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 November 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to __________
Commission file number 000-130048
| Black Hawk Exploration Inc. |
| (Exact name of small business issuer as specified in its charter) |
| Nevada | N/A | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) 27-0670160 |
| 1174 Manito NW, PO Box 363, Fox Island, WA 98333 |
| (Address of principal executive offices) |
| (253) 973-7135 |
| (Issuer's telephone number) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Check whether the issuer: (1) 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. Yes [X] No [ ]
| Accelerated filer ¨ | |
| Non-accelerated filer “ (Do not check if a smaller reporting company) | Smaller reporting company X |
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
59,201,428 common shares issued and outstanding as at January 13, 2010
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). . Yes [ X ] No [ ]
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
| November 30, | August 31, | |||||||
| 2009 | 2009 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 234,684 | $ | 13,000 | ||||
| Prepaid expenses | 8,500 | 33,500 | ||||||
| Total current assets | 243,184 | 46,500 | ||||||
| Mineral property claims | 25,171 | 3,700 | ||||||
| Total assets | $ | 268,355 | $ | 50,200 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 9,000 | $ | - | ||||
| Total current liabilities | 9,000 | - | ||||||
| Total liabilities | 9,000 | - | ||||||
| COMMITMENTS | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock, $.001 par value, 300,000,000 shares authorized, | ||||||||
| 59,201,428 shares issued and outstanding as of November 30, 2009 and August 31, 2009 | 59,201 | 59,201 | ||||||
| Additional paid-in capital | 942,098 | 687,099 | ||||||
| Deficit accumulated during the exploration stage | (741,944 | ) | (696,100 | ) | ||||
| Total Stockholders' Equity | 259,355 | 50,200 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 268,355 | $ | 50,200 | ||||
The accompanying notes are an integral part of these consolidated financial statements
F-1
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended November 30, 2009 and 2008
and the Period from April 14, 2005 (Inception) through November 30, 2009
(Unaudited)
Three Months Ended November 30, | Inception through | |||||||||||
| 2009 | 2008 | November 30, 2009 | ||||||||||
| Cost and expenses: | ||||||||||||
| Mineral costs | $ | 7,963 | $ | - | $ | 9,793 | ||||||
| General and administrative | 37,881 | 5,510 | 177,589 | |||||||||
| Stock-based compensation | - | - | 30,000 | |||||||||
| Impairment of mineral property costs | - | - | 524,562 | |||||||||
| Loss from operations | (45,844 | ) | (5,510 | ) | (741,944 | ) | ||||||
| Net loss | $ | (45,844 | ) | $ | (5,510 | ) | $ | (741,944 | ) | |||
| Net loss per share: | ||||||||||||
| Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic and diluted | 59,201,428 | 58,301,428 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-2
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended August 31, 2009 and 2008
and Period from April 14, 2005 (Inception) through August 31, 2009
(Unaudited)
Three Months Ended November 30, 2009 | Three Months Ended November 30, 2008 | Inception through November 30, 2009 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net loss | $ | (45,844 | ) | $ | (5,510 | ) | $ | (741,944 | ) | |||
| Adjustments to reconcile net loss to cash used by operating activities: | ||||||||||||
| Impairment of mineral property costs | - | - | 524,562 | |||||||||
| Stock-based compensation | - | - | 30,000 | |||||||||
| Net change in: | ||||||||||||
| Prepaid expenses | 3,529 | - | (29,971 | ) | ||||||||
| Accounts payable | 9,000 | 290 | 9,000 | |||||||||
| Due to related party | - | - | - | |||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES | (33,315 | ) | (5,220 | ) | (208,353 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Mineral property expenditures | - | - | (346,262 | ) | ||||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | - | - | (346,262 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Cash received from sales of common stock | 254,999 | - | 789,299 | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | 254,999 | - | 789,299 | |||||||||
| NET INCREASE (DECREASE) IN CASH | 221,684 | (5,220 | ) | 234,684 | ||||||||
| Cash, beginning of period | 13,000 | 26,393 | - | |||||||||
| Cash, end of period | $ | 234,684 | $ | 21,173 | $ | 234,684 | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for interest | $ | - | $ | - | $ | - | ||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON CASH TRANSACTION: | ||||||||||||
| Stock issued for mineral property costs | $ | - | $ | - | $ | 182,000 | ||||||
| Reclassification of deposit to mineral property costs | $ | 21,471 | $ | - | $ | 21,471 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
F-3
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of Black Hawk Exploration Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's registration statement filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year August 31, 2009 as reported in Form 10-K, have been omitted.
