Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2013
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 000-54073
LIBERTY COAL ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 90-0819102
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2782 Gateway Road, Carlsbad, CA 92009
(Address of principal executive offices) (Zip Code)
(760) 410-8189
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act [ ] YES [X] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
710,447,590 common shares issued and outstanding as of February 5, 2014
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 23
Item 4. Controls and Procedures 23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Mine Safety Disclosures 24
Item 5. Other Information 24
Item 6. Exhibits 24
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three month period ended
December 31, 2013 form part of this quarterly report. They are stated in United
States Dollars (US$) and are prepared in accordance with United States generally
accepted accounting principles.
3
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Balance Sheets (unaudited)
As of As of
December 31, September 30,
2013 2013
------------ ------------
ASSETS
ASSETS
Cash $ 3,293 $ 14,432
Prepaid expenses -- 938
------------ ------------
TOTAL CURRENT ASSETS 3,293 15,370
------------ ------------
Website, net of amortization -- --
Mineral properties 15,000 15,000
------------ ------------
TOTAL OTHER ASSETS 15,000 15,000
------------ ------------
TOTAL ASSETS $ 18,293 $ 30,370
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 311,485 $ 301,603
Accounts payable related parties 37,104 77,004
Convertible note payable, net of discount of $46,666 and $10,833 29,464 105,367
Derivative liability 79,011 19,628
------------ ------------
TOTAL CURRENT LIABILITIES 457,064 503,602
------------ ------------
TOTAL LIABILITIES 457,064 503,602
------------ ------------
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, 1,500,000,000 shares authorized;
592,193,622 and 153,004,106 shares issued and outstanding as of
December 31, 2013 and September 30, 2013, respectively 592,195 153,004
Series C Preferred stock $0.001 par vlaue, 100,000 shares authorized;
100,000 shares issued and outstanding as of December 31, 2013 and
September 30, 2013, respectively 100 100
Additional paid-in capital 1,410,943 1,674,492
Additional paid-in capital - warrants 336,673 336,673
Deferred stock-based compensation -- (8,838)
Stock subscription receivable -- --
Deficit accumulated during the exploration sage (2,778,682) (2,628,663)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (438,771) (473,232)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 18,293 $ 30,370
============ ============
See Notes to Consolidated Financial Statements
4
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Statements of Operations (unaudited)
For the
For the For the period from
Three Months Three Months August 31, 2007
Ending Ending (Inception) to
December 31, December 31, December 31,
2013 2012 2013
------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ --
------------ ------------ ------------
OPERATING EXPENSES
Development costs -- -- 10,000
Maintenance 3,087 -- 8,902
General and administrative 1,697 1,244 115,276
Consulting services 34,500 304,320 947,140
Stock-based compensation 23,838 -- 352,500
Amortization -- 422 3,800
Investor relations -- 39,200 109,447
Transfer agent 756 325 25,971
Legal and accounting 6,800 15,433 208,856
Impairment expense -- -- 800,570
------------ ------------ ------------
TOTAL OPERATING EXPENSES 70,678 360,944 2,582,462
LOSS FROM OPERATIONS (70,678) (360,944) (2,582,462)
OTHER INCOME AND (EXPENSES)
Amortization of debt discount (39,167) -- (141,434)
Derivative expense (34,862) -- (73,238)
Gain / loss on change in value of derivative liability (4,492) 30,851
Interest expense (820) (1,759) (12,399)
------------ ------------ ------------
TOTAL OTHER INCOME AND (EXPENSES) (79,341) (1,759) (196,220)
------------ ------------ ------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES (150,019) (362,703) (2,778,682)
PROVISION FOR INCOME TAXES -- -- --
------------ ------------ ------------
NET LOSS $ (150,019) $ (362,703) $ (2,778,682)
============ ============ ============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 363,593,390 316,287,267
============ ============
See Notes to Consolidated Financial Statements
5
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Statements of Cash Flows (unaudited)
For the
For the For the period from
Three Months Three Months August 31, 2007
Ending Ending (Inception) to
December 31, December 31, December 31,
2013 2012 2013
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (150,019) $ (362,703) $ (2,778,682)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Amortization -- 422 3,800
Amortization of debt discount 39,167 -- 77,543
Derivative expense 34,862 -- 137,129
Gain / loss on change in value of derivative liability 4,492 -- (30,851)
Stock-based compensation 23,838 -- 442,440
Impairment expense -- -- 800,570
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses 938 304,820 449,700
Increase in accounts payable and accrued liabilities 10,483 63,152 85,310
Increase (decrease) in related party payables 25,100 18,000 102,104
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (11,139) 23,691 (710,937)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in website -- -- (3,800)
Acquisition of mineral properties -- (60,000) (560,570)
