U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007.
(unaudited)
or
o TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-4686
HIKO BELL MINING & OIL COMPANY
(Name of small business issued in its charter)
| | UTAH | | 87-0267432 |
| | _____________________ | | _____________________ |
| | (state of incorporation) | | (IRS Employer I.D. Number) |
P.O. Box 1845, 1635 E. 1500 S. Vernal, UT 84078
Phone: (435) 789-3233 Fax: (325) 789-4560
Securities registered under Section 12(g) of the exchange Act:
Common Stock $0.01 par value
(Title of class)
Over-the-Counter (Pink Sheets)
(Name of each exchange on which registered)
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 ¨
The number of shares outstanding of the issuer's common stock, $0.01 par value, as of August 14, 2007 is 24,887,200.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Transitional Small Business Disclosure Format (check one): Yes ¨ No x
PART I
ITEM 1 Financial Statements
Hiko Bell Mining & Oil Company
For quarters ending June 30, 2007 and September 30, 2006
Consolidated Balance Sheet
(unaudited)
| | | June 30, 2007 | | | September 30, 2006 | |
| | | | | | | |
Current Assets | | | | | | |
Cash | | $ | 438 | | | $ | 34,866 | |
Current receivables less allowance for bad debt | | $ | 54,620 | | | $ | 26,955 | |
Investments | | $ | 28,809 | | | $ | 28,809 | |
Other Assets | | | -0- | | | | - 0 - | |
Totals | | $ | 83,867 | | | $ | 90,630 | |
| | | | | | | | | |
Properties, Building & Equipment | | | | | | | | |
Assigned Non-producing Leases | | $ | 169,690 | | | $ | 169,690 | |
Assigned Producing Leases | | $ | 21,875 | | | $ | 21,875 | |
Producing Gas & Oil Properties | | | - 0 - | | | | - 0 - | |
Non-producing Gas & Oil Leases | | $ | 25,618 | | | $ | 25,618 | |
Working Interest | | $ | 49,162 | | | | 49,162 | |
Mining Property | | $ | 337,520 | | | $ | 278,730 | |
Totals | | $ | 603,415 | | | $ | 545,075 | |
| | | | | | | | | |
TOTAL ASSETS | | $ | 687,282 | | | $ | 660,866 | |
| | | | | | | | | |
| | | | | | | | | |
Current Liabilities | | | | | | | | |
Accounts payable | | | - 0 - | | | | - 0 - | |
Property and other taxes | | | - 0 - | | | | - 0 - | |
Royalty Payments | | | - 0 - | | | | - 0 - | |
Notes Payable | | | - 0 - | | | | - 0 - | |
Related Parties | | | - 0 - | | | | - 0 - | |
Totals | | | - 0 - | | | | - 0 - | |
| | | | | | | | | |
| | | | | | | | | |
Stockholder’s Equity | | | | | | | | |
Common Stock, 25,000,000 | | | | | | | | |
Authorized $.01 par value | | $ | 248,872 | | | $ | 248,872 | |
Capital paid in excess of par value | | $ | 3,430,469 | | | $ | 3,430,469 | |
| | | | | | | | | |
Retained Earning (deficit) | | $ | (3,179,624 | ) | | $ | (3,087,412 | ) |
| | | | | | | | | |
Total Liability and Stockholders Equity | | $ | 687,282 | | | $ | 660,866 | |
Statement of Operations and Retained Earnings
For quarters ending June 30, 2007 and September 30, 2006
(unaudited)
| | | | June 30, 2007 | | | September 30, 2006 | |
Income | | | | | | |
Consulting Income | | $ | 1,310 | | | $ | 6,219 | |
Sale of Working Interet | | | - 0 - | | | | - 0 - | |
Capital Gains | | | - 0 - | | | | - 0 - | |
Production Income | | $ | 192 | | | $ | 307 | |
Services | | | - 0 - | | | | - 0 - | |
Return of Bond | | | - 0 - | | | $ | 10,600 | |
| | | | | | | | | | |
Total | | $ | 1,502 | | | $ | 17,126 | |
| | | | | | | | | | |
Expense | | | | | | | | |
Operating Costs | | $ | 15,257 | | | $ | 42,306 | |
Depreciation & Depletion | | | - 0 - | | | | - 0 - | |
Interest | | | - 0 - | | | | -0 - | |
Lease Payments | | $ | 21,020 | | | | -0 - | |
| | | | | | | | | | |
Total | | $ | 36,277 | | | $ | 42,306 | |
| | | | | | | | | | |
Income (loss) before taxes | | $ | (34,775 | ) | | $ | (25,180 | ) |
