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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 1)

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                  For the fiscal year ended September 30, 2012

[ ] 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                                                  N/A
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

 99 18th Street, Suite 3000, Denver, CO                            80202
(Address of principal executive offices)                         (Zip Code)

                                 (888) 399-3989
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class                    Name of Each Exchange On Which Registered
-------------------                    -----------------------------------------
       N/A                                                N/A

           Securities registered pursuant to Section 12(g) of the Act:

                        Common Stock, par value of $0.001
                                (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]

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 last 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Website, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-K (ss.229.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

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
definition 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]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State the aggregate market value of voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and ask price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter.

The aggregate market value of Common Stock held by non-affiliates of the
Registrant on December 20, 2011, was $1,453,400 based on the average bid/ask
price for the Common Stock on December 20, 2011. For purposes of this
computation, all executive officers and directors have been deemed to be
affiliates. Such determination should not be deemed to be an admission that such
executive officers and directors are, in fact, affiliates of the Registrant.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.

316,287,267 shares of common stock issued & outstanding as of January 5, 2013

                       DOCUMENTS INCORPORATED BY REFERENCE
None.

TABLE OF CONTENTS Item 1. Business............................................................. 3 Item 1A. Risk Factors......................................................... 8 Item 1B. Unresolved Staff Comments............................................15 Item 2. Properties...........................................................15 Item 3. Legal Proceedings....................................................16 Item 4. Mine Safety Disclosures..............................................16 Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.......................................17 Item 6. Selected Financial Data..............................................18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........23 Item 8. Financial Statements and Supplementary Data..........................24 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................38 Item 9A. Controls and Procedures..............................................38 Item 9B. Other Information....................................................39 Item 10. Directors, Executive Officers and Corporate Governance...............39 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters..........................................42 Item 13. Certain Relationships and Related Transactions, and Director Independence.........................................................44 Item 14. Principal Accountants Fees and Services..............................45 Item 15. Exhibits, Financial Statement Schedules..............................46 2
FORWARD LOOKING STATEMENTS This annual 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 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. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this Form 10-K. Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. 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$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and all references to "common shares" refer to the common shares in our capital stock. As used in this annual report, the terms "we", "us", "our company", or "the Company" mean Liberty Coal Energy Corp., a Nevada corporation, unless otherwise indicated. PART I ITEM 1. BUSINESS CORPORATE HISTORY The address of our principal executive office is 99 18th Street, Suite 3000, Denver, Colorado 80202. Our telephone number is (888) 399-3989. 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 ESEL 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 director of our company to that of a precious metal mineral 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. Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business. 3
OUR CURRENT BUSINESS Our primary business focus is to acquire, explore and develop coal properties in North America. We are currently developing a project in Owsley County, Kentucky. 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 production can be commenced within 90 days of breaking ground. The previous two properties that Liberty controlled in Sheridan and Campell counties Wyoming were dropped in 2012. This decision was a result of evaluation of the probable economics, especially in view of the market projections for thermal coal from the Wyoming region. Neither property could compete with the larger and low cost open pit mines in the Powder River Basin and any conceivable investment did not show a favorable return. COMPETITION The mining industry is intensely competitive. We compete with numerous individuals and companies, including many major mining companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for access to funds. There are other competitors that have operations in the area and the presence of these competitors could adversely affect our ability to compete for financing and obtain the service providers, staff or equipment necessary for the exploration and exploitation of our properties. We compete with many companies in the mining business, including larger, more established mining companies with substantial capabilities, personnel and financial resources. Further, there is a limited supply of desirable mineral lands available for claim-staking, lease or acquisition in areas where we may conduct exploration activities. Because we compete with individuals and companies that have greater financial resources and larger technical staffs, we may be at a competitive disadvantage in acquiring desirable mineral properties. From time to time, specific properties or areas that would otherwise be attractive to us for exploration or acquisition are unavailable due to their previous acquisition by other companies or our lack of financial resources. Competition in the mining industry is not limited to the acquisition of mineral properties but also extends to the technical expertise to find, advance and operate such properties; the labor to operate the properties; and the capital needed to fund the acquisition and operation of such properties. Competition may result in our company being unable not only to acquire desired properties, but to recruit or retain qualified employees, to obtain equipment and personnel to assist in our exploration activities or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operations and business. As noted above, we compete with other mining and exploration companies, many of which possess greater financial resources and technical facilities than we do, in connection with the acquisition of suitable exploration properties and in connection with the engagement of qualified personnel. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have established more strategic partnerships and relationships and have greater financial accessibility than we have. Accordingly, given the significant competition for mineral exploration properties, we may be unable to continue to acquire interests in attractive mineral exploration properties on terms we consider acceptable. 4
The most important factors on which we compete are coal price, coal quality and characteristics, transportation costs and the reliability of supply. Demand for coal and the prices that we will be able to obtain for our coal are closely linked to coal consumption patterns of the domestic electric generation industry and international consumers. These coal consumption patterns are influenced by factors beyond our control, including demand for electricity, which is significantly dependent upon economic activity and summer and winter temperatures in the United States, government regulation, technological developments and the location, availability, quality and price of competing sources of fuel such as natural gas, oil and nuclear, and alternative energy sources such as hydroelectric power. We do not engage in hedging transactions and we have no hedged mineral resources. MINING PERMITS AND APPROVALS We plan to secure all necessary state and federal permits for our exploration activities and we intend to file for the required permits to conduct our exploration programs as necessary. These permits are usually obtained from either the Bureau of Land Management or the United States Forest Service. Obtaining such permits usually requires the posting of small bonds for subsequent remediation of trenching, drilling and bulk-sampling. Applications for permits require extensive engineering and data analysis and presentation, and must address a variety of environmental, health, and safety matters associated with a proposed mining operation. These matters include the manner and sequencing of coal extraction, the storage, use and disposal of waste and other substances and other impacts on the environment, the construction of water containment areas, and reclamation of the area after coal extraction. Meeting all requirements imposed by any of these authorities may be costly and time consuming, and may delay or prevent commencement or continuation of mining operations. The permitting process for certain mining operations can extend over several years and can be subject to judicial challenge, including by the public. Some required mining permits are becoming increasingly difficult to obtain in a timely manner, or at all. We cannot assure you that we will not experience difficulty or delays in obtaining mining permits in the future. We may be required to post bonds to secure performance under such permits. Under some circumstances, substantial fines and penalties, including revocation of mining permits, may be imposed under applicable laws and regulations. Monetary sanctions and, in severe circumstances, criminal sanctions may be imposed for failure to comply with these laws and regulations. Regulations also provide that a mining permit can be refused or revoked if the permit applicant or permittee owns or controls, directly or indirectly through other entities, mining operations that have outstanding environmental violations. COMPLIANCE WITH GOVERNMENT REGULATIONS Various levels of governmental controls and regulations address, among other things, the environmental impact of mineral exploration and mineral processing operations and establish requirements for decommissioning of mineral exploration properties after operations have ceased. With respect to the regulation of mineral exploration and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards and other design or operational requirements for various aspects of the operations, including health and safety standards. Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mineral exploration properties following the cessation of operations and may require that some former mineral properties be managed for long periods of time. Our exploration activities are subject to various levels of federal and state laws and regulations relating to protection of the environment, including requirements for closure and reclamation of mineral exploration properties. Some of the laws and regulations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act, the Federal Land Policy and Management Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act, and all the related state laws in Wyoming, some of which are discussed in more detail below. 5
