U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-27409
LIBERTY MINT, LTD.
(Exact name of small business issuer as specified in its
charter)
Nevada 84-1409219
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
975 North 1430 West, Orem, Utah 84057
(Address of principal executive offices)
801-426-6699
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under
a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of March 31, 2001: 38,517,150
shares of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
LIBERTY MINT, LD.
INDEX
Page
PART I. Financial Information
Item I. Financial Statements (unaudited) 3
Condensed Consolidated Balance Sheets -
March 31, 2001 (unaudited) and December
31, 2000 4
Condensed Consolidated Statements of
Operations (unaudited) for the Three
Months Ended March 31, 2001 and 2000 5
Condensed Consolidated Statements of Cash
Flows (unaudited) for the Three Months
Ended March 31, 2001and 2001 6
Notes to Consolidated Financial Statements 9
Statements
Item 2. Management's Discussion and 16
Analysis of Financial Condition or Plan
of Operation
PART II Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 21
(Inapplicable items have been omitted)
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations
for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results
to be expected for the full year.
3
LIBERTY MINT, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited]
ASSETS
March 31, December 31,
2001 2000
________________________
CURRENT ASSETS:
Cash and cash equivalents $ 46,429 $ 3,323
Accounts receivable 167,477 125,500
Inventory 154,801
168,020
Prepaid expenses 225,711 193,296
____________ ___________
Total Current Assets 594,418 490,139
____________ ___________
PROPERTY AND EQUIPMENT, net 133,945 136,773
____________ ___________
OTHER ASSETS:
Other assets 7,193 3,400
____________ ___________
Total Other Assets 7,193 3,400
____________ ___________
$ 735,556 $ 630,312
____________ ___________
[Continued]
4
LIBERTY MINT, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited]
[Continued]
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31,
2001 2000
__________ __________
CURRENT LIABILITIES:
Accounts payable $ 182,743 $ 165,599
Accounts payable - related party - 5,399
Factoring advances 47,259 67,339
Accrued liabilities 466,358 461,867
Liabilities of discontinued operations 514,457 537,985
Customer deposits 150,520 138,924
Notes payable - related party 276,586 276,586
__________ __________
Total Current Liabilities 1,637,923 1,653,699
__________ __________
1,637,923 1,653,699
__________ __________
COMMITMENTS AND CONTINGENCIES
[See Note 9] - -
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.001 par value, 50,000,000
shares authorized, 38,517,150 and 30,563,260
shares issued and outstanding, respectively 38,517 30,563
Additional paid in capital 6,190,619 5,822,395
Retained earnings (deficit) (6,842,295) (6,752,137)
__________ _________
(613,159) (899,179)
__________ _________
Less Stock Subscriptions Receivable (289,208) (124,208)
__________ _________
Total Stockholders' Equity (Deficit) (902,367) (1,023,387)
__________ _________
$ 735,556 $ 630,312
__________ _________
Note: The balance sheet at December 31, 2000 was taken from the
audited financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
5
LIBERTY MINT, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[Unaudited]
For the Three
Months Ended
March 31,
__________________________
2001 2000
_________________________
SALES, net of returns and discounts $ 293,077 $ 910,523
COST OF GOODS SOLD 145,102 670,186
_________________________
GROSS PROFIT 147,975 240,337
_________________________
OPERATING EXPENSES:
General and administrative 214,803 309,577
Bad debt expense - -
_________________________
Total Operating Expenses 214,803 309,577
_________________________
LOSS FROM OPERATIONS (66,828) (69,240)
_________________________
OTHER INCOME (EXPENSE):
Interest expense (23,330) (20,998)
_________________________
Total Other Income (Expense) (23,330) (20,998)
_________________________
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (90,158) (90,238)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
_________________________
NET LOSS $ (90,158) $ (90,238)
_________________________
LOSS PER COMMOM SHARE $ (.00) $ (.02)
____________________________
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
6
LIBERTY MINT, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
Increase (Decrease) in Cash and Cash Equivalents
For the Three
Months Ended
December 31,
________________________
2001 2000
Cash Flows Provided by Operating Activities:
