Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2012
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 000-54073
LIBERTY COAL ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 90-0819102
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
99 - 18th Street, Suite 3000, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(888) 399-3989
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
316,287,267 common shares issued and outstanding as of February 11, 2013
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
PART II - OTHER INFORMATION 19
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Mine Safety Disclosures 20
Item 5. Other Information 20
Item 6. Exhibits 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three month period ended
December 31, 2012 form part of this quarterly report. They are stated in United
States Dollars (US$) and are prepared in accordance with United States generally
accepted accounting principles.
3
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Balance Sheets (Unaudited)
As of As of
December 31, September 30,
2012 2012
------------ ------------
ASSETS
ASSETS
Cash $ 7,556 $ 11,365
Prepaid expenses 185,630 490,450
------------ ------------
TOTAL CURRENT ASSETS 193,186 501,815
------------ ------------
Website, net of amortization -- 422
Mineral properties 220,000 160,000
------------ ------------
TOTAL OTHER ASSETS 220,000 160,422
------------ ------------
TOTAL ASSETS $ 413,186 $ 662,237
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 145,180 $ 82,028
Accounts payable related parties 25,504 7,504
Convertible note payable 70,000 37,500
------------ ------------
TOTAL CURRENT LIAILITIES 240,684 127,032
------------ ------------
TOTAL LIABILITIES 240,684 127,032
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 1,500,000,000 shares authorized;
316,287,267 and 316,287,267 shares issued and outstanding as
of December 31, 2012 and September 30, 2012, respectively 316,288 316,288
Additional paid-in capital 6,317,650 6,317,650
Additional paid-in capital - warrants 4,390,203 4,390,203
Stock subscription receivable (9,196,500) (9,196,500)
Deficit accumulated during the exploration sage (1,655,139) (1,292,436)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 172,502 535,205
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 413,186 $ 662,237
============ ============
See Notes to Consolidated Financial Statements
4
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Statements of Operations (Unaudited)
Cumulative Amounts
From Date of
Incorporation on
For the Three Month Period Ending August 31, 2007 -
December 31, December 31, December 31,
2012 2011 2012
------------ ------------ ------------
REVENUES $ -- $ -- $ --
------------ ------------ ------------
COSTS AND EXPENSES
Development costs -- -- 10,000
General & administrative 1,244 10,939 75,889
Consulting services 304,320 22,500 651,259
Stock-based compensation -- -- 200,000
Impairment -- -- 400,570
Amortization 422 422 3,800
Investor relations 39,200 4,200 104,727
Transfer agent 325 100 22,684
Legal & accounting 15,433 11,433 180,810
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 360,944 49,594 1,649,739
------------ ------------ ------------
LOSS FROM OPERATIONS (360,944) (49,594) (1,649,739)
------------ ------------ ------------
OTHER INCOME & (EXPENSES)
Interest expense (1,759) -- (5,400)
------------ ------------ ------------
TOTAL OTHER INCOME & (EXPENSES) (1,759) -- (5,400)
------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (362,703) (49,594) (1,655,139)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------
NET LOSS $ (362,703) $ (49,594) $ (1,655,139)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 316,287,267 58,566,667
============ ============
See Notes to Consolidated Financial Statements
5
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Statements of Cash Flows (Unaudited)
Cumulative Amounts
From Date of
Three months Three months Incorporation on
ended ended August 31, 2007 -
December 31, December 31, December 31,
2012 2011 2012
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (362,703) $ (49,594) $ (1,655,139)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization 422 422 3,800
Stock Compensation -- -- 289,940
Impairment -- -- 400,570
Changes in assets and liabilities:
Decrease in prepaid expenses 304,820 8,371 264,070
Increase in accounts payable and accrued liabilities 63,152 1,801 145,181
Increase in related party payables 18,000 3,078 25,504
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 23,691 (35,922) (526,074)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in website -- -- (3,800)
Acquisition of mineral properties (60,000) -- (595,570)
------------ ------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES (60,000) -- (599,370)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash -- -- 1,063,000
Payments made on loans payable -- -- (100,000)
Proceeds from loans payable 32,500 -- 170,000
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,500 -- 1,133,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (3,809) (35,922) 7,556
CASH AT BEGINNING OF PERIOD 11,365 341,207 --
------------ ------------ ------------
CASH AT END OF PERIOD $ 7,556 $ 305,285 $ 7,556
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ -- $ -- $ --
============ ============ ============
Interest paid $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Reclassified long-term loan to short-term loan $ -- $ -- $ 219,754
