As filed with the Securities and Exchange Commission on March 15, 2012
Registration No.333-147368
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 8
TO FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HINTO ENERGY, INC.
(FORMERLY KNOWN AS GARNER INVESTMENTS, INC.)
(Exact name of registrant as specified in its charter)
WYOMING 1381 84-1384961
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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7609 RALSTON ROAD, ARVADA, COLORADO 80002/ PHONE (303)647-4850
(Address and telephone number of principal executive offices)
George Harris, Chief Financial Officer
7609 RALSTON ROAD, ARVADA, COLORADO 80002/ PHONE (303)647-4850
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
Michael A. Littman, Attorney at Law
7609 Ralston Road, Arvada, CO, 80002 phone 303-422-8127 / fax 303-431-1567
Approximate date of commencement of proposed sale to the public: As soon as
possible after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, 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.
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Large accelerated filer [___] Accelerated filer [___]
--------------------------- ----------- -------------------------- ------------
--------------------------- ----------- -------------------------- ------------
Non-accelerated filer [___] Smaller reporting company [_X_]
(Do not check if a smaller
reporting company)
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING REGISTRATION
PRICE(1) FEE
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Common Stock by Selling 1,030,000 $0.10 $103,000 $4.05(2)
Shareholders
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(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(o) under the Securities Act.
(2) A Registration Fee of $4.05 was paid in November 2007 for the original
registration of 1,030,000 shares of common stock by Selling
Shareholders.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
EXPLANATORY NOTE
This Post-Effective Amendment No. 8 to the Registration Statement on Form S-1,
Registration No. 333-147368, is filed for the purposes of business disclosures
and including updated financial statements as a result of the Registrant's
acquisition of South Uintah Gas Properties, Inc.
iii
(SUBJECT TO COMPLETION)
PROSPECTUS
HINTO ENERGY, INC.
1,030,000 SHARES OF COMMON STOCK OF SELLING SHAREHOLDERS
We are registering 1,030,000 shares listed for sale on behalf of selling
shareholders.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK; SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") OR ANY STATE OR PROVINCIAL SECURITIES
COMMISSION, NOR HAS THE SEC OR ANY STATE OR PROVINCIAL SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AMENDED PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Our common stock is presently quoted on the OTC Bulletin Board under the symbol
"HENI" On March 13, 2012, the last reported bid price of our common stock on the
OTC Bulletin Board was $1.50 per share (rounded to the nearest penny). Our
common stock having been recently listed has a limited trading history. See
"DESCRIPTION OF COMMON STOCK--Common Stock." These prices will fluctuate based
on the demand for the shares of our common stock and other factors.
This offering will be on a delayed and continuous basis only for sales of
selling shareholders shares. The selling shareholders are not paying any of the
offering expenses and we will not receive any of the proceeds from the sale of
the shares by the selling shareholders (See "Description of Securities -
Shares").
The information in this amended prospectus is not complete and may be changed.
We may not sell these securities until the date that the registration statement
relating to these securities, which has been filed with the Securities and
Exchange Commission, becomes effective. This amended prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this Prospectus is March 15, 2012.
-1-
TABLE OF CONTENTS
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PART I - INFORMATION REQUIRED IN Page No.
PROSPECTUS
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ITEM 1. Front of Registration Statement and Outside Front Cover Page
of Prospectus
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ITEM 2. Prospectus Cover Page 1
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ITEM 3. Prospectus Summary Information, Risk Factors and Ratio of 3
Earnings to Fixed Charges
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ITEM 4. Use of Proceeds 12
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ITEM 5. Determination of Offering Price 12
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ITEM 6. Dilution 13
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ITEM 7. Selling Security Holders 13
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ITEM 8. Plan of Distribution 15
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ITEM 9. Description of Securities 15
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ITEM 10. Interest of Named Experts and Counsel 16
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ITEM 11. Information with Respect to the Registrant 16
a. Description of Business 16
b. Description of Property 25
c. Legal Proceedings 26
d. Market for Common Equity and Related Stockholder Matters 26
e. Financial Statements 27
f. Selected Financial Data 28
g. Supplementary Financial Information 28
h. Management's Discussion and Analysis of Financial Condition 28
and Results of Operations
i. Changes In and Disagreements With Accountants on Accounting 33
and Financial Disclosure
j. Quantitative and Qualitative Disclosures About Market Risk 33
k. Directors and Executive Officers 33
l. Executive and Directors Compensation 36
m. Security Ownership of Certain Beneficial Owners and 39
Management
n. Certain Relationships, Related Transactions, Promoters And 40
Control Persons
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ITEM 11 A. Material Changes 43
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ITEM 12. Incorporation of Certain Information by Reference 43
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ITEM 12 A. Disclosure of Commission Position on Indemnification for 44
Securities Act Liabilities
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PART II - INFORMATION NOT REQUIRED IN
PROSPECTUS
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ITEM 13. Other Expenses of Issuance and Distribution 45
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ITEM 14. Indemnification of Directors and Officers 45
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ITEM 15. Recent Sales of Unregistered Securities 46
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ITEM 16. Exhibits and Financial Statement Schedules 47
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ITEM 17. Undertakings 48
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Signatures 49
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-2-
ITEM 3. PROSPECTUS SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO
FIXED CHARGES
OUR COMPANY
Hinto Energy, Inc. ("We," "Us," "Our") was organized under the laws of the State
of Wyoming on February 13, 1997, as Garner Investments, Inc. On August 18, 2012,
we amended our Articles of Incorporation to change our name to Hinto Energy,
Inc. and to authorize 25,000,000 shares of preferred stock. We were organized to
engage in the acquisition, exploration, and if warranted, development of oil and
gas prospects in the rocky mountain region.
Prior to January 2012, we had minimal operations that were focused mainly on
administrative activities and the identification of potential oil and gas
prospects. On January 23, 2012, we acquired 100% of the issued and outstanding
common stock of South Uintah Gas Properties, Inc. ("South Uintah") pursuant to
the Share Purchase and Exchange Agreement ("the Share Exchange Agreement")
entered into on July 27, 2011, at the time South Uintah was our majority
shareholder, as discussed below.
On July 11, 2011, prior to entering into the Share Exchange 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 held
approximately 70% of the issued and outstanding common stock of the Company.
Prior to closing of the acquisition of South Uintah, South Uintah transferred
300,000 shares to an unrelated third party as partial consideration for the
acquisition of the gas prospect in Utah. As part of the Share Exchange
Agreement, South Uintah has agreed to return the remaining 2,700,000 shares of
common stock to the Company. We have retired such shares to treasury, concurrent
with the transaction.
SHARE ACQUISITION AND EXCHANGE AGREEMENT
On July 27, 2011, we entered into a Share Exchange and Acquisition Agreement
with South Uintah and the South Uintah shareholders. On January 23, 2012, we
entered into an Amended Share Exchange and Acquisition Agreement ("the Amended
Share Exchange Agreement"). Pursuant to the Amended Share Exchange Agreement, we
agreed to issue shares of our 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. As a result, South Uintah became a wholly-owned subsidiary of
the Company.
In addition to the exchange of common stock, we have agreed to exchange on a one
for one basis the following outstanding equity documents with those of our own.
The table below sets forth the equity that is being exchanged.
Type of Equity South Uintah Balance To Be Issued By Hinto
-------------------------- ------------------------ -------------------------
Common Stock 11,446,931 shares 11,446,931 shares
Warrants (1) 6,700,000 6,700,000
Promissory Note (2) $375,000 $375,000
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(1) The warrants have exercise prices ranging from $0.50 to $3.00 per share and
terms ranging from 2 to 5 years.
(2) The promissory note has a provision to convert into shares of common stock
at $0.20 per share.
At the time of the acquisition, George Harris, Gary Herick, Max Sommer and Kevin
Blair, officers and directors of Hinto, were and are officers, directors and
shareholders of South Uintah. Mr. David Keller, a director of Hinto, was also a
shareholder of South Uintah.
The effective date of the acquisition is December 31, 2011, with Hinto being the
legal acquirer. However, since Hinto is a public company, which had nominal
activity, the acquisition has been treated as a recapitalization of South
Uintah. Though Hinto was the legal acquirer in the merger, South Uintah was the
accounting acquirer since its shareholders gained control of Hinto. Therefore at
the date of the merger the historical financial statements of South Uintah
became those of Hinto. As a result, the historical financial statements of South
Uintah supersede any prior financial statements of Hinto.
-3-
CURRENT PRIVATE OFFERING EFFORTS
We have conducted a Private Offering of shares of our restricted Common Stock
for capital. We intend to raise up to $5,000,000 in the next twelve months with
a structure not yet determined in debt or equity. As of March 9, 2012, the
Company had sold approximately 830,000 shares, raising a total of $415,000. We
cannot give any assurances that we will be able to raise the full $5,000,000.
Further, we will need to raise additional funds to support not only our expected
budget, but our continued operations.
ADDITIONAL REGISTRATION STATEMENT
The Company does intend to file a Registration Statement on Form S-1 pursuant to
Rule 429 of the Securities Act of 1933 to register 4,758,080 shares of the
Company's common stock held by existing shareholders and 2,000,000 shares
underlying warrants exercisable for shares of the Company's common stock at
$0.50 per share. The Company expects to file such Registration Statement in the
next 30 days.
SOUTH UINTAH
South Uintah was incorporated in the State of Colorado in March 2011 and is
headquartered in Denver, Colorado. South Uintah has interests in oil and gas
properties. South Uintah has acquired interests in approximately 5,600 gross
acres in the Central part of the Uintah Basin, at Natural Buttes, Utah from a
farmout. The acreage is located in a prolific gas production area from multiple
hydrocarbon reservoirs such as: Castlegate, Mancos, Dakota, Buck Tongue, Emery,
Frontier and Prairie Canyon. The upper zones above 9,800 feet (approximately)
are precluded in the farmout and the overall targets will be zones from 9,800
feet to 16,000 feet.
Our Auditors have issued a going concern opinion and the reasons noted for
issuing the opinion are our lack of revenues and modest capital.
Factors that make this offering highly speculative or risky are:
o There is a limited market for any securities;
o We have no revenues or sales;
o We are a start up company; and
o We are undercapitalized.
Our executive offices are now located at 7609 Ralston Road, Arvada, Colorado
80002 and the telephone number is (303)647-4850.
SUMMARY OF FINANCIAL INFORMATION
The effective date of the South Uintah acquisition is December 31, 2011. Since
Hinto is a public company, which had nominal activity, the acquisition has been
treated as a recapitalization of South Uintah. Though Hinto was the legal
acquirer in the merger, South Uintah was the accounting acquirer since its
shareholders gained control of Hinto. Therefore at the date of the merger the
historical financial statements of South Uintah became those of Hinto. As a
result, the historical financial statements of South Uintah supersede any prior
financial statements of Hinto. Therefore, the Summary Financial Information
presented below is that of South Uintah at September 30, 2011.
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As at September 30, 2011
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Total Assets $581,455
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Current Liabilities $1,123,974
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Shareholders' Equity $ (542,519)
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From March 8, 2011 through September 30, 2011
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Revenues $0
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Net Loss at September 30, 2011 $ (599,275)
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As of September 30, 2011, the accumulated deficit for was $(599,275). We
anticipate that we will operate in a deficit position and continue to sustain
net losses for the foreseeable future.
-4-
THE OFFERING
We are registering 1,030,000 shares listed for sale on behalf of selling
shareholders.
We will NOT receive any proceeds from sales of shares by selling shareholders.
=================================================================== ===========
Common shares outstanding before this offering 13,925,931
------------------------------------------------------------------- -----------
Maximum common shares being offered by our existing
selling shareholders 1,030,000
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We are authorized to issue 50,000,000 shares of common stock and 25,000,000
shares of preferred stock. Our current shareholders, officers and directors
collectively own 13,806,931 shares of restricted common stock. These shares were
issued at a price of $.01 per share for 1,580,000 shares, $0.001 for 11,446,931
shares and $0.50 for 780,000 shares.
The common stock is presently traded on the over-the-counter market on the OTC
Bulletin Board maintained by the Financial Industry Regulatory Authority (the
"FINRA"). The OTCBB symbol for the Common Stock is "HENI."
GLOSSARY
The following are definitions of terms used in this Memorandum:
BBL. An abbreviation for the term "barrel" which is a unit of
measurement of volume of oil or related petroleum products. One barrel (one bbl)
is the equivalent of 42 U.S. gallons or approximately 159 liters.
BONUS PAYMENT. Usually a one time payment made to a mineral owner as
consideration for the execution of an oil and gas lease.
CASING POINT. That point in time during the drilling of an oil well at
which a decision is made to install well casing and to attempt to complete the
well as an oil producer.
COMPLETION. The procedure used in finishing and equipping an oil or gas
well for production.
DELAY RENTAL. Payment made to the lessor under a nonproducing oil and
gas lease at the end of each year to continue the lease in force for another
year during its primary term.
DEVELOPMENT WELL. A well drilled to a known producing formation in a
previously discovered field, usually offsetting a producing well on the same or
an adjacent oil and gas lease.
EXPLORATORY WELL. A well drilled either (a) in search of a new and as
yet undiscovered pool of oil or gas or (b) with the hope of significantly
extending the limits of a pool already developed (also known as a "wildcat
well").
FARMIN. An agreement which allows a party earn a full or partial
working interest (also known as an "earned working interest") in an oil and gas
lease in return for providing exploration or development funds.
FARMOUT. An agreement whereby the owner of the leasehold or working
interest agrees to assign a portion of his interest in certain acreage subject
to the drilling of one or more specific wells or other performance by the
assignee as a condition of the assignment. Under a farmout, the owner of the
leasehold or working interest may retain some interest such as an overriding
royalty interest, an oil and gas payment, offset acreage or other type of
interest.
GROSS ACRE. An acre in which a working interest is owned. The number of
gross acres is the total number of acres in which an interest is owned (see "Net
Acre" below).
GROSS WELL. A well in which a working interest is owned. The number of
gross wells is the total number of wells in which a working interest is owned.
LANDOWNER ROYALTY. That interest retained by the holder of a mineral
interest upon the execution of an oil and gas lease which usually ranges from
1/8 to 1/4 of all gross revenues from oil and gas production unencumbered with
an expenses of operation, development or maintenance.
-5-
LEASES. Full or partial interests in oil or gas properties authorizing
the owner of the lease to drill for, produce and sell oil and gas upon payment
of rental, bonus, royalty or any of them. Leases generally are acquired from
private landowners (fee leases) and from federal and state governments on
acreage held by them.
LEASE PLAY. A term used to describe lease acquisition activity in a
prospect or geologically defined area.
MCF. An abbreviation for "1,000 cubic feet," which is a unit of
measurement of volume for natural gas.
NET WELL OR ACRE. A net well or acre exists when the sum of the
fractional ownership working interests in gross wells or acres equals one. The
number of net wells or acres is the sum of the factional working interests owned
in gross wells or acres expressed as whole number and fractions thereof.
NET REVENUE INTEREST. The fractional undivided interest in the oil or
gas or in the revenues from the sale of oil or gas attributable to a particular
working interest after reduction for a proportionate share of landowner's
royalty interest and overriding royalty interest.
OVERRIDING ROYALTY. An interest in the gross revenues or production
over and above the landowner's royalty carved out of the working interest and
also unencumbered with any expenses of operation, development or maintenance.
PAYOUT. The point in time when the cumulative total of gross income
from the production of oil and gas from a given well (and any proceeds from the
sale of such well) equals the cumulative total cost and expenses of acquiring,
drilling, completing and operating such well, including tangible and intangible
drilling and completion costs.
PROSPECT. A geological area which is believed to have the potential for
oil or gas production.
PROVED DEVELOPED RESERVES. The reserves which can be expected to be
recovered through existing wells with existing equipment and operating methods.
Such reserves include the reserves which are expected to be produced from the
existing completion interval(s) now open for production in existing wells and in
addition to those reserves which exist behind the casing (pipe) of existing
wells, or at minor depths below the present bottom of such wells, which are
expected to be produced through these wells in the predictable future where the
cost of making such oil and gas available for production is relatively small
compared to the cost of drilling a new well.
PROVED UNDEVELOPED RESERVES. Proved reserves which are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for a recompletion. Reserves on
undrilled acreage are limited to those drilling tracts offsetting productive
units which are reasonable certain of production when drilled. Proved reserves
for other undrilled tracts are claimed only where it can be demonstrated with
certainty that there is continuity of production from the existing productive
formation.
REVERSIONARY INTEREST. The portion of the working interest in an oil
and gas lease which will be returned to its former owner when payout occurs or
after a predetermined amount of production and income has been produced.
UNDEVELOPED LEASEHOLD ACREAGE. Leased acreage on which wells have not
been drilled or completed to a point that would permit the production of
commercial quantities of oil and gas.
WORKING INTEREST. An interest in an oil and gas lease entitling the
holder at its expense to conduct drilling and production operations on the
leased property and to receive the net revenues attributable to such interest,
after deducting the landowner's royalty, any overriding royalties, production
costs, taxes and other costs.
-6-
RISK FACTORS RELATED TO OUR COMPANY
Our securities, as offered hereby, are highly speculative and should be
purchased only by persons who can afford to lose their entire investment in us.
Each prospective investor should carefully consider the following risk factors,
as well as all other information set forth elsewhere in this prospectus, before
purchasing any of the shares of our common stock.
OUR BUSINESS IS A DEVELOPMENT STAGE COMPANY AND UNPROVEN AND THEREFORE RISKY.
We have only very recently begun operations under the business plan discussed
herein. Potential investors should be made aware of the risk and difficulties
encountered by a new enterprise in the oil and gas industry, especially in view
of the intense competition from existing businesses in the industry.
WE HAVE A LACK OF REVENUE HISTORY AND INVESTORS CANNOT VIEW OUR PAST PERFORMANCE
SINCE WE ARE A START-UP COMPANY.
We were formed on February 13, 1997 for the purpose of engaging in any lawful
business and have adopted a plan to engage the acquisition, exploration, and if
warranted, development of natural resource properties. We have had no revenues
in the last five years. We are not profitable and the business effort is
considered to be in an early development stage. We must be regarded as a new or
development venture with all of the unforeseen costs, expenses, problems, risks
and difficulties to which such ventures are subject.
WE ARE NOT DIVERSIFIED AND WE WILL BE DEPENDENT ON ONLY ONE BUSINESS.
Because of the limited financial resources that we have, it is unlikely that we
will be able to diversify our operations. Our probable inability to diversify
our activities into more than one area will subject us to economic fluctuations
within the energy industry and therefore increase the risks associated with our
operations due to lack of diversification.
WE CAN GIVE NO ASSURANCE OF SUCCESS OR PROFITABILITY TO OUR INVESTORS.
There is no assurance that we will ever operate profitably. There is no
assurance that we will generate revenues or profits, or that the market price of
our common stock will be increased thereby.
WE MAY HAVE A SHORTAGE OF WORKING CAPITAL IN THE FUTURE WHICH COULD JEOPARDIZE
OUR ABILITY TO CARRY OUT OUR BUSINESS PLAN.
Our capital needs consist primarily of expenses related to geological
evaluation, general and administrative and potential exploration participation
and could exceed $750,000 in the next twelve months. Such funds are not
currently committed, and we have cash of approximately $400,000 as of the date
of this Post-Effective Amendment No. 8.
We will not receive any proceeds from the sale of the common shares held by the
Selling Shareholders.
We have issued a total of 6,700,000 shares of common stock underlying Warrants
exercisable at exercise prices ranging from $0.50 to $3.00 per share, which if
exercised; we would receive proceeds totaling approximately $9,900,000 from the
exercise of the Warrants. Warrants exercisable for 4,700,000 shares are subject
to vesting terms and are not eligible for exercise for at least one year. We
cannot provide any assurances that such warrants will be exercised or when they
will be exercised.
If we find oil and gas reserves to exist on a prospect we will need substantial
additional financing to fund the necessary exploration and development work.
Furthermore, if the results of that exploration and development work are
successful, we will need substantial additional funds for continued development.
We will not receive proceeds from this offering to conduct such work and,
therefore, we will need to obtain the necessary funds either through debt or
equity financing, some form of cost-sharing arrangement with others, or the sale
of all or part of the property. There is no assurance that we will be successful
in obtaining any financing. These various financing alternatives may dilute the
interest of our shareholders and/or reduce our interest in the properties. (See
"Use of Proceeds" and "Our Business")
WE WILL NEED ADDITIONAL FINANCING FOR WHICH WE HAVE NO COMMITMENTS, AND THIS MAY
JEOPARDIZE EXECUTION OF OUR BUSINESS PLAN.
We have limited funds, and such funds may not be adequate to carry out the
business plan in the oil and gas industry. Our ultimate success depends upon our
ability to raise additional capital. We have not investigated the availability,
source, or terms that might govern the acquisition of additional capital and
will not do so until it determines a need for additional financing. If we need
additional capital, we have no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to us. If
not available, our operations will be limited to those that can be financed with
our modest capital.
-7-
WE MAY IN THE FUTURE ISSUE MORE SHARES WHICH COULD CAUSE A LOSS OF CONTROL BY
OUR PRESENT MANAGEMENT AND CURRENT STOCKHOLDERS.
We may issue further shares as consideration for the cash or assets or services
out of our authorized but unissued common stock that would, upon issuance,
represent a majority of the voting power and equity of our Company. The result
of such an issuance would be those new stockholders and management would control
our Company, and persons unknown could replace our management at this time. Such
an occurrence would result in a greatly reduced percentage of ownership of our
Company by our current shareholders, which could present significant risks to
investors.