Net loss $ (90,158) $ (90,238)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 6,252 5,582
Non-cash expenses, including stock issued for
services & interest expense 5,600 152,271
Bad debt expense - -
Changes in assets and liabilities:
(Increase) in accounts receivable (41,977) (182,686)
(Increase) decrease in inventory 13,219 196,920
(Increase) decrease in prepaid expenses (32,415) (16,744)
(Increase) in other assets (3,793) 207
Increase in accounts payable 11,745 110,361
Increase (decrease) in factoring advances (20,080) 8,947
Increase in accrued expenses 54,491 (106,113)
Increase (decrease) in customer deposits 11,596 (204,027)
(Decrease) in liabilities of discontinued operations (2,950) (37,416)
Net Cash (Used) by Operating Activities (88,470) (162,936)
Cash Flows Provided by Investing Activities:
Purchases of property and equipment (3,424) (166,484)
Net Cash (Used) by Investing Activities (3,424) (166,484)
Cash Flows Provided by Financing Activities:
Proceeds from Issuance of common stock 300,000 80,000
Decrease (increase) in stock subscription receivable (165,000) 125,000
Proceeds from notes payable - related party - 90,000
Net Cash Provided by Financing Activities 135,000 295,000
Net Increase (Decrease) in Cash and Cash Equivalents $ 43,106 $ (34,420)
Cash and Cash Equivalents at Beginning of Period 3,323 53,858
Cash and Cash Equivalents at End of Period $ 46,429 $ 19,438
[Continued]
7
LIBERTY MINT, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
Increase (Decrease) in Cash and Cash Equivalents
[Continued]
For the Three
Months Ended
December 31,
________________________
2001 2000
______________________
Cash Flows Provided by Operating Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for:
Interest $ 5,711 $ 1,972
Income taxes $ - $ -
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
For the three months ended March 31, 2001:
The Company issued 257,223 shares of common stock to settle
liabilities of discontinued operations of $20,578 (or $.08
per share).
The Company issued 30,000 shares of common stock for
services rendered valued at $600 (or $.02 per share).
A subsidiary of the Company issued 2,200,000 shares of
common stock for services rendered valued at $5,000 and to
settle related party debt of $50,000 (or $.025 per share).
For the three months ended March 31, 2000:
The Company issued 380,494 shares of common stock for
services rendered value at $152,198 (or $.40 per share).
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
8
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation - The consolidated
financial statements include the following accounts: Liberty
Mint, Ltd. ("Parent") (a Nevada Corporation incorporated as
of October 8, 1999 to change the state of domicile from
Colorado). Parent was formerly known as Hana Acquisitions,
Inc., a Colorado Corporation incorporated on March 13, 1990
(Then a shell entity with no operations). The Parent is
engaged in custom minting, marketing and sales of sculptures,
and the creation of propriety minted collectibles through its
wholly owned subsidiary The Great Western Mint, Inc. ("GWM"),
a Utah Corporation organized on September 20, 1999. The
Parent is also engaged in licensing and marketing of
entertainment related collectibles through its wholly owned
subsidiary Liberty Mint Marketing, Inc. ("LMM"), a Utah
corporation organized on July 2, 1998. On January 2, 2001,
LMM issued 2,200,000 shares of common stock for services
rendered, valued at $5,000 and to settle related party debt of
$50,000 (or $.025 per share), reducing the Company's holdings
from 100% to 67%. On April 6, 2001, the Company spun off LMM
through the distribution of approximately 4,000,000 of the
4,500,000 shares held by the Parent to the shareholders of
Parent on a pro rata basis without payment or consideration
[See Note 10].
Consolidation - The consolidated financial statements
include the accounts of the Parent and its subsidiaries
(through the dates of disposition of subsidiaries). All
significant intercompany transactions between Parent and GWM
and LMM have been eliminated in consolidation.
Condensed Financial Statements - The accompanying financial
statements have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows
at March 31, 2001 and 2000 and for the periods then ended have
been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be
read in conjunction with the financial statements and notes
thereto included in the company's December 31, 2000 audited
financial statements. The results of operations for the
periods ended March 31, 2001 are not necessarily indicative of
the operating results for the full year.
