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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| Form 10-Q |
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 333-171046
| LIBERATED ENERGY, INC. |
| (Exact name of registrant as specified in its charter) |
| Nevada | 27-4715504 | |
| (State or other jurisdiction | (I.R.S. Employer Identification No.) | |
| of incorporation or organization) |
| 2 Coleman Court | ||
| Southampton, New Jersey | 08088 | |
| (Address of principal executive offices) | (Zip Code) |
| (845) 610-3817 |
| (Registrant's telephone number including area code) |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 oNo
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 (§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 o 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 o | Accelerated filer o |
| Non-accelerated filer o (Do not check if a smaller reporting company) | 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 o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 331,539,081 shares of common stock issued and outstanding as of May 19, 2015.
TABLE OF CONTENTS
| Item # | Description | Page Numbers | ||||
| PART I | 3 | |||||
| ITEM 1 | FINANCIAL STATEMENTS | 3 | ||||
| ITEM 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11 | ||||
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 12 | ||||
| ITEM 4 | CONTROLS AND PROCEDURES | 13 | ||||
| PART II | 14 | |||||
| ITEM 1 | LEGAL PROCEEDINGS | 14 | ||||
| ITEM 1A | RISK FACTORS | 14 | ||||
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 14 | ||||
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 14 | ||||
| ITEM 4 | MINE SAFETY DISCLOSURES | 14 | ||||
| ITEM 5 | OTHER INFORMATION | 14 | ||||
| ITEM 6 | EXHIBITS | 15 | ||||
| SIGNATURES | 16 | |||||
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This report contains these types of statements. Words such as “may,” “expect,” “believe,” “anticipate,” “estimate,” “project,” or “continue” or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
LIBERATED ENERGY, INC
BALANCESHEETS
(Unaudited)
| March 31, | September 30, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 12,065 | $ | 162,354 | ||||
| Inventory | 40,861 | 40,861 | ||||||
| Prepaid expense | — | 5,000 | ||||||
| Total current assets | 52,926 | 208,215 | ||||||
| Other assets | ||||||||
| Loans to stockholders | — | 9,701 | ||||||
| Patent | — | 2,000 | ||||||
| Deferred financing costs | — | 25,042 | ||||||
| Total assets | $ | 52,926 | $ | 244,958 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expense | $ | 146,945 | $ | 152,445 | ||||
| Deferred revenue | 43,565 | 43,565 | ||||||
| Advance- related party | 4,000 | |||||||
| Convertible notes payable | 400,679 | 316,066 | ||||||
| Total liabilities | 595,189 | 512,076 | ||||||
| Stockholders’ deficit | ||||||||
| Preferred shares, par value $0.001. 100,000,000 authorized; 10,000,000 issued and outstanding | 10,000 | — | ||||||
| Common stock, par value $0.001, authorized 900,000,000, issued and outstanding 169,563,725 and 93,422,721as of March 31, 2015 and September 30, 2014, respectively | 169,564 | 93,423 | ||||||
| Additional paid-in capital | 391,572 | 188,176 | ||||||
| Accumulated deficit | (1,113,398 | ) | (548,717 | ) | ||||
| Total stockholders’ deficit | (542,262 | ) | (267,118 | ) | ||||
| Total liabilities and stockholders’ equity(deficit) | $ | 52,926 | $ | 244,958 | ||||
| The accompanying notes are an integral part of the unaudited financial statements. | ||||||||
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LIBERATED ENERGY, INC
STATEMENT OF OPERATIONS
(Unaudited)
| Three Months | Six Months | |||||||||||||||
| Ended March 31, | Ended January 31 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenue | $ | — | $ | 39,000 | $ | — | $ | 39,000 | ||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 264,537 | 55,289 | 522,938 | 140,114 | ||||||||||||
| Loss from operations | (264,537 | ) | (16,289 | ) | (522,938 | ) | (101,114 | ) | ||||||||
| Other Income(expense) | ||||||||||||||||
| Other expense | (41,743 | ) | — | (41,743 | ) | — | ||||||||||
| Total other expense | (41,743 | ) | — | (41,743 | ) | — | ||||||||||
| Net loss | (306,280 | ) | (16,289 | ) | (564,681 | ) | (101,114 | ) | ||||||||
| Net loss per common share basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Weighted average number of common shares outstanding | 134,752,373 | 72,112,622 | 152,330,210 | 72,056,311 | ||||||||||||
The accompanying notes are an integral part of the unaudited financial statements.