The Company has evaluated subsequent events for recognition or disclosure through January 13, 2010, the date these financial statements were available to be issued.
During August, 2009, a geologist engaged by the Company identified and acquired 56 lithium claims in the State of Nevada on behalf of the Company. The titles to these claims were transferred to the Company in November, 2009.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the three months ended November 30, 2009, in accordance with a consulting agreement signed in July, 2009 and amended in September, 2009, the Company paid total consulting fees of $13,000 to a private company that has a common director with the Company.
NOTE 4 - COMMITMENTS
In accordance with the amended consulting agreements with a related party of the Company, the Company pays the related consultant consulting fees of $4,500 per month and a maximum of $500 for preapproved expenses per month to February, 2010.
NOTE 5 - COMMON STOCK
On October 16, 2009 the Company received gross proceeds of $54,999 for subscriptions of 64,705 shares of the Company’s common stock at $0.85 per share. These shares have not been issued to date.
On October 19, 2009 the Company entered into an equity financing agreement (the “Financing Agreement”), whereby the Company may draw up to $1,000,000 by issuing units (the “Units”) at $0.85 per unit with each unit consisting of one share of the Company’s common stock and one common stock purchase warrant exercisable into one common share for two years, at $1.05 for the first 12 months and $1.25 for the second 12 months. Under the term of the agreement the Company has the right to call upon funds as needed. The advances are at the discretion of the counter-party. In accordance with the Financing Agreement, on November 20, 2009 the Company received gross proceeds of $200,000 for subscription of 235,294 units at $0.85 per unit. The shares of common stock have not been issued to date.
F-4
NOTE 6 – SUBSEQUENT EVENTS
On December 1, 2009 the Company entered into an office rent agreement with a public company that has a common director and officer with the Company at $400 per month for office space in Nevada. The term of the agreement is on a month by month basis starting from December, 2009. A deposit of $1,200 was paid upon signing of the agreement.
On December 8, 2009 the Company formed Golden Black Hawk, Inc., a wholly owned subsidiary under the laws of the State of Nevada to acquire, explore and develop gold properties in the United States and Canada.
On December 10, 2009, (the “Effective Date”), the Company entered into a property interest purchase option agreement (the “Option Agreement”) with HuntMountain Resources Ltd. (“HuntMountain”), a public company that has the option right to acquire 100% interest in a total of 73 mining claims (the “Claims”) in Pershing County in the State of Nevada (the “Property”).
The Option Agreement entitles the Company to acquire undivided legal and beneficial interests of up to 75% in the Property free and clear of all liens, charges and claims of others. Considerations for the Option Agreement are as follows:
| - | An initial payment of $50,000 (paid) and issuance of 250,000 restricted shares of common stock (not issued) on the Effective Date; |
| - | A further payment of $25,000 and issuance of 100,000 restricted shares of common stock on the first anniversary of the Effective Date; |
| - | A further payment of $25,000 on the second anniversary of the Effective Date; |
| - | Incur or fund expenditures on the Property of not less than $700,000 on or before the fourth anniversary of the Effective Date. |
F-5
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars ($, or US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "CDN$" refer to Canadian dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our", and "Black Hawk" mean Black Hawk Exploration Inc., unless otherwise indicated.
Corporate History
We were incorporated in the State of Nevada on April 14, 2005. We are engaged in the acquisition and exploration of mining properties. We maintain our statutory registered agent's office at 9360 W. Flamingo #110-158 Las Vegas, NV 89147 and our business office is located at 1174 Manitou Dr.,PO Box 363, Fox Island, WA 98333. Our fiscal year end is August 31st. On March 15, 2007, we approved a ten (10) for one (1) forward stock split of our authorized, issued and outstanding shares of common stock. We amended our Articles of Incorporation by the filing of a Certificate of Change with the Nevada Secretary of State wherein it stated that we would issue ten shares for every one share of common stock issued and outstanding immediately prior to the effective date of the forward stock split. The change in the Articles of Incorporation was effected with the Nevada Secretary of State on April 6, 2007. As a result, the authorized capital increased from 30,000,000 to 300,000,000 shares of common stock with a par value of $0.001.