Net Income (loss) | | $ | (13,755 | ) | | $ | (25,180 | ) |
Retained Earnings (deficit) | | $ | (3,179,624 | ) | | $ | (3,087,412 | ) |
| | | | | | | | | | |
Income (loss) per share | | | (.0005 | ) | | | (.001 | ) |
Consolidated Statements of Cash Flows
(unaudited)
| | | June 30, 2007 | | | September 30, 2006 | |
Cash flows from operating activities: | | $ | 1,502 | | | $ | 6,526 | |
Net cash (used in) operating activities: | | $ | 15,297 | | | $ | 42,306 | |
Cash flows from investing activities: | | | - 0 - | | | $ | 10,600 | |
Net cash (used in) investing activities: | | $ | 21,020 | | | | - 0 - | |
Cash flows from financing activities: | | | - 0 - | | | | - 0 - | |
Net cash (used in) financing activities: | | | - 0 - | | | | - 0 - | |
| | | | | | | | | |
Net increase (decrease) in cash: | | $ | (8,662 | ) | | $ | (25,180 | ) |
| | | | | | | | | |
Cash at beginning of period: | | $ | 5,571 | | | $ | 60,047 | |
Cash at end of period: | | $ | 438 | | | $ | 34,866 | |
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-QSB ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT, THE WORDS “POTENTIAL,” “FAVORABLE,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDING AMONG OTHERS, THE RISK THAT OUR DEVELOPMENT PROGRAMS WILL NOT PROVE SUCCESSFUL, OR THAT WE WILL NOT BE ABLE TO OBTAIN FINANCING TO COMPLETE DEVELOPMENT. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, ESTIMATED OR PROJECTED.
General
Hiko Bell Mining and Oil Company is a Utah corporation organized in 1942 to mine tungsten for the World War II strategic metals plan on an 80-acre tract of patented land which the Company still owns, located in northwestern Box Elder County, Utah. The principal business of the registrant is exploring for, developing and producing oil, gas and minerals, including the acquisition of leases, farmouts, mining properties or other valuable mineral lands. Hiko Bell's portfolio other than recent acquisitions, is more fully described in “ITEM 2” in our Annual 10-K, for the period ending December 31, 2007.
Hiko Bell’s sources of the properties are state and federal oil and gas leases and fee (patented) lands, principally in the Rocky Mountain area.
Initial development of an oil and gas or mining prospect originates within the geologic department. The feasibility of acquiring such land is checked in state land offices, county court houses, with the Bureau of Land Management and other governmental agencies. Management then works up the economic viability of the project with an Authority for Expenditure (AFE). If the economics are favorable and the acreage is available, a review is made of the cost of acquisition, of geologic and geophysical work, the cost of the drilling or exploration work, the cost of completion of “putting into production: and the current and future market conditions. If all of these varied factors are favorable, the plan is then approached from the standpoint of funding the project.
All of the above operations are conducted by Hiko Bell and require various degrees of skill, knowledge and experience, combined with a high degree of group effort and motivation.
Hiko Bell is also staying apprised of alternatives to oil, such as those currently being developed worldwide using bio-fuels. In the first quarter of 2006 the Company was approached by an extraction technology firm to participate in projects such as tar sands and oil shale that exist in the Uintah Basin of Eastern Utah. It remains evident however that the most prudent corporate plan of action at present is to work for development of new oil and gas reserves, such as those held by most Geologists to be present in the Eastern Great Basin of Nevada.
