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 June 30, 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 or (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 August 14, 2001: 40,717,150
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 - 4
June 30, 2001 (unaudited) and December
31, 2000
6
Condensed Consolidated Statements of
Operations (unaudited) for the Three
Months and Six Months Ended June 30, 2001
and 2000 7
Condensed Consolidated Statements of Cash
Flows (unaudited) for the Three Months
and Six Months Ended June 30, 2001 and 9
2001
Notes to Consolidated Financial 16
Statements
Item 2. Management's Discussion and
Analysis of Financial Condition or Plan
of Operation
PART II Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
(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
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2001 2000
________________________
CURRENT ASSETS:
Cash and cash equivalents $ 27,404 $ 3,323
Accounts receivable, net 54,184 125,500
Inventory 184,769
168,020
Prepaid expenses 181,647 193,296
____________ ___________
Total Current Assets 448,004 490,139
____________ ___________
PROPERTY AND EQUIPMENT, net 126,926 136,773
____________ ___________
OTHER ASSETS:
Other assets 6,790 3,400
____________ ___________
Total Other Assets 6,790 3,400
____________ ___________
$ 581,720 $ 630,312
____________ ___________
[Continued]
4
LIBERTY MINT, LTD. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
[Continued]
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
June 30, December 31,
2001 2000
____________ ___________
CURRENT LIABILITIES:
Accounts payable $ 184,525 $ 165,599
Accounts Payable- related party - 5,399
Factoring advances 15,096 67,339
Accrued liabilities 544,875 461,867
Liabilities of discontinued operations 513,425 537,985
Customer deposits 34,503 138,924
Notes payable - related party 297,408 276,586
____________ ___________
Total Current Liabilities 1,589,832 1,653,699
____________ ___________
1,589,832 1,653,699
____________ ___________
COMMITMENTS AND CONTINGENCIES
[See Note 10] - -
____________ ___________
STOCKHOLDERS' (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,
40,717,150 and 30,563,260
shares issued and outstanding 40,717 30,563
Capital in excess of par value 6,222,739 5,822,395
Retained (deficit) (7,147,360) (6,752,137)
____________ ___________
(883,904) (899,179)
____________ ___________
Less Stock Subscriptions Receivable 124,208 124,208
____________ ___________
Total Stockholders' (Deficit) (1,008,112) (1,023,387)
____________ ___________
$ 581,720 $ 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
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
_________________________________________________
2001 2000 2001 2000
_________________________________________________
SALES, net of returns and discounts $ 163,223 $ 844,764 $ 456,300 $ 1,755,287
COST OF GOODS SOLD 138,794 695,115 283,896 1,365,301
_________ _________ ________ _________
GROSS PROFIT 24,429 149,649 172,404 389,986
_________ _________ ________ _________
OPERATING EXPENSES:
General and administrative 339,480 280,949 544,283 588,626
Bad debt expense - - 1,106
_________ _________ ________ _________
Total Operating Expenses 339,480 280,949 544,283 589,732
_________ _________ ________ _________
LOSS FROM OPERATIONS (305,051) (131,300) (371,879) (199,746)
_________ _________ ________ _________
OTHER EXPENSE:
Interest expense (14) (9,902) (23,344) (30,900)
Other expense - (709) (1,326)
_________ _________ ________ __________
Total Other (Expense) (14) (10,611) (23,344) (32,226)
_________ _________ ________ __________
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (305,065) (141,911) (395,223) (231,972)
CURRENT TAX EXPENSE - - - -
DEFERRED TAX EXPENSE - - - -
_________ _________ _______ _________
NET (L0SS) $ (305,065) $ (141,911) $ (395,223) $ (231,972)
_________ _________ _______ __________
(LOSS) PER COMMON SHARE $ (.01) $ (.01) $ (.01) $ (.01)
_________ _________ ________ __________
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
6
LIBERTY MINT, LTD. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six
Months Ended
December 31,
_______________________
2001 2000
______________________
Cash Flows Provided by Operating Activities:
Net loss $ (395,223) $ (231,972)
________ _________
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 13,271 11,577
Non-cash expenses, including stock issued for
services & interest expense 39,920 239,272
Changes in assets and liabilities:
Decrease in accounts receivable 71,316 130,871
Increase (decrease) in inventory (16,749) 634,258
(Increase) decrease in prepaid expenses 11,649 (7,804)
(Increase) decrease in other assets (3,390) 207
Increase in accounts payable 13,527 76,425
(Decrease) in factoring advances (52,243) (85,710)
Increase (decrease) in accrued expenses 133,008 (298,865)
(Decrease) in customer deposits (104,421) (716,486)
(Decrease) in liabilities of discontinued
operations (3,982) (16,802)
________ ________
Net Cash (Used) by Operating Activities (293,317) (265,029)
________ ________
Cash Flows Provided by Investing Activities:
Purchases of property and equipment (3,424) (177,569)
________ _________
Net Cash (Used) by Investing Activities (3,424) (177,569)
