Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from __________ to ___________
Commission file number: 000-26317
HINTO ENERGY, INC.
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(Exact name of registrant as specified in its charter)
Wyoming 84-1384961
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(State of Incorporation) (IRS Employer ID Number)
7609 Ralston Road, Arvada, CO 80002
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(Address of principal executive offices)
303-422-8127
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(Registrant's Telephone number)
(Former Address and phone of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X ] No []
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
Smaller reporting company [X] (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of October 24, 2011 there were 4,280,000 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
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Balance Sheets - September 30, 2011 and December 31, 2010 (Audited) F-1
Statements of Operations -
Three and Nine months ended September 30, 2011 and 2010 and
From February 13, 1997 (Inception) to September 30, 2011 F-2
Statements of Changes in Shareholders' Deficit -
From February 13, 1997 (Inception) to September 30, 2011 F-3
Statements of Cash Flows -
Nine months ended September 30, 2011 and 2010 and
From February 13, 1997 (Inception) to September 30, 2011 F-4
Notes to the Financial Statements F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- Not Applicable 5
Item 4. Controls and Procedures 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 6
Item 1A. Risk Factors - Not Applicable 6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 6
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 6
Item 4. Removed and Reserved 6
Item 5. Other Information - Not Applicable 6
Item 6. Exhibits 6
SIGNATURES 7
PART I
ITEM 1. FINANCIAL STATEMENTS
HINTO ENERGY, INC.
(Formerly Garner Investments, Inc.)
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
September 30, December 31,
2011 2010
--------------- ---------------
Assets
Current Assets:
Cash $ - $ -
--------------- ---------------
Total Current Assets - -
--------------- ---------------
Other assets:
Farmout Agreement - 3,500
--------------- ---------------
Total Other Assets - 3,500
--------------- ---------------
Total Assets $ - $ 3,500
=============== ===============
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable $ - $ 55,600
Intercompany payable 18,982 -
Accrued liabilities 5,000 -
--------------- ---------------
Total Current Liabilities 23,982 55,600
Stockholders' (Deficit) Equity
Preferred stock, $0.001 par value; 25,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $0.001 par value; 50,000,000 shares
authorized, 4,280,000 shares issued and outstanding
at June 30, 2011 and December 31, 2010, respectively 4,280 4,280
Additional paid-in capital 98,710 8,710
Deficit accumulated during the development stage (126,972) (65,090)
--------------- ---------------
Total Stockholders' (Deficit) Equity (23,982) (52,100)
--------------- ---------------
Total liabilities and stockholders' (deficit) equity $ - $ 3,500
=============== ===============
See the notes to these financial statements.
F-1
HINTO ENERGY, INC.
(Formerly Garner Investments, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
February 13, 1997
For The Three Months Ended For The Nine Months Ended (Inception) to
September 30, September 30, September 30,
2011 2010 2011 2010 2011
------------ -------------- -------------- ------------- ---------------------
Revenue: $ - $ - $ - $ - $ -
------------ -------------- -------------- ------------- ---------------------
Operational expenses:
Office expenses 5,774 - 5,774 - 62,069
Impairment of farmout - - 3,500 - 3,500
Filing fees - - - - 85
Professional fees 52,216 - 52,608 - 61,318
------------ -------------- -------------- ------------- ---------------------
Total operational expenses 57,990 - 61,882 - 126,972
------------ -------------- -------------- ------------- ---------------------
Net loss $(57,990) $ - $ (61,882) $ - $ (126,972)
============ ============== ============== ============= =====================
Per share information
Net loss per common share
Basic $ * $ * $ * $ *
Fully diluted * * * *
============ ============== ============== =============
Weighted average number of common
stock outstanding 4,280,000 4,280,000 4,280,000 4,280,000
============ ============== ============== =============
* Less than $(0.01) per share.
See the notes to these financial statements.
F-2
HINTO ENERGY, INC.
