Item 1. Description of Business.
This annual 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 company's 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 (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.
As used in this annual 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 Suite 300 - 7251 West Lake Mead Blvd, Las Vegas, Nevada 89128 and our business office is located at # 305-8391 Beverly Blvd., Los Angeles, California 90058.
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.
Our Current 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. We do not currently have any properties. We are actively pursuing an acquisition of a resource property.
We will be engaged in the acquisition, and exploration of mineral properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility. In 2005 we acquired a 100% undivided right, title and interest in and to 3 mineral claims comprising 942 hectares located 15 kilometers south of the Golden Bear Mine and 73 km northwest of the town of Telegraph Creek, British Columbia, Canada. In order to acquire the claims, our former President, Garrett Ainsworth paid $2,000 to Mr. Peter Burjoski, the vendor of the property, in an arm's length transaction. On August 21, 2005 we reimbursed Mr. Ainsworth for the purchase. In addition, on December 19, 2005, our President, Garret Ainsworth staked an additional 410 hectares of property contiguous with the Samotua Property. This property is called the Bandit claims. In May 2006 our former President, Garrett Ainsworth staked another approximately 400 hectares of property contiguous with the Bandit claim. In 2008 we discontinued our pursuit of this property.
The Samotua Property and the Bandit claim shall hereinafter be referred to as our 'mineral claims' or our 'property'.
The mineral claims are located approximately 15 kilometers south of the Golden Bear Mine and 73 kilometers northwest of the town of Telegraph Creek, British Columbia. The mineral claims are within the Atlin Mining Division.
Access to the mineral claims is gained by helicopter. A helicopter is based in Telegraph Creek during the summer months and at Dease Lake, British Columbia year round. The Golden Bear Mine road passes approximately 15 kilometers northeast of the claims. No infrastructure is located on the property. The mineral claims lie on the east side of the Coast Mountains in rugged alpine terrain with elevation ranging between 1500 and 2140 meters.
The mineral claims are located at latitude 58o 04' north and longitude 132o 20' west.
We hold title to the mineral claims. The mineral claims give us the right to all of the underlying minerals of the land on which the claims have been staked. We began exploration on our property in August 2006. We arranged for soil sampling of the property. We will arrange for additional work upon availability of qualified geologists. Geologists in British Columbia are currently experiencing unprecedented demand.
The Samotua property and Bandit claim have both seen various amounts of work in the past. Chevron Minerals Limited has completed several phases of geochemical soil and rock sampling, trenching and detailed geological mapping on the Bandit claim. Geochemical sampling consists of the gathering of samples from property areas with the most potential to host economically significant mineralization based on past exploration results. All samples gathered are normally sent to a laboratory where they are crushed and analyzed for metal content.
Geological mapping involves dividing a portion of the property being explored into small sections. Results are then recorded, or mapped, depending on that area of the grid from which samples are taken. Trenching identifies the continuity and extent of mineralization, if any, below the surface.
We have obtained various geological reports on the mineral claims. One report by Dr. E.A. Schiller and C.E. Fipke, both professional geologists, prepared for Chevron Exploration and Dia Met Minerals Ltd summarized information compiled from four assessment reports completed by Chevron Minerals' geologists. The geological report summarizes the results of exploration in the area of the property and makes a recommendation for further exploration work.
In the report, Messrs. Fipke and Schiller conclude that the results of exploration work clearly indicate a highly prospective gold target has been delineated on the claims. The authors note that the combination of several factors warrant an aggressive exploration program. The existence of rocks, similar to those known to host mineralization elsewhere in the area, also makes the property a target for additional exploration work.
Messrs. Fipke and Schiller in their report make specific recommendations based on their conclusions to determine the potential of the property to host economic quantities of gold, They believe certain areas of the claim should be examined in more detail, using air photos by an experienced structural geologist. They also recommend that the previous geological mapping should be plotted on topographic maps. In addition, Messrs. Fipke and Schiller believe drill targets in certain specific areas should be established by heavy mineral sampling. Magnetic geophysical methods should also be used to locate possible mineralization. We discontinued exploration of this property in 2008.
Alberta Sun Project
On June 15, 2007 we entered into an option agreement with Firestone Ventures to acquire the Alberta Sun Uranium project. Under the terms of the agreement, we can earn a 60% interest by paying Firestone a total of $210,000 cash (completed) and issuing 135,000 shares on signing (completed) and paying an additional $70,000 cash, issuing 270,000 shares and incurring $700,000 in exploration expenditures over the next two years. We can earn an additional 15% interest by paying Firestone $100,000, issuing Firestone 400,000 common shares and incurring another $1 million in exploration expenditures over the following two years. Firestone will retain a 1% net smelter royalty (“NSR”) of which 0.5% can be purchased by us for $500,000 at any time. There is an additional 1% NSR to the underlying property owners.
The Alberta Sun uranium property (covering over 200,000 acres) is characterized by easy access across southern Alberta rangeland. Results of initial fieldwork on the project include scintillometer readings of up to 1250 cps (counts per second), visible alteration, shale beds and abundant hematite and carbonaceous material within sandstone. Composite grab samples of isolated organic debris material returned up to 7640 ppm uranium (0.901 U3O8). Grab rock samples (sandstone) from a separate area 40 km southeast returned 57 to 150 ppm uranium. Elevated vanadium, molybdenum, arsenic, and lead values, important indicators of sandstone-hosted uranium, occur at both areas.
A 2,384 line kilometer electromagnetic and magnetic airborne survey over four priority areas has been completed. TerraNotes Ltd. of Edmonton is carrying out initial analysis of the survey to be followed by sophisticated modeling of the dataset which should delineate high-priority areas for drilling. In, March 2008 we discontinued our pursuit of this property and terminated the Alberta Sun option.
Sand Lake North
On July 13, 2007 we signed a formal option agreement with Perry English (English) for Rubicon Minerals Corp. pursuant to which we may earn up to a 100% interest in English’s Sand Lake North project located in Ontario, Canada. Under the terms of the agreement, we can earn a 100% interest by paying English $44,000 cash (completed) and issuing 25,000 shares on signing (completed) and paying an additional $88,000 cash and issuing 75,000 shares and incurring $700,000 in exploration expenditures over the next two years. English will retain a 2% net smelter royalty (“NSR”) of which 1% can be purchased by us for $1,000,000 at any time. In August 2008, we discontinued our pursuit of the Sand Lake North property. We did not make the annual payment required to keep the property in good standing under the option agreement.