WE HAVE WARRANTS ISSUED AND OUTSTANDING WHICH ARE CONVERTIBLE INTO OUR COMMON
STOCK. A CONVERSION OF SUCH EQUITY INSTRUMENTS COULD HAVE A DILUTIVE EFFECT TO
EXISTING SHAREHOLDERS.
At March 12, 2012, we have warrants issued and outstanding exercisable into
6,700,000 shares of our common stock at ranges from $0.50 to $3.00 per share. We
will be registering 2,000,000 shares underlying our $0.50 Warrants in a separate
registration statement. We do not intend to register warrants held by our
officers and directors. The warrants are exercisable in whole or in part. The
2,000,000 shares underlying our warrants that will be separately registered,
upon the effectiveness of that registration statement, will be free trading
shares and available for immediate transfer. The exercise of the warrants into
shares of our common stock could have a dilutive effect to the holdings of our
existing shareholders.
WE WILL DEPEND UPON MANAGEMENT BUT WE WILL HAVE LIMITED PARTICIPATION OF
MANAGEMENT.
Our directors are also acting as our officers. We will be heavily dependent upon
their skills, talents, and abilities, as well as several consultants to us, to
implement our business plan, and may, from time to time, find that the inability
of the officers, directors and consultants to devote their full-time attention
to our business results in a delay in progress toward implementing our business
plan. Consultants may be employed on a part-time basis under a contract to be
determined.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, our officers and directors may have
potential conflicts including their time and efforts involved in participation
with other business entities. Each officer and director of our business is
engaged in business activities outside of our business, and the amount of time
they devote as Officers and Directors to our business will be up to 25 hours per
week. (See "Executive Team") Because investors will not be able to manage our
business, they should critically assess all of the information concerning our
officers and directors.
We do not know of any reason other than outside business interests that would
prevent them from devoting full-time to our Company, when the business may
demand such full-time participation.
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTERESTS AS TO CORPORATE
OPPORTUNITIES WHICH WE MAY NOT BE ABLE OR ALLOWED TO PARTICIPATE IN.
Presently there is no requirement contained in our Articles of Incorporation,
Bylaws, or minutes which requires officers and directors of our business to
disclose to us business opportunities which come to their attention. Our
officers and directors do, however, have a fiduciary duty of loyalty to us to
disclose to us any business opportunities which come to their attention, in
their capacity as an officer and/or director or otherwise. Excluded from this
duty would be opportunities which the person learns about through his
involvement as an officer and director of another company. We have no intention
of merging with or acquiring business opportunity from any affiliate or officer
or director. (See "Conflicts of Interest" at page 27)
WE HAVE AGREED TO INDEMNIFICATION OF OFFICERS AND DIRECTORS AS IS PROVIDED BY
WYOMING STATUTE.
Wyoming Statutes provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against attorney's fees and
other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities our behalf. We will also bear
the expenses of such litigation for any of our directors, officers, employees,
or agents, upon such person's promise to repay us therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification.
This indemnification policy could result in substantial expenditures by us that
we will be unable to recoup.
OUR DIRECTORS' LIABILITY TO US AND SHAREHOLDERS IS LIMITED
Wyoming Revised Statutes exclude personal liability of our directors and our
stockholders for monetary damages for breach of fiduciary duty except in certain
specified circumstances. Accordingly, we will have a much more limited right of
-8-
action against our directors that otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
RISK FACTORS RELATING TO OUR BUSINESS
Any person or entity contemplating an investment in the securities offered
hereby should be aware of the high risks involved and the hazards inherent
therein. Specifically, the investor should consider, among others, the following
risks:
OUR BUSINESS, THE OIL AND GAS BUSINESS HAS NUMEROUS RISKS WHICH COULD RENDER US
UNSUCCESSFUL.
The search for new oil and gas reserves frequently results in unprofitable
efforts, not only from dry holes, but also from wells which, though productive,
will not produce oil or gas in sufficient quantities to return a profit on the
costs incurred. There is no assurance we will find or produce oil or gas from
any of the undeveloped acreage farmed out to us or which may be acquired by us,
nor are there any assurances that if we ever obtain any production it will be
profitable. (See "Business and Properties")
WE HAVE SUBSTANTIAL COMPETITORS WHO HAVE AN ADVANTAGE OVER US IN RESOURCES AND
MANAGEMENT.
We are and will continue to be an insignificant participant in the oil and gas
business. Most of our competitors have significantly greater financial
resources, technical expertise and managerial capabilities than us and,
consequently, we will be at a competitive disadvantage in identifying and
developing or exploring suitable prospects. Competitor's resources could
overwhelm our restricted efforts to acquire and explore oil and gas prospects
and cause failure of our business plan.
WE WILL BE SUBJECT TO ALL OF THE MARKET FORCES IN THE ENERGY BUSINESS, MANY OF
WHICH COULD POSE A SIGNIFICANT RISK TO OUR OPERATIONS.
The marketing of natural gas and oil which may be produced by our prospects will
be affected by a number of factors beyond our control. These factors include the
extent of the supply of oil or gas in the market, the availability of
competitive fuels, crude oil imports, the world-wide political situation, price
regulation, and other factors. Current economic and market conditions have
created dramatic fluctuations in oil prices. Any significant decrease in the
market prices of oil and gas could materially affect our profitability of oil
and gas activities.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase our gas production, there
is assurance that we will be able to enter into purchase contracts with any
transmission companies or other purchasers of natural gas and there can be no
assurance regarding the price which such purchasers would be willing to pay for
such gas. There may, on occasion, be an oversupply of gas in the marketplace or
in pipelines, the extent and duration may affect prices adversely. Such
oversupply may result in reductions of purchases and prices paid to producers by
principal gas pipeline purchasers. (See "Our Business and Competition, Markets,
Regulation and Taxation.")
WE BELIEVE INVESTORS SHOULD CONSIDER CERTAIN NEGATIVE ASPECTS OF OUR OPERATIONS.
DRY HOLES: We may expend substantial funds acquiring and potentially
participating in exploring properties which we later determine not to be
productive. All funds so expended will be a total loss to us.
TECHNICAL ASSISTANCE: We will find it necessary to employ technical assistance
in the operation of our business. As of the date of this Prospectus, we have not
contracted for any technical assistance. When we need it such assistance is
likely to be available at compensation levels we would be able to pay.
UNCERTAINTY OF TITLE: We will attempt to acquire leases or interests in leases
by option, lease, farmout or by purchase. The validity of title to oil and gas
property depends upon numerous circumstances and factual matters (many of which
are not discoverable of record or by other readily available means) and is
subject to many uncertainties of existing law and our application. We intend to
obtain an oil and gas attorney's opinion of valid title before any significant
expenditure upon a lease.
GOVERNMENT REGULATIONS: The area of exploration of natural resources has become
significantly regulated by state and federal governmental agencies, and such
regulation could have an adverse effect on our operations. Compliance with
statutes and regulations governing the oil and gas industry could significantly
increase the capital expenditures necessary to develop our prospects.
-9-
NATURE OF OUR BUSINESS: Our business is highly speculative, involves the
commitment of high-risk capital, and exposes us to potentially substantial
losses. In addition, we will be in direct competition with other organizations
which are significantly better financed and staffed than we are.
GENERAL ECONOMIC AND OTHER CONDITIONS: Our business may be adversely affected
from time to time by such matters as changes in general economic, industrial and
international conditions; changes in taxes; oil and gas prices and costs; excess
supplies and other factors of a general nature.
OUR BUSINESS IS SUBJECT TO SIGNIFICANT WEATHER INTERRUPTIONS.
Our activities may be subject to periodic interruptions due to weather
conditions. Weather-imposed restrictions during certain times of the year on
roads accessing properties could adversely affect our ability to benefit from
production on such properties or could increase the costs of drilling new wells
because of delays.
WE ARE SUBJECT TO SIGNIFICANT OPERATING HAZARDS AND UNINSURED RISK IN THE ENERGY
INDUSTRY.
Our proposed operations will be subject to all of the operating hazards and
risks normally incident to exploring, drilling for and producing oil and gas,
such as encountering unusual or unexpected formations and pressures, blowouts,
environmental pollution and personal injury. We will maintain general liability
insurance but we have not obtained insurance against such things as blowouts and
pollution risks because of the prohibitive expense. Should we sustain an
uninsured loss or liability, or a loss in excess of policy limits, our ability
to operate may be materially adversely affected.
WE ARE SUBJECT TO FEDERAL INCOME TAX LAWS AND CHANGES THEREIN WHICH COULD
ADVERSELY IMPACT US.
Federal income tax laws are of particular significance to the oil and gas
industry in which we engage. Legislation has eroded various benefits of oil and
gas producers and subsequent legislation could continue this trend. Congress is
continually considering proposals with respect to Federal income taxation which
could have a material adverse effect on our future operations and on our ability
to obtain risk capital which our industry has traditionally attracted from
taxpayers in high tax brackets.
WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION IN THE ENERGY INDUSTRY WHICH
COULD ADVERSELY IMPACT US.
The production and sale of oil and gas are subject to regulation by state and
federal authorities, the spacing of wells and the prevention of waste. There are
both federal and state laws regarding environmental controls which may
necessitate significant capital outlays, resulting in extended delays,
materially affect our earnings potential and cause material changes in the in
our proposed business. We cannot predict what legislation, if any, may be passed
by Congress or state legislatures in the future, or the effect of such
legislation, if any, on us. Such regulations may have a significant affect on
our operating results.
RISK FACTORS RELATED TO OUR STOCK
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA MAY DISCOURAGE THE TRADABILITY
OF OUR SECURITIES.
We are a "penny stock" company. Our securities are subject to a Securities and
Exchange Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
or having an annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Effectively, this discourages broker-dealers from executing trades in
penny stocks. Consequently, the rule will affect the ability of purchasers in
this offering to sell their securities in any market that might develop
therefore because it imposes additional regulatory burdens on penny stock
transactions.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
-10-
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.
WE WILL PAY NO FORESEEABLE DIVIDENDS IN THE FUTURE.
We have not paid dividends on our common stock and do not ever anticipate paying
such dividends in the foreseeable future.
OUR INVESTORS MAY SUFFER FUTURE DILUTION DUE TO ISSUANCES OF SHARES FOR VARIOUS
CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to our shareholders purchasing in this
Offering as a result of future decisions of the Board to issue shares without
shareholder approval for cash, services, or acquisitions.
At March 12, 2012, we have warrants issued and outstanding exercisable into
6,700,000 shares of our common stock at ranges from $0.50 to $3.00 per share. We
intend to register 2,000,000 shares underlying our $0.50 Warrants in a separate
registration statement. We do not intend to register the warrants held by our
officers and directors. The warrants are exercisable in whole or in part. The
exercise of the warrants into shares of our common stock could have a dilutive
effect to the holdings of our existing shareholders.
The Company does intend to file a Registration Statement on Form S-1 pursuant to
Rule 429 of the Securities Act of 1933 to register 4,758,080 shares of the
Company's common stock held by existing shareholders and 2,000,000 shares
underlying warrants exercisable for shares of the Company's common stock at
$0.50 per share. The Company expects to file such Registration Statement in the
next 30 days.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR STOCK PRICE.
All of the outstanding shares of common stock held by our present officers,
directors, and affiliate stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
Shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. We are registering all of our outstanding shares so officers,
directors and affiliates will be able to sell their shares if this Registration
Statement becomes effective. Rule 144 provides in essence that a person who has
held restricted securities for six months, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the owner has held the restricted securities for a period of
six month. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
OUR COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY INCREASES THE RISK THAT
YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE PRICE THAT YOU MAY PAY
FOR THE SHARES.
Because of the limited trading market for our common stock and because of the
possible price volatility, you may not be able to sell your shares of common
stock when you desire to do so. The inability to sell your shares in a rapidly
declining market may substantially increase your risk of loss because of such
illiquidity and because the price for our Securities may suffer greater declines
because of our price volatility.
The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you may pay. Certain factors,
some of which are beyond our control, that may cause our share price to
fluctuate significantly include, but are not limited to the following:
o Variations in our quarterly operating results;
o Loss of a key relationship or failure to complete significant
transactions;
-11-
o Additions or departures of key personnel; and
o Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the
over-the-counter markets in particular, have experienced extreme price and
volume fluctuations. In some cases, these fluctuations are unrelated or
disproportionate to the operating performance of the underlying company. These
market and industry factors may materially and adversely affect our stock price,
regardless of our operating performance. In the past, class action litigation
often has been brought against companies following periods of volatility in the
market price of those companies common stock. If we become involved in this type
of litigation in the future, it could result in substantial costs and diversion
of management attention and resources, which could have a further negative
effect on your investment in our stock.
ANY SALES OF OUR COMMON STOCK, IF IN SIGNIFICANT AMOUNTS, ARE LIKELY TO DEPRESS
THE MARKET PRICE OF OUR SECURITIES.
Assuming all of the shares of common stock, under this Post-Effective Amendment
No. 8 are sold and all of the shares of common stock held by the selling
security holders registered hereby are sold, we would have 1,030,000 shares that
are freely tradable. Even our officers and directors are registering a portion
of their shares for sale under this amended prospectus.
Unrestricted sales of 1,030,000 shares of stock by our selling stockholders
could have a huge negative impact on our share price, and the market for our
shares.
ANY NEW POTENTIAL INVESTORS WILL SUFFER A DISPROPORTIONATE RISK AND THERE WILL
BE IMMEDIATE DILUTION OF EXISTING INVESTOR'S INVESTMENTS.
Our present shareholders have acquired their securities at a cost significantly
less than that which the investors purchasing pursuant to shares will pay for
their stock holdings or at which future purchasers in the market may pay.
Therefore, any new potential investors will bear most of the risk of loss.
OUR BUSINESS IS HIGHLY SPECULATIVE AND THE INVESTMENT IS THEREFORE RISKY.
Due to the speculative nature of our business, it is probable that the
investment in shares offered hereby will result in a total loss to the investor.
Investors should be able to financially bear the loss of their entire
investment. Investment should, therefore, be limited to that portion of
discretionary funds not needed for normal living purposes or for reserves for
disability and retirement.
ITEM 4. USE OF PROCEEDS
We have conducted a Private Offering of shares of our restricted Common Stock
for capital. We intend to raise up to $5,000,000 in the next twelve months with
a structure not yet determined in debt or equity. As of March 12, 2012, the
Company had sold approximately 830,000 shares, raising a total of $415,000. We
cannot give any assurances that we will be able to raise the full $5,000,000 to
fund the budget. Further, we will need to raise additional funds to support not
only our expected budget, but our continued operations. We cannot make any
assurances that we will be able to raise such funds or whether we would be able
to raise such funds with terms that are favorable to us.
Our lack of funds could and would severely limit our operations, and might
render us unable to carry out our business plan with resulting business failure.
ITEM 5. DETERMINATION OF OFFERING PRICE
The Common Stock is presently thinly traded on the over-the-counter market on
the OTC Bulletin Board maintained by the Financial Industry Regulatory Authority
(the "FINRA"). The OTCBB symbol for the Common Stock is "HENI." The Company's
stock began trading on the OTC Bulletin Board on December 31, 2010.
The offering price of the Common Stock being registered on behalf of the
selling shareholders was determined using a 5-day average of the closing market
price. We will not receive any proceeds from the sale of our stock by our
selling shareholders.
-------------------------- ----------------------------------------------------
TITLE PER SECURITY
-------------------------- ----------------------------------------------------
Common Stock $0.10
-------------------------- ----------------------------------------------------
|
-12-
We have arbitrarily determined our offering price for shares to be sold pursuant
to this offering at $0.10. The 480,000 shares of stock already purchased by
original officers and directors at $.003 and other shareholders were sold for
$.0025 per Share. We issued 3,500,000 shares at $.001 to Sharon K. Fowler in
2006 for the farmout of the mineral lease in Wyoming. The additional major
factors that were included in determining the initial sales price to our
founders and private investors were the lack of liquidity since there was no
present market for our stock and the high level of risk considering our lack of
operating history.
The share price bears no relationship to any criteria of goodwill value, asset
value, market price or any other measure of value and were arbitrarily
determined in the judgment of our Board of Directors.
ITEM 6. DILUTION
We are registering shares of existing shareholders who hold 1,030,000. Other
shareholders purchased shares at $.0025 per share in 1998. Since our inception
on February 13, 1997, our original officers and directors purchased 480,000
shares at $0.003 per share. Sharon K. Fowler was issued 3,500,000 shares of our
common stock at $.001 per share for the farmout of the mineral lease in Natrona
County, Wyoming.
The following table sets forth with respect to existing shareholders, the number
of our shares of common stock purchased the percentage ownership of such shares,
the total consideration paid, the percentage of total consideration paid and the
average price per share. All percentages are computed based upon cumulative
shares and consideration assuming sale of all shares in the line item as
compared to maximum in each previous line.
Shares Purchased Total Consideration
----------------- -------------------- Average
Number Percent Amount Percent Price/Share
1) Existing Shareholders 1,030,000 100% $1,339 <1% $0.0013
"Net tangible book value" is the amount that results from subtracting the total
liabilities and intangible assets from the total assets of an entity. Dilution
occurs because we determined the offering price based on factors other than
those used in computing book value of our stock. Dilution exists because the
book value of shares held by existing stockholders is lower than the offering
price offered to new investors.
As at September 30, 2011, the net tangible book value of our stock was $(0.06)
per share. If we are successful in achieving exercise of the warrants at the
exercise price, that would represent an immediate increase in net tangible book
value per share and per share dilution to new investors as shown in chart above,
assuming the warrants are exercised at a price of $0.50 for 2,000,000 shares.
The exercise of the warrants by the holders thereof could result in a further
dilution of the book value of our Common Stock. Furthermore, the holders of the
warrants might be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital by a new offering of securities
on terms more favorable than those provided for by the warrants.
ITEM 7. SELLING SECURITY HOLDERS
The selling shareholders, including officers and directors, obtained their
shares of our stock in the following transactions:
(a) A private placement of 480,000 shares occurring at inception in 1997
to founders at $.003 per share;
(b) A private placement in early 1998 of 300,000 shares at $0.0025 per
share;
(c) Sharon K. Fowler contributed a farmout of lease acreage for 3,500,000
shares at $.001 per share;
(d) Pursuant to Amended Share Exchange Agreement, dated January 23, 2012,
the shareholders of South Uintah were issued 11,446,931 shares of
common stock on a one for one basis for their shares of South Uintah;
and
(e) A private placement from October 2011 through January 2012 for 780,000
shares at $0.50 per share.
Other than the stock transactions discussed above, we have not entered into any
transaction nor are there any proposed transactions in which any founder,
director, executive officer, significant shareholder of our company or any
member of the immediate family of any of the foregoing had or is to have a
direct or indirect material interest, except the following,
Sharon K. Fowler, founder and shareholder granted a farmout of the
lease in Section 16, T38N, R81W in Natrona County, Wyoming, to us at
$.001 per share for 3,500,000 shares of our common stock in 1998.
-13-
On July 11, 2011, prior to entering into the Share Exchange 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 held approximately 70% of the issued and outstanding common
stock of the Company. Prior to closing of the acquisition of South
Uintah, South Uintah transferred 300,000 shares to an unrelated third
party as partial consideration for the acquisition of the gas prospect
in Utah. As part of the Share Exchange Agreement, South Uintah has
agreed to return the remaining 2,700,000 shares of common stock to the
Company. We have retired such shares to treasury, concurrent with the
transaction.
No person who may, in the future, be considered a promoter of this offering,
will receive or expect to receive assets, services or other considerations from
us except those persons who are our salaried employees or directors. No assets
will be, nor expected to be, acquired from any promoter on behalf of us. We have
not entered into any agreements that require disclosure to the shareholders.
All of the securities listed below are being registered in this Registration
Statement, which include all of the securities outstanding as of date hereof.