------------ ------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES -- (60,000) (564,370)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash -- -- 1,063,000
Payments made on loans payable -- -- (100,000)
Proceeds from loans payable -- 32,500 315,600
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 32,500 1,278,600
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (11,139) (3,809) 3,293
CASH AT BEGINNING OF PERIOD 14,432 11,365 --
------------ ------------ ------------
CASH AT END OF PERIOD $ 3,293 $ 7,556 $ 3,293
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ -- $ -- $ --
============ -=---------- ============
Interest paid $ -- $ -- $ --
============ ============ ============
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Notes payable for settlement of notes $ -- $ -- $ 2,183,000
============ ============ ============
Preferred stock issuance for settlement of notes payable $ -- $ -- $ 3,104,139
============ ============ ============
Common stock issued for payment of related party accounts payable $ 65,000 $ -- $ --
============ ============ ============
Common stock issued for services and prepaid expenses $ -- $ -- $ 539,640
============ ============ ============
Stock issued for debt conversion $ 48,950 $ -- $ 160,350
============ ============ ============
Acquisition of mineral properties for accounts payable $ -- $ -- $ 230,000
============ ============ ============
Reclassification of derivative liability upon full conversion $ 54,972 $ -- $ 151,475
============ ============ ============
Accrued interest converted to common stock $ 600 $ -- $ 3,826
============ ============ ============
See Notes to Consolidated Financial Statements
6
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 1 - NATURE OF OPERATIONS
Liberty Coal Energy Corp. (the "Company"), incorporated in the state of Nevada
on August 31, 2007, and was developing business activities in teacher
recruiting. The Company changed its business focus in March, 2010 and now
intends to enter the business of precious mineral exploration, development, and
production. The Company has not yet commenced significant business operations
and is considered to be in the exploration stage (formerly in the development
stage).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING BASIS
The Company uses accrual basis of accounting and accounting principles generally
accepted in the United States of America ("GAAP"). The Company has adopted a
September 30 fiscal year end.
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.
7
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
As of December 31, 2013, 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.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements had included the accounts of the Company
and its subsidiary, Liberty Coal Energy Kentucky, LLC. The LLC is currently
suspended and will be reinstated when necessary, and as such, the financial
statements are no longer consolidated as of September 28, 2013. There was no
activity in the LLC during the three months ended December 31, 2013 or the year
ended September 30, 2013.
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 6.
8
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
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 - 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.
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.
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 50,000 to minimal lease payments and accrued another
270,000 which are currently behind. The Company is uncertain that it will be
able to raise the capital needed to put the property into production at this
time, as a result the Company recorded an impairment of $400,000 as of September
30, 2013.
On August 13, 2013, Liberty entered an agreement with Colt Resources Inc., one
of the original vendors of the property. The agreement provides a time window
for voluntary termination of the lease, and allows for either party to fund the
reclamation bond and placing the property into production. The agreement will
allow Liberty to recover 50 percent of the cost of the existing permit ($40,000)
if Colt Resources can find financing for placing the project into production. If
Liberty secures financing for the property, and brings the lease payments
current, the existing lease purchase will remain in effect.
On May 24, 2013 Liberty Coal Energy Corp. ("Liberty") paid $15,000 down toward
the purchase of the Gamm Lease, the balance of which will be paid via a share
transaction, not to exceed approximately $30,000.
The Gamm Lease is in Caddo Parrish, in Northwest Louisiana. The 20 acre property
is located in the West 825 feet of the South One-Half of the Northwest Quarter
(S 1/2 of NW 1/4) of Section 25, Township 21 North, Range 15 West, Caddo Parish,
Louisiana.
The Gamm Lease is a previous producing property and contains 11 shallow (+/-
1700 ft.) production wells. The property is accessible by paved and dirt roads
from Oil City LA and has electric power and some existing equipment on site.
Liberty is in the process of restoring the existing wells to production and
installing wellhead production equipment.
Liberty plans to test the next formation at approximately 2500 feet with
additional wells in early 2014.
9
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 3 - MINERAL PROPERTIES (CONTINUED)
There are additional shallow oil production opportunities in the immediate area
that Liberty is considering for participation.