We do not anticipate discharging water into active streams, creeks, rivers, lakes or any other bodies of water without an appropriate permit. We also do not anticipate disturbing any endangered species or archaeological sites or causing damage to the properties in which we have an interest. Re-contouring and re-vegetation of disturbed surface areas will be completed pursuant to the applicable permits. The cost of remediation work varies according to the degree of physical disturbance. It is difficult to estimate the cost of compliance with environmental laws since the full nature and extent of our proposed activities cannot be determined at present. MINE HEALTH AND SAFETY LAWS Stringent safety and health standards have been imposed by federal legislation since Congress adopted the Mine Safety and Health Act of 1969. The Mine Safety and Health Act of 1977 significantly expanded the enforcement of safety and health standards and imposed further comprehensive safety and health standards on all aspects of mining operations. In reaction to several mine accidents in recent years, federal and state legislatures and regulatory authorities have increased scrutiny of mine safety matters and passed more stringent laws governing mining. ENVIRONMENTAL REGULATION As noted above, mining activities at and on our properties are subject to various environmental laws, both federal and state, including but not limited to the federal National Environmental Policy Act, CERCLA (as defined below), the Resource Recovery and Conservation Act, the Clean Water Act, the Clean Air Act and the Endangered Species Act, and certain state laws governing the discharge of pollutants and the use and discharge of water. Various permits from federal and state agencies are required under many of these laws. Local laws and ordinances may also apply to such activities as construction of facilities, land use, waste disposal, road use and noise levels. These laws and regulations are continually changing and, as a general matter, are becoming more restrictive. Our policy is to conduct our business in a manner that safeguards public health and mitigates the environmental effects of our business activities. To comply with these laws and regulations, some of which are discussed below, we have made, and in the future may be required to make, significant capital and operating expenditures. The COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, as amended ("CERCLA"), imposes strict, joint, and several liability on parties associated with releases or threats of releases of hazardous substances. Liable parties include, among others, the current owners and operators of facilities at which hazardous substances were disposed or released into the environment and past owners and operators of properties who owned such properties at the time of such disposal or release. This liability could include response costs for removing or remediating the release and damages to natural resources. The properties in which we have certain interests, because of past mining activities, could give rise to potential liability under CERCLA. Under the RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA") and related state laws, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous or solid wastes associated with certain mining-related activities. RCRA costs may also include corrective action or clean up costs. The majority of the waste which is produced by such operations is "extraction" waste that Environmental Protection Agency ("EPA") has determined not to regulate under RCRA's "hazardous waste" program. Instead, the EPA is creating a solid waste regulatory program specific to mining operations under the RCRA. Of particular concern to the mining industry is a proposal by the EPA entitled "Recommendation for a Regulatory Program for Mining Waste and Materials Under Subtitle D of the Resource Conservation and Recovery Act" ("Strawman II") which, if implemented, would create a system of comprehensive Federal regulation of the entire mine site. Many of these requirements would be duplicates of existing state regulations. Strawman II as currently proposed would regulate not only mine and mill wastes but also numerous production facilities and processes which could limit internal flexibility in operating a mine. To implement Strawman II the EPA must seek additional statutory authority, which is expected to be requested in connection with Congress' reauthorization of RCRA. Mining operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, such as crushers and storage facilities, and from mobile sources such as trucks and heavy construction equipment. All of these sources are subject to review, monitoring, permitting, and/or control requirements under the federal CLEAN AIR ACT and related state air quality laws. Air quality permitting rules may impose limitations on our production levels or create additional capital expenditures in order to comply with the permitting conditions. 6
Under the federal CLEAN WATER ACT, point-source discharges are regulated by the National Pollution Discharge Elimination System program. Stormwater discharges also are regulated and permitted under that statute. Section 404 of the CLEAN WATER ACT regulates the discharge of dredge and fill material into waters of the United States, including wetlands. All of those programs may impose permitting and other requirements on our operations. The NATIONAL ENVIRONMENTAL POLICY ACT ("NEPA") requires an assessment of the environmental impacts of major federal actions. The federal action requirement must be satisfied if the project involves federal land or if the federal government provides financing or permitting approvals. NEPA does not establish any substantive standards, but requires the analysis of any potential impacts. The scope of the assessment process depends on the size of the project. An Environmental Assessment ("EA") may be adequate for smaller projects. An Environmental Impact Statement, which is much more detailed and broader in scope than an EA, is required for larger projects. NEPA compliance requirements for any of our proposed projects could result in additional costs or delays. The ENDANGERED SPECIES ACT ("ESA") is administered by the U.S. Fish and Wildlife Service of the U.S. Department of Interior. The purpose of the ESA is to conserve and recover listed endangered and threatened species and their habitat. Under the ESA, endangered means that a species is in danger of extinction throughout all or a significant portion of its range. The term threatened under such statute means that a species is likely to become endangered within the foreseeable future. Under the ESA, it is unlawful to take a listed species, which can include harassing or harming members of such species or significantly modifying their habitat. Future identification of endangered species or habitat in our project areas may delay or adversely affect our operations. U.S. federal and state reclamation requirements often mandate concurrent reclamation and require permitting in addition to the posting of reclamation bonds, letters of credit or other financial assurance sufficient to guarantee the cost of reclamation. If reclamation obligations are not met, the designated agency could draw on these bonds or letters of credit to fund expenditures for reclamation requirements. Reclamation requirements generally include stabilizing, contouring and re-vegetating disturbed lands, controlling drainage from portals and waste rock dumps, removing roads and structures, neutralizing or removing process solutions, monitoring groundwater at the mining site and maintaining visual aesthetics. EMPLOYEES At present, only our directors and officers act as our employees of our company. We do not expect any material changes in the number of employees over the next 12 month period. We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs. We will continue to outsource contract employment as needed. RESEARCH AND DEVELOPMENT We have not spent any amounts on which has been classified as research and development activities in our financial statements since our inception. GOING CONCERN We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing. SUBSIDIARIES We have registered a Kentucky LLC, which will handle the day to day management of the Owsley project and handle all state filings. 7
INTELLECTUAL PROPERTY We do not own, either legally or beneficially, any patent or trademark. REPORTS TO SECURITY HOLDERS We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together with our annual audited financial statements upon request. We are required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov. ITEM 1A. RISK FACTORS Much of the information included in this annual report includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections and estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward looking statements". RISKS RELATED TO OUR BUSINESS WE ARE IN THE EXPLORATION STAGE AND HAVE YET TO ESTABLISH OUR MINING OPERATIONS, WHICH MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS. THERE CAN BE NO ASSURANCE THAT WE WILL EVER GENERATE REVENUES FROM OPERATIONS OR EVER OPERATE PROFITABLY. We are currently in the exploration stage and have yet to establish our mining operations. Our limited history makes it difficult for potential investors to evaluate our business. We need to complete a drilling program and obtain feasibility studies on the properties in which we have an interest in order to establish the existence of commercially viable coal deposits and proven and probable reserves on such properties. Therefore, our proposed operations are subject to all of the risks inherent in the unforeseen costs and expenses, challenges, complications and delays frequently encountered in connection with the formation of any new business, as well as those risks that are specific to the coal industry in general. Despite our best efforts, we may never overcome these obstacles to financial success. There can be no assurance that our efforts will be successful or result in revenue or profit, or that investors will not lose their entire investment. WE FACE NUMEROUS UNCERTAINTIES IN CONFIRMING THE EXISTENCE OF ECONOMICALLY RECOVERABLE COAL RESERVES AND IN ESTIMATING THE SIZE OF SUCH RESERVES, AND INACCURACIES IN OUR ESTIMATES COULD RESULT IN LOWER THAN EXPECTED REVENUES, HIGHER THAN EXPECTED COSTS OR FAILURE TO ACHIEVE PROFITABILITY. We have not established the existence of a commercially viable coal deposit on the properties in which we have an interest. Further exploration will be required in order to establish the existence of economically recoverable coal reserves and in estimating the size of those reserves. However, estimates of the economically recoverable quantities and qualities attributable to any particular group of properties, classifications of reserves based on risk of recovery and 8
estimates of net cash flows expected from particular reserves prepared by different engineers or by the same engineers at different times may vary substantially. Actual coal tonnage recovered from identified reserve areas or properties and revenues and expenditures with respect to such reserves may vary materially from estimates. Inaccuracies in any estimates related to our reserves could materially affect our ability to successfully commence profitable mining operations. OUR FUTURE SUCCESS DEPENDS UPON OUR ABILITY TO ACQUIRE AND DEVELOP COAL RESERVES THAT ARE ECONOMICALLY RECOVERABLE AND TO RAISE THE CAPITAL NECESSARY TO FUND MINING OPERATIONS. Our future success depends upon our conducting successful exploration and development activities and acquiring properties containing economically recoverable coal deposits. In addition, we must also generate enough capital, either through our operations or through outside financing, to mine these reserves. Our current strategy includes completion of exploration activities on our current properties and, in the event we are able to establish the existence of commercially viable coal deposits on such properties, continuing to develop our existing properties. Our ability to develop our existing properties and to commence mining operations will depend on our ability to obtain sufficient working capital through financing activities. DUE TO VARIABILITY IN COAL PRICES AND IN OUR COST OF PRODUCING COAL, AS WELL AS CERTAIN CONTRACTUAL COMMITMENTS, WE MAY BE UNABLE TO SELL COAL AT A PROFIT. In the event we are able to commence coal production from our properties, we will plan to sell any coal we produce for a specified tonnage amount and at a negotiated price pursuant to short-term and long-term contracts. Price adjustment, "price reopener" and other similar provisions in long-term supply agreements may reduce the protection from short-term coal price volatility traditionally provided by such contracts. Any adjustment or renegotiation leading to a significantly lower contract price would result in decreased revenues and lower our gross margins. Coal supply agreements also typically contain force majeure provisions allowing temporary suspension of performance by us or our customers during the duration of specified events beyond the control of the affected party. Most coal supply agreements contain provisions requiring us to deliver coal meeting quality thresholds for certain characteristics such as Btu, sulfur content, ash content, hardness and ash fusion temperature. Failure to meet these specifications could result in economic penalties, including price adjustments, the rejection of deliveries or, in the extreme, termination of the contracts. Consequently, due to the risks mentioned above with respect to long-term supply agreements, we may not achieve the revenue or profit we expect to achieve from any such future sales commitments. In addition, we may not