10-K
2012-09-30
false
Liberty Coal Energy Corp.
0001424030
--09-30
316287267
1453400
Smaller Reporting Company
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<!--egx--><pre>NOTE 1 - NATURE OF OPERATIONS</pre><pre> </pre><pre>Liberty Coal Energy Corp. (the "Company") was incorporated in the state of</pre><pre>Nevada on August 31, 2007 as "ESL Teachers, Inc.", and was developing business</pre><pre>activities in teacher recruiting. The Company changed its business focus in</pre><pre>March, 2010 and now intends to enter the business of precious mineral</pre><pre>exploration, development, and production. The Company has not yet commenced</pre><pre>significant business operations and is considered to be in the exploration stage</pre><pre>(formerly in the development stage). We have enterd into a purchase agreement</pre><pre>which we have not been able to close as of this date. The company has also</pre><pre>attempted to secure financing for its short and long term needs but has todate</pre><pre>not been able to realize any of its efforts.</pre>
<!--egx--><pre>NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES</pre><pre> </pre><pre>Exploration Stage Company The Company is an Exploration Stage Company, as</pre><pre>defined by Financial Accounting Standards Board ("FASB") Accounting Standards</pre><pre>Codification ("ASC") 915, DEVELOPMENT STAGE ENTITIES. The Company's principal</pre><pre>business is the acquisition and exploration of mineral resources. The Company</pre><pre>has not presently determined whether its properties contain mineral reserves</pre><pre>that are economically recoverable.</pre><pre> </pre><pre>Cash and Cash Equivalents</pre><pre>The Company considers all highly liquid investments with maturities of three</pre><pre>months or less to be cash equivalents.</pre><pre> </pre><pre>Fair Value of Financial Instruments</pre><pre>The Company's financial instruments consist of cash, prepaid expenses, and</pre><pre>accounts payable and accrued liabilities.</pre><pre> </pre><pre>The carrying amount of these financial instruments approximates fair value due</pre><pre>either to length of maturity or interest rates that approximate prevailing</pre><pre>market rates unless otherwise disclosed in these financial statements. It is</pre><pre>management's opinion that the Company is not exposed to significant interest,</pre><pre>currency or credit risks arising from its other financial instruments and that</pre><pre>their fair values approximate their carrying values except where separately</pre><pre>disclosed.</pre><pre> </pre><pre>Use of Estimates</pre><pre>The preparation of financial statements in conformity with generally accepted</pre><pre>accounting principles of the United States requires management to make estimates</pre><pre>and assumptions that affect the reported amounts of assets and liabilities and</pre><pre>disclosure of contingent assets and liabilities at the date of the financial</pre><pre>statements and the reported amounts of revenues and expenses during the year.</pre><pre>The more significant areas requiring the use of estimates include asset</pre><pre>impairment, stock-based compensation, and future income tax amounts. Management</pre><pre>bases its estimates on historical experience and on other assumptions considered</pre><pre>to be reasonable under the circumstances. However, actual results may differ</pre><pre>from the estimates.</pre><pre> </pre><pre>Revenue Recognition</pre><pre>The Company will recognize revenue when products are fully delivered or services</pre><pre>have been provided and collection is reasonably assured.</pre><pre> </pre><pre>Dividends</pre><pre>The Company has not adopted any policy regarding payment of dividends. No</pre><pre>dividends have been paid during the period shown.</pre><pre> </pre><pre>Stock-Based Compensation</pre><pre>As of September 30, 2012, the Company has not issued any stock-based payments to</pre><pre>its employees. The Company uses the modified prospective method of accounting</pre><pre>for stock-based compensation. Under this transition method, stock compensation</pre><pre>expense includes compensation expense for all stock-based compensation awards</pre><pre>granted on or after January 1, 2006, based on the estimated grant-date fair</pre><pre>value.</pre><pre> </pre><pre>Reclassifications</pre><pre>Certain balances in the prior years have been reclassified to conform to the</pre><pre>current year presentation.</pre><pre> </pre><pre>Mineral Properties Costs</pre><pre>Mineral exploration and development costs are accounted for using the successful</pre><pre>efforts method of accounting.</pre><pre> </pre><pre>Property acquisition costs - Mineral property acquisition costs are capitalized</pre><pre>as mineral exploration properties. Upon achievement of all conditions necessary</pre><pre>for reserves to be classified as proved, the associated acquisition costs are</pre><pre>reclassified to prove properties</pre><pre> </pre><pre>Exploration costs - Geological and geophysical costs and the costs of carrying</pre><pre>and retaining undeveloped properties are expensed as incurred.