Wyoming
In August 2007, we acquired a 100% interest in the Lucky Emma Uranium claims, ("Wyoming Claims"), located in the recording district of Lander, Wyoming. Pursuant to an Asset Purchase Agreement between us and Maria Regina Caeli Management Corp (the “Seller), we paid $20,000 and issued 50,000 shares to the Seller for a 100% interest in the Wyoming Claims. In August 2008, we discontinued our pursuit of the Wyoming property. We did not make the annual payment to the State of Nevada in order to keep the property in good standing.
North West Territories
Effective November 14, 2007 we entered into a formal option agreement with Perry English for Rubicon Minerals Corp. and Precambrian Ventures Ltd (collectively the “Optionor”) pursuant to which we may earn up to a 100% interest in the Optionor’s NWT project located in the Northwest Territories, Canada. Under the terms of the agreement, we can earn a 100% interest by paying the Optionor $86,000 cash (completed) and issuing 50,000 shares on signing (completed) and paying an additional $95,000 cash and issuing 100,000 shares over the next three years. The Optionor will retain a 2% net smelter royalty (“NSR”) of which 1% can be purchased by us for $1,000,000 at any time. In August 2008, we discontinued our pursuit of the North West Territories property. We did not make the annual payment required to keep the property in good standing under the option agreement.
We intend to formulate an exploration program based on the various reports we have reviewed.
Our exploration program is designed to economically explore and evaluate the properties.
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 August 31, 2009.
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.
Purchase or Sale of Equipment
We do not intend to purchase any significant equipment over the next twelve months ending August 31, 2009.
Competition
The gold mining industry is fragmented. We compete with other exploration companies looking for 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. Readily available gold markets exist in Canada and around the world for the sale of gold.
We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials after this offering is complete. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.
Government Regulations and Supervision
Our mineral exploration program will be subject to the laws of the jurisdiction in which we operate. We are currently sourcing projects in the North West Territories and other Canadian jurisdictions such as Ontario. We anticipate that the jurisdiction in which we operate in the future will have regulations similar to the Mineral Tenure Act (British Columbia) and Regulation. This act sets forth rules for
Locating claims
Posting claims
Working claims
Reporting work performed
The Mineral Tenure Act (British Columbia) and Regulation also governs the work requirements for a claim including the minimum annual work requirements necessary to maintain a claim. The holder of a mineral claim must perform exploration and development work on the claim of $100 in each of the first three years and $200 in the eighth and subsequent years.
We may also be subject to a mineral exploration code similar to the British Columbia Mineral Exploration Code (the "Code") that tells us how and where we can explore for minerals. We must comply with these laws to operate our business. The purpose of the Code is to assist persons who wish to explore for minerals in British Columbia to understand the process whereby exploration activities are permitted and regulated. The Code establishes province wide standards for mineral exploration and development activities. The Code also manages and administers exploration and development activities to ensure maximum extraction with a minimum of environmental disturbance. The Code does not apply to certain exploration work we will be conducting. Specifically, work that does not involve mechanical disturbance of the surface including:
Prospecting using hand-held tools
Geological and geochemical surveying
Airborne geophysical surveying
Hand-trenching without the use of explosives
The establishment of gridlines that do not require the felling of trees
Exploration activities that we intend on carrying out which are subject to the provisions of the Code are as follows:
Drilling, trenching and excavating using machinery
Disturbance of the ground by mechanical means
Compliance with these rules and regulations will require us to meet the minimum annual work requirements. Also, prior to proceeding with any exploration work subject to the Code we must apply for a notice of work permit. In this notice we will be required to set out the location, nature, extent and duration of the proposed exploration activities. The notice is submitted to the regional office of the Mines Branch, Energy Division.
We currently do not have any pending applications for government approval of our exploration program. We only require one permit for exploration and we have not yet applied for it since it is not required until later stages of exploration (i.e. drilling). We estimate that this exploration permit can be obtained within 2 weeks.
Environmental Law
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.
We believe that compliance with these regulations will not adversely affect our business operations in the future.
RISK FACTORS
Much of the information included in this current 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.
Such estimates, projections or other "forward looking statements" involve various risks and uncertainties as outlined below. We caution the reader 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".
Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.
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 period ended August 31, 2008, 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.
Because of the unique difficulties and uncertainties inherent in mineral exploration ventures, we face a high risk of business failure.
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. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claim and acquire new claims for new exploration. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations.
If we do not obtain additional financing, our business will fail.
Our current operating funds are less than necessary to complete all intended exploration of the property, and therefore we will need to obtain additional financing in order to complete our business plan. As of August 31, 2008, we had cash in the amount of $26,393. We currently have minimal 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.
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 copper, silver and gold, 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 commenced limited business operations, we face a high risk of business failure.
We have commenced limited exploration on our properties. 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.
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 locate a profitable mineral property;
·
Our ability to generate revenues; and
·
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.
We have no known ore reserves and we cannot guarantee we will find any gold or if we find gold, that production will be profitable. Even if we are successful in discovering gold or other mineralized material we may not be able to realize a profit from its sale. If we cannot make a profit, we may have to cease operations.
We have no known ore reserves. We have not identified any gold on the mineral claims and we cannot guarantee that we will ever find any gold. The report we reviewed in selecting the mineral claims for exploration are old and may be out of date. Even if we find that there is gold on our mineral claims, we cannot guarantee that we will be able to recover the gold. If we cannot find gold or it is not economical to recover the gold, we will have to cease operations.
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. Under Alberta, Ontario and NWT mining law, to engage in certain types of exploration will 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.
We may not have access to all of the supplies and materials we need to begin exploration that could cause us to delay or suspend operations.
Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies, such as explosives, and certain equipment such as bulldozers and excavators that we might need to conduct exploration. We have not attempted to locate or negotiate with any suppliers of products, equipment or materials. We will attempt to locate products, equipment and materials after this offering is complete. If we cannot find the products and equipment we need, we will have to suspend our exploration plans until we do find the products and equipment we need.
Because of the speculative nature of exploration of mineral properties, there is no assurance that our exploration activities will result in the discovery of new commercially exploitable quantities of minerals.
We plan to continue exploration on our mineral claims. The search for valuable minerals as a business is extremely risky. We can provide investors with no assurance that additional exploration on our properties will establish that additional commercially exploitable reserves of gold exist on our properties Problems such as unusual or unexpected geological formations or other variable conditions are involved in exploration and often result in exploration efforts being unsuccessful. The additional potential problems include, but are not limited to, unanticipated problems relating to exploration and attendant additional costs and expenses that may exceed current estimates. These risks may result in us being unable to establish the presence of additional commercial quantities of ore on our mineral claims with the result that our ability to fund future exploration activities may be impeded.
Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that you may have difficulty in reselling your shares and may cause the price of the shares to decline.