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LIBERATED ENERGY, INC
STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months | ||||||||
| Ended January 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | (564,681 | ) | $ | (101,114 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Write down of assets | 11,701 | — | ||||||
| Stock based compensation | 158,650 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | — | (19,500 | ) | |||||
| Prepaid | 5,000 | — | ||||||
| Accounts payable and accrued expense | 19,543 | 20,000 | ||||||
| Net cash used in operating activities | (369,789 | ) | (100,614 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Repayment of loan from related party | — | (38,000 | ) | |||||
| Borrowings on convertible notes | 215,500 | 182,000 | ||||||
| Loan from stockholder | 4,000 | 63,250 | ||||||
| Net cash provided by financing activities | 219,500 | 207,250 | ||||||
| Net change in cash | (150,289 | ) | 106,636 | |||||
| Cash at beginning of period | 162,354 | 44,684 | ||||||
| Cash at end of period | $ | 12,065 | $ | 151,320 | ||||
| Non-Cash Transactions | ||||||||
| Payment of accounts payable by third party | $ | — | $ | 3,700 | ||||
| Common stock issued for convertible debt conversion | $ | 130,887 | $ | 57,417 | ||||
The accompanying notes are an integral part of the unaudited financial statements.
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LIBERATED ENERGY, INC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION AND ORGANIZATION
Liberated Energy, Inc. (the “Company”), formerly known as Mega World Food Holdings Company is a Nevada corporation formed on September 14, 2010.
On January 19, 2013, pursuant to a Common Stock Purchase Agreement, dated January 7, 2013, Perpetual Wind Power Corporation, a privately held corporation formed under the laws of the State of Delaware on July 1, 2010, acquired 24,500,000 non-registered shares of the Company from its shareholders, thereby owning 24,500,000 out of a total of 25,000,000 issued and outstanding shares of the Company. Thereafter, the Company acquired from Perpetual Wind Power Corporation its patented wind and solar powered turbine technology for 2,500,000 newly issued shares of the Company which were distributed in a dividend to its shareholders and Perpetual Wind Power Corporation returned to treasury its 24,500,000 shares it acquired from the Company's shareholders. As a result of this transaction, the Company had on January 19, 2013, 3,000,000 shares issued and outstanding. On February 14, 2013, the Company changed its name from Mega World Food Holding Company to Liberated Energy, Inc. and underwent a 24 for 1 stock split, whereby the Company's outstanding shares increased from 3,000,000 to 72,000,000.
On January 19, 2013, the Company disposed of its wholly-owned subsidiary, Mega World Food Limited (HK). Mega World Food Limited (HK) was incorporated on June 24, 2010 and was in the business of selling frozen vegetables in all areas of the world except China. From inception, Mega World Food Limited (HK) only incurred setting up, formation or organization activities. Upon disposal, the Company ceased these operations and accordingly, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of this business displayed separately as “discontinued operations.”
Effective January 19, 2013, the Company’s business is the sale of alternative energy products and services.
On February 4, 2015 the Company increased their number of authorized preferred shares from 10,000,000 to 100,000,000 and authorized common shares from 250,000,000 to 900,000,000.
Bases of Presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required to be included in a complete set of financial statements in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended January 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2015. The accompanying unaudited financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2014 Annual Report filed with the SEC for year end September 30, 2014.
The Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to exploration stage.
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LIBERATED ENERGY, INC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - GOING CONCERN
As shown in the accompanying financial statements, the Company has a negative working capital of $542,263 and an accumulated deficit of $1,113,398, as of March 31, 2015. The Company’s ability to generate net income and positive cash flows is dependent on the ability to grow its operating entity as well as the ability to raise additional capital. Management is following strategic plans to accomplish these objectives, but success is not guaranteed. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company maintains its books and records on the accrual basis of accounting. The accompanying financial statements have been prepared on that basis, in which revenues and gains are recognized when earned and expenses and losses are recognized when incurred.
