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CERX
COLOMBIA ENERGY RESOURCES, INC.
false
Smaller Reporting Company
Q2
Freedom Resources Enterprises, Inc.
2012
10-Q
Nevada
2012-06-30
1996-11-06
0001045390
--12-31
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Company History and Basis of Reporting</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and accompanying notes in the
Company's Annual Report on Form 10-K for the year ended December
31, 2011 filed with the SEC on March 30, 2012. The accompanying (a)
consolidated balance sheet as of December 31, 2011, which has been
derived from the audited consolidated financial statements, and (b)
unaudited condensed consolidated financial statements have been
prepared pursuant to SEC Rule 8-03 of Regulation S-X. As a result,
while the Company believes the disclosures made are adequate to
make the information not misleading, certain information and note
disclosures normally included in audited financial statements
prepared in accordance with U.S. GAAP have been condensed or
omitted pursuant to those rules and regulations.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The unaudited results of operations for the interim periods shown
in these financial statements are not necessarily indicative of
operating results for the entire year. In the opinion of
management, the accompanying unaudited condensed consolidated
financial statements recognize all adjustments of a normal
recurring nature considered necessary to fairly state the
Company’s consolidated financial position as of June 30,
2012, and its consolidated results of operations and comprehensive
income (loss) for the three and six months ended June 30, 2012, and
cash flows for the six months ended June 30, 2012.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company was incorporated in the State of Nevada on November 6,
1996 under the name “Freedom Resources Enterprises,
Inc.” to engage in the business of self-help publications and
workshops. Between November 1996 and September 2005 the Company
generated minimal revenues, and in October 2005, the Company ceased
all business operations. From October 2005 to early May 2010, the
Company did not engage in any business activities. Prior to this
period, the Company’s management had been evaluating
potential business opportunities that might be available to the
Company to preserve its shareholders’ investment in its
common shares.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On May 6, 2010, the Company entered into a subscription agreement
(the “Subscription Agreement”) with LIFE Power &
Fuels, LLC (“LIFE”), pursuant to which it issued to
LIFE 19,080,000 (post-split) shares of its common stock, which
shares represented approximately 94.1% of its issued and
outstanding shares of common stock at such time, elected one new
director to its board of directors and changed its management team.
Concurrently with the closing of the transactions contemplated by
the Subscription Agreement, the Company ceased to be a shell
company, as defined in Rule 12b-2 of the Exchange Act, and adopted
a new plan of operations. Subsequently, LIFE sold approximately
4,800,000 shares of the Company's common stock to certain related
parties. Also, in March 2011, LIFE distributed 2,159,996 shares of
the Company’s common stock to LIFE’s limited partner
investors. As of June 30, 2012, LIFE owned approximately 26.1%
(adjusted for dilution of shares) of the outstanding shares of the
Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On July 28, 2010, the Company affected a reverse stock split of two
shares for every five shares of common stock outstanding.
Accordingly, outstanding shares and share price of common stock and
stock options were adjusted to account for the effects of the
reverse stock split.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Effective July 28, 2010, the Company changed its name from Freedom
Resources Enterprises, Inc. to “Colombia Clean Power &
Fuels, Inc.”</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In June 2011 we completed a non-public offering of units in which
each unit consisted of 10,000 shares of Series A Preferred Stock
convertible into an aggregate of 50,000 shares of
common stock at any time and a five-year stock purchase warrant
entitling the holder thereof to purchase 3,500 shares of Common
Stock for $0.01 per share. Certain holders of 10% convertible
promissory notes in the aggregate amount of $7,305,000 converted
their notes into 730,500 shares of Series A Preferred Stock and
were also granted warrants to purchase 255,675 shares of our common
stock.   In addition, the Company issued an aggregate of
2,200,000 shares of Series A Preferred Stock and warrants to
purchase 1,022,175 shares of Common Stock in consideration of
aggregate cash proceeds of $22,000,000. Aggregate cash fees of
$1,139,855 were paid to the placement agents.  In
addition, the placement agents were issued five-year warrants,
substantially similar to the warrants sold in the offering, to
purchase an aggregate of 480,000 shares of common stock for an
exercise price of $2.00 per share. The securities sold in this
offering have not been registered under the Securities Act and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On September 6, 2011, shareholders owning a majority of the voting
control of the Company authorized, by written consent, an amendment
to the articles of incorporation to change the name of the Company
from “Colombia Clean Power & Fuels, Inc.” to
“Colombia Energy Resources, Inc.” and authorized the
change of domicile of the Company from the State of Nevada to the
State of Delaware through the merger of the Company with and into a
Delaware corporation formed solely for the purpose of changing
domicile. The effective date of the change of domicile and name
change was November 4, 2011.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On November 7, 2011, the quotation of the Company’s common
stock on the OTC QX was approved.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Accounts payable and accrued liabilities of $1,943,456 and
$1,697,875 as of June 30, 2012 and December 31, 2011, respectively,
are broken down as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2" nowrap="nowrap">June 30, 2012</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2" nowrap="nowrap">December 31, 2011</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 74%">Accounts payable</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">467,403</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">601,128</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Mining concessions payable (current
portion)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,319,285</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,018,699</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Accrued
payroll</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
156,768</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
78,048</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt; PADDING-LEFT: 9pt; FONT-WEIGHT: bold">
TOTAL</td>
<td style="PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left; FONT-WEIGHT: bold">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right; FONT-WEIGHT: bold">
1,943,456</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
 </td>
<td style="PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left; FONT-WEIGHT: bold">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right; FONT-WEIGHT: bold">
1,697,875</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
 </td>
</tr>
</table>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Reclassification</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Certain balances in the prior period’s financial statements
were reclassified to conform to the current period’s
presentation.</p>
</div>
P5Y
309165
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The elements for calculation of earnings (loss) per share for the
three and six-month periods ended June 30, 2012 and 2011 were as
follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Six Months Ended June 30</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Three Months Ended June 30</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2012</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2011</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2012</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 48%">Net Loss Attributable to
Common Shareholders</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(7,301,533</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(16,094,804</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(3,760,930</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(13,109,627</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Weighted Average Shares Used in Basic
and Diluted Calculation</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,368,101</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">23,708,676</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,494,746</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">23,888,793</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Loss Per Share Basic and Diluted</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.29</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.68</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.15</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.55</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
</table>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>5.</b></td>
<td style="TEXT-ALIGN: justify"><b>STOCKHOLDERS’
EQUITY</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Subscription Agreement with LIFE</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; TEXT-INDENT: 0px; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On May 6, 2010, the Company entered into a Subscription Agreement
with LIFE. Pursuant to the Subscription Agreement, the Company sold
an aggregate of 19,080,000 (post-split) shares (the
“Shares”) of its common stock to LIFE for an aggregate
purchase price of $100,000, which funds were used to eliminate the
Company’s then current liabilities. The Shares represented
94.1% of the Company’s issued and outstanding shares of
common stock immediately following the transaction, and the
transaction resulted in a change in control of the Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Reverse Stock Split</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On July 28, 2010, the Company executed a reverse stock split of its
common stock in which two new shares of common stock were issued
for every five shares of common stock held as of the date of the
reverse stock split. This reverse split has been applied
retrospectively in the consolidated financial statements.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Convertible Series A Preferred Stock</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On June 1, 2011, the first closing of a private placement of a
minimum of 200 units and a maximum of 300 units for a purchase
price of $100,000 per unit was completed.  Each Unit
consists of 10,000 shares of our Series A Preferred Stock, which
shares initially are convertible into an aggregate
of 50,000 shares of common stock at any time and a
five-year stock purchase warrant entitling the holder thereof to
purchase 3,500 shares of Common Stock for $.01 per share. At the
first closing of the offering, certain holders of 10% convertible
promissory notes converted their notes into shares of Series A
Preferred Stock and were also granted warrants to purchase shares
of common stock at the rate of 3,500 shares for each $100,000
aggregate principal amount of notes converted.   In the
first closing, an aggregate of 2,920,500 shares of Series A
Preferred Stock and warrants to purchase 1,022,175 shares of Common
Stock were issued, in consideration of aggregate cash proceeds of
$22,000,000 and the conversion of notes in the aggregate principal
amount of $7,305,000. Holders of the Series A preferred stock are
entitled to certain rights and preferences over the common stock as
described below. Aggregate cash fees of $1,139,855 were paid to the
placement agents at the first closing.  In addition, the
placement agents were issued five-year warrants, substantially
similar to the warrants sold in the offering, to purchase an
aggregate of 480,000 shares of common stock for an exercise price
of $2.00 per share.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Dividends are payable on the Series A Preferred Stock at the rate
per share (as a percentage of the Stated Rate, which is originally
$10.00) of 9% per annum, payable quarterly, in arrears, on each
March 15, June 15, September 15 and December 15. For dividend
payment dates occurring prior to June 1, 2013, the dividend is
payable one-third in cash and two-thirds in common stock.
