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, 2011
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 000-54073
LIBERTY COAL ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 75-3252264
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
99 - 18th Street, Suite 3000, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 997-3161
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [ ] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
58,566,667 common shares issued and outstanding as of August 15, 2011
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 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. [Removed and Reserved] 17
Item 5. Other Information 17
Item 6. Exhibits 18
SIGNATURES 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three and nine month periods
ended June 30, 2011 form part of this quarterly report. They are stated in
United States Dollars (US$) and are prepared in accordance with United States
generally accepted accounting principles.
3
Liberty Coal Energy Corp.
(An Exploration Stage Company)
BALANCE SHEETS (Unaudited)
As of As of
June 30, September 30,
2011 2010
---------- ----------
ASSETS
ASSETS
Cash $ 385,283 $ 59,190
Prepaid 17,135 5,291
---------- ----------
TOTAL CURRENT ASSETS 402,418 64,481
---------- ----------
Website, net of amortization 2,111 3,378
Mineral properties 397,985 350,000
---------- ----------
TOTAL OTHER ASSETS 400,096 353,378
---------- ----------
TOTAL ASSETS $ 802,514 $ 417,859
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 15,120 $ 18,590
Loans payable -- --
---------- ----------
TOTAL LIABILITIES 15,120 18,590
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, (1,500,000) shares authorized;
58,566,667 and 57,900,000 shares issued and outstanding as
of June 30, 2011 and September 30, 2010, respectively) 58,567 57,900
Additional paid-in capital 624,911 346,786
Additional paid-in capital - warrants 404,522 183,314
Accumulated deficit during the exploration sage (300,606) (188,731)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 787,394 399,269
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 802,514 $ 417,859
========== ==========
See Notes to Consolidated Financial Statements
4
LIBERTY COAL ENERGY CORP
Statements of Operations (Unaudited)
(An Exploration Stage Company)
Cumulative Amounts
From Date of
Incorporation on
For Three Months Ending For Nine Months Ending August 31, 2007 -
June 30, June 30, June 30, June 30, June 30,
2011 2010 2011 2010 2011
------------ ------------ ------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
NET SALES -- -- -- -- --
COSTS AND EXPENSES
General & administrative 6,157 2,141 19,138 3,342 37,540
Consulting services 22,500 45,000 52,500 45,000 112,500
Amortization 422 -- 1,267 -- 1,687
Investor relations 8,185 13,333 21,381 13,333 43,497
Transfer agent -- -- 382 2,895 14,691
Legal & accounting 7,690 20,286 13,706 33,924 87,190
------------ ------------ ------------ ------------ ------------
Loss before income taxes 44,954 80,760 108,374 98,494 297,105
Provision for income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (44,954) (80,760) (108,374) (98,494) (297,105)
OTHER INCOME & (EXPENSES)
Interest expense (2,111) -- (3,500) -- (3,500)
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME & (EXPENSES) (2,111) -- (3,500) -- (3,500)
------------ ------------ ------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS (47,065) (80,760) (111,874) (98,494) (300,605)
------------ ------------ ------------ ------------ ------------
NET LOSS $ (47,065) $ (80,760) $ (111,874) $ (98,494) $ (300,605)
============ ============ ============ ============ ============
BASIC AND DILUTED LOSS PER COMMON
SHARE $ (1) $ (1) $ (1) $ (1)
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 58,255,556 75,900,000 58,018,519 74,913,553
============ ============ ============ ============
See Notes to Consolidated Financial Statements
5
Liberty Coal Energy Corp.