be able to successfully convert these future sales commitments into long-term supply agreements. THE COAL INDUSTRY IS HIGHLY COMPETITIVE AND INCLUDES MANY LARGE NATIONAL AND INTERNATIONAL RESOURCE COMPANIES. THERE IS NO ASSURANCE THAT WE WILL BE ABLE TO EFFECTIVELY COMPETE IN THIS INDUSTRY AND OUR FAILURE TO COMPETE EFFECTIVELY COULD CAUSE OUR BUSINESS TO FAIL OR COULD REDUCE OUR REVENUE AND MARGINS AND PREVENT US FROM ACHIEVING PROFITABILITY. In the event we are able to produce coal, we will be in competition for sale of our coal with numerous large producers and hundreds of small producers who operate globally. The markets in which we may seek to sell our coal are highly competitive and are affected by factors beyond our control. There is no assurance of demand for any coal we are able to produce, and the prices that we may be able to obtain will depend primarily on global coal consumption patterns, which in turn are affected by the demand for electricity, coal transportation costs, environmental and other governmental regulations and orders, technological developments and the availability and price of competing alternative energy sources such as oil, natural gas, nuclear energy and hydroelectric energy. In addition, during the mid-1970s and early 1980s, a growing coal market and increased demand for coal attracted new investors to the coal industry and spurred the development of new mines and added production capacity throughout the industry. Although demand for coal has grown over the recent past, the industry has since been faced with overcapacity, which in turn has increased competition and lowered prevailing coal prices. Moreover, because of greater competition for electricity and increased pressure from customers and regulators to lower electricity prices, public utilities are lowering fuel costs and requiring competitive prices on their purchases of coal. Accordingly, there is no assurance that we will be able to produce coal at competitive prices or that we will be able to sell any coal we produce for a profit. Our inability to compete effectively in the global market for coal would cause our business to fail. 9
OUR INABILITY TO DIVERSIFY OUR OPERATIONS MAY SUBJECT US TO ECONOMIC FLUCTUATIONS WITHIN OUR INDUSTRY. Our limited financial resources reduce the likelihood that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one business area will subject us to economic fluctuations within the coal industry and therefore increase the risks associated with our operations. THE INTERNATIONAL COAL INDUSTRY IS HIGHLY CYCLICAL, WHICH WILL SUBJECT US TO FLUCTUATIONS IN PRICES FOR ANY COAL WE PRODUCE. In the event we are able to produce coal, we will be exposed to swings in the demand for coal, which will have an impact on the prices for our coal. The demand for coal products and, thus, the financial condition and results of operations of companies in the coal industry, including us, are generally affected by macroeconomic fluctuations in the world economy and the domestic and international demand for energy. In recent years, the price of coal has been at historically high levels, but these price levels may not continue. Any material decrease in demand for coal could have a material adverse effect on our operations and profitability. THE PRICE OF COAL IS DRIVEN BY THE GLOBAL MARKET. IT IS AFFECTED BY CHANGING REQUIREMENTS OF CUSTOMERS BASED ON THEIR NEEDS AND THE PRICE OF ALTERNATIVE SOURCES OF ENERGY SUCH AS NATURAL GAS AND OIL. In the event that we are able to begin producing coal, our success will depend upon maintaining a consistent margin on our coal sales to pay our costs of mining and capital expenditures. We intend to seek to control our costs of operations, but pressures by government policies and the price of substitutes could drive the price of coal down to make it unprofitable for us. The price of coal is controlled by the global market and we will be dependent on both economic and government policies to maintain the price above our future cost structure. OPERATING A MINE HAS HAZARDOUS RISKS THAT CAN DELAY AND INCREASE THE COSTS OF PRODUCTION. Our mining operations, if any, will be subject to conditions that can impact the safety of the workforce, or delay production and deliveries or increase the full cost of mining. These conditions include fires and explosions from methane gas or coal dust; accidental discharges; weather, flooding and natural disasters; unexpected maintenance problems; key equipment failures; variations in coal seam thickness; variations in the amount of rock and soil overlying the coal deposit; variations in rock and other natural materials and variations in geologic conditions. Despite our efforts, once operational, significant mine accidents could occur and have a substantial impact. OUR PLANNED MINING OPERATIONS ARE INHERENTLY SUBJECT TO CONDITIONS THAT COULD AFFECT LEVELS OF PRODUCTION AND PRODUCTION COSTS AT PARTICULAR MINES FOR VARYING LENGTHS OF TIME AND COULD REDUCE OUR PROFITABILITY. Our planned coal mining operations are subject to conditions or events beyond our control that could disrupt operations, affect production and increase the cost of mining for varying lengths of time and negatively affect our profitability. These conditions or events include, (i) unplanned equipment failures, which could interrupt production and require us to expend significant sums to repair our capital equipment that we would use to remove the soil that overlies coal deposits; (ii) geological conditions, such as variations in the quality of the coal produced from a particular seam, variations in the thickness of coal seams and variations in the amounts of rock and other natural materials that overlie the coal that we are mining; (iii) unexpected delays and difficulties in acquiring, maintaining or renewing necessary permits or mining or surface rights; (iv) unavailability of mining equipment and supplies and increases in the price of mining equipment and supplies; (v) shortage of qualified labor and a significant rise in labor costs; (vi) fluctuations in the cost of industrial supplies, including steel-based supplies, natural gas, diesel fuel and oil; (vii) unexpected or accidental surface subsidence from underground mining; (viii) accidental mine water discharges, fires, explosions or similar mining accidents; (ix) regulatory issues involving the plugging of and mining through oil and gas wells that penetrate the coal seams we mine; and (x) adverse weather conditions and natural disasters, such as heavy rains and flooding. If any of these conditions or events occur in the future at any of our mining properties, our cost of mining and any delay or halt of production either permanently or for varying lengths of time could adversely affect our operating results. 10
DEFECTS IN TITLE OR LOSS OF ANY LEASEHOLD INTERESTS IN OUR PROPERTIES COULD LIMIT OUR ABILITY TO MINE THESE PROPERTIES OR RESULT IN SIGNIFICANT UNANTICIPATED COSTS. We plan to conduct some of our mining operations on properties that we lease. A title defect or the loss of any lease could adversely affect our ability to mine any associated reserves. Because title to most of our leased properties and mineral rights is not usually verified until we make a commitment to develop a property, which may not occur until after we have obtained necessary permits and completed exploration of the property, our right to mine some of our reserves may, in the future, be adversely affected if defects in title or boundaries exist. In order to obtain leases or mining contracts to conduct our mining operations on property where these defects exist, we may in the future have to incur unanticipated costs. In addition, we may not be able to successfully negotiate new leases or mining contracts for properties containing additional reserves or maintain our leasehold interests in properties where we have not commenced mining operations during the term of the lease. THE COAL INDUSTRY COULD HAVE OVERCAPACITY WHICH WOULD AFFECT THE PRICE OF COAL AND IN TURN, WOULD IMPACT OUR ABILITY TO REALIZE A PROFIT FROM FUTURE COAL SALES. Current prices of alternative fuels such as oil are at high levels, spurring demand and investment in coal. This can lead to over investment and over capacity in the sector, dropping the price of coal to unprofitable levels. Such an occurrence would adversely affect our ability to commence mining operations or to realize a profit from any future coal sales we may seek to make. ENVIRONMENTAL PRESSURES COULD INCREASE AND ACCELERATE REQUIREMENTS FOR CLEANER COAL OR COAL PROCESSING. Environmental pressures could drive potential purchasers of coal to either push the price of coal down in order to compete in the energy market or move to alternative energy supplies therefore reducing demand for coal. Requirements to have cleaner mining operations could lead to higher costs for us which could hamper our ability to make future sales at a profitable level. Coal plants emit carbon dioxide, sulfur and nitrate particles to the air. Various countries have imposed cleaner air legislations in order to minimize those emissions. Some technologies are available to do so, but also increase the price of energy derived by coal. Such an increase will drive customers to make a choice on whether or not to use coal as their driver for energy production. EXPLORATION AND EXPLOITATION ACTIVITIES ARE SUBJECT TO COMPREHENSIVE REGULATION WHICH MAY CAUSE SUBSTANTIAL DELAYS OR REQUIRE CAPITAL OUTLAYS IN EXCESS OF THOSE ANTICIPATED CAUSING AN ADVERSE EFFECT ON OUR COMPANY. Exploration and exploitation activities are subject to federal, state, and local laws, regulations, and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. Exploration and exploitation activities are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted, and no assurance can be given that such permits will be received. Environmental and other legal standards imposed by federal, state, or local authorities may be changed and any such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Any laws, regulations, or policies of any government body or regulatory agency may be changed, applied, or interpreted in a manner which will alter and negatively affect our ability to carry on our business. SEVERE WEATHER OR VIOLENT STORMS COULD MATERIALLY AFFECT OUR OPERATIONS DUE TO DAMAGE OR DELAYS CAUSED BY SUCH WEATHER. Our exploration activities are subject to normal seasonal weather conditions that often hamper and may temporarily prevent exploration activities. There is a risk that unexpectedly harsh weather or violent storms could affect areas where 11
we conduct exploration activities. Delays or damage caused by severe weather could materially affect our operations or our financial position. RISKS ASSOCIATED WITH OUR COMPANY BECAUSE WE MAY NEVER EARN REVENUES FROM OUR OPERATIONS, OUR BUSINESS MAY FAIL AND THEN INVESTORS MAY LOSE ALL OF THEIR INVESTMENT IN OUR COMPANY. We have no history of revenues from operations. We have never had significant operations and have no significant assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our company has a limited operating history. If our business plan is not successful and we are not able to operate profitably, then our stock may become worthless and investors may lose all of their investment in our company. We expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from our properties, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will fail and investors may lose all of their investment in our company. WE HAVE A HISTORY OF LOSSES AND HAVE NEGATIVE CASH FLOWS FROM OPERATIONS, WHICH RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. We have not generated any revenues since our incorporation and we will continue to incur operating expenses without revenues until we are in commercial deployment. To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements and have incurred net losses from inception to September 30, 2012 of $1,292,435. Our net cash used in operations for the year ended September 30, 2012 was $204,757. As of September 30, 2012, we had a working capital of $374,783. We do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that drilling and completion costs increase beyond our expectations; or we encounter greater costs associated with general and administrative expenses or offering costs. The occurrence of any of the aforementioned events could adversely affect our ability to meet our business plans. We cannot provide assurances that we will be able to successfully execute our business plan. These circumstances raise substantial doubt about our ability to continue as a going concern. If we are unable to continue as a going concern, investors will likely lose all of their investments in our company. There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will purchase our services, the size of customers' purchases, the demand for our services, and the level of competition and general economic conditions. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our normal operations, then we may be forced to scale down or even close our operations. IF WE DO NOT OBTAIN FINANCING WHEN NEEDED, OUR BUSINESS WILL FAIL. As of September 30, 2012, we had approximately $11,365 in cash and cash equivalents in our accounts. We estimate that we will need approximately US $750,000 in working capital to fund capital and operational costs with respect to our planned exploration phase. We do not have any arrangements for additional financing and we may not be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including the market prices for our products, production costs, the availability of credit, prevailing interest rates and the market price for our common stock. We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. There is no guarantee 12
