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EX-21.1 - SUBSIDIARIES - Liberated Solutions, Inc.f10q_211-libe.htm
EX-31.1 - RULE 13A-14(A) / 15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Liberated Solutions, Inc.f10q_311-libe.htm
EX-32.1 - SECTION 1350 CERTIFICATIONS OF CEO - Liberated Solutions, Inc.f10q_321-libe.htm
EX-32.2 - SECTION 1350 CERTIFICATIONS OF CFO - Liberated Solutions, Inc.f10q_322-libe.htm
EX-31.2 - RULE 13A-14(A) / 15D-14(A) CERTIFICATION OF CHIEF FINANCIAL OFFICER - Liberated Solutions, Inc.f10q_312-libe.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
Form 10-Q
 
 
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
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ to _______.
 
Commission file number 333-171046
 
 
 

 
LIBERATED ENERGY, INC.
(Exact name of registrant as specified in its charter)
 

Nevada
 
27-4715504
(State or other jurisdiction
 
(I.R.S. Employer Identification No.)
 of icorporation or organization)    

109 Burtons Road
   
Marlton, New Jersey
 
08053
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number including area code (609) 707-1519

 
(Former Name or Former Address, if changed since last report)

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

None

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

Common Stock, $0.0001 par value

 
1

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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  oNo
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)  x Yes    o 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 o
   
 Accelerated filer  o
 
 
 Non-accelerated filer o   (Do not check if a smaller reporting company)
   
 Smaller reporting company x
 
           
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No   x
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o

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: 72,000,000 shares of common stock issued and outstanding as of February 19, 2013.
 
 
2

 
 
LIBERATED ENERGY, INC.
 
FORM 10-Q
 

 
Item #
 
Description
 
Page Numbers
           
   
PART I
 
 5
 
           
ITEM 1
 
FINANCIAL STATEMENTS
 
5
 
           
ITEM 2
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
21
 
           
ITEM 3
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 25
 
           
ITEM 4
 
CONTROLS AND PROCEDURES
 
25
 
           
   
PART II
 
 26
 
           
ITEM 1
 
LEGAL PROCEEDINGS
 
26
 
           
ITEM 1A
 
RISK FACTORS
 
26
 
           
ITEM 2
 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
26
 
           
ITEM 3
 
DEFAULTS UPON SENIOR SECURITIES
 
27
 
           
ITEM 4
  MINE SAFETY DISCLOSURES  
27
 
           
ITEM 5
 
OTHER INFORMATION
 
27
 
           
ITEM 6
 
EXHIBITS
 
 27
 
           
   
SIGNATURES
 
28
 
           
EXHIBIT 21.1   SUBSIDIARIES      
           
EXHIBIT 31.1
 
SECTION 302 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
     
           
EXHIBIT 31.2
 
SECTION 302 CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
     
           
EXHIBIT 32.1
 
SECTION 906 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
     
           
EXHIBIT 32.2
 
SECTION 906 CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
     
 
 
 
3

 
INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE
 
This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent annual report on Form 10-K, and any updated risk factors we include in our quarterly reports on Form 10-Q and other filings with the SEC. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
 
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
 
     
 
risks arising from material weaknesses in our internal control over financial reporting, including material weaknesses in our control environment;
     
 
our ability to attract new clients and retain existing clients;
     
 
our ability to retain and attract key employees;
     
 
risks associated with assumptions we make in connection with our critical accounting estimates;
     
 
potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments;
     
 
potential downgrades in the credit ratings of our securities;
     
 
risks associated with the effects of global, national and regional economic and political conditions, including fluctuations in economic growth rates, interest rates and currency exchange rates; and
     
 
developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world.
 
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our September 30, 2012 Annual Report on Form 10-K and other filings with the SEC.
 
 
4

 
 

 
LIBERATED ENERGY, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012
 
CONTENTS
 
 
Consolidated Balance Sheets as of December 31, 2012 (Unaudited) and September 30, 2012 
Page      6

Consolidated Statements of Operations for the three months ended December 31, 2012 and 2011 (unaudited)
  7

Consolidated Statements of Cash Flows for the three months ended December 31, 2012 and December 31, 2011 (unaudited)
  8
 
Notes to Consolidated Financial Statements (Unaudited)
  9

 
 
5

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
 
CONSOLIDATED BALANCE SHEET
 
     
 
   
   
December 31, 2012
   
September 30, 2012
 
ASSETS
   (Unaudited)        
             
CURRENT ASSETS:
           
          Cash and Cash equivalents
 
$
3,904    
$
3,904
 
          Prepaid rent deposit, net
    --      
--
 
          Prepaid deposit to supplier
   
38,000
     
38,000
 
                     Total current assets
    41.904      
41,904
 
                 
           TOTAL ASSETS
 
$
41,904
   
$
41,904
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
           Accounts Payable
 