</pre><pre> </pre><pre>Impairment of Mineral Properties</pre><pre>Unproved mineral properties are assessed at each reporting period for impairment</pre><pre>of value, and a loss is recognized at the time of the impairment by providing an</pre><pre>impairment allowance. An asset would be impaired if the undiscounted cash flows</pre><pre>were less than its carrying value. Impairments are measured by the amount by</pre><pre>which the carrying value exceeds its fair value. Because the Company uses the</pre><pre>successful efforts method, the Company assesses its properties individually for</pre><pre>impairment, instead of on an aggregate pool of costs. Impairment of unproved</pre><pre>properties is based on the facts and circumstances surrounding each lease and is</pre><pre>recognized based on management's evaluation. Management's evaluation follows a</pre><pre>two-step process where (1) recoverability of the carrying value of the asset is</pre><pre>reviewed to determine if there is sufficient value recoverable to support the</pre><pre>capitalized value at the report date; and, (2) If assets fail the recoverability</pre><pre>test, impairment testing is conducted, including the evaluation of various</pre><pre>criteria such as: prior history of successful operations; production currently</pre><pre>in place and/or future projected cash flows (if any); reserve reports or</pre><pre>evaluations from which management can prepare future cash flow analyses; the</pre><pre>Company's ability to monetize the asset(s) under evaluation; and, Management's</pre><pre>intent regarding future development.</pre><pre> </pre><pre>Net Loss Per Common Share</pre><pre>Net loss per common share is computed based on the weighted average number of</pre><pre>common shares outstanding and common stock equivalents, if not anti-dilutive.</pre><pre>The Company has not issued any potentially dilutive common shares.</pre><pre> </pre><pre>Income Taxes</pre><pre>The Company provides for income taxes using an asset and liability approach.</pre><pre>Deferred tax assets are reduced by a valuation allowance if, based on the weight</pre><pre>of available evidence, it is more likely than not that some or all of the</pre><pre>deferred tax assets will not be realized. No provision for income taxes is</pre><pre>included in the statement due to its immaterial amount, net of the allowance</pre><pre>account, based on the likelihood of the Company to utilize the loss</pre><pre>carry-forward. See Note 7.</pre><pre> </pre><pre>RECENTLY ADOPTED PRONOUNCEMENTS</pre><pre> </pre><pre>Variable Interest Entities</pre><pre>In June 2009, the FASB issued changes to require an enterprise to perform an</pre><pre>analysis to determine whether the enterprise's variable interest or interests</pre><pre>give it a controlling financial interest in a variable interest entity; to</pre><pre>require ongoing reassessments of whether an enterprise is the primary</pre><pre>beneficiary of a variable interest entity; to eliminate the quantitative</pre><pre>approach previously required for determining the primary beneficiary of a</pre><pre>variable interest entity; to add an additional reconsideration event for</pre><pre>determining whether an entity is a variable interest entity when any changes in</pre><pre>facts and circumstances occur such that holders of the equity investment at</pre><pre>risk, as a group, lose the power from voting rights or similar rights of those</pre><pre>investments to direct the activities of the entity that most significantly</pre><pre>impact the entity's economic performance; and to require enhanced disclosures</pre><pre>that will provide users of financial statements with more transparent</pre><pre>information about an enterprise's involvement in a variable interest entity. The</pre><pre>guidance became effective for the Company on February 1, 2010. The adoption of</pre><pre>the guidance did not have an impact on the Company's consolidated financial</pre><pre>statements.</pre><pre> </pre><pre>Intangible Assets</pre><pre>In April 2008, the FASB adopted changes to require companies estimating the</pre><pre>useful life of a recognized intangible asset to consider their historical</pre><pre>experience in renewing or extending similar arrangements or, in the absence of</pre><pre>historical experience, to consider assumptions that market participants would</pre><pre>use about renewal or extension as adjusted for entity-specific factors. The</pre><pre>guidance is effective for fiscal years beginning after December 15, 2008 and is</pre><pre>to be applied prospectively to intangible assets whether acquired before or</pre><pre>after the effective date. The Company adopted the guidance on February 1, 2009.</pre><pre>The adoption had no impact on the Company's consolidated financial statements.</pre><pre> </pre><pre>Revenue Recognition</pre><pre>In September 2009, the FASB issued new revenue recognition guidance on multiple</pre><pre>deliverable arrangements. It updates the existing multiple-element revenue</pre><pre>arrangements guidance currently included under the Accounting Standards</pre><pre>Codification ("ASC") 605-25. The revised guidance primarily provides two</pre><pre>significant changes: 1) eliminates the need for objective and reliable evidence</pre><pre>of the fair value for the undelivered element in order for a delivered item to</pre><pre>be treated as a separate unit of accounting, and 2) requires the use of the</pre><pre>relative selling price method to allocate the entire arrangement consideration.</pre><pre>In addition, the guidance also expands the disclosure requirements for revenue</pre><pre>recognition. ASU 2009-13 will be effective for the first annual reporting period</pre><pre>beginning on or after fiscal 2011, with early adoption permitted provided that</pre><pre>the revised guidance is retroactively applied to the beginning of the year of</pre><pre>adoption. Management is currently evaluating the impact of adopting this</pre><pre>guidance on the Company's consolidated financial statements.</pre><pre> </pre><pre>The Company does not expect the adoption of recently issued accounting</pre><pre>pronouncements to have a significant impact on the Company's results of</pre><pre>operations, financial position or cash flow.</pre>