________ _________
Cash Flows Provided by Financing Activities:
Proceeds from Issuance of common stock 300,000 -
Decrease in stock subscription receivable - 125,000
Increase in notes payable - related party 20,822 271,973
________ _________
Net Cash Provided by Financing Activities 320,822 396,973
________ _________
Net Increase (Decrease) in Cash and
Cash Equivalents 24,081 (45,625)
Cash and Cash Equivalents at Beginning of Period 3,323 53,858
________ ________
Cash and Cash Equivalents at End of Period $ 27,404 $ 8,233
________ ________
[Continued]
7
LIBERTY MINT, LTD. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Continued]
For the Six
Months Ended
June 30,
________________________
2001 2000
_______________________
Cash Flows Provided by Operating Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for:
Interest $ - $ 3,902
Income taxes $ - $ -
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
For the six months ended June 30, 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 valued at $5,000 and to settle
related party debt of $50,000, or $.025 per share.
In April 2001, the Company issued 2,100,000 shares of common
stock to consultants for services valued at $32,760 or
$.0156 per share.
In April 2001, the Company issued 100,000 shares of common
stock to an employee for services valued at $1,560 or $.0156
per share.
For the six months ended June 30, 2000:
The Company issued 380,494 shares of common stock for
services rendered valued 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 June 30, 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 June 30, 2001 are not necessarily indicative of
the operating results for the full year.
Proposed 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.
9
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN
The Company has incurred significant losses during 2001 and
2000 and has current liabilities in excess of current assets
at June 30, 2001. As of June 30, 2001, the company does not
have the ability to pay off current liabilities 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.
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:
June 30, 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 (31,784) (18,513)
___________ _________
$ 126,926 $ 136,773
___________ _________
Depreciation and amortization expense for the six months ended
June 30, 2001 and 2000, amounted to $13,271 and $11,577,
respectively.
NOTE 4 - ACCRUED LIABILITIES
The following is a summary of accrued liabilities:
June 30, December 31,
2001 2000
___________ ___________
Payroll costs $ 326,187 $ 270,167
Contingency on stock guarantee 94,000 94,000
Accrued interest 124,688 97,700
__________ __________
$ 544,875 $ 461,867
__________ __________
10
LIBERTY MINT, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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
June 30, 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.
Warrants - At June 30, 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 six
months ended June 30, 2001 no warrants were exercised.
Stock Options - At June 30, 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 six months ended June 30, 2001 no options were
exercised.
Stock Value Guarantee -During December 1998, the Company
issued 60,000 shares of common stock for advertising services
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).
In April 2001, the Company issued 2,100,000 shares of common
stock to consultants for services valued at $32,760 or $.0156
per share.
In April 2001, the Company issued 100,000 shares of common
stock to an employee for services valued at $1,560 or $.0156
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.
Issuance 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 June 30, 2001, the
Company owed accrued interest of $107,072 on the note. The
note is in default and no interest or principle payments have
made against the note. At June 30, 2001, the note is
convertible into approximately, 10,235,735 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 June 30, 2001, unused operating
loss carryforwards of approximately $6,900,000 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 $2,350,000 as
of June 30, 2001, with an offsetting valuation allowance at
year end of the same amount resulting in a change in the
valuation allowance of approximately $80,000 during the six
months ended June 30, 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:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
___________________________________________________
2001 2000 2001 2000
__________________________________________________
Loss from continuing operations
Available to common
stockholders (Numerator) $ (305,065) $ (141,911) $ (395,223) $ (231,972)
___________ __________ __________ __________
Weighted average number of
common shares outstanding
used in basic earnings per
share (Denominator) 41,143,524 26,095,484 36,405,676 26,095,484
__________ __________ __________ __________
Weighted average number of
common shares and potential
dilutive common shares
outstanding used in dilutive
earnings per share
(Denominator) N/A N/A N/A N/A
The Company had at June 30, 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 was less than $1.00 per share.
