate revenue
unless and until our exploration program is successful in finding productive
wells, we will require substantial additional capital to fund our operations for
the next twelve months and in order to participate in the development of our
property, which has not had any production of oil or natural gas, as well as for
the future acquisition and/or development of other
properties.  Because we currently do not have any cash flow from
operations we need to raise additional capital, which may be in the form of
loans from current shareholders and/or from public and private equity
offerings.  Our ability to access capital will depend on our success
in participating in properties that are successful in exploring for and
producing oil and gas at profitable prices.  It will also be dependent
upon the status of the capital markets at the time such capital is
sought.  Should sufficient capital not be available, the development
of our business plan could be delayed and, accordingly, the implementation of
our business strategy would be adversely affected. In such event it would not be
likely that investors would obtain a profitable return on their investments or a
return of their investments at all.





4.
            Even
      if we discover coal bed methane on our property and commence the drilling
      of wells, we will not be able to generate revenues for at least an
      additional year thereafter, as we must dewater any such wells for a year
      on average before methane production begins.  We will need to
      raise a substantial amount of additional capital to fund our operations
      during the period of dewatering, and should we fail to do so, we will not
      be able to pursue our business plan, which would likely cause our common
      shares to become worthless.





Currently,
we are focused primarily on exploring our property to determine the potential of
the property to host any natural gas in the form of coal bed
methane.   We have no revenues, and we do not have any plan to
generate revenue unless and until our exploration program is successful in
finding productive wells.  However, even if we discover coal bed
methane on our property and commence the drilling of wells, we will not be able
to generate revenues for at least an additional year thereafter, as we must
dewater any such wells for a year on average before methane production
begins.  Coal bed methane cannot be extracted until the water that
permeates coal beds is pumped out, because the water traps the gas in the coal.
This dewatering lowers coal bed pressure and, like taking the cork out of a
bottle of champagne, the bubbles (methane) come to the
top.  Dewatering often means dumping 12 to 15 gallons of water a
minute from each well, a process that must continue for a year on average before
maximum methane production kicks in.  Accordingly, we will require
substantial additional capital to fund our operations during the one-year period
during which we must dewater any wells we may drill.  Because we
currently do not have any cash flow from operations, we will need to raise
additional capital, which may be in the form of loans from current shareholders
and/or from public and private equity offerings.  Should sufficient
capital not be available, the development of our business plan could be delayed
and, accordingly, the implementation of our business strategy would be adversely
affected, even if we discover coal bed methane on our properties.  In
such event it would not be likely that investors would obtain a profitable
return on their investments or a return of their investments at
all.





5.
            We
      have an irrevocable option to repurchase an aggregate of 30,000,000 common
      shares held by our directors, and unaffiliated stockholders have no
      protection against our future potential decision to repurchase
      such  shares pursuant to current or potentially modified
      contracts, even if such repurchase would essentially use all or
      substantially all of the company’s working capital and essentially cause
      the company to become insolvent.





11


We have
an irrevocable option to repurchase 16,000,000 common shares held by Paul Uppal,
our Director, Chairman, President, Chief Executive Officer, Chief Operating
Officer, and Secretary, and 14,000,000 common shares held by Duncan Budge, a
member of our Board of Directors.  This repurchase option is
exercisable by us if, at any time on or before April 30, 2025, the holder of
such shares ceases to be a director of the Company.   For further
information on such agreements, see our disclosure below under the section
entitled “Material Contracts.”





The
exercise price of such repurchase option is $0.01 per share, amounting in the
aggregate to $160,000 for the shares held by Mr. Uppal and $140,000 for the
shares held by Mr. Budge.  Such shares were originally purchased by
the holders thereof at a purchase price of $0.0001 per share, amounting in the
aggregate to $1,600 for the shares held by Mr. Uppal and $1,400 for the shares
held by Mr. Budge.  Accordingly, if we exercise our option to
repurchase such shares, Mr. Uppal will make a profit equal to $158,400, and Mr.
Budge will make a profit equal to $138,600.  Unaffiliated stockholders
have no protection against our future potential decision to repurchase the
shares of the two directors pursuant to current or potentially modified
contracts, even if such repurchase would essentially use all or substantially
all of the company’s working capital and essentially cause the company to become
insolvent.





6.
            We
      are heavily dependent on contracted third parties and upon Paul Uppal, who
      is our Director, Chairman, President, Chief Executive and Operating,
      Officer, and Secretary.  The loss of Mr. Uppal, whose knowledge,
      leadership and technical expertise upon which we rely, would harm our
      ability to execute our business plan and continue our operations until we
      found a suitable replacement.





We are
dependent on the continued contributions of Paul Uppal, whose knowledge and
leadership would be difficult to replace.  Our success is also heavily
dependent on our ability to retain and attract experienced engineers,
geoscientists and other technical and professional staff.  We do not
currently have any consulting agreements in place with either Mr. Uppal or third
parties under which we can ensure that we will have sufficient expertise to
undertake our planned exploration program.  We do not maintain any key
person insurance on Mr. Uppal.   If we were to lose his services,
our ability to execute our business plan would be harmed and we may be forced to
cease operations until such time as we could hire a suitable replacement for Mr.
Uppal.





7.
            Volatility
      of oil and gas prices and markets, over which we have no control, could
      make it difficult for us to achieve profitability and investors are likely
      to lose their investment in our common
shares.





Our
ability to achieve profitability is substantially dependent on prevailing prices
for natural gas and oil.  The amounts of, and price obtainable for,
any oil and gas production that we achieve will be affected by market factors
beyond our control.  If these factors are not favorable over time to
our financial interests, it is likely that owners of our common shares will lose
their investments. Such factors include:





•
      worldwide or regional demand for energy, which is affected by economic
      conditions;


•
      the domestic and foreign supply of natural gas and
  oil;


•
      weather conditions;


•
      domestic and foreign governmental
regulations;


•
      political conditions in natural gas and oil producing
    regions;


•
      the ability of members of the Organization of Petroleum Exporting
      Countries to agree upon and maintain oil prices and production levels;
      and


•
      the price and availability of other
fuels.





12


8.
            Drilling
      wells is speculative, often involving significant costs that are difficult
      to project and may be more than our estimates, unsuccessful drilling of
      wells or successful drilling of wells that are, nonetheless, unprofitable,
      any one of which is likely to reduce the profitability of our business and
      negatively affect our results of
operations.





Developing
and exploring for natural gas and oil involves a high degree of operational and
financial risk, which precludes definitive statements as to the time required
and costs involved in reaching certain objectives.  The budgeted costs
of drilling, completing and operating wells are often exceeded and can increase
significantly when drilling costs rise due to a tightening in the supply of
various types of oilfield equipment and related services.  Drilling
may be unsuccessful for many reasons, including title problems, weather, cost
overruns, equipment shortages and mechanical difficulties.  Moreover,
the successful drilling of a natural gas or oil well does not ensure a profit on
investment.  Exploratory wells bear a much greater risk of loss than
development wells.  A variety of factors, both geological and
market-related, can cause a well to become uneconomical or only marginally
economic and the results of our operations will be negatively affected as
well.





9.
            The
      natural gas and oil business involves numerous uncertainties and operating
      risks that can prevent us from realizing profits and can cause substantial
      losses.





Our
development, exploitation and exploration activities may be unsuccessful for
many reasons, including weather, cost overruns, equipment shortages and
mechanical difficulties. Moreover, the successful drilling of a natural gas and
oil well does not ensure a profit on investment.  A variety of
factors, both geological and market-related, can cause a well to become
uneconomical or only marginally economical.





The
natural gas and oil business involves a variety of operating risks,
including:





•
      fires;


•
      explosions;


•
      blow-outs and surface cratering;


•
      uncontrollable flows of oil, natural gas, and formation
    water;


•
      natural disasters, such as hurricanes and other adverse weather
      conditions;


•
      pipe, cement, or pipeline failures;


•
      casing collapses;


•
      embedded oil field drilling and service
tools;


•
      abnormally pressured formations;
and


•
      environmental hazards, such as natural gas leaks, oil spills, pipeline
      ruptures and discharges of toxic
gases.





If we
experience any of these problems, it could affect well bores, gathering systems
and processing facilities, which could adversely affect our ability to conduct
operations. We could also incur substantial losses as a result of:





•
      injury or loss of life;


•
      severe damage to and destruction of property, natural resources and
      equipment;


•
      pollution and other environmental
damage;


•
      clean-up responsibilities;


•
      regulatory investigation and
penalties;


•
      suspension of our operations; and


•
      repairs to resume operations.


13


10.
            If
      we commence drilling, we do not currently have any contracts with
      equipment providers, we may face the unavailability or high cost of
      drilling rigs, equipment, supplies, personnel and other services which
      could adversely affect our ability to execute on a timely basis our
      development, exploitation and exploration plans within our budget and, as
      a result, negatively impact our financial condition and results of
      operations.





If we
commence drilling, shortages or an increase in cost of drilling rigs, equipment,
supplies or personnel could delay or interrupt our operations, which could
negatively impact our financial condition and results of
operations.  Drilling activity in the geographic areas in which we
conduct drilling activities may increase, which would lead to increases in
associated costs, including those related to drilling rigs, equipment, supplies
and personnel and the services and products of other vendors to the
industry.  Increased drilling activity in these areas may also
decrease the availability of rigs.  We do not currently have any
contracts with providers of drilling rigs and, consequently we may not be able
to obtain drilling rigs when we need them.  Therefore, our drilling
and other costs may increase further and necessary equipment and services may
not be available to us at economical prices.





11.
            We
      are subject to complex laws and regulations, including environmental
      regulations, which can significantly increase our costs and possibly force
      our operations to cease.





If we
commence drilling and experience any leakage of crude oil and/or gas from the
subsurface portions of a well, our gathering system could cause degradation of
fresh groundwater resources, as well as surface damage, potentially resulting in
suspension of operation of a well, fines and penalties from governmental
agencies, expenditures for remediation of the affected resource, and liabilities
to third parties for property damages and personal injuries.  In
addition, any sale of residual crude oil collected as part of the drilling and
recovery process could impose liability on us if the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.





Drilling
operations generally involve a high degree of risk. Hazards such as unusual or
unexpected geological formations, power outages, labor disruptions, blow-outs,
sour gas leakage, fire, inability to obtain suitable or adequate machinery,
equipment or labor, and other risks are involved. We may become subject to
liability for pollution or hazards against which it cannot adequately insure or
which it may elect not to insure. Incurring any such liability may have a
material adverse effect on our financial position and operations.





Development,
production and sale of natural gas and oil in Canada are subject to extensive
laws and regulations, including environmental laws and
regulations.  We may be required to make large expenditures to comply
with environmental and other governmental regulations.  Matters
subject to regulation include:





•
      location and density of wells;


•
      the handling of drilling fluids and obtaining discharge permits for
      drilling operations;


•
      accounting for and payment of royalties on production from state, federal
      and Indian lands;


•
      bonds for ownership, development and production of natural gas and oil
      properties;


•
      transportation of natural gas and oil by
  pipelines;


•
      operation of wells and reports concerning operations;
  and


•
      taxation.





14


Under
these laws and regulations, we could be liable for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages.  Failure to comply with these
laws and regulations also may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal
penalties.  Moreover, these laws and regulations could change in ways
that substantially increase our costs.  Accordingly, any of these
liabilities, penalties, suspensions, terminations or regulatory changes could
materially adversely affect our financial condition and results of operations
enough to possibly force us to cease our business operations.





12.
            The
      potential profitability of oil and gas ventures depends upon various
      factors beyond the control of our company, which may materially affect our
      financial performance.





The
potential profitability of oil and gas properties is dependent upon many factors
beyond our control.  For instance, world prices and markets for oil
and gas are unpredictable, highly volatile, potentially subject to governmental
fixing, pegging, controls, or any combination of these and other factors, and
respond to changes in domestic, international, political, social, and economic
environments. Additionally, due to worldwide economic uncertainty, the
availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project.  These changes
and events may materially affect our financial performance.





13.
            Our
      auditors’ opinion in our December 31, 2007 financial statements includes
      an explanatory paragraph in respect of there being substantial doubt about
      our ability to continue as a going concern.   We will need
      to raise additional capital in order to fund our operations for the next
      twelve months, and if we fail to raise such capital investors may lose
      some or all of their investment in our common
  shares.





We have
incurred net losses of $105,260 from April 25, 2005 (inception) to December 31,
2007.  Our financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts of and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.  We anticipate
generating losses for at least the next 12 months.  Therefore, there
is substantial doubt about our ability to continue operations in the future as a
going concern.  We will need to obtain additional funds in order to
fund our operations for the next twelve months.  Our plans to deal
with this cash requirement include loans from existing shareholders, raising
additional capital from the public or private sale of equity or entering into a
strategic arrangement with a third party.  If we cannot continue as a
viable entity, our shareholders may lose some or all of their investment in our
company.





14.
            If
      we do not maintain the property lease payments on our property, we will
      lose our interest in the property as well as losing all monies incurred in
      connection with the property.





We have a
leased property in Alberta, Canada that we acquired through a Petroleum, Natural
Gas and General Rights Conveyance with Stone Petroleums Ltd., Supernova
Resources Ltd., 349385 Alberta Ltd., and Torland Ltd.  The property
requires lease payments to the Alberta provincial government.  See
Section 4.D entitled ‘Property, Plant and Equipment’ of this 20-F for a more
detailed description of the property obligations.  If we do not
continue to make the annual lease payments, we will lose our ability to explore
and develop the property and we will not retain any kind of interest in the
property.





15


15.
            We
      may not be able to compete with current and potential exploration
      companies, some of whom have greater resources and experience than we do
      in locating and commercializing oil and natural gas reserves and, as a
      result, we may fail in our ability to maintain or expand our
      business.





The
natural gas and oil market is intensely competitive, highly fragmented and
subject to rapid change.  We may be unable to compete successfully
with our existing competitors or with any new competitors.  We compete
with many exploration companies which have significantly greater personnel,
financial, managerial, and technical resources than we do.  This
competition from other companies with greater resources and reputations may
result in our failure to maintain or expand our business.





16.
            We
      expect losses to continue in the next 12 months because we have no oil or
      gas reserves and, consequently, no revenue to offset
    losses.





Based
upon the fact that we currently do not have any oil or gas reserves, we expect
to incur operating losses in next 12 months.  The operating losses
will occur because there are expenses associated with the acquisition of, and
exploration of natural gas and oil properties which do not have any
income-producing reserves.  Failure to generate revenues may cause us
to go out of business.  We will require additional funds to achieve
our current business strategy and our inability to obtain additional financing
will interfere with our ability to expand our current business
operations.





17.
            Since
      our directors work for other natural resource exploration companies, their
      other activities for those other companies may involve a conflict of
      interest with regard to their time, could slow down our operations or
      negatively affect our
profitability.





Our
officers and directors are not required to work exclusively for us and do not
devote all of their time to our operations.  In fact, our directors
work for other natural resource exploration companies.  Therefore, it
is possible that a conflict of interest with regard to their time may arise
based on their employment by such other companies.  Their other
activities may prevent them from devoting full-time to our operations which
could slow our operations and may reduce our financial results because of the
slow down in operations.  It is expected that each of our directors
will devote approximately 1 hour per week to our operations on an ongoing basis,
and when required will devote whole days and even multiple days at a stretch
when property visits are required or when extensive analysis of information is
needed.





18.
            Our
      principal shareholders, officers and directors own a controlling interest
      in our voting stock and investors will not have any voice in our
      management, which could result in decisions adverse to our general
      shareholders.





Our
officers and directors, in the aggregate, beneficially own approximately or have
the right to vote approximately 71.9% of our outstanding common stock. As a
result, these stockholders, acting together, will have the ability to control
substantially all matters submitted to our stockholders for approval
including:





·
            election  of  our  board  of  directors;


·
            removal  of  any  of  our  directors;


·
            amendment  of  our  Articles
      of
      Incorporation  or  bylaws;  and


·
            adoption
      of measures that could delay or prevent a change in control or impede a
      merger, takeover or other business combination involving
    us.