<!--egx--><pre>NOTE 4 - MINERAL PROPERTIES</pre><pre> </pre><pre>On February 1, 2012, the Company entered into a letter of intent for the</pre><pre>acquisition of private mineral leasehold rights to certain coal mining property</pre><pre>in Owsley County, Kentucky with AMS Development LLC. and Colt Resources, Inc.</pre><pre>(the "Owsley Agreement" ).</pre><pre> </pre><pre>The Owsley property covers approximately 1,000 acres and has 3,600,000 tons of</pre><pre>coal recoverable by surface and high wall (auger) methods. There are underground</pre><pre>reserves in place which are not being considered for production at this time.</pre><pre> </pre><pre>The Owsley project has a permit completed and technically approved by the</pre><pre>Kentucky Department of Natural Resources for the first 80 acre phase. The permit</pre><pre>can be placed on active status and mining initiated by posting a $175,000</pre><pre>reclamation bond. The Company believes mining can be commenced within 90 days of</pre><pre>breaking ground.</pre><pre> </pre><pre>In consideration for the mineral property leasehold, the Company paid $80,000 to</pre><pre>purchase the rights to the mining permits and operate under a leasehold. It has</pre><pre>also paid an additional 40,000 to minimal lease payments and accrued another</pre><pre>40,000 which are currently behind. These payments have been capitalized as part</pre><pre>of the purchase price of the property.</pre><pre> </pre><pre>As part of the Owsley Agreement, the Company has agreed to enter into a purchase</pre><pre>agreement with AMS Development LLC & Colt Resources, Inc., pursuant to which AMS</pre><pre>& Colt would receive The agreement provides for the purchase of the 1,000 acres</pre><pre>of surface property at $600,000, as well as surface mineable coal, (3.6 million</pre><pre>tons at $.75/ton), underground coal rights (2.2 million tons at $.20/ton) and</pre><pre>the discharge of a first mortgage due to a former owner of $150,000 for a total</pre><pre>purchase price of $3,890,000. The total purchase price is payable through a</pre><pre>combination of cash, a promissory note and Liberty Coal common shares. To this</pre><pre>date the Company has not been able to close on this agreement.</pre><pre> </pre><pre>The Company is no longer pursuing the Campbell Property or the Sheridan Property</pre><pre>and recorded impairment on these properties in the amount of 400,570.</pre>
<!--egx--><pre>NOTE 5 - CAPITAL STOCK</pre><pre> </pre><pre>The company has 1,500,000,000 common shares authorized at a par value of $0.001</pre><pre>per share.</pre><pre> </pre><pre>On February 1, 2010, the company completed a private placement whereby it issued</pre><pre>1,000,000 units for $0.25 per unit. Each unit consists of one common share and</pre><pre>common share purchase warrant allowing the holder to purchase a common share at</pre><pre>$0.25 per share expiring February 1, 2012.</pre><pre> </pre><pre>On February 1, 2010, the company issued 100,000 common shares as partial</pre><pre>consideration to acquire the Campbell Property.</pre><pre> </pre><pre>On February 11, 2010, the company completed a private placement whereby it</pre><pre>issued 1,000,000 units for $0.25 per unit. Each unit consists of one common</pre><pre>share and common share purchase warrant allowing the holder to purchase a common</pre><pre>share at $0.25 per share expiring February 1, 2012.</pre><pre> </pre><pre>On March 15, 2010, the Company increased its authorized common shares from</pre><pre>50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock</pre><pre>split. All share amounts reflected in the financial statements have been</pre><pre>adjusted to reflect the results of the stock split.</pre><pre> </pre><pre>On March 20, 2010, the Company cancelled 18,000,000 of its common stock</pre><pre>outstanding.</pre><pre> </pre><pre>On May 12, 2011, the company completed a private placement whereby it issued</pre><pre>666,667 units for $0.75 per unit. Each unit consists of one common share and</pre><pre>common share purchase warrant allowing the holder to purchase a common share at</pre><pre>$0.75 per share expiring February 1, 2013.</pre><pre> </pre><pre>On August 17, the Company completed a financing whereby it issued 237,732,600</pre><pre>units for a escrowed equity line in the amount of $9,196,500. In conjunction</pre><pre>with this transaction the company also issued common share purchase warrant to</pre><pre>purchase 250,095,420 common shares at an exercise price of $0.07 expiring on</pre><pre>August 16, 2018. On January 18, 2012, the Company issued 2,000,000 shares @</pre><pre>$0.10 to its CFO and Director as part of his compensation.</pre><pre> </pre><pre>On September 10, 2012, the Company issued 17,988,000 shares of common stock to</pre><pre>three non-employee consultants pursuant to the Plan valued at $539,640. The</pre><pre>stock was issued for services to be rendered from September 1, 2012 through</pre><pre>February 28, 2013. As of September 30, 2012, $449,700 has been recorded as</pre><pre>prepaid expenses related to this stock issuance.</pre><pre> </pre><pre>On September 13, 2012, Liberty Coal Energy Corp. consummated a Securities</pre><pre>Purchase Agreement with Asher Enterprises, Inc. The agreement was entered into</pre><pre>pursuant to a September 4, 2012 resolution of Company's Board of Directors. The</pre><pre>parties agreed that Asher would acquire from Company five promissory notes</pre><pre>totaling $37,500, due and payable on June 19, 2013 with interest payable at 8%.</pre><pre>The Notes are convertible into Common Shares of the Company, for which the</pre><pre>Company has reserved 10,500,000 shares.</pre><pre> </pre><pre>Warrants</pre><pre>Warrants were granted during the years ended September 30, 2012 and 2011 in</pre><pre>connection with private placements. The Company has accounted for these warrants</pre><pre>as equity instruments in accordance with ASC 815-40, Accounting for Derivative</pre><pre>Financial Instruments Indexed to, and Potentially Settled in, a Company's Own</pre><pre>Stock, and as such, were classified in stockholders' equity. The Company has</pre><pre>estimated the fair value of the warrants issued in connection with the private</pre><pre>placements at $4,053,530 and $153,359 as of the grant date using the</pre><pre>Black-Scholes option pricing model during the years ended September 30, 2012 and</pre><pre>2011, respectively.