10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 000-52979

Heavy Earth Resources, Inc.

(Exact name of registrant as specified in its charter)

Florida

75-3160134

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2101 Cedar Springs Road Suite 1525, Dallas, TX

(Address of principal executive offices) (Zip Code)

(214) 466-2030

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of June 30, 2014, there were 71,371,038 shares of the issuer’s $.001 par value common stock issued and outstanding.

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5
Item 4.	Controls and Procedures	5

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	6
Item 1A.	Risk Factors	6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6
Item 3.	Defaults Upon Senior Securities	6
Item 4.	Mine Safety Disclosures	6
Item 5.	Other Information	6
Item 6.	Exhibits	6

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

HEAVY EARTH RESOURCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2014			December 31, 2013
		(Unaudited)
Assets
Current Assets
Cash	$	2,975		$	965
Other receivables		7,473			1,950
Total current assets		10,448			2,915

Participation in oil and gas property interest, net
		-			-
Total assets	$	10,448		$	2,915

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued liabilities		1,638,029			1,429,529
Related party payables		374,335			379,285
Total current liabilities		2,012,364			1,808,814

Convertible notes payable		2,599,000			2,500,000
Total liabilities		4,611,364			4,308,814

Stockholders’ Equity (Deficit):
Common stock, $0.001 par value 3,000,000 shares authorized, 71,371,038 shares issued and outstanding, respectively		71,371			71,371
Common stock issuance obligation		261,884			213,884
Additional paid in capital		21,802,783			21,802,783
Accumulated deficit		(26,736,954	)		(26,393,937	)

Total stockholders’ equity (deficit)		(4,600,916	)		(4,305,899	)

Total Liabilities and Stockholders’ Equity (Deficit)	$	10,448		$	2,915

See accompanying notes to financial statements.

F-1

HEAVY EARTH RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Revenues	$	-		$	-		$	-		$	-

Operating costs and expenses
Exploration and lease operating costs		-			29,442			-			59,459
Depreciation and amortization		-			2,603			-			3,252
General and administrative		32,785			48,728			97,230			296,089
Legal and professional		25,233			47,012			79,870			288,652
Impairment of oil and gas properties		-			19,580			-			19,580

Total operating expenses		58,018			147,365			177,100			667,032

Loss from Operations		(58,018	)		(147,365	)		(177,100	)		(667,032	)

Other Income (Expense)
Amortization of debt discount		-			(59,250	)		-			(59,250	)
Interest expense		(83,417	)		(22,750	)		(165,917	)		(56,918	)

Total other income (expense)		(83,417	)		(82,000	)		(165,917	)		(116,168	)

Net Loss Before Income Taxes		(141,435	)		(229,365	)		(343,017	)		(783,200	)

Provision For Income Taxes		-			-			-			-

Net Loss / Comprehensive Loss	$	(141,435	)	$	(229,365	)	$	(343,017	)	$	(783,200	)

Loss per share – basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

Weighted average of shares outstanding		70,767,670			71,038,253			70,767,670			71,038,253

See accompanying notes to financial statements.

F-2

HEAVY EARTH RESOURCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months Ended June 30,
	2014			2013
Cash Flows from Operating Activities
Net loss	$	(343,017	)	$	(783,200	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		-			3,252
Common stock for services		48,000			102,000
Common stock issued for late payment penalty		-			59,250
Impairment of oil and gas properties		-			19,580
Changes in operating assets and liabilities:
Decrease in restricted cash		-			97,918
(Increase) in other receivables		(5,523	)		(26,898	)
Increase in accounts payable and accrued liabilities		208,500			236,489
Increase (decrease) in related party payables		(4,950	)		68,571
Net cash used in operating activities		(96,990	)		(220,308	)

Cash Flows from Investing Activities
Decrease in short term investments		-			3,418
Cost of oil and gas properties, plant & equipment		-			(193,044	)
Net cash used in investing activities		-			(189,626	)

Cash Flows from Financing Activities
Proceeds from convertible notes		99,000			-
Net cash provided by financing activities		99,000			-

Foreign currency exchange		-			233,232

Net increase(decrease) in cash		2,010			(176,702	)
Cash, beginning of period		965			178,136
Cash and cash equivalents, end of period	$	2,975		$	1,434

Supplemental Cash Flow Information
Cash Paid For:
Interest	$	-		$	56,918
Income taxes	$	-		$	-
Non-cash transactions:
Common stock for services	$	48,000		$	161,250

See accompanying notes to financial statements.

