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 June 30, 2010
[ ] TRANISITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 333-148801
LIBERTY COAL ENERGY CORP.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 75-3252264
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)
99 18th Street, Suite 3000
Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
(303) 997-3161
(Registrant's telephone number, including area code)
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. Yes [X] 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). Yes [ ] No [ ]
Indicate by checkmark 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-3 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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 14, 2010, there were 75,900,000 shares of the registrant's $0.001
par value common stock issued and outstanding.
LIBERTY COAL ENERGY CORP.
FORM 10-Q INDEX
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4T. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 1A. Risk Factors 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits 17
Signature Page 18
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Liberty Coal Energy Corp.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
BALANCE SHEETS
June 30, September 30,
2010 2009
---------- ----------
(unaudited) (audited)
ASSETS
Current asset
Cash and bank accounts $ 91,430 $ 17,430
Prepaid expenses 5,920 445
---------- ----------
Total current assets 97,350 17,875
---------- ----------
Website 3,800 --
Mineral Properties 365,800 --
---------- ----------
Total assets $ 466,950 $ 17,875
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 18,969 $ 7,200
Due to stockholder 1,058 6,058
---------- ----------
Total liabilities 20,027 13,258
---------- ----------
Stockholders' equity
Common stock authorized -
1,500,000,000 common shares with a par value of $0.001
Common stock issued and outstanding
75,900,000 and 73,800,000 common shares 75,900 73,800
Additional paid-in capital 344,586 (10,800)
Additional paid-in capital - warrants 183,314 --
Deficit accumulated during the exploration stage (156,877) (58,383)
---------- ----------
Total stockholders' equity 446,923 4,617
---------- ----------
Total liabilities and stockholders' equity $ 466,950 $ 17,875
========== ==========
The accompanying notes are an integral part of these financial statements.
3
Liberty Coal Energy Corp.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS (unaudited)
Cumulative Amounts
From Date of
Three Months Three Months Nine Months Nine Months Incorporation on
Ended Ended Ended Ended August 31, 2007 to
June 30, June 30, June 30, June 30, June 30,
2010 2009 2010 2009 2010
------------ ------------ ------------ ------------ ------------
REVENUE $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
General & Administrative 2,141 750 3,342 885 7,448
Consulting 45,000 -- 45,000 -- 45,000
Investor Relations 13,333 -- 13,333 -- 13,333
Transfer Agent -- 2,800 2,895 7,955 15,751
Legal and Accounting 20,286 1,000 33,924 5,002 75,345
------------ ------------ ------------ ------------ ------------
Loss before income taxes (80,760) (4,550) (98,494) (13,842) (156,877)
Provision for income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss $ (80,760) $ (4,550) $ (98,494) $ (13,842) $ (156,877)
============ ============ ============ ============ ============
Basic and diluted loss per
Common share (1) (1) (1) (1) (1)
============ ============ ============ ============
Weighted average number
of common shares
outstanding (Note 5) 75,900,000 73,800,000 74,913,553 73,800,000
============ ============ ============ ============
----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
4
Liberty Coal Energy Corp.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
Deficit
Additional Accumulated
Common Stock Additional Paid-in During the Total
--------------------- Paid in Capital Exploration Stockholders'
Shares Amount Capital Warrants Stage Equity
------ ------ ------- -------- ----- ------
Inception, August 31, 2007 -- $ -- $ -- $ -- $ -- $ --
Initial sale of common stock 45,000,000 45,000 (30,000) -- -- 15,000
Net loss for the year -- -- -- -- (4,158) (4,158)
---------- ------- -------- -------- --------- --------
Balance September 30, 2007 45,000,000 45,000 (30,000) -- (4,158) 10,842
Private placement on May 31,
2008 at $0.05 per share 28,800,000 28,800 19,200 -- -- 48,000
Net loss for the period -- -- -- -- (31,673) (31,673)
---------- ------- -------- -------- --------- --------
September 30, 2008 73,800,000 73,800 (10,800) -- (35,831) 27,169
Net loss for the period -- -- -- -- (22,552) (22,552)
---------- ------- -------- -------- --------- --------
September 30, 2009 73,800,000 73,800 (10,800) -- (58,383) 4,617
Private placement on February 1,
2010 at $0.25 per unit 1,000,000 1,000 157,343 91,657 -- 250,000
Stock issued with respect to
property acquisition 100,000 100 40,700 -- -- 40,800
Private placement on February 11,
2010 at $0.25 per unit 1,000,000 1,000 157,343 91,657 -- 250,000
Net loss for the period -- -- -- -- (98,494) (98,494)
---------- ------- -------- -------- --------- --------
June 30, 2010 75,900,000 $75,900 $344,586 $183,314 $(156,877) $446,923
========== ======= ======== ======== ========= ========
The accompanying notes are an integral part of these financial statements.