------------------------------------- ------------------ ---------------- --------------- -----------------
NAME COMMON SHARES
HELD BY EACH TOTAL SHARES % SHARES OWNED
SHARE-HOLDER TO BE OWNED BEFORE AFTER OFFERING
BEFORE OFFERING REGIST-ERED OFFERING (1) (2)
------------------------------------- ------------------ ---------------- --------------- -----------------
John E. Bradley 61,500 11,500 0.44% 11,500
------------------------------------- ------------------ ---------------- --------------- -----------------
Brandy Butler 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Jessica L. Butler 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Michael R. Butler 140,000 140,000 1.00% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Linda J. Cheney 12,000 12,000 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Percy S. Chopping, Jr. 5,500 5,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Leslie J. Cotton 17,500 17,500 0.12% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Bret A. Erickson 300 300 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Eric C. Erickson 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
G. Todd Erickson 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Robert C. Erickson 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Family Fire Protections, LLC 6,500 6,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Lourie J. Fleet 17,000 17,000 0.12% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Sherry L. Foate 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Everett M. Fowler 5,500 5,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Guy E. Fowler 7,800 7,800 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Michael E. Fowler 16,000 16,000 0.11% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Robert G. Fowler 170,000 170,000 1.22% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Robert D. Fowler 17,000 17,000 0.12% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Sharon K. Fowler 510,000 260,000 3.66% 250,000
------------------------------------- ------------------ ---------------- --------------- -----------------
Kenneth D. Freemole 1,500 1,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
April A. Frost 12,700 12,700 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Grant Glazier 11,000 11,000 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Warren N. Golligher, M.D. 8,500 8,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Everett M. Gordon 12,800 12,800 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Philip G. Hinds 5,750 5,750 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Thomas M. Hockaday 10,750 10,750 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Andrea K. Hunt 16,500 16,500 0.11% 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Rashelle L. Hunt 11,500 11,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
Michael Johnson 5,000 5,000 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
John L. Lee or Patricia J. Lee 13,500 13,500 * 0
------------------------------------- ------------------ ---------------- --------------- -----------------
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|
------------------------------------- ------------------- --------------- --------------- -----------------
NAME COMMON SHARES
HELD BY EACH TOTAL SHARES % SHARES OWNED
SHARE-HOLDER TO BE OWNED BEFORE AFTER OFFERING
BEFORE OFFERING REGIST-ERED OFFERING (1) (2)
------------------------------------- ------------------- --------------- --------------- -----------------
Z.S. Merritt 10,750 10,750 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Lesha J. Morrison 18,500 18,500 0.13% 0
------------------------------------- ------------------- --------------- --------------- -----------------
William Rittahler 500 500 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Ralph Schauss 13,000 13,000 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Barbara S. Schmidt 1,500 1,500 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Harlan A. Schmidt 63,000 63,000 0.45% 0
------------------------------------- ------------------- --------------- --------------- -----------------
Ronald A. Shogren 40,000 40,000 0.28% 0
------------------------------------- ------------------- --------------- --------------- -----------------
Roy C. Smith 50,000 50,000 0.35% 0
------------------------------------- ------------------- --------------- --------------- -----------------
Jamie L. Vig 1,900 1,900 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Roger W. Wesnitzer 11,500 11,500 * 0
------------------------------------- ------------------- --------------- --------------- -----------------
Dale A. Wood 14,250 14,250 0.10% 0
------------------------------------- ------------------- --------------- --------------- -----------------
TOTAL 1,330,000 1,030,000 9.55%
------------------------------------- ------------------- --------------- --------------- -----------------
|
*Less than 1%
MATERIAL RELATIONSHIPS
(1) Based upon 13,925,931shares of common stock issued and outstanding.
(2) Assumes the sale of all shares being registered.
ITEM 8. PLAN OF DISTRIBUTION
Upon effectiveness of this amendment to the registration statement, of which
this prospectus is a part, our existing selling shareholders may sell their
securities at market prices or at any price in privately negotiated
transactions.
Our selling shareholders may be deemed underwriters in this offering.
The selling shareholders are not paying any of the offering expenses and we will
not receive any of the proceeds from the sale of the shares by the selling
shareholders.
ITEM 9. DESCRIPTION OF SECURITIES
The securities being registered and/or offered by this Prospectus are common
shares.
COMMON STOCK
We are presently authorized to issue fifty million (50,000,000) shares of our
common stock. A total of Thirteen Million, Nine Hundred Twenty-Five Thousand and
Nine Hundred and Thirty-One (13,925, 931) common shares are issued and
outstanding.
COMMON SHARES
All shares are equal to each other with respect to voting, liquidation, and
dividend rights. Special shareholders' meetings may be called by the officers or
director, or upon the request of holders of at least one-tenth (1/10th) of the
outstanding shares. Holders of shares are entitled to one vote at any
shareholders' meeting for each share they own as of the record date fixed by the
board of directors. There is no quorum requirement for shareholders' meetings.
Therefore, a vote of the majority of the shares represented at a meeting will
govern even if this is substantially less than a majority of the shares
outstanding. Holders of shares are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefore, and
upon liquidation are entitled to participate pro rata in a distribution of
assets available for such a distribution to shareholders. There are no
conversion, pre-emptive or other subscription rights or privileges with respect
to any shares. Reference is made to our Articles of Incorporation and our
By-Laws as well as to the applicable statutes of the State of Wyoming for a more
complete description of the rights and liabilities of holders of shares. It
should be noted that the board of directors without notice to the shareholders
may amend the By-Laws. Our shares do not have cumulative voting rights, which
means that the holders of more than fifty percent (50%) of the shares voting for
election of directors may elect all the directors if they choose to do so. In
-15-
such event, the holders of the remaining shares aggregating less than fifty
percent (50%) of the shares voting for election of directors may not be able to
elect any director.
PREFERRED SHARES
We are authorized to issue twenty-five million (25,000,000) shares of preferred
stock. At the time of this filing there are no classes of preferred stock
designated, nor are there any preferred shares issued and outstanding.
The Board of Directors will have complete discretion to authorize Series and
Classes, and to negotiate and set the rights, privileges, and preferences of the
classes and series. Management will have also the discretion, subject to Board
of Director approval of how, when, and for what consideration the Preferred
Shares may be issued.
WARRANTS
We have a total of 6,700,000 warrants issued and outstanding, which entitle the
holder to purchase one Share of Common Stock at an exercise prices ranging from
$0.50 to $3.00 per share. We intend to register 2,000,000 shares underlying our
$0.50 Warrants, in a separate registration statement.
Our officers and directors hold warrants exercisable for 2,700,000 shares with
exercise prices ranging from $1.00 to $3.00 per share, which we are not
registering as part of this Offering. Of which, warrants exercisable for
1,000,000 shares have an exercise price of $2.00 per share and will expire in
July 2016. Such warrants will vest at a rate of 1/3 per year throughout the term
of the warrants and will expire 2 years after vesting. Warrants exercisable for
1,100,000 shares have an exercise price of $1.00 per share have a term of 3
years and will expire in July 2014 through November 2014. Warrants exercisable
for 600,000 shares have an exercise price of $3.00 per share and have a term of
3 years and will expire from July 2014 through September 2014.
Certain affiliates of the Company hold warrants exercisable of 2,000,000 shares
with an exercise price of $2.00 per share and will expire in July 2016, and have
a vesting rate of 1/3 per year throughout the term of the warrants and will
expire two years after vesting.
Such warrants are not held by any officers or directors of the Company. The
$0.50 Warrants have an exercise price of $0.50 per share and have a term of 2
years with a maximum expiration date of July 2013.
TRANSFER AGENT
The transfer agent for our securities is Continental Stock Transfer & Trust
Company, 17 Battery Place, New York City, NY 10004; phone number (212) 845-3274.
ITEM 10. INTEREST OF NAMED EXPERTS AND COUNSEL
We have not hired or retained any experts or counsel on a contingent basis, who
would receive a direct or indirect interest in us, or who is, or was, our
promoter, underwriter, voting trustee, director, officer or employee.
ITEM 11. INFORMATION WITH RESPECT TO THE REGISTRANT
A. DESCRIPTION OF BUSINESS
HISTORY OF HINTO ENERGY, INC.
Our Company, Hinto Energy, Inc., was formed February 13, 1997, as Garner
Investments, Inc. On August 18, 2012, we amended our Articles of Incorporation
to change our name to Hinto Energy, Inc. and to authorize 25,000,000 shares of
preferred stock. We were organized to engage in the acquisition, exploration,
and if warranted, development of oil and gas prospects in the rocky mountain
region. Our main emphasis will be to acquire, either by lease, farmout, or
purchase, an interest in oil or gas prospects or properties for exploration,
when available, with third parties.
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COMPANY OVERVIEW
We have been inactive during the last 5 years. We have changed from a farmout
business to actively commence evaluation and possibly exploration of oil and gas
prospects. We had a farmout interest in one lease. There were no producing
acreage and no reserves. On April 30, 2011, the farmout agreement expired.
Prior to January 2012, we had minimal operations that were focused mainly on
administrative activities and the identification of potential oil and gas
prospects. On January 23, 2012, we acquired 100% of the issued and outstanding
common stock of South Uintah Gas Properties, Inc. ("South Uintah") pursuant to
the Share Purchase and Exchange Agreement ("the Share Exchange Agreement")
entered into on July 27, 2011, at the time South Uintah was our majority
shareholder, as discussed below.
CHANGE OF CONTROL
On July 11, 2011, prior to entering into the Share Exchange 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 held
approximately 70% of the issued and outstanding common stock of the Company.
Prior to closing of the acquisition of South Uintah, South Uintah transferred
300,000 shares to an unrelated third party as partial consideration for the
acquisition of the gas prospect in Utah. As part of the Share Exchange
Agreement, South Uintah has agreed to return the remaining 2,700,000 shares of
common stock to the Company. We have retired such shares to treasury, concurrent
with the transaction.
SHARE ACQUISITION AND EXCHANGE AGREEMENT
On July 27, 2011, we entered into a Share Exchange and Acquisition Agreement
with South Uintah and the South Uintah shareholders. On January 23, 2012, we
entered into an Amended Share Exchange and Acquisition Agreement ("the Amended
Share Exchange Agreement"). Pursuant to the Amended Share Exchange Agreement, we
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. As a result, South Uintah became a wholly-owned subsidiary of
the Company.
In addition to the exchange of common stock, we have agreed to exchange on a one
for one basis the following outstanding equity documents with those of our own.
The table below sets forth the equity that is being exchanged.
Type of Equity South Uintah Balance To Be Issued By Hinto
-------------------------- ------------------------ -------------------------
Common Stock 11,446,931 shares 11,446,931 shares
Warrants (1) 6,700,000 6,700,000
Promissory Note (2) $375,000 $375,000
--------------------------
|
(1) The warrants have exercise prices ranging from $0.25 to $3.00 per
share and terms ranging from 2 to 3 years.
(2) The promissory note has a provision to convert into shares of common
stock at $0.20 per share.
At the time of the acquisition, George Harris, Gary Herick, Max Sommer and Kevin
Blair, officers and directors of Hinto, were and are officers, directors and
shareholders of South Uintah. Mr. David Keller, a director of Hinto, was also a
shareholder of South Uintah.
The effective date of the acquisition is December 31, 2011, with Hinto being the
legal acquirer. However, since Hinto is a public company, which had nominal
activity, the acquisition has been treated as a recapitalization of South
Uintah. Though Hinto was the legal acquirer in the merger, South Uintah was the
accounting acquirer since its shareholders gained control of Hinto. Therefore at
the date of the merger the historical financial statements of South Uintah
became those of Hinto. As a result, the historical financial statements of South
Uintah supersede any prior financial statements of Hinto.
South Uintah Gas Properties, Inc. was incorporated in the state of Colorado on
March 8, 2011. South Uintah was organized to operate as an independent oil and
gas company which would engage in the acquisition, exploration, development,
production and sale of natural gas and crude oil. Selected managed risk
exploration ventures would also be considered from time to time. The core area
of operation is the Rocky Mountain region, which contains all of our areas of
interest.
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With the acquisition of South Uintah, the Company intends to strive to be a low
cost and effective producer of hydrocarbons and intends to develop the business
model and corporate strategy as discussed herein.
The Company's approach to lease acquisition, development and production is
founded on the discipline of ONLY acquiring leases in areas of proven
production. In most cases the leases that are under consideration have at one
time contained producing oil or gas wells and currently have production or
shut-in wells that are viable for work over and or re-completion. This managed
risk approach greatly reduces the risk normally associated with oil and gas
development. There are hundreds of wells in our area of interest that meet these
criteria. In many instances, the wells were shut-in during a period of declining
oil and gas prices and in most cases are ideal for our business model. Our
business model is simple; strict adherence to lease acquisition surrounded by
proven production, offering well workovers, re-completion, and enhanced oil
recovery opportunities in the known producing formations, with long term
production potential at a low cost of development, maintenance, and operation.
The Company is NOT an exploration company, per se, rather it seeks leases with
discovered oil and gas with current or prior production.
One strategy that is quickly growing in prominence and application with respect
to petroleum is to use a development program approach. We describe our
development plan approach as a set of techniques utilizing the injection of
specific fluids such as: water, steam, natural gas, carbon dioxide, nitrogen,
and various chemicals and surfactants intended to increase the amount of oil
that can ultimately be extracted from any oil field. Many oil exploration and
production companies are using development program approaches to maximize the
potential of old oil fields.
Our business operations are in the development, production, and low risk
exploration of oil and gas including unconventional natural gas, in the Rocky
Mountain region of the continental United States. Specifically, in the Rocky
Mountain area of Utah, Colorado, Montana and Wyoming.
At this time, we are in the early stage of operational activities and do not
have production. We are currently evaluating numerous development and
exploration projects and potential production acquisitions through our
experienced management.
CURRENT PRIVATE OFFERING EFFORTS
We have conducted a Private Offering of shares of our restricted Common Stock
for capital. We intend to raise up to $5,000,000 in the next twelve months with
a structure not yet determined in debt or equity. As of March 9, 2012, the
Company had sold approximately 830,000 shares, raising a total of $415,000. We
cannot give any assurances that we will be able to raise the full $5,000,000.
Further, we will need to raise additional funds to support not only our expected
budget, but our continued operations.
ADDITIONAL REGISTRATION STATEMENT
The Company does intend to file a Registration Statement on Form S-1 pursuant to
Rule 429 of the Securities Act of 1933 to register 4,758,080 shares of the
Company's common stock held by existing shareholders and 2,000,000 shares
underlying warrants exercisable for shares of the Company's common stock at
$0.50 per share. The Company expects to file such Registration Statement in the
next 30 days.
CORPORATE STRATEGY
Our corporate strategy in developing our operations and evaluating potential
acquisitions is as follows.
PURSUE CONCURRENT DEVELOPMENT OF OUR CORE AREA OF THE ROCKY MOUNTAINS.
We plan to spend up to $10,000,000 on acquisition, drilling,
re-completion, and development programs which were started in late 2011
and will continue in 2013. We plan to raise these funds in Private
Placements of Common Stock, Preferred Stock and/or convertible debt. We
expect that all of the 2012 and 2013 drilling capital expenditures will
be incurred in Utah, Colorado, Wyoming and Montana property and
development prospects. Many of our targeted prospects are in reservoirs
that have demonstrated predictable geologic attributes and consistent
reservoir characteristics, which typically lead to more repeatable
drilling and re-completion results than those achieved through
wildcats.
ACHIEVE CONSISTENT RESERVE GROWTH THROUGH REPEATABLE DEVELOPMENT
We intend to achieve consistent reserve growth over the next four years
through a combination of acquisitions and drilling. In 2012, we intend
to achieve reserve and production increases as a result of our
acquisition, drilling, re-completion and development programs. We
anticipate that the majority of future reserve and production growth
will come through the acquisition of production, the execution of our
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drilling and re-completion program, and on development activities on
prospects of which we are aware, which include proved and unproved
locations. Our targets generally will consist of locations in fields
that demonstrate low variance in well performance, which leads to
predictable and repeatable field development.
Our reserve estimates, if any, may change continuously and we intend to
evaluate such reserve estimates internally on a frequent basis --
quarterly if warranted -- with independent engineering evaluation on an
annual basis. Deviations in the market prices of both crude oil and
natural gas and the effects of acquisitions, dispositions, development
and any successful exploration activities may have a significant effect
on the quantities and future values of our reserves, if any.
MAINTAIN HIGH PERCENTAGE OWNERSHIP AND OPERATIONAL CONTROL OVER OUR ASSET BASE
We intend to retain a high degree of operational control over our asset
base, through a high average Working Interest or acting as the operator
in our areas of significant activity. This is designed to provide us
with controlling interests in a multi-year inventory of drilling
locations, positioning us for reserve and production growth through our
drilling operations. We plan to control the timing, level and
allocation of our drilling capital expenditures and the technology and
methods utilized in the planning, drilling and completion process on
related targets. We believe this flexibility to opportunistically
pursue low risk exploration and development projects relating to
selected prospects may provide us with a meaningful competitive
advantage.
ACQUIRE AND MAINTAIN ACREAGE POSITIONS IN HIGH POTENTIAL RESOURCE PLAYS
We believe that our intended acquisition and development in known
production prospects in the Rockies should be supplemented with
exploratory efforts that may lead to new discoveries in the future. We
intend to continually evaluate our opportunities and pursue potential
opportunities that take advantage of our strengths. We are examining
potential prospects in such areas as Utah, Wyoming and Montana, which
have gained substantial interest within the exploration and production
sector due to their relatively under-explored nature and the potential
for meaningful hydrocarbon recoveries. There are other mid-size and
large independent exploration and production companies conducting
drilling activities in these plays. We anticipate that meaningful
drilling and completion results will become known in our acquired Utah
properties during late 2012.
PURSUE A DISCIPLINED ACQUISITION STRATEGY IN OUR CORE AREAS OF OPERATION
We intend to also focus on growing through targeted acquisitions.
Although drilling prospects may provide us with the opportunity to grow
reserves and production without acquisitions, we continue to evaluate
acquisition opportunities, primarily in our core areas of operation.
EXPERIENCED MANAGEMENT AND OPERATIONAL TEAM WITH ADVANCED EXPLORATION AND
DEVELOPMENT TECHNOLOGY
Our senior management team has over 75 years of experience in the oil
and gas industry, and has a proven track record of creating value both
organically and through strategic acquisitions. Our management intends
to utilize the best available and fit-for-purpose technology,
sophisticated geologic and 3-D seismic models to enhance predictability
and reproducibility over significantly larger areas than historically
possible. We also intend to utilize state-of-the art drilling and
completion technology, as well as multi-zone, multi-stage artificial
stimulation ("frac") technology in completing wells to substantially
increase near-term production, resulting in faster payback periods and
higher rates of return and present values. Our team has successfully
applied these techniques, normally associated with completions in the
most advanced Rocky Mountain crude oil and natural gas fields, to
improve initial and ultimate production and returns, in other
companies.
PROPOSED OIL AND GAS PROJECTS
Our initial project will center on the Uintah Basin of Utah. The Uintah Basin
has long been known to contain petroleum and natural gas and has established
itself as a petroleum production hub in the United States. The Utah Division of
Oil, Gas, and Mining have recently approved a significant density increase for
the Altamont Bluebell Cedar Rim Oil Field, opening up expanded opportunities for
development drilling. This recent increased density allotment, may allow
extended access to some of the richest petroleum reserves in the United States,
that until now have remained unavailable for drilling.
Ever since the discoveries of large reserves in the late 1940s, the Uintah Basin
has proven to be a rich petroleum area for companies. From the time that the
initial boom of the region commenced, it has been in a state of growth. From the
late 1960's through the mid 1980's companies such as Exxon, Chevron Gulf, and
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Shell Oil achieved remarkable success in the basin by drilling into
over-pressurized geological formations. Historically, these deep pay zones known
as the Wasatch and Wasatch Transition Formations have led to some of the most
productive onshore "flowing" oil wells in the continental U.S.
FIRST PROPOSED PROJECT - NATURAL BUTTES
South Uintah, in July 2011, acquired deep rights interests via farmout in
approximately 5,656 gross and 5,143 net acres within the Central part of the
Uintah Basin, at Natural Buttes, a prolific gas production area from multiple
hydrocarbon reservoirs such as: Castlegate, Mancos, Dakota, Buck Tongue, Emery,
Frontier and Prairie Canyon. The agreement was subsequently amended on December
31, 2011. The purchase price of the farmout interest was $478,200, made up of
$303,000 in cash, $175,000 in notes payable and $200 in common stock of South
Uintah.
The upper zones above approximately 9,800 feet are precluded in the farmout and
the overall targets will be zones from 9,800 feet to 16,000 feet. The well is
currently holding approximately 3,000 PSI in a 9" casing. We intend to rework
the existing well, Federal Conoco 22-1, which was drilled in 1972 to a depth of
20,053 feet. We believe that the well was shut in, primarily due to low gas
prices at the time mechanical production issues and lack of proximity to a gas
pipe line. We completed a lateral pipeline connection that is approximately
2,000 foot long to the Andarko pipeline for production to commence in the first
quarter of 2012.
We have reviewed the drilling, geological and engineering files for the Conoco
Federal No. 22-1 Well. Our evaluation indicates that the well has significant
hydrocarbon potential in both the Frontier and the Upper Mancos Formations, and
that by utilizing best available completion and stimulation techniques,
commercial production, may be possible.
WELL HISTORY: This well was drilled in 1972 to a total depth of 20,053, tested
in the Frontier Formation from 14,666 to 14,803 at a rate of 1.15 MMCFD
declining in 8 hours to 0.250 MMCFD, and temporarily abandoned. The well was
re-entered by Gilman A. Hill in 1980. In a WELL COMPLETION OR RECOMPLETION
REPORT filed with the USGS in 1981, the well had been cleaned out from the
original plug back depth of 14,108 feet to a new plugged back depth of 14,750
feet. It had been perforated from 14, 580 feet to 14,800 feet and tested at a
rate estimated to be 500 MCFD. In a SUNDRY NOTICES AND REPORTS ON WELLS filed
with the State of Utah, Department of Natural Resources, Division of Oil, Gas,
and Mining in 1985, it was reported that the well had been placed in indefinite
suspended activity.
PLANNED RE-WORKING PROCEDURE: Our review of the available data indicates that
with the application of best available completion and stimulation practices, the
well could contain commercial reserves in both the Frontier and Upper Mancos
Formations. We plan to re-work the well and individually test these formations.
Our planned re-working procedure calls for the well to be connected to
Anadarko's gathering system, and the pressure to be reduced in increments over
time, until the well can be safely and effectively killed. This "unconventional
completion" will be closely monitored and controlled. Gas will be sold into the
Anadarko system during the time pressure is being reduced until the well can no
longer buck the back pressure of the pipeline system. This process of pressure
reduction could be completed within several days, or it could take several
months. Once the well is killed, a Workover Unit will be rigged-up, the casing
flange removed, and American Petroleum Institute ("API") approved wellhead and
tubing string will be installed. The well will be cleaned out and a testing
program of the Frontier and Upper Mancos Formations will be undertaken. The
process of pressure reduction and subsequent installation of a wellhead and
tubing, and the cleanout and initial testing is estimated to cost $300,000. Gas
sales should cover at least a portion of these costs.