Beginning in the last quarter of 2005 and continuing into the second quarter of 2006, Hiko Bell Mining & Oil Company acquired new Federal 10-year oil and gas leases covering in excess of 42,000 acres with 100% Working Interest. These leases are located in the East Great Basin of Nevada trend along the Thrust-Belt Hingeline. Major thrust faults, mapped by the U.S. Geological Survey, indicate the new leases to be favorably located. The U.S.G.S. fact sheet of May 2005 has estimated an average of 1.6 billion barrels of undiscovered oil and a mean of 1.8 trillion cubic feet of natural gas in the Eastern Great Basin. These acquisitions are seen as a major new asset for the company.
During the time period in which Hiko Bell acquired its 42,000 acres currently under lease from the BLM, company management undertook, on the advice of its landman to secure acreage totaling over an additional 42,000 acres. This new acreage has not yet been finally secured for the company, but management is optimistic that negotiations currently underway will provide the revenue needed to do so.
After the geologic study of its currently held Nevada leases Hiko Bell chose, in the second quarter of 2006, a tract of approximately 16,000 acres which shows perhaps, the best potential for the discovery of a major new find. The prospect is in southeastern Nevada, in Lincoln County just west of the Utah State line. The block lies on top of a major structural fold trending north to south and is over 16 miles in length, lying in the Hingleline-Great Basin Thrust area of the Rocky Mountain oil and gas production “Fairway”. Included in this area are many prolific fields such as Pineview, Anschutz, Anschutz Ranch East, Ryckman Creek, Whitney Canyon, East Painter and the recently discovered Covenant oil field of Wolverine Gas and Oil Company in central Utah at Sigurd. All of these fields contain very large volumes of gas and oil reserves and most significantly, all are analogous to the geologic structure, reservoir rocks, source beds, trap time formation and maturation of the entrapped hydrocarbons that are present in Hiko Bell’s prospect.
Hiko Bell had scheduled Digital Satellite Spectral Mapping (DSSM) of the acreage to take place in the third quarter of 2006. It was decided however, in the last quarter of 2006, to pursue several other new proprietary technologies for the determination of reserves in this area. These studies are planned for completion as part of negotiations currently underway with a multinational firm. These new proprietary technologies promise to be more conclusive than older mapping techniques. If undertaken, these studies would also be expanded to include other acreage within its Nevada leases.
During the third quarter, representatives of an international energy corporation in regard to its Nevada leases approached Hiko Bell. This company, which currently has exploration and production operations in several countries worldwide, is seeking to enter a joint venture arrangement with Hiko for the drilling of a test well on Hiko Bell’s Nevada prospect. If concluded, this arrangement would also likely include options for involvement in Hiko’s other Nevada acreage as well as capital to secure Hiko Bell’s currently pending acreage. These negotiations were not completed, given the holiday season in the final quarter, but have continued in earnest.
Current negotiations are being pursued with a great level of optimism as was previously felt by Hiko’s management in this regard. Management feels that if an agreement is reached in the third or fourth quarter of 2007, it will allow Hiko Bell to not only continue with more comprehensive geologic studies of other acreage, but also to drill exploratory wells on its Nevada acreage. The additional acreage under option would also be secured. Current negotiations are seen as proceeding at an acceptable pace, considering the complexity of Hiko dealing with such a large, foreign corporation. The relationship being developed in these discussions are seen as a major new opportunity, which would allow Hiko Bell to put wells into production in Nevada.
Hiko Bell’s management has also begun the task of concomitant planning for the test well being discussed. Such matters as verifying the status of roads, securing water supplies, planning for transportation of oil between the location and an existing railhead, in addition to other requirements are being addressed. This planning will continue. After an initial test well, Hiko’s potential partner has the means to participate in Hiko’s other Nevada sites using substantial financial resources.An agreement with this company could substantially increase Hiko’s financial stability as well add to its staff by providing geologists, production supervisors, financial consultants and other experts. While negotiations are still underway, the management of Hiko Bell is optimistic this relationship will progress and lead to a new exploration era for Hiko Bell.