16


As a
result of their ownership and positions, our directors and executive officers
collectively are able to influence all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions.  In addition, it is possible for our directors and
executive officers to modify their share purchase agreements such that they
could force the repurchase of their shares and remain on the
board.  Also, sales of significant amounts of shares held by our
directors and executive officers, or the prospect of these sales, could affect
the market price of our common stock if the marketplace does not orderly adjust
to the increase in shares in the market and the value of your investment in the
Company may decrease.  Management's stock ownership may discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of us, which in turn could reduce our stock price or prevent our
stockholders from realizing a premium over our stock price.







19.
            We
      have no employees and our only officer works one day per week on our
      business and our directors work only one hour per week on our
      business.  Consequently, we may not be able to monitor our
      operations and respond to matters when they arise in a prompt or timely
      fashion.  Until we have additional capital or generate revenue,
      we will have to rely on consultants and service providers, which will
      increase our expenses and increase our
losses.





We do not
have any employees, our only officer works on our business one day per week and
our directors each spends one hour a week on our business.  With
practically no personnel, we have a limited ability to monitor our operations,
such as the progress of oil and gas exploration, and to respond to inquiries
from third parties, such as regulatory authorities or potential business
partners.  Though we may rely on third party service providers, such
as accountants and lawyers, to address some of our matters, until we raise
additional capital or generate revenue, we will have to rely on consultants and
third party service providers to monitor our operations, which will increase our
expenses and have a negative effect on our results of operations.





RISKS
RELATING TO OUR COMMON SHARES





20.
            We
      may, in the future, issue additional common shares, which would reduce
      investors’ percent of ownership and may dilute our share
      value.





Our
Articles of Incorporation authorize the issuance of an unlimited number of
common shares without par value and an unlimited number of preferred shares
without par value.  The future issuance of our unlimited authorized
common shares may result in substantial dilution in the percentage of our common
shares held by our then existing shareholders. We may value any common shares
issued in the future on an arbitrary basis.  The issuance of common
shares for future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by our investors, and might
have an adverse effect on any trading market for our common shares.





21.
            Our
      common shares are subject to the "Penny Stock" Rules of the SEC and we
      have no established market for our securities, which makes transactions in
      our stock cumbersome and may reduce the value of an investment in our
      stock.





The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than USD $5.00 per share or with an
exercise price of less than USD $5.00 per share, subject to certain
exceptions.  For any transaction involving a penny stock, unless
exempt, the rules require:





·
            that
      a broker or dealer approve a person’s account for transactions in penny
      stocks; and


·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.


17


In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            obtain
      financial information and investment experience objectives of the person;
      and


·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:





·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and


·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.





Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules.  This may make it more difficult for investors to
dispose of our common shares and cause a decline in the market value of our
stock.





Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions.  Finally, monthly statements have
to be sent disclosing recent


price
information for the penny stock held in the account and information on the
limited market in penny stocks.





22.
            We
      have registered 34,650,000 common shares underlying our warrants that may
      be available for future sale.  The sale of these shares may
      depress the market price of our common shares and shareholders could
      suffer a loss on their investment.





As of May
21, 2008, we had warrants outstanding to purchase an aggregate of 34,650,000
common shares.  We have registered the 34,650,000 common shares
underlying the warrants and all of these warrants will be freely tradable under
U.S. federal law upon their respective vesting dates of May 26, 2009 with
respect to the 11,550,000 Class A warrants, November 26, 2009 with respect to
the 11,550,000 Class B warrants, and May 26, 2010 with respect to the 11,550,000
Class C warrants. If such warrants are exercised in full and converted to common
shares, our shareholders may experience a decline in the price of our common
shares as such common shares are sold into the open market.  If such
decline in the price of our common shares were to materialize, shareholders
could suffer a loss on their investment.





23.
            There
      is no current trading market for our securities and if a trading market
      does not develop, purchasers of our securities may have difficulty selling
      their shares.





Our
shares only began trading on the OTC Bulletin Board in January 2008 under the
symbol LTYPF and there is currently no established public trading market for our
securities and an active trading market in our securities may not develop or, if
developed, may not be sustained.  If for any reason a public trading
market does not otherwise develop, purchasers of the shares may have difficulty
selling their common shares should they desire to do so.





18


24.
            State
      securities laws may limit secondary trading, which may restrict the states
      in which and conditions under which you can sell the shares offered by
      this prospectus.





Secondary
trading in common shares sold in this offering will not be possible in any state
until the common shares are qualified for sale under the applicable securities
laws of the state or there is confirmation that an exemption, such as listing in
certain recognized securities manuals, is available for secondary trading in the
state.  If we fail to register or qualify, or to obtain or verify an
exemption for the secondary trading of, the common shares in any particular
state, the common shares could not be offered or sold to, or purchased by, a
resident of that state. In the event that a significant number of states refuse
to permit secondary trading in our common shares, the liquidity for the common
shares could be significantly impacted thus causing you to realize a loss on
your investment.





25.
            We
      are a “foreign private issuer”, and you may not have access to the
      information you could obtain about us if we were not a “foreign private
      issuer”.





We are
considered a "foreign private issuer" under the Securities Act of 1933, as
amended. As an issuer incorporated in Canada, we will be required to prepare our
annual and interim financial statements in accordance with Canadian generally
accepted accounting principles. For purpose of our annual disclosure obligations
in the United States, we will annually file in the United States financial
statements prepared in accordance with Canadian GAAP together with
reconciliation to US GAAP.  In addition, as a foreign private issuer
we will not have to file quarterly reports with the SEC nor will our directors,
officers and 10% stockholders be subject to Section 16(b) of the Exchange Act.
As a foreign private issuer we will not be subject to the proxy rules of Section
14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S.
companies and will not apply to us. Accordingly, you may not be able to obtain
information about us as you could obtain if we were not a “foreign private
issuer”.





26.
            Because
      we do not intend to pay any cash dividends on our common shares, our
      stockholders will not be able to receive a return on their shares unless
      they sell them.





We intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common shares in
the foreseeable future.  Unless we pay dividends, our stockholders
will not be able to receive a return on their shares unless they sell
them.





27.
            We
      may become a passive foreign investment company, or PFIC, which could
      result in adverse U.S. tax consequences to U.S.
  investors.





If we are
a “passive foreign investment company” or “PFIC” as defined in Section 1297 of
the Code, U.S. Holders will be subject to U.S. federal income taxation under one
of two alternative tax regimes at the election of each such U.S. Holder. Section
1297 of the Code defines a PFIC as a corporation that is not formed in the
United States and either (i) 75% or more of its gross income for the taxable
year is “passive income”, which generally includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if we elect, adjusted tax basis), of its assets that produce or are held
for the production of “passive income” is 50% or more.  Whether we are
a PFIC in any year and the tax consequences relating to PFIC status will depend
on the composition of our income and assets, including cash. U.S. Holders should
be aware, however, that if we become a PFIC, we may not be able or willing to
satisfy record-keeping requirements that would enable U.S. Holders to make an
election to treat us as a “qualified electing fund” for purposes of one of the
two alternative tax regimes applicable to a PFIC, which would result in adverse
tax consequences to our shareholders who are U.S. citizens.





19


28.
            Because
      we are formed under the Canadian Business Corporations Act in Canada and
      all of our assets, officers, and directors are located outside the United
      States, it may be difficult for an investor to enforce within the United
      States any judgments obtained against us or any of our officers and
      directors.





All of
our assets are located outside of the United States and we do not currently
maintain a permanent place of business within the United States. In addition,
all of our officers and directors are nationals and/or residents of countries
other than the United States, and all or a substantial portion of such persons'
assets are located outside the United States. As a result, it may be difficult
for an investor to effect service of process or enforce within the United States
any judgments obtained against us or our officers or directors, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. In addition, there is uncertainty as
to whether the courts of Canada would recognize or enforce judgments of United
States courts obtained against us or our directors and officers predicated upon
the civil liability provisions of the securities laws of the United States or
any state thereof.  There is even uncertainty as to whether the
Canadian courts would have jurisdiction to hear original actions brought in
Canada against us or our directors and officers predicated upon the securities
laws of the United States or any state thereof.








ITEM 4.  INFORMATION ON THE
COMPANY





4.A. History and Development of the
Company





Liberty
Petroleum Inc. (formerly Liberty Gold Corp.)(the “Company") is principally a
company engaged in the acquisition and exploration of oil and gas
properties.  On March 15, 2006, the Company entered into an agreement
giving it the exclusive right and option to acquire a 100% interest in a mineral
exploration property known as the GQ Property located in the Kamloops Mining
District of British Columbia, Canada.  In relation to the Company’s
decision to pursue opportunities in the oil and gas industry, it terminated the
GQ Property option on May 31, 2006.





The
Company currently has a coal bed methane project in the Milk River area of
Alberta, Canada.  On June 14, 2006, the Company entered into a
Petroleum, Natural Gas and General Rights Conveyance (the “Agreement”) with
Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta Ltd. and Torland
Ltd. (together, the “Vendor”) whereby the Company acquired a 100% interest in a
petroleum and natural gas (“PN&G”) lease with the government of
Alberta.  The underlying lease acquired by the Company is Alberta
PN&G lease 0405070015 (the “Lease”), and the property to which the Lease
pertains is located in the Milk River area of Alberta. Upon signing the
Agreement, the Company paid the Vendor $7,500 and paid closing costs of $938 and
agreed to assume the underlying lease payments to the province of
Alberta.  In addition, the Vendor is entitled to an overriding 5%
royalty on all petroleum substances produced from the Milk River Property, if
any.  The Vendor is entitled to a first and paramount lien upon all of
the petroleum substances produced or allocated to the Property to secure the
payment of any amounts due and payable to the Vendor relating to the
royalty.





Our
office is located at 4620 Manilla Road, S.E., Calgary, Alberta, Canada, T2G
4B7.  Our telephone number is 604-608-3830.  We do not yet
maintain an Internet address.





We are a
company in the early stages of engaging in the exploration and development of
oil and gas properties.





20


No
commercially viable natural gas deposit may exist on our
property.  Our plan of operations is to carry out geological analysis
of this property in order to ascertain whether it possesses deposits of natural
gas.  We can provide no assurance to investors that our property
contains a commercially viable natural gas deposit until appropriate exploratory
work is done and an evaluation based on that work concludes further work
programs are justified.  At this time, we definitely have no known
reserves on our property.





For the
period from April 25 2005 (inception) to December 31, 2007, we did not generate
any revenue.








4.B. Business Overview





Historical Corporate Development





Liberty
Petroleum Inc. (formerly Liberty Gold Corp.)(the “Company") is principally a
company engaged in the acquisition and exploration of oil and gas
properties.  On March 15, 2006, the Company entered into an agreement
giving it the exclusive right and option to acquire a 100% interest in a mineral
exploration property known as the GQ Property located in the Kamloops Mining
District of British Columbia, Canada.  In relation to the Company’s
decision to pursue opportunities in the oil and gas industry, it terminated the
GQ Property option on May 31, 2006.





We are a
company in the early stages of engaging in the exploration and development of
oil and gas properties.  To accomplish our objective, our strategy is
to acquire exploration prospects. On June 14, 2006, the Company entered into a
Petroleum, Natural Gas and General Conveyance Agreement with Stone Petroleums
Ltd. et al whereby the Company acquired a 100% interest in a petroleum and
natural gas lease in the Milk River area of Alberta, Canada.  The
rights associated with the lease relate to petroleum and natural
gas.  The Company’s specific goal is to explore the property for
potential coal bed methane.





However,
extensive analysis of this property will be required before we can make an
evaluation as to the economic feasibility of developing or finding valuable
natural gas on these grounds. In addition, there is no assurance that we will be
able to make the payments required by the lease agreement for the
property.  There is no assurance that the property will ever generate
any revenue.





We have
limited finances and require additional funding in order to accomplish our
exploration, development and acquisition objectives. There is no assurance that
we will have revenues in the future or that we will be able to secure other
funding necessary for our future growth and expansion.  There is also
no assurance that our oil and natural gas exploration activities will produce
commercially viable reserves.  Our efforts to extract oil and gas may
be unprofitable.





We may
seek relationships with other mineral exploration and development companies that
will allow us to exploit idle and/or undeveloped resources.





MATERIAL EFFECTS OF GOVERNMENT
REGULATIONS





Development,
production and sale of natural gas and oil in Canada are subject to extensive
laws and regulations, including environmental laws and
regulations.  The oil and gas leases currently leased by the Company
are owned by the Province of Alberta and are managed by the Department of
Energy.  We may be required to make large expenditures to comply with
environmental and other governmental regulations.  Matters subject to
regulation include:





21


•
      location and density of wells;


•
      the handling of drilling fluids and obtaining discharge permits for
      drilling operations;


•
      accounting
      for and payment of royalties on production from state, federal and Indian
      lands;


•
      bonds for ownership, development and production of natural gas and oil
      properties;


•
      transportation of natural gas and oil by
  pipelines;


•
      operation of wells and reports concerning operations;
  and


•
      taxation.





Under
these laws and regulations, we could be liable for personal injuries, property
damage, oil spills, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages.  Failure to comply with these
laws and regulations also may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal
penalties.  Moreover, these laws and regulations could change in ways
that substantially increase our costs.  Accordingly, any of these
liabilities, penalties, suspensions, terminations or regulatory changes could
materially adversely affect our financial condition and results of operations
enough to possibly force us to cease our business operations.





ANTICIPATED CHANGES TO FACILITIES AND
EMPLOYEES





Management
of the Company anticipates no changes to either facilities or employees in the
near future.





SEASONALITY, DEPENDENCY UPON PATENTS, LICENSES,
CONTRACTS, PROCESSES, SOURCES AND AVAILIBILTY OF RAW
MATERIALS





Certain
of the Company’s properties may be in remote locations and subject to
significant temperature variations and changes in working
conditions.  It may not be possible to actively explore the Company’s
property in Alberta throughout the year because seasonal changes in the
weather.  If exploration is pursued at the wrong time of year, the
Company may incur additional costs to address issues relating to the
weather.





If we
commence drilling, shortages or an increase in cost of drilling rigs, equipment,
supplies or personnel could delay or interrupt our operations, which could
impact our financial condition and results of operations.  Drilling
activity in the geographic areas in which we conduct drilling activities may
increase, which would lead to increases in associated costs, including those
related to drilling rigs, equipment, supplies and personnel and the services and
products of other vendors to the industry. Increased drilling activity in these
areas may also decrease the availability of rigs.  We do not have any
contracts with providers of drilling rigs and, consequently we may not be able
to obtain drilling rigs when we need them.  Therefore, our drilling
and other costs may increase further and necessary equipment and services may
not be available to us at economical prices.





COMPETITION





The oil
and gas exploration industry is intensely competitive, highly fragmented and
subject to rapid change.  We may be unable to compete successfully
with our existing competitors or with any new competitors.  We compete
with many exploration companies that have significantly greater personnel,
financial, managerial, and technical resources than we do.  This
competition from other companies with greater resources and reputations may
result in our failure to maintain or expand our business.





22


4.C. Organizational Structure





The
Company is not part of a group and has no subsidiaries.





4.D. Property, Plant And Equipment





CORPORATE
OFFICES





We do not
own any real property.  We currently lease our corporate headquarters
at 4620 Manilla Road S.E., Calgary, Alberta T2G 4B7.  We believe that
our rented properties are adequate for our current and immediately foreseeable
operating needs.  We do not have any policies regarding investments in
real estate, securities or other forms of property.





A
detailed description of the Company’s exploration properties with additional
information for the properties of major significance to the Company is outlined
below.





23


PETROLEUM AND NATURAL GAS
LEASE





The
Company has an interest in a petroleum and natural gas (“PN&G”) lease in
Alberta, Canada.





Coal
Bed Methane Background











24


Alberta
contains vast amounts of coal distributed throughout the southern Plains,
Foothills, and Mountains.  The Alberta Energy and Utilities Board
estimates there are 91 billion tonnes of coal resources suitable for mining and
an additional 2 trillion tonnes of coal at depth in the Alberta Plains that may
be suited for CBM.  According to a study by the Alberta Geological
Survey, Alberta’s coal bed resource could contain approximately 14 trillion
cubic meters (500 trillion cubic feet) of natural gas.