NOTE 2 - GOING CONCERN
The Company has incurred significant losses during 2001 and
2000 and has current liabilities in excess of current assets
at March 31, 2001. As of March 31, 2001, the company does not
have the ability to pay off current liabilities of
discontinued operations without additional funds provided
through loans and/or through additional sales of its common
stock. These items raise substantial doubt about the ability
of the Company to continue as a going concern.
Management's plans in regards to these matters are as follows:
Management is proposing to raise necessary additional funds
not provided by operations through loans and/or through
additional sales of its common stock. Management believes
that it can improve operations, refinance debt, convert debt
to equity, and reduce expenses. Management believes that a
combination of these efforts will be necessary to continue
as a going concern.
9
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN [Continued]
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
The financial statements do not include any adjustments
relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain
additional financing, establish profitable operations or
realize its plans.
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at
cost, less accumulated depreciation and amortization as of
March 31, 2001 and December 31, 2000:
March 31, December 31,
2001 2000
__________ __________
Production equipment, pledged as collateral
for note payable [See note 6] $ 121,447 $ 121,447
Leasehold improvements 13,769 13,769
Computer equipment 9,970 9,970
Office furniture 13,524 10,100
__________ __________
158,710 155,286
Less: accumulated depreciation
and amortization (24,765) (18,513)
___________ ___________
$ 133,945 $ 136,773
____________ ____________
Depreciation and amortization expense for the three months
ended March 31, 2001 and 2000, amounted to $6,252 and $5,582,
respectively.
NOTE 4 - ACCRUED LIABILITIES
The following is a summary of accrued liabilities:
March 31, December 31,
2001 2000
___________ ___________
Payroll costs $ 263,839 $ 270,167
Contingency on stock guarantee 94,000 94,000
Accrued interest 108,176 97,700
Sales tax payable 343 -
___________ ___________
$ 466,358 $ 461,867
___________ ___________
NOTE 5 - CAPITAL STOCK
Preferred Stock - The Company is authorized to issue
10,000,000 shares of preferred stock, $.001 par value with
such rights, preferences and designations and to be issued in
such series as determined by the Board of Directors.
10
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - CAPITAL STOCK [Continued]
Stock Subscription Receivable - During April 1999, the Company
issued 12,000,000 shares of its common stock for total
proceeds of $800,000 (or $.067 per share). The issuance of
these shares resulted in 34% ownership of the Company. As of
March 31, 2001, $675,792 of the total amount was collected.
The balance of $124,208 is reflected as a stock subscription
receivable on the financials and is classified as a reduction
to stockholders equity.
During March 2001, the Company issued 7,666,667 shares of its
common stock for total proceeds of $300,000 (or $.039 per
share). As of March 31, 2001, $135,000 of the total amount
was collected. The balance of $165,000 is reflected as a
stock subscription receivable on the financials and is
classified as a reduction to stockholders' equity.
Warrants - At March 31, 2001, the Company had warrants
outstanding to purchase a total of 2,956,667 shares of the
Company's common stock at prices ranging from $1.20 to $15.00
per share. The warrants expire June 26, 2002. During the
three months ended March 31, 2001 no warrants were exercised.
Stock Options - At March 31, 2001, the Company had options
outstanding to purchase a total of 2,015,333 shares of the
Company's common stock at prices ranging from $1.40 to $12.96
per share. The options expire through December 31, 2007.
During the three months ended March 31, 2001 no options were
exercised.
Stock Value Guarantee -During December 1998, the Company
issued 60,000 shares of common stock for advertising services
which services were valued at $60,000 (or $1.00 per share).
During 1999, the Company issued an additional 40,000 shares of
common stock for advertising services which were valued at
$40,000. The Company guaranteed that one year from the date
of issue, the value of the 100,000 shares would be at least
$100,000. During 2000, the Company issued an additional
100,000 shares of common stock valued at $.25 per share in
partial settlement of the price guarantee [See Note 9].
Stock Issued for Liabilities - On February 23, 2001, the
Company issued 257,223 shares of common stock to settle
$20,578 (or $.08 per share) in claims that were included in
the liabilities of discontinued operations.