5
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Company)
STATEMENTS OF CASH FLOWS (unaudited)
Cumulative Amounts
From Date of
Nine Months Nine Months Incorporation on
Ended Ended August 31, 2007 to
June 30, June 30, June 30,
2010 2009 2010
---------- ---------- ----------
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period $ (98,494) $ (13,842) $ (156,877)
(Increase) Decrease in prepaid expenses (5,475) (2,496) (5,920)
Increase (Decrease) in accounts payable and
accrued liabilities 11,769 (5,327) 18,969
Increase (Decrease) in due to stockholder (5,000) -- 1,058
---------- ---------- ----------
Net cash used in operating activities (97,200) (22,115) (142,770)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 500,000 -- 563,000
---------- ---------- ----------
Net cash used in financing activities 500,000 -- 563,000
---------- ---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Investment in website (3,800) -- (3,800)
Acquisition of mineral properties (325,000) -- (325,000)
---------- ---------- ----------
Net cash used in financing activities (328,800) -- (328,800)
---------- ---------- ----------
Change in cash during the period 74,000 (22,115) 91,430
Cash, beginning of the period 17,430 40,604 --
---------- ---------- ----------
Cash, end of the period $ 91,430 $ 18,489 $ 91,430
========== ========== ==========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ -- $ --
========== ========== ==========
Cash paid for interest $ -- $ -- $ --
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
6
Liberty Coal Energy Corp.
(formerly ESL Teachers Inc.)
(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
ACCOUNTING BASIS
The accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the Company's annual report filed with the SEC on Form 10-K
as of and for the period ended September 30, 2009. In the opinion of management,
all adjustments necessary in order to make the financial statements not
misleading have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year.
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 and amounts due to Company
stockholder.
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
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 usng 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
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 consolidated 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 consolidated financial statements.
8
SUBSEQUENT EVENTS
On July 31, 2009, the Company adopted changes issued by the FASB that
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, the guidance sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The
Company has evaluated subsequent events through August 12, 2010, the date the
financial statements were issued.
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.
The guidance is effective for the Company's acquisitions occurring on or after
February 1, 2009. The Company applied these new provisions to two acquisitions
that occurred during the year, Rock Coast Media, Inc. and Pixel Bridge, Inc.
These acquisitions are more fully disclosed in Note 5 in our Consolidated
Financial Statements.
NON-CONTROLLING INTERESTS
In December 2007, the FASB issued changes to establish accounting and reporting
standards for all entities that prepare consolidated financial statements that
have outstanding non-controlling interests, sometimes called minority interest.
These standards require that ownership interests in subsidiaries held by outside
parties be clearly identified, labeled and presented in equity separate from the
parent's equity; the amount of net income attributable to the parent and the
non-controlling interest be separately presented on the consolidated statement
of income; accounting standards applied to changes in a parent's interest be
consistently applied; fair value measurement upon deconsolidation of a
non-controlling interest be used; and the interests of the non-controlling
owners be already identified and distinguished. The adoption of this guidance
had no impact on the Company's consolidated financial statements.
INTANGIBLE ASSETS
In April 2008, the FASB adopted changes to require companies estimating the
useful life of a recognized intangible asset to consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, to consider assumptions that market participants would
use about renewal or extension as adjusted for entity-specific factors. The
guidance is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively to intangible assets whether acquired before or
after the effective date. The Company adopted the guidance on February 1, 2009.