Generally, adjacent to the farmout acreage that includes the Conoco Federal No.
22-1 Well is our adjacent acreage, which contains approximately 5,656 gross and
5,143 net acres. If we drill this acreage on 160 acre spacing - a maximum of 27
wells -- and if consistent and similar results are obtained, we believe there is
potential for significant of gas resources. No results can be guaranteed or
assured, and the financing is not in place for a drilling program of this
magnitude.
AVAILABLE INFRASTRUCTURE AND MULTI-WELL DRILL SITES: The 22-1 well location is a
flat developed drill site with close highway access and an access road. This
infrastructure provides the Company with the ability to develop a significant
portion of its acreage from one drill site through slant drilling with
accompanying laterals. A pipeline connection has been installed at the time of
this filing. This environmentally responsible development plan is designed to
minimize surface impacts and is designed to provide a core platform for up to
twelve wells without additional roads, pipelines, rights of way, etc. Assuming
any initial success, the Company plans to drill continuously from this concrete
pad, using drilling technology developed and proved on Alaska's North Slope
which utilizes a moveable drilling rig, allowing efficient and low cost movement
of the rig for a short distance to subsequent wells, without dismantling the rig
and incurring all the downtime and mobilization costs.
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Further, the Company intends to eventually have a liquids and gas processing
facility on site to provide all of its fuels for drilling (a major expense of
development) and an environmentally responsible program to diminish transport
traffic for fuels. Here, the concentrated platform for a 12 well development per
drill site will allow best available practices to be followed for the management
of the drilling, completion, and production operations.
Management believes that based on existing seismic data and nearby well control,
that a series of wells drilled in the Sections 22, 18, and 7 of T 9S R20E to a
depth of 16,000 feet would have a high probability of encountering multi-pay
zones containing commercial oil and gas reserves. The substantial variation in
reserves recovered per unit of pore volume in this area is due in large part to
the degree of formation damage induced by drilling and stimulation fluids, and
by problems associated with the inclusion of excessive perforations in borehole
resulting in co-mingling, both of which are preventable occurrences and, to a
lesser extent by lateral discontinuity of individual sand units. Management is
considering drilling the initial well in a state of significant under-balance to
prevent formation damage caused by invasion of mud and mud filtrate. Please keep
in mind that all zones above 9,800 feet are precluded from the farmout and our
overall targets will be zones from depths beginning at 9,800 feet down to depths
of 16,000 feet.
Total Field Development Costs are estimated to be $150 million to drill and
complete up to 27 wells over a 7.5 year development period. None of this
financing for drilling has been obtained and there is no assurance that such
financing could be obtained.
Subsequent to the date of the audit report for South Uintah, the Company
obtained an updated report as to its interests in the Uintah Basin property.
COMPETITION, MARKETS, REGULATION AND TAXATION
COMPETITION.
There are a large number of companies and individuals engaged in the exploration
for minerals and oil and gas; accordingly, there is a high degree of competition
for desirable properties. Almost all of the companies and individuals so engaged
have substantially greater technical and financial resources than we do.
MARKETS.
The availability of a ready market for oil and gas discovered, if any, will
depend on numerous factors beyond our control, including the proximity and
capacity of refineries, pipelines, and the effect of state regulation of
production and of federal regulations of products sold in interstate commerce,
and recent intrastate sales. The market price of oil and gas are volatile and
beyond our control. The market for natural gas is also unsettled, and gas prices
have increased dramatically in the past four years with substantial fluctuation,
seasonally and annually.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase our gas production, there
is no assurance that we will be able to enter into purchase contracts with any
transmission companies or other purchasers of natural gas and there can be no
assurance regarding the price which such purchasers would be willing to pay for
such gas. There presently exists an oversupply of gas in the certain areas of
the marketplace due to pipeline capacity, the extent and duration of which is
not known. Such oversupply may result in restrictions of purchases by principal
gas pipeline purchasers.
EFFECT OF CHANGING INDUSTRY CONDITIONS ON DRILLING ACTIVITY.
Lower oil and gas prices have caused a decline in drilling activity in the U.S.
from time to time. However, such reduced activity has also resulted in a decline
in drilling costs, lease acquisition costs and equipment costs, and an
improvement in the terms under which drilling prospects are generally available.
We cannot predict what oil and gas prices will be in the future and what effect
those prices may have on drilling activity in general, or on our ability to
generate economic drilling prospects and to raise the necessary funds with which
to drill them.
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FEDERAL REGULATIONS.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONSIDERATION.
Oil and Gas: The oil and gas business in the United States is subject to
regulation by both federal and state authorities, particularly with respect to
pricing, allowable rates of production, marketing and environmental matters.
The production of crude oil and gas has, in recent years, been the subject of
increasing state and federal controls. No assurance can be given that newly
imposed or changed federal laws will not adversely affect the economic viability
of any oil and gas properties we may acquire in the future. Federal income and
"windfall profit" taxes have in the past affected the economic viability of such
properties.
The above paragraphs only give a brief overview of potential state and federal
regulations. Because we have only acquired specific properties, and because of
the wide range of activities in which we may participate, it is impossible to
set forth in detail the potential impact federal and state regulations may have
on us.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS.
Our operations are subject to local, state and federal laws and regulations
governing environmental quality and pollution control. To date our compliance
with these regulations has had no material effect on our operations, capital,
earnings, or competitive position, and the cost of such compliance has not been
material. We are unable to assess or predict at this time what effect additional
regulations or legislation could have on our activities.
THE DEPARTMENT OF ENERGY.
The Department of Energy Organization Act (Pub. L. No. 95-91) became effective
October 1, 1977. Under this Act various agencies, including the Federal Energy
Administration (FEA) and the Federal Power Commission (FPC), have been
consolidated to constitute the cabinet-level Department of Energy (DOE). The
Economic Regulatory Administration (ERA), a semi-independent administration
within the DOE, now administers most of the regulatory programs formerly managed
by the FEA, including oil pricing and allocation. The Federal Energy Regulatory
Commission (FERC), an independent agency within the DOE, has assumed the FPC's
responsibility for natural gas regulation.
REGULATION AND PRICING OF NATURAL GAS.
Our operations may be subject to the jurisdiction of the Federal Energy
Regulatory Commission (FERC) with respect to the sale of natural gas for resale
in interstate and intrastate commerce. State regulatory agencies may exercise or
attempt to exercise similar powers with respect to intrastate sales of gas.
Because of its complexity and broad scope, the price impact of future
legislation on the operation of us cannot be determined at this time.
CRUDE OIL AND NATURAL GAS LIQUIDS PRICE AND ALLOCATION REGULATION.
Pursuant to Executive Order Number 12287, issued January 28, 1981, President
Reagan lifted all existing federal price and allocation controls over the sale
and distribution of crude oil and natural gas liquids. Executive Order Number
12287 was made effective as of January 28, 1981, and consequently, sales of
crude oil and natural gas liquids after January 27, 1981 are free from federal
regulation. The price for such sales and the supplier-purchaser relationship
will be determined by private contract and prevailing market conditions. As a
result of this action, oil which may be sold by us will be sold at deregulated
or free market prices. At various times, certain groups have advocated the
reestablishment of regulations and control on the sale of domestic oil and gas.
STATE REGULATIONS.
Our production of oil and gas, if any, will be subject to regulation by state
regulatory authorities in the states in which we may produce oil and gas. In
general, these regulatory authorities are empowered to make and enforce
regulations to prevent waste of oil and gas and to protect correlative rights
and opportunities to produce oil and gas as between owners of a common
reservoir. Some regulatory authorities may also regulate the amount of oil and
gas produced by assigning allowable rates of production.
PROPOSED LEGISLATION.
A number of legislative proposals have been and probably will continue to be
introduced in Congress and in the legislatures of various states, which, if
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enacted, would significantly affect the petroleum industries. Such proposals and
executive actions involve, among other things, the imposition of land use
controls such as prohibiting drilling activities on certain federal and state
lands in roadless wilderness areas. At present, it is impossible to predict what
proposals, if any, will actually be enacted by Congress or the various state
legislatures and what effect, if any, such proposals will have. However,
President Clinton's establishment of numerous National Monuments by executive
order has had the effect of precluding drilling across vast areas of the Rocky
Mountain West.
ENVIRONMENTAL LAWS.
Oil and gas exploration and development are specifically subject to existing
federal and state laws and regulations governing environmental quality and
pollution control. Such laws and regulations may substantially increase the
costs of exploring for, developing, or producing oil and gas and may prevent or
delay the commencement or continuation of a given operation.
All of our operations involving the exploration for or the production of any
minerals are subject to existing laws and regulations relating to exploration
procedures, safety precautions, employee health and safety, air quality
standards, pollution of stream and fresh water sources, odor, noise, dust, and
other environmental protection controls adopted by federal, state and local
governmental authorities as well as the right of adjoining property owners. We
may be required to prepare and present to federal, state or local authorities
data pertaining to the effect or impact that any proposed exploration for or
production of minerals may have upon the environment. All requirements imposed
by any such authorities may be costly, time consuming, and may delay
commencement or continuation of exploration or production operations.
It may be anticipated that future legislation will significantly emphasize the
protection of the environment, and that, as a consequence, our activities may be
more closely regulated to further the cause of environmental protection. Such
legislation, as well as future interpretation of existing laws, may require
substantial increases in equipment and operating costs to us and delays,
interruptions, or a termination of operations, the extent to which cannot now be
predicted.
TITLE TO PROPERTIES.
We are not the record owner of our interest in our properties and rely instead
on contracts with the owner or operator of the property, pursuant to which,
among other things, we have is the right to have our interest placed of record.
As is customary in the oil and gas industry, a preliminary title examination
will be conducted at the time unproved properties or interests are acquired by
us. Prior to commencement of drilling operations on such acreage and prior to
the acquisition of proved properties, we will conduct a title examination and
attempt extremely significant defects before proceeding with operations or the
acquisition of proved properties, as we may deem appropriate.
Our properties are subject to royalty, overriding royalty and other interests
customary in the industry, liens incident to agreements, current taxes and other
burdens, minor encumbrances, easements and restrictions. Although we are not
aware of any material title defects or disputes with respect to its undeveloped
acreage, to the extent such defects or disputes exist, we would suffer title
failures.
BACKLOG OF ORDERS.
We currently have no orders for sales at this time.
GOVERNMENT CONTRACTS.
We have no government contracts.
COMPANY SPONSORED RESEARCH AND DEVELOPMENT.
We are not conducting any research.
NUMBER OF PERSONS EMPLOYED.
As of March 13, 2012, we had no full-time employees. Officers and Directors work
on an as needed part-time basis up to 25 hours per week.
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PLAN OF OPERATIONS
We had no operations prior to 2011 and we did not have any revenues during the
fiscal years ended December 31, 2011 2010 and 2009. We did not recognize any
income in the years ended December 31, 2011 and 2010. We have minimal capital,
moderate cash of approximately $487,000, and only our intangible assets which
consist of our business plan, relationships, contacts and farmout mineral
acreage and one well. We are illiquid and need cash infusions from investors or
shareholders to provide capital, or loans from any sources, none of which have
been arranged nor assured.
During the years ended December 31, 2011 and 2010, our operations were focused
on the listing of the Company's common stock on the OTCBB and the maintenance of
our accounting records and the beginnings of oil and gas exploration prospect
evaluations.
During the 2012 fiscal year, the Company intends to continue its efforts to
acquire, either by lease, farmout, or purchase, interests in oil or gas
prospects or properties for development, production, and low risk exploration,
when available, by itself, or with third parties. The Company intends to
continue to raise funds to support the efforts through the sale of its equity
securities, and occasionally through commercial debt.
EXPECTED 2012 BUDGET - 12 MONTHS
Development of connection, rework, recompletion, 3 well program $1,500,000
Working Capital $1,300,000
Acquisitions $1,000,000
Payment of Debt $375,000
General and Administrative Expenses:
Legal and Accounting/Auditing $157,000
Consulting $495,000
Filing Fees (State, SEC, etc.) $7,500
Travel $60,000
Interest $66,000
Miscellaneous $405,000
-------------
TOTAL $5,000,000
|
The Company may change any or all of the budget categories in the execution of
its business model. None of the line items are to be considered fixed or
unchangeable. The Company may need substantial additional capital to support its
budget. The Company has no revenues to date in the oil and gas exploration,
development and production business.
We have conducted a Private Offering of shares of our restricted Common Stock
for capital. We intend to raise up to $5,000,000 in the next twelve months with
a structure not yet determined in debt or equity. As of March 12, 2012, the
Company had sold approximately 805,000 shares, raising a total of $415,000. We
cannot give any assurances that we will be able to raise the full $5,000,000 to
fund the budget. Further, we will need to raise additional funds to support not
only our expected budget, but our continued operations. We cannot make any
assurances that we will be able to raise such funds or whether we would be able
to raise such funds with terms that are favorable to us.
We will NOT receive any proceeds from sales of shares by selling shareholders.
Furthermore, given that we have limited operating history and no revenues, it is
unlikely that our warrants will be exercised in the foreseeable future.
We make no assurance that all the warrants will be exercised. We have not
included any funds from the sale of warrants in our 2012 operating plan and
budget. If any warrants are exercised in 2012, the funds received from such
exercised warrants would be used as working capital and for oil and gas
acquisition and development.
-24-
Our plan of operations is as follows:
MILESTONES
1st Quarter 2012 Completion of share exchange and acquisition with South
Uintah; Raise funds through a private placement; and
Gas well hookup to pipeline.
2nd Quarter 2012 Development of South Uintah properties;
Commencement of Recompletion Operations;
Identification of possible oil and gas prospect candidates;
and Seeking Additional Capital for Company.
3rd Quarter 2012 Continuation of Recompletion Operations;
Dependent upon receipt of Additional Capital the acquisition
of additional oil and gas prospects
4th Quarter 2012 Continuation of Recompletion Operations and development of
any new oil and gas prospects
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.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
B. DESCRIPTION OF PROPERTY
DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS
------- ------------------------- ------------------------------
(a) Real Estate. None.
------- ------------------------- ------------------------------
(b) Title to properties. None.
------- ------------------------- ------------------------------
(c) Oil and Gas Properties.
------- ------------------------- ------------------------------
|
Subsequent to the date of the audit report of South Uintah, included
herein, we obtained an updated report as to its interests in the
Uintah Basin property.
Oil and Gas properties, wells, operations and acreage*
Gas Wells Productive Acreage Undeveloped Acreage
-------------------------- ----------------------- ----------------------------
Gross Net Gross Net Gross Net
------------- ------------ ---------- ------------ ------------ ---------------
1 0.8 80 64 5,575 5,079
|
* Note - The one well has been shut in due to no available pipeline
for gas carriage. During January 2012, a lateral connection to a
pipeline was completed. The well is expected to begin gas production
in the first quarter of 2012.
------- ------------------------- ------------------------------
(d) Patents. None.
------- ------------------------- ------------------------------
|
-25-
C. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, nor are we aware of any
civil proceeding or government authority contemplating any legal proceeding.
D. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our Common Stock is presently traded on the over-the-counter market on the OTC
Bulletin Board maintained by the Financial Industry Regulatory Authority
("FINRA"). On December 31, 2010, we began trading on the OTC Bulletin Board
under the symbol "HENI", prior to the Company's name change in August 2011, the
Company's trading symbol was "GVTS."
The offering of the shares registered hereby could have a material negative
effect on the market price for the stock.
RULES GOVERNING LOW-PRICE STOCKS THAT MAY AFFECT OUR SHAREHOLDERS' ABILITY TO
RESELL SHARES OF OUR COMMON STOCK
Our stock is currently traded on the OTC Bulletin Board.
Quotations on the OTC/BB reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not reflect actual transactions. Our common stock
will be subject to certain rules adopted by the SEC that regulate broker-dealer
practices in connection with transactions in "penny stocks." Penny stocks
generally are securities with a price of less than $5.00, other than securities
registered on certain national exchanges or quoted on the Nasdaq system,
provided that the exchange or system provides current price and volume
information with respect to transaction in such securities. The additional sales
practice and disclosure requirements imposed upon broker-dealers are and may
discourage broker-dealers from effecting transactions in our shares which could
severely limit the market liquidity of the shares and impede the sale of shares
in the secondary market.
The penny stock rules require broker-dealers, prior to a transaction in a penny
stock not otherwise exempt from the rules, to make a special suitability
determination for the purchaser to receive the purchaser's written consent to
the transaction prior to sale, to deliver standardized risk disclosure documents
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny stock.
In addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the SEC relating to the penny stock market, unless the broker-dealer or the
transaction is otherwise exempt. A broker-dealer is also required to disclose
commissions payable to the broker-dealer and the registered representative and
current quotations for the securities. Finally, a broker-dealer is required to
send monthly statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect to the
limited market in penny stocks.
HOLDERS
As of the filing of this prospectus, we have 106 shareholders of record of our
common stock. Sales under Rule 144 are also subject to manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who has not been one of our affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least 6 months, is entitled to sell
shares without complying with the manner of sale, volume limitation or notice
provisions of Rule 144.
As of the date of this amended prospectus, our selling shareholders hold
1,030,000 Shares, all of which may be sold pursuant to this amended Registration
Statement, the shares being registered herein are not held by any affiliates or
officers/directors of the Company.
ADDITIONAL REGISTRATION STATEMENT
The Company does intend to file a Registration Statement on Form S-1 pursuant to
Rule 429 of the Securities Act of 1933 to register 4,758,080 shares of the
Company's common stock held by existing shareholders and 2,000,000 shares
underlying warrants exercisable for shares of the Company's common stock at
$0.50 per share. The Company expects to file such Registration Statement in the
next 30 days.
-26-
DIVIDENDS
As of the filing of this amended prospectus, we have not paid any dividends to
shareholders. There are no restrictions which would limit our ability to pay
dividends on common equity or that are likely to do so in the future. The
Wyoming Revised Statutes, however, do prohibit us from declaring dividends
where, after giving effect to the distribution of the dividend; we would not be
able to pay our debts as they become due in the usual course of business; or our
total assets would be less than the sum of the total liabilities plus the amount
that would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.
E. FINANCIAL STATEMENTS
The following is a complete list of the pro forma financial statements filed as
a part of this Report:
Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30,
2011.
Unaudited Pro Forma Condensed Consolidated Statement of Earnings Per Share
for the Period From March 8, 2011 (inception) through September 30, 2011.
Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statement of Earnings Per Share for the Period From March 8, 2011
(inception) through September 30, 2011.
For South Uintah Gas Properties the Financial Statements for the Period from
March 8, 2011 (Inception) through September 30, 2011.
The historical financial statements of Hinto Energy, Inc. which includes the
unaudited financial statements for the nine months ended September 30, 2011 and
2010.
Hinto Energy, Inc., fka Garner Investments, Inc., financial statements for the
years ended December 31, 2010 and 2009.
Since Hinto Energy, Inc. was a publicly traded shell company and South Uintah
was an operating company - this merger transaction is treated as a
recapitalization of South Uintah and the historical financial statements of
South Uintah will supersede and become those of Hinto Energy, Inc.
-27-
HINTO ENERGY, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2011
HINTO ENERGY, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited pro forma condensed consolidated balance sheet is based
on the historical balance sheets of Hinto Energy, Inc. ("Hinto") and South
Uintah Gas Properties, Inc. ("SUGP") as of September 30, 2011.
The following unaudited pro forma condensed earning per share is based on the
historical statement of income of South Uintah Gas Properties, Inc. ("SUGP") for
the nine-months ending September 30, 2011 as if the transactions below had taken
place as of the beginning of the period and with the equity structure of Hinto
Energy, Inc.
On July 12, 2011, SUGP purchased 3,000,000 shares of the common stock of Hinto
from its then majority shareholder, representing approximately 70% of the then
outstanding shares of Hinto for cash of $300,000. The purchase resulted in SUGP
recording goodwill of approximately $339,000, negative net worth in the
subsidiary of approximately $56,000 and noncontrolling interest of approximately
negative $17,000.
SUGP entered into a Share Purchase and Exchange Agreement with Hinto, on July
27, 2011 and subsequently amended on January 20, 2012, whereby Hinto will
acquire SUGP for approximately 11,536,424 common shares, $375,000 in
non-convertible promissory notes and 6,700,000 warrants in varying increments
and exercise prices, subject to receipt of audited financial statements in
accordance with SEC Rules and Regulations and further subject to any final
closing terms and conditions.
The two entities merged on January 23, 2012, with an effective date of December
31, 2011and Hinto Energy, Inc. being the legal acquirer. However, since Hinto
was a public company, which had nominal activity, the merger has been treated as
a recapitalization of SUGP. Though Hinto was the legal acquirer in the merger,
SUGP was the accounting acquirer since its shareholders ended up with control of
Hinto. Therefore at the date of the merger the historical financial statements
of SUGP became those of Hinto. Since the historical financial statements of SUGP
supersede any prior financial statements of Hinto and are presented elsewhere in
this Form 8K there is no specific pro forma statement of operations presented,
only a pro forma earning per share for SUGP based on the new capital structure.
As of the merger, Hinto has an authorized capitalization consisting of
25,000,000 shares of preferred stock, of which no shares are issued or
outstanding and 50,000,000 shares of Common Stock, of which, 4,280,000 shares of
Common Stock were currently issued and outstanding as of September 30, 2011. At
September 30, 2011, SUGP had 9,500,000 shares of Common Stock issued and
outstanding.