Statements of Cash Flows (Unaudited)
(an Exploration Company)
Cumulative Amounts
From Date of
Nine Months Nine Months Incorporation on
Ended Ended August 31, 2007 -
June 30, June 30, June 30,
2011 2010 2011
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (111,874) $ (17,734) $ (300,605)
Amortization 1,267 -- 1,689
Accrued interest expense -- -- --
(Increase) decrease in prepaid expenses (11,845) 445 (17,136)
Increase (decrease) in accounts payable and accrued liabilities (2,566) (3,100) 10,116
Increase (decrease) in related party payables (904) -- 5,004
Increase (decrease) in due to stockholder -- (5,000) --
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (125,922) (25,389) (300,932)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in website (3,800)
Acquisition of mineral properties (47,985) (325,000) (372,985)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (47,985) (325,000) (376,785)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash 500,000 500,000 1,063,000
Payments made on loans payable (100,000) -- (100,000)
Proceeds from loans payable 100,000 -- 100,000
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 500,000 500,000 1,063,000
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 326,093 149,611 385,283
CASH AT BEGINNING OF PERIOD 59,190 17,430 --
---------- ---------- ----------
CASH AT END OF PERIOD $ 385,283 $ 167,041 $ 385,283
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ -- $ -- $ --
========== ---------- ==========
Interest paid $ 3,500 $ -- $ 3,500
========== ========== ==========
NON-CASH ACTIVITIES
Notes issued to officers $ -- $ -- $ --
Retirement of debt -- -- --
Reclassified long-term loan to short-term loan -- 219,754 219,754
Stock issued from conversion of convertible notes -- -- --
Notes payable for settlement of notes -- 2,183,000 2,183,000
Stock issued for services -- -- --
Preferred stock issuance for settlement of notes payable -- 3,104,139 3,104,139
---------- ---------- ----------
Total non-cash activities $ -- $5,506,893 $5,506,893
========== ========== ==========
See Notes to Consolidated Financial Statements
6
Liberty Coal Energy Corp.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Liberty Coal Energy Corp. (the "Company") incorporated in the state of Nevada on
August 31, 2007 to develop business activities in teacher recruiting. The
Company changed its business focus in March, 2010 and now intends to enter the
business of precious mineral exploration, development, and production. The
Company has not yet commenced significant business operations and is considered
to be in the exploration stage (formerly in the development stage).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
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.
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.
7
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward. See Note 5.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENTLY ADOPTED PRONOUNCEMENTS
The Company does not expect the adoption of other recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
NOTE 3 - 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 interest in exchange for
$55,000 (paid), $25,000 within 90 days of the each of the next three following
anniversaries of the date of the Agreement. The first of the $25,000 payments
has been paid. 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.
8
NOTE 4 - LOANS PAYABLE
Loans payable as of June 30, 2011 and September 30, 2010 consist of the
following:
June 30, 2011 September 30, 2010
------------- ------------------
Loan at 10% interest $ -- $ --
-------- --------
Net deferred tax asset $ -- $ --
======== ========
The company paid its only loan off with a face value of $100,000 and $3,500
interest.
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.
On March 15, 2010, the Company increased its authorized common shares from
50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock
split. All share amounts reflected in the financial statements have been
adjusted to reflect the results of the stock split.
On March 20, 2010, the Company cancelled 18,000,000 of its common stock
outstanding.
On May 11 2011, the Company completed a private placement whereby it issued
666,667 units for $0.75 per unit. Each unit consists of one commonshare and
common share purchase warrant allowing the holder to purchase a common share at
$0.82 per share expiring April 30, 2013.
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date September 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
May 11, 2011 666,667 $0.82 May 11, 2013 666,667
9
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 $300,606 at
June 30, 2011, 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:
June 30, 2011 September 30, 2010
------------- ------------------
Deferred tax asset attributable to:
Net operating loss carryover $ 66,793 $ 41,388
Valuation allowance (66,793) (41,388)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
NOTE 7 - RELATED PARTY TRANSACTION
As of June 30, 2011, there is a balance owing to two officers of the Company in
the amount of $7,500 (September 30, 2010 - $5,908). This amount is included in
accounts payable.
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 $300,605 as of June 30, 2010. Management continues to seek funding from
its shareholders and other qualified investors to pursue its business plan. In
the alternative, the Company may be amenable to a sale, merger or other
acquisition in the event such transaction is deemed by management to be in the
best interests of the shareholders.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks noted herein in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$), unless
otherwise specified, and are prepared in accordance with United States Generally
Accepted Accounting Principles. All references to "common shares" refer to the
common shares in our capital stock.
As used in this quarterly report, the terms "we," "us," "our company," and the
"Company" mean Liberty Coal Energy Corp., a Nevada corporation, unless otherwise
indicated.
CORPORATE HISTORY
The address of our principal executive office is 99 18th Street, Suite 3000,
Denver, Colorado 80202. Our telephone number is 303.997.3161.
Our common stock is quoted on the OTC Bulletin Board under the symbol "LBTG."
We were incorporated on August 31, 2007 as "ESL Teachers Inc." under the laws of
the State of Nevada. Our original business plan was to develop and sell online
employment services specifically for both ESL Teachers and ESL operations
seeking to hire teachers worldwide. On March 15, 2010, we changed our name to
Liberty Coal Energy Corp. by way of a merger with our wholly owned subsidiary
"Liberty Coal Energy Corp." which was formed solely for the purpose of the
change of name. The change of name was to better represent the new business
direction of our company to that of a coal exploration, development, and
production company.