Thereafter, the dividend is payable, at the option of the Company,
either 100% in cash or one-third in cash and two-thirds in
stock.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Series A Preferred Stock votes with the common stock as a
single class and each holder of shares of Series A Preferred Stock
shall be entitled to a number of votes equal to the number of
shares of common stock into which such shares of Series A Preferred
Stock could be converted. Each share of Series A Preferred Stock is
convertible at any time at the holder's option into a number of
shares of our common stock equal to $10.00 divided by the
conversion price (initially $2.00), or initially five shares,
subject to adjustment for stock splits, stock dividends,
distributions, subdivisions and combinations.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Series A Preferred Stock is subject to mandatory conversion by
the company commencing November 30, 2012, if the closing bid price
of the company’s common stock exceeds 2.5 times the
then-applicable conversion price for 60 consecutive days. The
Series A Preferred Stock is also subject to mandatory conversion
beginning on the date that 60% or more of the shares of Series A
Preferred issued on June 1, 2011 have been converted to common
stock through voluntary conversion.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Amended Certificate of Designation provides that in the event
of the liquidation, dissolution or winding up of our affairs,
whether voluntary or involuntary, the holders of shares of Series A
Preferred Stock then outstanding would be entitled to receive, out
of assets available for distribution to stockholders, before any
payment is made or any assets distributed to the holders of our
common stock or any other class or series of preferred stock that
is junior to the Series A Preferred Stock, an amount per share of
the Series A Preferred Stock equal to $15.00 as a liquidation
preference. A consolidation or merger with another entity or the
sale or other disposition of all or substantially all of the assets
under specified circumstances would be deemed to be a liquidation,
dissolution or winding up of our company. However, these events are
solely within Company control.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Stock Options</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company is seeking to recruit and retain experienced
professionals from the global energy, natural resource development
and mining industries. The Company will seek to offer compensation
that is commensurate with the qualifications of future employees
and advisors, including the ability to offer equity participation
with vesting provisions typical of early-stage public companies. On
May 12, 2010, the Board of Directors adopted the 2010 Equity
Incentive Plan (“Incentive Plan”), which gives the
Company the ability to grant stock options, stock appreciation
rights (“SARs”), restricted stock and stock bonuses
(collectively, “Awards”) to employees or consultants of
the Company or of any subsidiary of the Company and to non-employee
members of the Company’s board of directors of the Company or
the Company’s subsidiaries. The Incentive Plan was amended on
August 31, 2011.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Board of Directors has authorized 6,133,334 shares of common
stock for issuance under the Incentive Plan. In the event of any
change in the number of shares of Company common stock outstanding
by reason of any stock dividend or split, reverse stock split,
recapitalization, merger, consolidation, combination or exchange of
shares or similar corporate change, the maximum number of shares of
common stock with respect to which the Board of Directors may grant
awards, appropriate adjustments will be made to the shares subject
to the Incentive Plan and to any outstanding Awards. Shares
available for Awards under the Incentive Plan may be either
newly-issued shares or treasury shares. If an Award or portion
thereof shall expire or terminate for any reason without having
been exercised in full, the unexercised shares covered by such
Award shall be available for future grants of Awards under the
Incentive Plan.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The aggregate grant date fair value of stock option awards granted
was determined in accordance with ASC Topic 718. The Company uses
the Black-Scholes Options Pricing Model (Black-Scholes) to estimate
fair value of its stock-based awards. Black-Scholes requires
various judgmental assumptions, including estimating stock price
volatility, expected option life and forfeiture rates. If the
Company had made different assumptions, the amount of its deferred
stock-based compensation, stock-based compensation expense, net
loss and net loss per share amounts could have been significantly
different. The Company believes that it has used reasonable
methodologies, approaches and assumptions to determine the fair
value of its common stock and that deferred stock-based
compensation and related amortization were recorded properly for
accounting purposes. If any of the assumptions used change
significantly, stock-based compensation expense may differ
materially in the future from that recorded in the current
period.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following table sets forth the number of options granted and
outstanding and the weighted average exercise price stock option
activity for the six months ended June 30, 2012:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted
average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number
of shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted
average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
remaining</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">subject to option</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">exercise price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">contractual term</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 61%">Outstanding at December,
31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">3,738,334</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">2.86</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">4.5</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Granted during the period</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">367,200</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.10</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Forfeited / canceled / expired during
the period</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(187,500</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.27</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Exercised during
the period</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Outstanding at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,918,034</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">2.82</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Exercisable at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
1,098,885</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.1</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Shares vested
and expected to vest at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,918,034</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">2.82</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The weighted-average exercise price per share for the options
granted during the six month period ended June 30, 2012 and 2011
was $3.10 per share and $3.17 per share, respectively. The total
intrinsic value of options exercisable during the six months ended
June 30, 2012 and 2011 was $57,750 and $256,200, respectively.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
During the six months ended June 30, 2012 and 2011, the total
intrinsic value of options exercised (i.e. the difference between
the market price at exercise and the price paid by the employee to
exercise the options) was $0 and $57,500, respectively, and the
total amount of cash received from exercise of these options was $0
and $7,250, respectively. The total grant date fair value of stock
options vested during the six months ended June 30, 2012 and 2011
was $0.3 million and $0.5 million, respectively. Stock compensation
expense was $490,268 and $596,478 during the six months ended June
30, 2012 and 2011, respectively, and $1,708,231for the cumulative
period from November 6, 1996 (date of inception) through June 30,
2012.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The following table summarizes information about stock options
outstanding and exercisable as of June 30, 2012:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Stock
Options Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Stock
Options Exercisable</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Range
of</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Number</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Remaining</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Number</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">of
Shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Contractual</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">of
Shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Life in
Years</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercisable</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">530,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: center; WIDTH: 14%">4.0</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">105,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">175,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.4</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">81,250</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">117,200</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.6</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">38,676</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,908,334</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.7</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">577,084</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">50,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.6</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">12,500</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,137,500</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt">4.6</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
284,375</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,918,034</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,098,885</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: center; TEXT-INDENT: 35.4pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Stock Warrants</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company issued warrants to purchase an aggregate of 3,200,000
shares of common stock to investors in the Notes offering. Of those
warrants, 676,000 shares had not been exercised as of June 30,
2012. All of the warrants issued to investors in the Notes offering
expire on June 30, 2015 and have an exercise price of $0.01 per
share. The value of these warrants at issuance had been accounted
for in shareholder’s equity as an increase in additional paid
in capital.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In connection with the Notes financing, the Company issued stock
warrants to purchase an aggregate of 340,640 shares of common stock
to the security brokers in the Notes offering on December 23,
2010.  All of the warrants issued to the security brokers
expire on December 20, 2015 and have an exercise price of $2.50 per
share.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As part of the first closing of the Series A Preferred Stock
Financing, the Company issued stock warrants to purchase an
aggregate of 1,025,675 shares of common stock to the investors in
the Stock Financing on June 1, 2011.  Of those warrants,
975,100 shares had not been exercised as of June 30, 2012. All of
the warrants issued to the Series A preferred stock investors
expire on June 1, 2016 and have an exercise price of $0.01 per
share. In addition, 480,000 in stock warrants were issued to
security brokers in the stock offering. All of the warrants issued
in connection with the Stock Financing expire on June 1, 2016 and
have an exercise price of $2.00 per share.   Except for the
warrants issued to the holders of the converted notes payable, the
fair value of the warrants issued to the holders of Series A
preferred stock and to the security brokers was reported as an
increase and decrease in additional paid-in capital. The fair value
of the warrants issued to the holders of the Notes that were
converted to Series A preferred stock was estimated at $682,753
using the Black-Scholes pricing model, and was accounted for as an
increase in additional paid-in capital and expense.</p>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">A
summary of the stock warrants activity for the six-month period
ended June 30, 2012 is presented below:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of Shares</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Excercise Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 74%">Outstanding at December 31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">2,725,240</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">0.81</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Granted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Exercised</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(53,500</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.01</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Cancelled</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Outstanding at June 30, 2012</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
0.83</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">At June
30, 2012, the range of warrant prices for shares under warrants and
the weighted-average remaining contractual life is as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10" nowrap="nowrap">
Stock Warrants Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">
Stock Warrants Exercisable</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Range of <br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of<br />
Shares<br />
Outstanding</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Remaining<br />
Contractual<br />
Life in Years</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of<br />
Shares<br />
Exercisable</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,651,100</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">4.0</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,651,100</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">100,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">5.0</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">100,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">580,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4.5</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">580,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
340,640</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">3.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
340,640</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Restricted Stock Units</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Board of Directors has authorized a compensation plan for
non-employee directors of the Company beginning January 1, 2012.
Under the plan directors would receive cash compensation of $4,000
per month and $6,250 per month for the Chairman. In addition, each
non-employee board member would receive restricted stock in the
form of restricted stock units (“RSUs”) for each year
of service based upon the fair market value of the stock on the
grant date. The RSUs would be granted on the date of the annual
meeting of shareholders. The vesting period for the restricted
stock units would expire at end of the director’s term which
would normally be the next annual meeting of shareholders.</p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On January 3, 2012, RSU’s of 214,200 were awarded to the
non-employee directors of the Company. The RSU’s vested on
the date of the annual shareholders meeting which was May 8, 2012.