NOTE 4 - CONVERTIBLE NOTES
At
December 31,
2013
--------
8% convertible note to Asher Enterprises, Inc., due January 22, 2014 $ 16,130
8% convertible note to Asher Enterprises, Inc., due March 17, 2014 32,500
8% convertible note to Asher Enterprises, Inc., due June 3, 2014 27,500
--------
Total Convertible notes payable 76,130
Debt discount (46,666)
--------
Total Convertible notes payable, net of discount $ 29,464
========
On October 24, 2012, January 14, 2013, January 24, 2013, April 17, 2013, June
13, 2013 and August 29, 2013, the Company borrowed $32,500, $10,600, $32,500,
$42,500, $32,500 and $27,500, respectively, from Asher Enterprises, Inc. All six
notes accrue interest at the rate of 8% per annum. They are due on July 26,
2013, September 16, 2013, October 28, 2013, January 22, 2014, March 17, 2014,
and June 3, 2014, respectively.
These notes are convertible by the holder after 180 days at 45%-58% of the
average of the lowest five closing bid prices in the ten trading day period
before the conversion. These notes have no financial covenants.
Pursuant to the Convertible Note Agreements and the Notes, the Investor, or
registered Assigns, shall have the right, from time to time, and at any time
during the period beginning on the date which is 180 days following the date of
the Note and ending on the later of the maturity date or the date of payment of
the Default Amount (as defined in the Note), to convert all or any part of the
outstanding and unpaid principal amount of the Note into fully paid and
non-assessable shares of Common Stock of the Company; provided however, to the
extent that the Holder's beneficial ownership of the Common Stock of the Company
would not exceed 9.99% at any such time as a result of its conversion of the
Note.
On December 31, 2013 and September 30, 2013, the Company had $76,130 and
$105,367, respectively, of convertible debt outstanding, with accrued interest
of $4,508 and $4,289 shown net of $46,666 and $10,833 of debt discount. The
variable conversion feature at less than market value gives rise to a derivative
liability. The liability for each note was computed using the Black-Sholes
Option Pricing method as they became convertible (initial value date) with the
following inputs for the year ended September 30, 2013:
Notes Dated
---------------------------------------------------------
September 13, October 24, January 14, January 24,
2012 2012 2013 2013
---------- ---------- ---------- ----------
Estimated fair value $ .01572 $ .0087 $ .00128 $ .00077
Expected life (years) .27 .27 .27 .27
Risk free interest rate .01% .05% .04% .01%
Volatility 268.46% 357.71% 371.72% 342.25%
10
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 4 - CONVERTIBLE NOTES (CONTINUED)
The liability for each remaining note is recomputed using the Black-Sholes
Option Pricing method at each quarter and year-end the note is outstanding
(revalue date) with the following inputs at December 31, 2013:
Note Dated
----------
January 24,
2013
--------
Estimated fair value $ .00054
Expected life (years) .13
Risk free interest rate .03%
Volatility 315%
The liability for each note was computed using the Black-Scholes Option Pricing
method as they became convertible (initial value date) with the following inputs
for the quarter ended December 31, 2013:
Notes Dated
----------------------
April 17, June 13,
2013 2013
-------- --------
Estimated fair value $ .0005 $ .00014
Expected life (years) .27 .27
Risk free interest rate .01% .07%
Volatility 344% 327%
The liability for each remaining note is recomputed using the Black-Sholes
Option Pricing method at each quarter and year-end the note is outstanding
(revalue date) with the following inputs at December 31, 2013:
Note Dated
----------
April 17,
2013
--------
Estimated fair value $ .00018
Expected life (years) .06
Risk free interest rate .01%
Volatility 572%
During the period ending December 31, 2013, Asher converted $40,670 of principal
and interest into 239,189,516 shares of common stock.
NOTE 5 - CAPITAL STOCK
The Company has 1,500,000,000 common shares authorized at a par value of $0.001
per share.
On August 31, 2007, the Company issued 45,000,000 common shares to founders for
total proceeds of $45,000.
On May 31, 2008, the Company completed a private placement whereby it issued
28,800,000 common shares for total proceeds of $48,000.
On February 1, 2010, the Company completed a private placement whereby it issued
1,000,000 units for total proceeds of $250,000. 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.
11
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 5 - CAPITAL STOCK (CONTINUED)
On February 11, 2010, the Company completed a private placement whereby it
issued 1,000,000 units for total proceeds of $250,000. Each unit consists of one
common share and common share purchase warrant allowing the holder to purchase a
common share at $0.25 per share expiring February 1, 2012.
On March 15, 2010, the Company increased its authorized common shares from
50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock
split. All share amounts reflected in the financial statements have been
adjusted to reflect the results of the stock split.
On March 20, 2010, the Company cancelled 18,000,000 of its common stock
outstanding.
On May 11, 2011, the Company completed a private placement whereby it issued
666,667 units for total proceeds of $500,000. Each unit consists of one common
share and common share purchase warrant allowing the holder to purchase a common
share at $0.82 per share expiring April 30, 2013.