Our shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket. In particular, prior to selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that: contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the broker/dealers' duties to the customer and of the rights and remedies available to the customer with respect to violations of such duties or other requirements of Federal securities laws; contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the bid and ask prices; contains the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i); defines significant terms used in the disclosure document or in the conduct of trading in penny stocks; and contains such other information, and is in such form (including language, type size, and format), as the SEC requires by rule or regulation. Further, for sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement before making a sale to you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the price of the shares to decline.
We have no known ore reserves and we cannot guarantee we will find any gold or if we find gold, that production will be profitable.
We have no known ore reserves. We have not identified any gold on the property and we cannot guarantee that we will ever find any gold. We did not rely upon any expert advice in selecting the property for the exploration. Even if we find that there is gold on our property, we cannot guarantee that we will be able to recover the gold. Even if we recover the gold, we cannot guarantee that we will make a profit. If we cannot find gold or it is not economical to recover the gold, we will have to cease operations.
Rain and snow may make the road leading to our property impassable. This will delay our proposed exploration operations and could prevent us from working.
While we plan to conduct our exploration year round, it is possible that snow or rain could cause roads leading to our claims to be impassable. When roads are impassable, we are unable to work.
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.
Trading of our stock may be restricted by the SEC's Penny Stock Regulations which may limit a stockholder's ability to buy and sell our stock.
The U.S. Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock.
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.
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 judgement, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgement 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 not currently publicly traded. 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.
Item 2.
Item 2. Description of Property.
Our administrative mailing office is located at 8391 Beverly Blvd. #305, Los Angeles, California and our telephone number is (323) 275-8475.
We will be engaged in the acquisition, and exploration of mineral properties with a view to exploiting any mineral deposits we discover that demonstrate economic feasibility. We acquired a 100% undivided right, title and interest in and to 3 mineral claims comprising 942 hectares located 15 kilometers south of the Golden Bear Mine and 73 km northwest of the town of Telegraph Creek, British Columbia, Canada. In order to acquire the claims, our former President, Garrett Ainsworth paid $2,000 to Mr. Peter Burjoski, the vendor of the property, in an arm's length transaction. On August 21, 2005 we reimbursed Mr. Ainsworth for the purchase. In addition, on December 19, 2005, our President, Garret Ainsworth staked an additional 410 hectares of property contiguous with the Samotua Property. This property is called the Bandit claims. In May 2006 we acquired an additional 400 hectares contigous to the Bandit claim when our President staked such claims on our behalf. The Samotua Property and the Bandit claim shall hereinafter be referred to as our 'mineral claims' or our 'property'. In 2008 we discontinued the pursuit of this property.
Samotua Mineral Property Purchase Agreement
In April 2005, Mr. Garrett Ainsworth, our former President, entered into an agreement with Mr. Peter Burjoski of Atlin, British Columbia, whereby he acquired a total of 3 mineral claims located approximately 73 kilometers from Telegraph Creek, British Columbia. Mr. Ainsworth acquired this property on our behalf for the sum of $2,000 for a 100% undivided right, title and interest in and to these claims. On August 21, 2005, we reimbursed Mr. Ainsworth for the Samotua Property.
Title to the Samotua Property and the Bandit claim
The Samotua Property consists of 3 mineral claims totaling 493 hectares. The Bandit claim consists of one 410 hectare mineral claim. A "mineral claim" refers to a specific section of land over which a title holder owns rights to exploration to ground. Such rights may be transferred or held in trust. The claims comprising the Samotua property are registered 100% in the name of our former President, Garrett Ainsworth. The claims have been transferred to us by Mr. Ainsworth. The Bandit claim is registered 100% in the name of Garrett Ainsworth also. These claims will only be valid as long as we spend a minimum of $880 in exploration work on each one each year. Alternatively, we may pay the same amount per claims in cash to the British Columbia government in order to maintain the claims in good standing.
If Garrett Ainsworth, as trustee becomes bankrupt or transfers the claims to a third party, we may incur significant legal expenses in enforcing our interest in the claims in British Columbia courts.
The registration of the claims in the name of a trustee does not impact a third party's ability to commence an action against us respecting the Samotua property or the Bandit claim or to seize the claims after obtaining judgment.
The claims are all recorded in Mr. Ainsworth's name to a avoid paying additional fees, however, title to the claims has been conveyed to us by an unrecorded deed. An unrecorded deed is one in which title to the property has been transferred to us, but the deed has not been filed with the British Columbia Land Title Office. Our title to the property is superior to all other unrecorded deeds. Should Mr. Rolin transfer title to another person and that deed is recorded before recording our deed, that person will have superior title and we will have none. If that event occurs, however, Mr. Rolin will be liable to us for monetary damages for breach of his warranty of title and for breach of his fiduciary duties to us as director. The extent of these damages will be calculated so as to place us in the position we would have been in had the breach of warranty and fiduciary duties not occurred. Damages would include expenditures incurred by us in respect of the property in addition to loss of opportunity costs, the quantification of which would depend on any subsequently successful exploration of the properties.
Under British Columbia provincial law, if the deed is recorded in our name, we will have to pay a minimum of $500 and file other documents since we are a foreign corporation in Canada. We will also be required to form a British Columbia corporation to hold the property because foreign corporations are not permitted to hold mineral claims in British Columbia. We have decided that if gold is discovered on the property and it is economical to remove the gold, we will record the deed, pay the additional tax, and file as a foreign corporation. We are in possession of the unrecorded deed and the decision to record or not record the deed is solely within our province.
All Canadian lands and minerals that have not been granted to private persons are owned by either the federal or provincial governments in the name of Her Majesty. Ungranted minerals are commonly known as Crown minerals. Ownership rights to Crown minerals are vested by the Canadian Constitution in the province where the minerals are located. In the case of our mineral claims, that is the province of British Columbia. In the 19th century the practice of reserving the minerals from fee simple Crown grants was established. Minerals are reserved from Crown land dispositions under the Mineral Tenure Act (British Columbia). The result is that the Crown is the largest mineral owner in Canada, both as the fee simple owner of Crown lands and through mineral reservations in Crown grants. Most privately held mineral titles are acquired directly from the Crown. Our property is one such acquisition. Accordingly, fee simple title to our property resides with the Crown. Our claims are mineral claims issued pursuant to the Mineral Tenure Act (British Columbia). We have exclusive rights to mine and recover all of the minerals contained within the surface boundaries of the lease continued vertically downward. The legal significance of these different ownership interests is simply that the Crown maintains fee simple ownership of the surface rights on the properties and we have obtained the right to all of the underlying minerals. Under provisions of the Mineral Tenure Act (British Columbia) a claim grants the holder the rights to use the surface for exploration and mining purposes. A disposition of surface rights by the Crown cannot diminish the rights of the mineral titleholder.