In addition to negotiation for production on its new Nevada oil & gas prospects, an offer is still being negotiated for the sale of its gold mining claims along the Green River in northeastern Utah. If this negotiation is successful, Hiko Bell could receive a substantial infusion of cash in late 2007, which would allow the company to proceed at a much faster rate with its plan to extensively explore and drill test holes on its Nevada lease. It would also allow Hiko to secure more acreage while the cost remains relatively low.
The management of Hiko Bell has pursued a course throughout the last year of emphasizing the acquisition of new leases and endeavors that would lead to the exploration and subsequent production on these leases. Most of the cash received from the sale of properties in 2005 has been depleted to this end, and management has no doubt that this plan was the correct course of action. The newly established contacts, as well as relationships cultivated earlier, appear capable of yielding impressive results. An infusion of cash to be used for exploration and drilling is of utmost importance. To this end, the discussions currently on the table are being carefully analyzed and pursued with all due diligence.
Hiko Bell’s management has previously used significant resources acquiring the leases in the eastern Great Basin of Nevada. It undertook geologic studies of its primary prospect chosen from that acreage and has also pursued acquisition of additional acreage in Nevada. With the negotiations begun in the third quarter for a joint venture agreement in Nevada, and the sale of its gold claims in northeastern Utah, Hiko Bell’s management feels the company could be uniquely posed to pursue a major new exploration and production plan in Nevada. If successful these agreements could rapidly allow Hiko Bell to put wells into production, which should increase the value of its stock, potentially creating significantly added value for its shareholders.
Hiko Bell's portfolio, previous to recent acquisitions, is more fully described in “ITEM 2” in our Annual 10-K, for the period ending December 31, 2006.
Competition
Hiko Bell operates in a highly competitive industry where success is dependent upon the ability to generate excellent projects, which are financially within the limits and range of the company, to move quickly and decisively and to obtain the required financing and follow the project through from beginning to end. Management is fortunate in having a highly motivated staff with more than 90 years of combined industry experience.
Legal Issues
None at present.
Reporting and Control Issues
Due to the Sarbanes-Oxley Act of 2002, our reporting and internal controls have been improved. The requirements of reporting and control changes continue to be costly and cause financial hardship for many small businesses. While requirements for small public companies remain subject to review and change and while we hope the S.E.C. will continue to rule for more flexibility in implementation, we are presently striving to be compliant, and believe Hiko Bell to be in compliance with current regulations.
Hiko Bell references the following excerpt from an S.E.C. proposal (dated August 9, 2006), as it addresses future measures that may be required.
SECURITIES AND EXCHANGE COMMISSION
17 CFR PARTS 210, 228, 229, 240 and 249
[RELEASE NOS. 33-8731; 34-54295; File No. S7-06-03]
RIN 3235-AJ64
INTERNAL CONTROL OVER FINANCIAL REPORTING IN EXCHANGE ACT
PERIODIC REPORTS OF NON-ACCELERATED FILERS AND NEWLY PUBLIC
COMPANIES
AGENCY: Securities and Exchange Commission.
ACTION: Proposed extension of compliance dates.
SUMMARY: We are proposing to further extend for smaller public companies the dates that were published on September 22, 2005, in Release No. 33-8618 [70 FR 56825] for their compliance with the internal control requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002. Pursuant to the proposal, a non-accelerated filer would not be required to provide management’s report on internal control over financial reporting until it files an annual report for a fiscal year ending on or after December 15, 2007. If we have not issued additional guidance for management on how to complete its assessment of internal control over financial reporting in time to be of assistance in connection with annual reports filed for fiscal years ending on or after December 15, 2007, this deadline could be further postponed. Under the proposal, the auditor’s attestation report on internal control over financial reporting would not be required until a non-accelerated filer files an annual report for a fiscal year ending on or after December 15, 2008. If revisions to Auditing Standard No. 2 have not been finalized in time to be of assistance in connection with annual reports filed for fiscal years ending on or after December 15, 2008, this deadline could also be further postponed.
This proposal was adopted and is found at http://www.sec.gov/news/press/2006/2006-136.htm
Please also see GAO report number GAO-06-361 entitled 'Sarbanes-Oxley Act: Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies’ (released May 8, 2006).