</pre><pre> </pre><pre>The estimated grant date fair value of the warrants granted during the year</pre><pre>ended September 30, 2012 was $4,053,530; this was estimated using the</pre><pre>Black-Scholes option pricing model with the following assumptions: expected</pre><pre>dividend yield of 0%, expected volatility of 50%, risk-free interest rate of</pre><pre>.61%, an expected life of 6 years. The stock price used in the Black-Scholes</pre><pre>option pricing model to calculate the volatility was the Company's stock price</pre><pre>for the year prior to grant using weekly pricing. The risk-free interest rate is</pre><pre>based on the US Treasury constant maturity interest rate whose term is</pre><pre>consistent with the expected life of the warrant. The expected life of the</pre><pre>warrant is based on the contractual term of the warrant.</pre><pre> </pre><pre>The estimated grant date fair value of the warrants granted during the year</pre><pre>ended September 30, 2011 was $153,359; this was estimated using the</pre><pre>Black-Scholes option pricing model with the following assumptions: expected</pre><pre>dividend yield of 0%, expected volatility of 50%, risk-free interest rate of</pre><pre>.61%, an expected life of 2 years. The stock price used in the Black-Scholes</pre><pre>option pricing model to calculate the volatility was the Company's stock price</pre><pre>for the year prior to grant using weekly pricing. The risk-free interest rate is</pre><pre>based on the US Treasury constant maturity interest rate whose term is</pre><pre>consistent with the expected life of the warrant. The expected life of the</pre><pre>warrant is based on the contractual term of the warrant.</pre><pre> </pre><pre>A summary of changes in share purchase warrants during the years ended September</pre><pre>30, 2012 and 2011 is as follows:</pre><pre> </pre><pre> Weighted Average</pre><pre> Warrants Exercise Price</pre><pre> -------- --------------</pre><pre>Outstanding, September 30, 2009 -- $ N/A</pre><pre>Granted - 2010 2,000,000 $0.25</pre><pre> ------------ -----</pre><pre>Outstanding, September 30, 2010 2,000,000 $0.25</pre><pre>Granted - 2011 666,667 $0.75</pre><pre> ------------ -----</pre><pre>Outstanding, September 30, 2011 2,666,667 $0.38</pre><pre>Granted - 2012 250,095,420 $0.07</pre><pre>Expired - 2012 (2,000,000) $0.25</pre><pre> ------------ -----</pre><pre> </pre><pre>Outstanding, September 30, 2012 250,762,087 $0.07</pre><pre> ============ =====</pre><pre> </pre><pre>As of September 30, 2012, the Company had warrants issued as follows:</pre><pre> </pre><pre> Outstanding at</pre><pre> September 30,</pre><pre>Issue Date Number Price Expiry Date 2012</pre><pre>---------- ------ ----- ----------- ----</pre><pre>May 12, 2011 666,667 $0.78 May 12, 2013 666,667</pre><pre>August 17, 2012 17,025,000 $0.03 August 17, 2017 17,025,000</pre><pre>August 17, 2012 15,985,920 $0.032 August 17, 2017 15,985,920</pre><pre>August 17, 2012 15,010,250 $0.034 August 17, 2017 15,010,250</pre><pre>August 17, 2012 14,094,130 $0.036 August 17, 2017 14,094,130</pre><pre>August 17, 2012 13,233,930 $0.039 August 17, 2017 13,233,930</pre><pre>August 17, 2012 12,426,220 $0.041 August 17, 2017 12,426,220</pre><pre>August 17, 2012 11,667,810 $0.044 August 17, 2017 11,667,810</pre><pre>August 17, 2012 10,955,690 $0.047 August 17, 2017 10,955,690</pre><pre>August 17, 2012 10,287,040 $0.050 August 17, 2017 10,287,040</pre><pre>August 17, 2012 9,659,190 $0.053 August 17, 2017 9,659,190</pre><pre>August 17, 2012 9,069,660 $0.056 August 17, 2017 9,069,660</pre><pre>August 17, 2012 8,516,110 $0.060 August 17, 2017 8,516,110</pre><pre>August 17, 2012 8,000,260 $0.064 August 17, 2017 8,000,260</pre><pre>August 17, 2012 7,511,990 $0.068 August 17, 2017 7,511,990</pre><pre>August 17, 2012 7,053,510 $0.072 August 17, 2017 7,053,510</pre><pre>August 17, 2012 6,623,010 $0.077 August 17, 2017 6,623,010</pre><pre>August 17, 2012 6,218,790 $0.082 August 17, 2017 6,218,790</pre><pre>August 17, 2012 5,839,240 $0.087 August 17, 2017 5,839,240</pre><pre>August 17, 2012 5,482,850 $0.093 August 17, 2017 5,482,850</pre><pre>August 17, 2012 5,148,220 $0.099 August 17, 2017 5,148,220</pre><pre>August 17, 2012 4,834,010 $0.106 August 17, 2017 4,834,010</pre><pre>August 17, 2012 4,538,980 $0.112 August 17, 2017 4,538,980</pre><pre>August 17, 2012 4,261,950 $0.120 August 17, 2017 4,261,950</pre><pre>August 17, 2012 4,001,830 $0.127 August 17, 2017 4,001,830</pre><pre>August 17, 2012 3,757,590 $0.136 August 17, 2017 3,757,590</pre><pre>August 17, 2012 3,528,250 $0.145 August 17, 2017 3,528,250</pre><pre>August 17, 2012 3,312,910 $0.154 August 17, 2017 3,312,910</pre><pre>August 17, 2012 3,110,720 $0.164 August 17, 2017 3,110,720</pre><pre>August 17, 2012 2,920,860 $0.175 August 17, 2017 2,920,860</pre><pre>August 17, 2012 2,742,590 $0.186 August 17, 2017 2,742,590</pre><pre>August 17, 2012 2,575,200 $0.198 August 17, 2017 2,575,200</pre><pre>August 17, 2012 2,418,030 $0.211 August 17, 2017 2,418,030</pre><pre>August 17, 2012 2,270,450 $0.225 August 17, 2017 2,270,450</pre><pre>August 17, 2012 2,131,880 $0.239 August 17, 2017 2,131,880</pre><pre>August 17, 2012 2,001,760 $0.255 August 17, 2017 2,001,760</pre><pre>August 17, 2012 1,879,590 $0.271 August 17, 2017 1,879,590</pre><pre> ----------- -----------</pre><pre> </pre><pre>Total 250,762,087 250,762,087</pre><pre> =========== ===========</pre>
