Attached files
file | filename |
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EX-31.1 - EXHIBIT 31.1 - BLACK HAWK EXPLORATION | ex31-1.htm |
EX-31.2 - EXHIBIT 31.2 - BLACK HAWK EXPLORATION | ex31-2.htm |
EX-32.1 - EXHIBIT 32.1 - BLACK HAWK EXPLORATION | ex32-1.htm |
EX-99.0 - EXHIBIT 99.0 - BLACK HAWK EXPLORATION | ex99-0.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended May 31,
2010
o TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the
transition period from
to
Commission
file number 000-130048
Black Hawk Exploration,
Inc.
|
||
(Exact name of small business issuer as specified in its charter) |
Nevada
|
N/A
|
|
(State
or other
jurisdiction of incorporation or organization) |
(I.R.S.
Employer
Identification No.) 27-0670160
|
1174 Manito NW, PO Box 363, Fox Island, WA
98333
|
||
(Address of principal executive offices) |
(253) 973-7135
|
||
(Issuer’s telephone number) |
N/A
|
||
(Former name, former address and former fiscal year, if changed since last report) |
Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes x No o
Accelerated
filer o
|
|
Non-accelerated
filer o (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes o No o
APPLICABLE
ONLY TO CORPORATE ISSUERS
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:
60,488,993
common shares issued and outstanding as at July 15, 2010
Transitional
Small Business Disclosure Format (Check one):
Yes o No x
Check
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No x
Our
financial statements are stated in United States Dollars (US$) and are prepared
in accordance with United States Generally Accepted Accounting
Principles.
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
CONSOLIDATED
FINANCIAL STATEMENTS
May
31, 2010
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Consolidated
Balance Sheets
May
31,
|
August
31,
|
|||||||
2010 |
2009
|
|||||||
(Unaudited)
|
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 230,006 | $ | 13,000 | ||||
Restricted
cash
|
22,474 | - | ||||||
Prepaid
expenses
|
8,000 | 33,500 | ||||||
Total
Current Assets
|
260,480 | 46,500 | ||||||
OTHER
ASSETS
|
||||||||
Mineral
property rights
|
350,171 | 3,700 | ||||||
Total
Other Assets
|
350,171 | 3,700 | ||||||
TOTAL
ASSETS
|
$ | 610,651 | $ | 50,200 | ||||
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | - | $ | - | ||||
Total
Current Liabilities
|
- | - | ||||||
COMITMENTS
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Common
stock, 300,000,000 shares authorized at
|
||||||||
par
value of $0.001; 60,478,643 and 59,201,428
|
||||||||
shares
issued and outstanding at May 31, 2010 and August 31, 2009,
respectively
|
60,479 | 59,201 | ||||||
Additional
paid-in capital
|
1,731,454 | 687,099 | ||||||
Deficit
accumulated during the exploration stage
|
(1,181,282 | ) | (696,100 | ) | ||||
Total
Stockholders’ Equity
|
610,651 | 50,200 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 610,651 | $ | 50,200 |
The
accompanying notes are an integral part of these consolidated financial
statements.
3
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Consolidated
Statements of Operations
(Unaudited)
|
From
Inception
|
|||||||||||||||||||
on
April 14,
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||||||||||||||||||||
For
the Three Months Ended
|
For
the Nine Months Ended
|
2005
Through
|
||||||||||||||||||
May
31,
|
May
31,
|
May
31,
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||||||
Mineral
development expenses
|
$ | 94,917 | $ | - | $ | 163,811 | $ | - | $ | 165,641 | ||||||||||
General
and administrative
|
68,913 | 2,500 | 321,371 | 16,350 | 491,079 | |||||||||||||||
Impairment
of mineral properties
|
- | - | - | - | 524,562 | |||||||||||||||
Total
Operating Expenses
|
163,830 | 2,500 | 485,182 | 16,350 | 1,181,282 | |||||||||||||||
NET
LOSS
|
$ | (163,830 | ) | $ | (2,500 | ) | $ | (485,182 | ) | $ | (16,350 | ) | $ | (1,181,282 | ) | |||||
BASIC AND
DILUTED LOSS
|
||||||||||||||||||||
PER
COMMON SHARE
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||||||
WEIGHTED
AVERAGE NUMBER
|
||||||||||||||||||||
OF
COMMON SHARES OUTSTANDING
|
60,286,361 | 58,301,248 | 59,637,353 | 58,301,428 |
The
accompanying notes are an integral part of these consolidated financial
statements.