To date we have performed limited exploration work on our properties. We began exploration on our property in August 2006. We were forced to delay the commencement of this initial exploration due to the shortage of available qualified geologists and prospectors. We arranged for soil sampling of the property. We are presently in the exploration stage and there is no assurance that a commercially viable mineral deposit, a reserve, exists in our property until further exploration is done and a comprehensive evaluation concludes economic and legal feasibility.
We may consider seeking the assistance of a major mining company if we find mineralized materials on the property. We do not intend to try to develop any reserves we find, if any, ourselves.
The following information is provided in compliance with "Guide 7 of Industry Guides Under the Securities Act and the Exchange Act" for issuers engaged or to be engaged in significant mining operations.
Location and Access
The mineral claims are located approximately 15 kilometers south of the Golden Bear Mine and 73 kilometers northwest of the town of Telegraph Creek, British Columbia. The mineral claims are within the Atlin Mining Division.
Access to the mineral claims is gained by helicopter. A helicopter is based in Telegraph Creek during the summer months and at Dease Lake, British Columbia year round. The Golden Bear Mine road passes approximately 15 kilometers northeast of the claims. No infrastructure is located on the property. The mineral claims lie on the east side of the Coast Mountains in rugged alpine terrain with elevation ranging between 1500 and 2140 meters.
The mineral claims are located at latitude 58o 04' north and longitude 132o 20' west.
Physiography and Geology
The mineral claims are located approximately 15 kilometers south of the Golden Bear Mine and 73 kilometers northwest of the town of Telegraph Creek, British Columbia.
We have obtained various geological reports on the mineral claims. One report by Dr. E.A. Schiller and C.E. Fipke, both professional geologists, prepared for Chevron Exploration and Dia Met Minerals Ltd summarized information compiled from four assessment reports completed by Chevron Minerals' geologists. The geological report summarizes the results of exploration in the area of the property and makes a recommendation for further exploration work.
In the report, Messrs. Fipke and Schiller conclude that the results of exploration work clearly indicate a highly prospective gold target has been delineated on the claims. The authors note that the combination of several factors warrant an aggressive exploration program. The existence of rocks, similar to those known to host mineralization elsewhere in the area, also makes the property a target for additional exploration work.
The Samotua property and Bandit claim have both seen various amounts of work in the past. Chevron Minerals Limited has completed several phases of geochemical soil and rock sampling, trenching and detailed geological mapping on the Bandit claim. Geochemical sampling consists of the gathering of samples from property areas with the most potential to host economically significant mineralization based on past exploration results. All samples gathered are normally sent to a laboratory where they are crushed and analyzed for metal content.
Geological mapping involves dividing a portion of the property being explored into small sections. Results are then recorded, or mapped, depending on that area of the grid from which samples are taken. Trenching identifies the continuity and extent of mineralization, if any, below the surface.
The claims are underlain by a pre-Upper Triassic phyllite package consisting of siliceous silstones to phyllitic greenstones.
The source of the above description of the rock formation and mineralization of the mineral claims was the Government of BC Ministry of Energy and Mines website at http://www.gov.bc.ca/em. This website contains a detailed description of the rock formation and mineralization of all staked lands in British Columbia.
In 2008 we discontinued the pursuit of this property.
Alberta Sun Uranium Project
On June 15, 2007, we signed a formal option agreement with Firestone Ventures Inc. (“Firestone”) pursuant to which we May earn up to a 75% interest in Firestone's Alberta Sun uranium project located in southwestern Alberta, Canada (the “Alberta Sun Project”). Under the terms of the agreement, we can earn a 60% interest by paying Firestone a total of CDN $210,000 cash (paid by June 2007), and issuing 135,000 shares on signing (issued in June, 2007) and paying an additional CDN $70,000 cash, issuing 270,000 shares and incurring $700,000 in exploration expenditures over the next two years. We can earn an additional 15% interest by paying Firestone CDN $100,000, issuing Firestone 400,000 common shares and incurring another $1 million in exploration expenditures over the following two years. Firestone will retain a 1% net smelter royalty ("NSR") of which 0.5% can be purchased by us for $500,000 at any time. There is an additional 1% NSR to the underlying property owners.
In March 2008, we discontinued the pursuit of this property.
Location and Access
The Alberta Sun uranium property (covering over 200,000 acres) is characterized by easy access across southern Alberta rangeland.
Previous Work
Results of initial fieldwork on the project include scintillometer readings of up to 1250 cps (counts per second), visible alteration, shale beds and abundant hematite and carbonaceous material within sandstone. Composite grab samples of isolated organic debris material returned up to 7640 parts per million (ppm) uranium (0.901 U3O8). Grab rock samples (sandstone) from a separate area 40 km southeast returned 57 to 150 ppm uranium. Elevated vanadium, molybdenum, arsenic, and lead values, important indicators of sandstone-hosted uranium, occur at both areas.
A 2,384 line kilometer electromagnetic and magnetic airborne survey over four priority areas has been completed. TerraNotes Ltd. of Edmonton is carrying out initial analysis of the survey to be followed by sophisticated modeling of the dataset which should delineate high-priority areas for drilling.
In March 2008, we terminated the Alberta Sun option agreement.
Wyoming
In August 2007, we acquired a 100% interest in the Lucky Emma Uranium claims, ("Wyoming Claims"), located in the recording district of Lander, Wyoming. Pursuant to an Asset Purchase Agreement between us and Maria Regina Caeli Management Corp (the “Seller), we paid $20,000 and issued 50,000 shares to the Seller for a 100% interest in the Wyoming Claims.
In August 2008 we discontinued the pursuit of the Wyoming property.
North West Territories
Effective November 14, 2007, we entered into a formal option agreement with Perry English for Rubicon Minerals Corp. and Precambrian Ventures Ltd (collectively the “Optionor”) pursuant to which we may earn up to a 100% interest in the Optionor’s NWT project located in the Northwest Territories, Canada. Under the terms of the agreement, we can earn a 100% interest by paying the Optionor CDN$86,000 cash (completed) and issuing 50,000 shares on signing (completed) and paying an additional CDN$95,000 cash and issuing 100,000 shares over the next three years. The Optionor will retain a 2% net smelter royalty (“NSR”) of which 1% can be purchased by us for $1,000,000 at any time.
In August 2008, we discontinued the pursuit of the North West territories property.
Our Proposed Exploration Program
We are currently reviewing geologic data for various properties in the North West Territories and the province of Ontario. We will develop an exploration program once we have acquired a resource property.
