☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on December 31, 2020, based on a closing price of $0.15 was approximately $48,153,663.
As of May 5, 2021 there were 353,524,425 shares of common stock issued and outstanding.
PART I
Item 1. Business.
Company History
Premier Products Group, Inc. formally known as Valley High Mining Company (“we,” “us,”, “our,” or the “Company”) was incorporated in the State of Utah on November 14, 1979, under the name Valley High Oil, Gas & Minerals, Inc. (“Valley High Oil”), for the purpose of engaging in the energy, mining and natural resources business. In order to raise the money necessary to acquire, explore and develop oil and gas properties and other natural resource-related ventures or projects, we undertook an offering of our common stock pursuant to the Regulation A exemption from registration afforded under the Securities Act of 1933, as amended, wherein we offered and sold a total of 25 million common shares at a price of two cents ($0.02) per share and received gross proceeds of $500,000 from over 1,000 subscribers. These funds were utilized in our attempt to acquire and explore for oil and gas, uranium, coal, geothermal, and other mineral (metallic and nonmetallic) properties.
During the Company’s history, we have engaged in various efforts to increase and maintain shareholder value. The company entered in various equity and debt financing to raise the money necessary to operate and partake in business development. These funds were utilized in our attempt to acquire, explore, and to support the company’s ability to make and execute appropriate corporation actions.
In February 2018, the Company changed its domicile from the State of Wyoming to the State of Delaware as filed in our Form 8-K with the Securities Exchange Commission on March 1, 2018. The Company completed a Holding Company Reorganization, whereby On February 22, 2018, the issuer (having been renamed, immediately prior to this Holding Company Reorganization, from “Premier Products Group, Inc.” to “Valley High Mining Company”) completed a corporate reorganization (the “Holding Company Reorganization”) pursuant to which Valley High Mining Company, as previously constituted (the “Predecessor”) became a direct, wholly-owned subsidiary of a newly formed Delaware corporation, Premier Products Group, Inc. (the “Holding Company”), which became the successor issuer. In other words, the Holding Company is now the public entity. The Holding Company Reorganization was affected by a merger conducted pursuant to Section 251(g) of the Delaware General Corporation Law (the “DGCL”), which provides for the formation of a holding company without a vote of the stockholders of the constituent corporations.
In accordance with Section 251(g) of the DGCL, Premier Services, Inc. (“Merger Sub”), another newly formed Delaware corporation and, prior to the Holding Company Reorganization, was an indirect, wholly-owned subsidiary of the Predecessor, merged with and into the Predecessor, with the Predecessor surviving the merger as a direct, wholly-owned subsidiary of the Holding Company (the “Merger”). The Merger was completed pursuant to the terms of an Agreement and Plan of Merger among the Predecessor, the Holding Company and Merger Sub, dated February 22, 2018 (the “Merger Agreement”).
On February 22, 2018, the Predecessor changed its name and then re-domiciled from Wyoming to Delaware. Immediately following such re- domiciliation, the Holding Company adopted a certificate of incorporation (the “Certificate”) and bylaws (the “Bylaws”) that are, in all material respects, identical to the certificate of incorporation and bylaws of the Predecessor immediately prior to the Holding Company Reorganization with the possible exception of certain amendments that are permissible under Section 251(g)(4) of the DGCL. The Holding Company has the same authorized capital stock and the designations, rights, powers and preferences of such capital stock, and the qualifications, limitations and restrictions thereof are the same as that of the Predecessor’s capital stock immediately prior to the Holding Company Reorganization.
Prior to this action, in February 2016, the Company changed its domicile from the state of Nevada to the State of Wyoming as filed in our Form 8-K on March 1, 2016.
On Apr 26, 2016, Valley High Mining Company submitted an amendment to its Articles of Incorporation changing the company name from Valley High Mining Company (VHMC) to Premier Product Group, Inc. (PMPG) to the State of Wyoming. The New Changes were approved, stamped and filed on June 1, 2016.
On February 13, 2017, the Company entered into an acquisition and stock purchase agreement with Satic Incorporated (“SATIC”) (Form 8-K filed on February 15, 2017), whereby SATIC was to become a wholly-owned subsidiary of the Company. On January 4, 2018 (subsequent to the filing period), due to SATIC and the Company’s inability to complete due diligence and acceptable closing terms, the parties mutually agreed to rescind and cancel the February 13, 2017 acquisition and stock purchase agreement, with the closing never having taken place (Form 8-K file on January 10, 2018).
Prior to this transaction and during the fiscal year ended December 31, 2016, the company entered in a Letter of Intent (LOI) with conditions to merger with Gear Sports Nutrition, Inc. (“GEAR”) During the due diligence period, the Company changed its name to Premier Products Group, Inc. in anticipated closing of the merger. However, due to specific deliverables not achieved as outlined in the LOI by GEAR, the agreement was cancelled in August 2016.