Use of Estimates
The presentation of financial statements in conformity with generally accepted accounting principles in the United States of America 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 reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, cash and cash equivalents include all cash balances, which are not subject to withdrawal restrictions or penalties, and highly liquid investments and debt instruments with a maturity of three months or less from the date of purchase.
Fair Value of Financial Instruments
Our short-term financial instruments, including cash, other assets and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates their book value based on their current maturity.
Net Loss per Common Share
The Company computes per share amounts in accordance with Statement of Financial Accounting Standards (SFAS) ASC 260, Earnings per Share (EPS). ASC 260 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding during the periods.
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LIBERATED ENERGY, INC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Stock-Based Compensation
The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including restricted stock awards. We estimate the fair value of stock using the stock price on date of the approval of the award. The fair value is then expensed over the requisite service periods of the awards, which is generally the date at which the counterparty’s performance is complete and the related amount recognized in our statements of operations.
Revenue and Cost Recognition
The Company has generated no revenues during the six months period ended March 31, 2015 and $39,000 for the same period in 2014. It is the Company’s policy that revenue from product sales or services will be recognized in accordance with ASC 605 “Revenue Recognition”. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Income Taxes
The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes primarily relate to the recognition of debt costs and stock based compensation expense. The adoption of ASC 740-10 did not have a material impact on the Company's results of operations or financial condition.
NOTE 4 – RELATED PARTY
On February 4, 2015 the Company issued to an officer and director of the Company 10,000,000 shares with a value of $10,000 of series A preferred stock for service. Each share has 10 votes on all matters of the Company in which the shareholders can vote.
During March , 2015 an officer and director of the Company advanced the Company $4,000 for payment of accounts payable. The advance is non interest bearing and is due on demand.
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LIBERATED ENERGY, INC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - EQUITY
On January 6, 2015 the Company issued 15,240,000 shares of common stock with a value of $148,650 for service.
On February 4, 2015 the Company issued to an officer and director of the Company 10,000,000 shares with a value of $10,000 of series A preferred stock for service. Each share has 10 votes on all matters of the Company in which the shareholders can vote.
During the Quarter ended March 31, 2015 the Company issued 50,371,144 shares of commons stock with a value of $106,157 for the conversion of convertible debt.
NOTE 6 – CONVERTIBLE DEBT
On September 4, 2013, the Company issued a Convertible Note (the “Note”) to JMJ Financial (“JMJ”) providing JMJ with the ability to invest up to $350,000 which contains a 10% original issue discount (the “JMJ Note”). The transaction closed on September 4, 2013. JMJ provided $50,000 to the Company on the Effective Date. The net proceeds the Company received from this offering were $45,000. . On December 10, 2013, JMJ provided $25,000 to the Company; the net proceeds the Company received from this offering were $22,500. On April 18, 2014, JMJ provided $40,000 to the Company; the net proceeds the Company received from this offering were $36,000. On June 23, 2014, JMJ provided $40,000 to the Company; the net proceeds the Company received from this offering were $36,000.
On November 27, 2013, the Company issued a Convertible Note (the “Note”) to LG CAPITAL FUNDING, LLC (“LG Capital”) providing LG Capital with the ability to invest $25,000 which contains $4,000 in financing cost (the LG Capital “Note”). The transaction closed on November 27, 2013. LG Capital provided $25,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $21,000.
On December 2, 2013, the Company issued a Convertible Note (the “Note”) to GEL Properties, LLC (“GEL”) providing GEL with the ability to invest $35,000 which contains $5,250 in financing cost (the GEL “Note”). The transaction closed on December 2, 2014. GEL provided $35,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $29,750.
On March 14, 2014, the Company issued a Convertible Note (the “Note”) to LG CAPITAL FUNDING, LLC (“LG Capital”) providing LG Capital with the ability to invest $30,000 which contains $4,500 in financing costs (the LG Capital “Note”). The transaction closed on March 14, 2014. LG Capital provided $30,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $25,500.