<!--egx--><pre>NOTE 6 - RELATED PARTY TRANSACTION</pre><pre> </pre><pre>The company has a consulting agreement with a company controlled by an officer</pre><pre>of the Company. The agreement calls for monthly payments of $7,000. There was an</pre><pre>outstanding payable of $7,004 and $5,004 to this related party as of September</pre><pre>30, 2012 and 2011, respectively for September services and reimbursement of</pre><pre>expenses.</pre><pre> </pre><pre>The company has a consulting agreement with a company controlled by an officer</pre><pre>of the Company. The agreement calls for monthly payments of $4,500. There was an</pre><pre>outstanding payable of $ 0 and $2,500 to this related party as of September 30,</pre><pre>2012 and 2011, respectively for September services and reimbursement of</pre><pre>expenses.</pre><pre> </pre><pre>On January 18, 2012, the Company issued 2,000,000 shares @ $0.10 to its CFO and</pre><pre>Director as part of his compensation.</pre><pre> </pre><pre>On September 10, 2012, the Board of Directors of the Liberty Coal Energy Corp.</pre><pre>approved the Liberty Coal Energy Corp. Consultant Compensation Plan, which</pre><pre>applies non-employee consultants and officers, directors and employees of the</pre><pre>Company. No shares have been granted to date.</pre><pre> </pre><pre>The officers and directors of the Company are involved in other business</pre><pre>activities and may, in the future, become involved in other business</pre><pre>opportunities that become available. They may face a conflict in selecting</pre><pre>between the Company and other business interests. The Company has not formulated</pre><pre>a policy for the resolution of such conflicts.</pre>
<!--egx--><pre>NOTE 7 - INCOME TAXES</pre><pre> </pre><pre>For the year ended September 30, 2012, the Company has incurred net losses and,</pre><pre>therefore, has no tax liability. The net deferred tax asset generated by the</pre><pre>loss carry-forward has been fully reserved. The cumulative net operating loss</pre><pre>carry-forward is approximately $1,300,000 at September 30, 2011, and will expire</pre><pre>beginning in the year 2028.</pre><pre> </pre><pre>The provision for Federal income tax consists of the following at September 30:</pre><pre> </pre><pre> 2012 2011</pre><pre> ---------- ----------</pre><pre>Federal income tax attributable to:</pre><pre> Current Operations $ 320,615 $ 54,644</pre><pre> Less: valuation allowance (320,615) (54,644)</pre><pre> ---------- ----------</pre><pre> </pre><pre>Net provision for Federal income taxes $ 0 $ 0</pre><pre> ========== ==========</pre><pre> </pre><pre>The cumulative tax effect at the expected rate of 34% of significant items</pre><pre>comprising our net deferred tax amount is as follows as of September, 30:</pre><pre> </pre><pre> 2012 2011</pre><pre> ---------- ----------</pre><pre>Deferred tax asset attributable to:</pre><pre> Net operating loss carryover $ 439,428 $ 118,813</pre><pre> Less: valuation allowance (439,428) (118,813)</pre><pre> ---------- ----------</pre><pre> </pre><pre>Net deferred tax asset $ 0 $ 0</pre><pre> ========== ==========</pre><pre> </pre><pre>Due to the change in ownership provisions of the Tax Reform Act of 1986, net</pre><pre>operating loss carry forwards of approximately $1,300,000 for Federal income tax</pre><pre>reporting purposes are subject to annual limitations. Should a change in</pre><pre>ownership occur net operating loss carry forwards may be limited as to use in</pre><pre>future years.</pre>
<!--egx--><pre>NOTE 8 - COMMITMENTS</pre><pre> </pre><pre>The Company has agreed to purchase 1,000 acres of surface property at $600,000</pre><pre>surface mineable coal, (3.6 million tons at $.75/ton), underground coal rights</pre><pre>(2.2 million tons at $.20/ton) and the discharge of a first mortgage due a</pre><pre>former owner of $150,000 for a total purchase price of $3,890,000. The total is</pre><pre>payable through a combination of cash, a promissory note and Liberty Coal common</pre><pre>shares.</pre><pre> </pre><pre>The company needs to continue to make it minimum lease payments until such time</pre><pre>it can pay an initial $500,000. The minimum payments of $20,000 per month are</pre><pre>applied to the initial payment.</pre>
<!--egx--><pre>NOTE 9 - GOING CONCERN</pre><pre> </pre><pre>The accompanying financial statements have been prepared assuming that the</pre><pre>company will continue as a going concern. As discussed in the notes to the</pre><pre>financial statements, the Company has no established source of revenue. This</pre><pre>raises substantial doubt about the Company's ability to continue as a going</pre><pre>concern. Without realization of additional capital, it would be unlikely for the</pre><pre>Company to continue as a going concern. The financial statements do not include</pre><pre>any adjustments that might result from this uncertainty.</pre><pre> </pre><pre>The Company's activities to date have been supported by equity financing. It has</pre><pre>sustained losses in all previous reporting periods with an inception to date</pre><pre>loss of $1,292,436 as of September 30, 2012. Management continues to seek</pre><pre>funding from its shareholders and other qualified investors to pursue its</pre><pre>business plan. In the alternative, the Company may be amenable to a sale, merger</pre><pre>or other acquisition in the event such transaction is deemed by management to be</pre><pre>in the best interests of the shareholders.</pre>