Coal bed
methane (“CBM”) is a natural gas found in coal seams and it is the same gas that
is commonly used to heat homes and used extensively by manufacturing
industries.  All provincial laws and regulations in Alberta in place
for ‘natural gas’ also cover CBM.  Conventional natural gas refers to
a mixture of hydrocarbons that can be recovered from rock reservoirs such as
sandstones and dolostones through commonplace production
techniques.  CBM is considered unconventional natural gas because the
coal acts as both the source of the gas and the storage
reservoir.  Most of the CBM is attached to or ‘adsorbed’ on the coal
surface and it may also be trapped in the coal
fractures.  Unconventional natural gas is considered less proven, and
potentially less productive and less economic than conventional natural gas,
based on current conditions, knowledge, economics, and technology.





The
natural gas found on coal seams is ‘sweet’ not ‘sour’, and generally has few
impurities.  Sweet Gas is found in its natural state that does not
need to be purified to remove sulfur-bearing compounds.   Sour
Gas is natural gas containing significant amounts of hydrogen sulfide and
requires special material treatments to avoid failures from sulfide corrosion
cracking.  When produced, natural gas typically does not require
extensive processing.  CBM is attached or ‘adsorbed’ to the coal
instead of being trapped in the pore space of the rock like most conventional
natural gas.  Pressure form overlying rock and water within the
natural fracture system of the coal seam keeps the methane gas bound to the
coal.  CBM is produced by reducing the pressure in the coal seam,
sometimes by pumping the ground water out, so that the natural gas flows through
fractures in the coal into the well bore.  The natural gas would then
flow up to the surface.  If few natural fractures exist, producers use
hydraulic fracturing to create channels in the coal.  When the gas
reaches the surface, it is compressed and transported through natural gas
pipelines.  The handling of the large volumes of water produced during
CBM extraction is a challenge to the natural gas industry.  The amount
of water used in the extraction process varies considerably from well to well
and from region to region.





MILK RIVER
PROPERTY





Acquisition
of Interest





On June
14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights
Conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources
Ltd., 349385 Alberta Ltd., and Torland Ltd. (together the “Vendor”) whereby the
Company acquired a 100% interest in a Petroleum and Natural Gas (“PN&G”)
lease with the government of the Province of Alberta.  The underlying
lease acquired by the Company is Alberta PN&G lease 0405070015, and the
property to which the lease pertains is located in the Milk River area of
Alberta, as further described below. Upon signing of the Agreement the Company
paid the Vendor $7,500 and paid closing costs of $938 and agreed to assume the
underlying lease payments to the Province of Alberta.  In addition,
the Vendor is entitled to an overriding 5% royalty on all petroleum substances
produced from the Milk River Property, if any.  The Vendor is entitled
to a first and paramount lien upon all of the petroleum substances produced or
allocated to the property to secure the payment of any amounts due and payable
to the Vendor relating to the royalty.





25


Location





The Milk
River Property (the “Property”) is located approximately 77km straight south
from Medicine Hat, Alberta, Canada.  This region of the Province is
part of the Alberta Plains.





Lease
      Number
            Hectares
            Township
            Range
            Section0405070015
            256
            3
            7
            23





Milk
River Property Lease Information





The Milk
River Property is comprised of a single lease with the government of the
province of Alberta, Canada.  The lease is a five-year lease and
expires on July 14, 2010 but can be renewed subject to certain
conditions.





Lease
      Number
            Hectares
            Rent
      / Hectare
            Total
      Annual Rent0405070015
            256
            $3.50
      per year
            $896
      per year





Regional
Geology





Alberta
contains vast amounts of coal distributed throughout the southern Plains,
Foothills, and Mountains.  Originally deposited in relatively
flat-lying peat swamps, organic matter (peat) was buried by sediments derived
from uplift (mountain building), in the west and gradually changed into coal
with increasing heat and pressure of burial.  Over time, the coals
were uplifted and partially eroded away, resulting in the present distribution
of coal across the Plains.  Coal-bearing strata dip gently westward
toward the Mountains where coals are folded and abruptly turn toward the surface
to be exposed in the Foothills.





Coal
typically occurs within a coal zone as discrete seams and/or packages with
several thin and thick seams interbedded with non-coaly rock layers or
beds.  A coal zone may be traceable over a large geographic
area.  Coal zones are found in strata ranging in age from Late
Jurassic (approximately 145 millions years old) to Tertiary (approximately 65
million years old).





The
oldest and deepest coals of the Alberta Plains belong to the Lower Cretaceous
Mannville Group coals.  The Mannville coals are widely
distributed


across
the Alberta Plains, are thick, continuous and contain some of the highest gas
contents of any coals in the Alberta Plains.  Typically six or more
seams with cumulative coal thickness ranging from 2 to 14 meters occur over a
stratigraphic interval of 40 to 100 meters.  The thickest coals extend
from southeast Grande Prairie in a widening wedge between Edmonton and Calgary
to the Coronation area with coals occurring at depths ranging from about 800
meters to 2800 meters.





Upper
Cretaceous through Tertiary-aged coal also occurs across the Plains with older
coals being overlain by progressively younger rocks and coals.  Three
coal zones are recognized within the Upper Cretaceous Belly River
Group:  the McKay Coal Zone, near the base of the Belly River Group;
the Taber Coal Zone, located in the middle; and the Lethbridge Coal Zone, at the
top of the Belly River Group.  Compared to the Mannville coals, the
overall thin coals and restricted lateral continuity of the Belly River Group
coal seams have resulted in limited exploration efforts in these
coals.





26


The rank
of coal in Alberta ranges from very low (lignite) to high
(anthracite).  Coal near the surface in the Plains is generally of
sub-bituminous rank with lignite occurring in the north and northeast part of
the Plains, and high volatile bituminous C in the northwest and southwest areas
of the Plains.  Coal rank increases with burial depth.  In
the Plains, coal rank increases towards the west as seams dip and become
progressively deeper toward the mountains.  CBM content increases with
increasing rank so that with greater seam depths, gas contents are expected to
increase.  With increasing depth also comes increasing overburden
pressure, which may restrict permeability.





To date,
Horseshoe Canyon coals with relatively low gas contents, but with favourable
fracturing are being successfully exploited for CBM production in the
south-central plains.  Mannville coals are showing potentially
favourable amounts of fracturing and high gas contents in some locations are
undergoing evaluation in the north central to central plains.





Property
Geology





The
Company’s Milk River Property has not undergone any drilling.  Drill
log information from wells drilled on adjacent properties is publicly available.
Based on a review of these drill logs, there is an indication that Belly River
and Mannville coals may be present.  There are no Horseshoe Canyon
coals as the Property is too far East for the presence of these
coals.





Previous
Work





The
Property is a very early stage property and has not had any drilling performed
on it.  The Property is located in an area that is known to host Belly
River and Mannville coals.





Planned
Work by the Company for 2008





The
Province of Alberta maintains a significant publicly-available database of
drilling information from all wells drilled under leases issued by the
provincial government.  Companies who drill on government land in
Alberta are required to submit their drill results to the
province.  Therefore, previous drilling undertaken on land adjacent to
the Company’s holding, or drilling on the Company’s land by companies exploring
for other resources (oil sands for example) are required to submit their drill
log data to the Alberta government.  As a result, there is a large
database of drill results available to the public.  The Company
intends to undertake a comprehensive review of this drill log data from
surrounding properties in order to gain a better understanding of the
exploration potential of the property.  The Company does not currently
have agreements in place with qualified geologists who can undertake this
review.  Currently, the Company is attempting to engage consultants to
perform the review.





The
review of the data will include preparing detailed geological maps using
existing drill log data with the aim of identifying potential drill targets and
to obtain a better understanding of potential strategies for acquiring new land
holdings.  The Company will not undertake any drilling in 2008, as the
review of available information will take between twelve to eighteen months to
complete commencing  January 2008.  Therefore, the Company
is not expecting to undertake any drilling until at least 2009.





ITEM 4A.  UNRESOLVED STAFF
COMMENTS





--- Not
applicable ---





27


ITEM 5.  OPERATING AND FINANCIAL REVIEW AND
PROSPECTS





The
following discussion for the fiscal year ended December 31, 2007, 2006 and for
the period from April 25, 2005 (inception) to December 31, 2005 should be read
in conjunction with the financial statements of the Company and the notes
thereto.





Certain
statements contained in the foregoing MD&A and elsewhere in this 20-F
constitute forward-looking statements.  Such forward-looking
statements involve a number of known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements.  Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of the
financial statements were made, and readers are advised to consider such
forward-looking statements in light of the risks set forth in section 3.D.
above.





OVERALL
PERFORMANCE





The
following table sets forth the audited statement of operations data for Liberty
Petroleum Inc. for the fiscal years indicated:








Liberty
      Petroleum Inc.Periods
      Ended December 312007
            
            
            2006
            
            
            2005Operating
      revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -Interest
      income
            
            $
            2,451
            
            
            $
            2,673
            
            
            $
            -Expenses
            
            $
            64,069
            
            
            $
            37,365
            
            
            $
            8,950Loss
      from operations
            
            $
            (61,618
            )
            
            $
            (34,692
            )
            
            $
            (8,950
            )Net
      loss
            
            $
            (61,618
            )
            
            $
            (34,692
            )
            
            $
            (8,950
            )Net
      loss per share:Basic
      and diluted
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00Weighted
      average number of  common shares outstanding
            
            
            41,709,750
            
            
            
            41,709,750
            
            
            
            39,628,347





Results
of Operations of Fiscal 2007 vs. Fiscal 2006





We are a
natural resource exploration company in the exploration stage with an objective
of acquiring, exploring, and, if warranted and feasible, developing oil and gas
properties.  Oil and natural gas exploration and development requires
significant capital and our assets and resources are limited. Therefore, we
participate in the oil and gas industry through the optioning of oil and gas
exploration and development projects.





Revenue
- Cost of Revenue





We did
not earn any revenues during the years ended December 31, 2007 or
2006.  We do not anticipate earning revenues until such time as we
have entered into commercial production of our oil and gas property. We can
provide no assurance that we will discover commercially exploitable levels of
oil or gas on our property, or if such resources are discovered, that we will
enter into commercial production of our oil and gas property.


28


General
and Administrative Expenses





For the
year ended December 31, 2007 we had a net loss of $61,618 consisting of: (a)
$21,404 in listing and filing fees related to the preparation of the Company’s
20-F and the updating of the F-1 registration statement; (b) $15,700 in
professional fees related to the preparation of our financial statements (c)
$7,966 in office expenses; (d) $4,000 in rent; (e) $1,499 for transfer agent
costs (f) $13,500 for Directors’ fees, and (g) $2,451 in interest
income.





For the
year ended December 31, 2006 we had a net loss of $34,692 consisting of: (a)
$18,733 in listing and filing fees related to the preparation of the Company’s
F-1 registration statement; (b) $7,500 in professional fees related to the
preparation of our financial statements (c) $3,000 relating to the write-off of
the Company’s option payment on its former gold exploration property; (d) $1,470
in office expenses; (e) $4,077 in rent; (f) $585 for transfer agent costs (g)
$2,000 for Directors’ fees, and (h) $2,673 in interest income.





The
increase in the loss in 2007 compared to 2006 is primarily related to the fact
the in 2007 the Company incurred more expenses relating to being a publicly
reporting issuer.  In 2007 we added two members to our Board of
Directors, and filed a 20-F report for the first time.  In 2006, we
completed the filing of our F-1 registration statement and entered into and
subsequently terminated an option on a mineral exploration property in British
Columbia.





Results
of Operations of Fiscal 2006 vs. Fiscal 2005





We are a
natural resource exploration company in the exploration stage with an objective
of acquiring, exploring, and, if warranted and feasible, developing oil and gas
properties.  Oil and natural gas exploration and development requires
significant capital and our assets and resources are limited. Therefore, we
participate in the oil and gas industry through the optioning of oil and gas
exploration and development projects.





Revenue
- Cost of Revenue





We did
not earn any revenues during the year ended December 31, 2006 or from the period
April 25, 2005 (inception) to December 31, 2005.  We do not anticipate
earning revenues until such time as we have entered into commercial production
of our oil and gas property. We can provide no assurance that we will discover
commercially exploitable levels of oil or gas on our property, or if such
resources are discovered, that we will enter into commercial production of our
oil and gas property.





General
and Administrative Expenses





For the
year ended December 31, 2006 we had a net loss of $34,692 consisting of: (a)
$18,733 in listing and filing fees related to the preparation of the Company’s
F-1 registration statement; (b) $7,500 in professional fees related to the
preparation of our financial statements (c) $3,000 relating to the write-off of
the Company’s option payment on its former gold exploration property; (d) $1,470
in office expenses; (e) $4,077 in rent; (f) $585 for transfer agent costs (g)
$2,000 for Directors’ fees, and (h) $2,673 in interest income.





We
incurred a loss of $8,950 for the period from April 25 2005 (inception) to
December 31, 2005, consisting of: (a) $5,000 in professional fees related to the
preparation of the Company’s financial statements; (b) $2,605 for rent; and (c)
$1,345 in office expenses.





29


The
increase in the loss in 2006 compared to 2005 is primarily related to the fact
the in 2005 the Company’s only activities were to incorporate the
Company.  In 2006, we completed the filing of our F-1 registration
statement and entered into and subsequently terminated an option on a mineral
exploration property in British Columbia.  Also in 2006 we expanded
our Board of Directors and initiated our efforts in the oil and gas exploration
business.





5.B.  Liquidity and Capital
Resources





Liquidity





We are an
oil and gas exploration company with an objective of acquiring, exploring, and
if warranted and feasible, developing oil and gas properties. We have members on
our board of directors who have extensive experience in the oil and gas
industry. However, exploration activities of properties without any proven
reserves require a considerable amount of time and money, and the subsequent
return on investment for our shareholders would be very long term
indeed.  Should we make a finding of natural gas on the Milk River
Property we would consider our alternatives to such finding, including the
possibility of selling any findings to a major oil and gas company. By selling
its findings to another oil and gas company, it would provide an immediate
return to our shareholders without the long time frame and cost of putting an
oil or gas operation into operation ourselves, and it would also provide future
capital for the company to continue operations.





Since our
incorporation we have financed our operations almost exclusively through the
sale of our common shares to investors.  As we are an oil and gas
exploration and development company with no producing resource properties, we do
not generate operating income or cash flow from our business
operations.  Until a significant body of ore is found, our working
capital requirements will be dependent upon the amount of our exploration budget
for any given year.  We expect to continue to finance operations
through the sale of equity.  However, there is no guarantee that we
will be successful in arranging financing on acceptable terms.





On May
26, 2005, we closed a private placement with seven investors for the sale of
11,550,000 units, which generated gross proceeds to us of $115,500. On July 11,
2005, we closed a private placement with forty Canadian investors for the sale
of 159,750 common shares for total gross proceeds of $15,975. The 2007, 2006 and
2005 operations were funded through these two private placements. Such proceeds
are not sufficient to enable us to continue our planned operations.





During
2007, we used $65,527 for operating activities, an increase of $38,510 over
2006.  The increase in 2007 from 2006 was primarily due to an increase
in the 2007 net loss ($61,618) compared to the net loss in 2006
($34,692).  In addition, in 2007 there was an outflow from accounts
payable and accrued liabilities of $4,954 while in 2006 there was an inflow of
$9,415.  There were no financing activities in either 2007 or 2006
while investing in 2007 related to the $70,673 received upon the maturity of
investments and cash used to make our annual property payment of
$896.  In 2006, we invested $90,673 in short-term investments and
$8,438 for the acquisition of our Milk River Property.





During
2006, we used $27,017 for operating activities, an increase of $22,216 over
2005.  The increase in 2006 over 2005 was primarily due to an increase
in the 2006 net loss ($34,692) compared to the net loss in 2005
($8,950).  No financing activities occurred in 2006.  In
2005 we received $134,475 from the proceeds of two private placements and shares
issued to our founders.    In 2006, we invested $90,673 in
short-term investments and $8,438 for the acquisition of our Milk River
Property.  No investing activities were undertaken in
2005.





30


We had
cash and short-term investments of $27,796 as of December 31, 2007. We
anticipate that we will incur through the end of our next fiscal
year:





·
            $100,900
      in connection with work expenditures, lease payments and the initial
      geological analysis of the Milk River
Property;





·
            $54,100
      for operating expenses, including working capital and general,
      administrative and professional legal and accounting expenses associated
      with our being a reporting issuer under the Securities Exchange Act of
      1934.