44,250
    $
44,250
 
                     Total current liabilities
   
44,250
     
44,250
 
                 
OTHER CURRENT LIABILITIES:                
            Loans from Shareholders               88,737       88,737  
                      Total Other Current Liabilities     88,737       88,387  
                 
           TOTAL LIABILITIES     132,987       132,987  
                 
STOCKHOLDERS’ EQUITY
               
              Preferred Stock:
               
              10,000,000 shares authorized par value $0.001 per share; none issued and outstanding
    --        --   
      Common Stock:
               
              100,000,000 shares authorized par value $0.001 per share; 25,000,000 issued and outstanding
   
25,000
     
25,000
 
      Additional paid-in-capital
   
73,125
     
73,125
 
               Deficit accumulated during the development stage     (189,248     (189,248
       Accumulated other comprehensive income (deficit)
   
40
 
   
40
 
                 
  TOTAL STOCKHOLDERS’ DEFICIT
   
(91,083
   
(91,083
)
                 
              TOTAL LIABILITIES AND EQUITY
 
$
41,904
   
$
41,904
 

The accompanying notes are an integral part of these financial statements.
 
 
6

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
 
CONSOLIDATED STATEMENTS OF LOSS
 
 
(Unaudited)
 
 
   
 
         
Cumulative from
 
   
For the Three Months Ended
   
June 24, 2010
 
   
December 31,
   
(Date of Inception)
 
   
2012
   
2011
   
to December 31, 2012
 
Revenues
  $ -     $ -     $ 20,000  
Costs of Goods Sold
    -       -       (16,800 )
                         
    Gross Profit
    -       -       3,200  
                         
Operating Expenses
                       
       General and Administrative
    -       8,979       192,448  
             Total Operating Expenses     -       8,979       192,448  
                         
Operating Loss
    -       (8,979 )     (189,248 )
                         
Other Income (Expense)
    -       -       -  
Interest Expense
    -       -       -  
                         
    Net Loss Before Taxes
    -       (8,979 )     (189,248 )
                         
    Net Loss
  $ -     $ (8,979 )   $ (189,248 )
                         
Loss per Share, Basic & Diluted
  $ (0.00 )   $ (0.00 )        
                         
Other comprehensive loss, net of tax                        
      Foreign currency translation adjustments     -       -       40  
                         
Comprehensive Income (Loss)   $ -     $ (8,979   $ (189,208
                         
Weighted Average Shares
                 
Outstanding
    25,000,000       25,000,000          
                         
The accompanying notes are an integral part of these financial statements.
 
 
 
7

 
     Table of Content
  LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   
 
(Unaudited)
 
 
   
For the Three Months Ended
   
June 24, 2010
 
    December 31,    
(Date of Inception)
 
   
2012
   
2011
   
to December 31, 2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
             
Net Loss
  $ -     $ (2,739 )   $ (189,248 )
                         
Adjustments to reconcile net income to net cash provided by operating activities:
                       
     Non-cash portion of shares based legal fee expense
    -       -       2,500  
     Non-cash portion of shares based consulting expense
    -       -       24,750  
     Prepaid deposit to supplier
    -       -       (38,000
     Prepaid rent deposit
    -       2,509       --  
     Account Payable
    -       -       44,250  
      Loan from Shareholders     -       220       88,737  
Net Cash Provided in Operating Activities
    -       -       (67,011 )
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                 
Net cash provided by Investing Activities
    -       -       --  
                         
CASH FLOWS FROM FINANCING ACTIVITIES:
                 
     Proceeds from issuance of common stock
    -       -       70,875  
Net Cash Provided by Financing Activities     -       -       70,875  
                         
Effect of Exchange Rate on Cash
    -       -       40  
Net increase (decrease) in cash and cash equivalents     3,904       3,956       3,904  
Cash and cash equivalents at Beginning of the Period
    -       -       -  
Cash and cash equivalents at End of Period
  $ 3,904     $ 3,956     $ 3,904  
                         
                         
 
                 
 The accompanying notes are an integral part of these financial statements.
 
 
8

 
 
 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
  CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE A- BUSINESS DESCRIPTION

Organization

Liberated Energy, Inc. formerly known as Mega World Food Holding Company (the Company) is a Nevada corporation formed on September 14, 2010.  At September 14, 2010, the Company acquired 100% ownership of Mega World Food Limited (HK), a Hong Kong China corporation formed in June 24, 2010, owned 100% by founder, chairman and director, Mr. Xiaozhong Wu.   At September 14, 2010, the Company issued 14,972,120 common shares at par value of $0.001 to founder, chairman and director, Mr. Xiaozhong Wu, to acquire 100% ownership of Mega World Food Limited (HK).  Mega World Food Limited (HK) is wholly-owned subsidiary of the Company. The purpose of this transaction was solely to form a U.S. holding company for the business, and this transaction is considered as a combination between entities under common control under the guidance of FASB ASC 805-50-25-2 and 805-50-45.
 