4
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
(Unaudited)
From
Inception
|
||||||||||||
on
April 14,
|
||||||||||||
For
the Nine Months Ended
|
2005
Through
|
|||||||||||
May
31,
|
May
31,
|
|||||||||||
2010
|
2009
|
2010
|
||||||||||
OPERATING
ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (485,182 | ) | $ | (16,350 | ) | $ | (1,181,282 | ) | |||
Adjustments
to reconcile net loss to
|
||||||||||||
net
cash used by operating activities:
|
||||||||||||
Impairment
of mineral property rights
|
- | - | 524,562 | |||||||||
Stock-based
compensation
|
140,633 | - | 170,633 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Restricted
cash
|
(22,474 | ) | - | (22,474 | ) | |||||||
Prepaid
expenses
|
4,029 | - | (8,000 | ) | ||||||||
Accounts
payable
|
- | 7,780 | - | |||||||||
Net
Cash Used in Operating Activities
|
(362,994 | ) | (8,570 | ) | (516,561 | ) | ||||||
INVESTING
ACTIVITIES
|
||||||||||||
Mineral
property right expenditures
|
(75,000 | ) | - | (442,733 | ) | |||||||
Net
Cash Used in Investing Activities
|
(75,000 | ) | - | (442,733 | ) | |||||||
FINANCING
ACTIVITIES
|
||||||||||||
Common
stock issued for cash
|
655,000 | - | 1,189,300 | |||||||||
Net
Cash Provided by Financing Activities
|
655,000 | - | 1,189,300 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
217,006 | (8,570 | ) | 230,006 | ||||||||
CASH
AT BEGINNING OF PERIOD
|
13,000 | 26,393 | - | |||||||||
CASH
AT END OF PERIOD
|
$ | 230,006 | $ | 17,823 | $ | 230,006 | ||||||
SUPPLEMENTAL
DISCLOSURES OF
|
||||||||||||
CASH
FLOW INFORMATION
|
||||||||||||
CASH
PAID FOR:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
Taxes
|
$ | - | $ | - | $ | - | ||||||
SUPPLEMENTAL
DISCLOSURE OF NON CASH TRANSACTIONS:
|
||||||||||||
Common
stock issued for mineral properties
|
$ | 250,000 | $ | - | $ | 432,000 | ||||||
Reclassification
of deposits of mineral property rights
|
$ | 21,471 | $ | - | $ | - |
The
accompanying notes are an integral part of these consolidated financial
statements.
5
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
May
31, 2010
NOTE
1 - BASIS OF PRESENTATION
The
accompanying consolidated financial statements of Black Hawk Exploration, Inc.
(“Black Hawk” or the “Company”) have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at May 31, 2010, and for all
periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company’s August 31,
2009 audited financial statements as included in Form 10-K as filed with the
Securities and Exchange Commission (“SEC”). The results of operations
for the periods ended May 31, 2010 are not necessarily indicative of the
operating results for the full year.
On
December 8, 2009 the Company formed Golden Black Hawk, Inc., a second
wholly-owned subsidiary under the laws of the State of Nevada to acquire,
explore and develop gold properties in the United States and
Canada.
Certain
2009 balances have been reclassified to conform to 2010
presentation.
NOTE
2 - GOING CONCERN
The
Company’s financial statements are prepared using generally accepted accounting
principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and allow it to continue as
a going concern. The ability of the Company to continue as a going concern is
dependent on the Company obtaining adequate capital to fund operating losses
until it becomes profitable. If the Company is unable to obtain adequate
capital, it could be forced to cease operations.
In order
to continue as a going concern, the Company will need, among other things,
additional capital resources. Management’s plan is to obtain such resources for
the Company by obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses and seeking equity and/or debt
financing. However management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
NOTE
3 – MINERAL PROPERTY RIGHTS
BMP
Property
During
the year ended August 31, 2009, a geologist engaged by the Company identified
and acquired 56 lithium claims in the state of Nevada on behalf of the
Company. The titles to these claims were transferred to the Company
in November 2009. As of May 31, 2010, the Company has incurred
$25,171 of acquisition costs related to the mineral rights of the BMP
Property.
6
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
May
31, 2010
Dun Glen
Property
On
December 10, 2009, (the “Effective Date”), the Company entered into a property
interest purchase option agreement (the “Option Agreement”) with HuntMountain
Resources, Inc. (“HuntMountain”), a public company that has the option right to
acquire 100% interest in a total of 73 mining claims in Pershing
County, Nevada.
The
Option Agreement entitles the Company to acquire undivided legal and beneficial
interests of up to 75% in the Property free and clear of all liens, charges and
claims of others. Considerations for the Option Agreement are as
follows:
●
|
An
initial payment of $50,000 (paid) and issuance of 250,000 restricted
shares of common stock on the effective date. The common shares
were issued on February 23, 2010.
|
●
|
An
additional payment of $25,000 and issuance of 100,000 restricted common
shares on or before the first year anniversary of the signing of the
agreement.
|
●
|
A
further payment of $25,000 on or before the second
anniversary.
|
●
|
Development
expenditures on the property of not less than $700,000 on or before the
fourth anniversary of the effective date of the
agreement.
|
The
Company must also pay third parties $72,500 in 2011 and each year thereafter as
part of their option agreements with HuntMountain, for which the Company assumed
responsibility as part of the Option Agreement.