The adoption had no impact on the Company's consolidated financial statements.
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
In May 2008, the FASB issued changes to identify the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). The guidance is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU section 411, THE MEANING OF PRESENT FAIRLY IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Management is
currently evaluating the guidance and assessing the impact, if any, on the
Company's consolidated financial statements.
9
REVENUE RECOGNITION
In September 2009, the FASB issued new revenue recognition guidance on multiple
deliverable arrangements. It updates the existing multiple-element revenue
arrangements guidance currently included under the Accounting Standards
Codification ("ASC") 605-25. The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) requires the use of the
relative selling price method to allocate the entire arrangement consideration.
In addition, the guidance also expands the disclosure requirements for revenue
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after fiscal 2011, with early adoption permitted provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. Management is currently evaluating the impact of adopting this
guidance on the Company's consolidated financial statements.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
NOTE 3 - DUE TO STOCKHOLDER
The $1,058 due to a stockholder at June 30, 2010 is unsecured, non-interest
bearing and has no specific terms of repayment. See Note 6.
NOTE 4 - MINERAL PROPERTIES
CAMPBELL PROPERTY
On February 1, 2010 the Company entered into, and closed, a Mineral and Mining
Lease with Miller and Associates, LLC. Pursuant to this agreement, the Company
issued 100,000 (post split) shares of its common stock to Miller and Associates,
LLC and acquired a 5 year lease on certain mining claims in the state of
Wyoming. In addition to the 100,000 (post split) shares issued, the Company
agreed to pay an annual fee of US $20,000, adjusted for inflation, as well as a
production royalty of 4% on the gross sales of product produced by the mineral
claims considered by this agreement.
SHERIDAN PROPERTY
The Company acquired a mineral property leasehold in exchange for $55,000 within
10 days of the date of the Agreement (paid), $25,000 within 90 days of the each
of the next three following anniversaries of the date of the Agreement.
Additionally, the Company must spend $2,750,000 on development of the property
within three years of the date of the Agreement. Additionally, the lessor would
receive a royalty of $1 per ton of coal produced from the property and sold with
a maximum of $5,000,000. The maximum amount of royalty must be paid within 15
years of the date of the Agreement.
NOTE 5 - 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.
10
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.
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date June 30, 2010
---------- ------ ----- ----------- -------------
February 1, 2010 1,000,000 $0.25 February 1, 2012 1,000,000
February 11, 2010 1,000,000 $0.25 February 11, 2012 1,000,000
NOTE 6 - 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 $156,877 at June 30, 2010, and will expire
beginning in the year 2028.
The cumulative tax effect at the expected rate of 22% of significant items
comprising our net deferred tax amount is as follows:
2010 2009
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 34,512 $ 12,888
Valuation allowance (34,512) (12,888)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
NOTE 7 - RELATED PARTY TRANSACTION
As at June 30, 2010, there is a balance owing to a stockholder of the Company in
the amount of $1,058.
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 8 - 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 $156,877 as of June 30, 2010. 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.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
Except for historical information, the following Management's Discussion and
Analysis contains forward-looking statements based upon current expectations
that involve certain risks and uncertainties. Such forward-looking statements
include statements regarding, among other things, (a) discussions about mineral
resources and mineralized material, (b) our projected sales and profitability,
(c) our growth strategies, (d) anticipated trends in our industry, (e) our
future financing plans, (f) our anticipated needs for working capital, (g) our
lack of operational experience and (h) the benefits related to ownership of our
common stock. Forward-looking statements, which involve assumptions and describe
our future plans, strategies, and expectations, are generally identifiable by
use of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology. This information may
involve known and unknown risks, uncertainties, and other factors that may cause
our actual results, performance, or achievements to be materially different from
the future results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Business," as well as in this Report generally. Actual events or
results may differ materially from those discussed in forward-looking statements
as a result of various factors, including, without limitation, the risks
outlined under "Risk Factors" and matters described in this Report generally. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this Report will in fact occur as
projected.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars. All references to "common shares" refer to
the common shares in our capital stock. As used in this quarterly report, the
terms "we," "us," and "our" mean Liberty Coal Energy Corp., unless otherwise
indicated.