In addition, on March 15, 2010, we effected a 30 for 1 forward stock split of
our authorized and issued and outstanding shares of common stock such that our
authorized capital increased from 50,000,000 shares of common stock, $0.001 par
value per share to 1,500,000,000 shares of common stock, par value $0.001 per
share.
OUR CURRENT BUSINESS
Our primary business focus is to acquire, explore and develop coal properties in
North America. We are currently exploring two properties, the Sheridan County
Project in Sheridan County, Wyoming and the Campbell Project in Campbell County,
Wyoming.
Our first project is the Sheridan County Project. In May 2010, we entered into a
letter of agreement for the acquisition of private mineral leasehold rights to
certain coal mining properties in Sheridan County, Wyoming with Rocking Hard
Investments, LLC and Synfuel Technology, Inc. Effective May 2, 2011 we entered
into that certain Second Amended Agreement with Rocking Hard Investments, LLC to
revise certain terms of the agreements related to the Sheridan, Wyoming coal
property. In consideration for the mineral leasehold, we were required to pay
$25,000 by February 13, 2011 and an additional $25,000 on or before February 13,
2012. Additionally, we must spend $500,000 on development of the property within
three years of the date of the agreement. As part of the agreement, Rocking Hard
11
is to receive certain royalties including a royalty of $1.00 per ton of coal
produced from the property and sold with a maximum royalty of $5,000,000. The
minimum royalty shall be paid beginning February 13, 2013 in the amount of
$35,000, $45,000 in 2014, and $55,000 in 2015. Minimum royalties shall remain at
$55,000 annually until production royalties becomes due or the Company
surrenders the property to Synfuel Technology, Inc. The maximum amount of
royalty must be paid within 15 years of the date of the agreement.
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 shares of our 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's payment is calculated by
multiplying $20,000 by [1+ fractional CPI index]. For example, if the CPI is 3%,
the 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.
We are an exploration stage company with limited operations and no revenues from
our business activities.
The following is a discussion and analysis of our results of operation for the
quarter ended June 30, 2011, and the factors that could affect our future
financial condition and results 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,
2010 and 2009, regarding concerns about our ability to continue as a going
concern.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our financial statements for the quarter ended June 30, 2011 which are
included herein.
THREE MONTHS ENDED JUNE 30, 2011 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2010
The following table summarizes key items of comparison for the three months
ended June 30, 2011, and 2010:
Three Months Ended
June 30,
2011 2010
-------- --------
Amortization $ 422 $ --
General and administrative 6,157 2,141
Legal and accounting 7,690 20,286
Investor Relations 8,185 13,333
Consulting 22,500 45,000
Transfer agent -- --
Interest Expense 2,111 --
-------- --------
Net Loss $ 47,065 $ 80,760
======== ========
We had a net loss of $47,065 for the quarter ended June 30, 2011, which was
$33,695 less than the net loss of $80,760 for the quarter ended June 30, 2010.
The significant change in our results over the two periods is primarily the
result of management's activities around the Company's projects.
12
NINE MONTHS ENDED JUNE 30, 2011 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2010
The following table summarizes key items of comparison for the nine months ended
June 30, 2011, and 2010:
Nine Months Ended
June 30,
2011 2010
-------- --------
Amortization $ 1,267 $ --
General and administrative 19,138 3,342
Legal and accounting 13,706 33,924
Investor Relations 21,381 13,333
Consulting 52,500 45,000
Transfer agent 382 2,895
Interest Expense 3,500 --
-------- --------
Net Loss $111,874 $ 98,494
======== ========
We had a net loss of $111,874 for the nine months ended June 30, 2011, which was
$13,380 greater than the net loss of $98,494 for the nine months ended June 30,
2010. The significant change in our results over the two periods is primarily
the result of management's activities around the Company's projects.
PERIOD FROM INCEPTION, AUGUST 31, 2007 TO JUNE 30, 2011
Since inception, we have an accumulated deficit of $300,605. We expect to
continue to incur losses as a result of continued exploration and development of
our coal mining interests.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of June 30, 2011, reflects assets of $802,514. We had cash
in the amount of $385,283 and working capital in the amount of $387,298 as of
June 30, 2011. On May 11, 2011, the Company sold 666,667 shares of its common
stock ("Shares") to one investor in exchange for $500,000, or $0.75 per share in
accordance with a subscription agreement. In connection with the sale of the
Shares, the investor also received warrants to purchase six hundred sixty-six
thousand six hundred sixty-seven (666,667) shares of the Company's common stock
at a purchase price of $0.82 per share ("Warrants"). The Warrants provide for an
expiration period of two years from the date of the investment.