As of May
31, 2010, the Company incurred $325,000 of acquisition costs related to the
mineral right of the Dun Glen Property. Management does not consider
any impairment of the assets necessary as of May 31, 2010.
NOTE
4 - RELATED PARTY TRANSACTIONS
During
the nine months ended May 31, 2010, the Company paid total consulting fees of
$92,000 to a private company that our CFO is a director.
During
the nine months ended May 31, 2010, the Company paid rent of $2,800 to a company
with a common director and CEO with the Company.
NOTE
5 – COMMITMENTS
In
accordance with the amended Consulting Agreements dated January 1, 2010 with a
company with a common director of the Company, the Company pays consulting fees
of $10,000 up front and $6,000 per month and preapproved office expenses of
$1,000 through July 2010. The Consulting Agreement is automatically
renewed for a further seven months unless a notice of termination is
received.
On
December 1, 2009, the Company entered into an office rent agreement with a
public company that has a common director and CEO with the Company to pay $400
per month for office space in Nevada. The term of the agreement is on
a month by month basis starting December 1, 2009. A deposit of $1,200
was paid upon signing the agreement.
7
BLACK
HAWK EXPLORATION, INC.
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
May
31, 2010
NOTE
6 – COMMON STOCK
On
October 16, 2009, the Company received gross proceeds of $55,000 for
subscriptions of 64,706 shares of the Company’s common stock at $0.85 per
share. The shares were issued in February 2009.
On
October 19, 2009, the Company entered into an equity financing agreement whereby
the Company may draw up to $1,000,000 by issuing units at $0.85 per unit with
each unit consisting of one share of the Company’s common stock and one common
stock purchase warrant exercisable into one common share for two years at $1.05
for the first 12 months and $1.25 for the second 12
months. Under the term of the agreement the Company has the
right to call upon funds as needed, subject to approval by the other party to
the agreement. As of May 31, 2010, the Company has received total proceeds of
$600,000, and issued 770,588 units under the terms of the
agreement.
In
February 2010, the Company issued 250,000 common shares in accordance with the
Dun Glen Property Option agreement. The shares were valued at $1.00
per share for a total of $250,000 based upon the fair market value of the
Company’s stock on December 10, 2009; the effective date of the Option
Agreement.
During
the nine month period ended May 31, 2010, the Company issued 250,000 common
shares to a consulting firm in accordance with a letter agreement effective
February 1, 2010 for consulting services on the Company’s website and
shareholder presentation and investment opportunities. The shares
were valued at $0.54 per share for a total value of $135,000 based on the fair
market value of the stock on February 1, 2010. According to the agreement with
Vista Partners LLC, should Vista facilitate financing for Black Hawk, they are
to receive eight percent (8%) of received funds in Black Hawk common
stock.
On May 1,
2010 the Company issued 6,627 shares of the Company to Hunsaker Inc., consulting
geologist, as partial payment of an invoice for work tendered valued at
$5,633.
NOTE
7 – SUBSEQUENT EVENTS
On June
1, 2010 the Company issued 10,350 shares of the Company to Hunsaker Inc.,
consulting geologist, as partial payment of an invoice for work tendered with a
fair value of $8,798.
On June
2, 2010, the Company has entered into an agreement with Mid-South Capital
wherein should Mid-South facilitate financing for the Company, they are to
receive eight percent (8%) in cash and two percent (2%) in warrants to purchase
common shares at a price of $ 0.22.
In
accordance with Financial Accounting Standards Board Accounting Standards
Codification (“FASB ASC”) 855, Company management reviewed all material events
through the date of this report and there are no additional material subsequent
events to report.
8
Item 2. Management’s Discussion and Analysis and Plan of Operation.
FORWARD-LOOKING
STATEMENTS
This
quarterly report contains forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as “may”, “should”,
“expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled “Risk Factors”, that may cause our or our industry’s actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
Our
financial statements are stated in United States Dollars ($, or US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. In this quarterly report, unless otherwise specified, all dollar
amounts are expressed in United States dollars. All references to “CDN$” refer
to Canadian dollars and all references to “common shares” refer to the common
shares in our capital stock.
As used
in this quarterly report, the terms “we”, “us”, “our”, and “Black Hawk” mean
Black Hawk Exploration Inc., unless otherwise indicated.
Corporate
History
We were
incorporated in the State of Nevada on April 14, 2005. We are engaged
in the acquisition and exploration of mining properties. We maintain
our statutory registered agent’s office at 9360 W. Flamingo #110-158
Las Vegas, NV 89147 and our business office is located at 1174 Manitou Dr., PO
Box 363, Fox Island, WA 98333. Our fiscal year end is August 31st. On March 15,
2007, we approved a ten (10) for one (1) forward stock split of our authorized,
issued and outstanding shares of common stock. We amended our Articles of
Incorporation by the filing of a Certificate of Change with the Nevada Secretary
of State wherein it stated that we would issue ten shares for every one share of
common stock issued and outstanding immediately prior to the effective date of
the forward stock split. The change in the Articles of Incorporation was
effected with the Nevada Secretary of State on April 6, 2007. As a result, the
authorized capital increased from 30,000,000 to 300,000,000 shares of common
stock with a par value of $0.001.
