UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





(Mark One)





x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended June 30, 2011.


or





 ̈ 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:  000-32735





COLOMBIA CLEAN POWER & FUELS, INC.


(Exact name of registrant as specified in its charter)





Nevada

87-0567033(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification No.)One Embarcadero Center, Suite 500, San Francisco,

CA

94901(Address of principal executive offices)

(Zip Code)





(415) 460-1165


(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 Securities Exchange Act of 1934 during the preceding 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).


Yes o  No x




Indicate by check mark whether the registrant is a large accelerated filer, 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  ̈
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: 22,539,396 shares of common stock, par value $.001 per share, were outstanding as of August 2, 2011.








COLOMBIA CLEAN POWER & FUELS, INC.


FORM 10-Q


JUNE 30, 2011





INDEX





PagePART I-FINANCIAL INFORMATIONItem 1. Financial Statements
3Condensed Consolidated Balance  Sheets as of June 30, 2011 (Unaudited) and December 31, 2010
3Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2011 and 2010 and From Inception on November 6, 1996 through June 30, 2011 (Unaudited)
4Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 and From Inception on November 6, 1996 through June 30, 2011 (Unaudited)
5Notes to Condensed Consolidated Financial Statements (Unaudited)
6Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
17Item 3. Quantitative and Qualitative Disclosures About Market Risk
19Item 4. Controls and Procedures
19PART II - OTHER INFORMATIONItem 5. Other Information
19Item 6. Exhibits
19Signatures
20




2





PART I.


Financial Information




Item 1. Financial Statements


COLOMBIA CLEAN POWER & FUELS, INC.


(AN EXPLORATION STAGE COMPANY)


CONDENSED CONSOLIDATED BALANCE SHEETS





June 30, 2011


December 31,

2010 (1)(Unaudited)ASSETSCurrent assets:Cash

$
20,530,251


$
5,027,656Prepaid expenses and other current assets


414,635



747,588Total current assets


20,944,886



5,775,244Property and equipment, net:Mining concessions


5,101,779



2,026,617Equipment


297,849



2,075Construction in progress


570,800



30,000Total


5,970,428



2,058,692less- accumulated depreciation


(17,663
)


-Property and equipment, net


5,952,765



2,058,692Other assets


3,420



341,651TOTAL ASSETS

$
26,901,071


$
8,175,587LIABILITIES AND STOCKHOLDERS' EQUITYLiabilitiesCurrent liabilities:Accounts payable and accrued liabilities

$
2,279,568


$
1,181,295Total current liabilities


2,279,568



1,181,295Long term liabilitiesConvertible notes - related party


-



19,122Convertible notes payable (net of discount)


559,799



2,885,022Interest Payable


62,821



110,846Long-term portion of mining concession payable


1,895,818



400,000Derivative liability - embedded conversion feature


273,480



2,816,000Total long term liabilities


2,791,918



6,230,990Total liabilities


5,071,486



7,412,285Stockholders' equitySeries A Convertible Preferred stock, $.001 par value, 5,000,000 shares authorized, 2,910,500 Shares issued and outstanding; aggregate liquidation preference of $43,657,000


2,911



-Common Stock, $.001 par value, 100,000,000 shares authorized,  22,527,690 shares and 20,549,637 shares issued and outstanding in 2011 and 2010, respectively


22,528



20,550Additional paid-in capital


31,161,304



3,263,345Accumulated deficit


(9,398,977
)


(2,438,927
)Accumulated other comprehensive income ( loss )


41,819



(81,666
)Total stockholders' equity


21,829,585



763,302TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
26,901,071


$
8,175,587





See accompanying notes to condensed consolidated financial statements.





(1) Derived from audited balance sheet included in our annual report on form 10-k for the year ended December 31, 2010.


3





COLOMBIA CLEAN POWER & FUELS, INC.