These documents are referenced herein only to note Hiko Bell’s desire that the S.E.C. continue using some latitude in dealing with smaller public companies. Hiko Bell seeks to be compliant with current regulations, and will continue to follow the S.E.C. lead in these matters.
Future Looking
Hiko Bell’s management has been pleased with progress made in securing its new leases, as well as the present status of ongoing talks. Management feels significant progress has been made toward securing the ongoing health of the company and sees great potential for growth.
Hiko Bell’s management has previously used significant resources acquiring the leases in the eastern Great Basin of Nevada. It undertook geologic studies of its primary prospect chosen from that acreage and has also pursued acquisition of additional acreage in Nevada. With the negotiations begun in the third quarter of 2006 for a joint venture agreement in Nevada, and the sale of its gold claims in northeastern Utah, Hiko Bell’s management feels the company could be uniquely posed to pursue a major new exploration and production plan in Nevada. If successful, these agreements could rapidly allow Hiko Bell to put wells into production, which should increase the value of its stock, potentially creating significantly added value for its shareholders.
In addition, Hiko Bell management has within the last two quarters, engaged in negotiations with several possible partners as well as fielding a stock-swap offer for a possible merger. These talk were with a nationwide energy group with oil & gas operations in several states, as well as significant mineral interests. This negotiation was very promising, but in the end, Hiko Bell management felt the offer was not equitable and should not be presented to the stockholders for a vote. After significantly increasing its offer, this young company still failed to present what was an equitable offer worthy of Hiko’s shareholders. There may yet be discussions with this group, should they choose to be more equitable in their offer.
As well as those negotiations, Hiko Bell’s management continues what has become a somewhat lengthy process for the sale of Hiko’s placer gold claims along the Green River in eastern Utah. This process continues and management believes it will be successful, given time for all the particulars to be completed. The arrangement has been struck, but the details relating to such complex contractual negotiations are, in fact, quite daunting. Hiko Bell’s management is continuing with this sale, and is quite optimistic that proceeds from the sale will allow Hiko to continue at a much faster pace with exploration and drilling operations on its Nevada leases, as well as pursuing other projects. Management feels the monies forthcoming from this sale will open a new era for Hiko Bell, and allow for possible additions to the board of directors, bringing much needed expertise in several areas.
Hiko Bell’s management hopes that its sale of the placer mines will give it freedom to expand in more advanced ways, leading to an increase in the value of its stock and added value to its shareholders. In addition to other endeavors, the Nevada properties could be explored at a much faster pace, as well as by more advanced means. In the meanwhile, management continues its pursuit of a partner for that exploration, and remains optimistic.
ITEM 3
CONTROLS AND PROCEDURES
Hiko Bell’s chief executive officer and secretary-treasurer are responsible for establishing and maintaining disclosure controls and procedures for Hiko Bell.
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision of our management, including our chief executive officer and secretary-treasurer, we evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of December 31, 2006. Based on this evaluation, our chief executive officer and our secretary-treasurer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were adequate to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our chief executive officer and secretary-treasurer, in a manner that allowed for timely decisions regarding required disclosure.
(b) Changes in Internal Controls
During the period ended June 30, 2007, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting. Hiko Bell’s management, including the chief executive officer and secretary-treasurer, do not expect that its disclosure controls or internal controls will prevent all error. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits and Reports on Form 10-QSB, filed for the quarter ended June 30, 2007:
Exhibit "31" - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit "32" - Certification of Chief Executive and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorize.
HIKO BELL MINING & OIL COMPANY
Date: August 20, 2007 | | /s/ Craig Caldwell |
| | | Craig Caldwell, Chief Executive Officer |
| | | President |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: August 20, 2007 | | /s/ Craig Caldwell |
| | | Craig Caldwell, Chief Executive Officer |
| | | President and Director |
Date: August 20, 2007 | | /s/ Robert E. Covington |
| | | Robert E. Covington, |
| | | Secretary-Treasurer and Director |