Stock Issued for Services - On February 23, 2001, the Company
issued 30,000 shares of common stock to its employees as a
bonus. The shares were valued at the trading price of $600
(or $.02 per share).
Stock Issued for Cash - On March 20, 2001, the Company issued
7,666,667 shares of common stock for total proceeds of
$300,000 (or $.039 per share). As of March 31, 2001, $135,000
of the total amount was collected. The balance of $165,000 is
reflected as a stock subscription receivable on the financials
and is classified as a reduction to stockholders' equity.
Sale of Subsidiary Stock - On January 2, 2001, LMM issued
2,200,000 shares of common stock for services rendered, valued
at $5,000 and to settle related party debt of $50,000 (or
$.025 per share), reducing the Company's holdings from 100% to
67%.
11
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - NOTES PAYABLE - RELATED PAYABLE
During 1997 the Company issued a $200,000 12% convertible note
payable to a shareholder of the Company. The interest on the
note is payable quarterly. The note matured on November 18,
2000. The note with any related accrued interest is
convertible into common stock of the Company at the option of
the holder at 60% of the fair market value of the Company
common stock on the date of conversion. The intrinsic value
of the beneficial conversion feature on the date of issuance
was $133,333, which was charged to interest expense and
credited to additional paid in capital. At March 31, 2001,
the Company owed accrued interest of $98,041 on the note. The
note is in default and no interest or principle payments have
made against the note. At March 31, 2001, the note is
convertible into approximately, 15,428,031 shares of the
Company's common stock.
During 2000, the Company purchased $156,586 of equipment from
a shareholder of the Company through the payment of $80,000 in
cash and the issuance of a $76,586, 12% secured note payable.
The equipment was previously owned by Liberty Mint, Inc.
("LMI") (a former subsidiary), but was foreclosed on and
acquired by the shareholders from the Company due to their
personal guarantee of debt of LMI. The equipment purchase is
collateral for the note payable.
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". FASB 109 requires the Company
to provide a net deferred tax asset/liability equal to the
expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any
available operating loss or tax credit carryforwards.
The Company has available at March 31, 2001, unused operating
loss carryforwards of approximately $6,800,000 which may be
applied against future taxable income and which expire in
various years through 2021.
The amount of and ultimate realization of the benefits from
the operating loss carryforwards for income tax purposes is
dependent, in part, upon the tax laws in effect, the future
earnings of the Company, and other future events, the effects
of which cannot be determined. Because of the uncertainty
surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the
amount of the loss carryforwards and, therefore, no deferred
tax asset has been recognized for the loss carryforwards.
The net deferred tax assets are approximately $2,300,000 as
of March 31, 2001, with an offsetting valuation allowance at
year end of the same amount resulting in a change in the
valuation allowance of approximately $30,000 during the three
months ended March 31, 2001.
12
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data show the amounts used in computing loss per
share and the effect on income and the weighted average number
of shares of potential dilutive common stock for the three
months ended March 31, 2001, and 2000:
For the Three
Months Ended
March 31,
______________________
2001 2000
____________________
Loss from continuing operations available
to common stockholders (Numerator) $ (90,158) $ (90,238)
Weighted average number of common shares
outstanding used in basic earnings per share
(Denominator) 31,615,186 4,537,298
Weighted average number of common shares and potential
dilutive common shares outstanding used in
dilutive earnings per share (Denominator) N/A N/A
The Company had at March 31, 2001 options and warrants
outstanding to purchase 4,972,000 shares of common stock at
prices ranging from $.40 to $12.96 per share, that were not
included in the computation of diluted earnings per share
because their effect was anti-dilutive (the exercise price of
the options was greater than the average market price of the
common shares).
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Stock guarantee - During December 1998, the Company issued
60,000 shares of its common stock for advertising services
performed valued at $60,000. The Company guaranteed the
advertising company that one year from the date of issue they
would be able to sell their 60,000 shares of common stock for
a minimum price of $1.00 per share (or for a total of
$60,000). During September 1999 the Company issued an
additional 140,000 shares of common stock at $.067 per share
under the same agreement. The Company further agreed to issue
a sufficient amount of shares to the advertising Company in
order to sell and receive total proceeds of $100,000 if the
trading price is less than $1.00 per share. As of March 31,
2001 the Company has recorded a $94,000 accrued expense as the
market price of the Company's common stock was less than the
guaranteed amount.