============ ============ ============
Notes payable for settlement of notes $ -- $ -- $ 2,183,000
============ ============ ============
Preferred stock issuance for settlement of notes payable $ -- $ -- $ 3,104,139
============ ============ ============
Common stock issued for services and prepaid expenses $ -- $ -- $ 539,640
============ ============ ============
Stock issued for subscription receivable $ -- $ -- $ 9,196,500
============ ============ ============
See Notes to Consolidated Financial Statements
6
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Liberty Coal Energy Corp. (the "Company"), incorporated in the state of Nevada
on August 31, 2007, and was developing business activities in teacher
recruiting. The Company changed its business focus in March, 2010 and now
intends to enter the business of precious mineral exploration, development, and
production. The Company has not yet commenced significant business operations
and is considered to be in the exploration stage (formerly in the development
stage).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. We believe that the disclosures are
adequate to make the financial information presented not misleading. These
condensed financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto for the year ended
September 30, 2012. All adjustments were of a normal recurring nature unless
otherwise disclosed. In the opinion of management, all adjustments necessary for
a fair statement of the financial position results of operations for the interim
period have been included. The results of operations for such interim periods
are not necessarily indicative of the results for the full year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses, accounts
payable and accrued liabilities, amounts due to officers and convertible notes
payable.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States 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 during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
7
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward. See Note 5.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENTLY ADOPTED PRONOUNCEMENTS
The Company does not expect the adoption of other recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
8
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - MINERAL PROPERTIES
OWSLEY COUNTY KENTUCKY PROPERTY
On February 1, 2012, the Company entered into a letter of intent for the
acquisition of private mineral leasehold rights to certain coal mining property
in Owsley County, Kentucky with AMS Development LLC. and Colt Resources, Inc.
(the "Owsley Agreement").
The Owsley property covers approximately 1,000 acres and has 3,600,000 tons of
coal recoverable by surface and high wall (auger) methods. There are underground
reserves in place which are not being considered for production at this time.
The Owsley project has a permit completed and technically approved by the
Kentucky Department of Natural Resources for the first 80 acre phase. The permit
can be placed on active status and mining initiated by posting a $175,000
reclamation bond. The Company believes mining can be commenced within 90 days of
breaking ground.
In consideration for the mineral property leasehold, the Company paid $80,000 to
purchase the rights to the mining permits and operate under leasehold. It has
also paid an additional $50,000 to minimal lease payments and accrued another
$90,000 which is currently behind. These payments have been capitalized as part
of the purchase price of the property.
As part of the Owsley Agreement, the Company has agreed to enter into a purchase
agreement with AMS Development LLC & Colt Resources, Inc., pursuant to which AMS
& Colt would receive The agreement provides for the purchase of the 1,000 acres
of surface property at $600,000, as well as surface mineable coal, (3.6 million
tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and
the discharge of a first mortgage due to a former owner of $150,000 for a total
purchase price of $3,890,000. The total purchase price is payable through a
combination of cash, a promissory note and Liberty Coal common shares. To this
date the Company has not been able to close on this agreement.
NOTE 4 - CAPITAL STOCK
The Company has 1,500,000,000 common shares authorized at a par value of $0.001
per share.
On August 31, 2007, the Company issued 1,500,000 common shares to founders for
total proceeds of $15,000.
On May 31, 2008, the Company completed a private placement whereby it issued
960,000 common shares at $0.05 per share for total proceeds of $48,000.
On February 1, 2010, the Company completed a private placement whereby it issued
1,000,000 units for $0.25 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.25 per share expiring February 1, 2012.
On February 1, 2010, the Company issued 100,000 common shares as partial
consideration to acquire the Campbell Property.
On February 11, 2010, the Company completed a private placement whereby it
issued 1,000,000 units for $0.25 per unit. Each unit consists of one common
share and common share purchase warrant allowing the holder to purchase a common
share at $0.25 per share expiring February 1, 2012.
9
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
On March 15, 2010, the Company increased its authorized common shares from
50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock
split. All share amounts reflected in the financial statements have been
adjusted to reflect the results of the stock split.