that sufficient capital will continue to be available to meet these continuing development costs or that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment. AS WE FACE INTENSE COMPETITION IN THE COAL EXPLORATION INDUSTRY, WE WILL HAVE TO COMPETE WITH OUR COMPETITORS FOR FINANCING AND FOR QUALIFIED MANAGERIAL AND TECHNICAL EMPLOYEES. Our properties are in Wyoming and our competition there includes large, established coal companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may have to compete for financing and be unable to acquire financing on terms we consider acceptable. We may also have to compete with the other energy companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or qualified employees, our exploration programs may be slowed down or suspended, which may cause us to cease operations as a company. THE ELIMINATION OF MONETARY LIABILITY AGAINST OUR DIRECTORS, OFFICERS AND EMPLOYEES UNDER NEVADA LAW AND THE EXISTENCE OF INDEMNIFICATION RIGHTS TO OUR DIRECTORS, OFFICERS AND EMPLOYEES MAY RESULT IN SUBSTANTIAL EXPENDITURES BY OUR COMPANY AND MAY DISCOURAGE LAWSUITS AGAINST OUR DIRECTORS, OFFICERS AND EMPLOYEES. Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to our company and shareholders for damages for breach of fiduciary duty as a director or officer to the extent provided by Nevada law. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders. TO DATE, WE HAVE NOT PAID ANY CASH DIVIDENDS AND NO CASH DIVIDENDS WILL BE PAID IN THE FORESEEABLE FUTURE. We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We presently intend to retain all earnings for our operations. RISKS RELATING TO OUR SECURITIES AND OUR STATUS AS A PUBLIC COMPANY WE WILL CONTINUE TO INCUR SIGNIFICANT COSTS AS A RESULT OF OPERATING AS A PUBLIC COMPANY, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO NEW COMPLIANCE REQUIREMENTS. As a public company we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report 13
on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. If we are not able to comply with the requirements of Section 404 in a timely manner, or if our accountants later identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities. A LIMITED PUBLIC TRADING MARKET EXISTS FOR OUR COMMON STOCK, WHICH MAKES IT MORE DIFFICULT FOR OUR STOCKHOLDERS TO SELL THEIR COMMON STOCK IN THE PUBLIC MARKETS. Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority ("FINRA"). Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the NYSE. The number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our stock until such time as we became more viable. Additionally, many brokerage firms may not be willing to effect transactions in the securities. As a consequence, there may be periods of several days or more when trading activity in our stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that trading levels will be sustained. Shareholders should be aware that, according to SEC Release No. 34-29093, the market for "penny stocks" has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the future volatility of our share price. OUR STOCK IS CATEGORIZED AS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS WHICH MAY LIMIT A SHAREHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than US$ 5.00 per share or an exercise price of less than US$ 5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide 14
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock. FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission,, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. ITEM 1B. UNRESOLVED STAFF COMMENTS As a "smaller reporting company", we are not required to provide the information required by this Item. ITEM 2. PROPERTIES We do not own any real property. Our principal business offices are located at is 99 18th Street, Suite 3000, Denver Co. 80202. We currently lease our space at an annual cost of $828. We believe that our current lease arrangements provide adequate space for our foreseeable future needs. OWSLEY COUNTY COAL PROPERTY 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" ). 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. As part of the Owsley Agreement, the Company has agreed to enter into a purchase agreement with AMS Development LLC & Colt Resources, Inc., pursuant to which AMS & Colt would receive a minimum royalty of 5 dollars per ton or 10% of gross sales price per ton, whichever is greater. The agreement provides for the purchase of the 1,000 acres of surface property at $600,000, as well as surface mineable coal, (3.6 million tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and the discharge of a first mortgage due to a former owner of $150,000 for a total purchase price of $3,890,000. The total purchase price is payable through a combination of cash, a promissory note and Liberty Coal common shares. 15
ITEM 3. LEGAL PROCEEDINGS We know of no material, existing or pending legal proceedings against us, 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 or beneficial shareholder, is an adverse party or has a material interest adverse to our company. ITEM 4. MINE SAFETY DISCLOSURES None. 16
PART II ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is quoted on the OTC Bulletin Board under the symbol "LBTG". The high and low bid prices of our common stock for the periods indicated below are as follows: NATIONAL ASSOCIATION OF SECURITIES DEALERS OTC BULLETIN BOARD(1) Quarter Ended High Low ------------- ---- --- September 30, 2012 $0.06 $0.03 June 30, 2012 $0.12 $0.04 March 31, 2012 $0.14 $0.06 December 31, 2011 $0.19 $0.02 September 30, 2011 $0.22 $0.16 June 30, 2011 $0.75 $0.41 March 31, 20111 $1.09 $0.749 ---------- (1) Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Our common shares are issued in registered form. Securities Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, Texas 75034 (Telephone: (469) 633-0101; Facsimile: (469) 633-0088) is the registrar and transfer agent for our common shares On January 5, 2013, the list of stockholders for our shares of common stock showed 24 registered stockholders and [316,287,667] shares of common stock outstanding. DIVIDENDS We have not declared any dividends on our common stock since the inception of our company on August 31, 2007. There is no restriction in our Articles of Incorporation and Bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future. EQUITY COMPENSATION PLAN INFORMATION We do not have any Equity Compensation Plans that authorize the issuance of securities. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS We did not purchase any of our shares of common stock or other securities during the year ended September 30, 2012. RECENT SALES OF UNREGISTERED SECURITIES We have entered into a financing agreement which has been disclosed in a Form 8-K. 17
In this transaction we have issued 237,732,600 shares to an escrow account in return for an escrowed deposit of $9,196,500. The transaction also included 250,095,420 warrants which expire in 6 years at an average price of $0.07. ITEM 6. SELECTED FINANCIAL DATA As a "smaller reporting company", we are not required to provide the information required by this Item. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended September 30, 2012 and September 30, 2011 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this registration statement, particularly in the section entitled "Risk Factors" beginning on page 9 of this annual report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. BACKGROUND 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 ESEL Teachers and ESL operations seeking to hire teachers worldwide. On March 15, 2010, we changed our name to Liberty Coal Energy Corp. to better represent the new business director of our company to that of a precious metal mineral exploration, development and production company. CURRENT BUSINESS Our primary business focus is to acquire, explore and develop coal properties in North America. We are currently developing a property in Owsley County Kentucky. 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. 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 fiscal year ended September 30, 2012, and the factors that could affect our future financial condition and results of operation. PLAN OF OPERATION During the next twelve month period, we intend to focus our efforts on our Owsley Property. Our company does and will continue to seek other viable coal opportunities in the geographic area of interest. Not accounting for our working capital of $374,783 and $13,500 monthly operating budget, we require approximately $750,000 at a minimum to proceed with our plan of operation over the next twelve months, exclusive of any acquisition or exploration costs. As we do not have the funds necessary to cover our projected operating expenses for the next twelve month period, we will be required to raise additional funds through the issuance of equity securities, through loans 18
or through debt financing. There can be no assurance that we will be successful in raising the required capital or that actual cash requirements will not exceed our estimates. We intend to fulfill any additional cash requirement through the sale of our equity securities. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation of our business. CAPITAL EXPENDITURES We are currently actively seeking to complete a project or even multiple projects that is in production or very close to being in production. We will seek additional financing once the projects are identified and initial evaluations have been completed over the twelve months ending September 30, 2012. GENERAL AND ADMINISTRATIVE EXPENSES We expect to spend approximately $250,000 during the twelve-month period ending September 30, 2013 on general and administrative expenses including legal and auditing fees, rent, office equipment and other administrative related expenses. PRODUCT RESEARCH AND DEVELOPMENT We will need to determine what funds will be needed on research and development, manufacturing and engineering pending what projects will be available over the twelve months ending September 30, 2013. PURCHASE OF SIGNIFICANT EQUIPMENT We will need to determine what purchase of significant equipment may be necessary over the twelve months ending September 30, 2013. PERSONNEL PLAN We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed. RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 The following summary of our results of operations should be read in conjunction with our audited financial statements for the years ended September 30, 2012 and 2011. Our operating results for the years ended September 30, 2012 and 2011 are summarized as follows: Year Ended September 30, ------------------------ Revenue $ Nil $ Nil Development costs 10,000 Nil General and Administrative 27,351 28,894 Consulting 211,940 75,000 Impairment 400,570 Nil Investor Relations 17,830 25,581 Transfer Agent 7,068 982 Legal and Accounting 66,399 25,495 Amortization 1,689 1,267 Interest Expense 140 3,500 Stock Compensation 200,000 Nil --------- --------- Net Loss $(942,987) $(160,718) ========= ========= 19