We intend to formulate an exploration program based on the various reports we have reviewed. We anticipate the program to be as follows:
We intend to implement an exploration program and intend to proceed in the following two phases all of which it is intended will be performed or supervised by a geologist with significant exploration experience, and by independent contractors hired by us.
Phase 1 will begin with research of the available geologic literature, personal interviews with geologists, mining engineers and others familiar with the prospect sites. We have completed this phase of the exploration process on the properties. This activity took approximately one month.
Our initial work will be augmented with geologic mapping and geochemical testing of our claims. The geologic mapping on the property will be done by taking soil samples throughout the property at approximately 200-300 foot intervals. On areas with no rock outcrops, we will do soil survey grids. We will also analyze surface outcrops of rock and the topography of the property to assist in the geologic mapping. We anticipate the costs of the geologic mapping during this Phase to be approximately $8,000.
We may also conduct limited geochemical testing during Phase 1. Rock samples will be taken from the property and taken to a lab where a determination of the elemental make up of the sample and the exact concentrations of gold will be made. We will then compare the relative concentrations of gold in samples so the results from different samples can be compared in a more precise manner and plotted on a map to evaluate their significance. We anticipate the cost of geochemical testing to be approximately $8,000 to $12,000. We will commence this activity immediately after completion of our research and anticipate that the geochemical testing will take up to six weeks. We anticipate spending up to $10,000 on initial trenching in this Phase. The trenching during this Phase will after the geochemical testing and will be completed in approximately two to four weeks. The trenching in Phase 1 will likely involve hand trenching or very limited use of machinery for excavation work. The trenching during Phase 1 will also likely focus on work on existing trenches, if any are found. During Phase 2 trenching will involve more extensive use of machinery and the use of explosives to assist in excavation.
When available, existing workings, like trenches, prospect pits, shafts or tunnels will be examined. If an apparent mineralized zone is identified and narrowed down to a specific area by the studies, we will begin trenching the area. Trenches are generally approximately 150 ft. in length and 10-20 ft. wide. These dimensions allow for a thorough examination of the surface of the vein structure types, if any, generally encountered in the area. They also allow easier restoration of the land to its pre-exploration condition when we conclude our operations. Once excavation of a trench is completed, samples are taken to a lab and then analyzed. Rock chip samples will tested for traces of gold, silver, lead, zinc and iron, however our primary focus is the search for gold. A careful interpretation of this available data collected from the various tests aids in determining whether or not the claims have current economic potential and whether further exploration is warranted.
Phase 1 will take about 3 months and cost up to $30,000. The anticipated date of completion for Phase 1 assumes adequate capital to complete the various stages of Phase 1.
Phase 2 involves an initial examination of the underground characteristics of any vein structure that was identified by Phase 1 of exploration. Phase 2 is aimed at identifying any mineral deposits of potential economic importance. The methods employed are:
More extensive trenching
More advanced geophysical work including ground magnetic and electrical geophysical work
Diamond Drilling
Trenching identifies the continuity and extent of mineralization, if any, below the surface. We will rely primarily on more extensive trenching and diamond drilling during Phase 2 to identify the extent of mineralization. We anticipate the cost of the trenching during Phase 2 to be approximately $20,000. We will commence more extensive trenching approximately two to four weeks after completion of Phase 1 after we have had time to review the results from Phase 1 and data from more extensive geophysical work in Phase 2. This stage will take approximately four to six weeks to complete.
Diamond drilling is an essential component of exploration and aids in the delineation and definition of any deposits. The extent of this drilling program will be determined by the occurrences of gold, if any, revealed by Phase 1. If gold occurrences are revealed during Phase 1 diamond drilling will be done to test for potential extensions.
Definition drilling is done with compressed air drills. Holes will be strategically drilled on the claims in reliance on the information generated during Phase 1. When drilling the accumulation of drilling mud may occur. We may use a small sump in order to collect the drilling mud.
Diamond drilling will occur after trenching and advanced geophysical work and will continue for up to two months.
We will also rely on ground magnetic and electrical geophysical work. Ground magnetic and electrical methods are used to determine the location of near-surface faults and to characterize the materials in and near fault zones. The types of properties considered would include grain size, sediment type and fault zone alteration.
Magnetic and electrical geophysics will be used to map shallow subsurface expressions of faulting. Subsurface electrical conductivity measurements will be used to locate zones of increased mineralization.
The geophysical work gives a general understanding of the location and extent of mineralization at depths that are unreachable by surface excavations and provides a target for more extensive trenching and core drilling. We anticipate the approximate cost of the geophysical work to be approximately $10,000 and anticipate commencing immediately after Phase 1 and completing in approximately 4 weeks. The approximate cost of drilling is estimated to be $50,000 to $70,000.
After a thorough analysis of the data collected in Phase 2, we will decide if the property warrants continued exploration.
Phase 2 will take up to 4 months and cost up to $100,000.
We intend to interest other companies in the property if we find mineralized materials.
The two phases of exploration will be conducted by a qualified geologist with reasonable experience in exploration of gold and mineral properties.
Following completion of Phases 1 and 2, our board of directors will make the assessment whether to continue exploration based on an analysis of results of our initial exploration efforts and based on advice from our contracted geologist. Criteria we will consider in making this assessment include the nature and density of the underlying rock. If the rock encountered is tombstone or granite we are more likely to proceed with more extensive drift driving as the cost of construction is lower than if the rock is unstable and/or fractured.
The primary factor we will take into account in deciding whether to proceed with extensive drift driving will be the grade and consistency of the ore encountered. That is to say, our estimate of the amount of gold per ton in the underlying rock will determine the extent of our underground work.
Geophysical surveys will require line cutting. Line cutting involves removing bush from the property in order to produce straight clearings. This provides grid boundaries for geophysical and other surveys.
Geophysical surveying is the search for mineral deposits by measuring the physical property of near-surface rocks, and looking for unusual responses caused by the presence of mineralization. Electrical, magnetic, gravitational, seismic and radioactive properties are the ones most commonly measured.
A more specific program wil be developed when we acquire another resource property.
Item 3.
Item 3. Legal Proceedings.
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officer or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
Item 4.
Item 4. Submissions of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of our security holders either through solicitation of proxies or otherwise in the fourth quarter of the fiscal year ended August 31, 2008.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters.
Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “BHWX”.