At
December 31, 2007 we had working capital of $19,881. Therefore, current cash on
hand is not sufficient for the next twelve months as proposed in our plan of
operations.  We shall require additional funding and we anticipate
that such funding will be in the form of equity financing from the sale of our
common shares.  However, we cannot provide investors with any
assurance that we will be able to raise sufficient funding from the sale of our
common shares to fund additional phases of the exploration program, should we
decide to proceed.  We believe that debt financing will not be an
alternative for funding any further phases in our exploration
program.  The risky nature of this enterprise and lack of tangible
assets places debt financing beyond the credit-worthiness required by most banks
or typical investors of corporate debt until such time as an economically viable
mine can be demonstrated.  We do not have any arrangements in place
for any future equity financing.





Critical
accounting estimates





The
preparation of financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses for the reporting period.  Actual results could differ from
these estimates and would impact future results of operations and cash
flows.





The
Company follows the full cost method for accounting for its oil and natural gas
property interests as prescribed by the Canadian Institute of Chartered
Accountants, (“CICA”) Accounting Guideline 16 - Oil and Gas Accounting – Full
Cost.  Under this method all costs related to the acquisition of, the
exploration for, and the development of oil and natural gas reserves are
capitalized on a country-by-country basis.  These capitalized costs
are depleted or depreciated on a unit-of-production basis on the estimated
proved reserves.  Certain costs associated with the acquisition and
exploration of unproven properties are excluded from depletion and depreciation
until it is determined whether proved reserves are attributable to the
properties. Where the Company has entered into option agreements for the
acquisition of an interest in oil and gas properties that provide for periodic
payments, amounts unpaid are not recorded as a liability since they are paid
entirely at the Company’s option.  Estimates of undiscounted future
cash flows that we use for conducting impairment tests are subject to
significant judgment decisions based on assumptions of highly uncertain future
factors such as, crude oil and natural gas prices, production quantities,
estimates of recoverable reserves, and production and transportation costs.
Given the significant assumptions required and the strong possibility that
actual future factors will differ, we consider the impairment test to be a
critical accounting procedure.





5.C. Research and
Development, Patents and Licenses etc.





---
Not applicable ---





31


5.D. Trends.





--- No
Disclosure Necessary ---





5.E. Off-Balance Sheet Arrangements.





We do not
have any off balance sheet arrangements as of December 31, 2007 and December 31,
2006 or of the date of this report.





5.F.Contractual
Obligations.





We have
the following contractual obligations as expressed in CDN dollars at December
31, 2007:





Contractual Obligations
            
            Payments due by periodTotal
            
            
            Less
      than 1 year
            
            
            1-3
      years
            
            
            3-5
      years
            
            
            More
      than five yearsAnnual
      CBM Lease Payments:Milk
      River Property Lease
            
            $
            2,688
            
            
            $
            896
            
            
            $
            1,792
            
            
            $
            0
            
            
            $
            0Capital
      (Finance) Lease Obligations
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Operating
      Lease Obligations
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Purchase
      Obligations
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Other
      Long-Term Liabilities Reflected on the Company’s Balance Sheet Under the
      GAAP of the primary financial statements
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Total
            
            $
            2,688
            
            
            $
            896
            
            
            $
            1,792
            
            
            $
            0
            
            
            $
            0





On June
14, 2006, the Company entered into a Petroleum, Natural Gas and General Rights
Conveyance with Stone Petroleums Ltd., Supernova Resources Ltd., 349385 Alberta
Ltd., and Torland Ltd. (collectively the “Vendor”) whereby the Company acquired
a 100% interest in a petroleum and natural gas lease with the government of the
Province of Alberta.  Upon signing of the agreement, the Company paid
the Vendor $8,438 (including closing costs) and agreed to assume the underlying
lease payments to the Province of Alberta of the greater of $3.50 per hectare or
$50 per year.  The Lease expires on July 14, 2010 but can be
renewed.





At
December 31, 2007 and 2006, the Company had trade payables and accrued
liabilities of $9,461 and $14,415 respectively.  All of these
obligations are unsecured and due in less than one year.





Recent
Accounting Pronouncements Applicable to US





SFAS 157





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
No. 157”).  The SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. This statement does not
require any new fair value measurements; however, for some entities the
application of this statement will change current practice. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, although early
adoption is permitted. SFAS 157 is not expected to have a material impact on the
Company’s financial statements.





32


SFAS 159





In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
Assets and Financial Liabilities”.  SFAS 159 permits companies to
choose to measure many financial instruments and certain other items at fair
value. This statement expands the use of fair value measurement and applies to
companies that elect the fair value option. The fair value option established by
this statement permits all entities to choose to measure eligible items at fair
value at specified election dates. This statement is effective as of the
beginning of fiscal years that begin after November 15, 2007. SFAS 159 is not
expected to have a material impact on the Company’s financial position, results
of operations or cash flows.





SFAS
141(4)





In
December 2007, the FASB issued SFAS 141(4) “Business Combinations” and SFAS 160
“Non-controlling Interests in Financial Statements”, which are both effective
for fiscal years beginning after December 15, 2008. SFAS 141(4), which will
replace FAS 141, is applicable to business combinations consummated after the
effective date of December 15, 2008.  The Company will evaluate the
impact of this standard if it becomes applicable to the Company.





SFAS 160





In
December 2007, the FASB issued SFAS No. 160, Non-Controlling Interests in
Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). SFAS
160 clarifies the accounting for non-controlling interests and establishes
accounting and reporting standards for the non-controlling interest in a
subsidiary, including classification as a component of equity. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. The Company does
not currently have any minority interests.





SFAS 161





In March
2008, the FASB issued SFAS 161 “Disclosures about Derivative Instruments and
Hedging Activities – an amendment of SFAS 130.  This Statement
requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. This
Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. This Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption.  The Company does
not currently have any derivative or hedging activities.





33


ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND
EMPLOYEES





6.A. Directors and Senior Management





Directors
and Senior Management


May 21,
2008





The
following table sets forth certain information regarding the members of our
board of directors and our executive officers:





Name
            Age
            Positions
      and Offices HeldPaul
      Uppal
            54
            Director,
      Chairman, President, Chief Executive Officer, Chief Operating Officer, and
      SecretaryDuncan
      Budge
            57
            DirectorMichael
      Nott
            34
            DirectorRob
      Sandhu
            32
            DirectorKeith
      Diakiw
            35
            Director





Our
directors hold office until the next annual meeting of our shareholders or until
their successors are duly elected and qualified.  None of our
directors have any family relationships with any of our other directors or
executive officers.  Set forth below is a summary description of the
principal occupation and business experience of each of our directors and
executive officers for at least the last five years.





Paul Uppal has been a Director
and our Chairman, President, and Chief Executive Officer, Chief Operating
Officer, and Secretary since our incorporation in April 2005. For the past five
years Mr. Uppal has owned and operated Goldwood Industries which is a lumber
manufacturing company.   Mr. Uppal will continue to devote
substantially all of his time to the manufacturing company while he serves as an
officer and director of Liberty.  From July 1, 1999 to June 30, 2005,
Mr. Uppal was the chairman of the North Fraser Port Authority.





Duncan Budge has served on our
Board of Directors since August 14, 2006.   Mr. Budge is also a
Director of Giant Oil & Gas Inc., Strata Oil & Gas Inc. and Patriot Gold
Corp. all of which are publicly traded natural resource
companies.  Since 2001 he has worked as an independent financial
consultant to firms in a variety of industries.  Mr. Budge owned and
operated his own Chartered Accounting firm from 1990 to 2001 until his
retirement.  Mr. Budge has a Bachelor of Commerce degree from the
University of British Columbia and obtained his Chartered Accountant designation
in 1977.  Subsequent to his retirement in 2001, Mr. Budge resigned his
Chartered Accountant designation and is not currently a Chartered
Accountant.





Michael Nott has served on our
Board of Directors since August 21, 2006.  He has been working as a
professional geologist since 1999.  Currently Mr. Nott is a project
geologist in the Unconventional Gas Research Group with the Alberta Research
Council which is primarily involved with the research and testing of Coal Bed
Methane and Shale gas. From 1999 to 2005, he worked as a Well Analyst and
Hydrocarbon Geologist for CL Consultants Ltd. in Calgary,
Alberta.  Mr. Nott is also a Director of Giant Oil & Gas Inc.
which is a publicly traded natural resource company.  He has field
experience across North America including Alberta, Saskatchewan and
Colorado.  Mr. Nott graduated from the University of New Brunswick
with a Bachelor of Science degree in geology and is a member of the Association
of Professional Engineers, Geologists, and Geophysicists of
Alberta.





34


Rob Sandhu has served on our
Board of Directors since May 15, 2007.  He is an oil and natural gas
drilling specialist who has been working as a professional petroleum driller
since 1999.  Mr. Sandhu is currently working for the Haliburton Group
as a directional driller and he is also the President and CEO of Giant Oil &
Gas Inc. which is a publicly traded natural resource company. From 2004 to 2006
he worked as a drilling operator for Phoenix Technology Income Trust and from
2000 to 2004 he was a field supervisor for Precision Drilling Technical Services
Group.  He has field drilling experience throughout
Alberta.  Mr. Sandhu has technical training from the Southern Alberta
Institute of Technology in Calgary.





Keith Diakiw has served on our
Board of Directors since May 15, 2007.  He is a professional geologist
who has field experience in Canada and Brazil.  Mr. Diakiw is
currently working as a geologist for Canadian Natural Resources in Fort
McMurray, Alberta, Canada.  From 2005 to 2006 he was employed by
Wellsite Masters Ltd. as a geologist for an oil sands drilling
program.  From 2003 to 2004 he worked as a field engineer for
Schlumberger D&M in Brazil while in 2003 he was employed by Encana
Corporation.  Prior to 2003 Mr. Diakiw was attending the University of
Alberta where he completed a Bachelor of Science (Geology) in 2003 and a
Bachelor of Arts in 2001.  Mr. Diakiw is a member of several
professional organizations including the Association of Professional Engineers,
Geologists, and Geophysicists of Alberta, the Canadian Institute of Mining,
Metallurgy, and Petroleum, and the Canadian Society of Petroleum
Geologists.





Involvement
in Certain Legal Proceedings





We are
not aware of any material legal proceedings that have occurred within the past
five years concerning any director, director nominee, or control person which
involved a criminal conviction, a pending criminal proceeding, a pending or
concluded administrative or civil proceeding limiting one's participation in the
securities or banking industries, or a finding of securities or commodities law
violations.





There are
no family relationships between any two or more Directors or Senior
Management.





There are
no arrangements or understandings with major shareholders, customers, suppliers
or others, pursuant to which any person referred to above was selected as a
Director or member of senior management.





6.B. Compensation





Cash Compensation





Except as
described herein, none of our officers or directors have received or earned any
compensation or bonus for services rendered in the fiscal years ended December
31, 2007 or 2006.   Commencing September 2006, Mr. Nott, and
commencing May 15, 2006, Mr. Sandhu and Mr. Diakiw, each has received $500 per
month to serve as a Director of the Company.  During the fiscal year
ended December 31, 2007, total Directors’ Fees were $13,500 (2006 -
$2,000).  The monthly fees owing to our Directors shall continue as
long as each person continues to serve as a Director of the
Company.





We do not
maintain key-man life insurance for any of our executive officers or
directors.





We do not
have any long-term compensation plans or stock option plans.





35


Change of Control Remuneration.





The
Company had no plans or arrangements in respect of remuneration received or that
may be received by Executive Officers of the Company in Fiscal 2007 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.





6.C. Board Practices





6.C.1. Terms of Office.





Refer to
ITEM 6.A.1.





6.C.2. Directors’ Service Contracts.





With the
exceptions of Michael Nott, Rob Sandhu, and Keith Diakiw, there are no Director
Service contracts.  Pursuant to an agreement dated September 2006
between the Company and Mr. Nott, commencing September 2006, Mr. Nott has
received $500 per month to serve as a Director of the
Company.  Pursuant to respective agreements dated May 15, 2007 between
the Company and Mr. Sandhu and Mr. Diakiw, commencing May 15, 2007, Mr. Sandhu
and Mr. Diakiw each began receiving $500 per month to serve as a Director of the
Company.





The
monthly fees owing to each respective Director shall continue as long as the
respective Director continues to serve as a Director of the
Company.  The respective service contracts will terminate upon the
respective Director ceasing to serve as a Director of the Company.





6.C.3. Board of Director Committees.





The Audit
Committee oversees the accounting and financial reporting processes of the
Company and all audits and external reviews of the financial statements of the
Company on behalf of the Board, and has general responsibility for oversight of
internal controls, accounting and auditing activities of the Company. The
Company’s Audit Committee consists of the following three directors, all of who
are financially literate and knowledgeable about the Company’s affairs: Paul
Uppal, Duncan Budge and Michael Nott. Mr. Duncan Budge is the audit committee’s
financial expert member as a qualified accountant with over 25 years experience
in business.





The
Committee reviews, on a continuous basis, any reports prepared by the Company's
external auditors relating to the Company's accounting policies and procedures,
as well as internal control procedures and systems. The Committee is also
responsible for examining all financial information, including annual financial
statements, prepared for securities commissions and similar regulatory bodies
prior to filing or delivery of the same. The Audit Committee also oversees the
annual audit process, the Company's internal accounting controls, any complaints
and concerns regarding accounting, internal controls or auditing matters and the
resolution of issues identified by the Company's external auditors. The Audit
Committee recommends to the Board the firm of independent auditors to be
nominated for appointment by the shareholders and the compensation of the
auditors. The Audit Committee meets on an as needed basis.





36


6.D. Employees





We have
no employees at this time. We utilize outside contractors where possible, and
rely on the industry expertise of management and our Board of Directors. These
contractors will be responsible for surveying, geology, engineering,
exploration, and excavation. The geologists will evaluate the information
derived from the exploration and excavation and the engineers will advise
us on the economic feasibility of removing the mineralized material. We
presently employ no member of our management team.  We do not foresee
any significant changes in the number of employees or consultants we will have
over the next twelve months, unless the growth of our business demands
it.





6.E. Share Ownership





The
following table lists, as of May 21, 2008 Directors and Senior Management who
beneficially own the Company's voting securities, consisting solely of common
shares and the amount of the Company's voting securities owned by the Directors
and Senior Management as a group.





Shareholdings
of Directors and Senior Management





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (the "SEC") and generally includes voting or investment
power with respect to securities.  In accordance with SEC rules,
shares of common shares issuable upon the exercise of options or warrants which
are currently exercisable or which become exercisable within 60 days following
the date of the information in this table are deemed to be beneficially owned
by, and outstanding with respect to, the holder of such option or
warrant.  Except as indicated by footnote, and subject to community
property laws where applicable, to our knowledge, each person listed is believed
to have sole voting and investment power with respect to all shares of common
shares owned by such person.





Name
      of Beneficial Owner
            
            Number
      of Shares
              of
      common shares
              Beneficially
      Owned *
            
            Percent
      of
              common
      shares
              Beneficially
      OwnedPaul
      Uppal
            
            16,000,000(1)
            
            38.3%Duncan
      Budge
            
            14,000,000(1)
            
            33.6%Michael
      Nott
            
            -
            
            -All
      directors and executive officers as a group  (three
      persons)
            
            30,000,000
            
            71.9%





*                        Based
on 41,709,750 shares outstanding as of May 21, 2008.





(1)
            The
      shares owned by Messrs. Uppal and Budge are subject to our option to
      purchase all or any portion of these shares are a purchase price of CDN
      $0.01 per share.  We are not obligated to repurchase the shares
      at any time or for any reason (such as termination of employment,
      resignation from the Board or as officer, a change of control of the
      Company or failure to reach performance goals).  Our repurchase
      right will continue with respect to and for so long as any of the 30
      million shares issued to Messrs. Uppal and Budge are held by them (or any
      of their affiliates or family members), and will survive the resignation
      as an officer or director of the Company by Mr. Uppal and/or Mr.
      Budge.  We may exercise our right of repurchase as to some or
      all of the shares held (directly or indirectly) by theses Directors by
      delivering a notice of such exercise to Mr. Uppal and/or Mr. Budge not
      less than ten business days prior to the closing of such
      repurchase.  Messrs. Uppal and Budge agree that they shall not,
      directly or indirectly, sell, exchange, pledge, hypothecate, transfer,
      gift, grant an irrevocable proxy with respect to, devise, assign or in any
      other way dispose of, encumber or grant a security interest in, any of the
      shares or any interest therein.  Messrs. Uppal and Budge also
      agree and acknowledge that said restriction is in addition to all
      applicable securities laws and
regulation.