13
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - COMMITMENTS AND CONTINGENCIES [Continued]
Sale of Subsidiary - During September 1999 the Company sold
all of it's shares in Liberty Mint, Inc. a 90% owned
subsidiary for $25. The Company has recorded net liabilities
of discontinued operations of $514,457 at March 31, 2001 for
subsidiary liabilities the Company estimates it will be
responsible to pay. Management believes that the Company is
not liable for any existing liabilities of its former
subsidiary, but the possibility exists that creditors and
others seeking relief from the former subsidiary may also
include the Company in claims and suits pursuant to the parent-
subsidiary relationship which previously existed between the
Company and its former subsidiary. The Company was named in
one suit prior to the disposition of the Liberty Mint, Inc.
(see below) but is not currently named in nor is it aware of
any other such claims or suits against its former subsidiary.
Management believes that the Company would be successful in
defending against any such claims and believes that no
material negative impact on the financial position of the
Company would occur. Management further believes that with
the passage of time, the likelihood of any such claims being
raised will become more remote. No amount has been reflected
or accrued in these financial statements for any contingent
liability other than $514,457 which the Company has accrued
for estimated potential liabilities at March 31, 2001 for
which it believes a possible payment may be required.
Litigation - On May 3, 1999, the Company was named in a
lawsuit alleging various causes of action related to
liabilities of the Liberty Mint, Inc. During January 2001,
the Company settled the suit for a total of $33,000 to be paid
in six monthly payments of $1,000, six payments of $2,000 and
five payments of $3,000. In addition, the settlement calls
for the return of certain coin dies and ingot dies and the
issuance of 5,000 shares of the Company class A common stock.
These amounts have been accrued as part of the estimated
liabilities of discontinued operations.
The Utah Department of Consumer Affairs ("UDCA") contacted the
Company on behalf of approximately 15 parties who are owed
money by Liberty Mint, Inc. The UDCA requested a plan from
the Company to resolve the outstanding debt. The Company
carried on negotiations and extended a settlement offer
consisting of its common stock to the parties involved. Four
of the parties have accepted shares of restricted stock of the
Company as settlement. None of the remaining parties nor the
UDCA have formally filed any charges against the Company.
The Company has been named in another complaint filed in Clark
County, Nevada, alleging that the Company has not made
required payments on certain silver leases. The Company
maintains that it was not a party to the leases and denies any
responsibility related to the leases. The complaint asks for
damages and awards in excess of $160,000.
Management intends to vigorously defend itself in the above
actions and any others that may arise and believes that it has
adequately estimated and accrued liabilities of discontinued
operations to cover these items.
Operating lease - The Company has entered into an operating
lease for its office and production facility. The lease
period on the facility commenced on November 1, 1999 and will
expire on October 31, 2002. Lease expense for the three
months ended March 31, 2001, and 2000 amounted to $56,460 and
$48,783, respectively. The minimum annual rental payments are
$103,510 through 2002.
14
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SUBSEQUENT EVENTS
Issuance of Common Stock - On April 4, 2001, the Company
issued 2,200,000 shares of common stock for services valued at
$46,200 (or $.021 per share).
Subsidiary Spin-Off - In March 2001, the Board of Directors
approved to distribute approximately 4,000,000 of the
4,500,000 shares of common stock held in its Subsidiary,
Liberty Mint Marketing, Inc. (LMM). The shares will be
distributed to shareholders of Liberty Mint, LTD. on a pro
rata basis without payment of consideration. As a condition
to this distribution, LMM shall acquire Marmar Acquisition
Corporation, a Nevada corporation, in a reverse merger
acquisition. In March 2001, LMM changed its name to SCCS,
Inc. Final consummation of the acquisition and spin-off is
not guaranteed and is subject to the completion of various
conditions.