As of June 30, 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 its shares in Liberty Mint, Inc. a 90% owned subsidiary
for $25. The Company has recorded net liabilities of
discontinued operations of $513,425 at June 30, 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 $513,475 which the Company has accrued
for estimated potential liabilities at June 30, 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 six months
ended March 31, 2001, and 2000 amounted to $112,920 and
$97,566, 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 - In August 2001, the Company issued
71,875 shares of common stock for debt relief of $2,875 or
$.04 per share.
In July 2001, the Company issued 2,000,000 shares of common
stock for services valued at $40,000 or $.02 per share.
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, SCCS, Inc. creates and markets licensed entertainment
and sports related collectibles.
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 marketing
sports and entertainment collectibles. The Company originally
anticipated the spin-off to be completed by June 15, 2001,
however, due to delays in completing the audit on SCCS, the
Company has postponed the dividend distribution until such time
as the SCCS audit is complete.
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.
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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.
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 and Six Month periods Ended June 30, 2001 and 2000
Gross revenues for the quarter ended June 30, 2001 were
$163,223 compared to $844,764 for the same period in 2000, a
decrease of $681,541. Gross revenues for the six months ended
June 30, 2001 were $456,300 compared to $1,755,287 for the same
period in 2000, a decrease of $1,298,987. The high level of
revenue for the period ending June 30, 2000 was due to the
Company producing a large order of gold commemorative coins which
inflated revenue for that quarter.
Costs of revenues were $138,794 or 85% of revenues for the
quarter ended on June 30, 2001, compared to $695,115 or 82.3% of
revenues for the first quarter of 2000. For the six months ended
June 30, 2001 and 2000, costs of revenues was $283,896 or 62.2%
in 2001 and $1,365,301 or 77.8% in 2000.
Gross profit was $24,429 for the quarter ended on June 30,
2001 and $149,649 for the comparable quarter in 2000. For the
six months ended June 30, 2001 and 2000, gross profit was
$172,204 and $389,986 respectively. Gross profit as a percentage
of revenues for the three months ended June 30, 2001 and 2000 was
15% and 18% respectively. Gross profit as a percentage of
revenues for the six months ended June 30, 2001 and 2000 was 38%
and 22% respectively.
General and administrative expenses were $339,480 for the
quarter ended June 30, 2001 and $280,949 for the comparable
period in 2000, an increase of $58,531. Expenses for the six
months ended June 30, 2001 were $544,283 compared to $588,626 for
the same period in 2000, a decrease of $44,343. The primary
reason for the decrease was the Company's continued effort to
reduce overhead.
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The Company had a net loss of $305,065 during the quarter
ended June 30, 2001 compared to an operating loss of $141,911 for
the comparable quarter in 2000. For the six months ended June
30, 2001 and 2000, the Company had a net loss of $395,223 and
$231,972 respectively.
During the quarter ended June 30, 2001, the Company incurred
interest expenses in the amount of $14 and $9,902 during the
comparable period in 2000. For the six months ended June 30,
2001, the Company had interest expense of $23,344 compared to
$30,900 for the same period of 2000.
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 $27,404 cash in hand and total
assets of $581,720. Current liabilities are $1,589,832 and
stockholder deficit is $1,008,112. The Company has $124,208 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 $513,425 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
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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.
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, five
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.
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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. 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.
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At June 30, 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 six months ended June
30, 2001 no warrants were exercised.
At June 30, 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 six months
ended June 30, 2001, no options were exercised.
In July 2001, the Company issued 2,000,000 shares of common
stock for services valued at $40,000. The stock was issued
pursuant to an S-8 registration statement filed with the
Securities and Exchange Commission on June 29, 2001.
In August 2001, the Company issued 71,875 shares of common
stock to settle liabilities of discontinued operations. The
shares were issued to one individual pursuant to an exemption
under Section 4(2). No public offering was made and no
commissions was paid on the transaction.
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 as soon as the
SCCS audit is complete.
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 June 30, 2001.
Exhibits: None
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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: August 14, 2001 /s/ Dan Southwick
Dan Southwick
President, Chief Executive Officer
and Director
Date: August 14, 2001 /s/ Eugene Pankrantz
Eugene Pankrantz
Controller
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