<!--egx--><pre>NOTE 10 - SUBSEQUENT EVENTS</pre><pre> </pre><pre>On October 24, 2012, Liberty Coal Energy Corp. consummated a Securities Purchase</pre><pre>Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant</pre><pre>to an October 24, 2012 resolution of Company's Board of Directors. Asher agreed</pre><pre>to purchase a Convertible Note in the amount of $32,500, due and payable on July</pre><pre>26, 2013 with interest payable at 8%. The Note was funded on November 1, 2012.</pre><pre>The Note is convertible into Common Shares of the Company, for which the Company</pre><pre>has reserved 14,300,000 shares.</pre><pre> </pre><pre>On Janauary 14, 2012 Liberty Coal Energy Corp. consummated a Securities Purchase</pre><pre>Agreement with Asher Enterprises, Inc. The agreement was entered into pursuant</pre><pre>to a January 14, 2012 resolution of Company's Board of Directors. Asher agreed</pre><pre>to purchase a Convertible Note in the amount of $10,600, due and payable on</pre><pre>September 26, 2013 with interest payable at 8%. The Note will be funded on</pre><pre>January 16, 2012. The Note is convertible into Common Shares of the Company, for</pre><pre>which the Company has reserved 40,000,000 shares.</pre><pre> </pre><pre>In accordance with ASC Topic 855-10, the Company has analyzed its operations</pre><pre>subsequent to September 30, 2012 to the date these financial statements were</pre><pre>issued, and has determined that it does not have any material subsequent events</pre><pre>to disclose in these financial statements other than the events described above.</pre>
<!--egx--><pre>NOTE 3 - WEBSITE</pre><pre> </pre><pre>The Company has capitalized costs related to developing a website. During the</pre><pre>year ended September 30, 2012 the Company paid $3,800 for the development of the</pre><pre>website. The Company determined that the website would have a three year useful</pre><pre>life. Amortization expense for the years ended September 30, 2012 and 2011 was</pre><pre>$1,689 and $1,267, respectively.</pre>
<!--egx--><pre>Cash and Cash Equivalents</pre><pre>The Company considers all highly liquid investments with maturities of three</pre><pre>months or less to be cash equivalents.</pre>
<!--egx--><pre>Fair Value of Financial Instruments</pre><pre>The Company's financial instruments consist of cash, prepaid expenses, and</pre><pre>accounts payable and accrued liabilities.</pre><pre> </pre><pre>The carrying amount of these financial instruments approximates fair value due</pre><pre>either to length of maturity or interest rates that approximate prevailing</pre><pre>market rates unless otherwise disclosed in these financial statements. It is</pre><pre>management's opinion that the Company is not exposed to significant interest,</pre><pre>currency or credit risks arising from its other financial instruments and that</pre><pre>their fair values approximate their carrying values except where separately</pre><pre>disclosed.</pre>
<!--egx--><pre>Use of Estimates</pre><pre>The preparation of financial statements in conformity with generally accepted</pre><pre>accounting principles of the United States requires management to make estimates</pre><pre>and assumptions that affect the reported amounts of assets and liabilities and</pre><pre>disclosure of contingent assets and liabilities at the date of the financial</pre><pre>statements and the reported amounts of revenues and expenses during the year.</pre><pre>The more significant areas requiring the use of estimates include asset</pre><pre>impairment, stock-based compensation, and future income tax amounts. Management</pre><pre>bases its estimates on historical experience and on other assumptions considered</pre><pre>to be reasonable under the circumstances. However, actual results may differ</pre><pre>from the estimates.</pre>
<!--egx--><pre>Revenue Recognition</pre><pre>The Company will recognize revenue when products are fully delivered or services</pre><pre>have been provided and collection is reasonably assured.</pre>
<!--egx--><pre>Dividends</pre><pre>The Company has not adopted any policy regarding payment of dividends. No</pre><pre>dividends have been paid during the period shown.</pre>
<!--egx--><pre>Stock-Based Compensation</pre><pre>As of September 30, 2012, the Company has not issued any stock-based payments to</pre><pre>its employees. The Company uses the modified prospective method of accounting</pre><pre>for stock-based compensation. Under this transition method, stock compensation</pre><pre>expense includes compensation expense for all stock-based compensation awards</pre><pre>granted on or after January 1, 2006, based on the estimated grant-date fair</pre><pre>value.</pre>
<!--egx--><pre>Reclassifications</pre><pre>Certain balances in the prior years have been reclassified to conform to the</pre><pre>current year presentation.</pre>
<!--egx--><pre>Mineral Properties Costs</pre><pre>Mineral exploration and development costs are accounted for using the successful</pre><pre>efforts method of accounting.</pre>
<!--egx--><pre>Property acquisition costs - Mineral property acquisition costs are capitalized</pre><pre>as mineral exploration properties. Upon achievement of all conditions necessary</pre><pre>for reserves to be classified as proved, the associated acquisition costs are</pre><pre>reclassified to prove properties</pre>
<!--egx--><pre>Exploration costs - Geological and geophysical costs and the costs of carrying</pre><pre>and retaining undeveloped properties are expensed as incurred.</pre>