Prior to closing of the proposed merger, SUGP transferred 300,000 shares of the
3,000,000 Hinto shares it holds to an unrelated third party and therefor is not
reflected in the pro forma financial statements as of September 30, 2011.
Concurrent to closing, SUGP has agreed to return the remaining 2,700,000 shares
of common stock to Hinto. Hinto will retire such shares to treasury.
Prior to the merger, Hinto advanced funds of approximately $271,000 to SUGP in
the form of an intercompany advance. Such funds were used by SUGP, prior to
closing of the acquisition, for production and general and administrative
activities.
Prior to the merger, Hinto commenced a private offering to accredited investors
of up to $3,000,000, which will close in January 2011. Prior to the acquisition,
Hinto raised $365,000, all after September 30, 2011 and therefore not reflected
in the pro forma financial statements of Hinto as of September 30, 2011. The
offering is for shares of Hinto's restricted common stock at $.50 per share. At
this time, there is no committed source of additional funds and we cannot give
any assurances of being able to raise additional funds. We can assure that we
will require additional funds to carry out our business plan. The availability
and terms of any future financing will depend on market and other conditions.
Prior to the merger, SUGP issued 175,000 shares of its common stock to certain
parties for services and therefore these shares are not reflected in the pro
forma financial statements as of September 30, 2011.
P-1
Concurrent with the closing of the transaction, all current officers and Board
members of the Registrant retained their positions with the Registrant.
The following unaudited pro forma condensed consolidated balance sheet is
presented for illustrative purposes only and is not necessarily indicative of
the financial position that would have been achieved, nor is it necessarily
indicative of future operating results. The unaudited pro forma balance sheet
should be read in conjunction with SUGP's historical financial statements (and
related notes thereto) included elsewhere in this Form 8-K and Hinto's
historical financial statements (and related notes thereto). Hinto historical
financial statements (and related notes thereto) can be found in the Hinto
Annual Report on Form 10-Q for year ended December 31, 2010 and Form 10-Q
Quarterly Report for the quarter ended September 30, 2011. A copy of the 10-K,
as well as other documents filed by Hinto with the Securities and Exchange
Commissions, are available to the public.
HINTO ENERGY, INC.
PRO FORMA ENTRIES
(a) To reflect the adjustments for Hinto liabilities and adjustments already
included in the SUGP consolidated balance sheet.
(b) Exchange of 9,500,000 common shares for shares of SUGP common shares for
common shares of Hinto and to reflect a change in par value from $0.0001 to
$0.001.
(c) Return and cancel 3,000,000 common shares of Hinto held by South Uintah Gas
Properties.
(d) Conversion of $500,000 in SUGP convertible promissory notes and $17,983 in
accrued interest as of September 30, 2011 at $0.25 per share into 2,071,931
shares of SUGP and exchanged for Hinto common shares.
(e) Recapitalization entry.
(f) To reflect the nine months ended September 30, 2011 pro-forma income per
share as if the recapitalization of SUGP and all note conversions and share
cancellations related to the assets and liabilities for the period ended
September 30, 201l had occurred on September 30, 2011.
P-2
HINTO ENERGY, INC. AND SUBSIDIARY
PRO FORMA CONDENSED BALANCE SHEET
September 30, 2011
(Unaudited)
Pro Forma Adj Pro Forma
SUGP Hinto for combined combined Pro Forma Pro Forma
(Audited) (Unaudited) balances balances Adj. Merger
-------------------------- ---------------------------- --------------------------
9/30/11 9/30/11 9/30/11 9/30/11 9/30/11 9/30/11
-------------------------- ---------------------------- --------------------------
Assets
Current Assets:
Cash $ 103,255 $ - $ - $ - $ - $ 103,255
-------------------------- ---------------------------- --------------------------
Total Current Assets 103,255 - - - - 103,255
-------------------------- ---------------------------- --------------------------
Other assets:
Oil and Gas Leases 478,200 - - - - 478,200
-------------------------- ---------------------------- --------------------------
Total Other Assets 478,200 - - - - 478,200
-------------------------- ---------------------------- --------------------------
Total Assets $ 581,455 $ - $ - $ - $ - $ 581,455
========================== ============================ ==========================
Liabilities and
Stockholders'(Deficit)Equity
Current liabilities
Accounts payable $ 25,581 $ - $ - $ 25,581 $ - $ 25,581
Payable to SUGP 18,982 (a) (18,982) - - -
Accrued liabilities 23,393 5,000 (a) (5,000) 23,393 (d) (9,106) 14,287
Conv notes payable 500,000 - - 500,000 (d) (500,000) -
Notes payable, other 575,000 - - 575,000 - 575,000
-------------------------- ---------------------------- --------------------------
Total Current Liabilities 1,123,974 23,982 (23,982) 1,123,974 (509,106) 614,868
-------------------------- ---------------------------- --------------------------
Stockholders' (Deficit) Equity
Common stock 950 4,280 - 5,230 (b) 8,550 12,816
(c) (3,000)
(d) 2,036
Additional paid-in capital 63,000 98,710 (a) (23,805) 137,905 (e) (126,972) 512,453
(b) (8,550)
(c) 3,000
(d) 507,070
Accumulated deficit (599,275) (126,972) (a) 40,593 (685,654) (e) 126,972 (558,682)
-------------------------- ---------------------------- --------------------------
Total SUGP
Stockholders' (deficit) equity (535,325) (23,982) 16,788 (542,519) 501,520 (33,413)
Noncontrolling interest (7,194) - (a) 7,194 - -
-------------------------- ---------------------------- --------------------------
Total stockholders' equity (542,519) (23,982) 23,982 (542,519) 501,520 (33,413)
-------------------------- ---------------------------- --------------------------
Total liabilities and
stockholders' (deficit) equity $ 581,455 $ - $ - $ 581,455 $ (7,586) $ 581,455
========================== ============================ ==========================
See accompanying notes to unaudited pro forma condensed consolidated financial information.
|
P-3
HINTO ENERGY, INC. AND SUBSIDIARY
PRO FORMA CONDENSED EARNINGS PER SHARE
Period from March 8,
2011(Inception) through
September 30, 2011
-----------------------
Pro Forma
South Uintah Gas
Properties, Inc.
-----------------------
Net Loss $ 558,682
Basic and diluted income per common share (f) $ (.13)
=======================
Weighted average basic and diluted shares of common
outstanding - basic 4,280,000
=======================
|
See accompanying notes to unaudited pro forma condensed
consolidated financial information.
P-4
HINTO ENERGY, INC. AND SUBSIDIARY
UNAUDITED NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed consolidated financial information included
herein has been prepared pursuant to the rules and regulations of the United
States Securities and Exchange Commission.
The unaudited pro forma condensed consolidated financial information of Hinto
Energy, Inc. is based on the historical balance sheets of South Uintah Gas
Properties, Inc. and Hinto Energy, Inc. as of September 30, 2011 and have been
prepared after giving effect to the adjustments and assumptions described below.
The unaudited pro forma condensed earning per share is based on the historical
statement of income of South Uintah Gas Properties, Inc. ("SUGP") for the period
beginning March 8, 2011 (inception) and ending September 30, 2011, as if the
transactions below had taken place as of the end of the period and with the
equity structure of Hinto Energy, Inc. ("Hinto.")
Hinto employs accounting policies that are in accordance with accounting
principles generally accepted in the United States of America. In management's
opinion, all material adjustments necessary to reflect fairly the pro forma
financial position of Hinto have been made.
The outstanding shares used in the earning per share calculation are as follows
and is as if the merger and cancelled shares were issued and outstanding at the
end of the period:
Number shares:
Hinto Shares Issued and Outstanding at 9-30-11 per balance sheet 4,280,000
Shares Issuance:
For Merger 11,536,424
Shares Cancellation:
Hinto shares held and returned by SUGP
(3,000,000)
----------------
Pro Forma Issued and Outstanding Shares at 9-30-11 per balance 12,816,424
|
NOTE 2. ACQUISITION OF SOUTH UINTAH GAS PROPERTIES, INC.
On July 27, 2011, Hinto Energy, Inc. and South Uintah Gas Properties, Inc.
entered into a binding agreement, whereby all of the issued and outstanding
common stock, debt and warrants of South Uintah Gas Properties, Inc. would be
exchanged for an equivalent notes and securities of Hinto Energy, Inc. On July
12, 2011, South Uintah Gas Properties, Inc. purchased 3,000,000 shares of Hinto
Energy's common stock, approximately 70 percent of the issued and outstanding
shares of Hinto Energy, prior to the merger.
The two entities merged on January 23, 2012, with an effective merger date of
December 31, 2011, with Hinto Energy being the legal acquirer. However, since
Hinto Energy was a public company, which had nominal activity, the merger has
been treated as a recapitalization of South Uintah Gas Properties and an
acquisition of the assets and liabilities of Hinto Energy by South Uintah Gas
Properties. Though Hinto Energy was the legal acquirer in the merger, South
Uintah Gas Properties was the accounting acquirer since its shareholders ended
P-5
up with control of Hinto Energy. Therefore at the date of the merger the
historical financial statements of South Uintah Gas Properties became those of
Hinto Energy. Since the historical financial statements of South Uintah Gas
Properties supersede any prior financial statements of Hinto Energy and are
presented elsewhere in this Form 8K there is no specific pro forma statement of
operations presented.
Concurrent to the closing, Hinto Energy will cancel 3,000,000 shares as of
September 30, 2011 (2,700,000 shares at the time of closing) of common stock
held by South Uintah Gas Properties, Inc.
Prior to the merger, Hinto Energy commenced a private offering to accredited
investors of up to $3,000,000 of common stock, which will close in January 2012.
Prior to the merger date of January 23, 2012, Hinto Energy raised $365,000, of
which $0 is recorded in the historical financial statements of Hinto Energy as
of September 30, 2011. The offering is for shares of Hinto Energy restricted
common stock at $.50 per share. In addition, Hinto Energy placed a three year
secured convertible note for $500,000 in December 2011, prior to the acquisition
and with $0 reflected in the September 30, 2011 historical financial statements.
At this time there is no committed source of additional funds and we cannot give
any assurances of being able to raise the additional funds. We can assure that
we will require additional funds to carry out our business plan. The
availability and terms of any future financing will depend on market and other
conditions.
Prior to the acquisition, on January 23, 2012, with an effective date of
December 31, 2011, Hinto Energy had advanced funds of approximately $271,000 and
$241,000, respectively to South Uintah Gas Properties. Such funds were used by
South Uintah Gas Properties to purchase assets and operate the business.
P-6
SOUTH UINTAH GAS PROPERTIES, INC.
(A DEVELOPMENT STAGE COMPANY)
Period March 8, 2011 through September 30, 2011
AUDITED
SOUTH UINTAH GAS PROPERTIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
September 30,
2011
-----------------
Assets
Current Assets:
Cash $ 103,255
-----------------
Total Current Assets 103,255
-----------------
Other assets:
Oil and Gas Leases 478,200
-----------------
Total Other Assets 478,200
-----------------
Total Assets $ 581,455
=================
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable $ 25,581
Accrued liabilities 23,393
Convertible notes payable 500,000
Notes payable, other 575,000
-----------------
Total Current Liabilities 1,123,974
-----------------
Stockholders' (Deficit) Equity
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 9,500,000 shares issued and outstanding 950
Additional paid-in capital 63,000
Deficit accumulated during the development stage (599,275)
-----------------
Total South Uintah Gas Properties, Inc. Stockholders' (Deficit) Equity (535,325)
Noncontrolling interest (7,194)
-----------------
Total stockholders' equity (542,519)
-----------------
Total liabilities and stockholders' (deficit) equity $ 581,455
=================
|
See the notes to these financial statements.
-1 of 9-
SOUTH UINTAH GAS PROPERTIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 8, 2011 (INCEPTION) THROUGH SEPTEMBER 30, 2011
Period March 8
through
September 30, 2011
----------------
Revenue: $ -
----------------
Operational expenses:
General and Administrative 146,404
Goodwill write off 339,195
Consulting fees 114,180
----------------
Total operational expenses 599,779
----------------
Other Income (Expenses)
Interest expense (16,893)
----------------
Total other income (expense) (16,893)
----------------
Net loss (616,672)
Less: Net loss attributable to
a non-controlling interest 17,397
----------------
Net loss attributable to South
Uintah Gas Properties, Inc. $ (599,275)
================
Per share information
---------------------------
Net loss per common share (South
Uintah Gas Properties, Inc.)
Basic $ (0.15)
Fully diluted *
================
Weighted average number of common
stock outstanding 4,207,729
================
|
* Not provided as it is anti-dilutive
See the notes to these financial statements.
-2 of 9-
SOUTH UINTAH GAS PROPERTIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 8, 2011 (INCEPTION) THROUGH SEPTEMBER 30, 2011
Period March 8 through
September 30, 2011
----------------------
Cash Flows from Operating Activities:
Net Loss $ (616,672)
Adjustments to reconcile net loss to net cash used
in operating activities:
Write down of goodwill in subsidiary 339,195
Compensatory stock issuances 550
Increase in accounts payable 59,689
Increase in accrued liabilities 23,393
----------------------
Net Cash Used by Operating Activities (193,845)
----------------------
Cash Flows from Investing Activities:
Investment to acquire 70% interest in subsidiary (300,000)
Purchase of Oil and Gas leases (303,000)
----------------------
Net Cash Used in Investing Activities (603,000)
----------------------
Cash Flows from Financing Activities:
Proceeds from convertible promissory notes 500,000
Proceeds from other notes payable 400,000
Proceeds from stock issuance 100
----------------------
Net Cash Provided by Financing Activities 900,100
----------------------
Net Increase in Cash 103,255
Cash and Cash Equivalents - Beginning of Period -
----------------------
Cash and Cash Equivalents - End of Period $ 103,255
======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ -
======================
Cash paid for income taxes $ -
======================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
ACTIVITIES:
Net deficit of subsidiary on purchase $ (55,992)
Donated legal services $ 90,000
Issuance of notes payable for assets $ 175,000
Issuance of common stock for accounts payable $ 100
Issuance of common stock for oil leases $ 200
======================
|
See the notes to these financial statements.
-3 of 9-
SOUTH UINTAH GAS PROPERTIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S (DEFICIT) EQUITY
FOR THE PERIOD FROM MARCH 8, 2011 (INCEPTION) THROUGH SEPTEMBER 30, 2011
Common Deficit Stockholders'
Stock Accumulated Equity
Number Additional During South Uintah Total
of paid-in Development Gas Noncontrolling Stockholders'
Shares Amount Capital Stage Properties, Inc. Interest Equity
---------- ------ ---------- --------------- --------------- -------------- -------------
Balance - March 8, 2011 - $ - $ - $ - $ - $ - $ -
Issuance of Founder Shares for cash 1,000,000 100 - 100 - 100
Issuance of Founder Shares for debt relief 1,000,000 100 - 100 - 100
Issuance of Founder Shares for services 5,500,000 550 - 550 - 550
Issuance of Common Stock
for oil and gas leases 1,500,000 150 - - 150 - 150
Issuance of Common Stock
for oil and gas leases 500,000 50 - - 50 - 50
Donated legal services 63,000 63,000 27,000 90,000
Minority interest at purchase
of majority interest in subsidiary - - - - - (16,797) (16,797)
Net Loss - - - (599,275) (599,275) (17,397) (616,672)
---------- ------ ---------- --------------- --------------- -------------- -------------
Balance - September 30, 2011 9,500,000 $ 950 $ 63,000 $ (599,275) $ (535,325) $ (7,194) $ (542,519)
========== ====== ========== =============== =============== ============== =============
|
See the notes to these financial statements.
-4 of 9-
SOUTH UINTAH PROPERTIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the Period From March 8, 2011 (Inception) through September 30, 2011
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
South Uintah Gas Properties, Inc. ("the Company") was incorporated on March 8,
2011 in the state of Colorado. The Company intends to become an independent
energy company that intends to acquire and develop oil and gas properties.
The Company's fiscal year end is December 31st. The Company's financial
statements are presented on the accrual basis of accounting.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its majority (approximately 70 percent) owned subsidiary, Hinto
Energy, Inc. All intercompany accounts and transactions have been eliminated in
consolidation.
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.
GOING CONCERN
The Company's financial statements for the period of March 8, 2011 (Inception)
through 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 total shareholders' deficit of $542,438 as of September 30, 2011.
The Company has not recognized any revenues from its activities since inception.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.
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.
-5 of 9-
SOUTH UINTAH PROPERTIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the Period From March 8, 2011 (Inception) through September 30, 2011
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 three months and
cumulative period from March 8, 2011 ended September 30, 2011, 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.
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
-6 of 9-
SOUTH UINTAH PROPERTIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the Period From March 8, 2011 (Inception) through September 30, 2011
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.
NONCONTROLLING INTEREST
A subsidiary of the Company has minority members, representing ownership
interests of 30% at September 30, 2011. The Company accounts for these minority,
or noncontolling interests pursuant to ASC 810-10-65 whereby gains or losses in
a subsidiary with a noncontrolling interest are allocated to the noncontrolling
interest based on the ownership percentage of the noncontrolling interest, even
if that allocation results in a deficit noncontrolling interest balance.
RECENT ACCOUNTING PRONOUNCEMENTS
There were accounting standards and interpretations issued during the period of
March 8, 2011 (Inception) through 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 - OIL AND GAS LEASES
The Company purchased a farmout of deep right interests in approximately 4,000
gross acres in the Uintah Basin in Utah in July 2011, amended in December 2011.
The purchase price of the farmout interest was $478,200, made up of $303,000 in
cash, $175,000 in notes payable and $200 in common stock.
NOTE 3 - INVESTMENT IN HINTO ENERGY, INC.
On July 12, 2011, the Company purchased 3,000,000 shares of the common stock of
Hinto Energy, Inc. (Hinto), formerly Garner Investments, Inc., for cash of
$300,000. The Company entered into a Share Purchase and Exchange Agreement with
-7 of 9-
SOUTH UINTAH PROPERTIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the Period From March 8, 2011 (Inception) through September 30, 2011
Hinto, on July 27, 2011 as discussed in Note 8. Upon the completion of a
proposed merger with Hinto, the Company has agreed to return the 3,000,000
shares to Hinto. The purchase resulted in the Company recording goodwill of
approximately $339,000, negative net worth in the subsidiary of approximately
$56,000 and noncontrolling interest of approximately negative $17,000.
NOTE 4 - CONVERTIBLE PROMISSORY NOTES
The Company has issued $500,000 of convertible promissory notes. The notes earn
interest at 6% per annum, are unsecured, with principal and interest convertible
in whole or in part by the holder into common shares of the Company at $.25 per
share any time prior to repayment. Conversion of the entire principal amount of
$500,000 would result in an additional 2,000,000 outstanding common shares. The
notes are due at various dates from April through July 2012. 2,000,000 common
stock purchase warrants exercisable at $.50 were issued in connection with these
notes. The Company has recognized no beneficial conversion expense on the
convertible notes as the Company's common stock currently has no trading market
or established cash market price.
NOTE 5 - NOTES PAYABLE, OTHER
The Company issued two non-interest bearing, unsecured notes payable for a total
of $175,000 as part of the purchase price of the lease interest described in
Note 2. One note for $75,000 is due in July 2012, and the second note for
$100,000 is due in July 2013.
In May 2011 the Company accepted a Subscription Agreement for $500,000 in
exchange for a $500,000 Secured Convertible Promissory Note in the amount of
$500,000, 1,000,000 shares of Company's common stock and warrants exercisable
for a total of 2,000,000 shares of the Company's common stock with prices
ranging from $0.25 per share to $1.50 per share. At the time of the closing, the
Company received $400,000 of the $500,000. On September 6, 2011, after a failure
to receive the remaining $100,000 from the subscriber, South Uintah Gas gave
notice to the subscriber of its termination of the Subscription Agreement and
associated agreements due to a failure of the subscriber to perform its
obligations. As a result, South Uintah Gas has cancelled the shares and the
warrants issued to the subscriber, remaining indebted to the former subscriber
for $400,000.
NOTE 6- STOCKHOLDERS' EQUITY (DEFICIT)
The authorized capital stock of the Company is 100,000,000 shares of common
stock and 25,000,000 of preferred stock, both with a $0.0001 par value. At
September 30, 2011, Company had 9,500,000 shares of its common stock issued and
outstanding.
-8 of 9-
SOUTH UINTAH PROPERTIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
For the Period From March 8, 2011 (Inception) through September 30, 2011
NOTE 7 - WARRANTS
The Company had the following warrants outstanding at September 30, 2011:
-------------- ------------------- ---------------------- -------------------
WARRANTS TERM IN YEARS VESTING IN YEARS EXERCISE PRICE
-------------- ------------------- ---------------------- -------------------
3,000,000 3 to 5 Variable $2.00
-------------- ------------------- ---------------------- -------------------
1,000,000 3 1 $1 and $3
-------------- ------------------- ---------------------- -------------------
2,000,000 2 Vested $0.50
-------------- ------------------- ---------------------- -------------------
|
Each warrant gives the holder the right to purchase one share of the Company's
common stock at the exercise price. The 3,000,000 vested warrants, issued in
connection with consulting services, vest at various dates from May 2012 through
June 2014 and expire at various dates from May 2014 through June 2016. The
1,000,000 vested warrants, issued in connection with consulting services, vest
at various dates from June 2012 through August 2012, with 400,000 warrants being
exercisable at $1 and 600,000 being exercisable at $3. The 2,000,000 warrants
currently exercisable were issued in connection with notes payable and expire at
dates from May 2013 through July 2013. These 2,000,000 warrants are callable at
the option of the Company in the first year from the grant dates of May through
July 2011 at the exercise price under various conditions, generally if the
Company completes a $4,500,000 private placement of common stock. No expense was
recorded by the Company on the issuance of any of the 6,000,000 warrants, as the
Company's common stock has no trading market and no material common stock cash
sales have been made, and thus none of the warrants were in the money.
