Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 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)
(888) 399-3989
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a 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.
60,566,667 common shares issued and outstanding as of February 14, 2012
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 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 1A. Risk Factors 19
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. [Removed and Reserved] 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three month period ended
December 31, 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
As of As of
Decemebr 31, September 30,
2011 2011
---------- ----------
Unaudited Audited
ASSETS
ASSETS
Cash $ 305,284 $ 341,207
Prepaid 7,413 15,784
---------- ----------
TOTAL CURRENT ASSETS 312,697 356,991
---------- ----------
Website, net of amortization 1,689 2,111
Mineral properties 397,985 397,985
---------- ----------
TOTAL OTHER ASSETS 399,674 400,096
---------- ----------
TOTAL ASSETS $ 712,371 $ 757,087
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 12,833 $ 11,032
Accounts payable - related party 10,582 7,504
Loans payable -- --
---------- ----------
TOTAL LIABILITIES 23,415 18,536
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, (1,500,000) shares authorized;
57,900,000 and 57,900,000 shares issued and outstanding as of
December 31, 2011 and September 30, 2010, respectively) 58,567 58,567
Additional paid-in capital 692,760 692,760
Additional paid-in capital - warrants 336,673 336,673
Accumulated deficit during the exploration sage (399,044) (349,450)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 688,956 738,550
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 712,371 $ 757,086
========== ==========
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 the Three Months Ending August 31, 2007 -
December 31, December 31, December 31,
2011 2010 2011
------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ --
------------ ------------ ------------
NET SALES -- -- --
COSTS AND EXPENSES
General & administrative 10,939 845 58,234
Consulting services 22,500 15,000 157,500
Amortization 422 422 2,111
Investor relations 4,200 8,266 51,897
Transfer agent 100 -- 15,391
Legal & accounting 11,433 4,282 110,412
------------ ------------ ------------
Loss before income taxes 49,594 28,815 395,544
Provision for income taxes -- -- --
------------ ------------ ------------
LOSS FROM OPERATIONS (49,594) (28,815) (395,544)
OTHER INCOME & (EXPENSES)
Interest expense -- -- (3,500)
------------ ------------ ------------
TOTAL OTHER INCOME & (EXPENSES) -- -- (3,500)
------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS (49,594) (28,815) (399,044)
------------ ------------ ------------
NET LOSS $ (49,594) $ (28,815) $ (399,044)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (1) $ (1)
------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 58,566,667 57,900,000
============ ============
See Notes to Consolidated Financial Statements
5
Liberty Coal Energy Corp.
Statements of Cash Flows (Unaudited)
(an Exploration Company)
Cumulative Amounts
From Date of
For the Period For the Period Incorporation on
Ended Ended August 31, 2007 -
December 31, December 31, December 31,
2011 2010 2011
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (49,594) $ (28,815) $ (399,044)
Amortization 422 422 2,111
Accrued interest expense -- -- --
(Increase) decrease in prepaid expenses 8,371 917 (7,413)
Increase (decrease) in accounts payable and accrued
liabilities 1,801 (5,668) 14,430
Increase (decrease) in related party payables 3,078 -- 8,986
Increase (decrease) in due to stockholder -- -- --
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (35,922) (33,144) (380,930)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in website -- -- (3,800)
Acquisition of mineral properties -- -- (372,985)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- (376,785)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash -- -- 1,063,000
Payments made on loans payable -- -- --
Proceeds from loans payable -- -- --
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- -- 1,063,000
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (35,922) (33,144) 305,285
CASH AT BEGINNING OF PERIOD 341,207 59,190 --
------------ ------------ ------------
CASH AT END OF PERIOD $ 305,285 $ 26,046 $ 305,285
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ -- $ -- $ --
============ -=---------- ============
Interest paid $ -- $ -- $ --
============ ============ ============
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, and was developing business activities in teacher
recruiting. The Company changed its business focus in March, 2010 and now
intends to enter the business of precious mineral exploration, development, and
production. The Company has not yet commenced significant business operations
and is considered to be in the exploration stage (formerly in the development
stage).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. We believe that the disclosures are
adequate to make the financial information presented not misleading. These
condensed financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto for the year ended
September 30, 2011. All adjustments were of a normal recurring nature unless
otherwise disclosed. In the opinion of management, all adjustments necessary for
a fair statement of the financial position results of operations for the interim
period have been included. The results of operations for such interim periods
are not necessarily indicative of the results for the full year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash 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 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
SOUTH POWDER RIVER PROJECT CAMPBELL COUNTY WY
On February 1, 2010, we entered into a mineral and mining lease with Miller and
Associates, LLC. Pursuant to this agreement, we issued 100,000 shares of common
stock to Miller and Associates and acquired a 5 year lease on certain mining
claims in Campbell County, Wyoming. In addition to the 100,000 shares of common
stock issued to Miller and Associates, we agreed to pay an annual fee of
$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 the
agreement.