The principal executive office is located at ROOM C1D, 6/F, WING HING INDUSTRIAL BUILDING, 14 HING YIP STREET, KWUN TONG, KOWLOON, HONG KONG.  The U.S. address is 1995 Baring Blvd., Sparks, NV 89434.

Business

Through wholly-owned subsidiary Mega World Food Limited (HK), referred to as Mega World HK, the Company’s business is the sale of frozen vegetables in all areas of the world except China.

The Company will sell the following types of frozen vegetables:  frozen bamboo shoots, frozen mulberry, frozen white cauliflower, frozen lotus root, frozen green soy bean, frozen broccoli, frozen rape flower, frozen snow bean and frozen sward bean.

These food products are produced in China by Lin’an Fengye Food Co., Ltd. (“Lin’an Fengye” or “Supplier”).  It was established in 2006 specializing in the growing and processing of frozen vegetables, and is located Maoli Village, Longgang Town, Lin’an City, Zhejiang Province.  On August, 1, 2010, Mega World Limited signed a ten year distribution agreement with Lin’an Fengye.  Lin’an Fengye is a Chinese vegetable processing company owned 51% by Mr. Xiaozhong Wu, our shareholder.  Lin’an Fengye is currently the primary supplier of the products we sell.  Under the distribution agreement, we are not prohibited from distributing products produced and supplied by entities other than the Supplier.
 
 
9

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
  CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
Business (Continue)

The prices to be paid by for Products purchased pursuant to the Distribution Agreement shall be the same price as Supplier charges other non-affiliated third party distributors or other sales made on a wholesale basis as modified from time to time in Supplier’s discretion but only if the same modification is made for other non-affiliated third party distributors or wholesale purchasers.  Supplier has further agreed that it will not require us to purchase a quantity of products in excess of that which we can reasonably afford or reasonably expect to sell in within two to three months of our purchase of the Products.

Going Concern and Plan of Operation

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is in the development stage and has not earned any revenues from operations to date. These conditions raise substantial doubt about its ability to continue as a going concern.  These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE B – SIGNIFICANT ACCOUNTING POLICIES

Development Stage Company

The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) ASC 915, “Development Stage Entities”. The Company has devoted substantially all of its efforts to establishing a new business and for which either of the following conditions exists: planned principal operations have not commenced; or the planned principal operations have commenced, but there has been no significant revenue there from.  Due to the Company’s primary efforts was on the formation of new company, and there were no sales activities incurred, accordingly, the Company is considered as development stage entity.
 
Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect certain amounts reported in the financial statements and disclosures.  Accordingly, actual results could differ from those estimates.
 
 
 
10

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of accounting

The financial statements reflect the assets, revenues and expenditures of the Company on the accrued basis of accounting.  The Company’s fiscal year end is the last day of September 30.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Mega World Food Holding Company and Mega World Food Limited (HK).  All significant intercompany balances and transactions have been eliminated in consolidation

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2012, the company had cash and cash equivalents of $3,904.

Stock-Based Compensation

The Company accounts for stock issued for services using the fair value method.  In accordance with FASB ASC 718, Stock-Based Compensation, the measurement date of shares issued for services is the date at which the counterparty’s performance is complete.
 
The Company incurred legal fee of $2,500 and consulting fee of $24,750 by issuing common stocks after the service completed.

Basics and Diluted Net Loss Per Common Share

The Company computes per share amounts in accordance with Statement of Financial Accounting Standards (SFAS) ASC 260, Earnings per Share (EPS).  ASC 260 requires presentation of basis and diluted EPS.  Basic EPS is computed by dividing the income (loss) available to Common Shareholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the periods.

As of December 31, 2012, the Company only issued one type of shares, i.e., common shares only.  There are no other types securities were issued.  Accordingly, the diluted and basics net loss per common share are the same.
  
 
11

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE B – SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant, and Equipment Depreciation

Property, plant, and equipment are stated at cost.  Depreciation is being provided principally by straight line methods over the estimated useful lives of the assets.  As of December 31, 2012, there were no fixed assets in the Company’s balance sheets.

Operating Expense

For the fiscal quarter ended December 310, 2012 and 2011, there was a total of $0 and $ 8,979 operating expenses respectively. Detail was showed in Exhibit A.
 
Operating Leases
  
The Company entered into a lease for its corporate offices in under terms of non-cancelable operating leases in Hong Kong. The lease term is from August 01, 2011 through July 31, 2012 and requires a HKD 6,500 monthly lease payment, and this office is located at Wing Hing Industrial Building, 14 Hing Yip Street, Kwun Tong, Kowloon, Hong Kong.

Comprehensive Income

The company’s comprehensive income is comprised of net income, unrealized gains and losses on marketable securities classified foreign currency translation adjustments, and unrealized gains and losses on derivative financial instruments related to foreign currency hedging.