(Formerly Garner Investments, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S (DEFICIT) EQUITY From February 13, 1997
(Inception) through September 30, 2011
(Unaudited)
Deficit accum
Additional During
Common Stock paid-in Development
Number of shares Amount Capital Stage Totals
------------- ----------- ------------ -------------- ------------
Issuance of stock for cash 480,000 $ 480 $ 1,020 $ - $ 1,500
Net loss - - - (144) (144)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 1997 480,000 480 1,020 (144) 1,356
------------- ----------- ------------ -------------- ------------
Issuance of stock for cash 300,000 300 450 - 750
Net loss - - - (1,557) (1,557)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 1998 780,000 780 1,470 (1,701) 549
------------- ----------- ------------ -------------- ------------
Net loss - - - (240) (240)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 1999 780,000 780 1,470 (1,941) 309
------------- ----------- ------------ -------------- ------------
Net loss - - - (50) (50)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2000 780,000 780 1,470 (1,991) 259
------------- ----------- ------------ -------------- ------------
Net loss - - - (259) (259)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2001 780,000 780 1,470 (2,250)
------------- ----------- ------------ -------------- ------------
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2002 780,000 780 1,470 (2,250) -
------------- ----------- ------------ -------------- ------------
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2003 780,000 780 1,470 (2,250) -
------------- ----------- ------------ -------------- ------------
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2004 780,000 780 1,470 (2,250) -
------------- ----------- ------------ -------------- ------------
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2005 780,000 780 1,470 (2,250) -
------------- ----------- ------------ -------------- ------------
Issuance of stock for oil lease 3,500,000 3,500 - - 3,500
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2006 4,280,000 4,280 1,470 (2,250) 3,500
------------- ----------- ------------ -------------- ------------
Net loss - - - - -
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2007 4,280,000 4,280 1,470 (2,250) 3,500
------------- ----------- ------------ -------------- ------------
Shareholder capital contribution - - 5,740 - 5,740
Net loss - - - (22,461) (22,461)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2008 4,280,000 4,280 7,210 (24,711) (13,221)
------------- ----------- ------------ -------------- ------------
Net loss - - - (14,944) (14,944)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2009 4,280,000 4,280 7,210 (39,655) (28,165)
------------- ----------- ------------ -------------- ------------
Shareholder capital contribution - - 1,500 - 1,500
Net Loss - - - (25,435) (25,435)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2010 4,280,000 4,280 8,710 (65,090) (52,100)
------------- ----------- ------------ -------------- ------------
Shareholder capital contribution 90,000 - 90,000
Net Loss - - - (61,882) (61,882)
------------- ----------- ------------ -------------- ------------
Balance - September 30, 2011 4,280,000 4,280 98,710 (126,972) (23,982)
------------- ----------- ------------ -------------- ------------
See the notes to these financial statements.
F-3
HINTO ENERGY, INC.
(Formerly Garner Investments, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
February 13,
1997
For The Nine Months Ended (Inception) to
September 30, September 30,
2011 2010 2011
-------------- -------------- -----------------
Cash Flows from Operating Activities:
Net Loss $ (61,882) $ - $ (126,972)
Adjustments to net loss for non-cash items:
Impairment to farmout agreement 3,500 - 3,500
Adjustments to reconcile net loss to net cash used
in operating activities:
Decrease in accounts payable (55,600) -
Increase in shareholder payable 18,982 18,982
Increase in accrued liabilities 5,000 - 5,000
-------------- -------------- -----------------
Net Cash Used by Operating Activities (90,000) - (99,490)
-------------- -------------- -----------------
Net Cash Used in Investing Activities - - -
-------------- -------------- -----------------
Cash Flows from Financing Activities:
Shareholder payment of accounts payable 90,000 - 97,240
Proceeds from stock issuance, net of
issuance costs - - 2,250
-------------- -------------- -----------------
Net Cash Provided by Financing Activities 90,000 - 99,490
-------------- -------------- -----------------
Net Increase (decrease) in Cash - - -
Cash and Cash Equivalents - Beginning of Period - - -
-------------- -------------- -----------------
Cash and Cash Equivalents - End of Period $ - $ - $ -
============== ============== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - $ - $ -
============== ============== =================
Cash paid for income taxes $ - $ - $ -
============== ============== =================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
ACTIVITIES:
Issuance of common stock for oil lease $ - $ - $ 3,500
============== ============== =================
See the notes to these financial statements.