(AN EXPLORATION STAGE COMPANY)


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


(Unaudited)





For the Three


For the Six


From Inception onMonths Ended


Months Ended


November 6, 1996June 30,


June 30,


June 30,


through June 30,2011


2010


2011


2010


2011Revenue

$
-


$
-


$
-


$
-


$
3,560Expenses:General and administrative


2,221,913



112,861



4,097,818



119,264



6,236,386Loss before other income (expense)


(2,221,913
)


(112,861
)


(4,097,818
)


(119,264
)


(6,232,826
)Other income (expense):Change in fair value of derivative liability-embedded conversion feature


(85,640
)

$
-



6,360



-



262,360Inducement Expense


(678,550
)

$
-



(678,550
)


-



(678,550
)Interest expense, net


(888,006
)

$
(3,122
)


(2,089,278
)


(5,564
)


(2,649,197
)Total other expense, net


(1,652,196
)

$
(3,122
)


(2,761,468
)


(5,564
)


(3,065,387
)Loss before income tax


(3,874,109
)

$
(115,983
)


(6,859,286
)


(124,828
)


(9,298,213
)Provision for income tax


-



-



-



-



-Net loss


(3,874,109
)


(115,983
)


(6,859,286
)


(124,828
)


(9,298,213
)Preferred stock deemed dividend


(9,134,754
)


-



(9,134,754
)


-



(9,134,754
)Preferred stock dividend paid


(100,764
)


-



(100,764
)


-



(100,764
)Net loss attributable to Common Shareholders


(13,109,627
)


(115,983
)


(16,094,804
)


(124,828
)


(18,533,731
)Other comprehensive income (loss):Foreign currency translation adjustment


85,724



1,324



123,485



1,324



41,819Total comprehensive loss

$
(13,023,903
)

$
(114,659
)

$
(15,971,319
)

$
(123,504
)

$
(18,491,912
)Basic and diluted loss per common shareNet Loss

$
(0.16
)

$
(0.01
)

$
(0.29
)

$
(0.02
)Net Loss attributable to Common Shareholders

$
(0.55
)

$
(0.01
)

$
(0.68
)

$
(0.02
)Weighted average common shares


23,888,793



12,489,670



23,708,676



6,836,243





See accompanying notes to condensed consolidated financial statements.


4





COLOMBIA CLEAN POWER & FUELS, INC.


(AN EXPLORATION STAGE COMPANY)


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Six Months Ended


From Inception on

November 6, 1996

through June 30,June 30, 2011


June 30, 2010


2011Cash flows from operating activities:Net loss

$
(6,859,286
)

$
(124,828
)

$
(9,298,213
)Adjustments to reconcile net loss to net cash used by operating activities:Stock compensation cost


596,478



17,904



901,455Amortization of discount on note payable


1,482,205



246



1,847,138Amortization of debt issuance cost


285,335



-



343,955Inducement expense for conversion of convertible notes payable


678,550



-



678,550Unrealized gain on change in fair value of derivative liability-embedded conversion feature


(6,360
)


-



(262,360
)Depreciation


17,115



-



17,115Other


-



-



(4,097
)Changes in assets and liabilities:Other current assets


(278,539
)


(11,689
)


(858,042
)Accounts payable and accrued liabilities


1,098,273



81,141



2,311,031Other assets


(3,420
)


-



(227,058
)Accrued interest payable


(48,025
)


-



62,820Long-term portion of mining concession payable


1,495,818



-



1,895,818Net cash used in operating activities


(1,541,856
)


(37,226
)


(2,591,888
)Cash flows from investing activities:Acquisition of property and equipment


(3,911,188
)


(9,471
)


(5,969,880
)Net cash used in investing activities


(3,911,188
)


(9,471
)


(5,969,880
)Cash flows from financing activities:Net proceeds from issuance of Series A preferred stock


20,860,145



-



20,860,145Net proceeds from issuance of convertible notes payable


-



475,000



8,020,000Net proceeds from issuance of common stock and subscribed capital stock


87



100,000



154,837Proceeds from exercise of stock options and stock warrants


5,510



-



7,610Cash dividends paid


(33,588
)


-



(33,588
)Advances from (repayments to) officers, directors and shareholders


-



(70,705
)