Recent Accounting Pronouncements

The following pronouncements have become effective during the period covered by these financial statements or will become effective after the end of the period covered by these financial statements:
 
 
12

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
Recent Accounting Pronouncements ( Continue)
 
Pronouncement
 
Issued
 
Title
ASC 605
 
October 2009
 
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force
ASC 860
 
December 2009
 
Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets
ASC 505
 
January 2010
 
Accounting for Distributions to Shareholders with Components of Stock and Cash – a consensus of the FASB Emerging Issues Task Force
ASC 810
 
January 2010
 
Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification
ASC 718
 
January 2010
 
Compensation – Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation
ASC 820
 
January 2010
 
Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements
ASC 810
 
February 2010
 
Consolidation (Topic 810): Amendments for Certain Investment Funds
ASC 815
 
March 2010
 
Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives
ASC-310 Receivables
 
July 2010
 
For public entities, the disclosure as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. For nonpublic entities, the disclosures are effective for annual reporting period ending on or after December 15, 2011.
 
Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.
 
 
13

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE C – RELATED PARTY TRANSACTIONS

Loans from Shareholders/Officers

Since the date of Company’s inception on June 24, 2010, the officers and directors of the Company have advanced the amount of $85,236 to the Company for incorporation and operation as of December 31, 2012. The outstanding balance is due on demand and no agreement was signed.
 
Cost of Goods Sold

These food products are manufactured in China by Lin’an Fengye Food Co., Ltd. (“Lin’an Fengye” or “Supplier”).  It was established in 2006 specializing in the growing and processing of frozen vegetables, and is located Maoli Village, Longgang Town, Lin’an City, Zhejiang Province.  On August, 1, 2010, Mega World Limited signed a ten year distribution agreement with Lin’an Fengye.  Lin’an Fengye is a Chinese vegetable processing company owned 51% by Mr. Xiaozhong Wu, our shareholder.  Lin’an Fengye is currently the main supplier of the Company.  Under the distribution agreement, we are not prohibited from distributing products produced and supplied by entities other than the Supplier.

The prices to be paid by for Products purchased pursuant to the Distribution Agreement shall be the same price as Supplier charges other non-affiliated third party distributors or other sales made on a wholesale basis as modified from time to time in Supplier’s discretion but only if the same modification is made for other non-affiliated third party distributors or wholesale purchasers.

Prepaid Deposit to Supplier

In March 2011, the Company prepaid $ 38,000 deposit to supplier, Lin’an Fengye Food Co., Ltd, for ensuring timely delivery for later purchases.

Therefore, as of December 31, 2012, the Company had $ 38,000 prepaid deposit to supplier.
 
 
14

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE D – SHAREHOLDERS’ EQUITY

Common Stock

Under the Company’s Articles of Incorporation of the Company, the Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.001; and 10,000,000 shares of preferred stocks with par value of $0.001.

Liberated Energy, Inc. formerly Mega World Food Holding Company (the Company) is a Nevada corporation formed on September 14, 2010.  On September 14, 2010, the Company acquired 100% of ownership of Mega World Food Limited (HK), a Hong Kong China corporation formed in June 24, 2010, and owned 100% by founder, Mr. Xiaozhong Wu.  At September 14, 2010, the Company issued 14,972,120 common shares at par value of $0.001 for the total amount of $14,972.12 to Mr. Xiaozhong Wu to exchange the ownership of the Mega World Food Limited (HK), for the same amount of value of Mega World Food Limited (HK).  After the acquisition, Mega World Food Limited (HK) is wholly-owned subsidiary of the Company.

The Company issued shares as of December 31, 2012 are listed as follows:

   
Common Stock
 
   
Shares
 
       
Issued common stocks to founder at $0.001 per share for organization expenses on 9/14/2010
    14,972,120  
         
Issued common stocks to founder at $0.001 per share for consulting expenses paid by cash on 9/14/2010
    5,902,880  
         
Issued common stocks to Williams @$0.01 per share for services rendered on 9/20/2010
    250,000  
         
Issued common stocks to Jian Di  @$0.01 per share  for services rendered on 9/20/2010
    2,475,000  
         
Issued common stocks to Yuan Su and Guoyong Xu @$0.01 per share for cash on 9/20/2010
    1,000,000  
         
Issued common stocks to 40 shareholders @$0.1 per share for cash on 9/30/2010
    400,000  
         
Balance, December  31, 2012
   
25,000,000
 
  
 
15

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE D – SHAREHOLDERS’ EQUITY (Continued)

On September 30, 2010, the Company issued 25,000,000 shares of its common stock to total 45 shareholders, including restricted shares issued to Founder, Xiaozhong Wu, consultant JianDi & Yuan Su; and non-affiliated other 42 shareholders, equal to the equity value of $59,112.

The restricted common shares were issued as follows:

   
Total Shares
   
%
 
             
Xiaozhong Wu, Chairman & CEO
   
20,875,000.00
     
83.50
%
Jian Di*
   
2,475,000.00
     
9.90
%
Yuan Su*
   
500,000.00
     
2.00
%
                 
Total
   
23,850,000.00
     
95.40
%
_______
* Jian Di and Yuan Su are husband and wife.
 