OVERVIEW
We are a precious metal mineral acquisition, exploration and development
company, formed in Nevada on August 31, 2007. At the time of our incorporation,
we were incorporated under the name "ESL Teachers Inc." and our original
business plan was to develop and sell online employment services specifically
for both ESL Teachers and the ESL operations seeking to hire them 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. that was
formed solely for the purpose of changing our name. In addition to the name
change, we changed our intended business purpose to that of precious metal
mineral exploration, development and production. Further, effective March 15,
2010, we effected a 30 for 1 forward stock split of our issued and outstanding
common stock. As a result, 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, $0.001 par value per share. Unless specifically stated otherwise,
all share amounts referenced herein, will refer to post-forward stock split
share amounts.
Our primary business focus is to acquire, explore and develop coal properties in
North America. Currently, we are developing two projects. The first is the
Sheridan County Project in Wyoming, USA, located on a 1,292.47-acre property in
Sheridan County, Wyoming. We currently have a 100% interest in the property.
The second project is the Campbell Project. On February 1, 2010, we entered into
a lease agreement with Miller and Associates, LLC. to acquire a 100% interest in
the project by issuing 100,000 post-split shares of common stock, an annual
payment of $20,000 adjusted annually by the CPI (consumer price index as
published by the US Government) according to this formula each year previous
payment times 1+ fractional CPI index. For example, if CPI is 3% the following
payment will be $20,000 x 1.03 or $20,600. In addition, we agreed to pay on the
25th day of each calendar month, for the right to mine all coal on the Project a
production royalty of 4% of the Gross Sales Price of all coal mined and sold
from the Project.
12
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 plan of operation for the
quarter ended March 31, 2010, and the factors that could affect our future
financial condition and plan of operation.
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,
2009 and 2008, regarding concerns about our ability to continue as a going
concern.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities, which may prove more profitable to our
shareholders. Historically, we have been able to raise a limited amount of
capital through private placements of our equity stock, but we are uncertain
about our continued ability to raise funds privately. If we are unable to secure
adequate capital to continue our acquisition and exploration efforts, our
business may fail and our stockholders may lose some or all of their investment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2009
We had a net loss of $80,760 for the quarter ended June 30, 2010, which was
$71,437 greater than the net loss of $4,550 for the quarter ended March 31,
2010. The significant change in our results over the two periods is primarily
the result of increases in legal fees and accounting fees and the introduction
of consulting fees and investor relations. These increases were partially offset
by decreases in transfer agent fees.
The following table summarizes key items of comparison and their related
increase (decrease) for the quarters ended June 30, 2010, and 2009:
Three-Months Ended
June 30,
-------------------------- Increase
2010 2009 (Decrease)
-------- -------- ----------
REVENUES $ -- $ -- $ 0
======== ======== ========
EXPENSES:
General and Administrative -
Legal and Accounting Fees 20,286 1,000 19,286
Investor Relations 13,333 -- 13,333
Consulting Fees 45,000 -- 45,000
General and Administrative 2,141 750 1,391
Transfer Agent -- 2,800 (2,800)
-------- -------- --------
Total G & A Expenses $ 80,760 $ 4,550 $ 76,210
======== ======== ========
NET (LOSS) $ 80,760 $ 4,550 $ 76,210
======== ======== ========
NINE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2009
We had a net loss of $98,494 for the nine months ended June 30, 2010, which was
$84,652 greater than the net loss of $13,842 for the nine months ended June 30,
2009. The significant change in our results over the two is primarily the result
of increases in legal fees and accounting fees and the introduction of
consulting fees and investor relations. These increases were partially offset by
decreases in transfer agent fees.