F-4
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2011
(Unaudited)
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business
Hinto Energy, Inc. ("the Company") was incorporated in February 13, 1997 in the
state of Wyoming. The Company was originally incorporated for the purpose of
general investing. Due to an inability to raise adequate financing the Company
was forced to cease operations in 2001. On October 12, 2004, the Company filed a
Form 15-12G, with the Securities and Exchange Commission ("SEC") to cease its
filing obligations under the Securities Act of 1934. On November 14, 2007, the
Company filed a Registration Statement on Form S-1 in order to register its
outstanding shares of common stock and resume its SEC filing status.
The Company's fiscal year end is December 31st. The Company's financial
statements are presented on the accrual basis of accounting.
Shareholder Meeting
On August 17 2011, the Company held a Special and Annual Shareholder Meeting
("Meeting.") At such Meeting, a majority of the Company's shareholders approval
the following:
- To authorize an Amendment to the Articles of Incorporation to change
of the corporate name to Hinto Energy, Inc. On August 18, 2011, the
Company filed an amendment its Articles of Incorporation to change the
corporate name from Garner Investments, Inc. to Hinto Energy, Inc.
- To authorize 25,000,000 Preferred Shares, in such classes or series
with designation of rights, privileges, and preferences as the Board
may later determine. On August 18, 2011, the Company filed an
amendment to its Articles of Incorporation to authorize such preferred
shares.
- To authorize the Hinto Energy, Inc. Stock Option and Award Incentive
Plan.
- To approve and appoint our Auditor, Ronald R. Chadwick, PC for the
year ending December 31, 2011.
- To approve the Share Exchange and Acquisition Agreement by and between
the Company and South Uintah Gas Properties, Inc.
- The election of George Harris, Max Sommers, Gary Herick, Kevin Blair
and J. David Keller to our Board of Directors.
F-5
Share Exchange Agreement
On July 27, 2011, the Company entered into a Share Exchange and Acquisition
Agreement with South Uintah Gas Properties, Inc. ("South Uintah") and the South
Uintah shareholders. Pursuant to the Share Exchange and Acquisition Agreement
("the Agreement"), the Company has agreed to issue shares of its restricted
common stock for 100% of the issued and outstanding common stock of South
Uintah. The shares are to be exchanged on a one for one basis.
The closing of the transaction is dependent upon the delivery of audited
financial statements by South Uintah.
Prior to the signing of the Agreement, South Uintah had purchased 3,000,000
shares of the Company from its then majority shareholder Ms. Sharon Fowler.
After such purchase, South Uintah holds approximately 70% of the issued and
outstanding common stock of the Company. As part of the Agreement, South Uintah
has agreed to return the 3,000,000 shares of common stock to the Company. The
Company will retire such shares to treasury at that time.
South Uintah is headquartered in Denver, Colorado. South Uintah holds deep
drilling rights (below approximately 9,800 ft.) on approximately 5,655 gross
acres and approximately 4,887 net acres in the deeper area of the Uintah basin,
with one gas well awaiting hookup, (but which South Uintah expects will need a
work over).
Basis of Presentation
Development Stage Company
The Company has not earned significant revenues from planned operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company." Therefore, the Company's financial statements of
operations, stockholders' equity and cash flows disclose activity since the date
of the Company's inception.