The percentage calculation is based on the total outstanding 25,000, 000 shares

There were no any shares issued for the period from October 1 to December 31, 2012.

On May 25, 2012, Mr. Wu resigned as Chairman, CEO and Director, and transferred the following shares to the following individuals who were the same date elected new officers and directors with the title, age and percentage ownership as set forth below:

Name
Title
Age
Number of Shares of Common Stock
Percentage
Lingling Wang
CEO and Director
37
11,000,000
44.00%
Lin Xiang Wang
General Manager and Director
33
500,000
2.00%
Guangqing Chen
Vice General Manager and Director
44
500,000
2.00%
Hanjun Shi
Vice  Manager
34
30,000
0.12%
Ke Wu
CFO/Principal Accounting Officer
21
20,000
0.08%
Shaoyun Zhou
Manager
30
50,000
0.20%
Total
   
12,100,000
48.40%

Therefore, as of December 31, 2012, there was total share of 25,000,000 outstanding.
  
 
16

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE E – Acquisition of Mega World Food Limited (HK)

On September 14, 2010, Liberated Energy, Inc. then known as Mega World Food Holding Company (the Company) acquired the 100% ownership of a Hong Kong company, Mega World Food Limited (HK) owned by Mr. Xiaozhong Wu.  Mega World Food Limited (HK) was incorporated on June 24, 2010, and incurred setting up, formation or organization activities since June 24, 2010.  Mega World Food Limited (HK) is wholly-owned subsidiary of the Company. The purpose of this transaction was solely to form a U.S. holding company for the business, and this transaction is considered as a combination between entities under common control under the guidance of FASB ASC 805-50-25-2 and 805-50-45.
 
Under the guidance of FASB ASC 805-50-25-2 and 805-50-45, the accounting of the two entities combination was recorded as combined two entities’ book value, or pooling of interest accounting.
 
The Company incurred registration fee, travel expense, and rent expense for setting up Mega World Food Limited in Hong Kong from June 24, 2010 to September 14, 2010.  The total expense incurred in Hong Kong prior September 14, 2010, the inception date of Mega World Food Holding Company incorporated in the State of Nevada, was fully expensed and listed as follows:
 
Mega World Food Limited (HK) Expense Prior 9/14/2010
     
Bank Service Charges
   
61.75
 
Registration Fee
   
2,947.05
 
Rent Expense
   
1,226.44
 
Travel Expense
   
1,218.69
 
Total Expense Prior 9/14/2010
  $
5,453.93
 

The following table summarizes the amounts recognized for assets and liabilities assumed as of the acquisition date, September 14, 2010.

As of September 14, 2010:
 
HSBC Bank Balance 
 
$
710.15
 
Prepaid Rent Deposit   
 
$
8,808.04
 
Loan from Mr. Xiaozhong Wu
 
$
14,972.12
 
 
At September 14, 2010, total consideration of $14,972.12 (common shares of 14,972,120 at $0.001) was transferred to Mr. Xiaozhong Wu.
 
  
 
17

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE F– GOING CONCERN

The Company is currently in the development stage and their activities consist solely of corporate formation, raising capital, and attempting to sell products to generate revenues.
 
There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations and carry out its business plan.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern
 
The financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.
 
The Company’s lack of operating history and financial resources raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include adjustments that might result from the outcome of this uncertainty and if the Company is unable to generate significant revenue or secure financing, then the Company may be required to cease or curtail its operations.
 
NOTE G – INCOME TAXES

The Company has incurred net losses since inception. The Company has not reflected any benefit of such net operating loss carry forward in the accompanying financial statements.  The net operating loss can be carried forward for 15 years.
 
The income tax benefit differed from the amount computed by applying the estimated US federal income tax rate of 15% to net loss as a result of the following:
 
   
2010
 
Computed expected tax benefit
   
(15.00
) %
State income tax, net of federal benefit
   
(7.30
)
Valuation allowance
   
22.30
 
         
Income tax benefit
   
-
%
 
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2012 is presented below:
 
  
 
18

 
     Table of Content
   LIBERATED ENERGY, INC. AND SUBSIDIARY  
   (A Development Stage Company)  
   CONSOLIDATED NOTES TO FINANCIAL STATEMENTS  
 
NOTE G – INCOME TAXES (Continued)

Deferred Tax Assets:
 
   
2011
 
Valuation allowance
 
$
-
 
Registration Fee for start-up costs
   
-
 
Net deferred tax assets
 
$
-
 
 
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible.
 