37


Our major
shareholders do not have voting rights that differ from the other holders of
shares of our common shares.





Stock
Options





On June
28, 2007, the stockholders of the Company approved the Company’s 2007 stock
option plan whereby the Company may grant options to its directors, consultants
and employees for up to 5,000,000 shares of common stock.  The
exercise price of each option equals the market price of the Company’s stock on
the date of grant.  Options vest over a three-year period, unless
otherwise specified by the Board of Directors.  All options have a ten
year term. No stock options have been granted under the 2007 plan.





ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS





7.A. Major Shareholders.





7.A.1.a. Holdings By Major
Shareholders.





The
Company has two shareholders who own more than 5% of the issued
shares.  As at May 21, 2008 Paul Uppal and Duncan Budge own an
aggregate 30,000,000 shares, or 71.9% of the common shares.





7.A.1.b. Significant Changes in Major Shareholders’
Holdings.





On August
17, 2006, one of founding Directors, Mr. Greg Crowe, resigned as our director,
and, pursuant to a share purchase agreement dated August 17, 2006, he sold his
14,000,000 common shares at a price of $0.0001 to Duncan Budge, who is our
director.  Pursuant to the share purchase agreement, the common shares
purchased by Mr. Budge are subject to the same terms and conditions as were in
our agreement with Mr. Crowe, including the repurchase option held by us with
respect to Mr. Crowe’s shares.   For further information on such
agreements, see our disclosure under the sub-section entitled “Material
Contracts.”





7.A.1.c. Different Voting Rights.





The
Company’s major shareholders do not have different voting rights.





7.A.2. Canadian Share Ownership.





On May
21, 2008 the Company’s shareholders’ list showed At 41,709,750 common shares
outstanding which were held by approximately 49 stockholders of
record.  We do not have any shareholders who are resident of the
United States.





The
Company’s shares began trading in January 2008 under the stock symbol LTYPF on
the OTC Bulletin Board.





7.A.4. Change of Control of Company
Arrangements.





There are
no arrangements, known to the Company, the operation of which may at a
subsequent date result in a change in control of the Company.





38


7.B. Related Party Transactions





In May 2004, pursuant to an
agreement, we issued 16,000,000 common shares to Paul Uppal, one of our
officers, directors and founder.   Such shares are restricted and
the certificates representing such shares contain a restrictive
legend.  In May 2004, we also issued 14,000,000 common shares to one
of our directors and founder, Greg Crowe.  On August 17, 2006 Mr.
Crowe, resigned as our director, and, pursuant to a share purchase agreement
dated August 17, 2006, he sold his 14,000,000 common shares at a price of
$0.0001 to Mr. Duncan Budge, who is our director.  Pursuant to the
share purchase agreement, the common shares purchased by Mr. Budge are subject
to the same terms and conditions as were in our agreement with Mr. Crowe,
including the repurchase option held by us with respect to Mr. Crowe’s
shares.





The
common shares issued to Mr. Uppal and Mr. Budge are subject to our right,
exercisable at any time, to purchase any or all of these shares from Mr. Uppal
and Mr. Budge at a purchase price of CDN$0.01 per share.  We have this
right until we, in our sole discretion, decide to terminate the
agreement.  The exercise price of such repurchase option is $0.01 per
share, amounting in the aggregate to $160,000 for the shares held by Mr. Uppal
and $140,000 for the shares held by Mr. Budge.  Such shares were
originally purchased by the holders thereof at a purchase price of $0.0001 per
share, amounting in the aggregate to $1,600 for the shares held by Mr. Uppal and
$1,400 for the shares held by Mr. Budge.  Accordingly, if we exercise
our option to repurchase such shares, Mr. Uppal will make a profit equal to
$158,400, and Mr. Budge will make a profit equal to
$138,600.  Unaffiliated stockholders have no protection against our
future potential decision to repurchase the shares of the two directors pursuant
to current or potentially modified contracts, even if such repurchase would
essentially use all or substantially all of the company’s working capital and
essentially cause the company to become insolvent.





Shareholder Loans





There are
no loans to shareholders.





Amounts Owing to Senior
Management/Directors





At
December 31, 2007 and 2006 no amounts were owed to senior management or
directors.  There have been no transactions since inception, or
proposed transactions, which have materially affected or will materially affect
the Company in which any director, executive officer, or beneficial holder of
more than 5% of the outstanding common shares, or any of their respective
relatives, spouses, associates or affiliates has had or will have any direct or
material indirect interest.  Management believes the transactions
referenced above were on terms at least as favorable to the Company as the
Company could have obtained from unaffiliated parties.





7.C. Interests of Experts and
Counsel





--- Not
applicable ---





39


ITEM 8.  FINANCIAL
INFORMATION





8.A.  Statements and Other Financial
Information





The
Company's financial statements are stated in Canadian Dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, as
discussed in footnotes to the financial statements.





The
financial statements as required under ITEM #17 are attached hereto and found
immediately following the text of this Annual Report.  The audit
report of Smythe Ratcliffe LLP is included herein immediately preceding the
financial statements.





Audited Financial Statements:





Fiscal
periods ended December 31, 2007, 2006, and 2005.





8.A.7. Legal/Arbitration Proceedings





The
directors and the management of the Company do not know of any material, active
or pending, legal proceedings against them; nor is the Company involved as a
plaintiff in any material proceeding or pending litigation.





The
directors and the management of the Company know of no active or pending
proceedings against anyone that might materially adversely affect an interest of
the Company.





8.A.8. Policy on Dividend
Distributions





The
Company has never declared or paid a dividend to its
shareholders.  The Company does not have any policy on dividend
distributions.





8.B. Significant Changes





On March
15, 2006, the Company entered into an agreement giving it the exclusive right
and option to acquire a 100% interest in a mineral exploration property known as
the GQ Property located in the Kamloops Mining District of British Columbia,
Canada.  In relation to the Company’s decision to pursue opportunities
in the oil and gas industry, it terminated the GQ Property option on May 31,
2006.





On June
14, 2006, the Company entered into a petroleum, natural gas and general rights
conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources
Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the
Company acquired a 100% interest in a petroleum and natural gas (“PN&G”)
lease with the government of Alberta.  The underlying lease acquired
by the Company is Alberta PN&G lease 0405070015 (the “Lease”), and the
property to which the Lease pertains is located in the Milk River area of
Alberta. Upon signing the Agreement, the Company paid the Vendor $7,500 and paid
closing costs of $938 and agreed to assume the underlying lease payments to the
province of Alberta.  In addition, the Vendor is entitled to an
overriding 5% royalty on all petroleum substances produced from the Milk River
Property, if any.  The Vendor is entitled to a first and paramount
lien upon all of the petroleum substances produced or allocated to the Property
to secure the payment of any amounts due and payable to the Vendor relating to
the royalty.


40


On June
23, 2006, at an annual general and special meeting of shareholders, a majority
of the shareholders of the Company approved a change in business of the Company
from mineral exploration to oil and gas exploration and
extraction.  At the same meeting, a majority of the shareholders of
the Company approved a change in name of the Company to Liberty Petroleum
Inc.





On August
14, 2006, Mr. Duncan Budge was appointed to the Board of Directors.





On August
17, 2006 Mr. Crowe, resigned as our director, and, pursuant to a share purchase
agreement dated August 17, 2006, he sold his 14,000,000 common shares at a price
of $0.0001 to Mr. Duncan Budge, who is our director.  Pursuant to the
share purchase agreement, the common shares purchased by Mr. Budge are subject
to the same terms and conditions as were in our agreement with Mr. Crowe,
including the repurchase option held by us with respect to Mr. Crowe’s
shares.





On August
21, 2006 Mr. Michael Nott was appointed to the Board of Directors.





On May
15, 2007 Mr. Rob Sandhu and Mr. Keith Diakiw were appointed to the Board of
Directors.





ITEM 9.  THE OFFER AND
LISTING





9.C. Markets





Admission
to Quotation on the OTC Bulletin Board





Our
shares began trading in January 2008 under the stock symbol LTYPF on the OTC
Bulletin Board.  However, a trading market has not yet been
established for our shares.  As a result, a market may never develop
or if developed may not be maintained.  As a result an investor may
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of our securities. The OTC Bulletin Board differs from national and
regional stock exchanges in that it:





(1)
      is not situated in a single location but operates through communication of
      bids, offers and confirmations between broker-dealers,
  and





(2)
            securities
      admitted to quotation are offered by one or more Broker-dealers rather
      than the  "specialist" common to stock
  exchanges.





To
qualify for quotation on the OTC Bulletin Board, an equity security must have at
least one registered broker-dealer, known as the market maker, willing to list
bid or sale quotations and to sponsor the company listing.





The
following description of our capital stock is a summary and is qualified in its
entirety by the provisions of our Articles of Incorporation, which were
previously filed as an exhibit to the Company’s registration statement on Form
F-1 filed with the Commission on September 25, 2006.





ITEM 10.  ADDITIONAL
INFORMATION





10.A. Share Capital





--- Not
applicable ---





41


10.B.  Memorandum and Articles of
Association





The
Company’s Articles of Incorporation were filed with the Director under the
Canada Business Corporations Act on April 25, 2005. The Company, having a
primary place of business in the Province of British Columbia, was also issued a
Certificate of Registration as an extraprovincial company under the Business
Corporations Act, British Columbia on May 6, 2005.  In addition, the
Company also was issued a Certificate of Registration as an extraprovincial
company in Alberta on July 17, 2006.  On June 28, 2006 the Company
filed its Articles of Amendment changing its name to Liberty Petroleum Inc. and
changing its purpose to “oil and natural gas exploration”.





The
directors of the Company are empowered under the Articles of Incorporation and
By-Laws, and in accordance with the Canada Business Corporations Act, to (1)
borrow money upon the credit of the Company; (2) issue, reissue, sell or pledge
the debt obligations of the Company; (3) give a guarantee on behalf of the
Company to secure performance of an obligation of any person; and (4) charge,
mortgage, hypothecate, pledge or otherwise create a security interest in all or
any of the currently owned or subsequently acquired property and assets of the
Company, including, without limitation, real and personal property, movable and
immovable property, tangible and intangible assets, book debts, right, powers,
franchises and undertakings, to secure any obligation of the
Company.  The Company’s Articles of Incorporation and By-Laws do not
place any restrictions on the voting powers of interested
directors.  With respect to the directors of the Company, in
accordance with section 3 of the By-Laws of the Company and the Canada Business
Corporations Act , as long as an interested director has complied with the
applicable provisions of the Canada Business Corporations Act, any director
shall not be disqualified by his office from contracting with the Company, nor
shall any contract or arrangement entered into by or on behalf of the Company
with any director or in which any director is in any way interested be liable to
be voided, nor shall any director so contracting or interested be liable to
account to the Company for any profit realized from such contract or arrangement
by reason of that director or officer holding that office or of the fiduciary
relationship thereby established provided that such officer or director shall
have complied with the provisions of the Canada Business Corporations
Act





The
holders of the Company’s Common shares are entitled to receive notice of, and
attend and vote at all, meetings of shareholders.   Currently,
there are no specific rights, preferences and restrictions attaching to each of
the Company’s Preferred shares.  The Company may issue Preferred
shares in one or more series and, pursuant to Schedule A to the Company’s
Articles of Incorporation, the directors may, by majority resolution, alter the
Articles of Incorporation to create, define and attach rights and restrictions
to the shares of each series.





Pursuant
to section 6 of the Company’s By-Laws, the quorum at meetings of the Company’s
shareholders shall be constituted by the presence of two shareholders entitled
to vote at any such meeting holding or representing by proxy not less than
one-twentieth of the shares entitled to be voted at such meeting.





There are
no limitations on the rights of non-resident or foreign shareholders to hold or
exercise voting rights on the securities of the Company imposed by foreign law
or by the Articles of Incorporation or any other constituent document of the
Company.





42


10.C. Material Contracts





Since
inception (April 25, 2005), the Company has entered into the material contracts
listed below:





1.
            Property
      Option Agreement giving the Company the exclusive right and option to
      acquire a 100% interest in a mineral exploration property known as the GQ
      Property located in the Kamloops Mining District of British
      Columbia.  The Company could have exercised its option by making
      cash payments totaling $103,000 and incurring net expenditures on the
      property of at least $110,000 by March 15, 2010.  The Company
      paid the initial $3,000 deposit as required under the agreement but did
      not commence exploration.  In relation to the Company’s decision
      to pursue opportunities in the oil and gas industry, it terminated the GQ
      Property option on May 31, 2006.





2.
            We
      have an agreement with Paul Uppal, our Director, Chairman, President,
      Chief Executive Officer, Chief Operating Officer, and Secretary, which
      allows us at any time to send a notice to Mr. Uppal that we are purchasing
      all or any portion of his 16,000,000 shares. The irrevocable option which
      he granted us is exercisable at any time at an exercise price of CDN $0.01
      per share.  We have the same option right with respect to
      14,000,000 shares owned by Mr. Duncan Budge, a director. Under these
      agreements, if we elect to exercise our option to purchase their shares,
      we shall pay the applicable purchase price thereof no later than 10
      business days after the delivery of a
notice.





3.
            On
      June 14, 2006 the Company acquired a 100% interest in an Alberta oil sands
      lease (the “Milk River Property”).  The rights to the Milk River
      Property were acquired for $8,438 (including closing costs) which was paid
      upon signing.  The rights that were acquired relate to the
      petroleum and natural gas rights only.  The Milk River Property
      covers 256 hectares of land in the Milk River area of Alberta, which
      is approximately 77 kilometers south of Medicine Hat in the Plains region
      of Alberta.  The lease, which expires in July 2010, gives the
      Company the right to explore the Milk River Property covered by the
      lease.  Liberty’s acquisition of the lease includes an
      overriding 5% royalty agreement with the vendor.  The royalty is
      to be paid on a well-to-well basis and is payable on all petroleum
      substances produced by any well on the Milk River Property.  The
      Milk River Property is subject to an annual lease payment payable to the
      government of Alberta in the amount of $896 until expiry on July 14,
      2010.





10.D. Exchange Controls







There are
no government laws, decrees or regulations in Canada, which restrict the export
or import of capital or, subject to the following sentence, which affect the
remittance of dividends or other payments to nonresident holders of our common
shares. However, any such remittance to a resident of the United States is
generally subject to non-resident tax pursuant to Article X of the 1980
Canada-United States Income Tax Convention. See “Material Income Tax
Considerations” above for additional discussion on tax matters.




There are
currently no limitations of general application imposed by Canadian federal or
provincial laws on the rights of non-residents of Canada to hold or vote our
common shares. There are also no such limitations imposed by the articles of
incorporation with respect to our common shares. There are, however, certain
requirements on the acquisition of control of our securities by non-residents of
Canada. The Investment Canada Act requires notification to and, in certain
cases, advance review and approval by, the Government of Canada, of the
acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as
defined in the Investment Canada Act. Generally speaking, in order for an
acquisition to be subject to advance review and approval, the asset value of the
Canadian business being acquired must meet or exceed certain monetary
thresholds.





43


10.E. Taxation





Canadian Federal Income Tax
Considerations





The
following is a brief summary of some of the principal Canadian federal income
tax consequences to a holder of common shares of the Company (a "U.S. Holder")
who deals at arm's length with the Company, holds the shares as capital property
and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the
Canada – United States Income Tax Convention (the "Treaty"), is at all relevant
times resident in the United States, is not and is not deemed to be resident in
Canada and does not use or hold and is not deemed to use or hold the shares in
carrying on a business in Canada. Special rules, which are not discussed below,
may apply to a U.S. Holder that is an insurer that carries on business in Canada
and elsewhere.





Under the
Act and the Treaty, a U.S. Holder of common shares will generally be subject to
a 15% withholding tax on dividends paid or credited or deemed by the Act to have
been paid or credited on such shares. The withholding tax rate is 5% where the
U.S. Holder is a corporation that beneficially owns at least 10% of the voting
shares of the Company and the dividends may be exempt from such withholding in
the case of some U.S. Holders such as qualifying pension funds and
charities.