Interim Presentation
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all material adjustments, including all normal and
recurring adjustments, considered necessary to present fairly the financial
position and operating results of the Company for the periods presented. The
financial statements and notes do not contain certain information included in
the Company's financial statements for the year ended December 31, 2010. It is
the Company's opinion that when the interim financial statements are read in
conjunction with the December 31, 2010 Audited Financial Statements, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period.
Going Concern
The Company's financial statements for the nine months ended September 30, 2011
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company reported an accumulated deficit of $126,972 as of
September 30, 2011. The Company did not recognize revenues from its activities
during the nine months ended September 30, 2011. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
F-6
Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less and money market instruments to be cash equivalents.
Oil and Gas Properties, Full Cost Method
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
Revenue Recognition
The Company recognizes revenue when it is earned and expenses are recognized
when they occur.
Net Loss per Share
Basic net loss per common share is calculated by dividing the net loss
applicable to common shares by the weighted average number of common and common
equivalent shares outstanding during the period. For the nine months ended
September 30, 2011 and 2010, there were no potential common equivalent shares
used in the calculation of weighted average common shares outstanding as the
effect would be anti-dilutive because of the net loss.
F-7
Stock-Based Compensation
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
Fair Value of Financial Instruments
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
Other Comprehensive Income
The Company has no material components of other comprehensive income (loss) and
accordingly, net loss is equal to comprehensive loss in all periods.
Income Taxes
Provision for income taxes represents actual or estimated amounts payable on tax
return filings each year. Deferred tax assets and liabilities are recorded for
the estimated future tax effects of temporary differences between the tax basis
of assets and liabilities and amounts reported in the accompanying balance
sheets, and for operating loss and tax credit carry forwards. The change in
deferred tax assets and liabilities for the period measures the deferred tax
provision or benefit for the period. Effects of changes in enacted tax laws on
deferred tax assets and liabilities are reflected as adjustment to the tax
provision or benefit in the period of enactment.
Recent Accounting Pronouncements
There were accounting standards and interpretations issued during the nine
months ended September 30, 2011, none of which are expected to have a material
impact on the Company's financial position, operations or cash flows.
NOTE 2 - OTHER ASSETS
In August 2006, the Company issued 3,500,000 shares of its restricted common
stock to an unrelated third party in exchange as part of a Farmout Agreement on
an oil lease located in Natrona County, Wyoming. The shares were valued at
$3,500 at the time of the transaction ($0.001 per share). The Farmout Agreement
provides for the Company to retain 75% of the W.I. after payout by drilling a
7,000 foot Madison test. The Company will retain 100% of the W.I. income until
payout.
In December 31, 2010, the Farmout Agreement was extended to April 30, 2011. On
April 30, 2011, Farmout Agreement expired and the Company chose not to renew the
Farmout Agreement. As a result, the Company fully expensed the $3,500 value of
the Farmout Agreement.
F-8
NOTE 3 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the Company is 50,000,000 shares of common stock
with a $0.001 par value. At September 30, 2011, the Company had 4,280,000 shares
of its common stock issued and outstanding. The Company does not have any
preferred shares issued or authorized.
During the nine months ended September 30, 2011, the Company did not issue any
shares of its common stock.
Preferred Stock
On August 18, 2011, the Company filed an amendment to the Articles of
Incorporation with the Secretary of State of Wyoming to authorize 25,000,000
shares of Preferred Shares to be designated in any series or classes and with
those rights, privileges and preferences to be determined at the discretion of
the Company's Board of Directors. At this time, the Company has not designated
any series of preferred stock or issued any shares of preferred stock.
Stock Option Plan
On August 17, 2011, the Company's shareholders approved the 2011 Hinto Energy,
Inc. Stock Option and Award Incentive Plan ("Plan"). The Plan provides for the
grant of stock options to directors, officers, employees, consultants, and
advisors of the Company. The Plan is administered by a committee consisting of
members of the Board of Directors (the "Stock Option Committee"), or in its
absence, the Board of Directors.