During the fiscal year ended September 30, 2012, many of our operating expenses increased over our previous fiscal year. We started initial Development work at the Owsley property, general and administrative expenses remained approximately the same., Our consulting, legal and accounting, and transfer agent expenses increased due to the higher level of activity of the company and preparing for evaluation of the projects that we have acquired and looking to acquire and in conjunction with the financing that we had entered into. The Impairment cost was incurred due to the shift to the new project. Our amortization costs only increased slightly due to the website. Interest expense decreased as we had no debt for a majority of the year. Finally the company granted one of its officers a stock compensation package. REVENUES We have not earned any revenues since our inception. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2012, our total current assets were $501,815 and our total current liabilities were $127,032 and we had a working capital of $374,783. Our financial statements report a net loss of $942,987 for the year ended September 30, 2012, and a net loss of $1,292,435 for the period from August 31, 2007 (date of inception) to September 30, 2012. We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard we have raised additional capital through equity offerings and loan transactions. CASH FLOWS At At September 30, September 30, 2012 2011 ---------- ---------- Net Cash (Used in) Operating Activities $ (204,757) $ (169,998) Net Cash (Used In) Investing Activities $ (162,585) $ (47,985) Net Cash Provided by Financing Activities $ 37,500 $ 500,000 CASH INCREASE(DECREASE) DURING THE YEAR $ (329,842) $ 282,017 Our net cash used in operating activities has increased by $34,759 over the year ended September 30, 2011. This increase is primarily due to increased corporate activity and the expenses in and around the financing. Conversely, our net cash used in investing activities has increased from $47,985o $162,585. This increase is primarily due to additional acquisition of mineral properties in the latest fiscal year. Cash provided by financing activities decreased as no new cash was received from the sale of stock in 2012. We had cash in the amount of $11,365 as of September 30, 2012 as compared to cash in the amount of $341,207 as of September 30, 2011. We had working capital of $374,783 as of September 30, 2012 compared to working capital of $338,455 as of September 30, 2011. These differences can be attributed to the issuance of stock for prepaid consulting. Our principal sources of funds have been from the sale of stock in the prior year and the issuance of a Convertible Debenture in 2012. On September 19, 2012, pursuant to a Convertible Debenture, we received $37,500 which will be due on June 19, 2013 and becomes convertible 180 days from issuance and converts at a discount. As we do not yet have an established source of revenue, we anticipate that additional funding will be required in the form of equity or debt financing. There are no assurances that we will be successful in raising any funds in the future or even if we are successful, upon terms that are satisfactory or reasonable to us. Any failure to raise such funds or on favorable terms may have a material adverse effect on our company and business. 20
CONTRACTUAL OBLIGATIONS As a "smaller reporting company", we are not required to provide tabular disclosure obligations. GOING CONCERN The audited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. APPLICATION OF CRITICAL ACCOUNTING POLICIES Our audited financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials. MANAGEMENT CERTIFICATION The financial statements herein are certified by our officers 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 We consider all highly liquid investments with maturities of three months or less to be cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS Our financial instruments consist of cash and amounts due to our stockholders. 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 we are not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates. MINERAL PROPERTIES Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs are capitalized including licenses and lease payments. Although we have taken steps to verify 21
title to mineral properties in which it has an interest, these procedures do not guarantee our 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 We have not adopted any policy regarding payment of dividends. No dividends have been paid during the period shown. INCOME TAXES We provide 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 us utilizing the loss carry-forward. See Note 7. 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. We have not issued any potentially dilutive common shares. NEW 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 us on February 1, 2010. The adoption of the guidance did not have an impact on our consolidated financial statements. BUSINESS COMBINATIONS We 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. We also adopted the changes issued by the FASB which requires assets and liabilities assumed in a business combination that arise from contingencies be recognized on the acquisition date at fair value if it is more likely than not that they meet the definition of an asset or liability; and requires that contingent consideration arrangements of the target assumed by the acquirer be initially measured at fair value. The guidance is effective for our acquisitions occurring on or after February 1, 2009. We applied these new provisions to two acquisitions that occurred during the year, Rock Coast Media, Inc. and Pixel Bridge, Inc. These acquisitions are more fully disclosed in Note 5 in our Consolidated Financial Statements. 22
NON-CONTROLLING INTERESTS In December 2007, the FASB issued changes to establish accounting and reporting standards for all entities that prepare consolidated financial statements that have outstanding non-controlling interests, sometimes called minority interest. These standards require that ownership interests in subsidiaries held by outside parties be clearly identified, labeled and presented in equity separate from the parent's equity; the amount of net income attributable to the parent and the non-controlling interest be separately presented on the consolidated statement of income; accounting standards applied to changes in a parent's interest be consistently applied; fair value measurement upon deconsolidation of a non-controlling interest be used; and the interests of the non-controlling owners be already identified and distinguished. The adoption of this guidance had no impact on our consolidated financial statements. INTANGIBLE ASSETS In April 2008, the FASB adopted changes to require companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for entity-specific factors. The guidance is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to intangible assets whether acquired before or after the effective date. We adopted the guidance on February 1, 2009. The adoption had no impact on our consolidated financial statements. REVENUE RECOGNITION In September 2009, the FASB issued new revenue recognition guidance on multiple deliverable arrangements. It updates the existing multiple-element revenue arrangements guidance currently included under the Accounting Standards Codification ("ASC") 605-25. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) requires the use of the relative selling price method to allocate the entire arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after fiscal 2011, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. Management is currently evaluating the impact of adopting this guidance on our consolidated financial statements. RECLASSIFICATIONS Certain balances in the prior years have been reclassified to conform to the current year presentation. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a "smaller reporting company", we are not required to provide the information required by this Item. 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following audited financial statements are filed as part of this annual report: Independent Auditor's Report, dated January 13, 2013. Balance Sheet as at September 30, 2012 and,2011. Audited Statements of Operations for the year ended September 30, 2012, 2011, and Cumulative amounts from date of Inception on August 27, 2007 through September 30, 2012 Statements of Changes in Stockholders' Equity from the Inception date on August 27, 2007 through September 30, 2012. Statements of Cash Flows for the year ended September 30, 2012, 2011, and Cumulative amounts from date of Inception on August 27, 2007 through September 30, 2012 Notes to the Financial Statements. 24
Silberstein Ungar, PLLC CPAs and Business Advisors Phone (248) 203-0080 Fax (248) 281-0940 30600 Telegraph Road, Suite 2175 Bingham Farms, MI 48025-4586 www.sucpas.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Liberty Coal Energy Corp. Reno, Nevada We have audited the accompanying balance sheets of Liberty Coal Energy Corp. as of September 30, 2012 and 2011, and the related statements of operations, stockholders' equity, and cash flows for the years then ended and the period from August 31, 2007 (date of inception) to September 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Liberty Coal Energy Corp. as of September 30, 2012 and 2011, and the results of its operations and cash flows for the periods then ended and the period from August 31, 2007 (date of inception) to September 30, 2012, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has limited working capital, has not yet received revenue from sales of its products, and has incurred losses from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to these matters are described in Note 9. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Silberstein Ungar, PLLC -------------------------------------- Silberstein Ungar, PLLC Bingham Farms, Michigan January 13, 2013 25
Liberty Coal Energy Corp. (An Exploration Stage Company) Balance Sheets As of As of September 30, September 30, 2012 2011 ------------ ------------ ASSETS ASSETS Cash $ 11,365 $ 341,207 Prepaid expenses 490,450 15,784 ------------ ------------ TOTAL CURRENT ASSETS 501,815 356,991 ------------ ------------ Website, net of amortization 422 2,111 Mineral properties 160,000 397,985 ------------ ------------ TOTAL OTHER ASSETS 160,422 400,096 ------------ ------------ TOTAL ASSETS $ 662,237 $ 757,087 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 82,028 $ 11,032 Accounts payable related parties 7,504 7,504 Convertible note payable 37,500 -- ------------ ------------ TOTAL CURRENT LIAILITIES 127,032 18,536 ------------ ------------ TOTAL LIABILITIES 127,032 18,536 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 1,500,000,000 shares authorized; 316,287,267 and 58,566,667 shares issued and outstanding as of September 31, 2012 and 2011, respectively 316,288 58,567 Additional paid-in capital 6,317,650 692,760 Additional paid-in capital - warrants 4,390,203 336,673 Stock subscription receivable (9,196,500) -- Accumulated deficit during the exploration sage (1,292,436) (349,449) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 535,205 738,551 ------------ ------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 662,237 $ 757,087 ============ ============ See Notes to Consolidatedp Financial Statements 26
Liberty Coal Energy Corp. (An Exploration Stage Company) Statements of Operations Cumulative Amounts From Date of Incorporation on For Year Ending August 31, 2007 - September 30, September 30, September 30, 2012 2011 2012 ------------ ------------ ------------ REVENUES $ -- $ -- $ -- ------------ ------------ ------------ COSTS AND EXPENSES Development costs 10,000 -- 10,000 General & administrative 27,351 28,894 74,645 Consulting services 211,940 75,000 346,939 Stock-based compensation 200,000 -- 200,000 Impairment 400,570 -- 400,570 Amortization 1,689 1,267 3,378 Investor relations 17,830 25,581 65,527 Transfer agent 7,068 982 22,359 Legal & accounting 66,399 25,495 165,377 ------------ ------------ ------------ TOTAL COSTS AND EXPENSES 942,847 157,218 1,288,795 ------------ ------------ ------------ LOSS FROM OPERATIONS (942,847) (157,218) (1,288,795) OTHER INCOME & (EXPENSES) Interest expense (140) (3,500) (3,640) ------------ ------------ ------------ TOTAL OTHER INCOME & (EXPENSES) (140) (3,500) (3,640) ------------ ------------ ------------ LOSS BEFORE PROVISION FOR INCOME TAXES (942,987) (160,718) (1,292,435) PROVISION FOR INCOME TAXES -- -- -- ------------ ------------ ------------ NET LOSS $ (942,987) $ (160,718) $ (1,292,435) ============ ============ ============ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.01) $ (0.00) ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 86,978,539 58,181,279 ============ ============ See Notes to Consolidated Financial Statements 27
Liberty Coal Energy Corp. (An Exploration Stage Company) Statement of Changes in Stockholders' Equity For the period from August 31, 2007 (Inception) to September 30, 2012 Deficit Additional Accumulated Common Stock Additional Paid-in Stock During the ------------ Paid in Capital - Subscription Exploration Shares Amount Capital Warrants Receivable Stage Total ------ ------ ------- -------- ---------- ----- ----- Inception, August 31, 2007 -- $ -- $ -- $ -- $ -- $ -- $ -- Initial sale of common stock 45,000,000 45,000 (30,000) -- -- -- 15,000 Net loss for the period ended September 30, 2007 -- -- -- -- -- (4,158) (4,158) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2007 45,000,000 45,000 (30,000) -- -- (4,158) 10,842 Private placement on May 31, 2008 at $0.05 per share 28,800,000 28,800 19,200 -- -- -- 48,000 Net loss for the year ended September 30, 2008 -- -- -- -- -- (31,673) (31,673) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2008 73,800,000 73,800 (10,800) -- -- (35,831) 27,169 Net loss for the year ended September 30, 2009 -- -- -- -- -- (22,552) (22,552) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2009 73,800,000 73,800 (10,800) -- -- (58,383) 4,617 Private placement on Feb. 1, 2010 at $0.25 per share 1,000,000 1,000 157,343 91,657 -- -- 250,000 Stock issued with respect to property acquisition 100,000 100 24,900 -- -- -- 25,000 Private placement on Feb. 11, 2010 at $0.25 per share 1,000,000 1,000 157,343 91,657 -- -- 250,000 Cancellation of stock (18,000,000) (18,000) -- -- -- -- (18,000) Net loss for the year ended September 30, 2010 -- -- -- -- -- (130,348) (130,348) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2010 57,900,000 57,900 346,786 183,314 -- (188,731) 399,269 Private placement April 30, 2011 at $0.75 per share 666,667 667 345,974 153,359 -- -- 500,000 Net loss for the year ended September 30, 2011 -- -- -- -- -- (160,718) (160,718) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2011 58,566,667 58,567 692,760 336,673 -- (349,449) 738,551 Stock Compensation 2,000,000 2,000 198,000 -- -- -- 200,000 Common stock issued for services and prepaid expenses 17,988,000 17,988 521,652 -- -- -- 539,640 Common stock and stock warrants issued for subscription receivable 237,732,600 237,733 4,905,237 4,053,530 (9,196,500) -- -- Net loss for the year ended September 30, 2012 -- -- -- -- -- (942,987) (942,987) ----------- -------- ---------- ---------- ----------- ----------- --------- BALANCE, SEPTEMBER 30, 2012 316,287,267 $316,288 $6,317,649 $4,390,203 $(9,196,500) $(1,292,436) $ 535,204 =========== ======== ========== ========== =========== =========== ========= See Notes to Consolidated Financial Statements 28
