Commitment and Contingencies

3 Months Ended

Dec. 31, 2012

COMMITMENTS AND CONTINGENCIES {1}

Commitments and Contingencies Disclosure [Text Block]

NOTE 13 – COMMITMENTS AND CONTINGENCIES 

On December 1, 2011, the Company leased office space for a period of four years for fixed monthly rental of $2,500.  Accordingly, the Company's commitment to make these lease payments for each successive year is $30,000.

The Company is obligated to pay royalties to holders of oil and natural gas interests in both North Dakota and Kansas operations.  The Company also is obligated to pay working interest holders a pro-rata portion of revenue in oil operations net of shared operating expenses.  The amounts are based on monthly oil and natural gas sales and are charged monthly net of to oil and gas revenue and recognized as "Due to royalty and working interest holders" on the Company's balance sheet.

On March 7, 2012, Gross Capital, Inc. (“Gross”) filed suit against the Company in the United States District Court for the Southern District of Texas, Houston Division (the “Gross Lawsuit”).  Gross formerly provided the Company with investor relations and other consulting services.   The Gross Lawsuit alleges the Company breached two separate contracts between Gross and JayHawk.  The suit requests relief in the form of money damages, including attorneys’ fees and costs. No director, officer or affiliate of JayHawk Energy, Inc., and no owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or security holder is a party adverse to JayHawk Energy, Inc. or has a material interest adverse to JayHawk Energy, Inc. in reference to pending litigation.  The Company believes the likelihood it will incur a loss in connection with this litigation is reasonably possible but not probable and estimates a possible range of loss of $20,000 to $75,000.  At this time it is not possible to predict the potential financial impact to the Company.  The Company has not accrued any loss related to this litigation.