Other
than as set out herein, we have not been involved in any bankruptcy,
receivership or similar proceedings, nor have we been a party to any material
reclassification, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of our business.
We are an
exploration stage resource company, and are primarily engaged in the exploration
for and development in the properties in which we have acquired
interests. Black Hawk Exploration is a diversified energy and metals
exploration company focused on identifying and exploring strategic high value
properties and developing new prospective projects globally. Black Hawk
Exploration will establish wholly owned corporate identities in multiple
strategic minerals, high value commodities, and rare earth projects. In August
2009 the Company formed a wholly owned Nevada subsidiary, Blue Lithium Energy
Inc. Blue Lithium Energy will initially acquire, explore and develop a portfolio
of strategic Lithium properties in the United States and Canada.
T
he area the Company is currently
evaluating has a geologic and topographic setting that is similar to Clayton
Valley. During the mid-to late 1970’s the U.S. Geological Survey (USGS)
evaluated Lithium deposits and resources around the world. During the
course of the program they drilled 22 holes in Nevada and Arizona. Initial
drilling was in Clayton Valley (one of these drill sites was on Black Hawk
claims adjacent to Chemetall Foote) to evaluate the known
continental-brines. USGS holes drilled in the new target
area had 1.3 and 1.7 ppm Lithium in the brines that were intersected
plus 287 and 364 ppm lithium in the sediments. These are within
the range of values that could be indicative for lithium brines in the target
area.
9
We hold
title to 56 placer mineral claims over a 1,120 acre site allowing Lithium
exploration. The mineral claims give us the right to all of the minerals which
can be claimed by placer claims underlying the land on which the
claims have been staked. We began preliminary exploration on our property in
September 2009 and we have completed Phase 1 Lithium exploration at our Clayton
Valley properties.
On
September 30, 2009 Black Hawk announced its Clayton Valley, Nevada acquisition.
Black Hawk’s 1,120 acre site is located in the lithium rich Clayton Valley which
is the home of the largest lithium brine production facility in the U.S. The
Chemetall Foote facility has produced in excess of 50 million Kg of lithium to
date and is scaled to produce 1.2 million Kg a year. The American Institute of
Mining estimates the mineral resource of the Clayton Valley to be 750 million Kg
of lithium. The lithium brine deposits are located at depths of a few hundred
meters and can be extracted in an environmentally friendly manner.
On
December 8, 2009 the Company formed a second wholly owned subsidiary in Nevada
named Golden Black Hawk, Inc. This subsidiary then entered into an agreement
(“the Option Agreement”) on December 10, 2009 (“the Effective Date”) with
HuntMountain Resources Inc (HNTM) to purchase 75% of their option on a precious
metal property in Nevada called Dun Glen. The Option Agreement entitles the
Company to acquire undivided legal and beneficial interests of up to 75% in the
Property free and clear of all liens, charges and claims of others.
Considerations for the Option Agreement are as follows:
-
|
An
initial payment of $50,000 (paid) and issuance of 250,000 restricted
shares of common stock (not issued) on the Effective
Date;
|
-
|
A
further payment of $25,000 and issuance of 100,000 restricted shares of
common stock on the first anniversary of the effective
Date;
|
-
|
A
further payment of $25,000 on the second anniversary of the Effective
Date;
|
-
|
Incur
or fund expenditures on the Property of not less than $700,000 on or
before the fourth anniversary of the Effective
Date.
|
The
Company must also pay third parties $72,500 in 2011 and each year thereafter as
part of their previous option agreements with HuntMountain Resources, Inc., for
which Black Hawk assumed responsibility as part of the Option
Agreement.
Product
Research and Development
Our
business plan is focused on the long-term exploration and development of our
mineral properties.
In March
of 2010 Black Hawks wholly owned subsidiary Blue Lithium Energy completed its
primary drill program on its Clayton Valley claims, results are still
pending.
In April
of 2010 Black Hawks wholly owned subsidiary Golden Black Hawk authorized an
initial budget of $50,000 for further development of the Dun Glen Mining claims.
Permitting for an exploratory drill program was requested in April of
2010 and Black Hawk received authorization from the US Bureau of Land Management
to commence effective early July. Black Hawk Exploration filed the
required Reclamation Bond and currently is scheduling Phase 2 exploration
targeted for late July.
Subject
to funds available Black Hawk Exploration plans on increasing research and
development over the next twelve months ending August 31, 2011.
10
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
May 31, 2011 unless sufficient funding is realized.
Competition
The
mining industry is fragmented. We compete with other exploration companies
looking for uranium and gold. We are one of the smallest exploration companies
in existence. We are an infinitely small participant in the gold mining market.
While we compete with other exploration companies, there is no competition for
the exploration or removal of minerals from our property.