The Plan provides for a total of 2,000,000 shares of common stock to be reserved
for issuance subject to options. As of the date of this Proxy Statement, the
Board has not approved the grant of any options to purchase shares of common
stock, nor the conditions, performance or vesting requirements.
Shareholder Capital Contribution
During the nine months ended September 30, 2011, a shareholder of the Company
paid the Company's outstanding legal fees of $90,000. The Company has treated
the payment as a capital contribution and credited Additional Paid In Capital
for $90,000.
NOTE 4 - SUBSEQUENT EVENTS
The Company has evaluated it activities subsequent to the nine months ended
September 30, 2011 through October 24, 2011 and found no reportable subsequent
events.
F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2010, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
PLAN OF OPERATIONS
We had we had no revenues during the nine months ended September 30, 2011. We
have minimal capital, minimal cash, and only our intangible assets consisting of
our business plan, relationships, contacts and farmout mineral prospect. We are
illiquid and need cash infusions from investors or shareholders to provide
capital, or loans from any sources.
During the nine months ended September 30, 2011, our operations were focused on
the maintenance of our accounting records and working on the Company's annual
report.
Farmout Agreement
On August 28, 2006, the Company entered into a Farmout Agreement with Ms. Sharon
K. Fowler (Fowler) to commit and drill wells in Farmout Lands. The Farmout
Agreement with Fowler provides that the Company must commence drilling a well
within eighteen months after the date of the farmout or the farmed acreage will
revert to Ms. Fowler, however, on October 13, 2009 an extension of the farmout
was executed to extend the performance date to December 31, 2010 and was
extended on December 31, 2010 to April 30, 2011.
On April 30, 2011, Farmout Agreement expired and the Company chose not to renew
the Farmout Agreement. As a result, the Company expensed $3,500, the value of
the Farmout Agreement.
Share Exchange Agreement
On July 27, 2011, the Company entered into a Share Exchange and Acquisition
Agreement with South Uintah Gas Properties, Inc. ("South Uintah") and the South
Uintah shareholders. Pursuant to the Share Exchange and Acquisition Agreement
("the Agreement"), the Company has agreed to issue shares of its restricted
common stock for 100% of the issued and outstanding common stock of South
Uintah. The shares are to be exchanged on a one for one basis.
The closing of the transaction is dependent upon the delivery of audited
financial statements by South Uintah.
1
Prior to the signing of the Agreement, South Uintah had purchased 3,000,000
shares of the Company from its then majority shareholder Ms. Sharon Fowler.
After such purchase, South Uintah holds approximately 70% of the issued and
outstanding common stock of the Company. As part of the Agreement, South Uintah
has agreed to return the 3,000,000 shares of common stock to the Company. The
Company will retire such shares to treasury at that time.
South Uintah is headquartered in Denver, Colorado. South Uintah holds deep
drilling rights (below approximately 9,800 ft.) on approximately 5,655 gross
acres and approximately 4,887 net acres in the deeper area of the Uintah basin,
with one gas well awaiting hookup, (but which South Uintah expects will need a
work over).
We will need substantial additional capital to support our proposed future
energy operations. We have no revenues. We have no committed source for any
funds as of date here. No representation is made that any funds will be
available when needed. In the event funds cannot be raised when needed, we may
not be able to carry out our business plan, may never achieve sales or royalty
income, and could fail in business as a result of these uncertainties.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. We may, in any
particular case, decide to participate or decline participation. If
participating, we may pay our proportionate share of costs to maintain our
proportionate interest through cash flow or debt or equity financing. If
participation is declined, we may elect to farmout, non-consent, sell or
otherwise negotiate a method of cost sharing in order to maintain some
continuing interest in the prospect.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2010, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
RESULTS OF OPERATIONS
For the Three Months Ended September 30, 2011 Compared to the Three Months Ended
September 30, 2010
During the three months ended September 30, 2011 and 2010, we did not recognize
any revenues from our operations.
