Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Hiko Bell Mining and Oil Company is a Utah corporation organized in 1942 to mine tungsten for the World War II strategic metals plan on an 80-acre tract of patented land which the Company still owns, located in northwestern Box Elder County, Utah. The principal business of the registrant is exploring for, developing and producing oil, gas and minerals, including the acquisition of leases, farmouts, mining properties or other valuable mineral lands. Hiko Bell's current portfolio is more fully described in “ITEM 2” in our Annual 10-K, for the period ending December 31, 2005.
Hiko Bell’s sources of the properties are state and federal oil and gas leases and fee (patented) lands, principally in the Rocky Mountain area.
Initial development of an oil and gas or mining prospect originates within the geologic department. The feasibility of acquiring such land is checked in state land offices, county court houses, with the Bureau of Land Management and other governmental agencies. Management then works up the economic viability of the project with an Authority for Expenditure (AFE). If the economics are favorable and the acreage is available, a review is made of the cost of acquisition, of geologic and geophysical work, the cost of the drilling or exploration work, the cost of completion of “putting into production: and the current and future market conditions. If all of these varied factors are favorable, the plan is then approached form the standpoint of funding the project.
All of the above operations are conducted by Hiko Bell and require various degrees of skill, knowledge and experience, combined with a high degree of group effort and motivation.
Competition
Hiko Bell operates in a highly competitive industry were success is dependent upon the ability to generate excellent projects, which are financially within the limits and range of registrant, to move quickly and decisively and to obtain the required financing and follow the project through form beginning to end. Management is fortunate in having a highly motivated staff with more than 90 years of combined industry experience.
Legal Issues
During the last several quarters, Hiko Bell has incurred tremendous legal expenses. Much of it was from being sued several times in 2005 by individuals we believe may have acquired stock with the express purpose of bringing suit against Hiko Bell, in order to gain control of the company and its assets. Those legal matters at present have been settled, but it is critical to the financial survival of the corporation that future lawsuits or threats of lawsuits be more aggressively addressed by counter-suits, or other measures as deemed appropriate after negotiation has failed.
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