On March 20, 2010, the Company cancelled 18,000,000 of its common stock
outstanding.
On May 11, 2011, the Company completed a private placement whereby it issued
666,667 units for $0.75 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.82 per share expiring April 30, 2013.
On January 18, 2012, the Company issued 2,000,000 shares @ $0.10 to its CFO and
Director as part of his compensation.
On August 17, 2012, the Company completed a financing whereby it issued
237,732,600 units for a escrowed equity line in the amount of $9,196,500. In
conjunction with this transaction the company also issued common share purchase
warrant to purchase 250,095,420 common shares at an exercise price of $0.07
expiring on August 16, 2018.
On September 10, 2012, the Company issued 17,988,000 shares of common stock to
three non-employee consultants pursuant to the Plan valued at $539,640. The
stock was issued for services to be rendered from September 1, 2012 through
February 28, 2013. As of September 30, 2012, $449,700 had been recorded as
prepaid expenses related to this stock issuance. The balance of the prepaid
consulting was $179,880 as of December 31, 2012.
On September 13, 2012, Liberty Coal Energy Corp. consummated a Securities
Purchase Agreement with Asher Enterprises, Inc. The agreement was entered into
pursuant to a September 4, 2012 resolution of Company's Board of Directors. The
parties agreed that Asher would acquire from the Company five promissory notes
totaling $37,500, due and payable on June 19, 2013 with interest payable at 8%.
The Notes are convertible into Common Shares of the Company, for which the
Company has reserved 10,500,000 shares.
On October 24, 2012, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to an October 24, 2012 resolution of Company's Board of Directors. The parties
agreed that Asher would acquire from the Company five promissory notes totaling
$32,500, due and payable on September 26, 2013 with interest payable at 8%. The
Notes are convertible into Common Shares of the Company, for which the Company
has reserved 14,300,000 shares.
10
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CAPITAL STOCK (CONTINUED)
As of December 31, 2012, the Company had warrants issued as follows:
Warrants
Outstanding at
December 31,
Issue Date Number Price Expiry Date 2012
---------- ------ ----- ----'------- ----
May 11, 2011 666,667 $0.82 May 11, 2013 666,667
August 17, 2012 17,025,000 $0.03 August 17, 2017 17,025,000
August 17, 2012 15,985,920 $0.032 August 17, 2017 15,985,920
August 17, 2012 15,010,250 $0.034 August 17, 2017 15,010,250
August 17, 2012 14,094,130 $0.036 August 17, 2017 14,094,130
August 17, 2012 13,233,930 $0.039 August 17, 2017 13,233,930
August 17, 2012 12,426,220 $0.041 August 17, 2017 12,426,220
August 17, 2012 11,667,810 $0.044 August 17, 2017 11,667,810
August 17, 2012 10,955,690 $0.047 August 17, 2017 10,955,690
August 17, 2012 10,287,040 $0.050 August 17, 2017 10,287,040
August 17, 2012 9,659,190 $0.053 August 17, 2017 9,659,190
August 17, 2012 9,069,660 $0.056 August 17, 2017 9,069,660
August 17, 2012 8,516,110 $0.060 August 17, 2017 8,516,110
August 17, 2012 8,000,260 $0.064 August 17, 2017 8,000,260
August 17, 2012 7,511,990 $0.068 August 17, 2017 7,511,990
August 17, 2012 7,053,510 $0.072 August 17, 2017 7,053,510
August 17, 2012 6,623,010 $0.077 August 17, 2017 6,623,010
August 17, 2012 6,218,790 $0.082 August 17, 2017 6,218,790
August 17, 2012 5,839,240 $0.087 August 17, 2017 5,839,240
August 17, 2012 5,482,850 $0.093 August 17, 2017 5,482,850
August 17, 2012 5,148,220 $0.099 August 17, 2017 5,148,220
August 17, 2012 4,834,010 $0.106 August 17, 2017 4,834,010
August 17, 2012 4,538,980 $0.112 August 17, 2017 4,538,980
August 17, 2012 4,261,950 $0.120 August 17, 2017 4,261,950
August 17, 2012 4,001,830 $0.127 August 17, 2017 4,001,830
August 17, 2012 3,757,590 $0.136 August 17, 2017 3,757,590
August 17, 2012 3,528,250 $0.145 August 17, 2017 3,528,250
August 17, 2012 3,312,910 $0.154 August 17, 2017 3,312,910
August 17, 2012 3,110,720 $0.164 August 17, 2017 3,110,720
August 17, 2012 2,920,860 $0.175 August 17, 2017 2,920,860
August 17, 2012 2,742,590 $0.186 August 17, 2017 2,742,590
August 17, 2012 2,575,200 $0.198 August 17, 2017 2,575,200
August 17, 2012 2,418,030 $0.211 August 17, 2017 2,418,030
August 17, 2012 2,270,450 $0.225 August 17, 2017 2,270,450
August 17, 2012 2,131,880 $0.239 August 17, 2017 2,131,880
August 17, 2012 2,001,760 $0.255 August 17, 2017 2,001,760
August 17, 2012 1,879,590 $0.271 August 17, 2017 1,879,590
----------- -----------
TOTAL 250,762,087 250,762,087
=========== ===========
11
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded.