On this date, an additional 416,665 in RSU’s were awarded to
the outside directors. The total fair value related to the 214,200
RSU’s outstanding on June 30, 2012 was $220,222.</p>
</div>
57750
-6740430
-600
-264723
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Inventory</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, inventory principally consists of raw coal
extracted from the Ruku mine and is carried at the lower of cost or
market. Coal inventory costs include labor, supplies, equipment,
operating overhead and other related costs.</p>
</div>
P4Y1M6D
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Share-Based
Compensation</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company accounts for share-based compensation in accordance
with ASC No. 718, <i>Compensation-Stock Compensation</i>, which
establishes accounting for stock-based awards exchanged for
employee services. Accordingly, stock-based compensation cost is
measured at grant date, based on the fair value of the award, and
is recognized as expense on a straight-line basis over the employee
requisite service period, which is generally four years. The
Company’s stock compensation is generally accounted for as an
equity instrument.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
ASC No. 718 requires forfeitures to be estimated at the time of
grant and revised if necessary in subsequent periods if actual
forfeitures differ from those estimates. Changes in estimated
forfeitures will be recognized through a cumulative catch-up
adjustment in the period of change and will also impact the amount
of compensation expense to be recognized in future periods.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Segments</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company operates in one business segment. The Company and its
subsidiaries’ assets are located primarily in the United
States of America and in Colombia.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, long-term assets of approximately $12,000,000
and $900,000 are in Colombia and in the United States,
respectively. As of December 31, 2011, long-term assets of
approximately $10,600,000 and $800,000 were in Colombia and in the
United States, respectively.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
For the six-month period ended June 30, 2012, the Company generated
$823 in revenue from coal sales in Colombia.</p>
</div>
0
-6997196
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Property and Equipment</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Property and equipment, which include ten mining concessions in the
states of Santander and Boyaca, Colombia and construction in
progress, are stated at cost. Mining concessions will be amortized
using the units-of-production method based upon recoverable proven
and probable reserves of the mine and when the Company commences
operation at a specific concession. Equipment is depreciated using
the straight-line method over the estimated useful life of the
asset of 5 years. Repairs and maintenance are charged to expense as
incurred, and costs of significant renewals and improvements are
capitalized.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Cash and Cash Equivalents</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company considers all highly-liquid investments with maturities
of three months or less at the date of purchase to be cash
equivalents. As of June 30, 2012 and December 31, 2011, there were
no cash equivalents.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>2.</b></td>
<td style="TEXT-ALIGN: justify"><b>ACQUISITION OF MINING
ASSETS</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>North Block Mining Project</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On July 19, 2010 the Company entered into an agreement to purchase
two coal concessions (Ingeominas Titles GG7-111 and GG7-11522X).
The concessions have been fully paid for and are listed under the
Company’s name on the official website of the Colombian
mining authority, Ingeominas. Under the terms of the contract, the
Company will pay to the sellers a royalty payment of $2.00 per ton
of coal extracted under the term of the concession. This royalty
payment applies to all coal mined by our Company from these
concessions.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On October 20, 2010 the Company entered into an agreement to
purchase an additional coal concession (Ingeominas title FLG-092).
The Company has paid to the seller $515,000 and owes an additional
$1,000,000 payable in five quarterly payments of $200,000. A
portion of these amounts will offset against the per ton royalty
described below. In addition, the Company has paid to Ingeominas
$114,502, which represents past due governmental fees owed by the
seller. Also, as per the terms of the contract, the Company will
pay to the seller a royalty payment of $2.00 per ton of coal
extracted under the term of the concession. This royalty payment
applies to all coal mined by our Company from this concession; 50%
of this royalty will be applied to amortize the $1,200,000 in
concession payments.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Otanche Mining Project</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On February 11, 2011, the Company made a deposit of $100,000 to
purchase three additional coal concessions in the state of Boyaca,
Colombia. The aggregate purchase price of these concessions was
$2,500,000, of which $888,862 has been paid as of June 30, 2012. An
amount of $222,277 was due upon the Colombian Institute of Mining
and Geology’s approval of a third mining license; this was
paid on January 15, 2012. An amount of $111,138 is due upon the
earlier of the recording and publication of the assignment in the
National Mining Register or 90 days following the prior payment and
the balance of $1,500,000 is payable in three payments of
approximately $500,000 every 6 months thereafter. There will also
be an ongoing royalty payment to the sellers of $2.75 per ton of
coal mined.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Rukú Mining Complex</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On August 22, 2011, the Company entered into an agreement to
purchase a 70% working interest in two coal mining concessions
located near Socota, Colombia from Howerd Milton Cubides Botia (the
“Assignor”). The agreement also included the right to a
concession being permitted and another one in the process of being
purchased. These concessions cover approximately 222 acres and
included a coal mine that has been operating for eighteen years
producing metallurgical coal for the local market. In October 2011,
the agreement was amended with both parties agreeing that the
Assignor would continue to provide capital and operating
expenditures on the mining property through October 18, 2011.
Thereafter, the Company gained operating control of the mining
properties. Operating funds will be provided by each party in
proportion to its interest in the mining concessions, provided that
the Company has agreed to fund the project in full and receive 50%
of the proceeds allocable to the Assignor until the additional
funds provided by us are repaid.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The acquisition was considered to be a purchase of a business and
was accounted for as a purchase business combination effective when
the Company obtained control of the mining assets on
October 18, 2011. Accordingly, the results of operations of
the acquired business are included in the Company’s
consolidated financial statements beginning on October 18, 2011,
the date when the Company obtained control of the mining
assets.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The cost of acquiring the 70% interest is based on a series of
contingent payments over the next three years related to the number
of proven tons of reserves as determined by an independent
engineer’s review of our exploration program multiplied by
certain dollar amounts per ton. The Company initially paid $500,000
to the Assignor upon signing of the agreement in August 2011. Upon
obtaining control on October 18, 2011, the Company determined the
fair value at October 18, 2011 of the mining rights and other
assets acquired, net of liabilities to be $4,540,828. This was
allocated to the assets acquired and liabilities assumed based on
estimated fair values of the assets acquired and liabilities
assumed. The purchase price allocation was as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 70%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Assets Acquired and
Liabilities Assumed</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 82%">Property and
equipment</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 15%">827,238</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Concession mining rights</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,484,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Goodwill</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">230,264</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Taxes
payable</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(674</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
4,540,828</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Total Purchase Price</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Cash paid</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">500,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Contingent earnout liabilities</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,678,580</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Noncontrolling
interest</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,362,248</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
4,540,828</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On February 2, 2012, our Colombian subsidiary entered into a
contract with Dairo Ruben Herrera Perez and Ariel Salcedo Leal in
connection with the assignment of mining concession contract
FI7-081. The concession is adjacent to our Rukú Mining Complex
and will allow more efficient access to Rukú’s coal
resources and ultimately, lower operating costs and improved
safety. The concession has 17 hectares (42 acres) and metallurgical
coal resources similar in quality to Rukú’s. Its permit,
FI7-081, is currently in the construction or preoperative phase.
Compensation for the property includes $167,079 paid at signing of
the agreement on February 3, 2012 and additional $111,386 due upon
governmental approval of the concession’s transfer to our
Colombian subsidiary, which the Company anticipates later this
year.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Boavita Mining Project</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On October 7, 2011, our Colombian subsidiary entered into an
agreement (the “Option Agreement”) with Americana de
Minerales de Exploracion S.A.S. (“AMERALEX”) for the
option to purchase all of the rights of AMERALEX in mining
concession FFB-081 covering approximately 1,550 hectares
(approximately 3,830 acres) located in the jurisdiction of the
Municipalities of Boavita and La Uvita, Department of Boyacá,
Republic of Colombia (the “Boavita Mining Concession”).
Once INGEOMINAS approves the mining plan, we have up to 24 months
to conduct exploration of the entire concession, evaluate and
characterize the coal deposit, and exercise the option. The
purchase price will be determined based upon the determination of
proven and probable reserves using standard methodology. We are
obligated to pay an agreed amount upon reaching a firm purchase
arrangement and approval of the mining plan. We are obligated to
pay an agreed amount nine months after the first payment. Upon
completion of the exploration work, and if we exercise the option
to acquire the concession, we are obligated to make an additional
payment. Beginning 30 months after the initial payment under the
Agreement, we are obligated to make annual payments; however, the
total aggregate purchase price will be limited to the final
calculation of proven and probable reserves, not to exceed an
agreed maximum amount.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: whitesmoke; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On December 27, 2011, we entered into an operations agreement with
AMERALEX which allows for the immediate start of mining operations
on the Boavita Mining Concession once INGEOMINAS, the Colombian
state mining authority, approves the mining plan, which occurred on
March 13, 2012. As compensation to AMERALEX for this right, we paid
$100,000 on the date the agreement was entered into and have agreed
to pay $150,000 upon approval of the agreement by our
company’s board of directors. We have also agreed to pay
AMERALEX a 5% royalty on monthly sales, 50% of which will be offset
by the $250,000 in upfront payments. On March 15, 2012 the
agreement was amended to extend its term 90 days and further define
the manner in which the royalty is calculated.</p>
</div>
P4Y6M
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>6.</b></td>
<td style="TEXT-ALIGN: justify"><b>EARNINGS (LOSS) PER
SHARE</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The elements for calculation of earnings (loss) per share for the
three and six-month periods ended June 30, 2012 and 2011 were as
follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Six Months Ended June 30</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Three Months Ended June 30</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2012</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2011</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">2012</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 48%">Net Loss Attributable to
Common Shareholders</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(7,301,533</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(16,094,804</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(3,760,930</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">(13,109,627</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Weighted Average Shares Used in Basic
and Diluted Calculation</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,368,101</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">23,708,676</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,494,746</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">23,888,793</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Loss Per Share Basic and Diluted</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.29</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.68</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.15</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.55</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s issued and outstanding common shares as of
December 30, 2011 do not include for the underlying shares
exercisable with respect to the issuance of the warrants
exercisable at $0.01 per share. However, the Company has given
effect to the issuance of these warrants in computing loss per
share in accordance with ASC No. 260.</p>
</div>
490268
3.10
-1130961
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Recent Accounting Pronouncements</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
There were no accounting pronouncements or changes in accounting
pronouncements during the six-month period ended June 30, 2012,
that are of significance to the Company.</p>
</div>
2.27
-4000
-6728727
-0.29
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The following table summarizes information about stock options
outstanding and exercisable as of June 30, 2012:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Stock
Options Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">Stock
Options Exercisable</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Weighted-</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Range
of</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Number</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Remaining</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Number</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">of
Shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Contractual</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">of
Shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercise</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Life in
Years</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Exercisable</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Price</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">530,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: center; WIDTH: 14%">4.0</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">105,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.05</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">175,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.4</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">81,250</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.50</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">117,200</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.6</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">38,676</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.70</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,908,334</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.7</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">577,084</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.50</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">50,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center">4.6</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">12,500</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.00</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,137,500</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt">4.6</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
284,375</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">5.00</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,918,034</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: center"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,098,885</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Concentration of Credit
Risk</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 0.5in; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents.