F-3

HEAVY EARTH RESOURCES, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2014

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Heavy Earth Resources, Inc. (the “Company”) is an oil and gas company focused on exploration and production of oil and natural gas in Central and South America, primarily in the country of Colombia. The Company, through its wholly-owned subsidiary Syncline Technologies, Inc., a Cayman Islands exempt company (“Syncline Technologies”) owns a 25% participating interest in the La Maye Block located in the Lower Magdalena Basin, Colombia (“La Maye Block”). The Company also owns a 15% participation interest in the Morichito Block located in the Llanos Basin, Colombia (the “Morichito Block”). Previously, the Company through its subsidiaries, Deep Core, Inc. (“Deep Core”) and DCX SAS (“DCX”) owned a 50% participating oil and gas interest in the Morichito Block.

On August 28, 2013, the Company closed a transaction with Black Energy Oil & Gas Corp., a company based in Panama with principal operations in Colombia (“Black Energy”), for the sale of the Company’s subsidiary Deep Core, whose principal asset is DCX, for the assumption of liabilities of US$6,000,000. As a part of that transaction, the Company retained a 15% participation interest in the Morichito Block, including a 100% carry up to US$10 million for all expenses related to the Morichito-5 (“M-5”) discovery well and either the M5B well or another prospect.

The Company entered into a Share Purchase Agreement on February 20, 2014 with New Horizon Exploration, a Texas corporation (“New Horizon”), to purchase the both its US and Colombia branches. New Horizon serves as the Operator of the La Maye block. Along with the purchase, the Company will also purchase the remaining participating interest owned by New Horizon. Certain conditions to closing must be met including completed due diligence both with New Horizon and its’ Colombian branch prior to closing.

Basis of Presentation and Functional Currency

The condensed consolidated unaudited financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements included in our annual report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2014, are not necessarily indicative of the results that may be expected for any other interim period or the entire year. For further information, these unaudited financial statements and the related notes should be read in conjunction with our audited financial statements for the year ended December 31, 2014, included in our annual report on Form 10-K.

These unaudited financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America, and are expressed in United States dollars (USD). The Company’s functional currency is Colombian pesos (COP) which have been converted to USD based on the exchange rates at June 30, 2013, for purposes of the Company’s balance sheets and the average rates for the years ended June 30, 2013, for purposes of the Company’s statements of operations in accordance with Accounting Standards Codification 830, Foreign Currency Matters (ASC 830).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.

Oil and Gas Properties

The Company follows the full cost method of accounting for its investments in oil and gas properties. Under the full cost method, all costs associated with the exploration of properties are capitalized into appropriate cost centers within the full cost pool. Internal costs that are capitalized are limited to those costs that can be directly identified with acquisition, exploration, and development activities undertaken and do not include any costs related to production, general corporate overhead, or similar activities. Cost centers are established on a country-by-country basis.

Capitalized costs within the cost centers are amortized on the unit-of-production basis using proved oil and gas reserves. The cost of investments in unevaluated properties and major development projects are excluded from capitalized costs to be amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such a determination is made, the properties are assessed annually to ascertain whether impairment has occurred. The costs of drilling exploratory dry holes are included in the amortization base immediately upon determination that the well is dry.