The
Lithium industry is fragmented. We compete with other exploration companies
looking for Lithium. We are one of the smallest exploration companies. We are an
infinitely small participant in the Lithium exploration market. While
we compete with other exploration companies, there is no competition for the
exploration or removal of Lithium from our property. Readily available Lithium
markets exist in Canada and around the world for the sale of Lithium. As the
international demand for battery-powered devices steadily increases, the Global
demand for our potential lithium production will focus the investment
communities spotlight on Black Hawk and its Clayton Valley holdings. The
Chemetall Foote Minerals facility at their Clayton Valley Silver Peak Mine,
located in close proximity to our Blue Lithium Clayton Valley holdings, has been
continually producing lithium utilizing brines from shallow 300 ft to 800 ft
wells for almost 45 years (1965). The results from the Clayton Valley drill
program discovered less then commercial values and the future exploration of
Clayton Valley will be determined by Sept 1st ,2010
while Black Hawk focuses on its Nevada Dun Glen gold exploration
program.
The
mineral exploration industry is also fragmented. We compete with other
exploration companies looking for precious metals. We are one of the smallest
exploration companies with very limited gold and silver property holdings. We
are an infinitely small participant in the gold and silver
exploration market. While we compete with other exploration
companies, there is no competition for the exploration or removal
of gold and silver from our Dun Glen property. Readily
available precious metals markets exist in around the world for the sale of gold
and silver. As the international demand for these minerals steadily increases as
reflected by the record highs being paid for these minerals the Global demand
for our potential gold and silver production will focus the investment
communities spotlight on Black Hawk and its wholly owned subsidiary Golden Black
Hawk.
Government
Regulations and Supervision
Our
mineral exploration programs will be subject to the rules of the Bureau of Land
Management (BLM).
Site
permitting will be done utilizing the Bureau of Land Management’s (BLM) Notice
Level process and amending existing permits in place. This provides for
permitting in Clayton Valley of less then 5 acres of disturbance for exploration
on mineral properties which is more than sufficient for Black Hawks current
Lithium program. Most typically the entire Notice Level Permitting (NLP) is
approved / accepted in 3 to 4 weeks. Once the NLP is submitted the BLM has 15
days to review and issue their comments and/or approval. Permits for Clayton
Valley were applied for, approved and Phase 1 exploration was completed. Black
Hawk received an existing exploratory permit as part of the Dun Glen
acquisition and it was transferred to Black Hawk’s wholly owned
subsidiary Golden Black Hawk from HuntMountain and this permit has passed the
amendment process, Reclamation Bonds have been filed and accepted, and a Phase 2
exploratory program will commence late July 2010 .
The
submission of Black Hawk’s NLP describes our ownership, intended
exploration program, planned disturbance, and reclamation plans. The reclamation
program for the NLP required bonding based on a prescribed BLM formula. The
bonding process will utilize the Nevada Division of Mining Statewide Bonding
Pool. This is applicable to our Lithium and gold and silver claims in Nevada.
Bonding for all completed and pending projects have been approved.
11
Black
Hawk’s Board of Directors have approved funding for the program
submitted by Black Hawk Exploration’s Geologists and the Clayton Valley
permitting process began in December 2009 with completion of the program in
March of 2010. Black Hawk’s Board of Directors will approve funding for the Dun
Glen program submitted by Black Hawk Exploration’s Geologists upon positive
review by an independent Geophysicist retained by the
Company. Results are still pending.
In April
of 2010 Black Hawks wholly owned subsidiary Golden Black Hawk authorized an
initial budget of $50,000 for further development of the Dun Glen Mining claims.
Permitting and Bonding has been completed for the Nevada Dun Glen
Phase 2 exploration and the US Bureau of Land Management has approved Black Hawk
to proceed subject to the plans submitted.
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.
Nine
Months ended May 31, 2010
During
the nine months ended May 31, 2010, operating expenses totaled $485,182, and we
experienced a net loss of $485,182 against no revenues. During the nine months
ended May 31, 2009, operating expenses totaled $16,350, and we experienced a net
loss of $16,350 against no revenues. The increased operating expenses and net
loss resulted from the lack of activities in the nine month period in 2009.
There were no mineral costs or stock-based compensation in 2009, while the
Company incurred $163,811 related to mineral exploration activities and $140,633
stock based compensation by issuing 256,627 shares of the Company’s common stock
for consulting and geological services in the nine month period in 2010. General
and administrative expenses increased from $16,350 to $321,371 when the
Company’s overall operation level increased from 2009.
Three
Months ended May 31, 2010
During
the three months ended May 31, 2010, operating expenses totaled $163,830, and we
experienced a net loss of $163,830 against no revenues. During the three months
ended May 31, 2009, operating expenses totaled $2,500, and we experienced a net
loss of $2,500 against no revenues. The increased operating expenses and net
loss resulted from the lack of activities in the nine month period in 2009.