8
For the period beginning the date of this lease and continuing to the third
anniversary date, Miller and Associates grants our company an option to buy out
3% of the 4% production royalty in increments of 1% at a purchase price of
$600,000 per increment.
PROJECT SUMMARY
Located in the southern end of the Powder River Basin in Campbell County
Wyoming, the property is currently held as a 640 acre Wyoming State lease. The
property lies 37 miles south of Gillette Wyoming on WY State Highway 50, and
approximately 3 miles west of the railroad . Eight previous drill holes on the
lease have established the presence of sub-bituminous coal underlying the entire
property. The massive coal thickness obviously extends into surrounding lands.
Named the Big George Seam, it lies at a depth of about 1100 feet below surface,
and averages 66 feet in thickness. The area has been a producer of coal bed
methane, drawn through wells drilled into the coal strata. Coal Bed methane
production has been responsible for the discovery and characterization of huge
coal resources in the Powder River Basin and adjacent areas in the American
midwest.
The Big George Coal bed is an underground mining target. Initial pre-feasibility
work has identified a proposed mining scenario that, due to the thickness, is a
good candidate for underground production. Using inclined ramps for ingress,
egress, ventilation and conveyor haulage is proposed as the entry and mining
access. The project will lend itself to modified longwall techniques used in
most existing underground coal mines for decades.
We are in the beginning phase of continuing the prefeasibility work already
completed. After completion a phase 2 estimate of the timing and capital costs
to install and operate an underground mine, and leasing additional adjacent
resources, drilling to confirm ground conditions and detailed information on
coal quality will be the next step toward feasibility and mine planning.
While open pit mining is still the usual method of coal production in the State
of Wyoming, underground coal mining is becoming more common. The existing
surface mines are going continually deeper as the shallower coals are mined.
Several previous open cut mines in the Central US coal fields have converted to
underground operations as their costs for overburden removal increased,
eventually threatening the economics of the mine.
Our South Powder River project has the advantages of a thick coal bed, rivaling
or exceeding many produced in surface mines. An underground mine disturbs a
small fraction of the land area even a small open cut mine does. This
immediately relieves us of many of the high costs and risks of reclamation,
along with the lengthy studies which accompany permitting the huge surface
disturbance associated with open cut mines. The earth required to be removed for
a shaft, or inclined tunnel construction for coal access is fractional compared
to the earth that must be removed annually to exposed coal removed from surface
mines.
The next, detailed phase of feasibility will involve working out the economics
of the capital and operating costs for a Powder River Basin underground
producer. We are confident the economics will be prove to be favorable. Although
the existing property is about one square mile, coal bed methane exploration and
production has established the existence of large adjacent resources that will
be easily produced from the same project by expanding the leased lands.
NORTH RANCHESTER COAL PROPERTY
On March 2, 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 Investment, LLC and Synfuel Technology, Inc.
Effective May 2, 2011 we entered into that certain Second Amended Agreement with
Rocking Hard to revise certain terms of the agreements related to the Sheridan,
Wyoming coal property. The Second Amended Agreement combines and replaces in its
entirety that certain Amended Agreement by and between us and Rocking Horse and
that certain Royalty Agreement by and between us and Rocking Horse, both dated
May 20, 2010. It revises exploration, development and feasibility requirements
to better fit with the projected timing of the State permitting process. Minimum
royalties are also more accurately defined in the Second Amended Agreement.
9
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 at least $500,000 on development of the property
within three years of the date of the agreement.
As part of the agreement, Rocking Hard 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 we surrender the property to Synfuel Technology, Inc.