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27a of the Securities
Act of 1933 and Section 21e of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed under the "Item 2. Management's Discussion and
Analysis of Financial Condition or Plan of Operations," and also
include general economic factors and conditions that may directly
or indirectly impact the Company's financial condition or results
of operations.
The Company
Liberty Mint, Ltd., was originally incorporated in the State
of Colorado on March 15,1990 as St. Joseph Corp. VI. On July 26,
1993, the Company changed its name to Petrosavers International,
Inc., and on September 12, 1996 again changed its name to Hana
Acquisitions Inc. On June 9, 1997, the Company changed its name
to Liberty Mint, Ltd. On October 8, 1999, the Company filed
Articles of Merger with the State of Colorado and Nevada,
effecting a change of domicile of the Company to the State of
Nevada.
On September 23, 1999, the Company sold its 90% interest in
Liberty Mint, Inc., a Utah corporation.
Currently, the "Company" operates through two subsidiaries.
The Great Western Mint, Inc. ("GWM") provides custom minting
services for corporations, associations, government agencies, and
any other organization that desires to produce a custom coin or
commemorative. The GWM also conceives and markets proprietary
coin related products and sculpture. The Company's second
subsidiary, Liberty Mint Marketing, Inc., creates and markets
licensed entertainment and sports related collectibles.
The Company has identified two areas which it will attempt
to cultivate through its marketing efforts: 1) growth of its
custom minting business and 2) western art and collectibles.
Through GWM, the company intends to actively pursue business to
business sales and increase custom minting sales.
Liberty Mint Marketing, Inc., changed its name to SCCS, Inc.
to reflect the Superstar Commemorative Collector Series. Because
SCCS required an infusion of capital and management that could
not be supported by the Company, management made the decision to
spin-off SCCS in a dividend distribution to its shareholders.
SCCS will continue its business of
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marketing sports and entertainment collectibles. The Company
anticipates the spin-off to be completed by June 15, 2001 and
will send all shareholders an information statement regarding
SCCS.
In connection with the spin-off, the Company will assign its
rights in the licensing agreement and joint distribution contract
with Signatures Network to SCCS.
The Company remains focused on increasing sales through
improving and expanding upon its present marketing and
distribution methods. At present and in the near term, the
Company will seek relationships with established marketing
partners to assist in distribution and sales of the Company's
newly developed collectible products. As a result of the
Company's new direction, it has successfully begun to market its
products on a limited basis to businesses and the public. Many
of the Company's new product lines are derived from licenses and
rights to produce various collectibles. The Company intends to
continue licensed-based marketing by obtaining additional
licenses with public appeal. As new products are developed the
Company will proceed with its efforts to expand marketing
strategies and develop increased demand for its products.
Results of Operations
Three Month periods Ended March 31, 2001 and 2000
Gross revenues for the quarter ended March 31, 2001 were
$293,077 compared to $910,523 for the same period in 2000, a
decrease of $617,446. The high level of revenue for the period
ending March 31, 2000 was due to the Company producing a large
order of gold commemorative coins which inflated revenue for that
quarter.
Costs of revenues were $145,102 or 49.5% of revenues for the
quarter ended on March 31, 2001, compared to $670,186 or 73% of
revenues for the first quarter of 2000. Again, the Company
attributes the high cost of revenues in the first quarter of 2000
to the large gold coin order.
Gross profit was $147,975 for the quarter ended on March 31,
2001 and $240,337 for the comparable quarter in 2000. Gross
profit as a percentage of revenues was 50% and 26%, for March 31,
2001 and March 31, 2000 respectively.
General and administrative expenses were $214,803 for the
quarter ended March 31, 2001 and $309,577 for the comparable
period in 2000, a decrease of $94,774. The primary reason for
the decrease was the Company's continued effort to reduce
overhead.
The Company had an operating loss of $90,158 during the
quarter ended March 31, 2001 compared to an operating loss of
$90,238 for the comparable quarter in 2000. Net loss for the
period ended March 31, 2001 was $90,158 compared to $90,238 for
the same period in 2000.
During the quarter ended March 31, 2001, the Company
incurred interest expenses in the amount of $23,330. During the
comparable period in 2000, the Company incurred interest expenses
in the amount of $20,998.