The cumulative net operating loss carry-forward is approximately $ 1,655,139 at
December 31, 2012, and will expire beginning in the year 2029. The cumulative
tax effect at the expected rate of 34% of significant items comprising our net
deferred tax amount is as follows:
December 31, September 30,
2012 2012
---------- ----------
Deferred tax asset attributable to:
Net operating loss carryover $ 562,747 $ 439,428
Valuation allowance (562,747) (439,428)
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
NOTE 6 - RELATED PARTY TRANSACTION
As of December 31, 2012, there is a balance owing to two officers of the Company
in the amount of $25,504 (September 30, 2012 - $7,504). This amount is included
in accounts payable-related party.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $1,655,139 as of December 31, 2012. Management continues to seek funding
from its shareholders and other qualified investors to pursue its business plan.
In the alternative, the Company may be amenable to a sale, merger or other
acquisition in the event such transaction is deemed by management to be in the
best interests of the shareholders.
12
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS
The Company has agreed to purchase 1,000 acres of surface property at $600,000
surface mineable coal, (3.6 million tons at $.75/ton), underground coal rights
(2.2 million tons at $.20/ton) and the discharge of a first mortgage due a
former owner of $150,000 for a total purchase price of $3,890,000. The total is
payable through a combination of cash, a promissory note and Liberty Coal common
shares.
The company needs to continue to make it minimum lease payments until such time
it can pay an initial $500,000. The minimum payments of $20,000 per month are
applied to the initial payment.
NOTE 9 - SUBSEQUENT EVENTS
On January 14, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 14, 2013 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $10,600, due and payable on
September 26, 2013 with interest payable at 8%. The Note will be funded on
January 16, 2013. The Note is convertible into Common Shares of the Company, for
which the Company has reserved 40,000,000 shares.
On January 24, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 24, 2013 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $32,500, due and payable on
October 28, 2013 with interest payable at 8%. The Note was funded on January 30,
2013. The Note is convertible into Common Shares of the Company, for which the
Company has reserved 64,800,000 shares.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks noted herein in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$), unless
otherwise specified, and are prepared in accordance with United States Generally
Accepted Accounting Principles. All references to "common shares" refer to the
common shares in our capital stock.
As used in this quarterly report, the terms "we," "us," "our Company," and the
"Company" mean Liberty Coal Energy Corp., a Nevada corporation, unless otherwise
indicated.
CORPORATE HISTORY
The address of our principal executive office is 99 18th Street, Suite 3000,
Denver, Colorado 80202. Our telephone number is 888.399.3989.
Our common stock is quoted on the OTC Bulletin Board under the symbol "LBTG."
We were incorporated on August 31, 2007 as "ESL Teachers Inc." under the laws of
the State of Nevada. Our original business plan was to develop and sell online
employment services specifically for both ESL Teachers and ESL operations
seeking to hire teachers worldwide. On March 15, 2010, we changed our name to
Liberty Coal Energy Corp. by way of a merger with our wholly owned subsidiary
"Liberty Coal Energy Corp." which was formed solely for the purpose of the
change of name. The change of name was to better represent the new business
direction of our Company to that of a coal exploration, development, and
production company.