On March 17, 2014, the Company issued a Convertible Note (the “Note”) to UNION CAPITAL, LLC (“Union Capital”) providing Union Capital with the ability to invest $30,000 which contains $4,500 in financing costs. The transaction closed on March 17, 2014. Union Capital provided $30,000 to the Company on the Effective Date. The net proceeds the Company received from this offering were $25,500.
On March 19, 2014, the Company issued a Convertible Note (the “Note”) to GEL Properties, LLC (“GEL”) providing GEL with the ability to invest $35,000 which contains $5,250 in financing cost (the GEL “Note”). The transaction closed on March 19, 2014. GEL provided $35,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $29,750.
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LIBERATED ENERGY, INC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – CONVERTIBLE DEBT (Continued)
On June 02, 2014, the Company issued a Convertible Note (the “Note”) to LG CAPITAL FUNDING, LLC (“LG Capital”) providing LG Capital with the ability to invest $25,000 which contains $4,000 in financing fees (the LG Capital “Note”). The transaction closed on June 02, 2014. LG Capital provided $25,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $21,000.
On June 10, 2014, the Company issued a Convertible Note (the “Note”) to GEL Properties, LLC (“GEL”) providing GEL with the ability to invest $35,000 which contains $5,250 in financing cost (the GEL “Note”). The transaction closed on June 10, 2014. GEL provided $35,000 to the Company on the effective Date. The net proceeds the Company received from this offering were $29,750.
On July 14, 2014, the Company issued two Convertible Notes (the “Notes”) to LG CAPITAL FUNDING, LLC (“LG Capital”) providing LG Capital with the ability to invest up to $53,000 in aggregate. The transaction closed on July 14, 2014. LG Capital provided $26,500 on effective day, containing $4,000 in financing cost. The net proceeds the Company received from this offering were $22,500.
On July 17, 2014, the Company issued two Convertible Notes (the “Notes”) to UNION CAPITAL, LLC (“Union Capital”) providing Union Capital with the ability to invest up to $50,000. The transaction closed on July 17, 2014. Union Capital provided $25,000 to the Company on effective day, containing $4,000 in legal fees. The net proceeds the Company received from this offering were $21,000.
On January 11, 2015 the Company issued a convertible note for $59,000 Justin Keener
On March 4, 2015 the Company issued a convertible note of $27,000 to Justin Keener
On March 27, 2015 the Company issued a convertible note for $30,000 to Naidich Warman, LLP
NOTE 7 - SUBSEQUENT EVENTS
From April 1, 2015 to date, Company issued 161,975,356 shares of common stock with a value of $125,954 for the conversion of debt
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
This section and other parts of this Form 10-Q quarterly report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, that involves risks and uncertainties. All statements other than statements of historical facts, included in this Form 10-Q that address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strength, goals, expansion and growth of our business and operations, plans, references to future success, reference to intentions as to future matters, and other such matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors that we believe are appropriate in the circumstances. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks, uncertainties, and other factors, many of which are beyond our control.
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. Moreover, we do not assume responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results.
Overview
Liberated Energy, Inc. is a Nevada corporation formed on September 14, 2011. We were incorporated as Mega World Food Holding Company for the purpose of selling frozen vegetable products in all areas of the world except China.
On January 19, 2013, pursuant to a Common Stock Purchase Agreement, dated January 7, 2013, Perpetual Wind Power Corporation, a privately held corporation formed under the laws of the State of Delaware on July 1, 2010, acquired 24,500,000 non-registered shares of the Company from its shareholders, thereby owning 24,500,000 out of a total of 25,000,000 issued and outstanding shares of the Company. Thereafter, the Company acquired from Perpetual Wind Power Corporation its patented wind and solar powered turbine technology for 2,500,000 newly issued shares of the Company which were distributed in a dividend to its shareholders and Perpetual Wind Power Corporation returned to treasury its 24,500,000 shares it acquired from the Company's shareholders. As a result of this transaction, the Company had on January 19, 2013, 3,000,000 shares issued and outstanding. On February 14, 2013, the Company changed its name from Mega World Food Holding Company to Liberated Energy, Inc. and underwent a 24 for 1 stock split, whereby the Company's outstanding shares increased from 3,000,000 to 72,000,000.