On January 18, 2012, the Company issued 2,000,000 shares to its CFO and Director
as part of his compensation.
On August 17, 2012, 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 September 10, 2012, the Company issued 17,988,000 shares of common stock to
three non-employee consultants pursuant to the Plan valued at $539,641. The
stock was issued for services to be rendered from September 1, 2012 through
February 28, 2013. As of September 30, 2012, $449,700 had been recorded as
prepaid expenses related to this stock issuance. The balance of the prepaid
consulting was $179,880 as of December 31, 2012.
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 the Company five promissory notes
totaling $37,500, due and payable on June 19, 2013 with interest payable at 8%.
The Note was paid in full as of April 17, 2013.
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. The parties
agreed that Asher would acquire from the Company five promissory notes totaling
$32,500, due and payable on September 26, 2013 with interest payable at 8%. The
Note was paid in full as of May 28, 2013.
On January 14, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 14, 2013 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 was funded on January
16, 2013. The Note was paid in full as of August 19, 2013
On January 24, 2013 Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 24, 2013 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $32,500, due and payable on
October 28, 2013 with interest payable at 8%. The Note was funded on January 30,
2013. The Note was paid in full as of November 5, 2013.
On March 6, 2013, Liberty Coal Energy Corp. issued 100,000 Preferred Series C
shares at a value of $1.00 per share to two officers and directors for services
rendered. The Series C shares have no conversion feature and have a voting right
of 547 votes per share.
12
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 5 - CAPITAL STOCK (CONTINUED)
On March 6, 2013, Liberty Coal Energy Corp. issued 1,100,000 shares pursuant to
the break up agreements around a senior financing agreement it had entered
previously.
On March 21, 2013, Liberty Coal Energy Corp. issued 1,212,121 shares of its
common stock on a conversion of 12,000 from its principal note from September
13, 2012.
On April 13, 2013, Liberty Coal Energy Corp, issued 2,012,987 shares of its
common stock on a conversion of 15,500 from its principal note from September
13, 2012.
On April 17, 2013, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a April 17, 2013 resolution of Company's Board of Directors. Asher agreed to
purchase a Convertible Note in the amount of $42,500, due and payable on January
22, 2013 with interest payable at 8%. The Note was funded on May 2, 2013. The
Note is convertible into Common Shares of the Company, the balance on this note
as of December 31, 2013 is $16,130.
On April 17, 2013, Liberty Coal Energy Corp, issued 1,493,506 shares of its
common stock on a conversion of $10,000 from its principal note from September
13, 2012 and $1,500 of accrued interest.
On May 1, 2013, Liberty Coal Energy Corp, issued 1,395,349 shares of its common
stock on a conversion of $12,000 from its principal note from October 31, 2012.
On May 8, 2013, Liberty Coal Energy Corp. issued 2,343,750 shares of its common
stock on a conversion of $15,000 from its principal note from October 31, 2012.
On May 28, 2013, Liberty Coal Energy Corp. issued 1,446,809 shares of its common
stock on a conversion of $5,500 from its principal note from October 31, 2012
and $1,300 of accrued interest.
On June 13, 2013, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a June 13, 2013 resolution of Company's Board of Directors. Asher agreed to
purchase a Convertible Note in the amount of $32,500, due and payable on March
17, 2014 with interest payable at 8%. The Note will be funded on June 22, 2013.
The Note is convertible into Common Shares of the Company, for which the Company
has reserved 6,600,000 shares.
On July 19, 2013, Liberty Coal Energy Corp. issued 4,044,944 shares of its
common stock on a conversion of $3,600 from its principal note from January 14,
2013.
On July 24, 2013, Liberty Coal Energy Corp. issued 4,022,989 shares of its
common stock on a conversion of $3,500 from its principal note from January 14,
2013.
On August 12, 2013, Liberty Coal Energy Corp. issued 4,025,974 shares of its
common stock on a conversion of $3,600 from its principal note from January 14,
2013.
On August 19, 2013, Liberty Coal Energy Corp. issued 1,070,130 shares of its
common stock on a conversion of $400 from its principal note from January 14,
2013 and $424 of accrued interest.
On August 19, 2013, Liberty Coal Energy Corp. issued 3,833,333 shares of its
common stock on a conversion of $2,300 from its principal note from January 24,
2013.
On August 26, 2013, Liberty Coal Energy Corp. issued 4,909,091 shares of its
common stock on a conversion of $2,700 from its principal note from January 24,
2013.