The maximum amount of royalty must be paid within 15 years of the date of the
agreement.
PROJECT SUMMARY
Located in the Sheridan coalfield north of Sheridan Wyoming, this property is
approximately 1,200 acres. The entitlement is currently composed of Wyoming
State coal leases. The North Ranchester property is about 5 miles south west of
the Decker Mine in Montana, which has been producing coal since the early 1960s.
The North Ranchester area has hosted a variety of underground and surface coal
operations from the early 1900s through the late 1970s. The replacement of coal
with the low costs and convenience of natural gas and petroleum for home heating
and to power electric generating plants in the 1960s and beyond caused the
Sheridan coal fields to be largely shut down by the early 1980s. However, the
oil supply crises of the early 1970s and 1980s, along with the continuing rise
in the price of oil, has made coal a preferred and economic fuel for electricity
generation, and also a source for liquid fuels derived from coal. The United
States has hundreds of years of coal resources within its borders, and the
cleanest, most environmentally compliant coal in the world comes from the
central Rocky Mountain and Powder River basin areas, where we have focused our
activities.
Located geologically near the base of the Paleocene Fort Union Formation, North
Ranchester contains two coal beds, the Carney and Slater Creek beds. These have
been mined extensively in the area. Much data on the coal comes from older mines
adjacent or in the same coal beds. There are also a number of drill holes from
coal, oil and gas exploration and production that have provided location and
measurement for the North Ranchester coal beds. We believe that a large portion
of the North Ranchester could be developed as open pit mines.
We are currently in the process of designing and permitting a multi-phase
drilling program to establish the specific quality, thickness and attitudes of
the Carney and Slater Creek coal beds within the property. This information will
be included in reports and the data base, which will be used in the mine
feasibility study. The feasibility study will provide the initial design of a
mining plan, determine the capital cost of the operating project and determine
the requirements necessary for submission of permit applications to the
regulatory agencies responsible for overseeing coal mining in the State of
Wyoming. These requirements include an inventory of plant and wildlife occurring
on the site. The studies will guide the reclamation and return of the area to
its current surface use, which is grazing lands.
NOTE 4 - CAPITAL STOCK
The company has 1,500,000,000 common shares authorized at a par value of $0.001
per share.
On August 31, 2007, the company issued 1,500,000 common shares to founders for
total proceeds of $15,000.
On May 31, 2008, the company completed a private placement whereby it issued
960,000 common shares at $0.05 per share for total proceeds of $48,000.
On February 1, 2010, the company completed a private placement whereby it issued
1,000,000 units for $0.25 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.25 per share expiring February 1, 2012.
On February 1, 2010, the company issued 100,000 common shares as partial
consideration to acquire the Campbell Property.
10
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 common share 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 December 31, 2011
---------- ------ ----- ----------- -----------------
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
NOTE 5 - INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded.
The cumulative net operating loss carry-forward is approximately $399,044 at
December 31, 2011, and will expire beginning in the year 2029.The cumulative tax
effect at the expected rate of 22% of significant items comprising our net
deferred tax amount is as follows:
December 31, September 30,
2011 2011
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 65,554 $ 54,644
Valuation allowance (65,554) (54,644)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
NOTE 6 - RELATED PARTY TRANSACTION
As of December 31, 2011, there is a balance owing to two officers of the Company
in the amount of $10,582 (September 30, 2011 - $7,504). This amount is included
in accounts payable-related party.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
11
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $399,044 as of December 31, 2011. 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.
NOTE 8 - SUBSEQUENT EVENTS
On January 18, 2012 the Company issued 2,000,000 shares at $0.10 to its CFO and
Director as part of his compensation.
On February 1, 2012, Liberty Coal Energy (the "Company") entered into letter of
intent for the acquisition of private mineral leasehold rights to certain coal
mining property in Owsley County, Kentucky with AMS Development LLC. and Colt
Resources, Inc. (the "Agreement").
In consideration for the mineral property leasehold, the Company must pay
$20,000 within 5 days of the date of the Agreement, $60,000 within 45 days if
the Company decides to move forward and Purchase the rights to the mining
permits and operate under a leasehold.