Nine Months Nine Months
Ended Ended
June 30, June 30,
2011 2010
---------- ----------
Net Cash (Used in) Operating Activities $ (125,922) $ (25,389)
Net Cash (Used in) Investing Activities (47,985) (325,000)
Net Cash Provided by Financing Activities 500,000 500,000
---------- ----------
Increase (Decrease) in Cash $ 326,093 $ 149,611
========== ==========
Our current cash requirements are significant due to planned exploration and
development of our current coal mining property interests, and we anticipate
generating losses. In order to execute on our business strategy, including the
exploration and development of our current coal interest, we will require
additional working capital, commensurate with the operational needs of our
planned projects and obligations. Our management believes that we should be able
to raise sufficient amounts of working capital through debt or equity offerings,
as may be required to meet our short-term obligations. However, changes in our
operating plans, increased expenses, acquisitions, or other events, may cause us
to seek additional equity or debt financing in the future. We anticipate
continued and additional operations on our properties. Accordingly, we expect to
continue to use debt and equity financing to fund operations for the next twelve
months, as we look to expand our asset base and fund exploration and development
of our properties.
13
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
or continued operations in the future.
OPERATING ACTIVITIES
Net cash flow used in operating activities during the nine months ended June 30,
2011 was $125,922, an increase of $100,533 from the $25,389 net cash used in
operating activities during the nine months ended June 30, 2010.
INVESTING ACTIVITIES
The primary driver of cash used in investing activities in previous periods was
capital spending in the acquisition of coal properties. Cash used in investing
activities during the nine months ended June 30, 2011 was $47,985, which
resulted in a decrease of $277,015 from the $325,000 cash used in investing
activities during the nine months ended June 30, 2010.
FINANCING ACTIVITIES
Financing activities during the nine months ended June 30, 2011, provided
$500,000, which remained the same from the $500,000 cash proceeds in financing
activities during the nine months ended June 30, 2010.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and amounts due to a 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.
14
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's financial statements.
15
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's financial statements.
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
REVENUES
We have not generated revenues since inception.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting issuer," we are not required to provide the information
required by this Item.
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ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our chief executive officer
and chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this quarterly report. Based on this evaluation, our chief
executive officer and our chief financial officer (our principal executive
officer, principal financial officer and principal accounting officer) concluded
that our disclosure controls and procedures are effective as of June 30, 2011 to
ensure that information we are required to disclose in reports that we file or
submit under the Securities Exchange Act of 1934 (i) is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms, and (ii) is accumulated and communicated
to our management, including our chief executive officer and our chief financial
officer (our principal executive officer, principal financial officer and
principal accounting officer), as appropriate, to allow timely decisions
regarding required disclosure. Our disclosure controls and procedures are
designed to provide reasonable assurance that such information is accumulated
and communicated to our management. Our disclosure controls and procedures
include components of our internal control over financial reporting.
Management's assessment of the effectiveness of our internal control over
financial reporting is expressed at the level of reasonable assurance that the
control system, no matter how well designed and operated, can provide only
reasonable, but not absolute, assurance that the control system's objectives
will be met.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered beneficial shareholder, is an adverse
party or has any material interest adverse to our interest.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION
None.
17
ITEM 6. EXHIBITS
Exhibit
No. Description
------- -----------
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 originally filed on January 23,
2008).
3.2 By-laws (Incorporated by reference to our Registration Statement on
Form S1/A filed on February 27, 2008).
3.3 Articles of Merger (Incorporated by reference to our Current Report on
Form 8-K filed on March 29, 2010).
3.4 Certificate of Change (Incorporated by reference to our Current Report
on Form 8-K filed on March 29, 2010).
10.1 Form of Subscription Agreement (Incorporated by reference to our
Quarterly Report on Form 10-Q filed on May 16, 2011)
10.2 Second Amended Agreement by and between Liberty Coal Energy Corp. and
Rocking Hard Investments, LLC, dated May 2, 2010 (Incorporated by
reference to our Quarterly Report on Form 10-Q filed on May 16, 2011)
31.1* Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
----------
* Filed herewith
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY COAL ENERGY CORP.
Date: August 15, 2011 /s/ Robert T. Malasek
-----------------------------------------------
ROBERT T. MALASEK
Chief Financial Officer, Secretary and Director
(Principal Financial Officer & Principal
Accounting Officer)
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