In addition, on March 15, 2010, we effected a 30 for 1 forward stock split of
our authorized and issued and outstanding shares of common stock such that our
authorized capital increased from 50,000,000 shares of common stock, $0.001 par
value per share to 1,500,000,000 shares of common stock, par value $0.001 per
share.
OUR CURRENT BUSINESS
Our primary business focus is to acquire and develop advanced coal properties in
North America. We are currently holding one property- The Owsley Project in
Owsley county, Eastern Kentucky.
OWSLEY COAL PROJECT
On February 1, 2012, the Company entered into a letter of intent for the
acquisition of private mineral leasehold rights to certain coal mining property
in Owsley County, Kentucky with AMS Development LLC. and Colt Resources, Inc.
(the "Owsley Agreement").
The Owsley property covers approximately 1,000 acres and has 3,600,000 tons of
coal recoverable by surface and high wall (auger) methods. There are underground
reserves in place which are not being considered for production at this time.
14
The Owsley project has a permit completed and technically approved by the
Kentucky Department of Natural Resources for the first 80 acre phase. The permit
can be placed on active status and mining initiated by posting a $175,000
reclamation bond. The Company believes mining can be commenced within 90 days of
breaking ground.
In consideration for the mineral property leasehold, the Company paid $80,000 to
purchase the rights to the mining permits and operate under a leasehold. It has
also paid an additional $50,000 to minimal lease payments and accrued another
90,000 which are currently behind. These payments have been capitalized as part
of the purchase price of the property.
As part of the Owsley Agreement, the Company has agreed to enter into a purchase
agreement with AMS Development LLC & Colt Resources, Inc., pursuant to which AMS
& Colt would receive The agreement provides for the purchase of the 1,000 acres
of surface property at $600,000, as well as surface mineable coal, (3.6 million
tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and
the discharge of a first mortgage due to a former owner of $150,000 for a total
purchase price of $3,890,000. The total purchase price is payable through a
combination of cash, a promissory note and Liberty Coal common shares. To this
date the Company has not been able to close on this agreement.
We are an exploration stage company with limited operations and no revenues from
our business activities.
The following is a discussion and analysis of our results of operations for the
quarter ended December 31, 2012, and the factors that could affect our future
financial condition and results of operations.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on our financial statements as of and for the years ended September 30,
2012 and 2011, regarding concerns about our ability to continue as a going
concern.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our financial statements for the quarter ended December 31, 2012 which are
included herein.
THREE MONTHS ENDED DECEMBER 31, 2012 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2011
The following table summarizes key items of comparison for the three months
ended December 31, 2012, and 2011:
Three Months Ended
December 31,
2012 2011
-------- --------
Amortization $ 422 $ 422
General and administrative 1,244 10,939
Legal and accounting 15,433 11,433
Investor relations 39,200 4,200
Consulting 304,320 22,500
Transfer agent 325 100
Interest Expense 1,759 --
-------- --------
NET LOSS $362,703 $ 49,594
======== ========
We had a net loss of $362,703 for the quarter ended December 31, 2012, which was
an increase of $313,109 compared to the net loss of $49,594, for the quarter
ended December 31, 2011. The significant change in our results over the two
periods is primarily the result of management's activities around the Company's
projects and a 3rd party consulting expense as the Company expensed $269,820 of
these contracts from prepaid expenses during the three months ended December 31,
2012.
15
PERIOD FROM INCEPTION, AUGUST 31, 2007 TO DECEMBER 31, 2012
Since inception, we have an accumulated deficit of $1,655,139. We expect to
continue to incur losses as a result of continued exploration and development of
our coal mining interests.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of December 31, 2012, reflects assets of $413,186. We had
cash in the amount of $7,556 and working capital in the amount of $(47,498) as
of December 31, 2012.
Three Months Three Months
Ended Ended
December 31, December 31,
2012 2011
-------- --------
Net Cash Provided by (Used in)
Operating Activities $ 23,691 $(35,922)
Net Cash (Used in) Investing Activities (60,000) --
Net Cash Provided by Financing Activities 32,500 --
-------- --------
Increase (Decrease) in Cash $ (3,809) $(35,922)
======== ========
Our current cash requirements are significant due to planned exploration and
development of our current coal mining property interests, and we anticipate
generating losses. In order to execute on our business strategy, including the
exploration and development of our current coal interest, we will require
additional working capital, commensurate with the operational needs of our
planned projects and obligations. Our management believes that we should be able
to raise sufficient amounts of working capital through debt or equity offerings,
as may be required to meet our short-term obligations. However, changes in our
operating plans, increased expenses, acquisitions, or other events, may cause us
to seek additional equity or debt financing in the future. We anticipate
continued and additional operations on our properties. Accordingly, we expect to
continue to use debt and equity financing to fund operations for the next twelve
months, as we look to expand our asset base and fund exploration and development
of our properties.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
or continued operations in the future.