F-4

For each cost center, capitalized costs are subject to an annual ceiling test, in which the costs shall not exceed the cost center ceiling. The cost center ceiling is equal to: (i) the present value of estimated future net revenues computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus (ii) the cost of properties not being amortized; plus (iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; and less (iv) income tax effects related to differences between the book and tax basis of the properties. If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the cost center ceiling, the excess is charged to expense and separately disclosed during the period in which the excess occurs.

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915) (“ASU 2014-10”) that eliminated certain financial reporting requirements of development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The Company has adopted early application of ASU2014-10 as of January 1, 2014, and accordingly has retroactively applied the provisions therein since these unaudited consolidated financial statements had yet to be issued.

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

2. GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company has incurred a net loss of $26,736,954 through June 30, 2014 and has a working capital deficiency of $2,001,916 at June 30, 2014. The Company is subject to those risks associated with exploration stage companies. The Company has sustained losses since inception and additional debt and equity financing will be required by the Company to fund its development activities and to monetize economically recoverable oil and gas reserves. However, there is no assurance that the Company will be able to obtain additional financing to further its ongoing activities so that profitable operations can be attained.

Management is currently devoting substantially all of its efforts to exploit its existing oil and gas properties and recover as much of the resources available. The Company also continues to search for additional productive properties. There can be no assurance that the Company’s efforts will be successful, or that those efforts will translate in a beneficial manner to the Company. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

3. DIVESTITURE – SALE OF SUBSIDIARY

On August 28, 2013, the Company closed a transaction with Black Energy for the sale of the Company’s subsidiary Deep Core, whose principal asset is DCX, for the assumption of liabilities of US$6,000,000.

As a part of the transaction, the Company retained a 15% participation interest in the Morichito Block, including a 100% carry up to US$10 million for all expenses related to the development of the Morichito-5 (“M-5”) discovery well and either the M5B well or another prospect.

To facilitate the transaction, the Company transferred its ownership of Deep Core Barbados, whose principal asset is a 25% participation in La Maye, to Syncline Technologies.

The Company recorded a loss on sale of subsidiary as of August 28, 2013. Consideration for the sale included the participation interest in the Morichito Block, which was valued at $999,850, representing 15% of the total consideration for the assumption of liabilities and intercompany amounts. The consideration was offset by net assets and liabilities of $7,725,403, and intercompany transactions of $694,160, resulting in a loss on sale of $7,419,713.

4. OIL AND GAS PROPERTIES

During the prior year, DCX had an Exploration and Production Contract with the ANH for exploration and development of the Morichito Block in the Eastern Llanos Basin, Colombia (the E+P Contract). Pursuant to the E+P Contract, DCX maintained an approximately 50% working interest in the Morichito Block in exchange for a 4% net production royalty and a 1% overriding total production royalty plus other terms and conditions. The Morichito Block is comprised of approximately 23,000 hectares, or 57,000 gross acres. The exploration period was divided into six (6) exploration phases of which five (5) have been completed.

As described in Note 3 above, on August 28, 2013, the Company closed a transaction with Black Energy Oil & Gas Corp., a company based in Panama with principal operations in Colombia (“Black Energy”), for the sale of the Company’s subsidiary Deep Core, whose principal asset is DCX, for the assumption of liabilities of US$6,000,000, whereby the Company retained a 15% participation interest in the Morichito Block, including a 100% carry up to US$10 million for the Morichito-5 (“M-5”) discovery well and either the M5B well or another prospect.

F-5

The Company’s wholly owned subsidiary, Syncline Technologies, owns Deep Core Barbados, whose principal asset is a 25% participation interest in La Maye. The La Maye block is located in the lower Magdalena Valley Basin and is approximately 68,302 gross acres. The project has been in force majeure to unusually heavy rains during the last three (3) years. The Company is currently working together with the ANH and its’ partners to consider other options to move the project forward. This includes consideration for a seismic program to complete the year 2014.