13
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 5 - CAPITAL STOCK (CONTINUED)
On August 29, 2013, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a August 29, 2013 resolution of Company's Board of Directors. Asher agreed to
purchase a Convertible Note in the amount of $27,500, due and payable on June 3,
2014 with interest payable at 8%. The Note will be funded on September 9, 2013.
The Note is convertible into Common Shares of the Company, for which the Company
has reserved 635,000,000 shares.
On September 9, 2013, Liberty Coal Energy Corp. issued 5,000,000 shares of its
common stock on a conversion of $2,400 from its principal note from January 24,
2013.
On September 13, 2013, Liberty Coal Energy Corp. issued 5,000,000 shares of its
common stock on a conversion of $2,400 from its principal note from January 24,
2013.
On September 18, 2013, Liberty Coal Energy Corp. issued 10,000,000 shares of its
common stock on a conversion of $4,500 from its principal note from January 24,
2013.
On September 23, 2013, Liberty Coal Energy Corp. issued 10,000,000 shares of its
s-8 common stock for a consulting fees.
On September 30, 2013, Liberty Coal Energy Corp. issued 11,538,462 shares of its
common stock on a conversion of $4,500 from its principal note from January 24,
2013.
On October 7, 2013, Liberty Coal Energy Corp. issued 11,481,481 shares of its
common stock on a conversion of $3,100 from its principal note from January 24,
2013.
On October 11, 2013, Liberty Coal Energy Corp. issued 11,481,481 shares of its
common stock on a conversion of $3,100 from its principal note from January 24,
2013.
On October 18, 2013, Liberty Coal Energy Corp. issued 11,600,000 shares of its
common stock on a conversion of $2,900 from its principal note from January 24,
2013.
On October 25, 2013, Liberty Coal Energy Corp. issued 11,250,000 shares of its
common stock on a conversion of $2,700 from its principal note from January 24,
2013.
On October 30, 2013, Liberty Coal Energy Corp. issued 11,304,348 shares of its
common stock on a conversion of $1,900 from its principal note from January 24,
2013.
On November 5, 2013, Liberty Coal Energy Corp. issued 2,608,696 shares of its
common stock on a conversion of $600 from its accrued interest on the note from
January 24, 2013.
On November 5, 2013, Liberty Coal Energy Corp. issued 8,695,952 shares of its
common stock on a conversion of $2,000 from its principal note from January 24,
2013.
Effective November 7, 2013, the Board of Directors of Liberty Coal Energy
approved the issuance of 100,000,000 restricted shares of Liberty Coal Energy
common stock to Robert Malasek, Treasurer, CFO and Director for unpaid
compensation of $25,000 and $15,000 as a onetime grant.
Effective November 7, 2013, the Board of Directors of Liberty Coal Energy
approved the issuance of 100,000,000 restricted shares of Liberty Coal Energy
common stock to Edwin Morrow, President and Director for unpaid compensation of
$40,000.
On November 12, 2013, Liberty Coal Energy Corp., issued 11,562,500 shares of its
common stock on a conversion of $1,850 from its principal note from January 24,
2013.
14
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 5 - CAPITAL STOCK (CONTINUED)
On November 15, 2013, the Company filed a Certificate of Amendment to its
Certificate of Incorporation with the Nevada Secretary of State to effect: (i) a
reverse stock split of the outstanding common stock at a ratio of 1:15 (the "
Reverse Stock Split "); that became effective on December 20, 2013 (the "
Effective Date ").
On December 20, 2013 the Company effected a 1 for 15 reverse stock split. The
authorized 1,500,000,000 shares of common stock, par value $0.001 per share
remained the same. As a result of the Reverse Stock Split, the number of issued
and outstanding shares of Common Stock is approximately 39,479,575 subject to
adjustment for fractional shares. The Reverse Stock Split does not affect any
shareholder's ownership percentage of the Company's common stock, except to the
limited extent that the Reverse Stock Split resulted in any adjustment for
fractional shares. On January 15, 2014, FINRA rejected the proposed stock split;
however, on January 22, 2014, the Company filed a Notice of Appeal to FINRA's
rejection. See note 10 Subsequent Events.
On November 18, 2013, Liberty Coal Energy Corp. issued 11,562,500 shares of its
common stock on a conversion of $1,850 from its principal note from January 24,
2013.
On November 26, 2013, Liberty Coal Energy Corp. issued 11,571,429 shares of its
common stock on a conversion of $1,620 from its principal note from January 24,
2013.
On December 9, 2013, Liberty Coal Energy Corp. issued 45,357,143 shares of its
common stock on a conversion of $6,350 from its principal note from January 24,
2013.