There were no mineral costs in 2009, while the Company incurred
$94,917 related to mineral exploration activities and $68,913 in general and
administrative in 2010 when the Company’s overall operation level increased from
2009.
Financial
Condition, Liquidity and Capital Resources
At May
31, 2010, there was a working capital of $260,480 compared to $46,500 in
2009.
12
At May
31, 2010, our total current assets were $260,480, which consisted of cash of
$230,006, restricted cash of $22,474 and prepaid expenses of
$8,000.
At May
31, 2010 and August 31, 2009, our total current liabilities were $-0-,
respectively.
Historically,
we have financed our cash flow and operations from the sale of stock and
advances from shareholders. Net cash provided by financing activities was
$655,000 during the nine months ended May 31, 2010 and $1,189,300 from inception
to May 31, 2010.
We have
no external sources of liquidity in the form of credit lines from
banks.
On
October 19, 2009 the Company entered into an equity financing agreement (the
“Financing Agreement”), whereby the Company may draw up to $1,000,000 by issuing
units (the “Units”) at $0.85 per unit with each unit consisting of one share of
the Company’s common stock and one common stock purchase warrant exercisable
into one common share for two years, at $1.05 for the first 12 months and $1.25
for the second 12 months. Under the term of the agreement the Company has the
right to call upon funds as needed. The securities will be issued upon receiving
registration approval. In accordance with the Financing Agreement, as of May 31,
2010 the Company has received gross proceeds of $600,000 for subscription of
705,882 units at $0.85 per unit. The units were issued from February to May,
2010.
Plan
of Operation
Cash
Requirements
Over the
twelve months ending May 31, 2011 we plan to expend a total of approximately
$130,000 on future mineral property acquisitions and $1,000,000 on property
development.
Based on
our current plan of operations, we require immediate funds to commence our
exploration operations. We currently have cash on hand of $230,006. We
anticipate that we will have to raise additional cash of approximately
$1,000,000 to allow us to complete our proposed exploration program. If we fail
to raise sufficient funds, we may modify our operations plan accordingly. Even
if we do raise funds for operations, there is no assurance that we will be able
to maintain operations at a level sufficient for an investor to obtain a return
on his investment in our common stock. Further, we may continue to be
unprofitable.
We do not
have enough funds to commence and complete our proposed exploration
program.
There are
no assurances that we will be able to obtain additional funds required for our
continued operations. In such event that we do not raise sufficient additional
funds by secondary offering or private placement, we will consider alternative
financing options, if any, or be forced to scale down or perhaps even cease our
operations.
Over the
twelve months ending May 31, 2011 we intend to use all available funds to
commence exploration of our mineral properties, as follows:
General
and Administrative
|
$ | 10,000 | ||
Operations:
|
||||
Future
property acquisitions
|
130,000 | |||
Working
capital
|
10,000 | |||
Development
of properties
|
1,000,000 | |||
Total
|
$ | 1,150,000 |
Going
Concern
The
continuation of our business is dependent upon us raising additional financial
support. The issuance of additional equity securities by us could result in a
significant dilution in the equity interests of our current stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.
13
We have
historically incurred losses, and through May 31, 2010 have incurred losses of
$1,181,282 from our
inception.
However,
there are no assurances that we will be able to either (1) ever achieve a level
of revenues adequate to generate sufficient cash flow from operations; or (2)
obtain additional financing through future private placements, public offerings
and/or bank financing necessary to support our working capital requirements. To
the extent that funds generated from our recently completed offering, operations
and any future private placements, public offerings and/or bank financing are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available, will be
on terms acceptable to us. If adequate working capital is not available we may
not increase our operations.
These
conditions raise substantial doubt about our ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.
Our
independent auditor’s report on our audited financial statements, in our Form
10-K annual report filed November 30, 2009 for the fiscal year ended August 31,
2009, expressed substantial doubt concerning the Company’s ability to continue
as a going concern. The explanatory paragraph contained in their audit report
should be read in connection with our management’s discussion of our financial
condition, liquidity and capital resources.
Application
of Critical Accounting Estimates
The
preparation of our company’s financial statements requires management to make
estimates and assumptions regarding future events. These estimates and
assumptions affect the reported amounts of certain assets and liabilities, and
disclosure of contingent liabilities.
RISK
FACTORS
Much of
the information included in this quarterly report includes or is based upon
estimates, projections or other “forward-looking statements”. Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions, or other future
performance suggested herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements.
Such
estimates, projections or other “forward-looking statements” involve various
risks and uncertainties as outlined below. We caution readers of this quarterly
report that important factors in some cases have affected and, in the future,
could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or
other “forward-looking statements”. In evaluating us, our business and any
investment in our business, readers should carefully consider the following
factors.
We
need to continue as a going concern if our business is to succeed, if we do not
we will go out of business.
Our
independent accountant’s report to our audited financial statements for the year
ended August 31, 2009, indicates that there are a number of factors that raise
substantial doubt about our ability to continue as a going concern. Such
factors identified in the report are our accumulated deficit since inception,
our failure to attain profitable operations and our dependence upon obtaining
adequate financing to pay our liabilities. If we are not able to continue
as a going concern, it is likely investors will lose their
investments.