41,196Net cash provided by financing activities


20,832,154



504,295



29,050,200Effect of exchange rate currency changes on cash


123,485



1,324



41,819Net increase in cash


15,502,595



458,922



20,530,251Cash at beginning of period


5,027,656



89



-Cash at end of period

$
20,530,251


$
459,011


$
20,530,251-Supplemental disclosure of noncash financial information:Deemed dividend on Series A prefered stock

$
9,134,754


$
-


$
9,134,754Conversion of the carrying value of notes payable into Series A preferred stock

$
3,826,550


$
-


$
3,826,550Reversal of derivative liability-embedded conversion feature pertaining to notes payable converted to Series A preferred stock

$
2,536,160


$
-


$
2,536,160Reversal of unamortized debt issuance cost pertaining to notes payable converted to Series A preferred stock

$
(667,808
)

$
-


$
(667,808
)Initial fair value of of derivative liability-embedded conversion feature

$
-


$
-


$
(3,072,000
)Issuance of stock warrants in connection with debt

$
-


$
8,671


$
(2,733,508
)Issuance of common stock in connection with conversion of note payable

$
-


$
6,439


$
6,439Extinguishment of payable to a related party

$
-


$
38,853


$
41,196Issuance of common stock for services

$
20,000


$
-


$
20,000Stock dividends issued

$
67,176


$
-


$
67,176





See accompanying notes to condensed consolidated financial statements.


5





COLOMBIA CLEAN POWER & FUELS, INC.


(AN EXPLORATION STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Business




Colombia Clean Power & Fuels, Inc. (the “Company”) is an exploration stage company engaged in the business of acquiring and developing coal mining assets, and proposes to engage in the mining and sale of coal, coke and coal by-products using traditional and clean coal technologies, initially in Colombia, South America. The Company anticipates that its initial operations will include the mining of high-grade, metallurgical coal and coal coking, and that, within the next several years, its operations will include power generation and alternative energy production, such as coal gasification and coal-to-liquids. The Company adopted its new operating strategy based on the size of the Colombia coal market, and opportunities it has identified to acquire substantial coal resources and to build mines in Colombia.




The Company’s current operations are focused on 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 under consideration for acquisition by the Company. The Company’s team of executives, advisors and partners is comprised of experienced entrepreneurs and business professionals in U.S., Colombia and China that have a broad breadth of experience in coal mining and clean coal technologies and substantial industry relationships.





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. has established a corporate office in Bogota and is in the process of recruiting its team of operations, technical, financial, logistics, mining and marketing employees and consultants.




History and Basis of Reporting





The accompanying unaudited 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, 2010 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2011. The accompanying (a) consolidated balance sheet as of December 31, 2010, which has been derived from the audited consolidated financial statements, and (b) unaudited 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 generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to those rules and regulations.





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 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, 2011, and its consolidated results of operations and comprehensive income (loss) for the three and six months ended June 30, 2011 and cash flows for the six months ended June 30, 2011.




The accompanying consolidated financial statements have been prepared in conformity with GAAP in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has not commenced commercial operations. It incurred recurring loses since the date of inception that resulted in an accumulated deficit of approximately $9.4 million as of June 30, 2011. Although the Company had $20.5 million of available cash at June 30, 2011, that amount is not adequate to meet its capital expenditure and operating requirements over the next twelve (12) months. In addition, 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 issuance of notes or shares of stock in 2011 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 consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.


6





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.




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. See Note 2. 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 June30, 2011, LIFE owned approximately 28.1% (adjusted for dilution of shares) of the outstanding shares of the Company.




On July 28, 2010, the Company effected 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.




Effective July 28, 2010, the Company changed its name from Freedom Resources Enterprises, Inc. to “Colombia Clean Power & Fuels, Inc.”





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 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 $.001 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 our 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 $7,205,000.  Aggregate cash fees of $960,000 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.





Principles of Consolidation




The accompanying 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.




Use of Estimates




The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amount 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.