13
The following table summarizes key items of comparison and their related
increase (decrease) for the nine month periods ended June 30, 2010, and 2009:
Nine-Months Ended
June 30,
-------------------------- Increase
2010 2009 (Decrease)
-------- -------- ----------
REVENUES $ -- $ -- $ 0
======== ======== ========
EXPENSES:
General and Administrative -
Legal and Accounting Fees 33,924 5,002 28,922
Investor Relations 13,333 -- 13,333
Consulting 45,000 -- 45,000
General and Administrative 3,342 885 2,457
Transfer Agent 2,895 7,955 (5,060)
-------- -------- --------
Total G & A Expenses $ 98,494 $ 13,842 $ 84,652
======== ======== ========
NET (LOSS) $ 98,494 $ 13,842 $ 84,652
======== ======== ========
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of June 30, 2010, reflects assets of $466,950. We had cash
in the amount of $91,430 and a working capital in the amount of $77,323 as of
June 30, 2010. We have sufficient working capital to enable us to carry out our
stated plan of operation for the next twelve months.
At At
June 30, September 30,
2010 2009
---------- ----------
Current assets $ 97,350 $ 17,875
Current liabilities 20,027 13,258
Working capital $ 77,323 $ 4,617
We anticipate generating losses and, therefore, may be unable to continue
operations in the future. If we require additional capital, we would have to
issue debt or equity or enter into a strategic arrangement with a third party.
Nine-Months Ended
June 30,
------------------------------
2010 2009
---------- ----------
Net Cash (Used in) Operating Activities $ (97,200) $ (22,115)
Net Cash (Used in) Investing Activities (328,800) --
Net Cash Provided by Financing Activities 500,000 --
========== ==========
NET INCREASE (DECREASE) IN CASH $ 74,000 $ (22,115)
========== ==========
OPERATING ACTIVITIES
Net cash flow used in operating activities during the nine-months ended June 30,
2010 was $97,200 - an increase of $75,085 from the $22,115 net cash outflow
during the nine-months ended June 30, 2009.
14
INVESTING ACTIVITIES
The primary driver of cash used in investing activities was capital spending in
the acquisition of coal properties.
Cash used in investing activities during the nine-months ended June 30, 2010 was
$328,800, which was an increase of $328,800 from the $0 of cash used in
investing activities during the nine-months ended June 30, 2009. This increase
in the cash used in investing activities was primarily due to the acquisition of
the Sheridan County and Campbell projects.
FINANCING ACTIVITIES
Financing activities during the nine-months ended June 30, 2010, provided
$500,000 to us, an increase of $500,000 from the $0 provided by financing
activities during the nine-months ended June 30, 2009.
On February 1, 2010, we completed a private placement whereby we issued
1,000,000 (post-split) units at $0.25 per unit. Each unit consists of one common
share of the Company`s stock and one warrant to purchase an additional share of
the Company's common stock at $0.50 per share for a period of 24 months.
On February 11, 2010, we completed a private placement whereby we issued
1,000,000 (post-split) units at $0.25 per unit. Each unit consists of one common
share of the Company`s stock and one warrant to purchase an additional share of
the Company's common stock at $0.50 per share for a period of 24 months.
RECENT ACCOUNTING PRONOUNCEMENTS
For recent accounting pronouncements, please refer to the notes to the financial
statements section of this Quarterly Report.
MINERAL PROPERTIES
A. SHERIDAN VALLEY PROPERTY
On March 2, 2010, we entered into letter of agreement for the acquisition of
private mineral leasehold rights to certain coal mining property in Sheridan
County, Wyoming with Rocking Hard Investment, LLC and Synfuel Technology, Inc.
(the "Agreement").
In consideration for the mineral property leasehold, we must pay $55,000 within
10 days of the date of the Agreement, $25,000 within 90 days of the each of the
next three following anniversaries of the date of the Agreement. Additionally,
we must spend $2,750,000 on development of the property within three years of
the date of the Agreement.
As part of the Agreement, we have also agreed to enter into a royalty Agreement
with Rocking Hard Investment, LLC pursuant to which Rocking Hard would receive a
royalty of $1.00 per ton of coal produced from the property and sold with a
maximum of $5,000,000. The maximum amount of royalty must be paid within 15
years of the date of the Agreement.