Cash and cash equivalents are deposited with high credit quality
financial institutions to minimize credit risk; however, the
Company may periodically exceed federal deposit insurance
limits.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>7.</b></td>
<td style="TEXT-ALIGN: justify"><b>RELATED PARTY
TRANSACTIONS</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
At June 30, 2012, LIFE owned approximately 26.1% (adjusted for
dilution of shares) of the outstanding shares of the Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As described in Note 4, the Company had a convertible note payable
to LIFE totaling $80,000 as of December 31, 2010. The note was
converted to preferred shares as part of the Stock Financing.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On August 3, 2010, the Company entered into a 3-year management and
services agreement with LIFE pursuant to which LIFE agreed to
provide certain corporate, financial, and merger and acquisition
advisory services to the Company and assistance with securing
equipment leases and other equipment financing through June 30,
2013. Under the terms of the contract, LIFE is paid a fee equal to
the lesser of 1% of gross coal sales or $2 per ton of coal sold
with a minimum monthly fee of $25,000 plus expenses. As of July 18,
2012, the fee was reduced to $12,500 per month. Total management
fees and expenses during the six-month period ended June 30, 2012
were $178,299 compared with $160,000 for the six-month period ended
June 30, 2011. The accrued management fees payable as of June 30,
2012 and December 31, 2011 were $25,000 and $25,000, respectively,
included in “Accounts Payable & Accrued
Liabilities” in the Consolidated Balance Sheets.</p>
</div>
-7580037
-563654
75364
1
563654
-8843767
6740167
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Derivative Instruments</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company issued convertible notes payable that were considered
hybrid financial instruments that blend the characteristics of both
equity and debt securities. They embodied settlement alternatives
available to the holder providing for either redemption of the
principal and interest for cash at maturity (“Forward
Component”) or conversion into the Company’s common
stock (“Embedded Conversion Feature” or
“ECF”).  The convertible notes payable also
embodied contingent equity-linked share price protections on the
ECF in the form of down-round, anti-dilution adjustments to the
conversion price during the term to maturity. The Company
determined that the convertible notes payable contain an embedded
derivative feature that is bifurcated and accounted for as a
derivative instrument in accordance with ASC No. 815-40,
<i>Derivatives and Hedging-Contracts in Entity’s Own
Equity</i>. The embedded conversion feature has been carried at
fair value and marked-to-market at the end of each reporting
period. The Company uses the binomial lattice model to estimate the
fair value of the embedded conversion feature. See Note 4.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>9.</b></td>
<td style="TEXT-ALIGN: justify"><b>SUBSEQUENT EVENTS</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company has evaluated subsequent events through the date that
the unaudited interim consolidated financial statements were
issued. The Company is not aware of any subsequent events which
would require recognition or disclosure in the unaudited interim
financial statements.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following table sets forth the number of options granted and
outstanding and the weighted average exercise price stock option
activity for the six months ended June 30, 2012:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted
average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number
of shares</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted
average</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
remaining</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">subject to option</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">exercise price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">contractual term</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 61%">Outstanding at December,
31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">3,738,334</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">2.86</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">4.5</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Granted during the period</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">367,200</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">3.10</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Forfeited / canceled / expired during
the period</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(187,500</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.27</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Exercised during
the period</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Outstanding at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,918,034</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">2.82</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Exercisable at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
1,098,885</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.1</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Shares vested
and expected to vest at June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,918,034</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">2.82</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">4.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
-6728727
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The purchase price allocation was as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 70%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Assets Acquired and
Liabilities Assumed</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 82%">Property and
equipment</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 15%">827,238</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Concession mining rights</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,484,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Goodwill</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">230,264</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Taxes
payable</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(674</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
4,540,828</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Total Purchase Price</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Cash paid</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">500,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Contingent earnout liabilities</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,678,580</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Noncontrolling
interest</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,362,248</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
4,540,828</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
304337
-700076
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Income Taxes</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled. The effect on
deferred taxes of a change in tax rates is recognized as income in
the period that includes the enactment date. A valuation allowance
is recorded to reduce the carrying amounts of deferred tax assets
unless it is more likely than not that such assets will be
realized.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company recognizes liabilities for uncertain positions based
upon the provisions of ASC No. 740, <i>Income Taxes</i>. The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company accounts for interest and penalties
generated by income tax contingencies as interest expense in the
consolidated statements of operations and comprehensive loss.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s subsidiaries are subject to foreign
taxation.</p>
</div>
-11589
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">A
summary of the stock warrants activity for the six-month period
ended June 30, 2012 is presented below:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of Shares</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Excercise Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 74%">Outstanding at December 31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">2,725,240</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">0.81</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Granted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Exercised</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(53,500</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">(0.01</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Cancelled</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Outstanding at June 30, 2012</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
0.83</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
</table>
</div>
-165204
362715
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The following table shows the changes in Level 3 liability measured
at fair value on a recurring basis for the six-month period ended
June 30, 2012:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Derivative</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Liability -</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Embedded</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Conversion</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Total</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Feature</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Level 3</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 74%">Balance, December 31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Unrealized loss on change in fair
value</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Reclass to
additional paid in capital on maturity of convertible notes</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Balance, June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
P4Y
187500
1086
823
-268000
120836
-263
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>4.</b></td>
<td style="TEXT-ALIGN: justify"><b>CONVERTIBLE NOTES
PAYABLE</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In multiple closings, the most recent taking place on December 21,
2010, the Company issued $8,000,000 aggregate principal amount of
10% convertible promissory notes (the “Notes”). The
proceeds of the Notes offering were used to fund exploration-stage
activities of the Company, including the identification, analysis
and negotiation for coal resources in Colombia that meet the
Company’s criteria for mining, processing and export
potential.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Notes are secured by the Company’s interest in the
business operation of its subsidiary in Colombia. The Notes accrue
interest at an annual rate of 10%. Principal and interest were due
on June 30, 2012 and paid on and shortly thereafter that date. An
amount of $430,000 was outstanding as of June 30, 2012, and was
paid in full in July 2012.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The notes were considered hybrid financial instruments that blend
characteristics of both equity and debt securities. They embodied
settlement alternatives available to the holder providing for
either redemption of the principal and interest for cash at
maturity (“Forward Component”) or conversion into the
Company’s common stock (“Embedded Conversion
Feature” or “ECF”).  The Notes also
embodied contingent equity-linked share price protections on the
ECF in the form of down-round, anti-dilution adjustments to the
conversion price during the term to maturity. As a result, the
Company determined that the Notes contained certain embedded
derivative features. The Company’s evaluation resulted in the
conclusion that the compound derivative financial instrument
required bifurcation and separately accounted for the embedded
conversion option as a derivative liability, carried at fair value
and marked-to-market each reporting period. The aggregate fair
value of the embedded conversion feature was estimated at
$3,072,000 on the date of issuance of the Notes.  At June 30,
2012 and December 31, 2011, the fair value of the embedded
conversion feature was estimated at $0 and $264,000 respectively.
