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 March 31, 2012
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 000-54073
LIBERTY COAL ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 90-0819102
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
99 - 18th Street, Suite 3000, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(888) 399-3989
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
60,566,667 common shares issued and outstanding as of May 10, 2012
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 1A. Risk Factors 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Mine Safety Disclosures 18
Item 5. Other Information 18
Item 6. Exhibits 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three and six month period
ended March 31, 2012 form part of this quarterly report. They are stated in
United States Dollars (US$) and are prepared in accordance with United States
generally accepted accounting principles.
3
Liberty Coal Energy Corp.
(An Exploration Stage Company)
BALANCE SHEETS
(Unaudited)
As of As of
March 31, September 30,
2012 2011
---------- ----------
ASSETS
ASSETS
Cash $ 175,841 $ 341,207
Prepaid 1,570 15,784
---------- ----------
TOTAL CURRENT ASSETS 177,411 356,991
---------- ----------
Website, net of amortization 1,267 2,111
Mineral properties 395,400 397,985
---------- ----------
TOTAL OTHER ASSETS 396,667 400,096
---------- ----------
TOTAL ASSETS $ 574,078 $ 757,087
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,207 $ 11,032
Accounts payable - related party 7,504 7,504
Loans payable -- --
---------- ----------
TOTAL LIABILITIES 12,711 18,536
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, (1,500,000) shares authorized;
60,566,667 and 58,566,667 shares issued and outstanding as
of December 31, 2011 and September 30, 2010, respectively) 60,567 58,567
Additional paid-in capital 890,760 692,760
Additional paid-in capital - warrants 336,673 336,673
Accumulated deficit during the exploration sage (726,633) (349,450)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 561,367 738,550
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 574,078 $ 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 For Six Months Ending August 31, 2007-
March 31, March 31, March 31, March 31, March 31,
2012 2011 2012 2011 2012
------------ ------------ ------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------ ------------
NET SALES -- -- -- -- --
COSTS AND EXPENSES
General & administrative 11,383 12,137 22,323 12,981 69,618
Consulting services 26,500 15,000 49,000 30,000 184,000
Stock compensation 200,000 200,000 200,000
Amortization 422 422 844 844 2,533
Investor relations 4,715 4,910 8,915 13,196 56,612
Transfer agent 303 382 403 382 15,694
Legal & accounting 1,680 1,754 13,113 6,016 112,091
------------ ------------ ------------ ------------ ------------
Loss before income taxes 245,003 34,605 294,598 63,419 640,548
Provision for income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (245,003) (34,605) (294,598) (63,419) (640,548)
OTHER INCOME & (EXPENSES)
Other expense (82,585) -- (82,585) -- (82,585)
Interest expense -- (1,389) -- -- (3,500)
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME & (EXPENSES) -- -- (82,585) -- (86,085)
------------ ------------ ------------ ------------ ------------
NET LOSS $ (327,588) $ (35,994) $ (377,183) $ (63,419) $ (726,633)
============ ============ ============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.01) $ -- $ (0.01) $ --
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 58,566,667 57,900,000 57,900,000 74,420,330
============ ============ ============ ============
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 For the Incorporation on
Period Ended Period Ended August 31, 2007-
March 31, March 31, March 31,
2012 2011 2012
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (377,183) $ (64,808) $ (726,633)
Amortization 422 844 2,112
Accrued interest expense -- 1,389 --
Other Expense 83,006 -- 83,006
Shares issuance for Compensation 200,000 -- 200,000
(Increase) decrease in prepaid expenses 14,214 (4,548) (1,570)
Increase (decrease) in accounts payable and accrued liabilities (5,825) (9,551) 5,207
Increase (decrease) in related party payables -- (904) 7,504
Increase (decrease) in due to stockholder -- -- --
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (85,366) (77,578) (430,374)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in website -- -- (3,800)
Acquisition of mineral properties (80,000) (27,585) (452,985)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (80,000) (27,585) (456,785)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash -- -- 1,063,000
Payments made on loans payable -- -- --
Proceeds from loans payable -- 100,000 --
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- 100,000 1,063,000
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (165,366) (5,163) 175,841
CASH AT BEGINNING OF PERIOD 341,207 59,190 --
---------- ---------- ----------
CASH AT END OF PERIOD $ 175,841 $ 54,027 $ 175,841
========== ========== ==========
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 200,000 -- --
Preferred stock issuance for settlement of notes payable -- 3,104,139 3,104,139
---------- ---------- ----------
TOTAL NON-CASH ACTIVITIES $ 200,000 $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 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.
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.
OWSLEY COUNTY KENTUCKY PROPERTY
On February 1, 2012, 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 "Owsley Agreement").