On May 7, 2007, our Board of Directors 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 we stated that our Corporation will issue ten (10) shares for every one (1) share of common stock issued and outstanding immediately prior to the effective date of the forward stock split. The change in our Articles of Incorporation was effected with the Nevada Secretary of State on April 6, 2007. As a result, our authorized capital has increased from 30,000,000 to 300,000,000 shares of common stock with a par value of $0.001 each. We will issue ten (10) shares of common stock in exchange for every one (1) share of common stock issued and outstanding. This will increase our issued and outstanding share capital from 5,747,000 shares of common stock to 57,470,000 shares of common stock.
As of November 30, 2008 there were 50 shareholders and 58,301,428 shares outstanding.
There are no outstanding options or warrants to purchase, or securities convertible into, our common shares. All of our issued and outstanding shares can be sold pursuant to Rule 144 of the Securities Act of 1933.
We have not declared any dividends since incorporation and does not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business.
Recent Sales of Unregistered Securities
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.
Equity Compensation Plan Information
We currently do not have any stock option or equity plans.
Item 6.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview
You should read the following discussion of our financial condition and results of operations together with the consolidated audited financial statements and the notes to consolidated audited financial statements included elsewhere in this filing prepared in accordance with accounting principles generally accepted in the United States. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.
Plan of Operations
Cash Requirements
For the next 12 months we plan to expend a total of approximately $150,000 in respect of our mineral properties. We currently have enough to complete Phase 1 of our exploration program.
We estimate that we will expend approximately $10,000 on general and administrative expenses over the next 12 months and working capital of approximately $10,000.
Based on our current plan of operations, we have sufficient funds for the next 6 months, after which time we will require additional funds to continue our exploration operations. In the event that we are unable to raise additional financing in the next 6 months, and fail to generate any cash flow, we may modify our operations plan accordingly. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still 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.
Over the next twelve months we intend to use all available funds to expand on the exploration and development of our mineral properties, as follows:
Estimated Funding Required During the Next Twelve Months
Financial Condition, Liquidity and Capital Resources
Since inception on April 14, 2005, we have been engaged in exploration and acquisition of mineral properties. Our principal capital resources have been acquired through the issuance of common stock.
At August 31, 2008, we had a working capital of $22,079.
At August 31, 2008, our total assets of $31,393 which consists of cash of $26,393 and prepaid expenses of $5,000. This compares with our assets at August 31, 2007 our total assets of $284,691 which consisted of $89,305 of cash, $80,062 of deposits and $115,324 of mineral property costs.
At August 31, 2008, our total liabilities were $4,314, compared to our liabilities of $9,237 as at August 31, 2007.
We have had no revenues from inception. We currently have insufficient funding to complete our proposed exploration program
Results of Operations.
We posted losses of $283,375 for the year ending August 31, 2008, losses of $326,241 for the year ended August 31, 2007, and losses of $629,221 since inception to August 31, 2008. The principal component of the loss was the property option write-off and general and administrative expenses.
Operating expenses for the year ending August 31, 2008 were $283,375 compared to the year ending August 31, 2007 that were $326,241.
Product Research and Development
Our business plan is focused on the long-term exploration and development of our mineral properties once acquired.
Purchase of Significant Equipment
We do not intend to purchase any significant equipment over the twelve months ending August 31, 2009.
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.
Going Concern
Due to our being a development stage company and not having generated revenues, in the consolidated financial statements for the year ended August 31, 2008, we included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure.
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.
Recently Issued Accounting Standards
Black Hawk does not expect the adoption of recently issued accounting pronouncements to have a significant impact on Black Hawk's results of operations, financial position or cash flow.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.
We have historically incurred losses, and through August 31, 2008 have incurred losses of $629,221 from our inception. During this period, we have successfully raised $474,300 from our SB-2 offering and two subsequent private placements. Because of these historical losses, we will require additional working capital to develop our business operations.
We intend to raise additional working capital through a private placement. We are applying for quotation on the Over-the-Counter Bulletin Board and intend to offer our stock in a private placement after obtaining such quotation.
There are no assurances that we will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from operations, our SB-2 public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available we may not increase our operations.
These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Item 7.
Item 7. Financial Statements.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
The following consolidated financial statements are filed as part of this annual report:
Report of Independent Registered Public Accounting Firm, dated December 5,
Balance Sheets as at August 31, 2008 and 2007
Statements of Operations for each of the years ended August 31, 2008 and 2007 and for the period from April 14, 2005 (incorporation) to August 31, 2008
Statements of Stockholders' Equity (Deficit) for the year ended August 31, 2008 and 2007 and for the period from April 14, 2005 (incorporation) to August 31,
Statements of Cash Flows for each of the years ended August 31, 2008 and 2007 and for the period from April 14, 2005 (incorporation) to August 31,
Notes to the Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Black Hawk Exploration, Inc.
Los Angeles, CA
We have audited the accompanying balance sheet of Black Hawk Exploration, Inc. (the “Company”) as of August 31, 2008 and 2007, and the related statements of operations, stockholders' equity, and cash flows for each of the two years ended August 31, 2008 and 2007 and the period from April 14, 2005 (inception) through August 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Black Hawk Exploration, Inc. as of August 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two-year period then ended and the period from April 14, 2005 (inception) through August 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2009 raise substantial doubt about its ability to continue as a going concern. The 2008 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
LBB & Associates Ltd., LLP
Houston, Texas
December 5, 2008
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
Years Ended August 31, 2008 and 2007
and Period from April 14, 2005 (Inception) through August 31, 2008
The accompanying notes are an integral part of these financial statements
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period from April 14, 2005 (Inception) through August 31, 2008
*The common stock issued has been retroactively restated to reflect a forward stock split of 10 new shares for 1 old share, effective March 15, 2007.
The accompanying notes are an integral part of these financial statements
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
Years Ended August 31, 2008 and 2007
and Period from April 14, 2005 (Inception) through August 31, 2008
The accompanying notes are an integral part of these financial statements
BLACK HAWK EXPLORATION INC.
(An Exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
Black Hawk Exploration Inc. ("the Company") was incorporated in Nevada on April 14, 2005, to engage in acquisition and exploration of mineral properties.
Going concern
These financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception of $629,221. Further losses are anticipated in the development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability.
The continuing operations of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
There can be no assurance that capital will be available as necessary to meet the Company's working capital requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments with an original maturity of ninety days or less.
Exploration Stage Company
The Company complies with Financial Accounting Standard Board Statement ("SFAS") No. 7 for its characterization of the Company as an Exploration Stage Company. The Company is devoting its present efforts to establish a new business and nominal of its planned principal operations have commenced.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 amount of revenue and expenses during the period. Actual results may differ from those estimates.
Mineral Property Acquisition Costs
The costs of acquiring mineral properties are capitalized and will be amortized over their estimated useful lives following the commencement of production or expensed if it is determined that the mineral property has no future economic value or the properties are sold or abandoned.