As part of the Agreement if the Company decides to move forward, the Company has
agreed to enter into a royalty agreement with AMS Development LLC & Colt
Resources, Inc., pursuant to which AMS & Colt would receive a minimum royalty of
$5.00 per ton or 10% of the gross sales price per ton.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks noted herein in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$), 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
13
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 December 31, 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,
2011 and 2010, regarding concerns about our ability to continue as a going
concern.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our financial statements for the quarter ended December 31, 2011 which are
included herein.
THREE MONTHS ENDED DECEMBER 31, 2011 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2010
The following table summarizes key items of comparison for the three months
ended December 31, 2011, and 2010:
Three Months Ended
December 31,
2011 2010
-------- --------
Amortization $ 422 $ 422
General and administrative 10,939 845
Legal and accounting 11,433 4,282
Investor relations 4,200 8,266
Consulting 22,500 15,000
Transfer agent 100 --
-------- --------
Net Loss $ 49,594 $ 28,815
======== ========
We had a net loss of $49,594 for the quarter ended December 31, 2011, which was
an increase of $20,779 compared to the net loss of $28,815 for the quarter ended
December 31, 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 DECEMBER 31, 2011
Since inception, we have an accumulated deficit of $399,044. We expect to
continue to incur losses as a result of continued exploration and development of
our coal mining interests.
14
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of December 31, 2011, reflects assets of $712,371. We had
cash in the amount of $305,284 and working capital in the amount of $289,282 as
of December 31, 2011.
Three Months Three Months
Ended Ended
December 31, December 31,
2011 2010
-------- --------
Net Cash (Used in) Operating Activities $(35,923) $(33,144)
Net Cash (Used in) Investing Activities -- --
Net Cash Provided by Financing Activities -- --
-------- --------
Increase (Decrease) in Cash $(35,923) $(33,144)
======== ========
Our current cash requirements are significant due to planned exploration and
development of our current coal mining property interests, and we anticipate
generating losses. In order to execute on our business strategy, including the
exploration and development of our current coal interest, we will require
additional working capital, commensurate with the operational needs of our
planned projects and obligations. Our management believes that we should be able
to raise sufficient amounts of working capital through debt or equity offerings,
as may be required to meet our short-term obligations. However, changes in our
operating plans, increased expenses, acquisitions, or other events, may cause us
to seek additional equity or debt financing in the future. We anticipate
continued and additional operations on our properties. Accordingly, we expect to
continue to use debt and equity financing to fund operations for the next twelve
months, as we look to expand our asset base and fund exploration and development
of our properties.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
or continued operations in the future.
OPERATING ACTIVITIES
Net cash flow used in operating activities during the three months ended
December 31, 2011 was $35,923, an increase of $2,779 from the $33,144 net cash
used in operating activities during the three months ended December 31, 2010.
INVESTING ACTIVITIES
None.
FINANCING ACTIVITIES
None
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.
15
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.
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.
16
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's financial statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's financial statements.
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 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.
17
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.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our chief executive officer
and chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this quarterly report. Based on this evaluation, our chief
executive officer and our chief financial officer (our principal executive
officer, principal financial officer and principal accounting officer) concluded
that our disclosure controls and procedures are effective as of December 31,
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.
18
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. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On January 18, 2012, we issued 2,000,000 shares to Robert Malasek, our Chief
Financial Officer and Director as part of his compensation for services
rendered. We issued the securities in reliance on Rule 506 of Regulation D of
the Securities Act of 1933, as amended, and comparable exemptions for sales to
"accredited" investors under state securities laws.
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* Service Contract by and between Robert Malasek and Liberty Coal
Energy Corp., dated January 18, 2012.
31.1* Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
101* Interactive data files pursuant to Rule 405 of Regulation S-T**
----------
* Filed herewith
** Pursuant to Rule 406T of Regulation S-T, an interactive data file is deemed
not filed or part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for
purposes of Section 18 of the Securities Exchange Act of 1934 or Section
34(b) of the Investment Company Act of 1940, and otherwise is not subject
to liability under these sections.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY COAL ENERGY CORP.
Date: February 14, 2012 /s/ Robert T. Malasek
-----------------------------------------------
ROBERT T. MALASEK
Chief Financial Officer, Secretary and Director
(Principal Financial Officer & Principal
Accounting Officer)
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