NOTE 8 - SHARE PURCHASE AND EXCHANGE AGREEMENT
The Company on July 27, 2011, as subsequently amended December 22, 2011, entered
into a Share Exchange and Acquisition Agreement (Agreement) with Hinto Energy,
Inc., formerly Garner Investments, Inc., and its Shareholders whereby Hinto will
acquire the Company for approximately 9,500,000 common shares, up to $875,000 in
convertible and non-convertible promissory notes and 6,700,000 warrants in
varying increments and exercise prices, subject to receipt of audited financial
statements in accordance with SEC Rules and Regulations and further subject to
any final closing terms and conditions. The Company will return approximately
3,000,000 shares of Hinto stock currently held by the Company.
NOTE 9 - RELATED PARTY TRANSACTIONS
Of the $25,581 in outstanding Company accounts payable at September 30, 2011,
$23,000 are to a related party shareholder for legal services. A related party
shareholder donated $84,000 in legal fees to the capital of the Company in 2011,
and an additional $6,000 was paid on behalf of the Company by an outside
individual, for a total of $90,000 donated.
NOTE 10 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date of the issuance of
these financial statements.
-9 of 9-
HINTO ENERGY, INC.
(FORMERLY GARNER INVESTMENTS, INC.)
Financial Statements for the three and nine months ended September 30, 2011
(Unaudited)
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.
-1 of 9-
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.
-2 of 9-
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.
-3 of 9-
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
Accumulated
Common Stock Additional During
Number of paid-in Development
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
------------- ----------- ------------ ------------- ------------
Isssuance 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.
-4 of 9-
HINTO ENERGY, INC.
(FORMERLY 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.
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
-5 of 9-
HINTO ENERGY, INC.
(FORMERLY GARNER INVESTMENTS, INC.)
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2011
(Unaudited)
("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.
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
-6 of 9-
HINTO ENERGY, INC.
(FORMERLY GARNER INVESTMENTS, INC.)
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2011
(Unaudited)
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.
-7 of 9-
HINTO ENERGY, INC.
(FORMERLY GARNER INVESTMENTS, INC.)
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2011
(Unaudited)
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.
-8 of 9-
HINTO ENERGY, INC.
(FORMERLY GARNER INVESTMENTS, INC.)
(A Development Stage Company)
Notes to the Financial Statements
For the Nine Months Ended September 30, 2011
(Unaudited)
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.
-9 of 9-
HINTO ENERGY, INC.
fka GARNER INVESTMENTS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2010, PERIOD FROM
FEBRUARY 13, 1997 (INCEPTION) THROUGH DECEMBER 31, 2010, AND
PERIOD FROM FEBRUARY 13, 19997 THROUGH DECEMBER 31, 2009
AUDITED
F-1
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Garner Investments, Inc.
Casper, Wyoming
I have audited the accompanying balance sheets of Garner Investments, Inc. (a
development stage company) as of December 31, 2010 and 2009 and the related
statements of operations, stockholders' equity and cash flows for the years then
ended, and for the period from February 13, 1997 (inception) through December
31, 2010. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Garner Investments, Inc. as of
December 31, 2010 and 2009, and the results of its operations and its cash flows
for the years then ended, and for the period from February 13, 1997 (inception)
through December 31, 2010 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements the Company has suffered recurring losses from operations
and has a working capital deficit and stockholders' deficit that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Aurora, Colorado /s/Ronald R. Chadwick, P.C.
April 7, 2011 RONALD R. CHADWICK, P.C.
|
F-2
GARNER INVESTMENTS, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, December 31,
2010 2009
--------------- ---------------
Assets
Current Assets:
Cash $ - $ -
--------------- ---------------
Total Current Assets - -
--------------- ---------------
Other assets:
Farmout Agreement 3,500 3,500
--------------- ---------------
Total Other Assets 3,500 3,500
--------------- ---------------
Total Assets $ 3,500 $ 3,500
=============== ===============
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable $ 55,600 $ 31,665
--------------- ---------------
Total Current Liabilities 55,600 31,665
Stockholders' (Deficit) Equity
Common stock, $0.001 par value; 50,000,000 shares
authorized, 4,280,000 shares issued and outstanding
at December 31, 2010 and 2009, respectively 4,280 4,280
Additional paid-in capital 8,710 7,210
Deficit accumulated during the development stage (65,090) (39,655)
--------------- ---------------
Total Stockholders' (Deficit) Equity (52,100) (28,165)
--------------- ---------------
Total liabilities and stockholders' (deficit) equity $ 3,500 $ 3,500
=============== ===============
|
See the notes to these financial statements.
F-3
GARNER INVESTMENTS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
February 13, 1997
For the Years Ended (Inception) to
December 31, December 31,
2010 2009 2010
------------ -------------- ---------------------
Revenue: $ - $ - $ -
------------ -------------- ---------------------
Operational expenses:
Office expenses 23,935 14,944 56,295
Filing fees - - 85
Audit fees 1,500 - 8,710
------------ -------------- ---------------------
Total operational expenses 25,435 14,944 65,090
------------ -------------- ---------------------
Net loss $ (25,435) $ (14,944) $ (65,090)
============ ============== =====================
Per share information
Net loss per common share
Basic $ * $ *
Fully diluted * *
============ ==============
Weighted average number of common
stock outstanding 4,280,000 4,280,000
============ ==============
* Less than $(0.01) per share.
|
See the notes to these financial statements.
F-4
GARNER INVESTMENTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S (DEFICIT) EQUITY
From February 13, 1997 (Inception) through December 31, 2010
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
------------- ----------- ------------ -------------- ------------
Isssuance 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) (23,435)
------------- ----------- ------------ -------------- ------------
Balance - December 31, 2010 4,280,000 $ 4,280 $ 8,710 $ (65,090) $ (50,100)
============= =========== ============ ============== ============
|
See the notes to these financial statements.
F-5
GARNER INVESTMENTS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
February 13,
1997
For the Years Ended (Inception) to
December 31, December 31,
2010 2009 2010
-------------- -------------- -----------------
Cash Flows from Operating Activities:
Net Loss $ (25,435) $ (14,944) $ (65,090)
Adjustments to reconcile net loss to net cash used
in operating activities:
Increase in accounts payable 23,935 14,944 55,600
-------------- -------------- -----------------
Net Cash Used by Operating Activities (1,500) - (9,490)
-------------- -------------- -----------------
Net Cash Used in Investing Activities - - -
-------------- -------------- -----------------
Cash Flows from Financing Activities:
Shareholder payment of accounts payable 1,500 - 7,240
Proceeds from stock issuance, net of
issuance costs - - 2,250
-------------- -------------- -----------------
Net Cash Provided by Financing Activities 1,500 - 9,490
-------------- -------------- -----------------
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-6
GARNER INVESTMENTS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Years Ended December 31, 2010 and 2009
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Garner Investments, 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.
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.
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.
F-7
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.
F-8
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 year ended December 31,
2009, 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.
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 years
ended December 31, 2010 and 2009, none of which are expected to have a material
impact on the Company's financial position, operations or cash flows.
F-9
NOTE 2 - GOING CONCERN AND MANAGEMENTS' PLAN
In the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2010, the Report of the Independent Registered Public Accounting Firm
includes an explanatory paragraph that describes substantial doubt about the
Company's ability to continue as a going concern. The Company's financial
statements for the years ended December 31, 2010 and 2009 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 a net loss of $25,435 for the year ended December 31, 2010, and
an accumulated deficit of $65,090 as of December 31, 2010. At December 31, 2010,
the Company had a working capital deficit of $52,100.
The future success of the Company is likely dependent on its ability to attain
additional capital, or to find an acquisition to add value to its present
shareholders and ultimately, upon its ability to attain future profitable
operations. There can be no assurance that the Company will be successful in
obtaining such financing, or that it will attain positive cash flow from
operations. Management believes that actions presently being taken to revise the
Company's operating and financial requirements provide the opportunity for the
Company to continue as a going concern.
NOTE 3 - 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.
NOTE 4 - STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 50,000,000 shares of common stock
with a $0.001 par value. At December 31, 2010, 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 year ended December 31, 2010, the majority shareholder paid $1,500 in
auditing expenses on behalf of the Company. Such payment was treated as a
capital contribution and credited to Additional Paid In Capital.
NOTE 5 - INCOME TAXES
The Company is subject to federal and domestic income taxes. The Company has had
no income, and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the recognition
of income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit from net operating loss
(NOL) carry-forwards. The NOL carry forwards expire in various years through
2029. The Company's deferred tax assets are offset by a valuation allowance due
to the uncertainty of the realization of the NOL carry-forwards. NOL
carry-forwards may be further limited by a change in company ownership and other
provisions of the tax laws.
F-10
The Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
Estimated NOL
Carry-forward Valuation Net Tax
Period Ending benefit Allowance Benefit
------------------ ------------- ---------- -------
December 31, 2009 7,931 (7,931) -
December 31, 2010 13,108 (13,108) -
|
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated it activities subsequent to the year ended December
31, 2010 through April 5, 2011 and found no reportable subsequent events.
F-11
F. SELECTED FINANCIAL INFORMATION
Not applicable.
G. SUPPLEMENTARY FINANCIAL INFORMATION
Not applicable.
H. 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.
PLAN OF OPERATIONS
On July 12, 2011, South Uintah Gas Properties, Inc. purchased 3,000,000 shares
of Hinto's common stock, approximately 70 percent of the issued and outstanding
shares of Hinto, prior to the merger. On July 27, 2011, Hinto and South Uintah
entered into a binding agreement, whereby all of the issued and outstanding
common stock, debt and warrants of South Uintah would be exchanged for an
equivalent notes and securities of Hinto.
The two entities merged on January 23, 2012, with an effective merger date of
December 31, 2011, with Hinto being the legal acquirer. However, since Hinto is
a public company, which had nominal activity, the merger has been treated as a
recapitalization of South Uintah. Though Hinto was the legal acquirer in the
merger, South Uintah Gas was the accounting acquirer since its shareholders
ended up with control of Hinto. Therefore at the date of the merger the
historical financial statements of South Uintah became those of Hinto.
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.
In addition, the United States and the global business community is experiencing
severe instability in the commercial and investment banking systems which is
likely to continue to have far-reaching effects on the economic activity in the
country for an indeterminable period. The long-term impact on the United States
economy and the Company's operating activities and ability to raise capital
cannot be predicted at this time, but may be substantial.
SOUTH UINTAH GAS PROPERTIES, INC.
The following is a discussion of the results of operations and liquidity of
South Uintah Gas Properties at September 30, 2011 and for the Period of
Inception (March 8, 2011) through September 30, 2011.
-28-
RESULTS OF OPERATIONS FOR THE PERIOD OF INCEPTION (MARCH 8, 2011) THROUGH
SEPTEMBER 30, 2011 FOR SOUTH UINTAH
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah did not recognize any revenues from its operational activities in the oil
and gas industries. During the period, South Uintah did acquire deep rights
interests through a farmout in approximately 4,000 acres in the central part of
the Uintah Basin at Natural Buttes in Utah, South Uintah expects to be able to
generate revenues in the first quarter of 2012 from these interests, subsequent
to the completion of a lateral attachment to a pipeline, as discussed earlier in
this document.
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah did recognize total operational expenses of $599,799. Operational
expenses during the period included $146,404 of general and administrative
expenses, $114,180 in consulting expenses and a $339,195 write-off of goodwill.
General and Administrative expenses includes such items as $113,226 in legal
expenses connected to acquisition of the farmout interests by South Uintah,
holding of an annual shareholder meeting of Hinto Energy and the maintenance of
the SEC filing requirements at Hinto Energy. Consulting expense are those
expenses are for the services of individuals and firms used in connection with
geological analysis and identification of acquisition prospects. Management of
South Uintah expects that as it continues with it proposed activities with the
22-1 Well and as it continues to identify possible property acquisitions that
operational expenses will most likely increase during the 2012 fiscal year.
On July 12, 2011, South Uintah purchased 3,000,000 shares of the common stock of
Hinto Energy, Inc. for cash of $300,000. South Uintah entered into a Share
Purchase and Exchange Agreement with Hinto, on July 27, 2011. Upon the
completion of a proposed merger with Hinto, South Uintah has agreed to return
2,700,000 shares to Hinto, prior to the close of the merger, South Uintah
transferred 300,000 Hinto shares to a third party, as part of the consideration
for the acquisition of the Uintah Basin prospect. The purchase resulted in South
Uintah recording goodwill of approximately $339,000, negative net worth in Hinto
of approximately ($56,000) and noncontrolling interest of approximately negative
($17,000.)
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah incurred a net loss of $599,275.
LIQUIDITY OF SOUTH UINTAH AT SEPTEMBER 30, 2011
At September 30, 2011, South Uintah had total current assets of $103,255,
consisting solely of cash. At September 30, 2011, South Uintah had total current
liabilities of $1,123,974, consisting of $25,581 in accounts payables, $23,393
in accrued liabilities, $500,000 in convertible promissory notes and $575,000 in
promissory notes. At September 30, 2011, South Uintah had a working capital
deficit of $1,020,719.
The independent registered public accounting firm's report on South Uintah's
financial statements as of September 30, 2011, and for the Period of Inception
(March 8, 2011) through September 30, 2011, includes a "going concern"
explanatory paragraph, that describes substantial doubt about South Uintah's
ability to continue as a going concern.
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah used $193,845 in its operating activities. Net Losses of $616,672 were
adjusted for such non-cash expenses as the $339,195 write off of goodwill and
$550 in compensatory stock expenses.
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah used $603,000 in its investing activities. In July 2011, South Uintah
purchased 3,000,000 shares (70%) of Hinto Energy for $300,000.
In July 2011, the Company purchased a farmout of deep right interests in
approximately 4,000 acres in the Uintah Basin in Utah in July 2011, amended in
December 2011. The purchase price of the farmout interest was $478,200, made up
of $303,000 in cash, $175,000 in notes payable and $200 in common stock.
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah received $900,100 from its financing activities.
During the period of inception (March 8, 2011) through September 30, 2011, South
Uintah issued $500,000 of convertible promissory notes. The notes earn interest
at 6% per annum, are unsecured, with principal and interest convertible in whole
or in part by the holder into common shares of South Uintah at $.25 per share
any time prior to repayment. The notes are due at various dates from April
through July 2012. As part of the financing, 2,000,000 common stock purchase
warrants exercisable at $.50 were issued in connection with these notes. South
Uintah has recognized no beneficial conversion expense on the convertible notes
as the South Uintah's common stock currently does not have a trading market or
established cash market price. In January 2012, holders of the convertible
promissory notes converted principal of $500,000 and accrued interest of $17,983
for 2,071,931 shares of the restricted common stock of South Uintah.
-29-
In May 2011, South Uintah accepted a Subscription Agreement for $500,000 in
exchange for a $500,000 Secured Convertible Promissory Note in the amount of
$500,000, 1,000,000 shares of South Uintah's common stock and warrants
exercisable for a total of 2,000,000 shares of South Uintah's common stock with
prices ranging from $0.25 per share to $1.50 per share. At the time of the
closing, South Uintah received $400,000 of the $500,000. On September 6, 2011,
after a failure to receive the remaining $100,000 from the subscriber, South
Uintah Gas gave notice to the subscriber of its termination of the Subscription
Agreement and associated agreements due to a failure of the subscriber to
perform its obligations. As a result, South Uintah Gas has cancelled the shares
and the warrants issued to the subscriber. At the time of this filing, South
Uintah has repaid a total of $200,000 of the promissory note, leaving an
outstanding balance of $200,000.
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 South Uintah completes
attachment to the pipeline of Well 22-1 and explores additional acquisition
possibilities. For short term needs we will be dependent on receipt, if any, of
offering proceeds.
We have conducted a Private Offering of shares of our restricted Common Stock
for capital we intend to raise up to $5,000,000 in the next twelve months with a
structure not yet determined in debt or equity. As of February 9, 2012, the
Company had sold approximately 1,060,000 shares, raising a total of $530,000. We
cannot give any assurances that we will be able to raise the full $5,000,000 to
fund the budget. Further, we will need to raise additional funds to support not
only our expected budget, but our continued operations. We cannot make any
assurances that we will be able to raise such funds or whether we would be able
to raise such funds with terms that are favorable to us.
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 production 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.
SOUTH UINTAH CRITICAL ACCOUNTING POLICIES
OIL AND GAS PROPERTIES, FULL COST METHOD
South Uintah 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. South Uintah 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 South Uintah 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, South Uintah 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.
-30-
STOCK-BASED COMPENSATION
South Uintah 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. South Uintah 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.
NONCONTROLLING INTEREST
A subsidiary of the South Uintah (Hinto Energy at the time) has minority
members, representing ownership interests of 30% at September 30, 2011. South
Uintah accounts for these minority, or noncontolling interests pursuant to ASC
810-10-65 whereby gains or losses in a subsidiary with a noncontrolling interest
are allocated to the noncontrolling interest based on the ownership percentage
of the noncontrolling interest, even if that allocation results in a deficit
noncontrolling interest balance.
HINTO ENERGY, INC.
The following is a discussion of the results of operations and liquidity of
Hinto Energy, Inc. at September 30, 2011 and December 31, 2010 and the nine
months ended September 30, 2011 and the year ended December 31, 2010.
RESULTS OF OPERATIONS OF HINTO ENERGY, INC.
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.
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.
FOR THE YEAR ENDED DECEMBER 31, 2010 COMPARED TO THE YEAR ENDED DECEMBER 31,
2009
During the years ended December 31, 2010 and 2009, Garner Investments did not
have revenues.
During the year ended December 31, 2010, the Company incurred operational
expenses of $25,435 compared to $14,944 for the year ended December 31, 2009.
The increase of $10,491 was a result of an $8,991 increase in legal fees
resulting from the Company's efforts to get its common stock listed for trading.
During the year ended December 31, 2010, the Company recognized a net loss of
$25,435. During the year ended December 31, 2009, the Company recognized a net
loss of $14,944. The resulting $10,491 increase in net loss during the year
ended December 31, 2010, was a result of the increase in the operational
expenses incurred in obtaining listing of the Company's common stock for
trading.
LIQUIDITY OF HINTO ENERGY, INC.
AT SEPTEMBER 30, 2011
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.
-31-
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.
AT DECEMBER 31, 2010
The Company has no cash or other liquid assets at December 31, 2010. The Company
will be reliant upon shareholder loans or private placements of equity to fund
any kind of operations. Hinto Energy has secured no sources of loans or private
placements, at this time. Due to its lack of funds, the Company did not have any
cash flows during the years ended December 31, 2010 and 2009.
The independent registered public accounting firm's report on the 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.
During the year ended December 31, 2010, the Company recognized a net loss of
$25,435, which was not adjusted for any non-cash items. During the year ended
December 31, 2010, the Company incurred a $23,935 increase in its accounts
payable.
During the year ended December 31, 2009, the Company recognized a net loss of
$14,944, which was not adjusted for any non-cash items. During the year ended
December 31, 2009, the Company incurred a $14,944 increase in its accounts
payable.
During the year ended December 31, 2010, a shareholder of the Company paid the
Company's outstanding audit fees of $1,500. The Company has treated the payment
as a capital contribution and credited Additional Paid In Capital for $1,500.
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.
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 OF HINTO ENERGY, INC.
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.
-32-
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.
I. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
Not applicable.
J. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
K. DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION TERM
-------------------- -------- ----------------------------------------------------------------- -----------
George Harris 61 Chief Financial Officer and Director Annual
Gary Herick 47 Vice President of Finance, Secretary and Director Annual
J. David Keller 57 Vice President of Exploration and Development and Director Annual
Max Sommer 80 Director Annual
Kevin Blair 40 Director Annual
|
All current directors of the Company were elected by the shareholders on August
18, 2011. The Company's officers were appointed by the Board of Directors on
August 18, 2011. With the exception of Mr. Keller, the above officers and
directors hold the same positions with South Uintah, Hinto's wholly-owned
subsidiary.
GEORGE HARRIS, CHIEF FINANCIAL OFFICER, TREASURER & DIRECTOR. Mr. Harris
currently serves as the Chief Financial Officer of South Uintah Gas Properties,
Inc. From January 2008 to April 2009, Mr. Harris served as the President and
Chief Financial Officer for China Wi-Max Communications, Inc. Mr. Harris served
as a Senior Vice President at Falkenberg Capital Corporation, a boutique
investment bank to the telecommunications community from March 2006 to January
2008. Mr. Harris' experience includes active roles in several technology
startups and in his role at Falkenberg, he worked closely with companies that
deliver telecommunications and data services utilizing wired and wireless
technologies. Mr. Harris is also the President of Harris Products, Inc. and
-33-
Integrated Components, Inc., where he developed and managed component
manufacturing facilities based in the United States and Southern China. Mr.
Harris was formerly the Chief Financial Officer at Farm Credit Banks of St.
Louis, Missouri and managed a large financial organization with Lucent
Technologies.
Mr. Harris has been a Certified Public Accountant since 1977 in the state of
California, where he worked for Arthur Young and Company, and earned a Bachelor
of Science degree in Accounting and an MBA from Pepperdine University.