In
general, a U.S. Holder will not be subject to Canadian income tax on capital
gains arising on the disposition of shares of the Company unless (i) at any time
in the five-year period immediately preceding the disposition, 25% or more of
the shares of any class or series of the capital stock of the Company was owned
by (or was under option of or subject to an interest of) the U.S. holder,
persons with whom the U.S. holder did not deal at arm's length, or the U.S
holder, together with such persons and (ii) the value of the common shares of
the Company at the time of the disposition derives principally from real
property (as defined in the Treaty) situated in Canada. For this purpose, the
Treaty defines real property situated in Canada to include rights to explore for
or exploit mineral deposits and other natural resources situated in Canada,
rights to amounts computed by reference to the amount or value of production
from such resources, certain other rights in respect of natural resources
situated in Canada and shares of a corporation the value of whose shares is
derived principally from real property situated in Canada.





A U.S.
Holder who is subject to Canadian income tax in respect of a capital gain
realized on a disposition of a common share must include one-half of the capital
gain (taxable capital gain) in computing the Holder's taxable income earned in
Canada.  The Holder may, subject to certain limitations, deduct
one-half of any capital loss (allowable capital loss) arising on a disposition
of taxable Canadian property from taxable capital gains realized in the year of
disposition in respect of taxable Canadian property and, to the extent not so
deductible, from such taxable capital gains realized in any of the three
preceding years or any subsequent year.





United States Taxation





For
federal income tax purposes, an individual who is a citizen or resident of the
United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain
or loss on the sale of the Company's common shares equal to the difference
between the proceeds from such sale and the adjusted tax basis of the common
shares.  The gain or loss will be a capital gain or capital loss if
the Company's common shares are a capital asset in U.S. Taxpayer's
hands.





44


For
federal income tax purposes, a U.S. Taxpayer will be required to include in
gross income dividends received on the Company's common shares.  A
U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be
entitled, subject to certain limitations, to a credit (or alternatively, a
deduction) against federal income tax liability.  A domestic
corporation that owns at least 10% of the voting shares should consult its tax
advisor as to applicability of the deemed paid foreign tax credit with respect
to dividends paid on the Company's common shares.





Under a
number of circumstances, United States Investor acquiring shares of the Company
may be required to file an information return with the Internal Revenue Service
Center where they are required to file their tax returns with a duplicate copy
to the Internal Revenue Service Center, Philadelphia, PA 19255.  In
particular, any United States Investor who becomes the owner, directly or
indirectly, of 10% or more of the shares of the Company will be required to file
such a return.  Other filing requirements may apply, and United States
Investors should consult their own tax advisors concerning these
requirements.





The US
Internal Revenue Code provides special anti-deferral rules regarding certain
distributions received by US persons with respect to, and sales and other
dispositions (including pledges) of stock of, a passive foreign investment
company.  A foreign corporation, such as the Company, will be treated
as a passive foreign investment company if 75% or more of its gross income is
passive income for a taxable year or if the average percentage of its assets (by
value) that produce, or are held for the production of, passive income is at
least 50% for a taxable year.  The Company believes that it may be a
passive foreign investment company for the taxable year ended December 31,
2005.  Individual investors should consult with there own tax advisors
regarding the tax implications in their own situation.





10.F. Dividends and Paying Agents





--- Not
applicable ---





10.G. Statement by Experts





--- Not
applicable ---








ITEM 11.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





FOREIGN
CURRENCY EXCHANGE RATE SENSITIVITY







The
Company's operating expenses and liabilities are primarily incurred in Canadian
dollars.






To the
extent the Company engages in transactions in US dollars, the results of the
Company’s operations are subject to currency transaction risk and currency
translation risk. The operating results and financial position of the Company
are reported in Canadian dollars in the Company’s financial statements. The
fluctuation of the US dollar in relation to the Canadian dollar will
consequently have an impact upon the operations of the Company and may also
affect the value of the Company’s assets and the amount of shareholders’
equity.






The
Company’s functional currency is the Canadian dollar and its expenses are
predominantly incurred in Canadian dollars. The Company incurs a relatively
small portion of its expenses in U.S. dollars.






The
Company has not entered into any agreements or purchased any instruments to
hedge possible currency risks at this time.




45


INTEREST
RATE SENSITIVITY





The
Company currently has no significant long-term or short-term debt requiring
interest payments. Thus, the Company has not entered into any agreement or
purchased any instrument to hedge against possible interest rate risks at this
time.





The
Company's interest earning investments are primarily short-term, or can be held
to maturity, and thus, any reductions in carrying values due to future interest
rate declines are believed to be immaterial. However, as the Company has a
significant cash or near-cash position, which is invested in such instruments,
reductions in interest rates will reduce the interest income from these
investments.





ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES





12.A. Debt Securities





The
Company has no debt outstanding.





12.B. Warrants and Rights





We have
warrants outstanding to purchase an aggregate of 34,650,000 common shares. Of
these warrants, 11,550,000 are exercisable at $0.25 per share, which are
exercisable beginning May 26, 2009 and expire May 26, 2010; 11,550,000 are
exercisable at $0.50 per share, which are exercisable beginning November 26,
2009 and expire May 26, 2011; and 11,650,000 are exercisable at $1.00 per share,
which are exercisable beginning May 26, 2010 and expire May 26, 2012. The
warrants are non-transferable and provide for a cashless exercise
option.





We have
the right, in our sole and absolute discretion, to (i) accelerate the exercise
date of the warrants to a date which is prior to the date the warrants can be
exercised and /or (ii) reduce the exercise price. If we exercise our right to do
so, we shall provide notice thereof to the warrant holder.





12.C. Other Securities





--- Not
applicable ---





12.D. American Depository Shares





--- Not
applicable ---





46


PART
II





ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES





There
have been no defaults, dividend arrearages or delinquencies.








ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY


HOLDERS AND USE OF
PROCEEDS





There
have been no modifications to securities of any class of the
Company.








ITEM 15.  CONTROLS AND
PROCEDURES





Evaluation of Disclosure
Controls and Procedures





As
required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange
Act”), the Company’s management carried out an evaluation of the effectiveness
of the design and operation of its disclosure controls and procedures as of
December 31, 2007, being the date of the Company’s most recently completed
fiscal year end. This evaluation was carried out under the supervision and with
the participation of our Principal Executive Officer and Principal Financial
Officer, Mr. Paul Uppal.  Based upon that evaluation, our principal
executive officer and principal financial officer concluded that our disclosure
controls and procedures are effective.





Internal Controls over
Financial Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Under the supervision of the Company’s
Principal Executive Officer, the Company’s internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles (“GAAP”). The Company’s controls include policies and procedures
that:





 ̈
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;


 ̈
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with GAAP;
      and


 ̈
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company’s assets that
      could have a material effect on the annual financial statements or interim
      financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





47


Management
conducted an evaluation of the design and operation of the Company’s internal
control over financial reporting as of December 31, 2007, based on the criteria
set forth in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. This evaluation included
review of the documentation of controls, evaluation of the design effectiveness
of controls, testing of the operating effectiveness of controls and a conclusion
on this evaluation. Based on this evaluation, management has concluded that the
Company’s internal control over financial reporting was effective as of December
31, 2007 and no material weaknesses were discovered.





Limitations of Controls and
Procedures





The
Company’s management, including the Principal Executive Officer and Principal
Financial Officer, believe that any disclosure controls and procedures or
internal controls over financial reporting, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, they cannot provide absolute
assurance that all control issues and instances of fraud, if any, within the
Company have been prevented or detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by unauthorized override of the control. The design of any systems of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Accordingly,
because of the inherent limitations in a cost effective control system,
misstatements due to error or fraud may occur and not be detected.





Attestation Report of
Registered Public Accounting Firm





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





Changes in Internal Controls
over Financial Reporting





During
the most recently completed fiscal year ended December 31, 2007, there were no
changes in the Company’s internal control over financial reporting that have
materially affected, or are reasonably likely to affect, the Company’s internal
control over financial reporting.








ITEM 16.  RESERVED








ITEM 16A.  AUDIT COMMITTEE FINANCIAL
EXPERT





The
Company’s Audit Committee consists of three directors, all of who are
financially literate and knowledgeable about the Company’s
affairs.  Mr. Duncan Budge is the audit committee’s financial expert
member as a qualified accountant with over 25 years experience in business. In
addition to serving on the Board of Liberty Petroleum Inc., he also serves on
the Board and is the Audit Committee Chair of Patriot Gold Corp., Strata Oil
& Gas Inc., and Giant Oil & Gas Inc.





48


ITEM 16B.  CODE OF ETHICS





The
Company has not adopted a formal code of ethics that applies to the Company's
principal executive officer, principal financial officer, principal accounting
officer or controller, persons performing similar functions and other officers
of the Company.








Item 16C. PRINCIPAL ACCOUNTIING FEES AND
SERVICES





The audit
committee is directly responsible for the appointment, compensation and
oversight of auditors; the audit committee has in place procedures for receiving
complaints and concerns about accounting and auditing matters; and has the
authority and the funding to engage independent counsel and other outside
advisors.





The Audit
Committee may delegate to one or more designated members of the Audit Committee
the authority to grant pre-approvals required by this
policy/procedure.  The decisions of any Audit Committee member to whom
authority is delegated to pre-approve a service shall be presented to the full
Audit Committee at its next scheduled meeting.





Fees,
including reimbursements for expenses, for professional services rendered by
Smythe Ratcliffe LLP in 2007 and 2006, the Company’s auditors.





Fiscal
      Year ended December 31, 2007 and 2006
            
            Fiscal
      Year
            
            
            Fiscal
      YearPrincipal
      Accountant Fees and Services
            
            2007
            
            
            2006Audit
      Fees
            
            $
            11,700
            
            
            $
            11,500Audit
      Related Fees
            
            $Nil
            
            
            $NilTax
      Fees
            
            $Nil
            
            
            $NilAll
      Other Fees
            
            $Nil
            
            
            $
            4,400Total
            
            $
            11,700
            
            
            $
            15,900





Audit
related fees relate to services provided to review the Company’s annual
financial statements and related disclosures.








ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR
AUDIT COMMITTEES





--- Not
applicable ---







ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATED PURCHASERS





There
have been no purchases of the Company's common shares by the Company
or


affiliated
purchasers during the period covered by this report.


49


PART
III








ITEM 17.  FINANCIAL
STATEMENTS





The
Company's financial statements are stated in Canadian dollars (CDN$) and are
prepared in accordance with Canadian Generally Accepted Accounting Principles
(GAAP), the application of which, in the case of the Company, conforms in all
material respects for the periods presented with United States GAAP, except as
discussed in footnotes to the financial statements.





The
financial statements as required under ITEM 17 are attached hereto and found
immediately following the text of this Annual Report.  The audit
report of Smythe Ratcliffe LLP, is included herein immediately preceding the
audited financial statements.








ITEM 18.  FINANCIAL
STATEMENTS





The
Company has elected to provide financial statements pursuant to ITEM
17.


50


ITEM 19.  EXHIBITS





Exhibit
      Numbers
                Description
      of Document1.1(1)
                Articles  of  Incorporation  of  the  Company1.2(1)
                Articles
      of Amendment1.3(1)
                By-Laws  of  the  Company2.1(1)
                Specimen  Common  Stock  Certificate2.2(1)
                Form
      of Subscription Agreement2.3(1)
                Form
      of Class A Warrant2.4(1)
                Form
      of Class B Warrant2.5(1)
                Form
      of Class C Warrant2.6(1)
                Agreement
      between the Company and Paul Uppal dated April 30, 20052.7(1)
                Agreement
      between the Company and Greg Crowe dated April 30, 20052.8(1)
                Agreement
      among Greg Crowe, Duncan Budge, and the Company dated August 17,
      20064.1(1)
                Property
      Option Agreement between Warner Gruenwald and the Company dated March 15,
      20064.2(1)
                Petroleum,
      Natural Gas and General Rights Conveyance Agreement dated June 14, 2006,
      among the Company, Stone Petroleums Ltd., Supernova Resources Ltd., 349385
      Alberta Ltd., and Torland Ltd.4.3(1)
                Royalty
      Agreement dated June 14, 2006, among the Company, Stone Petroleums Ltd.,
      Supernova Resources Ltd., 349385 Alberta Ltd., and Torland
      Ltd.*12.1
                Certification
      of Principal Executive and Financial Officer*13.1
                Section
      1350 Certification





(1)
Previously filed as an exhibit to the Company’s registration statement on Form
F-1 filed with the Commission on September 25, 2006.





* Filed
herewith.





51




LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 
 Financial
Statements
 December
31, 2007 and 2006
 (Expressed
in Canadian Dollars)
 
 
 
 
 
 
 
 
 Index
              PageReport
      of Independent Registered Public Accounting Firm
              53Financial
      StatementsBalance
      Sheets
              54Statements
      of Operations
              55Statements
      of Shareholders’ Deficit
              56Statements
      of Cash Flows
              57Notes
      to Financial Statements
              58 -
      70
 
  52
   
 
 
 
 
 
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 TO
THE SHAREHOLDERS OF LIBERTY PETROLEUM INC. (An Exploration Stage
Company)
 
 We have
audited the balance sheets of Liberty Petroleum Inc. (Formerly Liberty Gold
Corp.) (An Exploration Stage Company) as at December 31, 2007 and 2006, and the
statements of operations, shareholders’ deficit and cash flows for the years
ended December 31, 2007 and 2006 and the initial 250-day period ended December
31, 2005 and the cumulative totals for the exploration stage of operations from
April 25, 2005 (inception) to December 31, 2007.  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 Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States).  Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. 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.
 
 In our
opinion, these financial statements present fairly, in all material respects,
the financial position of the Company as at December 31, 2007 and 2006 and
the results of its operations and its cash flows for the years ended
December 31, 2007 and 2006 and the initial 250-day period ended December
31, 2005 and for the period from April 25, 2005 (inception) to
December 31, 2007 in accordance with Canadian generally accepted accounting
principles.
 
 “Smythe
Ratcliffe LLP” (signed)
 
 Chartered
Accountants
 
 Vancouver,
Canada
 April 28,
2008
 
 COMMENTS
BY AUDITORS FOR US READERS ON CANADA-US REPORTING DIFFERENCES
 
 In the
United States, reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company’s ability to continue as a going-concern, such as those described in
note 1 to the financial statements.  Our report to the
shareholders dated April 28, 2008 is expressed in accordance with Canadian
reporting standards, which do not permit a reference to such events and
conditions in the auditors’ report when these are adequately disclosed in the
financial statements.
 