Cost includes cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made.
The recoverable amounts for mineral properties is dependent upon the existence of economically recoverable reserves; the acquisition and maintenance of appropriate permits, licenses and rights; the ability of the Company to obtain financing to complete the exploration and development of the properties; and upon future profitable production or alternatively upon the Company's ability to recover its spent costs from the sale of its interests. The amounts recorded as mineral properties reflect actual costs incurred and are not intended to express present or future values.
The capitalized amounts may be written down if potential future cash flows, including potential sales proceeds, related to the property are estimated to be less than the carrying value of the property. Management of the Company reviews the carrying value of each mineral property interest quarterly, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Reductions in the carrying value of each property would be recorded to the extent the carrying value of the investment exceeds the estimated future net cash flows.
Exploration and Development Costs
Exploration costs are expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration costs and development costs incurred after such determination will be capitalized. The establishment of proven and probable reserves is based on results of final feasibility studies which indicate whether a property is economically feasible. Upon commencement of commercial production, capitalized costs will be transferred to the appropriate asset category and amortized over their estimated useful lives. Capitalized costs, net of salvage values, relating to a deposit which is abandoned or considered uneconomic for the foreseeable future, will be written off.
Impairment of Mineral Rights
The Company reviews mineral rights for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the review indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow method using a discount rate that is considered to be commensurate with the risk inherent in the company's current business model. During the years ended August 31, 2008 and 2007, the Company recorded impairment to mineral rights of $233,051 and $291,511, respectively.
Asset Retirement Obligations
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. The adoption of this standard has had no effect on the Company's financial position or results of operations. To August 31, 2008 any potential costs relating to the ultimate disposition of the Company's mineral property interests have not yet been determinable.
Basic Loss per Share
Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.　The weighted average number of shares outstanding during the periods has been retroactively restated to reflect a forward stock split of 10 new shares for 1 old share, effective March 15, 2007.
Income Taxes
The asset and liability approach is used to account for income taxes by recognizing deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.
Financial Instruments
The Company's financial instruments consist of cash and accounts payable. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. Because of the short maturity of such assets and liabilities the fair value of these financial instruments approximate their carrying values, unless otherwise noted.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.
NOTE 3 - COMMITMENTS - Mineral Rights
During the year ended August 31, 2008, the Company allowed its mineral property options to expire. Accordingly, an impairment charge of $233,051 was recorded to write-off the assets.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the year ended August 31, 2007 the Company signed a management contract with a research and consulting company owned by a direct relative of the president of the Company for CDN$4,500 per month commencing June 2007. This contract was terminated upon the president’s resignation in December, 2007.
In the year ended August 31, 2008 a total of $22,449 was paid to this director. As of August 31, 2008, no balance was owed to this director.
NOTE 5 - COMMON STOCK
The Company’s authorized stocks are 300,000,000 common shares at a par value of $0.001.
In October 2006, the Company raised $20,000 from the sale of 2,000,000 post-split common shares at $0.10 per share.
On March 15, 2007, the board of directors approved a ten (10) for one (1) forward stock split of authorized, issued and outstanding shares of common stock. The Company amended its Articles of Incorporation by the filing of a Certificate of Change with the Nevada Secretary of State wherein it stated that it 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. The stock split is presented retroactively in these financial statements.
On May 30, 2007 the Company closed a private placement for an aggregate of 571,428 common shares at a price of $0.70 for total proceeds of $400,000. These common shares were issued in June 2007.
From June to August, 2007 the Company issued 210,000 common shares valued at $147,000 in connection with its mineral property option agreements and acquisition agreement.
The Company issued 50,000 shares for a mineral property option in November 2007 valued at $35,000.
As of August 31, 2008, 58,301,428 shares of the Company’s common stock are issued and outstanding.
NOTE 6 - INCOME TAXES
The Company follows Statement of Financial Accounting Standards Number 109 ("SFAS 109"), "Accounting for Income Taxes." Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
At August 31, 2008, the Company had an unused net operating loss carry-forward approximating $629,000 that is available to offset future taxable income; the loss carry-forward will start to expire in 2025.
Item 8.
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
During the year ended August 31, 2008 and subsequent to August 31, 2008 through the date hereof, neither Black Hawk nor anyone on our behalf consulted with LBB & Associates Ltd., LLP. regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, nor has LBB & Associates Ltd., LLP provided to us a written report or oral advice regarding such principles or audit opinion or any matter that was the subject of a disagreement or reportable events set forth in Item 304(a)(iv) of Regulation S-B with our former accountant.
Item 8A. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by the annual report, being August 31, 2008, 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. There have been no significant changes in our 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.
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 Securities Exchange Act of 1934 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 Securities Exchange Act of 1934 is accumulated and communicated to management including our president and secretary as appropriate, to allow timely decisions regarding required disclosure.
Internal Controls over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Currently, Management and Board review are being utilized to mitigate the risk of material misstatement in financial reporting, and also to ensure that existing internal controls remain effective. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of August 31, 2008.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.
There has been no change in our internal controls over financial reporting during our most recent fiscal year that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Item 8B. Other Information
None.
PART III
Item 9.
Item 9.
Directors, Executive Officer, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
DIRECTORS AND EXECUTIVE OFFICER, PROMOTERS AND CONTROL PERSONS
As at October 31, 2008, our directors and executive officer, their ages, positions held, and duration of such, are as follows:
Name
Position Held with our Company
Age
Date First
Elected or Appointed
Sterling Mcleod
Director, President, Secretary and Treasurer
September 10, 2008
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Sterling Mcleod
Since 2007, Mr. Mcleod has been a mining engineer at Shell Canada
From 2006 to 2007, Mr. Mcleod was a mining engineer at Petro Canada. From 2003 to 2006 Mr. Mcleod was a mining engineer at Suncor Energy.
In 2003, Mr. Mcleod graduated from the University of British Columbia Institute with a Bachelor of Mining Engineering. In 2000, Mr. Mcleod obtained a diploma in Mine Engineering from the British Columbia Institute of Technology in Burnaby, British Columbia.
Committees of the Board
Currently our company has the following committees:
·
Audit Committee;
·
Nominating and Corporate Governance Committee; and
·
Compensation Committee.
Our Audit Committee is currently made up of Sterling Mcleod. The Audit Committee is governed by the Audit Committee Charter adopted by the board of directors on November 15, 2006.
Our Nominating and Corporate Governance Committee is currently made up of Sterling Mcleod. The Nominating and Corporate Governance Committee is governed by the Nominating and Corporate Governance Committee Charter adopted by the board of directors on November 15, 2006.