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Liquidity and Capital Resources
The Company relies on revenue from sales of its products and
services to maintain operations. The Company estimates that it
will need to generate minimum monthly sales levels of $150,000 in
order to operate at a profit. The Company may not be able to
maintain this level of sales. If the Company's sales revenues
fall short of this minimum level on average, the Company may fall
short of the minimum capital required to maintain operations. In
that event, the Company may have to find additional financing in
the form of loans or sale of equity in the Company. The current
sources of cash available to the Company consist of (1) revenues
from sales and (2) debt financing through Performance Funding Co.
of Phoenix, Arizona (a factoring line of credit in the amount of
$250,000). The Company also has outstanding notes receivable for
equity stock purchases in the amount of $124,208 which is
currently delinquent. The Company is attempting to work out a
payment plan with the debtors to settle the outstanding amount
due.
The Company currently has $46,429 cash in hand and total
assets of $735,556. Current liabilities are $1,637,923 and
stockholder deficit is $902,367. The Company has $289,208 in
stock subscriptions receivable. These items raise a substantial
concern and doubt about the ability of the Company to continue as
a going concern. In an effort to overcome the financial
difficulties that had surrounded the continued operation of
Liberty Mint, Inc., the Company divested itself of its
interesting Liberty Mint, Inc. On going efforts to reduce
overhead and focus on the business of GWM have been the
subsequent decision to spin-off of SCCS, Inc. These divestitures
have allowed the Company to focus on its core business of custom
minting and western art and collectibles, reduce overhead and
expenses and improve operations. In view of the efforts the
Company is making to control costs and increase sales in a
focused area, the Company believes it can continue as a going
concern.
The Company is carrying $514,457 on its books as a
contingent liability that represents undelivered silver and gold
and past due payroll taxes of Liberty Mint, Inc. which accrued
during the two years while the Company owned Liberty Mint, Inc.
The Company continues to stabilize its financial position
and expects to improve revenues and become profitable in 2001 as
a result of spinning off the SCCS, Inc., operations and focusing
solely on the operations of The Great Western Mint.
Management believes the Company's ability to raise
additional capital to meet its needs depends on the ability to
demonstrate that the Company can generate profits from sales of
its products and services. If necessary, the Company may raise
additional capital in an equity offering.
The Company will continue to focus on its foundation
business of custom minting programs through The Great Western
Mint, Inc. to increase revenue to bring the Company into
profitability.
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The Company has no material commitments for capital
expenditures for the next twelve months.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Both the Internal Revenue Service ("IRS") and the state of
Utah have contacted the Company regarding past withholding tax
due regarding Liberty Mint, Inc. The Company owes approximately
$150,000 to the IRS and $35,000 to the state of Utah and has
acknowledged the debt on the Company's balance sheet. The
Company has responded to the IRS and the state of Utah with a
proposal on repayment of the outstanding debt and is awaiting a
response as to whether or not the proposal is acceptable. The
Company anticipates entering a settlement agreement with both
agencies whereby the Company will be obligated to make monthly
payments. At the present time, there is no current legal action
against the Company on either of these issues.
The Utah Department of Consumer Affairs ("UDCA") contacted
the Company on behalf of approximately 15 parties who are owed
money by Liberty Mint, Inc. The UDCA requested a plan from the
Company to resolve the outstanding debt. The Company has
extended a settlement offer of its common stock to the parties
who are owed money by Liberty Mint, Inc., and to date, four
parties have accepted shares of restricted stock of the Company
as settlement. None of the remaining parties or the UDCA have
formally filed any charges against the Company.
The Company received a Complaint filed in District Court,
Clark County, Nevada, Case No. A423386, Dept. No. XVII, dated
August 24, 2000, naming Liberty Mint, Ltd., as defendant among
other parties. The Complaint was brought by Jerry Schuetz as
Plaintiff. The Compliant alleges that Liberty Mint, Ltd. as
alter ego of other named defendants, executed silver leases with
the Plaintiff and has not made the required payments. The
Complaint asks for an award of in excess of $150,000 along with
interest, punitive damages in an amount in excess of $10,000 and
attorney's fees and costs. The Company believes it should not be
a party to the Complaint and that the alleged events occurred in
1985 and 1986, at a time when the Company did not exist and
therefore could not be an alter ego of the named defendants. The
Company has denied any responsibility and has filed an answer
stating the Company is not the alter ego of any of the other
named defendants.