Other than as set out herein, we have not been involved in any bankruptcy, receivership or similar proceedings, nor have we been a party to any material reclassification, merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of our business.
We are an exploration stage resource company, and are primarily engaged in the exploration for and development in the properties in which we have acquired interests. Black Hawk Exploration is a diversified energy and metals exploration company focused on identifying and exploring strategic high value properties and developing new prospective projects globally. Black Hawk Exploration will establish wholly owned corporate identities in multiple strategic minerals, high value commodities, and rare earth projects. In August 2009 the Company formed a wholly owned Nevada subsidiary, Blue Lithium Energy Inc. Blue Lithium Energy will initially acquire, explore and develop a portfolio of strategic Lithium properties in the United States and Canada.
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T he area the Company is currently evaluating has a geologic and topographic setting that is similar to Clayton Valley. During the mid-to late 1970’s the U.S. Geological Survey (USGS) evaluated Lithium deposits and resources around the world. During the course of the program they drilled 22 holes in Nevada and Arizona. Initial drilling was in Clayton Valley (one of these drill sites was on Black Hawk claims adjacent to Chemetall Foote) to evaluate the known continental-brines. USGS holes drilled in the new target area had 1.3 and 1.7 ppm Lithium in the brines that were intersected plus 287 and 364 ppm lithium in the sediments. These are within the range of values that could be indicative for lithium brines in the target area.
We hold title to 56 placer mineral claims over a 1,120 acre site. The mineral claims give us the right to all of the minerals which can be claimed by placer claims underlying the land on which the claims have been staked. We began exploration on our property in September 2009.
On September 30, 2009 Black Hawk announced its Clayton Valley, Nevada acquisition. Black Hawk’s 1,120 acre site is located in the lithium rich Clayton Valley which is the home of the largest lithium brine production facility in the U.S. The Chemetall Foote facility has produced in excess of 50 million Kg of lithium to date and is scaled to produce 1.2 million Kg a year. The American Institute of Mining estimates the mineral resource of the Clayton Valley to be 750 million Kg of lithium. The lithium brine deposits are located at depths of a few hundred meters and can be extracted in an environmentally friendly manner.
On December 8, 2009 the Company formed a second wholly owned subsidiary in Nevada named Golden Black Hawk, Inc. This subsidiary then entered into an agreement (“the Option Agreement”) on December 10, 2009 (“the Effective Date”) with HuntMountain Resoureces Inc (HNTM) to purchase 75% of their option on a precious metal property in Nevada called Dun Glen. The Option Agreement entitles the Company to acquire undivided legal and beneficial interests of up to 75% in the Property free and clear of all liens, charges and claims of others. Considerations for the Option Agreement are as follows:
| - | An initial payment of $50,000 (paid) and issuance of 250,000 restricted shares of common stock (not issued) on the Effective Date; |
| - | A further payment of $25,000 and issuance of 100,000 restricted shares of common stock on the first anniversary of the effective Date; |
| - | A further payment of $25,000 on the second anniversary of the Effective Date; |
| - | Incur or fund expenditures on the Property of not less than $700,000 on or before the fourth anniversary of the Effective Date. |
Product Research and Development
Our business plan is focused on the long-term exploration and development of our mineral properties.
We do not anticipate that we will expend any significant funds on research and development over the next twelve months ending November 30, 2010.
Employees
Currently there are no full time or part-time employees of our company (other than our directors and officer who, at present, have not signed employment or consulting agreements with us). We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officer or directors). We do and will continue to outsource contract employment as needed. However, if we are successful in our initial and any subsequent drilling programs we may retain additional employees.
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Purchase or Sale of Equipment
We do not intend to purchase any significant equipment over the next twelve months ending November 30, 2010.
Competition
The mining industry is fragmented. We compete with other exploration companies looking for uranium and gold. We are one of the smallest exploration companies in existence. We are an infinitely small participant in the gold mining market. While we compete with other exploration companies, there is no competition for the exploration or removal of minerals from our property.