The fair value of the embedded conversion feature liability
pertaining to the Notes that was converted to preferred stock was
adjusted as an increase in preferred stock. The initial value of
the embedded conversion feature was recorded as discount in notes
payable and has been accreted to interest expense method through
the maturity or conversion date of the Notes. The balance of the
unamortized discount related to the ECF was $0 and $75,366 as of
June 30, 2012 and December 31, 2011, respectively.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<font style="FONT-SIZE: 10pt">At the closings of the Notes
issuance, the Company also issued to the Notes investors five-year
warrants to purchase an aggregate of 3,200,000 shares of common
stock for a purchase price of $0.01 per share. The total number of
outstanding warrants issued in the Notes offering was 676,000 and
726,000 as of June 30, 2012 and December 31, 2011 respectively. The
stock warrants were initially recorded as discount on notes payable
and were allocated based upon their relative fair values on the
date of the issuance, which aggregated to $2,388,790. The fair
value of the stock warrants were calculated using the Black-Scholes
pricing model. The discount in notes payable is being amortized to
interest expense through the maturity or conversion date of the
Notes. The portion of unamortized discount pertaining to the Notes
that were converted to preferred stock was adjusted as a reduction
to preferred stock.</font> <font style="FONT-SIZE: 10pt">The
balance of the unamortized discount related to the warrants was $0
and $15,282 as of June 30, 2012 and December 31, 2011,
respectively.</font></p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>1.</b></td>
<td style="TEXT-ALIGN: justify"><b>ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Description of Business and Principles of Consolidation</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Colombia Energy Resources, Inc. (the “Company”) is
engaged in the business of acquiring, developing and operating
metallurgical coal assets in the Republic of Colombia, South
America. The Company owns coal mining concession contracts, which
grant us the right to explore and exploit coal deposits, in the
departments of Boyacá and Santander, areas well-known for
their metallurgical coal formations, and is currently operating and
developing metallurgical coal mines and conducting exploration of
our coal deposits.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Although the Company commenced limited production in December 2011,
it is still considered an exploration stage company under the
criteria set forth by the Securities and Exchange Commission
(“SEC”) since it has not yet demonstrated the existence
of proven or probable reserves, as defined by the SEC, at its
Rukú Mining Complex in Socota, Colombia or at any of its other
properties. As a result, and in accordance with accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) for exploration stage companies, all
expenditures for exploration and evaluation of the Company’s
properties are expensed as incurred and unless mineralized material
is classified as proven or probable reserves, substantially all
expenditures for mine and exploration activities have been and will
continue to be expensed as incurred. Certain expenditures, such as
for mining equipment or other general-purpose equipment, may be
capitalized, subject to evaluation of the possible impairment of
the asset. The Company expects to remain as an exploration stage
company for the foreseeable future. The Company will not exit the
exploration stage unless and until it demonstrates the existence of
proven or probable reserves that meet the SEC guidelines.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The definition of proven and probable reserves is set forth in SEC
<i>Industry Guide 7</i>. Proven reserves are reserves for which (a)
quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; (b) grade and/or quality are
computed from the results of detailed sampling; and (c) the sites
for inspection, sampling and measurement are spaced so closely and
the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. Probable
reserves are reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven
reserves, but the sites for inspection, sampling, and measurement
are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven reserves,
is high enough to assume continuity between points of observation.
In addition, reserves cannot be considered proven and probable
until they are supported by a feasibility study, indicating that
the reserves have had the requisite geologic, technical and
economic work performed and are economically and legally
extractable at the time of the reserve determination.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s current operations are focused on production,
exploration and development activities. The Company has retained
leading engineering and geological services firms in the U.S. and
Colombia to conduct exploration work in selected concessions owned
by the Company. The Company’s team of executives, advisors
and partners is comprised of experienced entrepreneurs and business
professionals in U.S. and Colombia that have a broad breadth of
experience in coal mining and substantial industry
relationships.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Through its wholly-owned subsidiaries, the Company owns 100% of
Colombia Clean Power S.A.S. (formerly known as Energia Andina
Santander Resources S.A.S.), a Colombian company established to
acquire and develop coal concessions. Colombia Clean Power
S.A.S.’ corporate offices are located in Bogota,
Colombia.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Company History and Basis of Reporting</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements and accompanying notes in the
Company's Annual Report on Form 10-K for the year ended December
31, 2011 filed with the SEC on March 30, 2012. The accompanying (a)
consolidated balance sheet as of December 31, 2011, which has been
derived from the audited consolidated financial statements, and (b)
unaudited condensed consolidated financial statements have been
prepared pursuant to SEC Rule 8-03 of Regulation S-X. As a result,
while the Company believes the disclosures made are adequate to
make the information not misleading, certain information and note
disclosures normally included in audited financial statements
prepared in accordance with U.S. GAAP have been condensed or
omitted pursuant to those rules and regulations.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The unaudited results of operations for the interim periods shown
in these financial statements are not necessarily indicative of
operating results for the entire year. In the opinion of
management, the accompanying unaudited condensed consolidated
financial statements recognize all adjustments of a normal
recurring nature considered necessary to fairly state the
Company’s consolidated financial position as of June 30,
2012, and its consolidated results of operations and comprehensive
income (loss) for the three and six months ended June 30, 2012, and
cash flows for the six months ended June 30, 2012.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company was incorporated in the State of Nevada on November 6,
1996 under the name “Freedom Resources Enterprises,
Inc.” to engage in the business of self-help publications and
workshops. Between November 1996 and September 2005 the Company
generated minimal revenues, and in October 2005, the Company ceased
all business operations. From October 2005 to early May 2010, the
Company did not engage in any business activities. Prior to this
period, the Company’s management had been evaluating
potential business opportunities that might be available to the
Company to preserve its shareholders’ investment in its
common shares.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On May 6, 2010, the Company entered into a subscription agreement
(the “Subscription Agreement”) with LIFE Power &
Fuels, LLC (“LIFE”), pursuant to which it issued to
LIFE 19,080,000 (post-split) shares of its common stock, which
shares represented approximately 94.1% of its issued and
outstanding shares of common stock at such time, elected one new
director to its board of directors and changed its management team.
Concurrently with the closing of the transactions contemplated by
the Subscription Agreement, the Company ceased to be a shell
company, as defined in Rule 12b-2 of the Exchange Act, and adopted
a new plan of operations. Subsequently, LIFE sold approximately
4,800,000 shares of the Company's common stock to certain related
parties. Also, in March 2011, LIFE distributed 2,159,996 shares of
the Company’s common stock to LIFE’s limited partner
investors. As of June 30, 2012, LIFE owned approximately 26.1%
(adjusted for dilution of shares) of the outstanding shares of the
Company.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On July 28, 2010, the Company affected a reverse stock split of two
shares for every five shares of common stock outstanding.
Accordingly, outstanding shares and share price of common stock and
stock options were adjusted to account for the effects of the
reverse stock split.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Effective July 28, 2010, the Company changed its name from Freedom
Resources Enterprises, Inc. to “Colombia Clean Power &
Fuels, Inc.”</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In June 2011 we completed a non-public offering of units in which
each unit consisted of 10,000 shares of Series A Preferred Stock
convertible into an aggregate of 50,000 shares of
common stock at any time and a five-year stock purchase warrant
entitling the holder thereof to purchase 3,500 shares of Common
Stock for $0.01 per share. Certain holders of 10% convertible
promissory notes in the aggregate amount of $7,305,000 converted
their notes into 730,500 shares of Series A Preferred Stock and
were also granted warrants to purchase 255,675 shares of our common
stock.   In addition, the Company issued an aggregate of
2,200,000 shares of Series A Preferred Stock and warrants to
purchase 1,022,175 shares of Common Stock in consideration of
aggregate cash proceeds of $22,000,000. Aggregate cash fees of
$1,139,855 were paid to the placement agents.  In
addition, the placement agents were issued five-year warrants,
substantially similar to the warrants sold in the offering, to
purchase an aggregate of 480,000 shares of common stock for an
exercise price of $2.00 per share. The securities sold in this
offering have not been registered under the Securities Act and may
not be offered or sold in the United States absent registration or
an applicable exemption from registration requirements.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On September 6, 2011, shareholders owning a majority of the voting
control of the Company authorized, by written consent, an amendment
to the articles of incorporation to change the name of the Company
from “Colombia Clean Power & Fuels, Inc.” to
“Colombia Energy Resources, Inc.” and authorized the
change of domicile of the Company from the State of Nevada to the
State of Delaware through the merger of the Company with and into a
Delaware corporation formed solely for the purpose of changing
domicile. The effective date of the change of domicile and name
change was November 4, 2011.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On November 7, 2011, the quotation of the Company’s common
stock on the OTC QX was approved.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Going Concern</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements have been prepared in conformity with U.S. GAAP which
contemplates continuation of the Company as a going concern. The
Company has incurred recurring losses since the date of inception
that resulted in an accumulated deficit attributable to common
stockholders of $32,926,828 as of June 30, 2012. At that date, the
Company had $2,460,879 of available cash, which is not adequate to
meet its capital expenditures and operating requirements over the
next 12 months (please refer to Liquidity and Capital Resources on
page 24 for additional information). Accordingly, the Company is
dependent upon obtaining funds from investors. These factors raise
substantial doubt about the ability of the Company to continue as a
going concern. Management plans to raise additional funds through
the issuance of notes or shares of stock in the second half of 2012
in order to meet its capital expenditures and operating
requirements. However, there is no assurance that the Company will
be successful in raising the additional funds it needs. The
unaudited condensed consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Use of Estimates</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Cash and Cash Equivalents</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company considers all highly-liquid investments with maturities
of three months or less at the date of purchase to be cash
equivalents. As of June 30, 2012 and December 31, 2011, there were
no cash equivalents.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Other Current Assets and Other Assets</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Other current assets and other assets include direct expenses
incurred, including the fair value of stock warrants issued to
brokers, as a result of the Company’s Note financing (see
Note 4). Placement agent fees and other direct costs incurred in
this transaction have been amortized over the life of the Notes. As
of June 30, 2012, these costs have been fully amortized.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Inventory</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, inventory principally consists of raw coal
extracted from the Ruku mine and is carried at the lower of cost or
market. Coal inventory costs include labor, supplies, equipment,
operating overhead and other related costs.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Property and Equipment</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Property and equipment, which include ten mining concessions in the
states of Santander and Boyaca, Colombia and construction in
progress, are stated at cost. Mining concessions will be amortized
using the units-of-production method based upon recoverable proven
and probable reserves of the mine and when the Company commences
operation at a specific concession. Equipment is depreciated using
the straight-line method over the estimated useful life of the
asset of 5 years. Repairs and maintenance are charged to expense as
incurred, and costs of significant renewals and improvements are
capitalized.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Impairment of Long-Lived Assets</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Long-lived assets, such as property and equipment are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or asset group may not be
recoverable. Events that trigger a test for recoverability include
material adverse changes in projected revenues and expenses,
significant underperformance relative to historical or projected
future operating results, and significant negative industry or
economic trends. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized for
the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company did not recognize any
impairment charges during the periods presented.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Mineral Exploration and Development Costs</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company accounts for mineral exploration costs in accordance
with Accounting Standards Codification (ASC) No. 930, <i>Extractive
Activities- Mining</i>. All exploration expenditures are expensed
as incurred. Expenditures to acquire new mines (e.g. purchase of
mining concessions), to define further mineralization in existing
ore bodies, and to expand the capacity of operating mines, are
capitalized and will be amortized on a units of production basis
over proven and probable reserves.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Asset Retirement Obligations</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company follows ASC 410-20, <i>Asset Retirement
Obligations</i>, which applies to obligations associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction and development of assets. ASC 410-20
requires that we record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related
long-lived asset.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Derivative Instruments</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company issued convertible notes payable that were considered
hybrid financial instruments that blend the characteristics of both
equity and debt securities. They embodied settlement alternatives
available to the holder providing for either redemption of the
principal and interest for cash at maturity (“Forward
Component”) or conversion into the Company’s common
stock (“Embedded Conversion Feature” or
“ECF”).  The convertible notes payable also
embodied contingent equity-linked share price protections on the
ECF in the form of down-round, anti-dilution adjustments to the
conversion price during the term to maturity. The Company
determined that the convertible notes payable contain an embedded
derivative feature that is bifurcated and accounted for as a
derivative instrument in accordance with ASC No. 815-40,
<i>Derivatives and Hedging-Contracts in Entity’s Own
Equity</i>. The embedded conversion feature has been carried at
fair value and marked-to-market at the end of each reporting
period. The Company uses the binomial lattice model to estimate the
fair value of the embedded conversion feature. See Note 4.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Foreign Currency Translation</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company and its wholly-owned Dutch and Spanish subsidiaries,
Energia Andina Santander Resources Coop UA and Energia Andina
Resources España, S.L., maintain accounting records using U.S.