 “Smythe
Ratcliffe LLP” (signed)
 
 Chartered
Accountants
 
 Vancouver,
Canada
 April 28,
2008
    7th
      Floor, Marine Building
                355
      Burrard Street, Vancouver, BC
                Canada
      V6C 2G8
              Fax:                      604.688.4675
                Telephone:         604.687.1231
                Web:                   SmytheRatcliffe.com
  53
  LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Balance Sheets
 December
31
 (Expressed
in Canadian Dollars)
 
 2007
              
              
              2006AssetsCurrentCash
              
              $
              7,796
              
              
              $
              3,546Short-term
      investment (note 2(d))
              
              
              20,000
              
              
              
              90,673Receivables
              
              
              536
              
              
              
              679Prepaid
      expenses
              
              
              1,010
              
              
              
              1,91229,342
              
              
              
              96,810Oil and Gas Property Interests(note 4)
              
              
              9,334
              
              
              
              8,438$
              38,676
              
              
              $
              105,248LiabilitiesCurrentAccounts
      payable and accrued liabilities
              
              $
              9,461
              
              
              $
              14,415Shareholders’
      EquityCapital
      StockAuthorizedUnlimited
      common shares without par valueUnlimited
      preferred shares without par valueIssued
      and outstanding41,709,750
      common shares (notes 6 and 7)
              
              
              134,475
              
              
              
              134,475Deficit
      Accumulated During the Exploration Stage
              
              
              (105,260
              )
              
              
              (43,642
              )29,215
              
              
              
              90,833$
              38,676
              
              
              $
              105,248
 
 Nature of
Operations and Going-Concern (note 1)
 
 Approved
by the Board:
  “Paul
Uppal” (signed)
 ...........................................................................  Director
 Paul
Uppal
  “Duncan
Budge” (signed)
 ...........................................................................  Director
 Duncan
Budge
  See notes
to financial statements.
 54
  LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Statements
of Operations
 (Expressed
in Canadian Dollars)
 
 Year
              
              
              Year
              
              
              Initial
      250-Day
              
              
              April
      25, 2005Ended
              
              
              Ended
              
              
              Period
      Ended
              
              
              (Inception)
      toDecember
      31,
              
              
              December
      31,
              
              
              December
      31,
              
              
              December
      31,2007
              
              
              2006
              
              
              2005
              
              
              2007ExpensesListing
      and filing fees
              
              $
              21,404
              
              
              $
              18,733
              
              
              $
              -
              
              
              $
              40,137Professional
      fees
              
              
              15,700
              
              
              
              7,500
              
              
              
              5,000
              
              
              
              28,200Directors’
      fees
              
              
              13,500
              
              
              
              2,000
              
              
              
              -
              
              
              
              15,500Office
      and sundry
              
              
              7,966
              
              
              
              1,470
              
              
              
              1,345
              
              
              
              10,781Rent
              
              
              4,000
              
              
              
              4,077
              
              
              
              2,605
              
              
              
              10,682Transfer
      agent fees
              
              
              1,499
              
              
              
              585
              
              
              
              -
              
              
              
              2,084Total
      Expenses
              
              
              64,069
              
              
              
              34,365
              
              
              
              8,950
              
              
              
              107,384Interest
      income
              
              
              (2,451
              )
              
              
              (2,673
              )
              
              
              -
              
              
              
              (5,124
              )61,618
              
              
              
              31,692
              
              
              
              8,950
              
              
              
              102,260Write-off
      of mineral property optionpayment
      (note 5)
              
              
              -
              
              
              
              (3,000
              )
              
              
              -
              
              
              
              3,000Net
      Loss and Comprehensive Loss for Period
              
              $
              61,618
              
              
              $
              34,692
              
              
              $
              8,950
              
              
              $
              105,260Basic
      Loss Per Share
              
              $
              0.00
              
              
              $
              0.00
              
              
              $
              0.00Weighted
      Average Number ofCommon
      Shares Outstanding
              
              
              41,709,750
              
              
              
              41,709,750
              
              
              
              39,628,347
 
  See notes
to financial statements.
 55
  LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Statements
of Shareholders’ Deficit
 Period
From April 25, 2005 (Inception) to December 31, 2007
 (Expressed
in Canadian Dollars)
 
 
 DeficitAccumulatedNumber
      of
              
              
              
              
              
              During
      theCommon
              
              
              Capital
              
              
              ExplorationShares
              
              
              Stock
              
              
              Stage
              
              
              TotalBalance,
      April 25, 2005
              
              
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Issued
      common shares to directorsfor
      cash at $0.0001 per shareon
      April 30, 2005 (notes 6(a) and 7)
              
              
              30,000,000
              
              
              
              3,000
              
              
              
              -
              
              
              
              3,000Private
      placement, common sharesfor
      cash at $0.01 per share onMay
      26, 2005 (note 6(a))
              
              
              11,550,000
              
              
              
              115,500
              
              
              
              -
              
              
              
              115,500Private
      placement, common sharesfor
      cash at $0.10 per share onJuly
      11, 2005 (note 6(a))
              
              
              159,750
              
              
              
              15,975
              
              
              
              -
              
              
              
              15,975Net
      loss for period
              
              
              
              
              
              
              
              
              
              
              (8,950
              )
              
              
              (8,950
              )Balance,
      December 31, 2005
              
              
              41,709,750
              
              
              
              134,475
              
              
              
              (8,950
              )
              
              
              125,525Net
      loss for year
              
              
              
              
              
              
              
              
              
              
              (34,692
              )
              
              
              (34,692
              )Balance,
      December 31, 2006
              
              
              41,709,750
              
              
              
              134,475
              
              
              
              (43,642
              )
              
              
              90,833Net
      loss for year
              
              
              
              
              
              
              
              
              
              
              (61,618
              )
              
              
              (61,618
              )Balance,
      December 31, 2007
              
              
              41,709,750
              
              
              $
              134,475
              
              
              $
              (105,260
              )
              
              $
              29,215
 
  See notes
to financial statements.
 56
  LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Statements
of Cash Flows
 (Expressed
in Canadian Dollars)
 
 Year
              
              
              Year
              
              
              Initial
      250-Day
              
              
              April
      25, 2005Ended
              
              
              Ended
              
              
              Period
      Ended
              
              
              (Inception)
      toDecember
      31,
              
              
              December
      31,
              
              
              December
      31,
              
              
              December
      31,2007
              
              
              2006
              
              
              2005
              
              
              2007Operating
      ActivitiesNet
      loss
              
              $
              (61,618
              )
              
              $
              (34,692
              )
              
              $
              (8,950
              )
              
              $
              (105,260
              )Adjustments
      to reconcile net loss to netcash used in operating
      activitiesReceivables
              
              
              143
              
              
              
              (463
              )
              
              
              (216
              )
              
              
              (536
              )Prepaid
      expenses
              
              
              902
              
              
              
              (1,277
              )
              
              
              (635
              )
              
              
              (1,010
              )Accounts
      payable and accrued liabilities
              
              
              (4,954
              )
              
              
              9,415
              
              
              
              5,000
              
              
              
              9,461Cash
      Used in Operating Activities
              
              
              (65,527
              )
              
              
              (27,017
              )
              
              
              (4,801
              )
              
              
              (97,345
              )Investing
      ActivitiesProceeds
      from (investment in) short-terminvestment
              
              
              70,673
              
              
              
              (90,673
              )
              
              
              -
              
              
              
              (20,000
              )Expenditures
      on oil and gas property
                interests
              
              
              (896
              )
              
              
              (8,438
              )
              
              
              -
              
              
              
              (9,334
              )Cash
      Provided by (Used in) InvestingActivities
              
              
              69,777
              
              
              
              (99,111
              )
              
              
              -
              
              
              
              (29,334
              )Financing
      ActivityShares
      issued for cash
              
              
              -
              
              
              
              -
              
              
              
              134,475
              
              
              
              134,475Inflow
      (Outflow) of Cash
              
              
              4,250
              
              
              
              (126,128
              )
              
              
              129,674
              
              
              
              7,796Cash,
      Beginning of Period
              
              
              3,546
              
              
              
              129,674
              
              
              
              -
              
              
              
              -Cash,
      End of Period
              
              $
              7,796
              
              
              $
              3,546
              
              
              $
              129,674
              
              
              $
              7,796
 
 
  See notes
to financial statements.
 57
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  1.
              NATURE
      OF OPERATIONS AND GOING-CONCERN
 
 Liberty
Petroleum Inc. (formerly Liberty Gold Corp.) (the “Company”) was incorporated
under the Canada Business
Corporations Acton April 25, 2005.  On June 23, 2006, at an
annual general and special meeting of shareholders, a majority of the
shareholders of the Company approved a change in business of the Company from
mineral exploration to oil and gas exploration and extraction.  At the
same meeting, a majority of the shareholders of the Company approved a change in
name of the Company to Liberty Petroleum Inc.
 
 The
Company has been in the exploration stage since its formation and has only
recently commenced its planned operations (oil and gas property
exploration).  The Company is primarily engaged in the acquisition and
exploration of oil and gas properties in North America.  The
accompanying financial statements have been prepared assuming the Company will
continue as a going-concern.  This contemplates that assets will be
realized and liabilities and commitments satisfied in the normal course of
business.
 
 As shown
in the accompanying financial statements, the Company has an accumulated deficit
of $105,260 for the period from April 25, 2005 (inception) to December 31,
2007, has no source of revenue and, as at December 31, 2007, had working capital
of $19,881 (2006 - $82,395).  The future of the Company is dependent
upon its ability to obtain financing and upon future acquisition, exploration
and development of profitable operations from its oil and gas exploration
property.  The Company does not have sufficient cash and investments
to fund its operations for the next 12 months.  Management has plans
to seek additional capital in the future through a private placement and public
offering of its common stock.  These conditions raise substantial
doubt about the Company’s ability to continue as a
going-concern.  Although there are no assurances that management’s
plans will be realized, management believes that the Company will be able to
continue operations in the future.  The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts of and classification of liabilities that might
be necessary in the event the Company cannot continue as a
going-concern.
 
 2.
              SIGNIFICANT
      ACCOUNTING POLICIES
 
 The
financial statements of the Company have been prepared in accordance with
Canadian generally accepted accounting principles in Canada
(“GAAP”).  The significant accounting policies are summarized as
follows:
 
 (a)
              Basis
      of presentation
 
 These
financial statements are prepared in accordance with GAAP and all figures are in
Canadian dollars.  Canadian GAAP differs in certain respects from
accounting principles generally accepted in the United States.  The
significant differences and the approximate related effects on these financial
statements are set forth in note 10.
 
  58
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  2.           SIGNIFICANT ACCOUNTING
POLICIES (Continued)
 
 (b)
              Use
      of estimates
 
 The
preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses for the reporting
period.  Significant areas requiring the use of estimates include the
carrying value of oil and gas property interests, valuation of accrued
liabilities, and the determination of the valuation allowance for future income
tax assets.  Management believes the estimates are reasonable;
however, actual results could differ from these estimates and could impact
future results of operations and cash flows.
 
 (c)
              Oil
      and gas property interests
 
 The
Company follows the full cost method for accounting for its oil and gas property
interests.  Under this method all costs related to the acquisition of,
exploration for, and development of oil and natural gas reserves are capitalized
on a country-by-country basis.  These capitalized costs are depleted
or depreciated on a unit-of-production method based on the estimated proven
reserves or charged to income if exploration is determined to be
unsuccessful.  Certain costs associated with the acquisition and
exploration of unproven properties are excluded from depletion and depreciation
until it is determined whether proved reserves are attributable to the
properties.
 
 Where the
Company has entered into option agreements for the acquisition of an interest in
oil and gas property that provide for periodic payments, amounts unpaid are not
recorded as a liability since they are paid entirely at the Company’s
option.
 
 (d)
              Income
      taxes
 
 The
Company follows the asset and liability method of accounting for income
taxes.  Under this method, future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis, and losses carried forward.  Future tax
assets and liabilities are measured using substantively enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect on
future tax assets and liabilities of a change in tax rates is recognized in
operations in the period in which the change is enacted or substantially
assumed.  The amount of future income tax assets is limited to the
amount of the benefit that is more likely than not to be realized.
 
  59
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  2.           SIGNIFICANT ACCOUNTING
POLICIES (Continued)
 
 (e)
              Stock-based
      compensation
 
 The
Company grants stock options pursuant to a stock option plan described in note
6(b). The Company accounts for stock-based compensation expense using the fair
value based method with respect to all stock-based payments to directors,
employees and non-employees, including awards that are direct awards of stock
and call for settlement in cash or other assets, or stock appreciation rights
that call for settlement by the issuance of equity instruments. Under this
method, stock-based payments are recorded as an expense over the vesting period
or when the awards or rights are granted, with a corresponding increase to
contributed surplus under shareholders’ equity. When stock options are
exercised, the corresponding fair value is transferred from contributed surplus
to capital stock.
 
 (f)
              Loss
      per share
 
 Loss per
share is calculated based on the weighted average number of common shares
outstanding during the year. The Company uses the treasury stock method for
calculating diluted loss per share.  Common equivalent shares
(consisting of shares issuable on the exercise of common stock warrants)
totalling 34,650,000 in each of 2007, 2006 and 2005, respectively, were not
included in the computation of diluted loss per share because the effect was
anti-dilutive.
 
 (g)
              Interest
      income
 
 The
Company recognizes interest income on its short-term investment on an accrual
basis at the stated rate over the term to maturity.
 
 (h)
              Asset
      retirement obligations
 
 The
Company recognizes an estimate of the liability associated with an asset
retirement obligation (“ARO”) in the financial statements at the time the
liability is incurred.  The estimated fair value of the ARO is
recorded as a long-term liability, with a corresponding increase in the carrying
amount of the related asset.  The capitalized amount is depleted on a
straight-line basis over the estimated life of the asset.  The
liability amount is increased each reporting period due to the passage of time
and the amount of accretion is charged to earnings in the period.  The
ARO can also increase or decrease due to changes in the estimates of timing of
cash flows or changes in the original estimated undiscounted
cost.  Actual costs incurred upon settlement of the ARO are charged
against the ARO to the extent of the liability recorded.  At present,
the Company has no material AROs to record in the financial
statements.
 
  60
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  2.
              SIGNIFICANT ACCOUNTING
      POLICIES (Continued)
 
 (i)
              New
      accounting pronouncements
 
 (i)
              Effective
      January 1, 2007, the Company adopted Canadian Institute of Chartered
      Accountants’ (“CICA”) Handbook Section 3855, “Financial Instruments -
      Recognition and Measurement”. This standard sets out criteria for the
      recognition and measurement of financial instruments for fiscal years
      beginning on or after October 1, 2006.  This standard requires
      all financial instruments within its scope, including derivatives, to be
      included on a Company’s balance sheet and measured either at fair value
      or, in certain circumstances when fair value may not be considered most
      relevant, at cost or amortized cost.  Changes in fair value are
      to be recognized in the statements of operations and other comprehensive
      income.
 
 All
financial assets and liabilities are recognized when the entity becomes a party
to the contract creating the item.  As such, any of the Company’s
outstanding financial assets and liabilities at the effective date of adoption
are recognized and measured in accordance with the new requirements as if these
requirements had always been in effect.  Any changes to the fair
values of assets and liabilities prior to October 1, 2006 are recognized by
adjusting opening deficit or opening accumulated other comprehensive
income.
 
 All
financial instruments are classified into one of the following five categories:
held-for-trading, held-to-maturity, loans and receivables, available-for-sale
financial assets or other financial liabilities.  Initial and
subsequent measurement and recognition of changes in the value of financial
instruments depends on their initial classification.
 
 The
adoption of this standard had no effect on the Company’s financial
statements.
 
 (ii)
              Comprehensive
      income (loss)
 
 Effective
      January 1, 2007, the Company adopted the CICA Handbook Section 1530
      “Comprehensive Loss”, which establishes standards for presentation and
      disclosure of comprehensive loss. Comprehensive loss is the overall change
      in the net assets of the Company for a period, other than changes
      attributable to transactions with shareholders. It is made up of net loss
      and other comprehensive loss. Other comprehensive loss consists of gains
      and losses affecting shareholders’ equity that, under Canadian GAAP are
      excluded from net loss. The Company has no items of other comprehensive
      loss in any period presented. Net loss as presented in the Company’s
      Statement of Operations equals comprehensive
  loss.
 
  61
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  2.           SIGNIFICANT ACCOUNTING
POLICIES (Continued)
 
 (j)
              Future
      accounting changes
 
 (i)
              Going-concern
 
 In June
2007, the CICA amended Handbook Section 1400, “General Standards of Financial
Statement Presentation”, which requires management to make an assessment of a
company’s ability to continue as a going-concern.  When financial
statements are not prepared on a going-concern basis, that fact shall be
disclosed together with the basis on which the financial statements are prepared
and the reason why the company is not considered a going-concern.
 
 The new
section is effective for years beginning on or after January 1, 2008, and
management anticipates that such adoption may have an impact on future financial
statements.
 
 (ii)
              Financial
      instruments
  In
February 2007, the CICA issued two new standards, Section 3862, “Financial
Instruments Disclosures”, and Section 3863, “Financial Instruments
Presentation”. These sections will replace the existing Section 3861, “Financial
Instruments Disclosure and Presentation”. Section 3862 provides users with
information to evaluate the significance of the financial instruments of the
entity’s financial position and performances, nature and extent of risks arising
from financial instruments, and how the entity manages those risks. Section 3863
deals with the classification of financial instruments, related interest,
dividends, losses and gains, and the circumstances in which financial assets and
financial liabilities are offset. The new sections are effective for years
beginning on or after October 1, 2007.  The Company is in the
process of assessing the impact of this new section on its financial
statements.
 