The Owsley property covers approximately 1,000 acres and has approximately
3,600,000 tons of coal recoverable by surface and high wall (auger) methods.
There are underground reserves in place which are not being considered for
production at this time.
Owsley has a permit technically approved by the Kentucky Department of Natural
Resources for the first 80 acre phase. The permit can be placed on active status
and mining initiated by posting a $175,000 reclamation bond. The Company
believes mining can be commenced within 90 days of breaking ground.
9
In consideration for the mineral property leasehold, the Company must pay
$20,000 within 5 days of the date of the Owsley 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 Owsley Agreement, 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.
NORTH RANCHESTER COAL PROPERTY
The Company has made the decision not to pursue this property further.
Ranchester is an exploration project with no known reserves. Cost projections,
including permitting, indicate production costs in this location would be higher
than the coal could be sold for if a resource was delineated. The Company has
elected to use existing capital on the projects which will generate cash flow in
the short term.
NOTE 4 - CAPITAL STOCK
The Company has 1,500,000,000 common shares authorized at a par value of $0.001
per share.
On August 31, 2007, the Company issued 1,500,000 common shares to founders for
total proceeds of $15,000.
On May 31, 2008, the Company completed a private placement whereby it issued
960,000 common shares at $0.05 per share for total proceeds of $48,000.
On February 1, 2010, the Company completed a private placement whereby it issued
1,000,000 units for $0.25 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.25 per share expiring February 1, 2012.
On February 1, 2010, the Company issued 100,000 common shares as partial
consideration to acquire the Campbell Property.
On February 11, 2010, the Company completed a private placement whereby it
issued 1,000,000 units for $0.25 per unit. Each unit consists of one common
share and common share purchase warrant allowing the holder to purchase a common
share at $0.25 per share expiring February 1, 2012.
On March 15, 2010, the Company increased its authorized common shares from
50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock
split. All share amounts reflected in the financial statements have been
adjusted to reflect the results of the stock split.
On March 20, 2010, the Company cancelled 18,000,000 of its common stock
outstanding.
On May 11, 2011, the Company completed a private placement whereby it issued
666,667 units for $0.75 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.82 per share expiring April 30, 2013.
On January 18, 2012 the Company issued 2,000,000 shares @ $0.10 to its CFO and
Director as part of his compensation.
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date December 31, 2011
---------- ------ ----- ----------- -----------------
May 11, 2011 666,667 $0.82 May 11, 2013 666,667
10
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 $726,633 at
March 31, 2012, 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:
March 31, September 30,
2012 2011
---------- ----------
Deferred tax asset attributable to:
Net operating loss carryover $ 159,859 $ 54,644
Valuation allowance (159,859) (54,644)
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
NOTE 6 - RELATED PARTY TRANSACTION
As of March 31, 2012, there is a balance owing to two officers of the Company in
the amount of $7,504 (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.
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 $726,633 as of March 31, 2012. Management continues to seek funding from
its shareholders and other qualified investors to pursue its business plan. In
the alternative, the Company may be amenable to a sale, merger or other
acquisition in the event such transaction is deemed by management to be in the
best interests of the shareholders.
NOTE 8 - SUBSEQUENT EVENTS
None
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks noted herein in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$), 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 and develop advanced coal properties in
North America. We are currently holding two properties- The Owsley Project in
Owsley county, Eastern Kentucky and the South Powder River Project in Campbell
County, Wyoming.
OWSLEY COAL PROJECT
On February 1, 2012, the Company entered into a letter of intent for the
acquisition of private mineral leasehold rights to certain coal mining property
in Owsley County, Kentucky with AMS Development LLC. and Colt Resources, Inc.
(the "Owsley Agreement").
12
The Owsley property covers approximately 1,000 acres and has 3,600,000 tons of
coal recoverable by surface and high wall (auger) methods. There are underground
reserves in place which are not being considered for production at this time.
The Owsley project has a permit completed and technically approved by the
Kentucky Department of Natural Resources for the first 80 acre phase. The permit
can be placed on active status and mining initiated by posting a $175,000
reclamation bond. The Company believes mining can be commenced within 90 days of
breaking ground.
In consideration for the mineral property leasehold, the Company must pay
$20,000 within 5 days of the date of the Owsley 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 Owsley Agreement, 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.
SOUTH POWDER RIVER PROJECT
The South Powder River Project is in Campbell County Wyoming. The project is an
underground coal deposit of approximately 75 million tons. On February 1, 2010,
Liberty 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) In addition, we agreed to pay on the
25th day of each calendar month, a production royalty of 4% of the gross sales
price of all coal mined and sold from the project.