5. COMMITMENTS AND CONTINGENCIES

As part of the agreement with Black Energy for the sale of the Company’s subsidiary Deep Core, whose principal asset is DCX, Black Energy agreed to assume all of DCX’s liabilities, including certain legal expenses associated with DCX. The Company entered into a guarantee agreement with DCX’s legal counsel, guaranteeing Black Energy’s payment of legal expenses associated with DCX. The expenses total approximately $120,000 USD.

6. CONVERTIBLE NOTES

Prior to the closing of the Share Exchange Agreement, Deep Core issued the convertible notes in exchange for an aggregate of $3,365,000 in proceeds. Pursuant to the agreement, Deep Core was obligated to repay the outstanding principal balance and accrued interest of the convertible notes by June 23, 2012 at an interest rate of 10% per annum, provided, however, that, upon closing of the Share Exchange Agreement while the convertible notes principal balance and unpaid accrued interest of the would automatically convert into shares of our common stock at a conversion price of $0.40 per share.

Upon closing of the Share Exchange on May 3 2012, the outstanding principal balance and unpaid accrued interest of the convertible notes were all converted at a conversion price of $0.40 per share.

On August 29, 2012, the Company entered into a securities purchase agreement with two investors providing for the issuance of an aggregate principal value of $1,000,000 of a 6% senior convertible note and common stock purchase warrants to purchase an aggregate of 1,666,667 shares of common stock in exchange for the aggregate for $1,000,000 (the “August 2012 Notes”).

The August 2012 Notes are due three years from August 29, 2012, the date of issuance. The August 2012 Notes may be converted at any time at the option of the investors into shares of the Company’s common stock at a conversion price of $0.60 per share. The August 2012 Notes bear interest at the rate of 6% per annum at inception, and increased to 12% per annum on March 31, 2013 since the Company had not consummated a primary public offering of its securities with gross proceeds of at least $6,000,000 on or before that date. Should the Company’s common stock not be listed for trading on the Nasdaq Capital Market or the Nasdaq Global Market by January 15, 2014, the interest rate will further increase to 15% per annum. Last, in the event of default the rate will increase to 18%. Interest is payable quarterly in cash and may be payable in shares of the Company’s common stock if certain conditions are met, including but not limited to, the condition that the Company is not in default and the daily trading volume for the Company’s common stock exceeds 25,000 shares per trading day. The Company has the option to redeem the August 2012 Notes at 115% of the outstanding principal together with any accrued but unpaid interest at any time if certain conditions are met. The August 2012 Notes are secured by the Company’s oil and gas properties.

The warrants grant the each investor the right to purchase up to a number of shares of common stock equal to 100% of the shares underlying the principal amount of the convertible notes issued to each respective investor and have an exercise price of $0.85 per share, are exercisable immediately upon issuance and have a term of exercise of five years from August 29, 2012, the date of issuance.

Pursuant to ASC 470-20 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, the Company determined that a beneficial conversion feature is present for the convertible notes issued during the period ended September 30, 2012 using the intrinsic value in the convertible notes adjusted for amounts allocated to the warrant valuation. The intrinsic value of the convertible notes amounted to $909,958 based on the fair market value of common stock on the respective dates of issuance.

Since the combined value of the warrants ($443,291) plus the intrinsic value of the August 2012 Notes ($909,958) exceeds the fair value of the proceeds received from the issuance of the debt ($1,000,000), the Company is limited to the amount of the proceeds when recording the beneficial conversion feature as debt discount. Using a pro rata contribution, the Company allocated the proceeds first to the warrant valuation in the amount of approximately $443,291 and the remainder to the beneficial conversion feature in the amount of $556,709. The Company immediately amortized the debt discount of $1,000,000 during the prior year since the debt was convertible upon issuance.

On December 6, 2012, the Company entered into a securities purchase agreement with an investor providing for the issuance of an aggregate principal value of $500,000 of a 6% senior convertible note and common stock purchase warrants to purchase an aggregate of 833,333 shares of common stock in exchange for the aggregate for $500,000 (the “December 2012 Note”).