The above legal proceedings are a result of Liberty Mint,
Inc. actions and not a result of current Company operations. The
Company has since divested itself of Liberty Mint, Inc. and is
attempting to settle certain outstanding claims.
Item 2. Change in Securities
During April 1999, the Company issued 12,000,000 shares of
its common stock for total proceeds of $800,000 (or $.067 per
share). The issuance of these shares resulted in 34% ownership
of the Company. As of March 31, 2001, $675,792 of the total
amount was collected.
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The balance of $124,208 is reflected as a stock subscription
receivable on the financials and is classified as a reduction to
stockholders equity.
On July 2, 2000, the Company issued 600,000 shares of common
stock for $100,000 cash to an accredited investor. The Company
relied on the exemption from registration under section 4(6) of
the 1933 Act. The shares were not issued in connection with any
public offering and no commissions were paid on the transaction.
On September 19, 2000, the Company issued 180,000 shares of
common stock valued at $45,000 to an individual for services
rendered to the Company pursuant to a written compensation plan.
The Company registered the shares under an S-8 registration
statement filed with the Securities and Exchange Commission.
On September 30, 2000, the Company issued 100,000 shares of
common stock valued at $50,000 to Donna O'Dell. The stock was
issued pursuant to an agreement entered in 1998 whereby the
Company received ITEX barter credits and further guaranteed the
value of its shares to be $1.00 after one year. If the shares
were not valued at $1.00 after one year the Company committed to
issuing additional shares to bring the total value of all shares
issued to Donna O'Dell to $100,000. The Company relied on
Section 4(2) of the Securities Act of 1933 to effect the
transaction. The shares were not issued in connection with any
public offering and no commissions were paid on the transaction.
In January 2001, the Company issued 2,200,000 shares for
services rendered to four individuals, valued at $55,000 or $.025
per share. The shares were issued to accredited investors
pursuant to an exemption under Section 4(2). No public offering
was made and no commissions were paid on the transactions.
In February 2001, the Company issued 257,223 shares to
settle liabilities of discontinued operations. The shares were
issued to two individuals pursuant to an exemption under Section
4(2). No public offering was made and no commissions were paid
on the transactions.
In February 2001, the Company granted 30,000 shares from its
Employee Stock Option Plan to employees and consultants as
incentive bonuses. The shares were granted pursuant to an
exemption under Section 4(2). No public offering was made and no
commissions were paid on the transactions.
During March 2001, the Company issued 7,666,667 shares of
its common stock for total proceeds of $300,000 (or $.039 per
share). The shares were issued to a single accredited investor
pursuant to an exemption under Section 4(2). No public offering
was made and no commissions were paid on the transactions.
At March 31, 2001, the Company had warrants outstanding to
purchase a total of 2,956,667 shares of the Company's common
stock at prices ranging from $1.20 to $15.00 per share. The
warrants expire June 26, 2002. During the three months ended
March 31, 2001 and 2000, 0 and 7,750 warrants have been exercised
for total proceeds of $0 and $55,800.
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Item 5. Other Information
The Company has decided to spin-off it's wholly owned
subsidiary, SCCS, Inc., in the manner of a dividend distribution
to its shareholders of record as of April 6, 2001. Each
shareholder of record as of April 6, 2001 will receive .09824
shares of SCCS, Inc. for each share of the Company held. The
Company anticipates effecting the distribution by mid June 2001.
Item 6. Exhibits and Reports on Form 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by the
Company during the quarter ended September 30, 2000.
Exhibits: None
SIGNATURES
In accordance with the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
LIBERTY MINT, LTD.
Date: May 15, 2001 By: /s/ Dan Southwick
Dan Southwick
President, Chief Executive Officer
and Director
Date: May 15, 2001 By: /s/ Eugene Pankrantz
Eugene Pankrantz
Controller