B. CAMPBELL PROPERTY
On February 1, 2010 we entered into, and closed, a Mineral and Mining Lease with
Miller and Associates, LLC. Pursuant to this agreement, the Company issued
100,000 (post split) shares of its common stock to Miller and Associates, LLC
and acquired a 5 year lease on certain mining claims in the state of Wyoming. In
addition to the 100,000 (post split) shares issued to Miller and Associates,
LLC, we agreed to pay an annual fee of US $20,000, adjusted for inflation, as
well as a production royalty of 4% on the gross sales of product produced by the
mineral claims considered by this agreement.
For the period beginning the date of this lease and continuing to the third
anniversary date, the Lessor grants the Lessee an option to buy out 3% of the 4%
production royalty in increments of 1% at a purchase price of $600,000 per
increment.
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
REVENUES
We had no revenues for the quarter ended June 30, 2010.
15
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that our
disclosure controls and procedures are effective 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, 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 may be involved from time to time in ordinary litigation, negotiation and
settlement matters that will not have a material effect on our operations or
finances. We are not aware of any pending or threatened litigation against us or
our officers and directors in their capacity as such that could have a material
impact on our operations or finances.
ITEM 1A. RISK FACTORS
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On February 1, 2010, we entered into a subscription agreement with a non-U.S.
investor, who acquired 1,000,000 (post split) units at $0.25 per unit for
aggregate proceeds of $250,000. Each unit consists of one common share of our
common stock and one warrant to purchase an additional share of the company's
common stock at $0.50 per share for a period of 24 months. These securities were
issued pursuant to an exemption from registration under Regulation S of the
Securities Act of 1933, as amended.
Also on February 1, 2010 we entered into, and closed, a Mineral and Mining Lease
with Miller and Associates, LLC. Pursuant to this agreement, we issued 100,000
(post split) shares of our common stock to Miller and Associates, LLC. The share
issuance was made without a prospectus in reliance on exemptions from
registration in Section 4(2) of the Securities Act of 1933, as amended.
The above share issuances were completed upon the company completing a 30 for
one forward split of its issued and outstanding shares of common stock.
16
On February 11, 2010, we entered into a subscription agreement with a with a
non-U.S. investor who acquired 1,000,000 (post split) units at $0.25 per unit
for aggregate proceeds of $250,000. Each unit consists of one common share of
the Company's stock and one warrant to purchase an additional share of the
Company's common stock at $0.50 per share for a period of 24 months. These
securities were issued pursuant to an exemption from registration under
Regulation S of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders in the period
covered by this Quarterly Report on Form 10-Q.
ITEM 5. OTHER INFORMATION
Effective April 30, 2010, Maria Guadalupe Flores N. resigned as secretary and as
a director of our company.
Effective April 30, 2010, Mauricio Beltran resigned as president, chief
executive officer, chief financial officer and treasurer of our company. Mr.
Beltran will remain as a director of our company.
On April 30, 2010, we appointed Edwin G. Morrow as president, chief executive
officer, chief financial officer and as a director of our company.
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (Attached as a exhibit to our
Registration Statement on Form SB-2 originally filed with the SEC
on January 23, 2008 and incorporated herein by reference).
3.2 Bylaws (Attached as a exhibit to our Registration Statement on Form
S1/A originally filed with the SEC on February 27, 2008 and
incorporated herein by reference).
3.3 Articles of Merger (previously filed as Exhibit 3.01 to our Current
Report on Form 8-K filed on March 29, 2010.)
3.4 Certificate of Change (previously filed as Exhibit 10.1 to our
Current Report on Form 8-K filed on March 29, 2010.)
10.1 Mineral and Mining Lease with Miller and Associates LLC dated
February 1, 2010. (previously filed as Exhibit 10.1 to our Current
Report on Form 8-K filed on February 10, 2010.)
10.2 Letter of Agreement with Rocking Hard Investment, LLC and Synfuel
Technology, Inc., dated March 2, 2010 (previously filed as Exhibit
10.1 to our Current Report on Form 8-K filed on March 4, 2010.)
31.1 Certification by the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 *
31.2 Certification by the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 *
32 Certification by the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
----------
* Filed herewith
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: August 16, 2010 By: /s/ Edwin G. Morrow
--------------------------------------
Name: Edwin G. Morrow
Title: Chief Executive Officer
(Principal Executive Officer)
1