GARY HERICK, VICE PRESIDENT OF FINANCE, SECRETARY & DIRECTOR. Mr. Herick has
been a licensed Securities Representative since 1985, involved in different
aspects of the business including: IPO's, Retail Accounts, Investment Advisory
Accounts, Commodities, Alternative Investments and Venture Capital Funding. From
2001 to 2005, he handled accounts as a Registered Investment Advisor
specializing in Alternative Investments and Stock Analysis for managed accounts
with Herick Asset Management.
Mr. Herick is currently licensed with Capwest Securities, a FINRA member firm
and resides in Edwards, Colorado. He holds a Series 7 and 63 Licenses and is
also a Registered Investment Advisor Representative.
He attended the University of Florida from 1981-1985 and holds a BS in
marketing.
J. DAVID KELLER, VICE PRESIDENT OF EXPLORATION & DEVELOPMENT & DIRECTOR. Mr.
Keller has been the Managing Partner and Exploration and Development Manager of
Powderhorn Energy of Boulder, Colorado. Mr. Keller founded Powderhorn Energy in
2009. Powderhorn Energy focuses on oil and gas opportunities in the Rocky
Mountain Basins. Mr. Keller is responsible for structuring projects to achieve
and surpass industry average profitability, cash flow and, especially, upside
potential. From 2006 through May 2009, Mr. Keller was the Chief Geophysicist for
TTI Exploration in Boulder, Colorado. While there he was responsible for all
geoscience technology for project evaluation, exploration, development and
exploitation.
Mr. Keller received his Bachelor of Science in Geoscience from the University of
Texas, Dallas in 1980 and his Master of Science in Geophysics from the Colorado
School of Mines in 1987.
MAX P. SOMMER, DIRECTOR. Since 1997, Mr. Sommer has served as the President,
Rose Run Energy Company, Inc., providing Consulting and Oil and Gas Production
activities mostly in the Appalachian Region. Mr. Sommer provided prospects to
Oil and Gas Partnership which drilled and participated in 140 wells. Rose Run
Energy sold its production in 2009. Mr. Sommer served as a director of
Intercontinental Energy Corporation from 1976-1977 and as a director of Gerber
Energy Corporation from 1977-1980, both public reporting companies.
Mr. Sommer\'s received his doctorate degree in Geology-Paleontology in 1955 from
the University of Basel, Switzerland.
Mr. Sommer's brings to the Board of Directors fifty-five years of experience in
operations and management of geological and geophysical exploration activities
for oil, gas and minerals in various countries.
KEVIN BLAIR, DIRECTOR. Mr. Blair has been the Principal and Attorney for General
Capital Partners, LLC of Denver, Colorado, since January 2010. There he has
complete business development responsibilities including strategic planning,
negotiation of agreements, acquisition of properties, supervision of
subcontractors, supervision of personnel, and financial reporting. He was a
Private Equity Broker at Capwest Securities, Inc. (Denver, Colorado, from
January 2007 to 2010), a federally licensed broker dealer specializing in
syndications of private debt and equity securities marketed exclusively to high
net worth clients for the purpose of acquiring real estate and energy
properties. He was an Attorney and Mergers & Acquisitions Intermediary at
Merchant Banking Associates, LLC (Denver, Colorado, from January 2000 to
December 2006).
Mr. Blair's education is as follows: LLM, University of Denver College of Law,
In Progress, Juris Doctorate, University of Denver College of Law, May 1994,
Bachelor of Science, Colorado School of Mines, Civil Engineering, May 1989.
His Skills, Licenses and Associations include: Admitted to the Colorado Bar,
Series 7 Federal Securities License, Series 63 Federal Securities License,
Completed Landman Training Course, Real Estate Broker in Colorado, Minnesota,
Alabama, and Louisiana, Member of the International Business Brokers
Association, Certified Business Intermediary and a Member of the Association for
Corporate Growth.
-34-
Our Officers and Directors prior to August 18, 2011 were:
ROY C. SMITH, age 55, was the President and a Director of since the Company from
2006 through August 18, 2011. Mr. Smith attended the University of Wyoming and
Casper College. He earned an A.S.S. in Marketing. He began his career in the Oil
and Gas business with his father Charles B. Smith in Gillette, Wyoming. From
1978 until present he has been a self-employed independent Landman.
MICHAEL R. BUTLER, age 57, was the Secretary/Treasurer and a Director of the
Company. Mr. Butler was employed for 19 years by Amoco Production Company, an
oil and gas producing company operating in the state of Wyoming. In 1997 and
1998, Mr. Butler has owned and operated a farm/ranch west of Casper, Wyoming.
Mr. Butler has been trained in and has experience in waterflood injection, oil
and gas producing operations, maintenance, and wetland development. Mr. Butler
is a Director of Hindsight, Inc. dba Oil City Printers, a commercial printing
business (since 1988). Mr. Butler was a Director and Secretary/Treasurer of The
Art Boutique, Inc. (1996 to 2003), Phillips 44, Inc., (1998 - 2001) and Tempus,
Inc. (1997 - 2000).
Z.S. MERRITT, age 83 was a Director of the Company. Mr. Merritt attended the
University of Wyoming as a Geology Major. He received a BS Degree in 1954 and an
MA Degree in 1958. From 1978 to 1994 Mr. Merritt worked with Viable Resources,
Inc. as an Exploration Manager, Officer and Director. Mr. Merritt has been an
independent consulting Geologist and Landman in Wyoming since 1994.
Our officers and directors are spending up to 25 hours per week on our business
at this time.
CONFLICTS OF INTEREST - GENERAL.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and corporation
opportunity, involved in participation with such other business entities. While
each officer and director of our business is engaged in business activities
outside of our business, the amount of time they devote to our business will be
up to approximately 25 hours per week.
CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES
Presently no requirement contained in our Articles of Incorporation, Bylaws, or
minutes which requires officers and directors of our business to disclose to us
business opportunities which come to their attention. Our officers and directors
do, however, have a fiduciary duty of loyalty to us to disclose to us any
business opportunities which come to their attention, in their capacity as an
officer and/or director or otherwise. Excluded from this duty would be
opportunities which the person learns about through his involvement as an
officer and director of another company. We have no intention of merging with or
acquiring an affiliate, associate person or business opportunity from any
affiliate or any client of any such person.
PROJECTED STAFF
STAFFING
Currently, we have no employees aside from the Chief Financial Officer. This
lean staffing is possible in this phase because of our determination to
outsource all operating functions. Our staff positions will be filled as budget
allows and business demands require, and the positions may be altered in
response to business needs.
-35-
L. EXECUTIVE AND DIRECTORS COMPENSATION
COMPENSATION
The following table sets forth certain information concerning compensation of
the President and our most highly compensated executive officers for the fiscal
years ended December 31, 2008, December 31, 2009 and December 31, 2010 the
("Named Executive Officers"):
SUMMARY EXECUTIVES COMPENSATION TABLE
NON-EQUITY NON-QUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
NAME & SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
POSITION YEAR ($) ($) ($) ($) ($) ($) ($) ($)
-------------- -------- -------- -------- --------- --------- --------------- ---------------- --------------- -------
Roy C. 2008 0 0 0 0 0 0 0 0
Smith, 2009 0 0 0 0 0 0 0 0
President (1) 2010 0 0 0 0 0 0 0 0
Michael R. 2008 0 0 0 0 0 0 0 0
Butler, 2009 0 0 0 0 0 0 0 0
Secretary 2010 0 0 0 0 0 0 0 0
and
Treasurer (1)
|
(1) Mr. Smith and Mr. Butler resigned as officers of the Company on August
18, 2011. At that time Mr. Harris was appointed the Chief Financial
Officer of the Company. During the period of January 1, 2011 through
August 18, 2011, Mr. Smith and Mr. Butler did not receive any
compensation for their services.
DIRECTOR COMPENSATION
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives' Compensation Table"
during the year ended December 31, 2010:
Non-qualified
Non-equity deferred
Fees earned or incentive compensation All other
paid in cash Stock awards Option awards plan earnings compensation Total
Name ($) ($) ($) compensation ($) ($) ($)
($)
------------------ ---------------- ---------------- ---------------- --------------- ---------------- ---------------- ------------
Roy C. Smith (1) $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Michael R. $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Butler (1)
Z.S. Merritt (1) $ -0- $ -0- $-0- $ -0- $-0- $ -0- $ -0-
|
(1) Messrs. Smith, Butler and Merritt served as directors of the Company
till August 18, 2011. At such time, George Harris, Gary Herick, J.
David Keller, Max Sommer and Kevin Blair were elected to the Board of
Directors. From the period of January 1, 2011 through August 18, 2011,
Messrs. Smith, Butler and Merritt did not receive any compensation for
their services as directors of Hinto.
-36-
COMPENSATION OF SOUTH UINTAH OFFICERS AND DIRECTORS PRIOR TO THE ACQUISITION BY
HINTO
Messrs. George Harris, Gary Herick, Max Sommer and Kevin Blair, officers and
directors of Hinto, were and are officers, directors and shareholders of South
Uintah, as such they were issued common shares of South Uintah and warrants
exercisable into common shares of South Uintah. Mr. David Keller, a director of
Hinto, was issued shares of South Uintah in connection with services offered to
South Uintah. As a result, they were issued shares of Hinto pursuant to the
Amended Share Exchange Agreement.
The tables below show the number of common shares issued by South Uintah to
these individuals during the period of March 8, 2011 (inception) through
December 31, 2011.
COMMON STOCK
---------------------------------------
NUMBER OF SOUTH UINTAH
NAME AND POSITION AT SOUTH UINTAH SHARES ISSUED VALUE OF SHARES
--------------------------------- ---------------------- ---------------
George Harris, CFO & Director 550,000 $55.00
Gary Herick, Secretary & Director 2,000,000 $200.00
Max Sommer, Director 200,000 $20.00
Kevin Blair, Director 325,000 $32.50
David Keller 525,000 $52.50
|
The common shares issued by South Uintah were valued at $0.0001 par value, since
South Uintah does not have a trading market. The shares were issued for services
as officers and directors of South Uintah.
During the period of March 8, 2011 (inception) through December 31, 2011, South
Uintah issued the following warrants to their officers and directors. No expense
was recorded by South Uintah on the issuance of any of the warrants, as South
Uintah's common stock has no trading market and no material common stock cash
sales have been made, and thus none of the warrants were in the money.
NUMBER OF SOUTH UINTAH WARRANTS
NAME AND POSITION AT SOUTH UINTAH ISSUED
--------------------------------- --------------------------------
George Harris, CFO & Director (1) 550,000
Gary Herick, Secretary & Director (2) 1,000,000
Max Sommer, Director (3) 200,000
Kevin Blair, Director (4) 325,000
David Keller, Director (5) 525,000
-------------------
|
(1) Mr. Harris holds warrants to purchase 550,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
350,000 shares have an exercise price of $1.00 per share and the
remaining 200,000 shares have an exercise price of $3.00 per share.
(2) Arrowhead Consulting, LLC, which Mr. Herick has voting control of,
holds warrants to purchase an additional 1,000,000 shares of common
stock. In addition the warrant is subject to vesting terms. The warrant
has an exercise price of $2.00 per share and will expire in July 2016.
The warrant vests at a rate of 1/3 per year throughout the term of the
warrant and will expire 2 years after vesting.
(3) Mr. Sommer holds warrants to purchase 200,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
100,000 shares have an exercise price of $1.00 per share and the
remaining 100,000 shares have an exercise price of $3.00 per share.
(4) Mr. Blair holds warrants to purchase 325,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
225,000 shares have an exercise price of $1.00 per share and the
remaining 100,000 shares have an exercise price of $3.00 per share.
(5) Mr. Keller holds warrants to purchase 525,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
325,000 shares have an exercise price $1.00 per share and the remaining
200,000 shares have a $3.00 per share.
-37-
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS OF SOUTH UINTAH
Messrs. George Harris, Gary Herick, Kevin Blair, J. David Keller and Max Sommer
have entered into Consulting Agreements with South Uintah for their services.
Mr. Herick has entered into a Consulting Agreement on June 1, 2011 with South
Uintah to provide services to South Uintah as a director and secretary. The
Consulting Agreement has a term of 1 year unless terminated with 30 days notice
by either party. The Consulting Agreement provides for Mr. Herick to receive
$10,000 per month beginning July 1, 2011 to perform such services. In addition,
Mr. Herick was issued a warrant exercisable for 1,000,000 shares of South Uintah
common stock, which pursuant to the Amended Share Exchange Agreement were
exchanged for shares and warrants of Hinto.
Mr. Harris has entered into a Consulting Agreement on June 1, 2011 with South
Uintah to provide services to South Uintah as a director and Chief Financial
Officer. The Consulting Agreement has a term of 1 year unless terminated with 30
days notice by either party. The Consulting Agreement provides for Mr. Harris to
receive $5,000 per month beginning July 1, 2011 to perform such services. In
addition, Mr. Harris was issued 300,000 shares of South Uintah common stock and
a warrant exercisable for 300,000 shares of South Uintah common stock, which
pursuant to the Amended Share Exchange Agreement were exchanged for shares and
warrants of Hinto.
Mr. Kevin Blair has entered into a Corporate Advisor/Director Agreement on July
12, 2011 with South Uintah to provide services as a director to South Uintah.
The Agreement has a term of 1 year unless terminated with 30 days notice by
either party. The Agreement provides for Mr. Blair to be issued 100,000 shares
of South Uintah common stock and a warrant exercisable for 100,000 shares of
South Uintah common stock for such services, which pursuant to the Amended Share
Exchange Agreement were exchanged for shares and warrants of Hinto.
Mr. J. David Keller has entered into a Corporate Advisor/Consulting Agreement on
August 4, 2011 with South Uintah to provide services as a director and the Vice
President Exploration and Development to South Uintah. The Agreement has a term
of 1 year unless terminated with 30 days notice by either party. The Agreement
provides for a cash retainer of $5,000 for the month of July 2011 and then
$10,000 for each month thereafter. The Agreement provides for Mr. Keller to be
issued 300,000 shares of South Uintah common stock and a warrant exercisable for
300,000 shares of South Uintah common stock for such services, which pursuant to
the Amended Share Exchange Agreement were exchanged for shares and warrants of
Hinto. Mr. Keller became an employee of the Company on December 16, 2011, with a
monthly base salary of $10,000.
Mr. Max Sommer has entered into a Corporate Advisor/Director Agreement on July
12, 2011 with South Uintah to provide services as a director to South Uintah.
The Agreement has a term of 1 year unless terminated with 30 days notice by
either party. The Agreement provides for Mr. Blair to be issued 100,000 shares
of South Uintah common stock and a warrant exercisable for 200,000 shares of
South Uintah common stock for such services, which pursuant to the Amended Share
Exchange Agreement were exchanged for shares and warrants of Hinto.
All of our officers and/or directors will continue to be active in other
companies. All officers and directors have retained the right to conduct their
own independent business interests.
It is possible that situations may arise in the future where the personal
interests of the officers and directors may conflict with our interests. Such
conflicts could include determining what portion of their working time will be
spent on our business and what portion on other business interest. To the best
ability and in the best judgment of our officers and directors, any conflicts of
interest between us and the personal interests of our officers and directors
will be resolved in a fair manner which will protect our interests. Any
transactions between us and entities affiliated with our officers and directors
will be on terms which are fair and equitable to us. Our Board of Directors
intends to continually review all corporate opportunities to further attempt to
safeguard against conflicts of interest between their business interests and our
interests.
We have no intention of merging with or acquiring an affiliate, associated
person or business opportunity from any affiliate or any client of any such
person.
-38-
M. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AS OF MARCH
13, 2012
(a) Beneficial owners of five percent (5%) or greater, of our common stock.
There are currently 50,000,000 common shares authorized of which 13,925,931
shares are outstanding, as of March 13, 2012.
The following sets forth information with respect to ownership by holders of
more than five percent (5%) of our common stock:
AMOUNT AND
NATURE OF
CLASS OF NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF
SECURITY OWNER* OWNER** CLASS (1)
------------ ------------------------------------- ---------------- ------------
Common Gary Herick (2) 1,640,000 11.77%
Common Craig Phillips (3) 1,000,000 7.24 %
Common Michael A. Littman (4) 1,100,000 7.96%
Common M.A. Littman Pension Plan (5) 900,000 6.51%
Common Paul Dickstein (6) 718,851 5.20%
Common Natural Buttes Gas Corp. 750,000 5.43%
Common Uinta Oil and Gas Properties, Inc. 750,000 5.43%
------------
|
*The Address for the above individuals and entities is c/o 7609 Ralston Road,
Arvada, Colorado 80002.
** BENEFICIAL OWNERSHIP OF EACH PERSON IS SHOWN AS CALCULATED IN ACCORDANCE WITH
RULE 13D-3 OF THE SECURITIES EXCHANGE ACT OF 1934, WHICH INCLUDES ALL SECURITIES
THAT THE PERSON, DIRECTLY, OR INDIRECTLY THROUGH AN CONTRACT, ARRANGEMENT,
UNDERSTANDING, RELATIONSHIP OR OTHERWISE HAS OR SHARES VOTING POWER WHICH
INCLUDES THE POWER TO VOTE OR DIRECT THE VOTING OF A SECURITY, OR INVESTMENT
POWER, WHICH INCLUDES THE POWER TO DISPOSE, OR DIRECT THE DISPOSITION OF SUCH
SECURITY.
(1) Based upon 13,925,931 shares issued and outstanding on a fully diluted
basis. Warrants exercisable for 6,700,000 shares of common stock are
not included in this number as they are not considered to be
exercisable in the next 60 days.
(2) Mr. Herick has direct ownership of 2,500,000 shares and indirect
ownership of 1,390,000 shares of common stock. Arrowhead Consulting,
LLC, which Mr. Herick has voting control of holds, 700,000 shares of
common stock and a warrant to purchase an additional 1,000,000 shares
of common stock. The warrant has an exercise price of $2.00 per share
and will expire in July 2016. The warrant vests at a rate of 1/3 per
year throughout the term of the warrant and will expire 2 years after
vesting.
Mr. Herick has beneficial ownership of 690,000 shares of common stock
through his wife's ownership of Whitemoon Energy, LLC which holds the
shares.
(3) Mr. Phillips owns 1,000,000 shares of common stock and warrant to
purchase an additional 1,000,000 shares of common stock. The warrant
is subject to vesting terms.
(4) Mr. Littman holds 600,000 shares of common stock directly and 500,000
shares of common stock indirectly through his wife.
Mr. Littman holds a warrant exercisable for 1,000,000 shares of common
stock. The warrant is subject to vesting terms.
(5) Mr. Littman has the ability to vote the 900,000 shares held by the
M.A. Littman Pension Plan.
(6) Mr. Dickstein holds 468,851 shares of common stock directly and has
beneficial ownership of 250,000 shares through JBPD, LLC.
-39-
(b) The following sets forth information with respect to our common
stock beneficially owned by each Officer and Director, and by all Directors and
Officers as a group as of March 13, 2012.
AMOUNT AND NATURE
CLASS OF OF BENEFICIAL PERCENT OF
SECURITY NAME AND ADDRESS OF BENEFICIAL OWNER* OWNER** CLASS (1)
--------- ---------------------------------------- ----------------- -----------
Common George Harris, Chief Financial Officer 550,000 3.98%
and Director (2)
Common Kevin Blair, Director (3) 325,000 2.35%
Common Max Sommer, Director (4) 200,000 1.44%
Common Gary Herick, Director (5) 1,640,000 11.87%
Common J. David Keller, Director (6) 525,000 3.80%
--------- ---------------------------------------- ----------------- -----------
All Proposed Directors and Executive 3,240,000 23.46%
|
Officers as a Group (5 persons) ----------------- -----------
*Addresses for the Officers and Directors are c/o 7609 Ralston Road, Arvada, CO
80002.
** BENEFICIAL OWNERSHIP OF EACH PERSON IS SHOWN AS CALCULATED IN ACCORDANCE WITH
RULE 13D-3 OF THE SECURITIES EXCHANGE ACT OF 1934, WHICH INCLUDES ALL SECURITIES
THAT THE PERSON, DIRECTLY, OR INDIRECTLY THROUGH AN CONTRACT, ARRANGEMENT,
UNDERSTANDING, RELATIONSHIP OR OTHERWISE HAS OR SHARES VOTING POWER WHICH
INCLUDES THE POWER TO VOTE OR DIRECT THE VOTING OF A SECURITY, OR INVESTMENT
POWER, WHICH INCLUDES THE POWER TO DISPOSE, OR DIRECT THE DISPOSITION OF SUCH
SECURITY.
(1) Based upon 13,925,931 shares issued and outstanding on a fully diluted
basis. Warrants exercisable for 6,700,000 shares of common stock are
not included in this number as they are not considered to be
exercisable in the next 60 days.
(2) Mr. Harris holds 550,000 shares of common stock and warrants to
purchase an additional 550,000 shares of common stock. The warrants are
subject to vesting terms and have a term of 3 years, 350,000 shares
have an exercise price of $1.00 per share and the remaining 200,000
shares have an exercise price of $3.00 per share.
(3) Mr. Blair holds 325,000 shares of common stock and warrants to purchase
an additional 325,000 shares of common stock. The warrants are subject
to vesting terms and have a term of 3 years, 225,000 shares have an
exercise price of $1.00 per share and the remaining 100,000 shares have
an exercise price of $3.00 per share.
(4) Mr. Sommer holds 200,000 shares of common stock and warrants to
purchase an additional 200,000 shares of common stock. The warrants are
subject to vesting terms and have a term of 3 years, 100,000 shares
have an exercise price of $1.00 per share and the remaining 100,000
shares have an exercise price of $3.00 per share.