<!--egx--><pre>Impairment of Mineral Properties</pre><pre>Unproved mineral properties are assessed at each reporting period for impairment</pre><pre>of value, and a loss is recognized at the time of the impairment by providing an</pre><pre>impairment allowance. An asset would be impaired if the undiscounted cash flows</pre><pre>were less than its carrying value. Impairments are measured by the amount by</pre><pre>which the carrying value exceeds its fair value. Because the Company uses the</pre><pre>successful efforts method, the Company assesses its properties individually for</pre><pre>impairment, instead of on an aggregate pool of costs. Impairment of unproved</pre><pre>properties is based on the facts and circumstances surrounding each lease and is</pre><pre>recognized based on management's evaluation. Management's evaluation follows a</pre><pre>two-step process where (1) recoverability of the carrying value of the asset is</pre><pre>reviewed to determine if there is sufficient value recoverable to support the</pre><pre>capitalized value at the report date; and, (2) If assets fail the recoverability</pre><pre>test, impairment testing is conducted, including the evaluation of various</pre><pre>criteria such as: prior history of successful operations; production currently</pre><pre>in place and/or future projected cash flows (if any); reserve reports or</pre><pre>evaluations from which management can prepare future cash flow analyses; the</pre><pre>Company's ability to monetize the asset(s) under evaluation; and, Management's</pre><pre>intent regarding future development.</pre>
<!--egx--><pre>Net Loss Per Common Share</pre><pre>Net loss per common share is computed based on the weighted average number of</pre><pre>common shares outstanding and common stock equivalents, if not anti-dilutive.</pre><pre>The Company has not issued any potentially dilutive common shares.</pre>
<!--egx--><pre>Income Taxes</pre><pre>The Company provides for income taxes using an asset and liability approach.</pre><pre>Deferred tax assets are reduced by a valuation allowance if, based on the weight</pre><pre>of available evidence, it is more likely than not that some or all of the</pre><pre>deferred tax assets will not be realized. No provision for income taxes is</pre><pre>included in the statement due to its immaterial amount, net of the allowance</pre><pre>account, based on the likelihood of the Company to utilize the loss</pre><pre>carry-forward. See Note 7.</pre>
<!--egx--><pre>RECENTLY ADOPTED PRONOUNCEMENTS</pre><pre> </pre><pre>Variable Interest Entities</pre><pre>In June 2009, the FASB issued changes to require an enterprise to perform an</pre><pre>analysis to determine whether the enterprise's variable interest or interests</pre><pre>give it a controlling financial interest in a variable interest entity; to</pre><pre>require ongoing reassessments of whether an enterprise is the primary</pre><pre>beneficiary of a variable interest entity; to eliminate the quantitative</pre><pre>approach previously required for determining the primary beneficiary of a</pre><pre>variable interest entity; to add an additional reconsideration event for</pre><pre>determining whether an entity is a variable interest entity when any changes in</pre><pre>facts and circumstances occur such that holders of the equity investment at</pre><pre>risk, as a group, lose the power from voting rights or similar rights of those</pre><pre>investments to direct the activities of the entity that most significantly</pre><pre>impact the entity's economic performance; and to require enhanced disclosures</pre><pre>that will provide users of financial statements with more transparent</pre><pre>information about an enterprise's involvement in a variable interest entity. The</pre><pre>guidance became effective for the Company on February 1, 2010. The adoption of</pre><pre>the guidance did not have an impact on the Company's consolidated financial</pre><pre>statements.</pre><pre> </pre><pre>Intangible Assets</pre><pre>In April 2008, the FASB adopted changes to require companies estimating the</pre><pre>useful life of a recognized intangible asset to consider their historical</pre><pre>experience in renewing or extending similar arrangements or, in the absence of</pre><pre>historical experience, to consider assumptions that market participants would</pre><pre>use about renewal or extension as adjusted for entity-specific factors. The</pre><pre>guidance is effective for fiscal years beginning after December 15, 2008 and is</pre><pre>to be applied prospectively to intangible assets whether acquired before or</pre><pre>after the effective date. The Company adopted the guidance on February 1, 2009.</pre><pre>The adoption had no impact on the Company's consolidated financial statements.</pre><pre> </pre><pre>Revenue Recognition</pre><pre>In September 2009, the FASB issued new revenue recognition guidance on multiple</pre><pre>deliverable arrangements. It updates the existing multiple-element revenue</pre><pre>arrangements guidance currently included under the Accounting Standards</pre><pre>Codification ("ASC") 605-25. The revised guidance primarily provides two</pre><pre>significant changes: 1) eliminates the need for objective and reliable evidence</pre><pre>of the fair value for the undelivered element in order for a delivered item to</pre><pre>be treated as a separate unit of accounting, and 2) requires the use of the</pre><pre>relative selling price method to allocate the entire arrangement consideration.</pre><pre>In addition, the guidance also expands the disclosure requirements for revenue</pre><pre>recognition. ASU 2009-13 will be effective for the first annual reporting period</pre><pre>beginning on or after fiscal 2011, with early adoption permitted provided that</pre><pre>the revised guidance is retroactively applied to the beginning of the year of</pre><pre>adoption. Management is currently evaluating the impact of adopting this</pre><pre>guidance on the Company's consolidated financial statements.</pre><pre> </pre><pre>The Company does not expect the adoption of recently issued accounting</pre><pre>pronouncements to have a significant impact on the Company's results of</pre><pre>operations, financial position or cash flow.</pre>