On December 18, 2013, Liberty Coal Energy Corp. issued 45,357,143 shares of its
common stock on a conversion of $6,350 from its principal note from January 24,
2013.
On December 26, 2013, Liberty Coal Energy Corp. issued 45,357,143 shares of its
common stock on a conversion of $6,350 from its principal note from January 24,
2013.
NOTE 6 - INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded.
The cumulative net operating loss carry-forward is approximately $2,778,682 at
December 31, 2013, and will expire beginning in the year 2030. The cumulative
tax effect at the expected rate of 34% of significant items comprising our net
deferred tax amount is as follows:
December 31, September 30,
2013 2013
---------- ----------
Deferred tax asset attributable to:
Net operating loss carryover $ 944,752 $ 893,745
Valuation allowance (944,752) (893,745)
---------- ----------
Net deferred tax asset $ -- $ --
========== ==========
15
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 7 - RELATED PARTY TRANSACTION
As of December 31, 2012, there is a balance owing to two officers of the Company
in the amount of $37,104 (September 30, 2013 - $77,004). This amount is included
in accounts payable-related party.
Effective November 7, 2013, the Board of Directors of Liberty Coal Energy
approved the issuance of 100,000,000 restricted shares of Liberty Coal Energy
common stock to Robert Malasek, Treasurer, CFO and Director for unpaid
compensation of $25,000 and $15,000 as a onetime grant.
Effective November 7, 2013, the Board of Directors of Liberty Coal Energy
approved the issuance of 100,000,000 restricted shares of Liberty Coal Energy
common stock to Edwin Morrow, President and Director for unpaid compensation of
$40,000
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $2,778,682 as of December 31, 2013. 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 9 - 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. As of December 31, 2013 the Company has been
able to pay $30,000 in minimum royalty payments and has a balance of $270,000 in
Accounts Payable.
On August 13, 2013, Liberty entered an agreement with Colt Resources Inc., one
of the original vendors of the property. The agreement provides a time window
for voluntary termination of the lease, and allows for either party to fund the
reclamation bond and placing the property into production. The agreement will
allow Liberty to recover 50 percent of the cost of the existing permit ($40,000)
if Colt Resources can find financing for placing the project into production. If
liberty secures financing for the property, and brings the lease payments
current, the existing lease purchase will remain in effect.
The Company has signed a month-to-month operating agreement with a local
operator in Caddo Parish who services the property. The agreement covers the
operator's basic monthly fees of approximately $355 per month, as well as any
additional fees that may occur due to maintenance work that may arise.
16
Liberty Coal Energy Corp.
(An Exploration Stage Company)
Notes to the Financial Statements
December 31, 2013
NOTE 10 - SUBSEQUENT EVENTS
On January 13, 2013, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 13, 2014 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $9,500.00, due and payable on
October 15, 2014 with interest payable at 8%. The Note was funded on January 14,
2014. The Note is convertible into Common Shares of the Company, for which the
Company the current reserve of 615,000,000 shares of Common Stock are reserved
for the subject Note and for three (3) prior convertible promissory notes in
favor of the Investor dated April 17, 2013 and June 13, 2013 and August 29,
2013.
On January 14, 2013, Liberty Coal Energy Corp., issued 59,142,857 shares of its
common stock on a conversion of $8,280 from its principal note from January 24,
2013.
On January 15, 2014, FINRA rejected the proposed reverse stock split; however,
on January 22, 2014, the Company filed a Notice of Appeal to FINRA's rejection.
It is anticipated that it will take several weeks or months to receive a final
decision from FINRA. If the reverse stock split is accepted by FINRA, the
Company's authorized 1,500,000,000 shares of common stock, par value $0.001 per
share will remain the same and the number of issued and outstanding shares of
Common Stock will be approximately 47,363,173 subject to adjustment for
fractional shares. The reverse stock split would not affect any shareholder's
ownership percentage of the Company's common stock, except to the limited extent
that the reverse stock split resulted in any adjustment for fractional shares.
On January 23, 2013 Liberty Coal Energy Corp., issued 59,111,111 shares of its
common stock on a conversion of $5,320 from its principal note from January 24,
2013.
On January 28, 2014, Mr. Edwin Morrow resigned as CEO and President of Liberty
Coal Energy Corp., effective immediately. Mr. Morrow will remain a Director of
the Company.
On January 28, 2014, the Board of Directors of Liberty Coal Energy Corp., a
Nevada corporation (the "Company"), appointed Robert T. Malasek to serve as the
Company's interim Chief Executive Officer and President. Mr. Malasek replaces
Mr. Edwin G. Morrow who was serving as the Company's Chief Executive Officer.