 (iii)
              Capital
      disclosures
 
 In
February 2007, the CICA issued Handbook Section 1535, “Capital Disclosures”,
which requires the disclosure of both qualitative and quantitative information
that provides users of financial statements with information to evaluate the
entity’s objectives, policies and procedures for managing capital. The new
section is effective for years beginning on or after October 1, 2007. The
Company is in the process of assessing the impact of this new section on its
financial statements.
 
  62
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  2.           SIGNIFICANT ACCOUNTING
POLICIES (Continued)
 
 (j)             Future
accounting changes (continued)
 
 (iv)
              International
      Financial Reporting Standards
("IFRS")
 
 In 2006,
the Canadian Accounting Standards Board ("AcSB") published a new strategic plan
that will significantly affect financial reporting requirements for Canadian
companies. The AcSB strategic plan outlines the convergence of Canadian
GAAP with IFRS over an expected five year transitional period.  In February
2008 the AcSB announced that 2011 is the changeover date for publicly-listed
companies to use IFRS, replacing Canada's own GAAP. The date is for interim and
annual financial statements relating to fiscal years beginning on or after
January 1, 2011. The transition date of January 1, 2011 will require the
restatement for comparative purposes of amounts reported by the Company for the
year ended December 31, 2010. While the Company has begun assessing the
adoption of IFRS for 2011, the financial reporting impact of the transition to
IFRS cannot be reasonably estimated at this time.
 
 3.
              FINANCIAL
      INSTRUMENTS
 
 The
company has designated its cash and short-term investment as held-for-trading
and accounts payable and accrued liabilities as other liabilities.
 
 (a)
              Fair
      value
 
 The
carrying values of cash, short-term investment, and accounts payable and accrued
liabilities approximate their fair values because of the short-term maturity of
these financial instruments.
 
 (b)
              Interest
      risk
 
 The
Company is not exposed to interest rate risk due to the short-term nature of its
monetary assets and liabilities.
 
 (c)
              Credit
      risk
 
 The
Company is not exposed to credit risk with respect to its cash and short-term
investment as these financial instruments are held at well capitalized financial
institutions.
 
 
 (d)
              Currency
      risk
 
 The
Company is exposed to foreign currency fluctuation to the extent expenditures
incurred by the Company are not denominated in Canadian dollars.  The
Company does not employ derivatives or similar techniques to manage foreign
currency risk.
 
  63
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  4.
              OIL
      AND GAS PROPERTY INTERESTS
 
 On June
14, 2006, the Company entered into a petroleum, natural gas and general rights
conveyance (the “Agreement”) with Stone Petroleums Ltd., Supernova Resources
Ltd., 349385 Alberta Ltd. and Torland Ltd. (together, the “Vendor”) whereby the
Company acquired a 100% interest in a petroleum and natural gas (“P&NG”)
lease with the government of Alberta.  The underlying lease acquired
by the Company is Alberta P&NG lease 0405070015 (the “Lease”), and the
property to which the Lease pertains is located in the Milk River area of
Alberta. Upon signing the Agreement, the Company paid the Vendor $7,500, paid
closing costs of $938 and agreed to assume the underlying lease payments to the
province of Alberta.  In addition, the Vendor is entitled to an
overriding 5% royalty on all petroleum substances produced from the Milk River
Property (the “Property”), if any.  The Vendor is entitled to a first
and paramount lien upon all of the petroleum substances produced or allocated to
the Property to secure the payment of any amounts due and payable to the Vendor
relating to the royalty.  In 2007, total lease payments were
$896.
 
 5.
              MINERAL
      PROPERTY OPTION PAYMENT
 
 On March
15, 2006, the Company entered into an agreement giving it the exclusive right
and option to acquire a 100% interest in a mineral exploration property known as
the GQ Property located in the Kamloops Mining District of British
Columbia.  The Company could have exercised its option by making cash
payments totaling $103,000 and incurring net expenditures on the property of at
least $110,000 by March 15, 2010.  The Company paid the initial $3,000
deposit as required under the agreement but did not commence
exploration.  In relation to the Company’s decision to pursue
opportunities in the oil and gas industry, it terminated the GQ Property option
on May 31, 2006.  The $3,000 property option payment for the GQ
Property has been expensed in the statement of loss and deficit for the year
ended December 31, 2006.
 
 6.
              CAPITAL
      STOCK
 
 (a)
              Common
      shares
 
 During
the period from April 25, 2005 (inception) to December 31, 2007, the
Company:
 
 (i)
              Issued
      30,000,000 shares on April 30, 2005 to two of the Company’s directors for
      $0.0001 per share.
 
 (ii)
              Issued
      11,550,000 units on May 26, 2005  at $0.01 per unit where each
      unit consisted of:
 
 ·           one
common share;
 ·           one
Class “A” warrant exercisable at $0.25 per share until May 26,
2010;
 ·           one
Class “B” warrant exercisable at $0.50 per share until May 26,
2011;and
 ·           one
Class “C” warrant exercisable at $1.00 per share until May 26,
2012.
 
 All of
the warrants become exercisable on May 26, 2008 and all of these warrants are
unexercised and outstanding as at December 31,
2007.  The
  64
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  6.
              CAPITAL STOCK(Continued)
 
 (a)
              Common
      shares (continued)
 
 Company
has the right, at its sole discretion, to accelerate the maturity date and to
lower the exercise price of all of the warrants.
 
 (iii)
              Issued
      a further 159,750 common shares on July 11, 2005 for gross proceeds of
      $15,975.
 
 (b)
              Stock
      options
 
 On June
28, 2007, the stockholders of the Company approved the Company’s 2007 stock
option plan whereby the Company may grant options to its directors, consultants
and employees for up to 5,000,000 shares of common stock.  The
exercise price of each option equals the market price of the Company’s stock on
the date of grant.  Options vest over a three-year period, unless
otherwise specified by the Board of Directors.  All options have a ten
year term. No stock options have been granted under the 2007 plan.
 
 (c)
              Share
      purchase warrants
 
 As at
December 31, 2007 and 2006, the following share purchase warrants were
outstanding and are exercisable after May 26, 2008:
 
 Expiry
      Date
              
              Exercise
      Price
              
              
              Number
      of WarrantsMay
      26, 2010
              
              $
              0.25
              
              
              
              11,550,000May
      26, 2011
              
              $
              0.50
              
              
              
              11,550,000May
      26, 2012
              
              $
              1.00
              
              
              
              11,550,00034,650,000
 
 The
weighted average exercise price of the warrants is $0.58.
 
 Subsequent
to the year ended December 31, 2007, the vesting dates of the share purchase
warrants have been extended. Originally, all of the warrants were to have become
exercisable on May 26, 2008.  On March 25, 2008, by way of letter
agreements with each individual warrant holder, the Company and each respective
warrant holder have agreed to extend the vesting of the Company’s Class A, Class
B and Class C warrants. As a result of the agreements between the Company and
the respective warrant holders, the warrant vesting date has been extended to
May 26, 2009 with respect to the Class A Warrants, to November 26, 2009 with
respect to the Class B Warrants, and to May 26, 2010 with respect to the Class C
Warrants.  All other terms of the Warrant agreements remain
unchanged.
 
  65
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  7.
              SHARE
      REPURCHASE OPTION
 
 The
Company holds an irrevocable right to repurchase all or a portion of the
30,000,000 shares owned by two of its Directors for a price of $0.01 per
share.  The right can be exercised by the Company at any time and at
its sole discretion.  The Company is not obligated to repurchase the
shares at any time or for any reason (such as termination of employment, a
change of control of the Company or failure to reach performance
goals).  The repurchase right held by the Company
 will
continue with respect to and for so long as any of the 30,000,000 shares issued
to these directors are held by them (or any of their affiliates or family
members), and will survive any such director’s resignation as an officer or
director of the Company.  The Company may exercise its right of
repurchase as to some or all of the shares held, directly or indirectly, by
these directors by delivering a notice of such exercise to such director(s) not
less than seven calendar days prior to the closing of such
repurchase.  The directors agree that they shall not, directly or
indirectly, sell, exchange, pledge, hypothecate, transfer, gift, grant an
irrevocable proxy with respect to, devise, assign or in any other way dispose
of, encumber or grant a security interest in any of the shares or any interest
therein. The directors also agree and acknowledge that said restriction is in
addition to all applicable securities laws and regulations.
 
 8.
              INCOME
      TAXES
 
 The
reconciliation of income tax provision computed at statutory rates to the
reported income tax provision is as follows:
 
 2007
              
              
              2006Income
      tax rate
              
              
              34.12
              %
              
              
              32.12
              %Income
      tax benefit computed at Canadian statutory rates
              
              $
              21,024
              
              
              $
              11,143Unrecognized
      tax losses
              
              
              (21,024
              )
              
              
              (11,143
              )Net
      future income tax assets
              
              $
              -
              
              
              $
              -
 
 The
significant components of future income tax assets are as follows:
 
 2007
              
              
              2006Income
      tax rate
              
              
              31
              %
              
              
              32.12
              %Non-capital
      loss carry-forwards for Canadian tax purposes
              
              $
              105,691
              
              
              $
              43,642Income
      tax asset
              
              
              32,764
              
              
              
              14,018Valuation
      allowance
              
              
              (32,764
              )
              
              
              (14,018
              )$
              -
              
              
              $
              -
 
  66
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  8.
              INCOME TAXES
      (Continued)
 
 The
valuation allowance reflects the Company’s estimate that the tax assets more
likely than not will not be realized.
 
 The
Company has accumulated non-capital losses for income tax purposes of
$105,691.  The losses expire in the following years:
 
 2015
              
              $
              8,9502026
              
              
              35,1232027
              
              
              61,618$
              105,691
 
 9.
              RELATED
      PARTY TRANSACTIONS
 
 During
the year ended December 31, 2007, directors’ fees in aggregate of $13,500 (2006
- $2,000) were paid to the directors of the Company.  These
transactions are in the normal course of operations and are measured at the
exchange amount, which is the amount agreed to by the related
parties.
 
 10.
              DIFFERENCES
      BETWEEN CANADIAN AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
      PRACTICES
 
 (a)
              Differences
      in accounting principles
 
 (i)
              Financial
      instruments
 
 Under
Canadian GAAP prior to October 31, 2006, investments were carried at the lower
of aggregate cost or quoted market value.  Subsequent to that date,
investments in marketable securities classified as available-for-sale and
derivative financial instruments classified as held for trading are all
recognized at fair value for both Canadian and US GAAP.  Unrealized
gains and losses are included in other comprehensive income or operations for
available-for-sale and held for trading investments respectively.
 
  67
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  10.
              DIFFERENCES BETWEEN CANADIAN
      AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES(Continued)
 
 (b)
              Recent
      US accounting pronouncements
 
 (i)
              On
      July 13, 2006, FASB issued Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes—an interpretation of FASB Statement No.
      109.  Interpretation 48 clarifies the accounting for uncertainty
      in income taxes recognized in an entity’s financial statements in
      accordance with Statement 109 and prescribes a recognition threshold and
      measurement attribute for financial statement disclosure of tax positions
      taken or expected to be taken on a tax return.  Additionally,
      Interpretation 48 provides guidance on de-recognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition.
 
 Interpretation
48 is effective for fiscal years beginning after December 15, 2006, with early
adoption permitted.
 
 On
January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). The Company files income tax returns in
Canada. All our tax returns are subject to tax examinations until respective
statute of limitation. The Company currently has no tax years under
examination.  Based on management’s assessment of FIN 48, the Company
concluded that the adoption of FIN 48, as of January 1, 2007, had no significant
impact on our results of operations or financial position, and required no
adjustment to the opening balance sheet accounts. The year-end analysis supports
the same conclusion, and the Company does not have an accrual for uncertain tax
positions as of December 31, 2007. As a result, tabular reconciliation of
beginning and ending balances would not be meaningful. If interest and penalties
were to be assessed, the Company would charge interest to interest expense, and
penalties to other operating expense. It is not anticipated that unrecognized
tax benefits would significantly increase or decrease within twelve months of
the reporting date.
 
 
 (ii)
              In
      September 2006, the U.S. Securities and Exchange Commission issued Staff
      Accounting Bulletin 108 (“SAB 108”). The interpretations in this bulletin
      express the staff’s views regarding the process of quantifying financial
      statement misstatements and are being issued to address diversity in
      practice in quantifying financial statement misstatements and the
      potential under current practice for the build up of improper amounts on
      the balance sheet. SAB 108 is not expected to have a material impact on
      the Company’s financial statements.
 
  68
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  10.
              DIFFERENCES BETWEEN CANADIAN
      AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES(Continued)
 
 (b)
              Recent
      US accounting pronouncements
(continued)
 
 (iii)
              In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
      (“SFAS No. 157”).  The SFAS 157 defines fair value, establishes
      a framework for measuring fair value in generally accepted accounting
      principles, and expands disclosures about fair value measurements. This
      statement does not require any new fair value measurements; however, for
      some entities the application of this statement will change current
      practice. SFAS No. 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those fiscal years, although early adoption is permitted. SFAS 157 is not
      expected to have a material impact on the Company’s financial
      statements.
 
 (iv)
              In
      February 2007, the FASB issued SFAS No.159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”.  SFAS 159 permits
      companies to choose to measure many financial instruments and certain
      other items at fair value. This statement expands the use of fair value
      measurement and applies to companies that elect the fair value option. The
      fair value option established by this statement permits all entities to
      choose to measure eligible items at fair value at specified election
      dates. This statement is effective as of the beginning of fiscal years
      that begin after November 15, 2007. SFAS 159 is not expected to have a
      material impact on the Company’s financial position, results of operations
      or cash flows
 
 (v)
              In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations
      (SFAS 141(R)), which replaces SFAS 141. SFAF 141(R) requires assets and
      liabilities acquired in a business combination, contingent consideration,
      and certain acquired contingencies to be measured at their fair values as
      of the date of acquisition. SFAS 141(R) also requires that
      acquisition-related costs and restructuring costs be recognized separately
      from the business combination.
 
 SFAS
141(R) is effective for fiscal years beginning after December 15, 2008 and will
be effective for business combinations entered into after January 1,
2009.
 
 (vi)
              In
      December 2007, the FASB issued SFAS No. 160, Non-Controlling Interests in
      Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160).
      SFAS 160 clarifies the accounting for non-controlling interests and
      establishes accounting and reporting standards for the non-controlling
      interest in a subsidiary, including classification as a component of
      equity. SFAS 160 is effective for fiscal years beginning after December
      15, 2008. The Company does not currently have any minority
      interests.  SFAS 160 is not expected to have a material impact
      on the Company’s financial position, results of operations or cash
      flows.
 
  69
 LIBERTY
PETROLEUM INC.
 (Formerly
Liberty Gold Corp.)
 (An
Exploration Stage Company)
 Notes
to Financial Statements
 Years
Ended December 31, 2007 and 2006
 (Expressed
in Canadian Dollars)
  10.
              DIFFERENCES BETWEEN CANADIAN
      AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES(Continued)
 
 (b)
              Recent
      US accounting pronouncements
(continued)
 
 
 (vii)
              In
      March 2008, the FASB issued SFAS 161 “Disclosures about Derivative
      Instruments and Hedging Activities – an amendment of SFAS
      130.  This Statement requires enhanced disclosures about an
      entity’s derivative and hedging activities and thereby improves the
      transparency of financial reporting. This Statement is effective for
      financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier
      periods at initial adoption.  The Company does not currently
      have any derivative or hedging activities.  SFAS 161 is not
      expected to have a material impact on the Company’s financial position,
      results of operations or cash
flows.
 
  70


Signature
Page





Pursuant
to the requirements of Section 12g of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.





Registrant:





Liberty
Petroleum Inc., SEC File No. 333-137571





Dated:
      May 21, 2008
            By:
            /s/ Paul UppalName:
            Paul
      UppalTitle:
            Director,
      Chairman, President, Chief Executive Officer, Chief Operating Officer, and
      SecretaryDated:
      May 21, 2008
            By:
            /s/ Duncan BudgeName:
            Duncan
      BudgeTitle:
            DirectorDated:
      May 21, 2008
            By:
            /s/ Michael NottName:
            Michael
      NottTitle:
            DirectorDated:
      May 21, 2008
            By:
            /s/ Keith DiakiwName:
            Keith
      DiakiwTitle:
            DirectorDated:
      May 21, 2008
            By:
            /s/ Rob SandhuName:
            Rob
      SandhuTitle:
            Director