dollars. Colombia Clean Power S.A.S., the Company’s principal
Colombian subsidiary, maintains accounting records in Colombian
Pesos.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The financial statements of Colombia Clean Power S.A.S. are
translated into U.S. dollars using the closing rate method. The
balance sheet items are translated into U.S. dollars using the
exchange rates at the respective balance sheet dates. The capital
account is translated at the historical exchange rate prevailing at
the time of the transactions while income and expenses items are
translated at the average exchange rate for the year. All exchange
differences are presented as currency translation adjustment within
the “consolidated statements of stockholders equity”.
The foreign currency translation gain or loss resulting from the
translation of the financial statements expressed in Colombian
Pesos to U.S. dollars is reported as a currency translation
adjustment and as a component of “other comprehensive income
(loss)” in the consolidated financial statements.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Earnings (Loss) Per Share</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Earnings (loss) per share are presented in accordance with the
provisions of the ASC No. 260, <i>Earnings Per Share</i>. ASC No.
260 requires presentation of basic and diluted earnings per share
in conjunction with the disclosure of the methodology used in
computing such earnings per share.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Basic earnings (loss) per share excludes dilution and is computed
by dividing net income (loss) available to common stockholders by
the weighted average common shares outstanding during the period.
Diluted earnings (loss) per share takes into account the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock using
the treasury method. The basic and diluted earnings (loss) per
share were the same for the three and six-month periods ended June
30, 2012 and 2011, because the Company was in a net loss
position.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s issued and outstanding common shares as of June
30, 2012 do not include the underlying shares exercisable with
respect to the 1,651,100 outstanding warrants exercisable at $0.01
per share. However, the Company has given effect to the issuance of
these warrants in computing basic loss per share in accordance with
ASC No. 260.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, the Company had outstanding stock warrants,
restricted stock units, and stock options exercisable to purchase,
and convertible preferred stock that were convertible into an
aggregate of 21,723,139 shares of common stock that were considered
anti-dilutive because of the net loss.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Segments</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company operates in one business segment. The Company and its
subsidiaries’ assets are located primarily in the United
States of America and in Colombia.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, long-term assets of approximately $12,000,000
and $900,000 are in Colombia and in the United States,
respectively. As of December 31, 2011, long-term assets of
approximately $10,600,000 and $800,000 were in Colombia and in the
United States, respectively.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
For the six-month period ended June 30, 2012, the Company generated
$823 in revenue from coal sales in Colombia.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Reclassification</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Certain balances in the prior period’s financial statements
were reclassified to conform to the current period’s
presentation.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Concentration of Credit
Risk</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 0.5in; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents.
Cash and cash equivalents are deposited with high credit quality
financial institutions to minimize credit risk; however, the
Company may periodically exceed federal deposit insurance
limits.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Income Taxes</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the periods in which those temporary
differences are expected to be recovered or settled. The effect on
deferred taxes of a change in tax rates is recognized as income in
the period that includes the enactment date. A valuation allowance
is recorded to reduce the carrying amounts of deferred tax assets
unless it is more likely than not that such assets will be
realized.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company recognizes liabilities for uncertain positions based
upon the provisions of ASC No. 740, <i>Income Taxes</i>. The
Company recognizes the effect of income tax positions only if those
positions are more likely than not of being sustained. Recognized
income tax positions are measured at the largest amount that is
greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in
judgment occurs. The Company accounts for interest and penalties
generated by income tax contingencies as interest expense in the
consolidated statements of operations and comprehensive loss.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s subsidiaries are subject to foreign
taxation.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Share-Based
Compensation</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company accounts for share-based compensation in accordance
with ASC No. 718, <i>Compensation-Stock Compensation</i>, which
establishes accounting for stock-based awards exchanged for
employee services. Accordingly, stock-based compensation cost is
measured at grant date, based on the fair value of the award, and
is recognized as expense on a straight-line basis over the employee
requisite service period, which is generally four years. The
Company’s stock compensation is generally accounted for as an
equity instrument.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
ASC No. 718 requires forfeitures to be estimated at the time of
grant and revised if necessary in subsequent periods if actual
forfeitures differ from those estimates. Changes in estimated
forfeitures will be recognized through a cumulative catch-up
adjustment in the period of change and will also impact the amount
of compensation expense to be recognized in future periods.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Fair Value of Financial
Instruments</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 0.5in; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
For financial instruments consisting of cash and cash equivalents,
accounts payable and accrued liabilities, the carrying amounts are
reasonable estimates of fair value due to their relative short
maturities. Based on borrowing rates available to the Company, the
convertible notes payable approximate their fair value. The fair
value of derivative liability was determined using Level 3 inputs
described below.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company adopted amendments to the accounting standard
addressing the measurement of the fair value of financial assets
and financial liabilities. Under this standard, fair value is
defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the
measurement date.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In determining fair values of all reported assets and liabilities
that represent financial instruments, the Company uses the carrying
market values of such amounts. The standard establishes a hierarchy
for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs reflect assumptions market participants would use
in pricing an asset or liability based on market data obtained from
independent sources. Unobservable inputs reflect a reporting
entity’s pricing an asset or liability developed based on the
best information available in the circumstances. The fair value
hierarchy consists of the following three levels:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 1</i>–instrument valuations are obtained from
real-time quotes for transactions in active exchange markets
involving identical assets.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 2</i>–instrument valuations are obtained from
readily-available pricing sources for comparable instruments.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i> </i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 3</i>–instrument valuations are obtained
without observable market values and require a high-level of
judgment to determine the fair value.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
At June 30, 2012, the Company’s only previous financial
liability, embedded conversion feature, was carried at fair value
of $0 using Level 3 inputs, because the notes matured in the period
ended June 30, 2012. The following table shows the changes in Level
3 liability measured at fair value on a recurring basis for the
six-month period ended June 30, 2012:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Derivative</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Liability -</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Embedded</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Conversion</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Total</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Feature</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Level 3</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 74%">Balance, December 31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Unrealized loss on change in fair
value</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Reclass to
additional paid in capital on maturity of convertible notes</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Balance, June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Recent Accounting Pronouncements</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
There were no accounting pronouncements or changes in accounting
pronouncements during the six-month period ended June 30, 2012,
that are of significance to the Company.</p>
</div>
393408
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="WIDTH: 0in"></td>
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>8.</b></td>
<td style="TEXT-ALIGN: justify"><b>COMMITMENTS AND
CONTINGENCIES</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<i> </i></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Mining Concessions</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<i> </i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On July 19, 2010 the Company entered into an agreement to purchase
two coal concessions (Ingeominas Titles GG7-111 and GG7-11522X). As
of June 30, 2012, the concessions have been fully paid for and are
listed under the Company’s name on the official website of
the Colombian mining authority, Ingeominas. Under the terms of the
contract, the Company will pay to the sellers a royalty payment of
$2.00 per ton of coal extracted under the term of the concession.
