Heavy Earth Resources, Inc.

On February 20, 2014 the company's subsidiary Deep Core Barbados agreed to buy all of New Horizon Exploration, Inc. from Greg Boyles of Houston. New Horizon holds a 13% interest in the La Maye Block in Colombia, where the company already holds 25%, so a completed deal would raise its stake there. The price is $800,000, less a $200,000 holdback and $404,890.46 of New Horizon debt that Deep Core pays directly, and it can be cut further if New Horizon's debts exceed set limits. Closing depends on Colombian hydrocarbons agency (ANH) approval and other conditions, and the agreement ends if ANH approval is not notified by April 15, 2014 or the deal has not closed by April 30, 2014, unless extended.

material agreement

The company said its 2012 and 2011 financial statements and its June 2013 quarterly report should no longer be relied upon. The errors were in how non-cash oil and gas property costs and related liabilities were shown in the cash flow statements, plus an accrued liability at June 30, 2013 that should have been shown as a note payable. The CFO concluded this on October 16, 2013 (and November 12 for the reclassification) after SEC staff comments, and the company is filing amended reports. Shareholders should treat the earlier figures as superseded.

financial restatement

On August 28, 2013 the company sold all of Deep Core Inc., which holds the 50% Morichito Block interest in Colombia, to Black Energy Oil & Gas Corp. for $1.5 million in cash, with Black Energy also assuming $6 million of existing liabilities and all future Deep Core liabilities. The company keeps a 15% participation interest in Morichito through Deep Core Barbados, held in trust by Black Energy until Colombia's hydrocarbons agency (ANH) approves the transfer. Black Energy must fund exploration there up to $10 million, and the company has a right of first refusal on any resale. The sale reverses the earlier build-up of the Morichito position, leaving the company with a minority stake.

asset acquisition disposition

On February 13, 2013 the company sold one investor a $1,000,000 15% convertible debenture due in three years, plus five-year warrants for 2,000,000 shares at $0.60. The debenture converts at $0.50 per share, below the $0.60 conversion price of the 2012 debentures, and the interest rate is higher. The investor also gets the right to appoint 3 directors as the board grows to 7 members. The subsidiaries guarantee repayment. Shareholders face more debt, more potential dilution and a shift in board control.

capital raising announcement

On December 6, 2012 the company sold one investor a $500,000 6% senior convertible debenture due in three years, plus five-year warrants for 833,333 shares at $0.85. It has the same terms as the August 2012 debenture: conversion at $0.60 per share, interest rising to 12% and 15% if the $6,000,000 public offering and Nasdaq listing targets are missed, subsidiary guarantees, and a registration statement due within 45 days. This adds to the debt and potential dilution from August.

capital raising announcement

On August 29, 2012 the company sold two investors a $1,000,000 6% senior convertible debenture due in three years, plus five-year warrants for 1,666,667 shares at $0.85. The debenture converts at $0.60 per share, and the interest rate rises to 12% if a public offering of at least $6,000,000 isn't completed by December 31, 2012, and to 15% if the stock isn't listed on Nasdaq by January 15, 2013. The subsidiaries (Deep Core Inc., DCX S.A.S., Deep Core (Barbados) Inc.) guarantee repayment. This is the company's first new borrowing since the Deep Core notes were converted to equity in May 2012. If converted and exercised, it would dilute existing shareholders. A resale registration statement is due within 45 days.

capital raising announcement

On May 15, 2012 the La Maye purchase closed, giving the company a 25% participating interest in the La Maye Block (about 68,302 gross acres in Colombia's Lower Magdalena Basin); an exploration well, Noelia-1, drilled in October 2009 is awaiting testing. On the same day DCX withdrew from the SSJN-5 contract with SK Innovation and Petroamerica International, handing over its 25% interest subject to approval by the Colombian hydrocarbons agency (ANH). DCX also agreed to indemnify SK and PIC for past obligations for six months. The attached press release says the exit was to focus on lower-risk opportunities and that the Morichito-5 discovery well was declared commercially viable.

asset acquisition disposition

On May 4, 2012 Deep Core agreed to buy Petro Vista Energy Colombia (Barbados) Corp., which owns a 25% interest in the La Maye Block in Colombia, from Petro Vista Energy Holdings (Barbados) Corp. Payment is $1.00 in cash, a $75,000 final payment and release under an earlier December 2011 agreement, and assumption of the remaining acquisition costs for the interest. This follows up on the La Maye negotiations mentioned in the Deep Core deal. Closing was still subject to conditions.

material agreement

On May 3, 2012 the company (a shell company that had earlier left the film business) acquired Deep Core, Inc., a Cayman Islands company, and changed its business to oil and gas exploration in Colombia through Deep Core's 99.68%-owned subsidiary DCX S.A.S. DCX holds a 50% working interest in an E&P contract including the Morichito Block, and Deep Core was negotiating for a 25% interest in the La Maye Block. The company issued 250,000 shares for Deep Core and 8,574,042 shares on conversion of Deep Core notes ($3,365,000 raised) at $0.40, sold 500,000 shares for $200,000, and director David Choi cancelled 9,324,042 shares, leaving 69,376,000 shares outstanding. Officers Grant Draper and Anthony Ives also run Deep Core, so the filing calls it a related-party transaction.

asset acquisition disposition