Cash and Cash Equivalents




The Company considers all highly-liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. There were no cash equivalents at June 30, 2011 or December 31, 2010.


7





Other Current Assets and Other Assets





Other current assets and other assets include direct expenses incurred, and 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 are being amortized over the life of the Notes, using the effective-interest method.




Property and Equipment




Property and equipment, which consist of six mining concessions in Santander, Colombia, equipment, and construction in progress, are stated at cost. Mining concessions will be amortized using the units-of-production method based upon proven and probable reserves of the mine and when the Company commences operation.  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.





Mineral Exploration and Development Costs





We account for mineral exploration costs in accordance with Accounting Standards Codification (ASC) No. 932, Extractive Activities.  All exploration expenditures are expensed as incurred.  Expenditures to explore 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.





Derivative Instruments




The Company issued Notes that are considered hybrid financial instruments that blend the characteristics of both equity and debt securities. They embody 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 embody 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 Notes contain an embedded derivative feature that is bifurcated and accounted for as a derivative instrument in accordance with ASC No. 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity. The embedded conversion feature is 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.





Foreign Currency Translation




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 Colombian subsidiary, maintains accounting records using the Colombian Peso.




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 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.”


Earnings (Loss) Per Share




Earnings (loss) per share are presented in accordance with the provisions of the ASC No. 260, “Earnings Per Share.”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.


8





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 are the same for the three and six months  ended June 30, 2011 and 2010 because the Company was in a net loss position.




The Company’s issued and outstanding common shares as of June 30, 2011 do not include the underlying shares exercisable with respect to the issuance of the 2,144,850 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.





During the three and six months ended June 30, 2011, the preferred stock deemed dividend and preferred stock dividends paid, amounting to $9,134,754 and $100,764, respectively, were added to the net loss in order to calculate the loss per share attributable to common shareholders.As of June 30, 2011, the Company had convertible preferred stock,stock warrants and stock options exercisable to purchase, and convertible notes that were convertible into an aggregate of 18,114,973 shares of common stock that were considered anti-dilutive because of the net loss.





Segments




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. 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.





As of June 30, 2011, approximately $6.1 million and $20.8 million of the Company’s assets are in Colombia and in the United States, respectively. As of December 31, 2010, approximately $2 million and $6.2 million of the Company’s assets were in Colombia and in the United States, respectively.





The net operating loss in Colombia and in the United States was approximately $1.8 million and  $5.1 million during the six months ended June 30, 2011and  approximately $1.1 million and $2.8 million during the three months ended June 30, 2011,respectively.





Reclassification





Certain balances in the prior period’s financial statements were reclassified to conform to the current period’s  presentation.





Concentration of Credit Risk





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.





Income Taxes





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 in 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.


9





The Company recognizes liabilities for uncertain positions based upon the provisions of ASC No. 740, “Income Taxes”.  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.





The Company’s subsidiaries are subject to foreign taxation.





Share-Based Compensation





The Company accounts for share-based compensation in accordance with ASC No. 718, “Compensation-Stock Compensation”, 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.





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.





Fair Value of Financial Instruments





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.





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.





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:





Level 1–instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.





Level 2–instrument valuations are obtained from readily-available pricing sources for comparable instruments.





Level 3–instrument valuations are obtained without observable market values and require a high-level of judgment to determine the fair value.


10





The financial instrument that is measured at fair value on a recurring basis is summarized as follows as of June 30 2011:





Liabilities

Level 1


Level 2


Level 3


TotalDerivative liability – embedded conversion feature

$
-


$
-


$
273,480


$
273,480





The following table shows the changes in Level 3 liability measured at fair value on a recurring basis for six months ended  June 30, 2011:





DerivativeLiability -EmbeddedConversion


TotalFeature


Level 3Balance, December 31, 2010

$
2,816,000


$
2,816,000Amount of Unamortized Discount Reversed at 6/30/11


(2,536,160
)


(2,536,160
)Unrealized gain on change in fair value


(6,360
)


(6,360
)Balance, June 30, 2011

$
273,480


$
273,480





Recent Accounting Pronouncements




There were no accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2011 that are of significance to the Company.





