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EX-31.1 - Liberty Coal Energy Corp.ex31-1.txt
EX-31.2 - Liberty Coal Energy Corp.ex31-2.txt
EX-32.1 - Liberty Coal Energy Corp.ex32-1.txt
EX-32.2 - Liberty Coal Energy Corp.ex32-2.txt
EXCEL - IDEA: XBRL DOCUMENT - Liberty Coal Energy Corp.Financial_Report.xls

                                  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 $726,633 as of March 31, 2012. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders. NOTE 8 - SUBSEQUENT EVENTS None 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks noted herein in the section entitled "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in United States Dollars (US$), 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