The Lithium industry is fragmented. We compete with other exploration companies looking for Lithium. We are one of the smallest exploration companies. We are an infinitely small participant in the Lithium exploration market. While we compete with other exploration companies, there is no competition for the exploration or removal of Lithium from our property. Readily available Lithium markets exist in Canada and around the world for the sale of Lithium. As the international demand for battery-powered devices steadily increases, the Global demand for our potential lithium production will focus the investment communities spotlight on Black Hawk and its Clayton Valley holdings. The Chemetall Foote Minerals facility at their Clayton Valley Silver Peak Mine, located in close proximity to our Blue Lithium Clayton Valley holdings, has been continually producing lithium utilizing brines from shallow 300 ft to 800 ft wells for almost 45 years (1965).
Government Regulations and Supervision
Our mineral exploration program will be subject to the rules of the Bureau of Land Management (BLM).
Site permitting will be done utilizing the Bureau of Land Management’s (BLM) Notice Level process. This provides for permitting less then 5 acres of disturbance for exploration on mineral properties which is more than sufficient for Black Hawks current program. Most typically the entire Notice Level Permitting (NLP) is approved / accepted in 3 to 4 weeks. Once the NLP is submitted the BLM has 15 days to review and issue their comments and/or approval.
The submission of Black Hawk’s NLP will describe our ownership, intended exploration program, planned disturbance, and reclamation plans. The reclamation program for the NLP requires bonding based on a prescribed BLM formula. The bonding process will utilize the Nevada Division of Mining Statewide Bonding Pool.
Black Hawk’s Board of Directors have approved funding for the program submitted by Black Hawk Exploration’s Geologists and the Clayton Valley permitting process began in December 2009.
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The Code deals with environmental matters relating to the exploration and development of mining properties. The goal of this Act is to protect the environment through a series of regulations affecting:
1. Health and Safety
2. Archaeological Sites
3. Exploration Access
We are responsible to provide a safe working environment, to not disrupt archaeological sites, and to conduct our activities to prevent unnecessary damage to the property.
We anticipate no discharge of water into active stream, creek, river, lake or any other body of water regulated by environmental law or regulation. No endangered species will be disturbed. Restoration of the disturbed land will be completed according to law. All holes, pits and shafts will be sealed upon abandonment of the property. It is difficult to estimate the cost of compliance with the environmental law since the full nature and extent of our proposed activities cannot be determined until we start our operations and we know what that will involve from an environmental standpoint.
Three Months Ended November 30, 2009
During the three months ended November 30, 2009, operating expenses totaled $45,844, and we experienced a net loss of $45,844 against no revenues. During the three months ended November 30, 2008, operating expenses totaled $5,510, and we experienced a net loss of $5,510 against no revenues.
Financial Condition, Liquidity and Capital Resources
At November 30, 2009, there was a working capital of $234,184.
At November 30, 2009, our total current assets were $243,184, which consisted of cash of $234,684, prepaid expenses of $8,500.
At November 30, 2009, our total current liabilities were $9,000.
Historically, we have financed our cash flow and operations from the sale of stock and advances from shareholders. Net cash provided by financing activities was $789,299 from inception to November 30, 2009.
We have no external sources of liquidity in the form of credit lines from banks. The Company entered into an equity financing agreement (the “Financing Agreement”), whereby the Company may draw up to $1,000,000 by issuing units (the “Units”) at $0.85 per unit with each unit consisting of one share of the Company’s common stock and one common stock purchase warrant exercisable into one common share for two years, at $1.05 for the first 12 months and $1.25 for the second 12 months. The advances are at the discretion of the counter-party. Based on the plan of operation described below, management believes that our available cash will be sufficient to fund our immediate working capital requirements.
Plan of Operation
Cash Requirements
Over the twelve months ending November 30, 2010 we plan to expend a total of approximately $150,000 in respect of future mineral property acquisitions.
-5-
Based on our current plan of operations, we require immediate funds to commence our exploration operations. We currently have cash on hand of $234,684. We anticipate that we will have to raise additional cash of approximately $1,000,000 to allow us to complete our proposed exploration program. The Company entered into an equity financing agreement (the “Financing Agreement”), whereby the Company may draw up to $1,000,000 by issuing units (the “Units”) at $0.85 per unit with each unit consisting of one share of the Company’s common stock and one common stock purchase warrant exercisable into one common share for two years, at $1.05 for the first 12 months and $1.25 for the second 12 months. The advances are at the discretion of the counter-party. If we fail to raise sufficient funds, we may modify our operations plan accordingly. Even if we do raise funds for operations, there is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable.