2.
PRIVATE PLACEMENTS





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.




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 $.001 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 $7,205,000.  Aggregate cash fees of $960,000 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.





3.
CURRENT LIABILITIES




Accounts Payable and Accrued Liabilities




Accounts payable and accrued liabilities of $2,279,568 existed at June 30, 2011.  This figure represented approximately $1.9 million in accounts payable related to our acquisition of mining concessions which are payable over the next twelve months as well asprofessional fees incurred as of  June 30, 2011 to mining engineers, auditors and financial professionals.


11




4.
CONVERTIBLE NOTES PAYABLE




Notes Payable





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”) to accredited investors in a private placement transaction.  In the first closing of the Series A Preferred Stock, the aggregate principal amount of $7,205,000 was converted to shares of Series A Preferred Stock.  The Company has, as of  June 30, 2011, $795,000 in Notes outstanding. The proceeds of the Note 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.





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 are due on June 30, 2012. The Notes can be converted at any time into common stock at a rate equal to $2.50 of principal for each share of common stock. The Notes are hybrid financial instruments that blend characteristics of both equity and debt securities. They embody 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 embody 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 contain certain embedded derivative features. The Company’s evaluation resulted in the conclusion that the compound derivative financial instrument required bifurcation and separately account for the embedded conversion option as a derivative liability, carried at fair value and marked-to-market each 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, 2011, the fair value of the remaining embedded conversion feature was estimated at $273,480. The fair value of the embedded conversion liability\feature pertaining to the notes that was converted to preferred stock were adjusted as a reduction to preferred stock. The initial value of the embedded conversion feature was recorded as discount in notes payable and is being accreted to interest expense using the effective interest method through the maturity date of the Notes. The balance of the unamortized discount was $176,282 and $2,826,103 as of June 30, 2011and December 31, 2010, respectively.





At the closings of the Note issuance, the Company also issued to the Note 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 Note offering as of June 30, 2011, is 1,126,000. The stock warrants were 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 using the effective interest method through the maturity date of the Notes. The portion of unamortized discount pertaining to the notes that were converted to preferred stock were adjusted as a reduction to preferred stock.The balance of the unamortized discount was $58,919 and $2,269,753 as of June 30, 2011 and December 31, 2010, respectively.


12




5.
STOCKHOLDERS’ EQUITY




Reverse Stock Split





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 financial statements.





Convertible Series A Preferred Stock





In June 2011, the Company issued 2,200,000 shares of Series A convertible preferred stock at $10 per share or for a total amount of $22,000,000.  In addition, the Company issued 720,500 shares of Series A preferred stock upon conversion of certain notes payables aggregating to $7,205,000.   Holders of the Series A preferred stock are entitled to certain rights and preferences over the common stock as described below.





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, commencing June 15, 2011.  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 1/3 in cash and 2/3 in stock.





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. At the date of issuance, the Company deemed that the Series A convertible preferred stock had a beneficial conversion feature and estimated its value at approximately $9.1 million. The amount was recorded as an issuance in additional paid-in capital for preferred stock and a reduction of additional paid-in capital for common stock, and is shown as a preferred stock deemed dividend in the consolidated statements of operations.As of June 30, 2011, 10,000 shares of Series A preferred stock were converted into 50,000 shares of common stocks.





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 in a voluntary conversion.





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 be 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.


13





Stock Warrants and Options


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 advisory board or the board of directors of the Company or the Company’s subsidiaries.





The Board of Directors has authorized  3,300,000 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.