Between 1980 and 1985, we spent nearly all of our capital on several natural resource and mining ventures. In 1985, we effectuated a 10:1 reverse split. By 1986, after engaging in several unsuccessful ventures, we exhausted our capital reserves. From April 1989 through 2003, we were dormant, doing only those actions necessary to allow the Company to remain as an active entity. In April 2004, pursuant to the affirmative vote of our shareholders we reincorporated into the State of Nevada by merging with a wholly-owned Nevada subsidiary company under the name Valley High Mining Company (the “Merger”). Pursuant to the Merger, among other things, for every 35 shares of Valley High Oil, a shareholder was entitled to receive one (1) share of Valley High Mining Company a Nevada corporation, the surviving entity in the Merger.
On April 19, 2004, the day that the Merger was effective, we entered into a mining lease agreement with North Beck Joint Venture, LLC, a Utah limited liability company (” North Beck”), an entity owned and controlled by our then principal shareholder and officer/director. The terms of the lease consideration were based upon prior lease agreements that North Beck Joint Venture had entered into with other mining companies in the past. As a result, we acquired control of over 470 acres of patented precious metals mining claims located adjacent to, and just west of, the town of Eureka in Juab County, Utah, in the so-called “Tintic Mining District” (the “North Beck Claims”). The Tintic Mining District of Juab County, Utah, is located approximately 100 miles south of Salt Lake City. The North Beck Claims have an extensive history and contain several mines, mining shafts or "prospecting pits," two of which are over 1,000 feet deep. This project also proved to be unsuccessful. As a result, in February 2010, control of our Company changed again, with the business objective to seek a suitable acquisition candidate through acquisition, merger, reverse merger or other suitable business combination method. We disposed of the North Beck Claims in connection with the change in control.
Until September 2012, our then management continued to seek a suitable acquisition candidate, without success. On September 8, 2012, we executed a Joint Venture Agreement (the “Joint Venture”) with Corizona Mining Partners LLC, a Minnesota limited liability company (“Corizona”). Prior, on July 20, 2012, the Company and Corizona formed a limited liability company, Minera Carabamba S.A. pursuant to the laws of Peru. The Joint Venture acquired a 50% leasehold interest in a property of approximately 966 hectares, located in La Libertad, Peru, in order to conduct gold mining operations on the property under the project name of Machacala. On March 1, 2013, the Company advised Corizona that we were no longer interested in continuing with our role in the Joint Venture due to the inability to gain access to the property.
Also, during our fiscal year ended December 31, 2012, we reviewed a second possible venture with Corizona. They introduced us to a second property located in Peru and on October 5, 2012, we executed a letter of intent (“LOI”) to develop this project, which consisted of a 50% aggregate interest. The LOI provided for us to initially own 80% of the venture, with Corizona owning the remaining 20%. We agreed to pay the costs of developing the project, which was estimated to be approximately $500,000, subject to our due diligence. We performed our due diligence on this project and discovered that it was not in production, despite representations to the contrary. We also could not reach an agreement with Corizona on a budget for this project. As a result, we elected to terminate this venture.
During the year ended December 31, 2013, we also formed a wholly-owned subsidiary, VH Energy, Inc., a Texas corporation, which was formed with the intention of engaging in the oil and gas industry. We initially engaged in a venture which involved the brokerage of diesel fuel, which failed to close. We have commenced legal action against various parties involved in this transaction, however the matter is closed. See “Part II, Item 1, Legal Proceedings,” below.
During the year ended December 31, 2014, the Company began to identify new underserved and emerging industries to move into and discovered an increasing demand for fresher locally grown organic foods. The demand for organic food rose 11% between 2011 and 2012, reaching $28 billion and the market is now predicted to grow at a 14% annual rate for the next four years. As a result, the Company attempted to transition into the organic foods market and on December 4, 2014, the Company completed the purchase of a fully contained grow environment, or grow pod, pursuant to that certain Agreement and Bill of Sale. The grow pod was a template for many to be built and deployed into culture centers (between 20 and 40 pods). The grow pods were steel shipping containers converted to be self-contained, insulated, solarized, bug-free, pesticide-free, heated, cooled, LED lighted hydroponic growing facilities that can be managed from a computer or phone. The Company has tried unsuccessfully throughout fiscal year ended December 31, 2015 to adequately capitalize its transition to the organic food market, and thus looked for new emerging markets.
Our principal place of business is located at 18653 Ventura Blvd. Suite 707, Tarzana, CA 91356. Our phone number is (818) 405-0830 and our website address is www.pmpginc.com.
Government Regulations
Estimate of the Amount Spent on Research and Development
Research and development expenses were $-0- and $-0- in 2020 and 2019, respectively. Employees
As of December 31st, 2020, we had one (1) part-time employee, who acted as our as interim Chief Executive Officer and President. For the foreseeable future, we intend to use the services of independent consultants and contractors to perform various professional services.