We do not have enough funds to commence and complete our proposed exploration program.
There are no assurances that we will be able to obtain additional funds required for our continued operations. In such event that we do not raise sufficient additional funds by secondary offering or private placement, we will consider alternative financing options, if any, or be forced to scale down or perhaps even cease our operations.
Over the twelve months ending November 30, 2010 we intend to use all available funds to commence exploration of our mineral properties, as follows:
| General and Administrative | $ | 10,000 | ||
| Operations: | ||||
| Future property acquisitions | 130,000 | |||
| Working capital | 10,000 | |||
| Development of properties | 1,000,000 | |||
| Total | $ | 1,150,000 | ||
Going Concern
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
We have historically incurred losses, and through November 30, 2009 have incurred losses of $741,944 from our inception.
However, there are no assurances that we will be able to either (1) ever achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through future private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from our recently completed offering, operations and any future private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available we may not increase our operations.
These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
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Our independent auditor's report on our audited financial statements, in our Form 10-K annual report filed November 30, 2009 for the fiscal year ended August 31, 2009, expressed substantial doubt concerning the
Company’s ability to continue as a going concern. The qualifying explanatory paragraph contained in their audit report should be read in connection with our management's discussion of our financial condition, liquidity and capital resources.
Application of Critical Accounting Estimates
The preparation of our company's financial statements requires management to make estimates and assumptions regarding future events. These estimates and assumptions affect the reported amounts of certain assets and liabilities, and disclosure of contingent liabilities.
RISK FACTORS
Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.
We need to continue as a going concern if our business is to succeed, if we do not we will go out of business.
Our independent accountant's report to our audited financial statements for the year ended August 31, 2009, indicates that there are a number of factors that raise substantial doubt about our ability to continue as a going concern. Such factors identified in the report are our accumulated deficit since inception, our failure to attain profitable operations and our dependence upon obtaining adequate financing to pay our liabilities. If we are not able to continue as a going concern, it is likely investors will lose their investments.
Our current operating funds are less than necessary to complete all intended exploration our properties, and therefore we will need to obtain additional financing in order to complete our business plan. As of November 30, 2009, we had cash in the amount of $234,684. We currently do not have any operations and we have no income.
Our business plan calls for significant expenses in connection with the exploration of the property. We do not currently have sufficient funds to conduct initial exploration on the property and require additional financing in order to determine whether the property contains economic mineralization. We will also require additional financing if the costs of the exploration of the property are greater than anticipated.
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We will require additional financing to sustain our business operations if we are not successful in earning revenues once exploration is complete. We do not currently have any arrangements for financing and we can provide no assurance to investors that we will be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including the market prices for resources, investor acceptance of our property and general market conditions. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.
The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. The only other anticipated alternative for the financing of further exploration would be our sale of a partial interest in the property to a third party in exchange for cash or exploration expenditures, which is not presently contemplated.
Because we have not commenced business operations, we face a high risk of business failure.
Although we have recently commenced operations and are preparing to commence exploration, we have commenced limited exploration on the property. Accordingly, we have no way to evaluate the likelihood that our business will be successful. We were incorporated on April 14, 2005 and have been involved primarily in organizational activities and the acquisition of our mineral property. We have not earned any revenues as of the date of this prospectus. Potential investors should be aware of the difficulties normally encountered by new mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.
Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from development of the mineral claims and the production of minerals from the claims, we will not be able to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
We lack an operating history and we expect to have losses in the future.
We have not started our proposed business operations or realized any revenues. We have no operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon the following:
| | Our ability to reduce exploration costs. |
Based upon current plans, we expect to incur operating losses in future periods. This will happen because there are expenses associated with the research and exploration of our mineral properties. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
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Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.
Because we are small and do not have much capital, we must limit our exploration and consequently may not find mineralized material. If we do not find mineralized material, we will cease operations.