The December 2012 Note is due three years from December 6, 2012, the date of issuance. The December 2012 Note may be converted at any time at the option of the investors into shares of the Company’s common stock at a conversion price of $0.60 per share. The December 2012 Note bears interest at the rate of 6% per annum inception, and increased to 12% per annum on March 31, 2013 since the Company had not consummated a primary public offering of its securities with gross proceeds of at least $6,000,000 on or before that date. Should the Company’s common stock is not be listed for trading on the Nasdaq Capital Market or the Nasdaq Global Market by January 15, 2014 the interest rate will further increase to 15% per annum. Last, in the event of default the rate will increase to 18%. Interest is payable quarterly in cash and may be payable in shares of the Company’s common stock if certain conditions are met, including but not limited to, the condition that the Company is not in default and the daily trading volume for the Company’s common stock exceeds 25,000 shares per trading day. The Company has the option to redeem the December 2012 Note at 115% of the outstanding principal together with any accrued but unpaid interest at any time if certain conditions are met. The December 2012 Note is secured by the Company’s oil and gas properties.

F-6

Pursuant to ASC 470-20 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, the Company determined that a beneficial conversion feature is present for the convertible notes issued during the prior year using the intrinsic value in the December 2012 Note adjusted for amounts allocated to the warrant valuation. The intrinsic value of the December 2012 Note amounted to $909,958 based on the fair market value of common stock on the respective dates of issuance.

Since the combined value of the warrants ($236,446) plus the intrinsic value of the December 2012 Note ($319,779) exceeded the fair value of the proceeds received from the issuance of the debt ($500,000), the Company is limited to the amount of the proceeds when recording the beneficial conversion feature as debt discount. Using a pro rata contribution, the Company allocated the proceeds first to the warrant valuation in the amount of approximately $236,446 and the remainder to the beneficial conversion feature in the amount of $263,554. The Company immediately amortized the debt discount of $500,000 during the prior year since the debt was convertible upon issuance.

On February 8, 2013, the Company entered into a securities purchase agreement with an investor providing for the issuance of an aggregate principal value of $1,000,000 of a 15% senior convertible note and common stock purchase warrants to purchase an aggregate of 2,000,000 shares of common stock in exchange for the aggregate for $1,000,000. The convertible notes will become due and payable three years from February 8, 2013, the date of issuance. The convertible note may be converted at any time at the option of the investors into shares of the Company’s common stock at a conversion price of $0.50 per share. The warrants grant the each investor the right to purchase up to a number of shares of common stock equal to 100% of the shares underlying the principal amount of the convertible notes issued to each respective investor and have an exercise price of $0.60 per share, are exercisable immediately upon issuance and have a term of exercise of five years from February 8, 2013.

The assumptions used in the Black-Scholes option pricing model for the Warrants were as follows:

Risk-free interest rate	0.74	%
Expected volatility of common stock	103	%
Dividend yield	0.00	%
Expected life of warrants and conversion feature	5 years

7. COMMON STOCK

On February 7, 2013, the Company issued 200,000 shares of its common stock to two (2) consultants for services at $0.51/share, or $102,000.

On April 26, 2013, the Company’s board of directors approved: (a) the issuance of 178,922 registered shares of the Company’s common stock (“Interest Shares”) as payment of interest and late fees on its outstanding convertibles notes; and (b) 150,000 restricted shares of the Company’s common stock in exchange for the note holder’s agreeing to waive the “Equity Conditions” set forth in the notes which the Company was required to either meet or have waived by such noteholders prior to issuing the Interest Shares. The Company issued the Interest Shares and the Waiver Shares to the noteholders on May 1, 2013.

On July 22, 2013, the Company’s board of directors approved the issuance of: (a) 281,900 shares of the Company’s registered common stock as payment of interest on its outstanding convertible notes; (b) 125,000 shares of the Company’s restricted common stock in exchange for in exchange for the note holders’ agreeing to waive the “Equity Conditions” set forth in the notes which the Company was required to either meet or have waived by such note holders prior to issuing the Interest Shares; and (c) 100,000 restricted shares of the Company’s common stock to its legal counsel in exchange for such legal counsel agreeing to defer payment for fees owed for legal services provided until the Company is able to close its next financing.