 
NOTE H – SUBSEQUENT EVENTS
 
On January 23, 2013, the Company issued an aggregate of 2,500,000 shares of the Company's common stock, par value $.001 per share, to the eighteen (18) shareholders of Perpetual Wind Power Corporation ("Perpetual Wind") for the rights to its wind and solar powered turbine technology for which it has a patent pending with the United States Patent and Trademark office (U.S. Patent App. Serial No. 61/257,578) as submitted on November 3, 2009 by Woodcock Washburn, a US law firm specializing in intellectual property law and as demonstrated on Perpetual Wind’s website at www.perpwindpower.com (the “Perpetual Wind Patent”).  As additional consideration, Perpetual Wind is returning to the Company's treasury, the 24,500,000 shares of common stock of the Company that it acquired from thirteen (13) shareholders of the Company this same day.  As a result, a change of control of the Company took place on this date, whereby said (18) shareholders of Perpetual Wind now own 2,500,000 of the Company's common stock out of a total of 3,000,000 total common stock outstanding.

On January 23, 2013, Lingling Wang, Lin Xiang Wang, Guangquing Chen, Hanjun Shi, Key Wu and Shaoyun Zhou presented to the Board of the Company a letter of resignation whereby they resigned from their positions as officers and directors with the Company, effective at 11;59 A.M. on January 23, 2013.  Their resignation was not the result of any disagreements with the Company on any matters relating to the Company’s operations, policies or practices.

On January 23, 2013, the stockholders of the Company holding a majority in interest of the Company’s voting equity, approved by written consent and the members of the board of directors (the “Board”) of the Company approved by unanimous written consent, (i) the acceptance of resignation of Lingling Wang, Lin Xiang Wang, Guangquing Chen, Hanjun Shi, Key Wu and Shaoyun Zhou from their positions as officers and directors of the Company, and (ii) the appointment of Mr. Frank Pringle as Chief Executive Officer and Director and Ms. Elyse M. Thompson as Chief Financial Officer, Secretary and Director of the Company.

On February 6, 2013, the Company changed its name officially to Liberated Energy, Inc. by filing a Certificate of Amendment to its Articles of Incorporation, pursuant to Nevada Revised Statutes 78.385 and 78.390 with the office of the Secretary of State for the State of Nevada, Document Number 20130082024-92.

Im addition, on February 6, 2013, at 8:30 AM the Company filed a Certificate of Change pursuant to Nevada Revised Statutes 78.209 with the office of the Secretary of State for the State of Nevada, Document Number 20130082024-92 whereby the Company agreed that for each Common Stock, the shareholders will receive twenty-four Common Stock, $0.001 par value.  Total Common Stock, $0.001 par value increased from 3,000,000 to 72,000,000 issued and outstanding.

On February 14, 2013, the Company received confirmation from OTC Corporate Actions that effective February 15, 2013 the following has been approved:

·  
24-1 Forward Split payable upon surrender of old certificates
·  
Pre-Split Total Shares Outstanding (prior to February 13, 2013): 3,000,000
·  
Post-Split Total Shares Outstanding (as of February 15, 2013): 72,000,000
·  
New CUSIP: 53012R105
·  
New Name: Liberated Energy, Inc.
·  
New Symbol: LIBE
                                                                  The new symbol will not take effect until 20 business days from the effective date of the Forward Split & Name Change.
 
 
19

 
Exhibit A

               
Cumulative from
 
   
Three Month Ended
   
Three Month Ended
   
June 24, 2010
 
   
December 31,
   
December 31,
   
(Date of Inception)
 
Expense
 
2012
   
2011
   
to December 31, 2012
 
Bank Service Charges
   
-
     
-
     
381
 
Postage and Delivery
   
-
     
-
     
19
 
Registration fee
   
-
     
220
     
7,566
 
Professional Fees
                       
Auditing/Accounting Fee
   
-
     
-
     
42,500
 
Consulting Expense
   
-
             
56,153
 
SEC filling Fee
   
-
     
-
     
7,499
 
Legal fee
   
-
     
6,250
     
43,250
 
Total Professional Fees
   
-
     
6,250
     
149,402
 
Rent Expense
   
-
     
2,509
     
20,069
 
Travel Expense
   
-
     
-
     
1,219
 
SEC Edgarzation Fee
   
-
     
-
     
-
 
Transfer Agent Service
   
-
     
-
     
13,792
 
Total Expense
   
-
     
8,979
     
192,448
 
 
 
 
 
20

 
 

FORWARD LOOKING INFORMATION

This section and other parts of this Form 10-Q quarterly report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, that involves risks and uncertainties. All statements other than statements of historical facts, included in this Form 10-Q that address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of our business and operations, plans, references to future success, reference to intentions as to future matters, and other such matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, uncertainties, and other factors, many of which are beyond our control.
 
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. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results.
 
BASIS OF PRESENTATION
 
The unaudited financial statements of Liberated Energy, Inc. formerly Mega World Food Holding Company, a Nevada corporation (“Liberated”, “Mega World.”, “the Company”, “our”, or “we”) for the period ended December 31, 2012, should be read in conjunction with the notes thereto. In the opinion of management, the unaudited financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation.  Interim results are not necessarily indicative of results to be expected for the entire year.
 