During the six months ended June 30, 2011, the Company granted 750,000 stock options with an estimated total grant-date fair value of approximately $923,053. The stock compensation expense for the stock options granted during the six months ended June 30, 2011 that are not expected to vest was considered immaterial.  The following table sets forth the number of options granted and outstanding and the weighted average exercise price:





Number of

shares subject

to option


Weighted

average

exercise priceOutstanding at January 1, 2011


1,923,334



1.98Granted during the period


750,000



3.17Forfeited/Canceled/Expired during the period


(250,000
)


1.50Exercised during the period


(85,000
)


2.50Outstanding at end of period


2,338,334


$
2.49Exercisable at end of period


793,334


$
2.55





The aggregate grant date fair value of stock option awards granted were determined in accordance with ASC Topic 718 (formerly SFAS123(R).  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.


14





The following table summarizes information about stock options outstanding and exercisable as of June 30, 2011.





Stock Options Outstanding





Stock Options ExercisableWeighted-Average


Weighted-





Weighted-Range of

Number


Remaining


Average


Number


AverageExercise

of Shares


Contractual


Exercise


of Shares


ExercisePrice

Outstanding


Life in Years


Price


Exercisable


Price$0.05


555,000



4.0


$
0.05



210,000


$
0.05$1.50


175,000



4.4


$
1.50



81,250


$
1.50$2.50


1,008,334



4.7


$
2.50



352,084


$
2.50$5.00


600,000



4.6


$
5.00



150,000


$
5.002,338,334











793,334





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, 1,126,000 had not been exercised as of June 30, 2011. 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 has been accounted for in shareholder’s equity as an increase in additional paid in capital.





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.





As part of the first closing of  the Series A Preferred Stock Financing, the Company issued stock warrants to purchase an aggregate of  1,022,175 shares of common stock to the investors in the Stock Financing on June 1, 2011.  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 had no impact on total shareholders equity.  The fair value of the warrants issued to the holders of the notes that were converted to Series A preferred stock was estimated at $678,550, using the Black-Scholes pricing model, and was accounted for as an increase in additional paid-in capital and expense.





6.
RELATED PARTY TRANSACTIONS





At June 30, 2011, LIFE owns approximately 28.1%  (adjusted for dilution of shares) of the outstanding shares of the Company.





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.





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. Total management fees and expenses during the three and six months ended June 30, 2011 were $217,649 and $305,488 respectively. There were no management fees paid during the three and six months ended June 30, 2010. The accrued management fee payable as of  June 30, 2011 and December 31, 2010 was $22,670 and $137,954, respectively, included in “Accounts Payable & Accrued Liabilities” in the Consolidated Balance Sheets.


15





7.
Commitments and Contingencies





Mining Concessions





On July 19, 2010 the Company entered into an agreement to purchase 2 coal concessions (Ingeominas Titles GG7-111 and GG7-11522X). As of June 30, 2011, 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.





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 $315,000 and owes an additional $1,200,000  payable in six payments of $200,000 every three months beginning August 2011. 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 our Company from this concession.





On February 11, 2011, the Company placed a $100,000 deposit on three additional coal concessions in the state of Boyaca, Colombia. The aggregate purchase price of these concessions was $2.50 million, $527,723 of which has been paid as of June 30, 2011. $222,277 is due upon the Colombian Institute of Mining and Geology’s approval of a third mining license. $250,000 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 (expected in November 2011) and the balance of $1,500,000 is payable in three payments of $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.





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 production.  Each concession has a 30 year production phase, less the total time spent in exploration and construction.





Management and Services Agreement with LIFE





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.  The term of the Management Agreement is 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.





Lease Commitments





The Company and its subsidiary in Colombia leases their current office facilities under noncancelable operating lease agreements that expire in 2012.  On June 13, 2011 the Company entered into a lease for expansion space in the same building.  The lease has a four-month term which is extendible.  In addition, on June 28, 2011 the Company entered into a lease for new office space. The future minimum lease payments under this operating lease are as follows:





TotalYear

All Leases2011


129.1242012


285,8972013


202,5072014


197,3772015


197,3772016


115,136Total

$
1,127,417





16





Asset Retirement Obligations
 
 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. As a result, the Company will be required to recognize an asset retirement obligation in the period in which the obligation is incurred in accordance with ASC 410,Asset Retirement and Environmental Obligation.The Company believes that any retirement obligation as of June 30, 2011 is not material because it is still in the exploration stage.