Because we are small and do not have much capital, we must limit our exploration. Because we may have to limit our exploration, we may not find mineralized material, although our mineral claims may contain mineralized material. If we do not find mineralized material, we will cease operations.
If we become subject to onerous government regulation or other legal uncertainties, our business will be negatively affected.
There are several governmental regulations that materially restrict mineral property exploration and development. The regulatory regime under which we operate in the future will likely require work permits, the posting of bonds, and the performance of remediation work for any physical disturbance to the land. While these current laws do not affect our current exploration plans, if we proceed to commence drilling operations on the mineral claims, we will incur modest regulatory compliance costs.
In addition, the legal and regulatory environment that pertains to the exploration of ore is uncertain and may change. Uncertainty and new regulations could increase our costs of doing business and prevent us from exploring for ore deposits. The growth of demand for ore may also be significantly slowed. This could delay growth in potential demand for and limit our ability to generate revenues. In addition to new laws and regulations being adopted, existing laws May be applied to mining that have not as yet been applied. These new laws may increase our cost of doing business with the result that our financial condition and operating results may be harmed.
Because we are small and do not have much capital, we must limit our exploration and consequently may not find mineralized material. If we do not find mineralized material, we will cease operations.
Because we are small and do not have much capital, we must limit our exploration. Because we may have to limit our exploration, we may not find mineralized material, although our property may contain mineralized material. If we do not find mineralized material, we will cease operations.
As we face intense competition in the mining industry, we will have to compete with our competitors for financing and for qualified managerial and technical employees.
The mining industry is intensely competitive in all of its phases. Competition includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional attractive mining claims or financing on terms we consider acceptable. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our exploration and development programs may be slowed down or suspended.
We do not expect to declare or pay any dividends .
We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.
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Anti-Takeover Provisions
We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.
Our By-laws contain provisions indemnifying our officer and directors against all costs, charges and expenses incurred by them.
Our By-laws contain provisions with respect to the indemnification of our officer and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officer.
Volatility of Stock Price .
Our common shares are currently publicly traded on the OTC BB exchange under the symbol BHWX. In the future, the trading price of our common shares may be subject to wide fluctuations. Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our control. In addition, the stock market in general, and the market for software technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely affect the market price of the common shares, regardless of our operating performance.
In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources.
As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this quarterly report, being November 30, 2009, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's President along with our company's Secretary. Based upon that evaluation, our company's President along with our company's Secretary concluded that our company's disclosure controls and procedures are effective as at the end of the period covered by this report.
Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and Secretary as appropriate, to allow timely decisions regarding required disclosure.
There have been no significant changes in our company's internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
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We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
On October 20, 2006 we sold 200,000 pre-split shares to one investor at a price of $0.10 for proceeds of $20,000.
On May 30, 2007, we closed a private placement of 571,428 common shares for gross proceeds of $400,000.
On August 6, 2009 we closed a private placement of 600,000 common shares at $0.10 for proceeds of $60,000.
On October 16, 2009 we closed a private placement of 64,705 common shares at a price of $0.85 for proceeds of $54,999.25. These shares have not been issued to date.
On November 20, 2009 the Company received a first tranche of $200,000 under a share agreement that provides the Company with up to $1,000,000. The agreement is to issue common shares at a price of $0.85 upon receipt of funds and to issue a warrant for the like number of shares priced at $1.05 for the first year and $1.25 if exercised in the second year. These shares have not been issued to date.
None.
Exhibits Required by Item 601 of Regulation S-B.
Exhibit Number/Description
(3) Charter and By-laws
3.1 Articles of Incorporation (incorporated by reference to the Company's SB-2 Registration Statement filed January 17, 2006).
3.2 Bylaws (incorporated by reference to the Company's SB-2 Registration Statement filed January 17, 2006).
(14) Code of Ethics
14.1 Code of Business Conduct and Ethics
(30) Section 302 Certification
31.2 Certification of Howard Bouch
(32) Section 906 Certification
32.1 Certification of Kevin M. Murphy & Howard Bouch
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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.
BLACK HAWK EXPLORATION INC.
By : /s/ Kevin M. Murphy
Kevin M. Murphy, President, CEO
(Principal Executive Officer),
By: Howard Bouch
Howard Bouch, CFO
Date: January 13, 2010
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