Hiko Energy Corp. (fka HIKO)

[db7]

Hiko's registration revoked
Mon, 01/28/2013 - 12:57
Due to various barriers, which I’ll outline below, we were unable to obtain all the information required for reporting under Sarbanes Oxley. The SEC initialized the action to revoke Hiko’s registration for non-reporting. According to the SEC the last year in which Hiko was in compliance was 1993. We took over the company in 2010.

After discussions with legal counsel, the consensus was the action was a blessing in that it provides us a safe harbor for non-reporting while we continue working to clean up the company. It also provides a simpler series of steps to become a SEC Rule 15c2-11 company.

Numerous deficiencies were discovered over the last three years. In an audit of the shareholder records, we discovered two things.

1. Old management issued more shares than they were authorized to issue.
2. Cede & Co had a million more shares reported in their Securities Position Report than our records indicated.

Having exhausted the Utah legal system in trying to make old management give us the remaining stock ledgers, we entered into a lengthy dialog with DTCC, which ended with a discussion between our lawyers and theirs. We requested DTCC’s Hiko records for active certificate numbers, share amounts, and the certificate numbers that were cancelled to create those shares. This seemed like a reasonable request since in normal circumstances, Hiko should have these records. In the end, DTCC refused to give us the records. Not having these records made it impossible to comply with Sarbanes Oxley.

In light of the above, the cost of being a fully reporting company under Sarbanes Oxley is largely prohibitive for small companies. It was our intention from the beginning to re-register under SEC Rule 15c2-11 which was designed to allow non-reporting public company's securities to be quoted on The Financial Industry Regulatory Authority ("FINRA") Over-the-Counter Bulletin Board ("OTCBB") by filing some simple disclosures. We tried to do this in 2011, but unfortunately, the total number of Hiko shareholders exceeds the 500 shareholder limit, and the process also requires being current in all reporting.

Where do we go from here? Though we don’t have the convenience of share liquidity, Hiko’s corporate entity still exists and can still conduct business. We are also obtaining advice from our lawyer as to the steps required to become an SEC Rule 15c2-11 company. As soon as we have a plan we will publish on the web site and will then have it voted on at the next shareholders meeting.

It has been our attorney thoughts from the beginning that becoming a SEC Rule 15c2-11 company, would require vending an asset into the company. That was impossible while we were in the noncompliance status with the SEC. Additionally, the situation with the SEC prevented us from entering into any merger negotiations.

Current shareholders WILL NOT be extinguished.

One of our cleanup options, which we are discussing with our attorney, may be to send notice of a share conversion 1 to 1 shares (no dilution), which would be an indirect way to force DTCC (Cede & Co) to send their shares in (thus obtaining those records). We were looking at this option before our registration was revoked, but believe it is still applicable.