If
we do not obtain additional financing, our business will fail.
Our
current operating funds are less than necessary to complete all intended
exploration our properties, and therefore we will need to obtain additional
financing in order to complete our business plan. As of May 31, 2010, we
had cash in the amount of $230,006. We currently do not have any
significant operations and we have no income.
14
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 resources, investor acceptance of our property and general
market conditions. These factors may make the timing, amount, terms or
conditions of additional financing unavailable to us.
The most
likely source of future funds presently available to us is through the sale of
equity capital. Any sale of share capital will result in dilution to existing
shareholders. The only other anticipated alternative for the financing of
further exploration would be our sale of a partial interest in the property to a
third party in exchange for cash or exploration expenditures, which is not
presently contemplated.
Because
we have not commenced business operations, we face a high risk of business
failure.
Although
we have recently commenced operations and are preparing to commence exploration,
we have commenced limited exploration on the property. Accordingly, we
have no way to evaluate the likelihood that our business will be successful.
We were incorporated on April 14, 2005 and have been involved primarily in
organizational activities and the acquisition of our mineral property. We
have not earned any revenues as of the date of this prospectus. Potential
investors should be aware of the difficulties normally encountered by new
mineral exploration companies and the high rate of failure of such enterprises.
The likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the mineral properties that we plan to undertake. These potential
problems include, but are not limited to, unanticipated problems relating to
exploration, and additional costs and expenses that may exceed current
estimates.
Prior to
completion of our exploration stage, we anticipate that we will incur increased
operating expenses without realizing any revenues. We therefore expect to
incur significant losses into the foreseeable future. We recognize that if
we are unable to generate significant revenues from development of the mineral
claims and the production of minerals from the claims, we will not be able to
earn profits or continue operations.
There is
no history upon which to base any assumption as to the likelihood that we will
prove successful, and we can provide investors with no assurance that we will
generate any operating revenues or ever achieve profitable operations. If we are
unsuccessful in addressing these risks, our business will most likely
fail.
We
lack an operating history and we expect to have losses in the
future.
We have
not started our proposed business operations or realized any revenues. We have
no operating history upon which an evaluation of our future success or failure
can be made. Our ability to achieve and maintain profitability and positive cash
flow is dependent upon the following:
o
|
Our
ability to locate a profitable mineral property;
|
o
|
Our
ability to generate revenues; and
|
o
|
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.
15
Because
of the inherent dangers involved in mineral exploration, there is a risk that we
may incur liability or damages as we conduct our business.
The
search for valuable minerals involves numerous hazards. As a result, we
may become subject to liability for such hazards, including pollution, cave-ins
and other hazards against which we cannot insure or against which we may elect
not to insure. The payment of such liabilities may have a material adverse
effect on our financial position.
Because
we are small and do not have much capital, we must limit our exploration and
consequently may not find mineralized material. If we do not find mineralized
material, we will cease operations.
Because
we are small and do not have much capital, we must limit our exploration.
Because we may have to limit our exploration, we may not find mineralized
material, although our mineral claims may contain mineralized material. If we do
not find mineralized material, we will cease operations.
If
we become subject to onerous government regulation or other legal uncertainties,
our business will be negatively affected.
There are
several governmental regulations that materially restrict mineral property
exploration and development. The regulatory regime under which we operate in the
future will likely require work permits, the posting of bonds, and the
performance of remediation work for any physical disturbance to the land. While
these current laws do not affect our current exploration plans, if we proceed to
commence drilling operations on the mineral claims, we will incur modest
regulatory compliance costs.
In
addition, the legal and regulatory environment that pertains to the exploration
of ore is uncertain and may change. Uncertainty and new regulations could
increase our costs of doing business and prevent us from exploring for ore
deposits. The growth of demand for ore may also be significantly slowed. This
could delay growth in potential demand for and limit our ability to generate
revenues. In addition to new laws and regulations being adopted, existing
laws May be applied to mining that have not as yet been applied. These new
laws may increase our cost of doing business with the result that our financial
condition and operating results may be harmed.
Because
we are small and do not have much capital, we must limit our exploration and
consequently may not find mineralized material. If we do not find mineralized
material, we will cease operations.
Because
we are small and do not have much capital, we must limit our exploration.
Because we may have to limit our exploration, we may not find mineralized
material, although our property may contain mineralized material. If we do not
find mineralized material, we will cease operations.
As we face intense competition in the
mining industry, we will have to compete with our competitors for financing and
for qualified managerial and technical employees.
The
mining industry is intensely competitive in all of its phases. Competition
includes large established mining companies with substantial capabilities and
with greater financial and technical resources than we have. As a result of this
competition, we may be unable to acquire additional attractive mining claims or
financing on terms we consider acceptable. We also compete with other mining
companies in the recruitment and retention of qualified managerial and technical
employees. If we are unable to successfully compete for financing or for
qualified employees, our exploration and development programs may be slowed down
or suspended.