This royalty payment applies to all coal mined by the Company from
these concessions.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On October 20, 2010 the Company entered into an agreement to
purchase an additional coal concession (Ingeominas title FLG-092)
that forms the North Block Mining Project. The Company has paid to
the seller $515,000 and owes an additional $1,000,000 payable in
five quarterly payments of $200,000. In addition, the Company has
paid to Ingeominas $114,502, which represents past due governmental
fees owed by the seller. Also, as per the terms of the contract,
the Company will pay to the sellers a royalty payment of $2.00 per
ton of coal extracted under the term of the concession. This
royalty payment applies to all coal mined by the Company from this
concession.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On February 11, 2011, the Company deposited $100,000 for three
additional coal concessions in the state of Boyaca, Colombia. The
aggregate purchase price of these concessions was $2,500,000, of
which $888,862 has been paid as of June 30, 2012. An amount of
$222,277 was due upon the Colombian Institute of Mining and
Geology’s approval of a third mining license; this was paid
on January 15, 2012. An amount of $111,138 is due upon the earlier
of the recording and publication of the assignment in the National
Mining Register or 90 days following the prior payment and the
balance of $1,500,000 is payable in three payments of approximately
$500,000 every 6 months thereafter. There will also be an ongoing
royalty payment to the sellers of $2.75 per ton of coal mined.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
All the mining concessions are in the exploration phase. While in
the exploration and construction phase, royalties to the government
are owed based on the applicable minimum wage rate times the number
of hectares. Once the concessions enter the production phase,
royalties owed to the government are equal to 5% of revenues. Each
concession has a 30 year production phase, less the total time
spent in exploration and construction.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Management and Services Agreement with LIFE</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<i> </i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
On August 3, 2010, we entered into a Management and Services
Agreement with LIFE Power & Fuels LLC, a Delaware limited
liability company and one of our principal shareholders, pursuant
to which LIFE agreed to provide certain
corporate,  financial, and merger and acquisition
advisory services and assistance with securing equipment leases and
other equipment financing.  In exchange for its services,
LIFE is entitled to receive a monthly fee equal to the lesser of 1%
of our gross coal sales or $2 per ton of coal sold by us; provided,
however, that such monthly fee shall not be less than
$25,000.  As of July 17, 2012, the fee was reduced to
$12,500 per month. The term of the Management Agreement was
initially 36 months, but the agreement shall automatically renew
for successive 12-month periods unless it is terminated by either
party in writing. Upon termination, and for a period of five years
thereafter, LIFE will continue to be entitled to receive an amount
equal to the lesser of 1% of our gross coal sales or $2 per ton of
coal sold by us from all mines and coking facilities on concessions
acquired or coke projects initiated during the term of the
Management Agreement. During the initial term of this agreement, we
have agreed to pay a minimum of $900,000 to LIFE.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Lease Commitments</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company and its subsidiary in Colombia lease their current
office facilities under non-cancelable operating lease agreements
that expire in 2016. The future minimum lease payments under these
operating leases are as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 94%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Bogota
Quantum</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">San
Anselmo, CA</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Minimum</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Operating Lease</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Operating Lease</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Lease Payment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Year ending December 31:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; WIDTH: 61%">2013</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">197,377</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">5,130</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">202,507</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center">2014</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center">2015</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt">2016</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
115,136</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
115,136</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
707,267</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
5,130</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
712,397</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="TEXT-ALIGN: center; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: center; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Asset Retirement Obligation</b></p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; BACKGROUND-COLOR: white; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In Colombia, the Company is subject to certain environmental and
regulatory obligations which will require the Company to restore
the mine properties after the mining has been completed. Three
months prior to the expected date of completion, the Company is
required to provide a plan for restoration and abandonment and
estimate its cost. At June 30, 2012 the Company has estimated its
asset retirement obligation to be $42,942.</p>
</div>
25368101
<div style="FONT: 10pt Times New Roman, Times, Serif">
<table style="MARGIN-TOP: 0px; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0px" cellspacing="0" cellpadding="0">
<tr style="TEXT-ALIGN: justify; VERTICAL-ALIGN: top">
<td style="TEXT-ALIGN: left; WIDTH: 0.5in"><b>3.</b></td>
<td style="TEXT-ALIGN: justify"><b>ACCOUNTS PAYABLE AND ACCRUED
EXPENSES</b></td>
</tr>
</table>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Accounts payable and accrued liabilities of $1,943,456 and
$1,697,875 as of June 30, 2012 and December 31, 2011, respectively,
are broken down as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif; MARGIN-LEFT: 0.5in" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2" nowrap="nowrap">June 30, 2012</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2" nowrap="nowrap">December 31, 2011</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold" nowrap="nowrap">
 </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 74%">Accounts payable</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">467,403</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">601,128</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Mining concessions payable (current
portion)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,319,285</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,018,699</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Accrued
payroll</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
156,768</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
78,048</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt; PADDING-LEFT: 9pt; FONT-WEIGHT: bold">
TOTAL</td>
<td style="PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left; FONT-WEIGHT: bold">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right; FONT-WEIGHT: bold">
1,943,456</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
 </td>
<td style="PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left; FONT-WEIGHT: bold">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right; FONT-WEIGHT: bold">
1,697,875</td>
</tr>
</table>
</div>
15283
837529
21723139
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The future minimum lease payments under these operating leases are
as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 94%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Bogota
Quantum</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">San
Anselmo, CA</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Minimum</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Operating Lease</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Operating Lease</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Lease Payment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Year ending December 31:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; WIDTH: 61%">2013</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">197,377</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">5,130</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">202,507</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center">2014</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center">2015</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">197,377</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt">2016</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
115,136</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
115,136</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
707,267</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
5,130</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
712,397</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
-6464004
11703
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Impairment of Long-Lived Assets</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Long-lived assets, such as property and equipment are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or asset group may not be
recoverable. Events that trigger a test for recoverability include
material adverse changes in projected revenues and expenses,
significant underperformance relative to historical or projected
future operating results, and significant negative industry or
economic trends. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized for
the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company did not recognize any
impairment charges during the periods presented.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Foreign Currency Translation</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company and its wholly-owned Dutch and Spanish subsidiaries,
Energia Andina Santander Resources Coop UA and Energia Andina
Resources España, S.L., maintain accounting records using U.S.
dollars. Colombia Clean Power S.A.S., the Company’s principal
Colombian subsidiary, maintains accounting records in Colombian
Pesos.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The financial statements of Colombia Clean Power S.A.S. are
translated into U.S. dollars using the closing rate method. The
balance sheet items are translated into U.S. dollars using the
exchange rates at the respective balance sheet dates. The capital
account is translated at the historical exchange rate prevailing at
the time of the transactions while income and expenses items are
translated at the average exchange rate for the year. All exchange
differences are presented as currency translation adjustment within
the “consolidated statements of stockholders equity”.
The foreign currency translation gain or loss resulting from the
translation of the financial statements expressed in Colombian
Pesos to U.S. dollars is reported as a currency translation
adjustment and as a component of “other comprehensive income
(loss)” in the consolidated financial statements.</p>
</div>
180907
367200
48410
-7301533
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Use of Estimates</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Earnings (Loss) Per Share</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Earnings (loss) per share are presented in accordance with the
provisions of the ASC No. 260, <i>Earnings Per Share</i>. ASC No.
260 requires presentation of basic and diluted earnings per share
in conjunction with the disclosure of the methodology used in
computing such earnings per share.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Basic earnings (loss) per share excludes dilution and is computed
by dividing net income (loss) available to common stockholders by
the weighted average common shares outstanding during the period.