(5) Mr. Herick has direct ownership of 250,000 shares and indirect
ownership of 1,390,000 shares of common stock. Arrowhead Consulting,
LLC, which Mr. Herick has voting control of holds 700,000 shares of
common stock and a warrant to purchase an additional 1,000,000 shares
of common stock. The warrant has an exercise price of $2.00 per share
and will expire in July 2016. The warrant vests at a rate of 1/3 per
year throughout the term of the warrant and will expire 2 years after
vesting. Mr. Herick has beneficial ownership of 690,000 shares of
common stock through his wife's ownership of Whitemoon Energy, LLC
which holds the shares.
(6) Mr. Keller holds 525,000 shares of common stock and warrants to
purchase an additional 525,000 shares of common stock. The warrants are
subject to vesting terms and have a term of 3 years, 325,000 shares
have an exercise price $1.00 per share and the remaining 200,000 shares
have a $3.00 per share.
N. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, PROMOTERS AND CONTROL PERSONS
Other than the stock transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any of our
founders, directors, executive officers, shareholders or any members of the
immediate family of any of the foregoing had or is to have a direct or indirect
material interest.
CHANGE OF CONTROL
On July 11, 2011, prior to entering into the Share Exchange 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 held
approximately 70% of the issued and outstanding common stock of the Company.
Prior to closing of the acquisition of South Uintah, South Uintah transferred
-40-
300,000 shares to an unrelated third party as partial consideration for the
acquisition of the gas prospect in Utah. As part of the Share Exchange
Agreement, South Uintah has agreed to return the remaining 2,700,000 shares of
common stock to the Company. We have retired such shares to treasury, concurrent
with the transaction.
SHARE ACQUISITION AND EXCHANGE AGREEMENT
On July 27, 2011, we entered into a Share Exchange and Acquisition Agreement
with South Uintah and the South Uintah shareholders. On January 23, 2012, we
entered into an Amended Share Exchange Agreement. Pursuant to the Amended Share
Exchange Agreement, we 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. As a result, South Uintah became a
wholly-owned subsidiary of the Company.
At the time of the acquisition, Mr. George Harris, Gary Herick, Max Sommer and
Kevin Blair, officers and directors of Hinto, were and are officers, directors
and shareholders of South Uintah. Mr. David Keller, a director of Hinto was also
a shareholder of South Uintah and as such were issued shares of the Company's
common stock under the Amended Share Exchange Agreement.
CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS
Messrs. George Harris, Gary Herick, Kevin Blair, David Keller and Max Sommer
have entered into Consulting Agreements with South Uintah for their services.
Mr. Herick has entered into a Consulting Agreement on June 1, 2011 with South
Uintah to provide services to South Uintah as a director and secretary. The
Consulting Agreement has a term of 1 year unless terminated with 30 days notice
by either party. The Consulting Agreement provides for Mr. Herick to receive
$10,000 per month beginning July 1, 2011 to perform such services. In addition,
Mr. Herick was issued a warrant exercisable for 1,000,000 shares of South Uintah
common stock, which pursuant to the Amended Share Exchange Agreement were
exchanged for shares and warrants of Hinto.
Mr. Harris has entered into a Consulting Agreement on June 1, 2011 with South
Uintah to provide services to South Uintah as a director and Chief Financial
Officer. The Consulting Agreement has a term of 1 year unless terminated with 30
days notice by either party. The Consulting Agreement provides for Mr. Harris to
receive $5,000 per month beginning July 1, 2011 to perform such services. In
addition, Mr. Harris was issued 300,000 shares of South Uintah common stock and
a warrant exercisable for 300,000 shares of South Uintah common stock, which
pursuant to the Amended Share Exchange Agreement were exchanged for shares and
warrants of Hinto.
Mr. Kevin Blair has entered into a Corporate Advisor/Director Agreement on July
12, 2011 with South Uintah to provide services as a director to South Uintah.
The Agreement has a term of 1 year unless terminated with 30 days notice by
either party. The Agreement provides for Mr. Blair to be issued 100,000 shares
of South Uintah common stock and a warrant exercisable for 100,000 shares of
South Uintah common stock for such services, which pursuant to the Amended Share
Exchange Agreement were exchanged for shares and warrants of Hinto.
Mr. J. David Keller has entered into a Corporate Advisor/Consulting Agreement on
August 4, 2011 with South Uintah to provide services as a director and the Vice
President Exploration and Development to South Uintah. The Agreement has a term
of 1 year unless terminated with 30 days notice by either party. The Agreement
provides for a cash retainer of $5,000 for the month of July 2011 and then
$10,000 for each month thereafter. The Agreement provides for Mr. Keller to be
issued 300,000 shares of South Uintah common stock and a warrant exercisable for
300,000 shares of South Uintah common stock for such services, which pursuant to
the Amended Share Exchange Agreement were exchanged for shares and warrants of
Hinto. Mr. Keller became an employee of the Company on December 16, 2011 with a
monthly base salary of $10,000.
Mr. Max Sommer has entered into a Corporate Advisor/Director Agreement on July
12, 2011 with South Uintah to provide services as a director to South Uintah.
The Agreement has a term of 1 year unless terminated with 30 days notice by
either party. The Agreement provides for Mr. Blair to be issued 100,000 shares
of South Uintah common stock and a warrant exercisable for 200,000 shares of
South Uintah common stock for such services, which pursuant to the Amended Share
Exchange Agreement were exchanged for shares and warrants of Hinto.
EQUITY ISSUANCES TO OFFICERS AND DIRECTORS
Mr. George Harris, Gary Herick, Max Sommer and Kevin Blair, officers and
directors of Hinto, were and are officers, directors and shareholders of South
Uintah, as such they were issued common shares of South Uintah and warrants
exercisable into common shares of South Uintah. Mr. David Keller, a director of
-41-
Hinto was issued shares of South Uintah in connection with services offered to
South Uintah. As a result, they were issued shares of Hinto pursuant to the
Amended Share Exchange Agreement.
The tables below show the number of common shares and/or warrants issued by the
companies to these individuals.
COMMON STOCK
-----------------------------------------------------------------------------
NUMBER OF SOUTH UINTAH SHARES ISSUED NUMBER OF SHARES OF HINTO ISSUED
-------------------------------------- ----------------------------------
George Harris 550,000 550,000
Gary Herick (2) 2,000,000 1,640,000
Max Sommer 200,000 200,000
Kevin Blair 325,000 325,000
David Keller 525,000 525,000
WARRANTS
-------------------------------------------------------------------------------
NUMBER OF SOUTH UINTAH WARRANTS ISSUED NUMBER OF WARRANTS OF HINTO ISSUED
------------------------------------------ ------------------------------------
George Harris (1) 550,000 550,000
Gary Herick (2) 1,000,000 1,000,000
Max Sommer (3) 200,000 300,000
Kevin Blair (4) 325,000 325,000
David Keller (5) 525,000 525,000
---------------
|
(1) Mr. Harris holds warrants to purchase 550,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
350,000 shares have an exercise price of $1.00 per share and the
remaining 200,000 shares have an exercise price of $3.00 per share.
(2) Mr. Herick has direct ownership of 250,000 shares and indirect
ownership of 1,390,000 shares of common stock. Arrowhead Consulting,
LLC, which Mr. Herick has voting control of holds 700,000 shares of
common stock and a warrant to purchase an additional 1,000,000 shares
of common stock. The warrant has an exercise price of $2.00 per share
and will expire in July 2016. The warrant vests at a rate of 1/3 per
year throughout the term of the warrant and will expire 2 years after
vesting. .Mr. Herick has beneficial ownership of 690,000 shares of
common stock through his wife's ownership of Whitemoon Energy, LLC
which holds the shares.
(3) Mr. Sommer holds warrants to purchase 200,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
100,000 shares have an exercise price of $1.00 per share and the
remaining 100,000 shares have an exercise price of $3.00 per share.
(4) Mr. Blair holds warrants to purchase 325,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
225,000 shares have an exercise price of $1.00 per share and the
remaining 100,000 shares have an exercise price of $3.00 per share.
(5) Mr. Keller holds warrants to purchase 525,000 shares of common stock.
The warrants are subject to vesting terms and have a term of 3 years,
325,000 shares have an exercise price $1.00 per share and the remaining
200,000 shares have a $3.00 per share.
OTHER
Mr. Littman, an affiliate, was owed $23,000 for legal services. During the year
of 2011, Mr. Littman contributed $90,000 in legal fees to the capital of South
Uintah. Mr. Littman has an Engagement Agreement with South Uintah to provide
legal services. The Agreement was entered into on May 1, 2011 and has a term of
1 year unless terminated prior to that date. The Engagement Agreement provides
for Mr. Littman to receive a monthly retainer of $10,000 and the issuance of a
warrant exercisable for 1,000,000 shares. The warrant has an exercise price of
$2.00 per share and will expire in July 2016. The warrant vests at a rate of 1/3
per year throughout the term of the warrant and will expire 2 years after
vesting.
Sharon K. Fowler, founder and majority shareholder, at the time, was granted a
farmout of the lease in Section 16, T38N, R81W in Natrona County, Wyoming, to
the Company for 3,500,000 shares issued in August 2006. 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. On December 31,
2010, the Farmout Agreement was extended to April 30, 2011. On April 30, 2011,
the Farmout Agreement expired and was not renewed.
During the year ended December 31, 2010, a shareholder of the Company paid the
Company's outstanding audit fees of $1,500. The Company has treated the payment
as a capital contribution and credited Additional Paid In Capital for $1,500.
-42-
There are no promoters being used in relation to this offering. No person who
may, in the future, be considered a promoter of this offering, will receive or
expect to receive assets, services or other considerations from us. No assets
will be, nor expected to be, acquired from any promoter on behalf of us. We have
not entered into any agreements that require disclosure to the shareholders.
ITEM 11A. MATERIAL CHANGES
None.
ITEM 12. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
NUMBER DESCRIPTION
-------------- --------------------------------------------------------- ---------------------------
3.1 Articles of Incorporation of Hinto Energy, Inc. (1)
3.2 Bylaws of Garner Investments, Inc. now known as Hinto (1)
Energy, Inc.
3.3 Amendment to Articles of Incorporation of Hinto Energy, (7)
Inc.
3.4 Articles of Incorporation of South Uintah Gas (8)
Properties, Inc.
3.5 Amendment to Articles of Incorporation of South Uintah (8)
Gas Properties, Inc.
3.6 Bylaws of South Uintah Gas Properties, Inc. (8)
4.1 Form of Vesting Warrants (8)
4.2 Form of $0.50 Warrants (8)
5.1 Opinion re: Legality Filed Herewith
10.1 Farmout Agreement (2)
10.2 Extension to Farmout Agreement (2)
10.3 Extension to Farmout Agreement - 2009 (3)
10.4 Extension to Farmout Agreement - 2010 (4)
10.5 Share Purchase Agreement (5)
10.6 Share Acquisition and Exchange Agreement (6)
10.7 Amended Share Exchange and Acquisition Agreement, dated (8)
January 23, 2012
23.1 Consent of Attorney Filed Herewith
23.2 Consent of Accountant Filed Herewith
101.INS XBRL Instance Document Filed Herewith (9)
101.SCH XBRL Taxonomy Extension Schema Document Filed Herewith (9)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed Herewith (9)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed Herewith (9)
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed Herewith (9)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed Herewith (9)
-------------- --------------------------------------------------------- ---------------------------
|
(1)Incorporated by reference from the exhibits included in the Company's SB-2
Registration Statement filed with the Securities and Exchange Commission
(www.sec.gov), dated November 13, 2007.
(2)Incorporated by reference from the exhibits included in the Company's second
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated April 23, 2008.
(3)Incorporated by reference from the exhibits included in the Company's fifth
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated December 2, 2009.
(4)Incorporated by reference from the exhibits included in the Company's sixth
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated April 27, 2011.
(5)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated July 12,
2011.
-43-
(6)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated August 5,
2011.
(7)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated August
17, 2011.
(8)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated January
23, 2012.
(9)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.
ITEM 12A. DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
The Wyoming Business Corporation Act requires us to indemnify officers and
directors for any expenses incurred by any officer or director in connection
with any actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or director because of his or her
status as an officer or director, to the extent that the director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Wyoming Business Corporation Act permits a corporation to
indemnify an officer or director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of us and such
indemnification is authorized by the stockholders, by a quorum of disinterested
directors, by independent legal counsel in a written opinion authorized by a
majority vote of a quorum of directors consisting of disinterested directors, or
by independent legal counsel in a written opinion if a quorum of disinterested
directors cannot be obtained.
The Wyoming Business Corporation Act prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Wyoming Business Corporation Act may permit
an officer or director to apply to the court for approval of indemnification
even if the officer or director is adjudged to have committed intentional
misconduct, fraud, or a knowing violation of the law.
The Wyoming Business Corporation Act also provides that indemnification of
directors is not permitted for the unlawful payment of distributions, except for
those directors registering their dissent to the payment of the distribution.
According to our bylaws, we are authorized to indemnify our directors to the
fullest extent authorized under Wyoming Law subject to certain specified
limitations.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and persons controlling
us pursuant to the foregoing provisions or otherwise, we are advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
-44-
[OUTSIDE BACK COVER PAGE OF PROSPECTUS]
DEALER PROSPECTUS DELIVERY REQUIREMENTS
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have expended, or will expend fees in relation to this registration statement
as detailed below:
================================================================= =========
EXPENDITURE ITEM AMOUNT
----------------------------------------------------------------- ---------
Attorney Fees $13,000
----------------------------------------------------------------- ---------
Audit Fees $7,500
----------------------------------------------------------------- ---------
Transfer Agent Fees $2,000
----------------------------------------------------------------- ---------
SEC Registration and Blue Sky Registration fees (estimated) $1,000
----------------------------------------------------------------- ---------
Printing Costs and Miscellaneous Expenses (estimated) $1,500
----------------------------------------------------------------- ---------
TOTAL $25,000
================================================================= =========
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Wyoming Revised
Statutes and the bylaws.
Under the Wyoming Revised Statutes, director immunity from liability to a
company or its shareholders for monetary liabilities applies automatically
unless it is specifically limited by a company's Articles of Incorporation. Our
Articles of Incorporation do not specifically limit the directors' immunity.
Excepted from that immunity are: (a) a willful failure to deal fairly with us or
our shareholders in connection with a matter in which the director has a
material conflict of interest; (b) a violation of criminal law, unless the
director had reasonable cause to believe that his or her conduct was lawful or
no reasonable cause to believe that his or her conduct was unlawful; (c) a
transaction from which the director derived an improper personal profit; and (d)
willful misconduct.
Our bylaws provide that it will indemnify the directors to the fullest extent
not prohibited by Wyoming law; provided, however, that we may modify the extent
of such indemnification by individual contracts with the directors and officers;
and, provided, further, that we shall not be required to indemnify any director
or officer in connection with any proceeding, or part thereof, initiated by such
person unless such indemnification: (a) is expressly required to be made by law,
(b) the proceeding was authorized by the board of directors, (c) is provided by
us, in sole discretion, pursuant to the powers vested under Wyoming law or (d)
is required to be made pursuant to the bylaws.
Our bylaws provide that it will advance to any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of us, or is or was
serving at the request of us as a director or executive officer of another
company, partnership, joint venture, trust or other enterprise, prior to the
final disposition of the proceeding, promptly following request therefore, all
expenses incurred by any director or officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under the bylaws or otherwise.
Our bylaws provide that no advance shall be made by us to an officer except by
reason of the fact that such officer is or was our director in which event this
paragraph shall not apply, in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made: (a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (b) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of us.
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ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the period of February 1, 2009 through January 31, 2012 we have made the
following unregistered sales or issuances of securities.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------ ------------------------ ---------------- ------------------------------ ----------------------
Shares of South Uintah
pursuant to the Amended Shareholders of
1/23/12 Share Exchange and South Uintah Gas
Common Shares 11,446,931 Acquisition Agreement Properties
Warrants of South Uintah
pursuant to the Amended Warrant holders of
1/23/12 Share Exchange and South Uintah Gas
Warrants 2,000,000 Acquisition Agreement Properties
Warrant holders of
Warrants of South Uintah South Uintah Gas
1/23/12 pursuant to the Amended Properties
Warrants 4,700,000 Share Exchange and (Directors and
Acquisition Agreement Officers)
2/29/12 Common Shares 69,000 Services Business Associate
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EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Rule 506 of Regulation D of the Securities Act
of 1933, as amended (the "1933 Act"). All of the individuals and/or entities
that purchased the unregistered securities were primarily existing shareholders,
known to the Company and its management, through pre-existing business
relationships, as long standing business associates and employees. All
purchasers were provided access to all material information, which they
requested, and all information necessary to verify such information and were
afforded access to management of the Company in connection with their purchases.
All purchasers of the unregistered securities acquired such securities for
investment and not with a view toward distribution, acknowledging such intent to
the Company. All certificates or agreements representing such securities that
were issued contained restrictive legends, prohibiting further transfer of the
certificates or agreements representing such securities, without such securities
either being first registered or otherwise exempt from registration in any
further resale or disposition.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
================== ======================== ================ ============================== ======================
10/1/2011 Common Shares 835,000 $415,000 Business Associates
through 3/13/2012
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EXEMPTION FROM REGISTRATION CLAIMED
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Rule 506 of Regulation D of the Securities Act
of 1933, as amended (the "1933 Act"). All of the individuals and/or entities
that purchased the unregistered securities were primarily existing shareholders,
known to the Company and its management, through pre-existing business
relationships, as long standing business associates. All purchasers were
provided access to all material information, which they requested, and all
information necessary to verify such information and were afforded access to
management of the Company in connection with their purchases. All purchasers of
the unregistered securities acquired such securities for investment and not with
a view toward distribution, acknowledging such intent to the Company. All
certificates or agreements representing such securities that were issued
contained restrictive legends, prohibiting further transfer of the certificates
or agreements representing such securities, without such securities either being
-46-
first registered or otherwise exempt from registration in any further resale or
disposition.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
NUMBER DESCRIPTION
--------------- --------------------------------------------------------- ----------------------------
3.1 Articles of Incorporation of Hinto Energy, Inc. (1)
3.2 Bylaws of Garner Investments, Inc. now known as Hinto (1)
Energy, Inc.
3.3 Amendment to Articles of Incorporation of Hinto Energy, (7)
Inc.
3.4 Articles of Incorporation of South Uintah Gas (8)
Properties, Inc.
3.5 Amendment to Articles of Incorporation of South Uintah (8)
Gas Properties, Inc.
3.6 Bylaws of South Uintah Gas Properties, Inc. (8)
4.1 Form of Vesting Warrants (8)
4.2 Form of $0.50 Warrants (8)
5.1 Opinion re: Legality Filed Herewith
10.1 Farmout Agreement (2)
10.2 Extension to Farmout Agreement (2)
10.3 Extension to Farmout Agreement - 2009 (3)
10.4 Extension to Farmout Agreement - 2010 (4)
10.5 Share Purchase Agreement (5)
10.6 Share Acquisition and Exchange Agreement (6)
10.7 Amended Share Exchange and Acquisition Agreement, dated (8)
January 23, 2012
23.1 Consent of Attorney Filed Herewith
23.2 Consent of Accountant Filed Herewith
101.INS XBRL Instance Document Filed Herewith (9)
101.SCH XBRL Taxonomy Extension Schema Document Filed Herewith (9)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed Herewith (9)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed Herewith (9)
101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed Herewith (9)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed Herewith (9)
--------------- --------------------------------------------------------- ----------------------------
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(1)Incorporated by reference from the exhibits included in the Company's SB-2
Registration Statement filed with the Securities and Exchange Commission
(www.sec.gov), dated November 13, 2007.
(2)Incorporated by reference from the exhibits included in the Company's second
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated April 23, 2008.
(3)Incorporated by reference from the exhibits included in the Company's fifth
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated December 2, 2009.
(4)Incorporated by reference from the exhibits included in the Company's sixth
Amended Registration Statement filed on Form S-1/A with the Securities and
Exchange Commission (www.sec.gov), dated April 27, 2011.
(5)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated July 12,
2011.
(6)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (ww.sec.gov), dated August 5,
2011.
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(7)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated August
17, 2011.
(8)Incorporated by reference from the exhibits included in the Company's Form 8K
filed with the Securities and Exchange Commission (www.sec.gov), dated January
23, 2012.
(9)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.
ITEM 17. UNDERTAKINGS
We hereby undertake the following:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
Offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to the directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of the directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of the directors, officers, or controlling
persons in connection with the securities being registered, we will unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
For determining liability under the Securities Act, to treat the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant under Rule 424(b) (1) or (4) or 497(h) under the Securities Act as
part of this Registration Statement as of the time the Commission declared it
effective.
-48-
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form POS AM and authorized this Amended
Registration Statement to be signed on our behalf by the undersigned, thereunto
duly authorized, in the City of Arvada, State of Colorado, on March 14, 2012.
HINTO ENERGY, INC.
/s/ George Harris March 14, 2012
-------------------------------------------------
George Harris
(Chief Financial Officer/Principal Accounting
Officer and Principal Executive Officer)
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In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ George Harris March 14, 2012
--------------------------------------------------
George Harris, Director
/s/ Gary Herick March 14, 2012
--------------------------------------------------
Gary Herick, Director
/s/ J. David Keller March 14, 2012
--------------------------------------------------
J. David Keller, Director
/s/ Max Sommer March 14, 2012
--------------------------------------------------
Max Sommer, Director
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