On November 6, 2013, the Company’s board of directors approved the issuance of 107,785 shares of the Company’s restricted common stock as payment to a consultant for business and financial services.

On November 6, 2013, the Company’s board of directors approved the issuance of: (a) 310,813 shares of the Company’s registered common stock as payment of interest on its outstanding convertible notes; and (b) 300,000 shares of the Company’s restricted common stock in exchange for in exchange for the note holders’ agreeing to waive the “Equity Conditions” set forth in the notes which the Company was required to either meet or have waived by such note holders prior to issuing the Interest Shares.

F-7

8. RELATED PARTY PAYABLES

During the period ended June 30, 2014, the Company received advances from officers and shareholders, for operating costs and expenses. These advances are non-interest bearing and are repaid as cash becomes available.

9. SUBSEQUENT EVENTS

Management Changes

Effective September 15, 2014, Anthony Ives resigned as the Chief Financial Officer, Secretary, Treasurer and a member of the Board of Directors of the Company.

On November 3, 2014, Grant Draper resigned as the President, Chief Executive Officer and a member of the Board of Directors of Heavy Earth Resources, Inc. (the ” Company “), effective immediately upon the appointment of Brian Ladin as the Company’s new sole director and sole executive officer.

On November 3, 2014, Brian Hepp resigned as the Chief Operating Officer and a member of the Board of Directors of the Company, effective immediately upon the appointment of Brian Ladin as the Company’s new sole director and sole executive officer.

On November 3, 2014, The Company’s Board of Directors appointed Mr. Brian Ladin, age 42, as the Company’s President, Chief Executive Officer, Chief Operating Officer, Secretary, Treasurer and sole member of the Company’s Board of Directors, to hold office until the Company’s next annual meeting of its shareholders or until his successor(s) are duly elected and qualified.

Business Operations

On November 14, 2014, the Company announced that it is evaluating the strategic alternatives and eventual sale of its participating working interests in the La Maye Block and Morachito Block oil and gas contracts. The Company does not expect to generate sales proceeds in excess of its existing liabilities.

F-8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Critical Accounting Policy and Estimates.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Annual Report on Form 10-K.

Basis of Presentation and Functional Currency

The financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America, and are expressed in United States dollars (“USD”). The Company’s functional currency is Colombian pesos (“COP”) which have been converted to USD based on the exchange rates at June 30, 2013, for purposes of the Company’s balance sheets and the average rates for the periods ended June 30, 2013, for purposes of the Company’s statements of operations in accordance with accounting standards codification 830, Foreign Currency Matters (ASC 830).

Use of Estimates

Cash and Cash Equivalents

For purposes of the balance sheet and statement of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents. As of June 30, 2014 and December 31, 2014, the Company had no cash equivalents.

Fair Value of Financial Instruments

Pursuant to ASC No. 825, Financial Instruments , the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying value of cash, short-term investments, other receivables, inventory, accounts payable and accrued expenses approximate their fair value due to the short period to maturity of these instruments.

Oil and Gas Properties

The following discussion of financial condition and results of operations should be read in conjunction with our audited financial statements for the years ended December 31, 2013, together with notes thereto as included in this Quarterly Report on Form 10-Q.

Results of Operations.

For the three months ended June 30, 2014, as compared to the three months ended June 30, 2013.

Revenues – We had no revenues for the years ended June 30, 2014 and 2013.

Operating Expenses – For the three months ended June 30, 2014, our total operating expenses were $58,018, which consisted of general and administrative expenses of $32,785, and legal and professional fees of $25,233. By comparison, for the three months ended June 30, 2013, our total operating expenses were $147,365, which consisted of exploration and lease operating costs of $29,442, depreciation and amortization expense of $2,603, general and administrative expenses of $48,728, legal and professional fees of $47,012, and impairment of oil and gas of $19,580.