The South Powder River Project currently has no permits and no active operations
on the property.
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 March 31, 2012, 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 March 31, 2012 which are
included herein.
THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2011
The following table summarizes key items of comparison for the three months
ended March 31, 2012, and 2011:
Three Months Ended
March 31,
2012 2011
-------- --------
Amortization $ 422 $ 422
General and administrative 11,384 12,137
Legal and accounting 1,680 1,754
Investor relations 4,715 4,910
Consulting 26,500 15,000
Stock Compensation 200,000 --
Transfer agent 303 403
-------- --------
Net Loss $245,003 $ 34,605
======== ========
13
We had a net loss of $245,003 for the quarter ended March 31, 2012, which was an
increase of $210,398 compared to the net loss of $34,505 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
and a stock incentive pay out to one of the directors.
SIX MONTHS ENDED MARCH 31, 2012 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2011
The following table summarizes key items of comparison for the six months ended
March 31, 2012, and 2011:
Six Months Ended
March 31,
2012 2011
-------- --------
Amortization $ 844 $ 844
General and administrative 222,323 12,981
Legal and accounting 13,113 6,016
Investor relations 8,915 13,196
Consulting 49,000 15,000
200,000 --
Transfer agent 403 382
-------- --------
Net Loss $294,598 $ 63,419
======== ========
We had a net loss of $377,183 for the six months ended March 31, 2012, which was
an increase of $313,764 compared to the net loss of $63,419 for the six months
ended March 31, 2011. The significant change in our results over the two periods
is primarily the result of management's activities around the Company's projects
and a 200,000 stock incentive pay-out to one of the directors.
PERIOD FROM INCEPTION, AUGUST 31, 2007 TO MARCH 31, 2012
Since inception, we have an accumulated deficit of $726,633. 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 March 31, 2012, reflects assets of $574,078. We had cash
in the amount of $175,841 and working capital in the amount of $164,700 as of
March 31, 2012.
Three Months Three Months
Ended Ended
March 31, March 31,
2012 2011
-------- --------
Net Cash (Used in) Operating Activities $(85,366) $(77,578)
Net Cash (Used in) Investing Activities -- --
Net Cash Provided by Financing Activities -- --
-------- --------
Increase (Decrease) in Cash $(85,366) $(77,578)
======== ========
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
14
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 six months ended March 31,
2012 was $(85,366), an increase of $7,788 from the $77,578 net cash used in
operating activities during the six months ended March 31, 2011.
INVESTING ACTIVITIES
Net Investing activities during the six months ended March 31, 2012 used $80,000
of cash, an increase of $52,415 from the $27,585 cash used in Investing
Activities during the six months ended March, 2011.
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.
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
15
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.
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.
16
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.
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.
17
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 March 31, 2012
to ensure that information we are required to disclose in reports that we file
or submit under the Securities Exchange Act of 1934 (i) is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms, and (ii) is accumulated and communicated
to our management, including our chief executive officer and our chief financial
officer (our principal executive officer, principal financial officer and
principal accounting officer), as appropriate, to allow timely decisions
regarding required disclosure. Our disclosure controls and procedures are
designed to provide reasonable assurance that such information is accumulated
and communicated to our management. Our disclosure controls and procedures
include components of our internal control over financial reporting.
Management's assessment of the effectiveness of our internal control over
financial reporting is expressed at the level of reasonable assurance that the
control system, no matter how well designed and operated, can provide only
reasonable, but not absolute, assurance that the control system's objectives
will be met.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered beneficial shareholder, is an adverse
party or has any material interest adverse to our interest.
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 DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
None.
18
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 originally filed on January
23, 2008).
3.2 By-laws (Incorporated by reference to our Registration Statement
on Form S1/A filed on February 27, 2008).
3.3 Articles of Merger (Incorporated by reference to our Current
Report on Form 8-K filed on March 29, 2010).
3.4 Certificate of Change (Incorporated by reference to our Current
Report on Form 8-K filed on March 29, 2010).
10.1 Form of Subscription Agreement (Incorporated by reference to our
Quarterly Report on Form 10-Q filed on May 16, 2011)
10.2 Second Amended Agreement by and between Liberty Coal Energy Corp.
and Rocking Hard Investments, LLC, dated May 2, 2010 (Incorporated
by reference to our Quarterly Report on Form 10-Q filed on May 16,
2011)
31.1* Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
101* Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* Filed herewith
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: May 15, 2012 /s/ Robert T. Malasek
---------------------------------------
Robert T. Malasek
Chief Financial Officer, Secretary and
Director (Principal Financial Officer &
Principal Accounting Officer)
2