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





Forward-Looking Statement Notice





This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include, but are not limited to:





·
economic conditions generally and in the industries in which we may participate;





·
competition within our chosen industry, including competition from such larger competitors; and





·
technological advances and failure to successfully develop business relationships.





Description of Business





We are an exploration and development stage company, and currently engage in the business of acquiring and developing coal mining assets, and the mining and sale of coal, coke and coal by-products using traditional and clean coal technologies, initially in Colombia, South America.  Colombian coal is recognized worldwide for its high-heat-value, low-ash and low-sulfur contents.  As the nation’s second largest export item after oil, investment and development of sustainable coal mining is an important priority for the Colombian government.





In Colombia, the state owns all hydrocarbon reserves and private companies operate coal mines under concession contracts with the state. The Company is in the process of securing concessions in the Santander region of Colombia.  The Company has established an initial target to control over 300 million tons of metallurgical coal through concessions.  The Santander region was selected because of its large metallurgical coal resources, its location on the Magdalena River with river access for shipping, and its proximity to Colombia’s main pipeline and several other refined products pipelines.  Colombia is the world’s tenth largest producer and fourth largest exporter of coal, with an estimated 7 billion metric tons (“MT”) of recoverable reserves and 17 billion MT of potential reserves.





The Company anticipates that its primary operations will include the mining of high-grade, metallurgical coal, coal coking, power generation and alternative energy production, such as coal gasification and coal-to-liquids.




We were incorporated under the name Freedom Resources Enterprises, Inc. in the State of Nevada on November 6, 1996 to engage in the business of self-help publications and workshops.  Between November 1996 and September 2005, the Company only 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 shareholder’s investment in its common shares.   On July 28, 2010, we completed a name change to Colombia Clean Power & Fuels, Inc.


17





Critical Accounting Policies and Estimates




For a discussion of our critical accounting policies, see Note 1 to the Consolidated financial statements.




New Accounting Standards




Refer to Note 1 in the notes to unaudited condensed consolidated financial statements for a discussion of new accounting standards.





Six-Month Period Ended June 30, 2011 and 2010





Our revenues since inception total $3,560  and we have a cumulative net loss of $9,298,213 from inception through June 30, 2011. We did not have any revenues for the six months ended June 30, 2011or 2010. For the six months ended June 30, 2011, our net loss was $6,859,286 compared to $124,828 for the same period in 2010. The increase in our net loss was due to increased expenses, primarily increased employee expense, outside professional services for mine engineering, legal, and accounting services related to our recommencing operations during the second quarter of 2010 as well as interest expense related to our Convertible Note offering completed in December 2010.  Expenses during the six months ended June 30, 2011, consisted mainly of  $4,097,818 in general and administrative expense, $2,089,278 in net interest expense, and $678,550 in inducement expense for the conversion of the notes payable into Series A Preferred Stock.  Expenses during the same period in 2010 consisted of $5,564 in net interest expense and $119,264 in general and administrative expenses. Loss per share in the six months ended June 30, 2011 was ($.29) compared to a loss per share of of ($0.02) in the six months ended June 30, 2010, based on weighted averages of 23,708,676 and 6,836,243 shares outstanding during the respective periods.





Three-Month Period Ended June 30, 2011 and 2010





. For the three months ended June 30, 2011, our net loss was $3,874,109 compared to $115,983 for the same period in 2010.  Expenses during the three months ended June 30, 2011, consisted of  $2,221,913 in general and administrative expense and $888,006 in net interest expense,  Expenses during the same period in 2010 consisted of $3,122 in net interest expense and $112,861 in general and administrative expenses. Loss per share in the three months ended June 30, 2011 was ($0.16) compared to a loss per share of of ($0.01) in the three months ended June 30, 2010, based on weighted averages of 23,888,793 and 12,489,670 shares outstanding during the respective periods.





Liquidity and Capital Resources





At June 30, 2011, we had $20,530,251 in cash and $18,665,318 in working capital.  At June 30, 2011, we also had total liabilities of $5,071,486. We anticipate funding our operation expenses with additional financings of debt and/or equity securities.