Mr. Morrow will remain on the Company's Board of Directors and as the Company's
Head of Geology.
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks noted herein in the
section entitled "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$), unless
otherwise specified, and are prepared in accordance with United States Generally
Accepted Accounting Principles. All references to "common shares" refer to the
common shares in our capital stock.
As used in this quarterly report, the terms "we," "us," "our Company," and the
"Company" mean Liberty Coal Energy Corp., a Nevada corporation, unless otherwise
indicated.
CORPORATE HISTORY
The address of our principal executive office is 2782 Gateway Road, Carlsbad, CA
92009. Our telephone number is 760-410-8189.
Our common stock is quoted on the OTC Bulletin Board under the symbol "LBTG."
We were incorporated on August 31, 2007 as "ESL Teachers Inc." under the laws of
the State of Nevada. Our original business plan was to develop and sell online
employment services specifically for both ESL Teachers and ESL operations
seeking to hire teachers worldwide. On March 15, 2010, we changed our name to
Liberty Coal Energy Corp. by way of a merger with our wholly owned subsidiary
"Liberty Coal Energy Corp." which was formed solely for the purpose of the
change of name. The change of name was to better represent the new business
direction of our Company to that of a coal exploration, development, and
production company. Due to the highly volatile and negative political climate
that coal has attracted lately, we have expanded our focus into broader energy
sources such as petroleum and crude oil.
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.
On December 20, 2013 the Company effected a 1 for 15 reverse stock split with
the State of Nevada; provided, however, the reverse stock split will not be
effective until it is approved by FINRA. On January 15, 2014, FINRA rejected the
proposed reverse stock split; however, on January 22, 2014, the Company filed a
Notice of Appeal to FINRA's rejection. It is anticipated that it will take
several weeks or months to receive a final decision from FINRA. If the reverse
stock split is accepted by FINRA, the Company's authorized 1,500,000,000 shares
of common stock, par value $0.001 per share will remain the same and the number
of issued and outstanding shares of Common Stock will be approximately
47,363,173 subject to adjustment for fractional shares. The reverse stock split
would not affect any shareholder's ownership percentage of the Company's common
stock, except to the limited extent that the reverse stock split resulted in any
adjustment for fractional shares.
18
OUR CURRENT BUSINESS
Our primary business focus is to acquire, explore and develop oil and coal
properties in North America.
We are currently developing a coal project in Owsley County, Kentucky and an oil
lease in Caddo Parish Louisiana.
The Gamm lease contains 11 shallow wells (1500 to 1700 feet approximately which
were drilled and developed over more than 20 years between the late 1940s and
the 1970s.
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.
In May 2012 the Company formed Liberty Coal Energy Kentucky, LLC in anticipation
for the operations of the Owsley project. The LLC is currently suspended and
will be reinstated when necessary
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 operations for the
quarter ended December 31, 2013, and the factors that could affect our future
financial condition and results of operations.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on our financial statements as of and for the years ended September 30,
2013 and 2012, regarding concerns about our ability to continue as a going
concern.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our financial statements for the quarter ended December 31, 2013 which are
included herein.
THREE MONTHS ENDED DECEMBER 31, 2013 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2012
The following table summarizes key items of comparison for the three months
ended December 31, 2013, and 2012:
Three Months Ended
December 31,
2013 2012
-------- --------
Amortization $ -- $ 422
General and administrative 1,697 1,244
Legal and accounting 6,800 15,433
Maintenance 3,087 --
Investor relations -- 39,200
Consulting 34,500 304,320
Stock-based compensation 23,838 --
Transfer agent 756 325
Interest Expense 820 1,759
Amortization of debt discount 39,167 --
Derivative expense 34,862 --
Gain/loss on change in value of derivative liability 4,492 --
-------- --------
Net Loss $150,019 $362,703
======== ========
19
We had a net loss of $150,019 for the quarter ended December 31, 2013, which was
a decrease of $212,684 compared to the net loss of $362,703, for the quarter
ended December 31, 2012. The significant change in our results over the two
periods is primarily the result of management's activities around the Company's
projects and a 3rd party consulting expense as the Company expensed $269,820 of
these contracts from prepaid expenses during the three months ended December 31,
2012
PERIOD FROM INCEPTION, AUGUST 31, 2007 TO DECEMBER 31, 2013
Since inception, we have an accumulated deficit of $2,778,682. We expect to
continue to incur losses as a result of continued exploration and development of
our coal mining interests.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of December 31, 2013, reflects assets of $18,293. We had
cash in the amount of $3,293 and a working capital deficit in the amount of
$(453,771) as of December 31, 2013.