On February 4, 2015 the Company increased their number of authorized preferred shares from 10,000,000 to 100,000,000 and authorized common shares from 250,000,000 to 900,000,000.
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Our goal is to develop new products related to alternative energy and bring them to the marketplace. Our primary areas of focus are in the areas of (1) wind energy for home and commercial use, (2) wind and solar energy for outdoor illumination for home, commercial and municipal use, (3) electromagnetic energy applications, and (4) an additive to convert water into a high BTU energy source.
Certain statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Results of Operations for the three and six months ended March 31, 2015 compared to the three and six months ended March 31, 2014
Revenue
During the three and six months ended March 31, 2015 the Company had no revenue compared to $39,000 during the same period in 2014.
Operation and Administrative Expenses
During the three and six months for the period ended March 31, 2015 the Company incurred general and administrative expense of $264,537 and $522,938 compared to $55,289 and $140,114 in the same period in 2014. Stock based compensation in 2015 of $148,650 contributed to the larger loss in 2015 verses 2014.
Net Loss
The net loss for the three and six month’s period ended March 31, 2015 was $306,280 and $564,681 compared to $16,289 and $101,114 for the same periods in 2014. The sales and lower G&A in 2014 resulted in lower losses in 2014 versus the same periods in 2015.
Liquidity and Capital Resources
The Company has current assets of $52,926 and current liabilities of $595,189 resulting in negative working capital of $542,263. This compares to negative working capital of $303,861 for the period ended March 31, 2014. The increase in negative working capital from 2014 to 2015 was $238,402 or 78%.
Funds used in operating activities was $369,789 for the six months ended March 31, 2015 compared to funds used of $100,614 for the same period in 2014. The larger loss in 2015 was the major contributor to the increase in funds used in 2015 over 2014.
Fund provided by financing activities for the six months period ended March 31, 2015 was $219,500 compared to $207,250 for the same period in 2014. The Company issued convertible debt of $215,500 for its financing activities in 2015 and issued $182,000 of convertible debt , received a loan form a shareholder of $63,250 and repaid a related party $38,000 in the same period in 2014.
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Off-Balance Sheet Arrangements
The Company does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from the fact that the area in which we do business is highly competitive and constantly evolving. The market in which we do business is highly competitive and constantly evolving. We face competition from the larger and more established companies, from companies that have greater resources, including but not limited to, more money, and greater ability to expand their markets also cut into our potential customers. Many of our competitors have longer operating histories, significantly greater financial strength, nationwide advertising coverage and other resources that we do not have.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures(as defined in Rule 13a-15e under the Securities Exchange Act of 1934 the "Exchange Act"), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this quarterly report on Form 10-Q such disclosure controls and procedures were not effective due to the lack of segregation of duties and lack of a formal review process that includes multiple levels of review to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms because of the identification of a material weakness in our internal control over financial reporting which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by an external consultant with no oversight by a professional with accounting expertise. Our CEO /CFO do not possess accounting expertise and our company does not have an audit committee. This weakness is due to the company’s lack of working capital to hire additional staff. To remedy this material weakness, we intend to engage another accountant to assist with financial reporting as soon as our finances will allow.
Changes in Internal Control over Financial Reporting
Except as noted above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 6, 2015 the Company issued 15,240,000 shares of common stock with a value of $148,650 for service.
During the Quarter ended March 31, 2015 the Company issued 50,371,144 shares of commons stock with a value of $106,157 for the conversion of convertible debt.
ITEM 3: DEFAULT UPON SENIOR SECURITIES
None
ITEM 4: MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5: OTHER INFORMATION
None
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ITEM 6. EXHIBITS
| EXHIBIT INDEX | ||
| Exhibit | ||
| Number | Exhibit Description | |
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended. | |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002. | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| * Pursuant to Rule 406T of Regulation S-T, these interactive date files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability. | ||
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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.
|
Date: May 20, 2015 |
LIBERATED ENERGY, INC
By: /s/ Brian Conway Brian Conway President Chief Executive Officer Principal Financial and Accounting Officer |
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