Liberty Coal Energy Corp. (An Exploration Stage Company) Statements of Cash Flows Cumulative Amounts From Date of Incorporation on For the Year Ended For the Year Ended August 31, 2007 - September 30, September 30, September 30, 2012 2011 2012 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $ (942,987) $ (160,718) $ (1,292,436) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 1,689 1,267 3,378 Stock Compensation 289,940 -- 289,940 Impairment 400,570 -- 400,570 Changes in assets and liabilities: (Increase) in prepaid expenses (24,966) (10,493) (40,750) Increase (decrease) in accounts payable and accrued liabilities 70,997 (1,650) 82,029 Increase in related party payables -- 1,596 7,504 ------------ ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (204,757) (169,998) (549,765) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in website -- -- (3,800) Acquisition of mineral properties (162,585) (47,985) (535,570) ------------ ------------ ------------ NET CASH (USED IN) INVESTING ACTIVITIES (162,585) (47,985) (539,370) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Stock issued for cash -- 500,000 1,063,000 Payments made on loans payable -- (100,000) (100,000) Proceeds from loans payable 37,500 100,000 137,500 ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 37,500 500,000 1,100,500 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH (329,842) 282,017 11,365 CASH AT BEGINNING OF PERIOD 341,207 59,190 -- ------------ ------------ ------------ CASH AT END OF PERIOD $ 11,365 $ 341,207 $ 11,365 ============ ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Income taxes paid $ -- $ -- $ -- ============ ============ ============ Interest paid $ -- $ -- $ -- ============ ============ ============ SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION: Reclassified long-term loan to short-term loan $ -- $ -- $ 219,754 ============ ============ ============ Notes payable for settlement of notes $ -- $ -- $ 2,183,000 ============ ============ ============ Preferred stock issuance for settlement of notes payable $ -- $ -- $ 3,104,139 ============ ============ ============ Common stock issued for services and prepaid expenses $ 539,640 $ -- $ 539,640 ============ ============ ============ Stock issued for subscription receivable $ 9,196,500 $ -- $ 9,196,500 ============ ============ ============ See Notes to Consolidated Financial Statements 29
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 1 - NATURE OF OPERATIONS Liberty Coal Energy Corp. (the "Company") was incorporated in the state of Nevada on August 31, 2007 as "ESL Teachers, Inc.", 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). We have enterd into a purchase agreement which we have not been able to close as of this date. The company has also attempted to secure financing for its short and long term needs but has todate not been able to realize any of its efforts. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Exploration Stage Company The Company is an Exploration Stage Company, as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, DEVELOPMENT STAGE ENTITIES. The Company's principal business is the acquisition and exploration of mineral resources. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable. 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, prepaid expenses, and accounts payable and accrued liabilities. 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. Revenue Recognition The Company will recognize revenue when products are fully delivered or services have been provided and collection is reasonably assured. Dividends The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during the period shown. Stock-Based Compensation As of September 30, 2012, the Company has not issued any stock-based payments to its employees. The Company uses the modified prospective method of accounting for stock-based compensation. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the estimated grant-date fair value. Reclassifications Certain balances in the prior years have been reclassified to conform to the current year presentation. 30
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Mineral Properties Costs Mineral exploration and development costs are accounted for using the successful efforts method of accounting. Property acquisition costs - Mineral property acquisition costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified as proved, the associated acquisition costs are reclassified to prove properties Exploration costs - Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred. Impairment of Mineral Properties Unproved mineral properties are assessed at each reporting period for impairment of value, and a loss is recognized at the time of the impairment by providing an impairment allowance. An asset would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount by which the carrying value exceeds its fair value. Because the Company uses the successful efforts method, the Company assesses its properties individually for impairment, instead of on an aggregate pool of costs. Impairment of unproved properties is based on the facts and circumstances surrounding each lease and is recognized based on management's evaluation. Management's evaluation follows a two-step process where (1) recoverability of the carrying value of the asset is reviewed to determine if there is sufficient value recoverable to support the capitalized value at the report date; and, (2) If assets fail the recoverability test, impairment testing is conducted, including the evaluation of various criteria such as: prior history of successful operations; production currently in place and/or future projected cash flows (if any); reserve reports or evaluations from which management can prepare future cash flow analyses; the Company's ability to monetize the asset(s) under evaluation; and, Management's intent regarding future development. 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. 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 7. RECENTLY ADOPTED PRONOUNCEMENTS Variable Interest Entities In June 2009, the FASB issued changes to require an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity's economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise's involvement in a variable interest entity. The guidance became effective for the Company on February 1, 2010. The adoption of the guidance did not have an impact on the Company's consolidated financial statements. 31
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENTLY ADOPTED PRONOUNCEMENTS (CONTINUED) Intangible Assets In April 2008, the FASB adopted changes to require companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for entity-specific factors. The guidance is effective for fiscal years beginning after December 15, 2008 and is to be applied prospectively to intangible assets whether acquired before or after the effective date. The Company adopted the guidance on February 1, 2009. The adoption had no impact on the Company's consolidated financial statements. Revenue Recognition In September 2009, the FASB issued new revenue recognition guidance on multiple deliverable arrangements. It updates the existing multiple-element revenue arrangements guidance currently included under the Accounting Standards Codification ("ASC") 605-25. The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) requires the use of the relative selling price method to allocate the entire arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after fiscal 2011, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. Management is currently evaluating the impact of adopting this guidance on the Company's consolidated financial statements. The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flow. NOTE 3 - WEBSITE The Company has capitalized costs related to developing a website. During the year ended September 30, 2012 the Company paid $3,800 for the development of the website. The Company determined that the website would have a three year useful life. Amortization expense for the years ended September 30, 2012 and 2011 was $1,689 and $1,267, respectively. NOTE 4 - MINERAL PROPERTIES 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" ). 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 paid $80,000 to purchase the rights to the mining permits and operate under a leasehold. It has also paid an additional 40,000 to minimal lease payments and accrued another 40,000 which are currently behind. These payments have been capitalized as part of the purchase price of the property. 32
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 4 - MINERAL PROPERTIES (CONTINUED) As part of the Owsley Agreement, the Company has agreed to enter into a purchase agreement with AMS Development LLC & Colt Resources, Inc., pursuant to which AMS & Colt would receive The agreement provides for the purchase of the 1,000 acres of surface property at $600,000, as well as surface mineable coal, (3.6 million tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and the discharge of a first mortgage due to a former owner of $150,000 for a total purchase price of $3,890,000. The total purchase price is payable through a combination of cash, a promissory note and Liberty Coal common shares. To this date the Company has not been able to close on this agreement. The Company is no longer pursuing the Campbell Property or the Sheridan Property and recorded impairment on these properties in the amount of 400,570. NOTE 5 - CAPITAL STOCK The company has 1,500,000,000 common shares authorized at a par value of $0.001 per share. 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 12, 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 $0.75 per share expiring February 1, 2013. On August 17, the Company completed a financing whereby it issued 237,732,600 units for a escrowed equity line in the amount of $9,196,500. In conjunction with this transaction the company also issued common share purchase warrant to purchase 250,095,420 common shares at an exercise price of $0.07 expiring on August 16, 2018. On January 18, 2012, the Company issued 2,000,000 shares @ $0.10 to its CFO and Director as part of his compensation. On September 10, 2012, the Company issued 17,988,000 shares of common stock to three non-employee consultants pursuant to the Plan valued at $539,640. The stock was issued for services to be rendered from September 1, 2012 through February 28, 2013. As of September 30, 2012, $449,700 has been recorded as prepaid expenses related to this stock issuance. On September 13, 2012, Liberty Coal Energy Corp. consummated a Securities Purchase Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant to a September 4, 2012 resolution of Company's Board of Directors. The parties agreed that Asher would acquire from Company five promissory notes totaling $37,500, due and payable on June 19, 2013 with interest payable at 8%. The Notes are convertible into Common Shares of the Company, for which the Company has reserved 10,500,000 shares. 33