Diluted earnings (loss) per share takes into account the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock using
the treasury method. The basic and diluted earnings (loss) per
share were the same for the three and six-month periods ended June
30, 2012 and 2011, because the Company was in a net loss
position.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s issued and outstanding common shares as of June
30, 2012 do not include the underlying shares exercisable with
respect to the 1,651,100 outstanding warrants exercisable at $0.01
per share. However, the Company has given effect to the issuance of
these warrants in computing basic loss per share in accordance with
ASC No. 260.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
As of June 30, 2012, the Company had outstanding stock warrants,
restricted stock units, and stock options exercisable to purchase,
and convertible preferred stock that were convertible into an
aggregate of 21,723,139 shares of common stock that were considered
anti-dilutive because of the net loss.</p>
</div>
435076
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: bold italic 10pt Times New Roman, Times, Serif">
<font style="FONT-STYLE: normal">Fair Value of Financial
Instruments</font></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 0.5in; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
For financial instruments consisting of cash and cash equivalents,
accounts payable and accrued liabilities, the carrying amounts are
reasonable estimates of fair value due to their relative short
maturities. Based on borrowing rates available to the Company, the
convertible notes payable approximate their fair value. The fair
value of derivative liability was determined using Level 3 inputs
described below.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company adopted amendments to the accounting standard
addressing the measurement of the fair value of financial assets
and financial liabilities. Under this standard, fair value is
defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the
measurement date.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In determining fair values of all reported assets and liabilities
that represent financial instruments, the Company uses the carrying
market values of such amounts. The standard establishes a hierarchy
for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs reflect assumptions market participants would use
in pricing an asset or liability based on market data obtained from
independent sources. Unobservable inputs reflect a reporting
entity’s pricing an asset or liability developed based on the
best information available in the circumstances. The fair value
hierarchy consists of the following three levels:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 1</i>–instrument valuations are obtained from
real-time quotes for transactions in active exchange markets
involving identical assets.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 2</i>–instrument valuations are obtained from
readily-available pricing sources for comparable instruments.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i> </i></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px 0pt 13.5pt; FONT: 10pt Times New Roman, Times, Serif">
<i>Level 3</i>–instrument valuations are obtained
without observable market values and require a high-level of
judgment to determine the fair value.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
At June 30, 2012, the Company’s only previous financial
liability, embedded conversion feature, was carried at fair value
of $0 using Level 3 inputs, because the notes matured in the period
ended June 30, 2012. The following table shows the changes in Level
3 liability measured at fair value on a recurring basis for the
six-month period ended June 30, 2012:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Derivative</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Liability -</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Embedded</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
 </td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Conversion</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="2" nowrap="nowrap">
Total</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Feature</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Level 3</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 74%">Balance, December 31, 2011</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 10%">264,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Unrealized loss on change in fair
value</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Reclass to
additional paid in capital on maturity of convertible notes</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(268,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Balance, June 30, 2012</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Asset Retirement Obligations</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b> </b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company follows ASC 410-20, <i>Asset Retirement
Obligations</i>, which applies to obligations associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction and development of assets. ASC 410-20
requires that we record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related
long-lived asset.</p>
</div>
382018
244267
402453
265000
4000
53500
10
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Other Current Assets and Other Assets</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Other current assets and other assets include direct expenses
incurred, including the fair value of stock warrants issued to
brokers, as a result of the Company’s Note financing (see
Note 4). Placement agent fees and other direct costs incurred in
this transaction have been amortized over the life of the Notes. As
of June 30, 2012, these costs have been fully amortized.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Description of Business and Principles of Consolidation</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Colombia Energy Resources, Inc. (the “Company”) is
engaged in the business of acquiring, developing and operating
metallurgical coal assets in the Republic of Colombia, South
America. The Company owns coal mining concession contracts, which
grant us the right to explore and exploit coal deposits, in the
departments of Boyacá and Santander, areas well-known for
their metallurgical coal formations, and is currently operating and
developing metallurgical coal mines and conducting exploration of
our coal deposits.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Although the Company commenced limited production in December 2011,
it is still considered an exploration stage company under the
criteria set forth by the Securities and Exchange Commission
(“SEC”) since it has not yet demonstrated the existence
of proven or probable reserves, as defined by the SEC, at its
Rukú Mining Complex in Socota, Colombia or at any of its other
properties. As a result, and in accordance with accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) for exploration stage companies, all
expenditures for exploration and evaluation of the Company’s
properties are expensed as incurred and unless mineralized material
is classified as proven or probable reserves, substantially all
expenditures for mine and exploration activities have been and will
continue to be expensed as incurred. Certain expenditures, such as
for mining equipment or other general-purpose equipment, may be
capitalized, subject to evaluation of the possible impairment of
the asset. The Company expects to remain as an exploration stage
company for the foreseeable future. The Company will not exit the
exploration stage unless and until it demonstrates the existence of
proven or probable reserves that meet the SEC guidelines.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The definition of proven and probable reserves is set forth in SEC
<i>Industry Guide 7</i>. Proven reserves are reserves for which (a)
quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; (b) grade and/or quality are
computed from the results of detailed sampling; and (c) the sites
for inspection, sampling and measurement are spaced so closely and
the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. Probable
reserves are reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven
reserves, but the sites for inspection, sampling, and measurement
are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven reserves,
is high enough to assume continuity between points of observation.
In addition, reserves cannot be considered proven and probable
until they are supported by a feasibility study, indicating that
the reserves have had the requisite geologic, technical and
economic work performed and are economically and legally
extractable at the time of the reserve determination.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company’s current operations are focused on production,
exploration and development activities. The Company has retained
leading engineering and geological services firms in the U.S. and
Colombia to conduct exploration work in selected concessions owned
by the Company. The Company’s team of executives, advisors
and partners is comprised of experienced entrepreneurs and business
professionals in U.S. and Colombia that have a broad breadth of
experience in coal mining and substantial industry
relationships.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Through its wholly-owned subsidiaries, the Company owns 100% of
Colombia Clean Power S.A.S. (formerly known as Energia Andina
Santander Resources S.A.S.), a Colombian company established to
acquire and develop coal concessions. Colombia Clean Power
S.A.S.’ corporate offices are located in Bogota,
Colombia.</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Mineral Exploration and Development Costs</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The Company accounts for mineral exploration costs in accordance
with Accounting Standards Codification (ASC) No. 930, <i>Extractive
Activities- Mining</i>. All exploration expenditures are expensed
as incurred. Expenditures to acquire new mines (e.g. purchase of
mining concessions), to define further mineralization in existing
ore bodies, and to expand the capacity of operating mines, are
capitalized and will be amortized on a units of production basis
over proven and probable reserves.</p>
</div>
-0.29
300000
0.50
0.05
178299
P30Y
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Going Concern</b></p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The accompanying unaudited condensed consolidated financial
statements have been prepared in conformity with U.S. GAAP which
contemplates continuation of the Company as a going concern. The
Company has incurred recurring losses since the date of inception
that resulted in an accumulated deficit attributable to common
stockholders of $32,926,828 as of June 30, 2012. At that date, the
Company had $2,460,879 of available cash, which is not adequate to
meet its capital expenditures and operating requirements over the
next 12 months (please refer to Liquidity and Capital Resources on
page 24 for additional information). Accordingly, the Company is
dependent upon obtaining funds from investors. These factors raise
substantial doubt about the ability of the Company to continue as a
going concern. Management plans to raise additional funds through
the issuance of notes or shares of stock in the second half of 2012
in order to meet its capital expenditures and operating
requirements. However, there is no assurance that the Company will
be successful in raising the additional funds it needs. The
unaudited condensed consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">At June
30, 2012, the range of warrant prices for shares under warrants and
the weighted-average remaining contractual life is as follows:</p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10" nowrap="nowrap">
Stock Warrants Outstanding</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: center" colspan="6" nowrap="nowrap">
Stock Warrants Exercisable</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Range of <br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of<br />
Shares<br />
Outstanding</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Remaining<br />
Contractual<br />
Life in Years</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Number of<br />
Shares<br />
Exercisable</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2" nowrap="nowrap">Weighted-<br />
Average<br />
Exercise<br />
Price</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,651,100</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">4.0</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,651,100</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.01</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">100,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">5.0</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">100,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.89</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">580,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4.5</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">580,000</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2.00</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
340,640</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">3.5</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
340,640</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">$</td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">2.50</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
2,671,740</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
-268000
4000
2.00
888862
P4Y
0.05
P4Y
P5Y
1.50
P4Y4M24D
P4Y6M
1.70
P4Y7M6D
P3Y6M
2.50
P4Y8M12D
3.00
P4Y7M6D
5.00
P4Y7M6D
823
0.10
2012-06-30
2012-07
0.60
P3M
2388790
3200000
0.6667
0.3333
1.00
220222
0.09
10.00
2011-06-01
2012-11-30
P60D
5
Reverse stock split of two shares for every five shares of common stock outstanding.
0.4
7305000
480000
682753
1025675
3500
22000000
1139855
1022175
480000
2920500
10000
7305000
22000000
1139855
1022175
480000
730500
2200000
10000
255675
2
2
P36M
P12M
515000
114502
2.00
5
0.50
340640
0.01
3
P90D
2.75
3
2
0.70
P18Y
0.50
0.05
2159996
2012-05-08
214200
222277
P90D
2013-06-30
2
P3Y
19080000
416665
309165
-18891639
-600
-264723
154750
41196
9134754
-33025243
1708231
601642
233440
-22127647
682753
-19039843
5782412
-6190622
22000000
453644
6190622
2460879
18894936
8020000
297843
-22127647
-98415
27915171
80926
-2967602
362715
1139855
1086
4383
181782
3297
682753
826894
1982296
1929150
-21862924
-3236008
180907
-223826
-32926828
909200
682753
13280
6439
382018
1901943
2733508
41196
1019950
9134754
265000
20000
4040828
3072000
-2221913
9134754
-13023903
-85640
-3874109
-0.55
2221913
-3874109
85724
-888006
678550
23888793
100764
-3874109
-1652196
-13109627
-0.55
-3449156
-158605
-3608390
-3582349
-0.15
3448893
-3582349
152540
-314100
1086
823
-263
25494746
337186
-3423744
-133193
180907
-3760930
-0.15
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2012-06-30
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2010-11-24
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2012-01-01
2012-06-30
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2012-01-01
2012-06-30
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2012-01-01
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2012-01-01
2012-06-30
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2012-01-01
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2012-01-01
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2012-01-01
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2012-01-01
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2012-01-01
2012-06-30
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2012-01-01
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2011-12-31
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2011-12-31
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2010-12-31
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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2012-06-30
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cerx:SanAnselmoCAMember
2012-06-30
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2012-06-30
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2012-06-30
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2011-10-18
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cerx:RukuMiningComplexMember
2011-10-18
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cerx:BoavitaMiningProjectMembercerx:UnitTwoMember
2011-10-07
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2011-06-30
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2011-06-30
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2010-10-20
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2012-07-17
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2011-06-01
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2011-06-01
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2011-06-01
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2011-06-01
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2011-06-01
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2011-06-01
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cerx:BoavitaMiningProjectMember
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2012-08-09
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cerx:RukuMiningComplexMember
2012-02-03
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2012-02-02
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cerx:RukuMiningComplexMembercerx:UnitOneMember
2012-02-02
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cerx:RukuMiningComplexMember
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cerx:RukuMiningComplexMember
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cerx:OtancheMiningProjectMember
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2010-08-03
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2010-08-03
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iso4217:USD
shares
pure
cerx:acre
cerx:ha
iso4217:USD
cerx:Right
iso4217:USD
shares
cerx:Year
cerx:Segment
cerx:Property
iso4217:USD
cerx:ton
cerx:Installment
Derived from the Company's audited December 31, 2011 consolidated balance sheet.