We do not expect to declare or pay
any dividends.
We have
not declared or paid any dividends on our common stock since our inception, and
we do not anticipate paying any such dividends for the foreseeable
future.
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.
16
Our
By-laws contain provisions indemnifying our officer and directors against all
costs, charges and expenses incurred by them.
Our
By-laws contain provisions with respect to the indemnification of our officer
and directors against all costs, charges and expenses, including an amount paid
to settle an action or satisfy a judgment, actually and reasonably incurred by
him, including an amount paid to settle an action or satisfy a judgment in a
civil, criminal or administrative action or proceeding to which he is made a
party by reason of his being or having been one of our directors or
officer.
Volatility of Stock
Price.
Our common shares are
currently publicly traded on the OTC BB exchange under the symbol
BHWX. In the future, the trading price of our common shares may be
subject to wide fluctuations. Trading prices of the common shares may
fluctuate in response to a number of factors, many of which will be beyond our
control. In addition, the stock market in general, and the market for
software technology companies in particular, has experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. Market and industry factors
may adversely affect the market price of the common shares, regardless of our
operating performance.
In the
past, following periods of volatility in the market price of a company’s
securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in
substantial costs and a diversion of management’s attention and
resources.
As a
“smaller reporting company”, we are not required to provide the information
required by this Item.
Item
4. Controls and Procedures
As
required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this quarterly report, being May 31, 2010, 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 not effective as at
the end of the period covered by this report. The deficiency is a
result of inadequate segregation of duties and the lack of an audit
committee. The Company plans to address these deficiencies as funds
become available.
Disclosure controls and procedures and
other procedures that are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commission’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our
President and Secretary as appropriate, to allow timely decisions regarding
required disclosure.
There
have been no changes in our company’s internal controls over financial reporting
that occurred during our most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect our internal controls
over financial reporting.
We know
of no material, active or pending legal proceedings against our company, nor are
we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
17
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 20, 2006
we sold 200,000 pre-split shares to one investor at a price of $0.10 for
proceeds of $20,000.
On May
30, 2007, we closed a private placement of 571,428 common shares for gross
proceeds of $400,000.
On August
6, 2009 we closed a private placement of 600,000 common shares at $0.10 for
proceeds of $60,000.
On
October 16, 2009 we closed a private placement of 64,705 common shares at a
price of $0.85 for proceeds of $54,999. These shares were issued in
February 2010.
On
November 20, 2009 the Company received a first tranche of $200,000 under a share
agreement that provides the Company with up to $1,000,000. The
agreement is to issue 235,294 common shares at a price of $0.85 upon receipt of
funds and to issue a warrant for the like number of shares priced at $1.05 for
the first year and $1.25 if exercised in the second year. These shares were
issued in February 2010.
On
January 29, 2010, the company entered into a consulting agreement with Vista
partners LLC and on February 3, 2010, 250,000 shares of the company were issued
to Vista, pursuant to that agreement.
In
February 2010 the Company received a second tranche of $200,000 under a share
agreement that provides the Company with up to $1,000,000. The
agreement is to issue 235,294 common shares at a price of $0.85 upon receipt of
funds and to issue a warrant for the like number of shares priced at $1.05 for
the first year and $1.25 if exercised in the second year. These shares were
issued in February 2010.
On May
14, 2010 the Company received a third tranche of $200,000 under a share
agreement that provides the Company with up to $1,000,000. The
agreement is to issue 235,294 common shares at a price of $0.85 upon receipt of
funds and to issue a warrant for the like number of shares priced at $1.05 for
the first year and $1.25 if exercised in the second year. These shares were
issued in May 2010.
On May 1,
2010 the Company issued 6,627 shares of the Company to Hunsaker Inc., consulting
geologist, as partial payment of an invoice for work tendered.
On June
1, 2010 the Company issued 10,350 shares of the Company to Hunsaker Inc.,
consulting geologist, as partial payment of an invoice for work
tendered.
None.
Exhibits
Required by Item 601 of Regulation S-B.
Exhibit
Number/Description
(3)
Charter and By-laws
3.1
Articles of Incorporation (incorporated by reference to the Company’s SB-2
Registration Statement filed January 17, 2006).
3.2
Bylaws (incorporated by reference to the Company’s SB-2 Registration Statement
filed January 17, 2006).
18
(30)
Section 302 Certification
31.2
Certification of Howard Bouch
(32)
Section 906 Certification
32.1
Certification of Kevin M. Murphy & Howard Bouch
99.0
Consulting agreement with Vista Partners LLC dated January 29, 2010
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
BLACK
HAWK EXPLORATION INC.
By: /s/ Kevin M.
Murphy
Kevin M.
Murphy, President, CEO
(Principal
Executive Officer),
By: Howard
Bouch
Howard
Bouch, CFO
Date:
July 15, 2010