<!--egx--><pre>A summary of changes in share purchase warrants during the years ended September</pre><pre>30, 2012 and 2011 is as follows:</pre><pre> </pre><pre> Weighted Average</pre><pre> Warrants Exercise Price</pre><pre> -------- --------------</pre><pre>Outstanding, September 30, 2009 -- $ N/A</pre><pre>Granted - 2010 2,000,000 $0.25</pre><pre> ------------ -----</pre><pre>Outstanding, September 30, 2010 2,000,000 $0.25</pre><pre>Granted - 2011 666,667 $0.75</pre><pre> ------------ -----</pre><pre>Outstanding, September 30, 2011 2,666,667 $0.38</pre><pre>Granted - 2012 250,095,420 $0.07</pre><pre>Expired - 2012 (2,000,000) $0.25</pre><pre> ------------ -----</pre><pre> </pre><pre>Outstanding, September 30, 2012 250,762,087 $0.07</pre>
<!--egx--><pre>The provision for Federal income tax consists of the following at September 30:</pre><pre> </pre><pre> 2012 2011</pre><pre> ---------- ----------</pre><pre>Federal income tax attributable to:</pre><pre> Current Operations $ 320,615 $ 54,644</pre><pre> Less: valuation allowance (320,615) (54,644)</pre><pre> ---------- ----------</pre><pre> </pre><pre>Net provision for Federal income taxes $ 0 $ 0</pre><pre> ========== ==========</pre>
<!--egx--><pre>The cumulative tax effect at the expected rate of 34% of significant items</pre><pre>comprising our net deferred tax amount is as follows as of September, 30:</pre><pre> </pre><pre> 2012 2011</pre><pre> ---------- ----------</pre><pre>Deferred tax asset attributable to:</pre><pre> Net operating loss carryover $ 439,428 $ 118,813</pre><pre> Less: valuation allowance (439,428) (118,813)</pre><pre> ---------- ----------</pre><pre> </pre><pre>Net deferred tax asset $ 0 $ 0</pre><pre> ========== ==========</pre>
3800
1000
3600000
80
175000
90
<!--egx--><pre>As of September 30, 2012, the Company had warrants issued as follows:</pre><pre> </pre><pre> Outstanding at</pre><pre> September 30,</pre><pre>Issue Date Number Price Expiry Date 2012</pre><pre>---------- ------ ----- ----------- ----</pre><pre>May 12, 2011 666,667 $0.78 May 12, 2013 666,667</pre><pre>August 17, 2012 17,025,000 $0.03 August 17, 2017 17,025,000</pre><pre>August 17, 2012 15,985,920 $0.032 August 17, 2017 15,985,920</pre><pre>August 17, 2012 15,010,250 $0.034 August 17, 2017 15,010,250</pre><pre>August 17, 2012 14,094,130 $0.036 August 17, 2017 14,094,130</pre><pre>August 17, 2012 13,233,930 $0.039 August 17, 2017 13,233,930</pre><pre>August 17, 2012 12,426,220 $0.041 August 17, 2017 12,426,220</pre><pre>August 17, 2012 11,667,810 $0.044 August 17, 2017 11,667,810</pre><pre>August 17, 2012 10,955,690 $0.047 August 17, 2017 10,955,690</pre><pre>August 17, 2012 10,287,040 $0.050 August 17, 2017 10,287,040</pre><pre>August 17, 2012 9,659,190 $0.053 August 17, 2017 9,659,190</pre><pre>August 17, 2012 9,069,660 $0.056 August 17, 2017 9,069,660</pre><pre>August 17, 2012 8,516,110 $0.060 August 17, 2017 8,516,110</pre><pre>August 17, 2012 8,000,260 $0.064 August 17, 2017 8,000,260</pre><pre>August 17, 2012 7,511,990 $0.068 August 17, 2017 7,511,990</pre><pre>August 17, 2012 7,053,510 $0.072 August 17, 2017 7,053,510</pre><pre>August 17, 2012 6,623,010 $0.077 August 17, 2017 6,623,010</pre><pre>August 17, 2012 6,218,790 $0.082 August 17, 2017 6,218,790</pre><pre>August 17, 2012 5,839,240 $0.087 August 17, 2017 5,839,240</pre><pre>August 17, 2012 5,482,850 $0.093 August 17, 2017 5,482,850</pre><pre>August 17, 2012 5,148,220 $0.099 August 17, 2017 5,148,220</pre><pre>August 17, 2012 4,834,010 $0.106 August 17, 2017 4,834,010</pre><pre>August 17, 2012 4,538,980 $0.112 August 17, 2017 4,538,980</pre><pre>August 17, 2012 4,261,950 $0.120 August 17, 2017 4,261,950</pre><pre>August 17, 2012 4,001,830 $0.127 August 17, 2017 4,001,830</pre><pre>August 17, 2012 3,757,590 $0.136 August 17, 2017 3,757,590</pre><pre>August 17, 2012 3,528,250 $0.145 August 17, 2017 3,528,250</pre><pre>August 17, 2012 3,312,910 $0.154 August 17, 2017 3,312,910</pre><pre>August 17, 2012 3,110,720 $0.164 August 17, 2017 3,110,720</pre><pre>August 17, 2012 2,920,860 $0.175 August 17, 2017 2,920,860</pre><pre>August 17, 2012 2,742,590 $0.186 August 17, 2017 2,742,590</pre><pre>August 17, 2012 2,575,200 $0.198 August 17, 2017 2,575,200</pre><pre>August 17, 2012 2,418,030 $0.211 August 17, 2017 2,418,030</pre><pre>August 17, 2012 2,270,450 $0.225 August 17, 2017 2,270,450</pre><pre>August 17, 2012 2,131,880 $0.239 August 17, 2017 2,131,880</pre><pre>August 17, 2012 2,001,760 $0.255 August 17, 2017 2,001,760</pre><pre>August 17, 2012 1,879,590 $0.271 August 17, 2017 1,879,590</pre><pre> ----------- -----------</pre><pre> </pre><pre>Total 250,762,087 250,762,087</pre><pre> =========== ===========</pre>
1689
1267
80000
40000
1000
600000
150000
3890000
400570
1500000000
0.001
449700
1000000
1000000
666667
0.25
0.25
0.75
0.25
0.25
0.75
100000
50000000
1500000000
18000000
237732600
9196500
250095420
0.07
2000000
0.10
17988000
539640
37500
10500000
0.00
2000000
0.25
2000000
0.25
666667
0.75
2666667
0.38
250095420
0.07
-2000000
0.25
250762087
0.07
0
7000
7004
5004
4500
0
2500
320615
54644
-320615
-54644
0
0
439428
118813
-439428
-118813
0
0
1000
600000
150000
3890000
500000
20000
1292436
32500
10600
14300000
40000000
0
666667
0.78
666667
17025000
0.03
17025000
15985920
0.032
15985920
15010250
0.034
15010250
14094130
0.036
14094130
13233930
0.039
13233930
12426220
0.041
12426220
11667810
0.044
11667810
10955690
0.047
10955690
10287040
0.050
10287040
9659190
0.053
9659190
9069660
0.056
9069660
8516110
0.060
8516110
8000260
0.064
8000260
7511990
0.068
7511990
7053510
0.072
7053510
6623010
0.077
6623010
6218790
0.082
6218790
5839240
0.087
5839240
5482850
0.093
5482850
5148220
0.099
5148220
4834010
0.106
4834010
4538980
0.112
4538980
4261950
0.120
4261950
4001830
0.127
4001830
3757590
0.136
3757590
3528250
0.145
3528250
3312910
0.154
3312910
3110720
0.164
3110720
2920860
0.175
2920860
2742590
0.186
2742590
2575200
0.198
2575200
2418030
0.211
2418030
2270450
0.225
2270450
2131880
0.239
2131880
2001760
0.255
2001760
1879590
0.271
1879590
250762087
250762087
0001424030
2011-10-01
2012-09-30
0001424030
2013-01-05
0001424030
2011-12-20
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