We prepare our financial statements in accordance with U.S. generally accepted accounting principals, which require that management make estimates and assumptions that affect reported amounts.  Actual results could differ from these estimates.
 
Certain statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
 
Results of Operations

For the three months ended December 31, 2012 vs. December 31, 2011:

Revenue
 
Revenues are recognized from product sales upon shipment, which is the point in time when risk of loss is transferred to the customer, net of estimated returns and allowances.

For the three months ended December 31, 2012 and December 31, 2011, the Company incurred no revenue, respectively.

Cost of Revenue

Our food products are manufactured in China by Lin’an Fengye Food Co., Ltd. (“Lin’an Fengye” or “Supplier”).  It was established in 2006 specializing in the growing and processing of frozen vegetables, and is located Maoli Village, Longgang Town, Lin’an City, Zhejiang Province.  On August, 1, 2010, Mega World Limited signed a ten year distribution agreement with Lin’an Fengye.  Lin’an Fengye is a Chinese vegetable processing company owned 51% by Mr. Xiaozhong Wu, our chairman.  Lin’an Fengye is currently the main supplier of the Company.  The management believes that the purchase price from Lin’an Fengye will be market price.

For the three months period ended December 31, 2012 and December 31, 2011, the total cost of goods sold was zero, $0, respectively.
 
 
 
21

 
Expense

Our operating expenses consist of selling, general and administrative expenses.

For three month period ending December 31, 2012, we incurred no selling, general and administrative expenses.
 
For three month period ending December 31, 2010, there was a total of $8,979 operating expenses, which include rent expense of $2,508.63, legal fee of $6,250, and the Company’s registration fee of $220.
 
We expect selling, general, and administrative expenses to increase as we change directions for the Company.

Income Taxes

We are subject to income taxes in the U.S., while the subsidiary in Hong Kong is subject to the income tax laws of Hong Kong.  Due to the accumulative net loss, we would not subject to both US and Hong Kong’s income taxes yet.

Net Income(Loss)

As a result of the foregoing, we incurred no additional loss for the three month period ended December 31, 2012, and net loss of $8,979 for the three month period ended December 31, 2011, respectively.

We expect selling, general, and administrative expenses to increase in future periods as we initiate a number of marketing and promotional activities.

Income Taxes

We are subject to income taxes in the U.S., while the subsidiary in Hong Kong is subject to the income tax laws of Hong Kong.  Due to the accumulative net loss, we would not subject to both US and Hong Kong’s income taxes yet.

Commitments and Contingencies

Our food products are manufactured in China by Lin’an Fengye Food Co., Ltd. (“Lin’an Fengye” or “Supplier”).  It was established in 2006 specializing in the growing and processing of frozen vegetables, and is located Maoli Village, Longgang Town, Lin’an City, Zhejiang Province.  On August, 1, 2010, Mega World Limited signed a ten year distribution agreement with Lin’an Fengye.  Lin’an Fengye is a Chinese vegetable processing company owned 51% by Mr. Xiaozhong Wu, our chairman.  Lin’an Fengye is currently the primary supplier of the products we sell.

Foreign Currency Translation

The Company has determined the United States dollars to be its functional currency for Mega World Food Holding Company; Hong Kong dollars to be its functional currency in Hong Kong’s Mega World Food Limited (Hong Kong).   Assets and liabilities were translated to U.S. dollars at the period-end exchange rate.  The exchange rate of issuance of common stocks to shareholders was used as one U.S. dollar to 7.773 Hong Kong dollar.  Statement of operations amounts were translated to U.S. dollars using the historic rate, i.e., the rate at first date of each month during the year.  Gains and losses resulting from translating foreign currency financial statements are accumulated in other comprehensive income (loss), a separate component of shareholders’ equity.
 
 
22

 
On March 22, 2011, we entered into a Funding Agreement with Xiaozhong Wu, our president and Director (“Lender”) to provide operational and going and staying public funding for us as follows:
 
 
1.  FUNDING

The Company requires and will continue to require funding for the Company for its operations and for the Company’s going and staying public in the U.S., including but not limited to legal, accounting, EDGAR, filing, corporate and other fees and expenses (the “Funding”).  Lender agrees to provide all Funding needed by the Company for its operations and for the Company’s going and staying public in the U.S. on the terms and conditions set forth in the Agreement.

2.  TERM

The term of the Agreement began as of the date of this Agreement and terminates when the Company generates operating revenues or receives other financing in amounts necessary to fund its operations and for the Company’s going and staying public in the U.S., including but not limited to legal, accounting, EDGAR, filing, corporate and other fees and expenses.

3.  FUNDING TERMS

The Funding will be provided by Lender on a non-interest bearing basis due upon demand.  There is no limit on the amount of Funding which must be provided under the Agreement, and Lender agrees to provide all needed Funding.  Lender further represents that he has sufficient liquid assets to meet all of Funding obligations under the Agreement.