Three Months Three Months
Ended Ended
December 31, December 31,
2013 2012
-------- --------
Net Cash Provided by (Used in) Operating Activities $(11,139) $ 23,691
Net Cash (Used in) Investing Activities -- (60,000)
Net Cash Provided by Financing Activities -- 32,500
-------- --------
(Decrease) in Cash $(11,139) $ (3,809)
======== ========
Our current cash requirements are significant due to planned exploration and
development of our current coal mining property interests, and we anticipate
generating losses. In order to execute on our business strategy, including the
exploration and development of our current coal interest, we will require
additional working capital, commensurate with the operational needs of our
planned projects and obligations. Our management believes that we should be able
to raise sufficient amounts of working capital through debt or equity offerings,
as may be required to meet our short-term obligations. However, changes in our
operating plans, increased expenses, acquisitions, or other events, may cause us
to seek additional equity or debt financing in the future. We anticipate
continued and additional operations on our properties. Accordingly, we expect to
continue to use debt and equity financing to fund operations for the next twelve
months, as we look to expand our asset base and fund exploration and development
of our properties.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
or continued operations in the future.
OPERATING ACTIVITIES
Net cash flow used in operating activities during the three months ended
December 31, 2013 was $(11,139), a change of $34,830 from the $23,691 net cash
provided by operating activities during the three months ended December 31,
2013.
INVESTING ACTIVITIES
Net Investing activities during the three months ended December 31, 2013 used
nil of cash, a decrease of $60,000 from the $60,000 cash used in Investing
Activities during the three months ended December 31, 2012.
20
FINANCING ACTIVITIES
Net Financing activities during the three months ended December 31, 2013 brought
in nil, a decrease of $32,500 from the 32,500 cash brought in by Financing
Activities during the three months ended December 31, 2013.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expenses, accounts
payable and accrued liabilities, amounts due to officers and convertible notes
payable.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
21
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's financial statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's financial statements.
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
22
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
REVENUES
We have not generated revenues since inception.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting issuer," we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our chief executive officer
and chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this quarterly report. Based on this evaluation, our chief
executive officer and our chief financial officer (our principal executive
officer, principal financial officer and principal accounting officer) concluded
that our disclosure controls and procedures are effective as of December 31,
2013 to ensure that information we are required to disclose in reports that we
file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and (ii) is accumulated
and communicated to our management, including our chief executive officer and
our chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), as appropriate, to allow
timely decisions regarding required disclosure. Our disclosure controls and
procedures are designed to provide reasonable assurance that such information is
accumulated and communicated to our management. Our disclosure controls and
procedures include components of our internal control over financial reporting.
Management's assessment of the effectiveness of our internal control over
financial reporting is expressed at the level of reasonable assurance that the
control system, no matter how well designed and operated, can provide only
reasonable, but not absolute, assurance that the control system's objectives
will be met.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
Company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
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officers or affiliates, or any registered beneficial shareholder, is an adverse
party or has any material interest adverse to our interest.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 13, 2013, Liberty Coal Energy Corp. consummated a Securities Purchase
Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant
to a January 13, 2014 resolution of Company's Board of Directors. Asher agreed
to purchase a Convertible Note in the amount of $9,500.00, due and payable on
October 15, 2014 with interest payable at 8%. The Note was funded on January 14,
2014. The Note is convertible into Common Shares of the Company, for which the
Company the current reserve of 615,000,000 shares of Common Stock are reserved
for the subject Note and for three (3) prior convertible promissory notes in
favor of the Investor dated April 17, 2013 and June 13, 2013 and August 29,
2013.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 originally filed on January 23,
2008).
3.2 By-laws (Incorporated by reference to our Registration Statement on
Form S1/A filed on February 27, 2008).
3.3 Articles of Merger (Incorporated by reference to our Current Report
on Form 8-K filed on March 29, 2010).
3.4 Certificate of Change (Incorporated by reference to our Current
Report on Form 8-K filed on March 29, 2010).
10.1 Form of Subscription Agreement (Incorporated by reference to our
Quarterly Report on Form 10-Q filed on May 16, 2011)
10.2 Second Amended Agreement by and between Liberty Coal Energy Corp.
and Rocking Hard Investments, LLC, dated May 2, 2010 (Incorporated
by reference to our Quarterly Report on Form 10-Q filed on May 16,
2011)
31.1* Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1* Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
101* Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY COAL ENERGY CORP.
Date: February 12, 2014 /s/ Robert T. Malasek
-------------------------------------------------
ROBERT T. MALASEK
Chief Executive Officer, Chief Financial Officer,
Secretary and Director (Principal Financial
Officer & Principal Accounting Officer)
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