As of June 30, 2011, our total assets were $26,901,071 consisting of cash, prepaid expenses and mining concessions. The increase in assets since December 31, 2010 is principally due to the funding provided by the Series A Preferred Stock Issuance.





Management anticipates that we will be dependent, for the near future, on additional capital to fund our operating expenses and anticipated growth.  Our operating losses have been funded through the issuance of equity securities and borrowings.  We will need additional funding in order to continue our business operations.  While we continually look for additional financing sources, in the current economic environment, the procurement of outside funding is extremely difficult and there can be no assurance that such financing will be available, or, if available, that such financing will be at a price that will be acceptable to us. Failure to generate sufficient revenue or raise additional capital would have an adverse impact on our ability to achieve our longer-term business objectives, and would adversely affect our ability to continue operating as a going concern.





Off Balance-Sheet Arrangements





There are no off-balance sheet arrangements or obligations that are not disclosed in the financial statements.




18




Item 3. Qualitative and Quantitative Disclosures About Market Risk





Not applicable.





Item 4. Controls And Procedures





Evaluation of disclosure controls and procedures





We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) under the Exchange Act as of June 30, 2011, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2011, our disclosure controls and procedures were effective.





Changes in internal control over financial reporting





There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during our most recent fiscal quarter ended June 30, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





PART II                OTHER INFORMATION




Item 5.  Other Information





On August 11, 2011, the Board of Directors approved an amendment to Section 3(a)(xiii) and to Section 4(b) of the Company’s Certificate of Designations for the Series A Convertible Preferred Stock.  The amendment was approved by a holder of a majority of the outstanding shares of Series A Convertible Preferred Stock. Set forth below is the text of the amendment with the changes designated:




3(a)(xiii) effect any transaction resulting in a “change of control.” “Change of control” means a consolidation or merger of the Company with or into any other corporation or corporations  or the disposition by sale or otherwise of all or substantially all of the Company’s assets, or the acquisition of the Company by means of any transaction or series of related transactions, including, without limitation, any reorganization, merger or consolidation, if, following such transaction, the holders of the outstanding voting power of the Corporation prior to the transaction cease to hold, directly or indirectly, a majority of the outstanding voting power of the surviving entity.




4(b) Certain Events Deemed a Liquidation; Election as to Consideration. Upon consent of the Board of Directors,aconsolidation or merger of the Company with or into any other corporation or corporations, or a sale or other disposition of all or substantially all of the assets of the Company, or the effectuation by the Company of a transaction or series of related transactions in which, following such transaction(s), the holders of the outstanding voting power of the Company prior to the transaction cease to hold, directly or indirectly, a majority of the outstanding voting power of the surviving entity, shall be deemed to be a liquidation, dissolution, or winding up within the meaning of this Section 4. Notwithstanding anything to the contrary herein, including Section 4(a), in the event of the occurrence of the transactions in the foregoing sentence, each holder of Series A Preferred Stock shall have the option to receive (i) an amount equal to the Liquidation Preference Amount or (ii) the amount that such holder would have received if it had converted its Series A Preferred Stock into Common Stock immediately prior to the closing of such transaction (without giving effect to the liquidation preference of, or any dividends payable on, any other capital stock of the Company).





A copy of the amendment is attached as an exhibit to this report.





Item 6.   Exhibits




The exhibits required by this item are set forth on the Exhibit Index attached hereto.





SIGNATURE PAGE FOLLOWS


19





SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) 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.




Colombia Clean Power & Fuels, Inc.August 15, 2011
By:
/s/ Edward P. MooneyEdward P. Mooney, Chief Executive Officer

(Principal Executive Officer)




August 15, 2011
By:
/s/ James A. FloresJames A. Flores, Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)




20





EXHIBIT INDEX





Exhibit

Number

Description of Exhibit3.1

Amendment to Certificate of Designation for Series A Convertible Preferred Stock31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).




21