Our lack of revenues raise substantial doubt about our ability to continue as a going concern.  The financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.  


Item 3.  Quantitative and Qualitative Disclosure about Market Risk

Not applicable.
 
 
Item 4.  Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

The Company has established disclosure controls and procedures to ensure that information required to be disclosed in this quarterly report on Form 10-Q was properly recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.  The Company’s controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers to allow timely decisions regarding required disclosure.   A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
 
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at June 30, 2010 based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at December 31, 2011, our disclosure controls and procedures are not effective.
 
 
23

 
Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Trading market

    Our common stock is quoted on the OTC Electronic Bulletin Board (OTCBB) under the symbol MWFH.  The symbol will be changing to LIBE.

Dividend Policy

    We have never paid dividends. We do not intend to declare any dividends in the foreseeable future. We presently intend to retain earnings, if any, for the development and expansion of our business.

 
CRITICAL ACCOUNTING POLICIES & ESTIMATES

    The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our balance sheet, and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Use of Estimates

    It is important to note that when preparing the financial statements in conformity with U.S. generally accepted accounting principles, management is required to make certain estimates and assumptions that affect the amounts reported and disclosed in the financial statements and related notes.  Actual results could differ if those estimates and assumptions approve to be incorrect.
 
    On an ongoing basis, we evaluate our estimates, including those related to estimated customer life, used to determine the appropriate amortization period for deferred revenue and deferred costs associated with licensing fees, the useful lives of property and equipment and our estimates of the value of common stock for the purpose of determining stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Off- Balance Sheet Arrangements

    We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Cash and Cash Equivalents

    For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of 90 days or less to be cash equivalents to the extent the funds are not being held for investment purposes.
 
GOING CONCERN QUALIFICATION

    In their Independent Auditor's Report for the fiscal years ending September 31, 2012and 2011 Enterprise CPAs, Ltd. stated that several conditions and events cast substantial doubt about our ability to continue as a “going concern.”   
 
 
 
24

 
 


 Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from the fact that the area in which we do business is highly competitive and constantly evolving. The market in which we do business is highly competitive and constantly evolving. We face competition from the larger and more established companies, from companies that have greater resources, including but not limited to, more money, and greater ability to expand their markets also cut into our potential customers. Many of our competitors have longer operating histories, significantly greater financial strength, nationwide advertising coverage and other resources that we do not have. 

Options, Warranties and Other Equity Items

There  are  no  outstanding  options  or  warrants  to  purchase,  nor  any securities convertible into, the our common shares.  Additionally, there are no shares that could be sold pursuant to Rule 144 under the Securities Act or that we had agreed to register under the Securities Act for sale by security holders.  Further, there are no common shares of the Company being, or proposed to be, publicly offered by the Company.
 
Market Information
 
Our common stock is quoted on the OTC Electronic Bulletin Board under the symbol MWFH.  Our symbol has been approved to change to LIBE.  
 
 

Evaluation of disclosure controls and procedures.
 
Management is responsible for establishing and maintaining adequate controls over financial reporting.  The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act of 1934, as amended (the “Exchange Act”), are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.  Furthermore, smaller reporting companies face additional limitations.  Smaller reporting companies employ fewer individuals and may find it difficult to properly segregate duties.  Often, one or two individuals control every aspect of the company’s operation and are in a position to override any system of internal control.  Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 
25

 
 
Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of 2002, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)) as of September 30, 2012.  In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework.
 
Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were not effective at a reasonable assurance level.  Management’s assessment identified the following material weaknesses:

·  
As of December 31, 2012, there was a lack of segregation of duties, in that we had only one person performing all accounting-related duties.

·  
As of December 31, 2012, there were no independent directors and no independent audit committee.

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.  We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.  We plan to further address these issues once we commence operations and are able to hire additional personnel in financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 


 
          None


          The Company is not required to provide the information required by this item as it is a smaller reporting company.
 

 

None.
 
 

None
 
 

    None
 
 
 
EXHIBIT INDEX
 
             
       
Incorporated by
       
Reference
           
Filing Date/
Exhibit
         
Period End
Number
 
Exhibit Description
 
Form
 
Date
             
 21.1
  Subsidiaries of the Registrant        
             
31.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
       
             
31.2
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
       
             
32.1
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
       
             
32.2
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
       
 
Reports on Form 8-K
 
Description
 
Form
 
 Filing Date
         
 None        
 
 
27

 

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.

 
   
 
PEGASUS TEL, INC.
 Date: February 19, 2013    
 
By:
/s/ FRANK PRINGLE
    Frank Pringle
    President, Director, Chief Executive Officer
    (Principal Executive Officer)
     
Date: February 13, 2013 By: /s/ ELYSE THOMPSON
  Elyse Thompson
  Chief Financial Officer
  (Principal Financial Officer
  and Principal Accounting Officer)


 
28