Net Loss – For the three months ended June 30, 2014, we had a net loss of $141,435. By comparison, for the three months ended June 30, 2013, we had a net loss of $229,365. We expect to incur net losses for the foreseeable future.

For the six months ended June 30, 2014, as compared to the six months ended June 30, 2013.

Revenues – We had no revenues for the years ended June 30, 2014 and 2013.

Operating Expenses – For the six months ended June 30, 2014, our total operating expenses were $177,100, which consisted of general and administrative expenses of $97,230, and legal and professional fees of $79,870. By comparison, for the six months ended June 30, 2013, our total operating expenses were $667,032, which consisted of exploration and lease operating costs of $59,459, depreciation and amortization expense of $3,252, general and administrative expenses of $296,089, legal and professional fees of $288,652, and impairment of oil and gas of $19,580.

Net Loss – For the six months ended June 30, 2014, we had a net loss of $343,017. By comparison, for the six months ended June 30, 2013, we had a net loss of $783,200. We expect to incur net losses for the foreseeable future.

Liquidity and Capital Resources – As of June 30, 2014, our total assets were $10,448. Our total current assets consist of cash and cash equivalents of $2,975, and other receivables of $ 7,473.

Our total current liabilities of $2,012,364 consisting of accounts payable and accrued expenses of $1,638,029, and related party payables of $374,335 as of June 30, 2014.

We have been financing our operations through the sale of our securities. Prior to the closing of the Share Exchange on May 4, 2012, Deep Core issued promissory notes to nine holders in exchange for an aggregate of $3,365,000 in proceeds. On the closing of the Share Exchange, the outstanding principal balance and unpaid accrued interest of those notes converted into shares of our common stock at a conversion price of $0.40 per share.

On February 13, 2013, we entered into a securities purchase agreement with a foreign investor pursuant to which we issued to the investor (i) an aggregate principal value of $1,000,000 of 15% convertible debentures and (ii) common stock purchase warrants granting the right to purchase an aggregate of 2,000,000 shares of our common stock at an exercise price of $0.60 per share in exchange for $1,000,000 in proceeds. The shares and warrant were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Regulation S promulgated pursuant to that act by the SEC.

During the period ended June 30, 2013, the Company received advances from officers and shareholders, for operating costs and expenses. These advances are non-interest bearing and are repaid as cash becomes available.

On August 28, 2013, the Company entered into a Share Purchase Agreement with Black Energy to sell of a 100% of its equity ownership of its subsidiary, Deep Core. Pursuant to the Purchase Agreement, the Company agreed to sell to Black Energy, and Black Energy agreed to purchase from the Company, the shares of Deep Core held by the Company, representing all of the issued and outstanding share capital of Deep Core. Deep Core owns 99.675% of the issued and outstanding share capital of DCX, that owns a 50% participating interest in the Morichito Block located in the Llanos Basin, Colombia for the total consideration of $1.5 million (the “Proceeds”) plus the assumption of existing liabilities as well as all future liabilities of Deep Core, and certain other terms and conditions set forth in the Purchase Agreement. The Company retained a 15% participation interest in the Morichito Block Contract, to be held by Deep Core Barbados pursuant to the Letter Agreement dated as of the same date, by and between the Deep Core Barbados and DCX. The Company reported a net loss on the Deep Core share sale totaling $7,419,713.

As of June 30, 2014, we have cash and cash equivalents of $2,975. We expect that our future available capital resources will consist primarily of cash on hand, cash generated from our business, if any, and future debt and/or equity financings, if any.

During 2014, we expect that our subsidiary will continue to incur significant exploration and development costs as we exploit our interests in the Morichito Block, La Maye Block and other interests we may acquire. Our exploration and lease operating costs in the Morichito Block and La Maye Block will be significant and will continue to impact our liquidity. We may also incur additional costs related to any potential acquisition of oil and gas properties or interests in Colombia and other areas of Central and South America. We also expect to incur significant professional fees associated with being a public company as well as significant general and administrative expenses. Those fees will be higher as our business volume and activity increases and will continue to impact our liquidity. Other than the exploration and development costs for the Morichito Block and the La Maye Block, any potential acquisitions costs and anticipated increases in legal and accounting costs and general and administrative expenses, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.