OPERATING ACTIVITIES
Net cash flow provided by operating activities during the three months ended
December 31, 2012 was $23,691, a change of $59,613 from the $(35,922) net cash
used in operating activities during the three months ended December 31, 2011.
INVESTING ACTIVITIES
Net Investing activities during the three months ended December 31, 2012 used
$(60,000) of cash, an increase of $60,000 from the nil cash used in Investing
Activities during the three months ended December 31, 2011.
FINANCING ACTIVITIES
Net Financing activities during the three months ended December 31, 2012 brought
in 32,500, an increase of $32,500 from the nil cash brought in by Financing
Activities during the three months ended December 31, 2011.
16
APPLICATION OF CRITICAL ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses, accounts
payable and accrued liabilities, amounts due to officers and convertible notes
payable.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States 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 during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
17
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's financial statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's financial statements.
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value.
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RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
REVENUES
We have not generated revenues since inception.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting issuer," we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our chief executive officer
and chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this quarterly report. Based on this evaluation, our chief
executive officer and our chief financial officer (our principal executive
officer, principal financial officer and principal accounting officer) concluded
that our disclosure controls and procedures are effective as of December 31,
2012 to ensure that information we are required to disclose in reports that we
file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and (ii) is accumulated
and communicated to our management, including our chief executive officer and
our chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), as appropriate, to allow
timely decisions regarding required disclosure. Our disclosure controls and
procedures are designed to provide reasonable assurance that such information is
accumulated and communicated to our management. Our disclosure controls and
procedures include components of our internal control over financial reporting.
Management's assessment of the effectiveness of our internal control over
financial reporting is expressed at the level of reasonable assurance that the
control system, no matter how well designed and operated, can provide only
reasonable, but not absolute, assurance that the control system's objectives
will be met.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
Company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered beneficial shareholder, is an adverse
party or has any material interest adverse to our interest.
19
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On October 24, 2012, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a October 24, 2012 resolution of Company's Board of Directors. The parties
agreed that Asher would acquire from Company five promissory notes totaling
$32,500, due and payable on September 26, 2013 with interest payable at 8%. The
Notes are convertible into Common Shares of the Company, for which the Company
has reserved 14,300,000 shares
On January 14, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 14, 2013 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $10,600, due and payable on
September 26, 2013 with interest payable at 8%. The Note will be funded on
January 16, 2013. The Note is convertible into Common Shares of the Company, for
which the Company has reserved 40,000,000 shares.
On January 24, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 24, 2013 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $32,500, due and payable on
October 28, 2013 with interest payable at 8%. The Note was funded on January 30,
2012. The Note is convertible into Common Shares of the Company, for which the
Company has reserved 64,800,000 shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
None.
20
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 originally filed on January
23, 2008).
3.2 By-laws (Incorporated by reference to our Registration Statement
on Form S1/A filed on February 27, 2008).
3.3 Articles of Merger (Incorporated by reference to our Current
Report on Form 8-K filed on March 29, 2010).
3.4 Certificate of Change (Incorporated by reference to our Current
Report on Form 8-K filed on March 29, 2010).
10.1 Form of Subscription Agreement (Incorporated by reference to our
Quarterly Report on Form 10-Q filed on May 16, 2011)
10.2 Second Amended Agreement by and between Liberty Coal Energy Corp.
and Rocking Hard Investments, LLC, dated May 2, 2010 (Incorporated
by reference to our Quarterly Report on Form 10-Q filed on May 16,
2011)
31.1* Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
101* Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* Filed herewith
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY COAL ENERGY CORP.
Date: February 14, 2013 /s/ Robert T. Malasek
--------------------------------------
ROBERT T. MALASEK
Chief Financial Officer, Secretary and
Director (Principal Financial Officer
& Principal Accounting Officer)
2