Our Compensation Committee is currently made up of Sterling Mcleod. The Compensation Committee is governed by the Compensation Committee Charter adopted by the board of directors on November 15, 2006.
Family Relationships
There are no family relationships between any of our directors or executive officer.
Involvement in Certain Legal Proceedings
Other than as discussed below, none of our directors, executive officer, promoters or control persons have been involved in any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
3. being subject to any order, judgement, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgement has not been reversed, suspended, or vacated.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None of our directors, executive officer, future directors, 5% shareholders, or any members of the immediate families of the foregoing persons have been indebted to us during the last fiscal year or the current fiscal year in an amount exceeding $60,000.
None of the current directors or officer of our company are related by blood or marriage.
On April 14, 2005, we issued a total of 2,000,000 shares of restricted common stock to Mr. Ainsworth, a former officer and director of our company for a subscription receivable of $2,000. On September 11, 2008 Mr. Ainsworth transferred all of his shares to our new President Sterling Mcleod for cash consideration of $2,000.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our executive officer and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended August 31, 2008, all filing requirements applicable to its officer, directors and greater than ten percent beneficial owners were complied with.
Code of Ethics
Effective November 15, 2006, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, our company's president (being our principal executive officer) and our company's secretary (being our principal financial and accounting officer and controller), as well as persons performing similar functions. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:
(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
(3) compliance with applicable governmental laws, rules and regulations;
(4) the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and
(5) accountability for adherence to the Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics requires, among other things, that all of our company's personnel shall be accorded full access to our president and secretary with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company's personnel are to be accorded full access to our company's board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our president or secretary.
In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company's president or secretary. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the president or secretary, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.
Our Code of Business Conduct and Ethics is filed herewith with the Securities and Exchange Commission as Exhibit 14.1 to our annual report filed December 21, 2006. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Black Hawk Exploration Inc., 8391 Beverly Blvd. #305, Los Angeles, California 90048.
Audit Committee Financial Expert
Our Board of Directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 401(e) of Regulation S-B, and is "independent" as the term is used in Term 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that the members of our Board of Directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.
Item 10.
Item 10. Executive Compensation.
There has not been any compensation awarded to, earned by, or paid to our directors and executive officer for the last three completed financial years.
Employment/Consulting Agreements
There are no written employment or consulting agreements between us and any of our directors and executive officer.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officer, except that our directors and executive officer may receive stock options at the discretion of our board of directors. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officer, except that stock options may be granted at the discretion of our board of directors.
We have no plans or arrangements in respect of remuneration received or that may be received by our executive officer to compensate such officer in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.
Stock Option Plan
Currently, there are no stock option plans in favour of any officer, directors, consultants or employees of ours.
Stock Options/SAR Grants
There were no grants of stock options or stock appreciation rights to any officer, directors, consultants or employees of ours during the fiscal year ended August 31, 2008.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values
There were no stock options outstanding as at August 31, 2008.
Directors Compensation
We reimburse our directors for expenses incurred in connection with attending board meetings but did not pay director's fees or other cash compensation for services rendered as a director in the year ended August 31, 2008.
We have no present formal plan for compensating our directors for their service in their capacity as directors, although in the future, such directors are expected to receive compensation and options to purchase shares of common stock as awarded by our board of directors or (as to future options) a compensation committee which may be established in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. The board of directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director. Other than indicated in this annual report, no director received and/or accrued any compensation for his or her services as a director, including committee participation and/or special assignments.
Report on Executive Compensation
Our compensation program for our executive officer is administered and reviewed by our board of directors. Historically, executive compensation consists of a combination of base salary and bonuses. Individual compensation levels are designed to reflect individual responsibilities, performance and experience, as well as the performance of our company. The determination of discretionary bonuses is based on various factors, including implementation of our business plan, acquisition of assets, development of corporate opportunities and completion of financing.
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as at November 30, 2008, certain information with respect to the beneficial ownership of our common stock by each shareholder known by us to be the beneficial owner of more than five percent (5%) of our common stock, and by each of our current directors and executive officer. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership(1)
Percentage
of Class(1)
Sterling Mcleod
506-733 3rd Ave SW
Calgary, Alberta T2P 0G7
20,000,000 common shares
34.3%
Directors and Executive Officer as a Group
20,000,000 common shares
34.3%
(1)
Based on 58,301,428 shares of common stock issued and outstanding as of November 30, 2008. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person
Future Changes in Control
We are unaware of any contract or other arrangement, the operation of which may, at a subsequent date, result in a change in control of our company.
Item 12.
Item 12. Certain Relationships and Related Transactions.
Other than as described under the heading "Executive Compensation", or as set forth below, there are no material transactions with any of our directors, officer or control person that have occurred during the last fiscal year.
Item 13.
Item 13. Exhibits.
Exhibit Number and Exhibit Title
(3)
Charter and By-laws
3.1
Articles of Incorporation (incorporated by reference from our SB-2 Registration Statement filed January 17, 2006).
3.2
Bylaws (incorporated by reference from our SB-2 Registration Statement filed January 17, 2006).
(10)
Material Contracts
10.1
None
(14)
Code of Ethics
14.1
Code of Business Conduct and Ethics
(31)
Section 302 Certification
31.1
Certification of Sterling Mcleod
(32)
Section 906 Certification
32.1
Certification of Sterling Mcleod
Item 14.
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed by LBB & Associates Ltd., LLP for professional services rendered for the audit of our annual financial statements included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2008 were estimated to be $15,400.
Audit Related Fees
For the fiscal year ended August 31, 2008, the aggregate fees billed fo assurance and related services by LBB & Associates Ltd., LLP relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above, was $0.
Tax Fees
For the fiscal year ended August 31, 2008, the aggregate fees billed by LBB & Associates Ltd., LLP for other non-audit professional services, other than those services listed above, totalled $0.
We do not use LBB & Associates Ltd., LLP for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage LBB & Associates Ltd., LLP to provide compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before LBB & Associates Ltd., LLP is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
·
approved by our audit committee (which consists of entire Board of Directors); or
·
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
The audit committee pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules, and therefore, the audit committee does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the audit committee either before or after the respective services were rendered.
The audit committee has considered the nature and amount of fees billed by LBB & Associates Ltd., LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining LBB & Associates Ltd., LLP's independence.
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 authorized.
Black Hawk Exploration Inc.
By: /s/ Sterling Mcleod
Sterling Mcleod, President, Secretary and Treasurer
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
Date: December 14, 2008
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.
Signature
Title
Date
/s/ Sterling Mcleod
Sterling Mcleod
President, Secretary and Treasurer
December 14, 2008