On November 14, 2014, the Company announced that it would evaluate the strategic alternatives and eventual sale of its participating working interests in the La Maye Block and Morachito Block oil and gas contracts. The Company does not expect to generate sales proceeds in excess of its existing liabilities.

We need additional funds to satisfy our working capital requirements to operate at our current level of activity for the next twelve months. Our forecast for the period for which our financial resources will be inadequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors. We must raise additional capital to continue and expand our operations. We cannot guarantee that additional funding will be available on favorable terms, if at all. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows. Additionally, these alternatives could be highly dilutive to our existing shareholders, and may not provide us with sufficient funds to meet our long-term capital requirements. We have and may continue to incur substantial costs in the future in connection with raising capital to fund our business, including investment banking fees, professional fees and other costs. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is insufficient to satisfy our capital needs, we will be required to reduce operating costs, which could hinder our future development of the Morichito Block and the La Maye Block.

We are not currently conducting any research and development activities. We do not anticipate conducting such activities in the near future. We do not anticipate that we will need to purchase or lease additional equipment for the foreseeable future.

Off-Balance Sheet Arrangements.

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) that such information is accumulated and communicated to our principal executive and principal financial officers to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of March, 31, 2014 , the date of this report, our Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were not effective.

Changes in internal controls over financial reporting. There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become party to various legal proceedings. Due to Black Energy’s purchase of the Company’s 100% equity ownership of our previous subsidiary, Deep Core (as described above), which in turn owns 99.675% of the issued and outstanding share capital of DCX, the operator of the Morichito Block, the Company believes that it has no legal proceedings to which it is a party, nor to the best of management’s knowledge, are any material legal proceedings contemplated, except as follows:

Black Energy did not comply with its obligations under the SPA by November 2014, in particular, Clause 5 and Schedule B. It was understood by the parties to the SPA that Black Energy was required, as part of its obligations under the SPA, to undertake those activities within a relatively short space of time (i.e. within about 12 months.) Black Energy did not cause DCX to conduct all exploration activities included in the Exploration Program and the Additional Exploration Program for phase 1 and such exploration activities necessary to commence production of the existing discovery under the E&P Contract. Black Energy also did not pay 100% of all costs and expenses for such exploration activities from and after August 19, 2013 and did not fund such activities up to or including an amount equal to $10,000,000 USD, pursuant to Clause 5. Black Energy also did not pay the share of profits due under the SPA for the end of 2014. Additionally, it has not secured any of the environmental licenses required to complete the work from the Colombian authorities, putting the entire Morichito block at risk of being repossessed by the Colombian government.

Black Energy is in repudiatory breach of the Clause 5 and the time of the essence clause of the SPA. According to Clause 5 of the SPA and in the events, which have happened, the beneficial interest in the Shares has now reverted to the Company, in accordance with the final paragraph of Clause 5 referencing the consequences of a failure to comply, who is entitled to an order requiring the transfer to be effected and registered by Black Energy and the directors of Deep Core.

Item 1A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

31.1		Certification of Principal Executive Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934*

32.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.ins		XBRL Instance Document*

101.def		XBRL Taxonomy Definition Linkbase Document*

101.sch		XBRL Taxonomy Schema Document*

101.cal		XBRL Taxonomy Calculation Linkbase Document*

101.lab		XBRL Taxonomy Label Linkbase Document*

101.pre		XBRL Taxonomy Presentation Linkbase Document*

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Heavy Earth Resources, Inc. a Florida corporation

July 24, 2015	By:	/s/ Brian Ladin
		Brian Ladin
		Principal Executive and Accounting Officer and Sole Director