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 5 - CAPITAL STOCK (CONTINUED) Warrants Warrants were granted during the years ended September 30, 2012 and 2011 in connection with private placements. The Company has accounted for these warrants as equity instruments in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock, and as such, were classified in stockholders' equity. The Company has estimated the fair value of the warrants issued in connection with the private placements at $4,053,530 and $153,359 as of the grant date using the Black-Scholes option pricing model during the years ended September 30, 2012 and 2011, respectively. The estimated grant date fair value of the warrants granted during the year ended September 30, 2012 was $4,053,530; this was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, expected volatility of 50%, risk-free interest rate of .61%, an expected life of 6 years. The stock price used in the Black-Scholes option pricing model to calculate the volatility was the Company's stock price for the year prior to grant using weekly pricing. The risk-free interest rate is based on the US Treasury constant maturity interest rate whose term is consistent with the expected life of the warrant. The expected life of the warrant is based on the contractual term of the warrant. The estimated grant date fair value of the warrants granted during the year ended September 30, 2011 was $153,359; this was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, expected volatility of 50%, risk-free interest rate of .61%, an expected life of 2 years. The stock price used in the Black-Scholes option pricing model to calculate the volatility was the Company's stock price for the year prior to grant using weekly pricing. The risk-free interest rate is based on the US Treasury constant maturity interest rate whose term is consistent with the expected life of the warrant. The expected life of the warrant is based on the contractual term of the warrant. A summary of changes in share purchase warrants during the years ended September 30, 2012 and 2011 is as follows: Weighted Average Warrants Exercise Price -------- -------------- Outstanding, September 30, 2009 -- $ N/A Granted - 2010 2,000,000 $0.25 ------------ ----- Outstanding, September 30, 2010 2,000,000 $0.25 Granted - 2011 666,667 $0.75 ------------ ----- Outstanding, September 30, 2011 2,666,667 $0.38 Granted - 2012 250,095,420 $0.07 Expired - 2012 (2,000,000) $0.25 ------------ ----- Outstanding, September 30, 2012 250,762,087 $0.07 ============ ===== 34
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 5 - CAPITAL STOCK (CONTINUED) As of September 30, 2012, the Company had warrants issued as follows: Outstanding at September 30, Issue Date Number Price Expiry Date 2012 ---------- ------ ----- ----------- ---- May 12, 2011 666,667 $0.78 May 12, 2013 666,667 August 17, 2012 17,025,000 $0.03 August 17, 2017 17,025,000 August 17, 2012 15,985,920 $0.032 August 17, 2017 15,985,920 August 17, 2012 15,010,250 $0.034 August 17, 2017 15,010,250 August 17, 2012 14,094,130 $0.036 August 17, 2017 14,094,130 August 17, 2012 13,233,930 $0.039 August 17, 2017 13,233,930 August 17, 2012 12,426,220 $0.041 August 17, 2017 12,426,220 August 17, 2012 11,667,810 $0.044 August 17, 2017 11,667,810 August 17, 2012 10,955,690 $0.047 August 17, 2017 10,955,690 August 17, 2012 10,287,040 $0.050 August 17, 2017 10,287,040 August 17, 2012 9,659,190 $0.053 August 17, 2017 9,659,190 August 17, 2012 9,069,660 $0.056 August 17, 2017 9,069,660 August 17, 2012 8,516,110 $0.060 August 17, 2017 8,516,110 August 17, 2012 8,000,260 $0.064 August 17, 2017 8,000,260 August 17, 2012 7,511,990 $0.068 August 17, 2017 7,511,990 August 17, 2012 7,053,510 $0.072 August 17, 2017 7,053,510 August 17, 2012 6,623,010 $0.077 August 17, 2017 6,623,010 August 17, 2012 6,218,790 $0.082 August 17, 2017 6,218,790 August 17, 2012 5,839,240 $0.087 August 17, 2017 5,839,240 August 17, 2012 5,482,850 $0.093 August 17, 2017 5,482,850 August 17, 2012 5,148,220 $0.099 August 17, 2017 5,148,220 August 17, 2012 4,834,010 $0.106 August 17, 2017 4,834,010 August 17, 2012 4,538,980 $0.112 August 17, 2017 4,538,980 August 17, 2012 4,261,950 $0.120 August 17, 2017 4,261,950 August 17, 2012 4,001,830 $0.127 August 17, 2017 4,001,830 August 17, 2012 3,757,590 $0.136 August 17, 2017 3,757,590 August 17, 2012 3,528,250 $0.145 August 17, 2017 3,528,250 August 17, 2012 3,312,910 $0.154 August 17, 2017 3,312,910 August 17, 2012 3,110,720 $0.164 August 17, 2017 3,110,720 August 17, 2012 2,920,860 $0.175 August 17, 2017 2,920,860 August 17, 2012 2,742,590 $0.186 August 17, 2017 2,742,590 August 17, 2012 2,575,200 $0.198 August 17, 2017 2,575,200 August 17, 2012 2,418,030 $0.211 August 17, 2017 2,418,030 August 17, 2012 2,270,450 $0.225 August 17, 2017 2,270,450 August 17, 2012 2,131,880 $0.239 August 17, 2017 2,131,880 August 17, 2012 2,001,760 $0.255 August 17, 2017 2,001,760 August 17, 2012 1,879,590 $0.271 August 17, 2017 1,879,590 ----------- ----------- Total 250,762,087 250,762,087 =========== =========== 35
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 6 - RELATED PARTY TRANSACTION The company has a consulting agreement with a company controlled by an officer of the Company. The agreement calls for monthly payments of $7,000. There was an outstanding payable of $7,004 and $5,004 to this related party as of September 30, 2012 and 2011, respectively for September services and reimbursement of expenses. The company has a consulting agreement with a company controlled by an officer of the Company. The agreement calls for monthly payments of $4,500. There was an outstanding payable of $ 0 and $2,500 to this related party as of September 30, 2012 and 2011, respectively for September services and reimbursement of expenses. On January 18, 2012, the Company issued 2,000,000 shares @ $0.10 to its CFO and Director as part of his compensation. On September 10, 2012, the Board of Directors of the Liberty Coal Energy Corp. approved the Liberty Coal Energy Corp. Consultant Compensation Plan, which applies non-employee consultants and officers, directors and employees of the Company. No shares have been granted to date. 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 - INCOME TAXES For the year ended September 30, 2012, the Company has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $1,300,000 at September 30, 2011, and will expire beginning in the year 2028. The provision for Federal income tax consists of the following at September 30: 2012 2011 ---------- ---------- Federal income tax attributable to: Current Operations $ 320,615 $ 54,644 Less: valuation allowance (320,615) (54,644) ---------- ---------- Net provision for Federal income taxes $ 0 $ 0 ========== ========== The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of September, 30: 2012 2011 ---------- ---------- Deferred tax asset attributable to: Net operating loss carryover $ 439,428 $ 118,813 Less: valuation allowance (439,428) (118,813) ---------- ---------- Net deferred tax asset $ 0 $ 0 ========== ========== Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $1,300,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. 36
Liberty Coal Energy Corp. (An Exploration Stage Company) Notes to the Financial Statements September 30, 2012 NOTE 8 - COMMITMENTS The Company has agreed to purchase 1,000 acres of surface property at $600,000 surface mineable coal, (3.6 million tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and the discharge of a first mortgage due a former owner of $150,000 for a total purchase price of $3,890,000. The total is payable through a combination of cash, a promissory note and Liberty Coal common shares. The company needs to continue to make it minimum lease payments until such time it can pay an initial $500,000. The minimum payments of $20,000 per month are applied to the initial payment. NOTE 9 - 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 $1,292,436 as of September 30, 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 10 - SUBSEQUENT EVENTS On October 24, 2012, Liberty Coal Energy Corp. consummated a Securities Purchase Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant to an October 24, 2012 resolution of Company's Board of Directors. Asher agreed to purchase a Convertible Note in the amount of $32,500, due and payable on July 26, 2013 with interest payable at 8%. The Note was funded on November 1, 2012. The Note is convertible into Common Shares of the Company, for which the Company has reserved 14,300,000 shares. On Janauary 14, 2012 Liberty Coal Energy Corp. consummated a Securities Purchase Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant to a January 14, 2012 resolution of Company's Board of Directors. Asher agreed to purchase a Convertible Note in the amount of $10,600, due and payable on September 26, 2013 with interest payable at 8%. The Note will be funded on January 16, 2012. The Note is convertible into Common Shares of the Company, for which the Company has reserved 40,000,000 shares. In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to September 30, 2012 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above. 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have not changed our auditors since our last year end and we have not had any disagreements with our auditors. ITEM 9A. CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the SECURITIES EXCHANGE ACT OF 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of September 30, 2012 the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in INTERNAL CONTROL-INTEGRATED FRAMEWORK. Our management has concluded that, as of September 30, 2010, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our management reviewed the results of their assessment with our Board of Directors. INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We believe that a control system, no matter how well designed 38
and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There have been no changes in our internal controls over financial reporting that occurred during the three month period ended September 30, 2010 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE All of the directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. Our officers are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows: Date First Elected Name Position Held with the Company Age or Appointed ---- ------------------------------ --- ------------ Edwin G. Morrow President Chief Executive 67 April 30, 2010 Officer and Director Robert T. Malasek Chief Financial Officer and 44 April 12, 2011 Director BUSINESS EXPERIENCE The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed. EDWIN G. MORROW - PRESIDENT, CEO AND DIRECTOR Mr. Morrow was appointed a director, president and chief executive officer on April 30, 2010. Mr. Morrow holds a Bachelor of Science in Geology from Mackay School of Mines, University of Nevada, Reno, with post graduate study in finance and mineral economics. A registered Professional Geologist, Mr. Morrow is a member of the Society for Mineral Exploration , has served on the Boards of Directors of several Associations and mining companies and as a Council Member of the Mineral Industry Advisory Board, University of Nevada, Mackay School of Mines. Mr. Morrow has worked as an employee or consultant for over 35 years in exploration, development and production in the natural resources area, in multiple commodities. He has held line and executive positions within the mining and minerals industry with Sonoma Quicksilver, Utah International Inc, InterPace Corporation, Federal Bentonite Corporation, Homestake Mining company, Laminco Resources Inc, and Zaruma Resources Inc. Mr. Morrow also has over 10 years experience in real estate management, including planning, entitlement, permitting, engineering and construction management. Mr. Morrow's education and extensive executive experience in the mining industry, as well as his additional experience in the real estate sector, gives him unique insight into our challenges, opportunities and operations, and as such, provides a beneficial perspective to our board. 39
ROBERT T. MALASEK - CFO, SECRETARY AND DIRECTOR Mr. Malasek was appointed as chief financial officer, secretary and director on April 12, 2011. Mr. Malasek currently serves as the Chief Financial Officer for Siga Resources, Inc. since September 2010, and as Chief Financial Officer for NatureWell, Inc.. to which he was appointed on August 15, 2006. Mr. Malasek had previously served as Controller for NatureWell, Inc. From 1987 until August 1999 Robert was employed with Starwood Hotel & Resorts Worldwide, Inc. in a number of positions within the accounting department and became Assistant Controller in 1998 until his departure in 1999. Mr. Malasek received his Bachelor of Science in Accountancy from San Diego State University, California in 1998. Mr. Malasek's extensive experience in business and accounting provides considerable practical value to our goals and to our board. Mr. Malasek's access to the financial community in the US as well as in the European markets brings additional value to the Company FAMILY RELATIONSHIPS There are no family relationships among our directors or officers. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS No director, executive officer, significant employee or control person of our company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years. SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended September 30, 2011, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with. CODE OF ETHICS We have adopted a Code of Ethics that apples to, among other persons, our company's principal executive officers and senior financial executives, as well as persons performing similar functions. As adopted, our Code of Ethics sets forth written standards that are designed to deter wrongdoing and to: 1. Act with honesty and integrity and in an ethical manner, avoiding actual or apparent conflicts of interest in personal and professional relationships. 2. Promptly disclose to us, through the General Counsel, Chief Accounting Officer, or Audit Committee, any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest between personal and professional relationships. 3. Provide full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submits to, the SEC and in other public communications made by us. 4. Provide constituents with information that is accurate, complete, objective, relevant, timely, and understandable. 5. Comply with applicable rules and regulations of federal, state, and local governments and other appropriate private and public regulatory agencies. 40
6. Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing his or her independent judgment to be subordinated. 7. Use good business judgment in the processing and recording of all financial transactions. 8. Respect the confidentiality of information acquired in the course of our business, except when authorized or otherwise legally obligated to disclose such information, and not use confidential information acquired in the course of work for personal advantage. 9. Share knowledge and maintain skills important and relevant to his or her constituents' needs. 10. Promote ethical behavior among constituents in the work environment. 11. Achieve responsible use of and control over all assets and resources employed or entrusted to him or her. 12. Comply with generally accepted accounting standards and practices, rules, regulations and controls. 13. Ensure that accounting entries are promptly and accurately recorded and properly documented and that no accounting entry intentionally distorts or disguises the true nature of any business transaction. 14. Maintain books and records that fairly and accurately reflect our business transactions. 15. Sign only those documents that he or she believes to be accurate and truthful. 16. Devise, implement, and maintain sufficient internal controls to assure that financial record keeping objectives are met. 17. Prohibit the establishment of any undisclosed or unrecorded funds or assets for any purpose and provide for the proper and prompt recording of all disbursements of funds and all receipts. 18. Not knowingly be a party to any illegal activity or engage in acts that are discreditable to his or her profession or our company. 19. Respect and contribute to the legitimate and ethical objects of our company. 20. Engage in only those services for which he or she has the necessary knowledge, skill, and expertise. 21. Not make, or tolerate to be made, false or artificial statements or entries for any purpose in our books and records or in any internal or external correspondence, memoranda, or communication of any type, including telephone or wire communications. 22. Report to us, through the General Counsel, Chief Accounting Officer, or Audit Committee any situation where the Code of Ethics, our standards, or the laws are being violated. Our Code of Ethics and Business Conduct has been filed with the Securities and Exchange Commission and is referenced in this annual report on Form 10-K as Exhibit 14.1. We will provide a copy of the Code of Ethics and Business Conduct to any person without charge, upon request. Requests can be sent to: Liberty Coal Energy Inc., 99 18th Street, Suite 3000, Denver, CO 80202. NOMINATIONS TO THE BOARD OF DIRECTORS There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. 41
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT Our audit committee is comprised of Edwin Morrow, our President, Chief Executive Officer and Chairman of the Audit Committee, and Robert Malasek our Chief Financial Officer, Secretary and director, neither of whom are independent. Mr. Morrow cannot be considered an "audit committee financial expert" as defined in Items 407(d)(5)(ii) and (iii) of Regulation S-K. Mr. Malasek does meet these qualifications. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the compensation of our executive officers for the fiscal years ended September 30, 2012 and September 30, 2011. SUMMARY COMPENSATION TABLE Change in Pension Value and Nonqualified Name Non-Equity Deferred All and Principal Salary or Stock Option Incentive Plan Compensation Other Position Year Fees Bonus Awards Awards Compensation Earnings Compensation Total ($) ($) ($) ($) ($) ($) ($) ($) -------- ---- ---- ----- ------ ------ ------------ -------- ------------ ----- Edwin G. Morrow(1) 2012 74,000 Nil Nil Nil Nil Nil Nil 74,000 President and 2011 60,000 Nil Nil Nil Nil Nil Nil 60,000 Chief Financial 2010 25,000 Nil Nil Nil Nil Nil Nil 25,000 Officer 2009 N/A N/A N/A N/A N/A N/A N/A N/A Robert T. Malasek(2) 2012 48,000 Nil 200,000 Nil Nil Nil Nil 248,000 Chief Financial 2011 15,000 Nil Nil Nil Nil Nil Nil 15,000 Officer and Secretary Mauricio Beltran(3) 2010 Nil Nil Nil Nil Nil Nil Nil Nil Former President, 2009 Nil Nil Nil Nil Nil Nil Nil Nil Chief Financial Officer and Chief Executive Officer ---------- (1) Mr. Morrow was appointed president and chief executive officer of our company on April 30, 2010. His fees are paid to Hay Creek Consultants Inc. a company wholly owned by Mr. Morrow, pursuant to a consulting agreement dated May 1, 2010. (2) Mr. Malasek was appointed president and chief executive officer of our company on April 12, 2011 (3) Mr. Beltran was appointed president, chief financial officer and chief executive officer on August 31, 2007 and resigned as an officer on April 30, 2010. STOCK OPTIONS/SAR GRANTS During the period from inception (August 31, 2007) to September 30, 2012, we did not grant any stock options to our executive officers. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES There were no options exercised during our fiscal years ended September 30, 2012 or 2011 by any officer or director of our company. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END No equity awards were outstanding as of the year ended September 30, 2012. 42
COMPENSATION OF DIRECTORS We reimburse our directors for expenses incurred in connection with attending board meetings. We have not paid any director's fees or other cash compensation for services rendered as a director since our inception to September 30, 2012. We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS Other than as set forth below, we have not entered into any employment agreement or consulting agreement with our directors and executive officers. On May 1, 2010, we entered into a consulting agreement with Hay Creek Consultants Inc., a company wholly owned by Edwin G. Morrow, under which Mr. Morrow will act as an officer of our company. The consulting agreement provides for monthly compensation in the amount of $5,000 for 50% of Mr. Morrow's time commitment and $10,000 per month starting upon our determination that the full time engagement of Mr. Morrow is warranted. The consulting agreement shall be for a term of three years. Under this agreement, Hay Creek received a total of $74,000 in compensation for the fiscal year ended September 30, 2012 and $60,000 for the fiscal year ended September 30, 2011. On April 12, 2011, we entered into a consulting agreement with Robert T. Malasek during the year ended September 30, 2011. The consulting agreement provides for monthly compensation in the amount of $4,500 for 50% of Mr. Malasek's time commitment and $8,000 per month starting upon our determination that the full time engagement of Mr. Malasek is warranted. The consulting agreement shall be for a term of three years. Under this agreement, Mr. Malasek received a total of $248,000 in compensation $200,000 in form of a stock compensation and $48,000 in cash for the fiscal year ended September 30, 2012 and of $17,500 for the fiscal year ended September 30, 2011. On January 18, 2012, the Company issued 2,000,000 shares @ $0.10 to its CFO and Director as part of his compensation. There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors. We have no plans or arrangements with respect to remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth, as January 5, 2012, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. 43
To our knowledge, except as indicated in the footnotes to this table or pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of common stock indicated. Name and Address of Amount and Nature of Percentage Title of Class Beneficial Owner Beneficial Owner(1) of Class -------------- ---------------- ------------------- -------- Common Shares Edwin Morrow 2,000,000 0.63% Common Shares Robert Malasek 2,000,000 0.63% Common Shares All Officers and 4,000,000 1.26% Directors As a Group (2 individuals) ---------- (1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding on December 15, 2010. As of January 5, 2013, there were 316,287,267 shares of our company's common stock issued and outstanding. CHANGES IN CONTROL We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE There have been no transactions or proposed transactions in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years in which any of our directors, executive officers or beneficial holders of more than 5% of the outstanding shares of our common stock, or any of their respective relatives, spouses, associates or affiliates, has had or will have any direct or material indirect interest. REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS Although we have adopted a Code of Ethics, we still rely on our Board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person's immediate family. Transactions are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. DIRECTOR INDEPENDENCE During the fiscal year ended September 30, 2012, we did not have any independent directors on our board. We evaluate independence by the standards for director independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established by The New York Stock Exchange, Inc., the NASDAQ National Market, and the Securities and Exchange Commission. 44
Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director's immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director's immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director's immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director's immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director's immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company's consolidated gross revenues. ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES The aggregate fees billed for the most recently completed fiscal year ended September 30, 2012 and for fiscal year ended September 30, 2011 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows: Year Ended September 30, 2012 2011 ------ ------ ($) ($) Audit Fees 6,600 6,500 Audit Related Fees 5,000 4,750 Tax Fees Nil Nil All Other Fees Nil Nil ------ ------ Total 11,600 11,250 ====== ====== Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered. Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors' independence. The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%. 45
PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Exhibits required by Item 601 of Regulation S-K Exhibit Number Description ------ ----------- 3.1(a) Articles of Incorporation (Attached as a Exhibit 3.1 to our Registration Statement on Form SB-2 originally filed with the SEC on January 23, 2008 and incorporated herein by reference). 3.1(b) Amendment to Articles of Incorporation, as effected by the Certificate of Change (previously filed as Exhibit 3.02 to our Current Report on Form 8-K filed on March 30, 2010.) 3.2 Bylaws (Attached as Exhibit 3.2 to our Registration Statement on Form SB-2 originally filed with the SEC on January 23, 2008 and incorporated herein by reference). 10.1 Form of Subscription Agreement (previously filed as Exhibit 10.1 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, effective May 2, 2011 (previously filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on May 16, 2011) 10.3 Consulting Agreement (previously filed as Exhibit 10.3 to our Annual Report on Form 10-K filed on January 11, 2011) 10.4 Consulting Agreement with Robert Malasek dated April 12, 2011 (previously filed as Exhibit 10.4 to our Annual Report on Form 10-K filed on January 12, 2012) 14.1 Code of Ethics (previously filed as Exhibit 14.1 to our Annual Report on Form 10-K filed on January 11, 2011) 31.1* Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted 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 46
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LIBERTY COAL ENERGY CORP. /s/ Edwin G. Morrow ---------------------------------------- Edwin G. Morrow President, Chief Executive Officer and Director (Principal Executive Officer) Date: February 4, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Edwin G. Morrow President, Chief Executive February 4, 2013 ------------------------------ Officer and Director Edwin G. Morrow (Principal Executive Officer) /s/ Robert T. Malasek Chief Financial Officer, February 4, 2013 ------------------------------ Secretary and Director Robert T. Malasek (Principal Financial Officer and Principal Accounting Officer) 4