During the three months ended September 30, 2011, the Company incurred operating
expenses of $57,990 compared to $0 during the three months ended September 30,
2010. The increase of $57,990 was a result of holding the Company's Special and
Annual Shareholder Meeting and the Company's entering into a Share and Exchange
Agreement with South Uintah Gas Properties.
During the three months ended September 30, 2011, we incurred a net loss of
$57,990. During the three months ended September 30, 2010 net income was zero.
For the Nine Months Ended September 30, 2011 Compared to the Nine Months Ended
September 30, 2010
During the nine months ended September 30, 2011 and 2010, we did not recognize
any revenues from our operations.
2
During the nine months ended September 30, 2011, we incurred operational
expenses of $61,882 compared to nil during the nine months ended September 30,
2010. The increase of $61,882 was a result of the $3,500 expense the value of
the farmout agreement, $52,608 increase in professional fees and a $5,774
increase in office expenses resulting from holding the Company's Special and
Annual Shareholder Meeting and the Company's entering into a Share and Exchange
Agreement with South Uintah Gas Properties.
During the nine months ended September 30, 2011, we incurred a net loss of
$61,882. During the nine months ended September 30, 2010, net income was zero.
LIQUIDITY
We have no cash or other liquid assets at September 30, 2011, and we will be
reliant upon shareholder loans or private placements of equity to fund any kind
of operations. We have secured no sources of loans or private placements at this
time.
During the nine months ended September 30, 2011, we used $90,000 in our
operational activities. During the nine months ended June 30, 2011, we
recognized a net loss of $61,882, which was adjusted for the $3,500 expense of
the value of the farmout agreement.
During the nine months ended September 30, 2010, we did not use or receive funds
from operations.
During the nine months ended September 30, 2011 and 2010, we did not use or
receive any funds from investment activities.
During the nine months ended September 30, 2011, we received funds of $90,000
from financing activities. During the nine months ended September 30, 2011, a
shareholder of the Company paid the Company's outstanding legal fees of $90,000.
The Company has treated the payment as a capital contribution and credited
Additional Paid In Capital for $90,000.
During the nine months ended September 30, 2010, the Company did not receive or
use any funds from financing activities.
Short Term.
On a short-term basis, we do not generate any revenue or revenues sufficient to
cover operations. Based on prior history, we will continue to have insufficient
revenue to satisfy current and recurring liabilities as it seeks explore. For
short term needs we will be dependent on receipt, if any, of offering proceeds.
We have no assets and liabilities were $23,982 as of September 30, 2011.
Capital Resources
We have only common stock as our capital resource.
We have no material commitments for capital expenditures within the next year,
however if operations are commenced, substantial capital will be needed to pay
for participation, investigation, exploration, acquisition and working capital.
3
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek
loans or equity placements to cover such cash needs. Once exploration commences,
our needs for additional financing is likely to increase substantially.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
Critical Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less and money market instruments to be cash equivalents.
Oil and Gas Properties, Full Cost Method
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
Revenue Recognition
The Company recognizes revenue when it is earned and expenses are recognized
when they occur.
4
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) and that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive/Financial Officer carried
out an evaluation under the supervision and with the participation of our
management, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of
the period covered by this report. Based on the foregoing evaluation, our Chief
Executive Officer has concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic SEC filings and to ensure that information required to
be disclosed in our periodic SEC filings is accumulated and communicated to our
management, including our Chief Executive Officer, to allow timely decisions
regarding required disclosure.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2011, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 1A. RISK FACTORS
Not Applicable to Smaller Reporting Companies.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Financial Officer and Principal
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive and Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act
Exhibit 101.INS XBRL Instance Document
Exhibit 101.SCH XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed
not filed for purposes of Section 18 of the Securities Exchange Act of
1934, and otherwise is not subject to liability under these sections.
6
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HINTO ENERGY, INC.
(Registrant)
Dated: October 25, 2011 By: /s/ George Harris
-------------
George Harris (Principal Executive
Officer, Chief Financial Officer and
Principal Accounting Officer)
7