Competition
The company is currently in the development stage, while marketing and pursuing a merger with a target to merge with company in marketspace the offers our shareholder the value that improves the Company’s ability to grow, expand, and maintain substance operating and Reporting requirements.
Patents, Trademarks, Licenses, Royalty Agreements or Labor Contract None
Available information
The public may read and copy any materials the Company files with the U.S. Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Item 2. Properties.
During the fiscal year ended December 31, 2020, the Company utilized office space under the control of our current interim Chief Executive Officer, approximately 400 square feet of executive office space located at 1325 Cavendish Drive, in Silver Spring, MD, without charge, on a month to month basis.
Item 3. Legal Proceedings.
In March 2014, the Company entered into a settlement agreement with one of its former CEO, Andrew Telsey. A dispute arose with respect to the Company’s performance under such settlement agreement and, in accordance with the terms of such agreement, such party moved for arbitration to resolve such dispute. An agreement was reached in April 2015 during arbitration; however, the Company was unable to perform under the settlement agreement. As of December 2020, the Company has recorded a legal liability in the amount of $197,283, the awarded amount plus accrued interested to account for liability they have incurred.
On February 24, 2015, the Company was named a defendant in a complaint filed by John Michael Coombs in the Third Judicial District Court in and For Salt Lake County, State of Utah, alleging, among other things, Breach of Contract, in connection with a Warrant Agreement issued by the Company to Mr. Coombs in 2010. Management has informed Mr. Coombs that it fully intends to honor the Warrant Agreement and is in discussions to settle this matter. The Company carries this liability on its balance sheet as a derivative asset, which amounted to liability $221,814 at the fiscal year ended December 31, 2020.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
Our shares of common stock are currently quoted on the OTC Pink under the symbol “PMPG”
The following table sets forth the high and low bid price for our common stock for each quarter during the past two fiscal years. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
|
Year Ended
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
$
|
0.0120
|
|
|
$
|
0.0055
|
|
|
June 30, 2019
|
|
$
|
0.0085
|
|
|
$
|
0.0022
|
|
|
September 30, 2019
|
|
$
|
0.0042
|
|
|
$
|
0.0015
|
|
|
December 31, 2019
|
|
$
|
0.0095
|
|
|
$
|
0.0037
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
$
|
0.0049
|
|
|
$
|
0.0014
|
|
|
June 30, 2020
|
|
$
|
0.0030
|
|
|
$
|
0.0007
|
|
|
September 30, 2020
|
|
$
|
0.0150
|
|
|
$
|
0.0010
|
|
|
December 31, 2020
|
|
$
|
0.1775
|
|
|
$
|
0.0046
|
|
(b) Holders
As of May 5, 2021 a total of 353,524,425 shares of the Company’s common stock are currently outstanding held by 1,229 shareholders of record. This figure does not take into account those shareholders whose certificates are held in the name of broker dealers or other nominees.
(c) Dividends
We have not declared or paid any dividends on our common stock and intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not anticipate paying dividends on our common stock for the foreseeable future. The payment of dividends in the future will depend upon, among other factors, our earnings, capital requirements, and operating financial conditions.
(d) Securities Authorized for Issuance under Equity Compensation Plan
We have not adopted any stock option or other employee plans as of the date of this Report. We may adopt such plans in the future. Transfer Agent
Our transfer agent is Pacific Stock Transfer Company. Their address is 6725 Via Austin Pkwy, Suite 300, Las Vegas, NV 89119. Their phone number is (702) 361-3033.
Recent Sales of Unregistered Securities
There were no sales of unregistered securities in 2020.
During the fiscal year ended December 31, 2018, we have issued the following securities which were not registered under the Securities Act and not previously disclosed in the Company’s Quarterly Reports on From 10-Q or Current Reports on Form 8-K. Unless otherwise indicated, all of the share issuances described below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act for transactions not involving a public offering:
The Company has instructed its transfer agent to place a stop transfer on certificates representing 20,000,000 shares of common stock pursuant to a failed Regulation S Stock Purchase Agreement as these shares were not paid for.
During the year ended December 31, 2018, a total of 65,343,669 shares of common stock were issued for the retirement of debt and accounts payable in the amount of $45,172. The Company recognized a netted loss of $ 980,874 on the conversions and transaction.
During the year ended December 31, 2020, the Company believes that its the Transfer Agent issued a total of 35,568,820 shares erroneously.
Rule 10B-18 Transactions
During the years ended December 31, 2020 and 2019, there were no repurchases of the Company’s common stock by the Company.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
THE FOLLOWING DISCUSSION OF RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.
Results of Operations
Comparison of Results of Operations for the fiscal years ended December 31, 2020 and 2019.
Total expenses, which included general and administrative expenses for our fiscal year ended December 31, 2020 were $540,672, compared to $75,720 during our fiscal year ended December 31, 2019, an increase of $464,952. The increase was attributable to an increase in share based compensation of $508,547, offset by a decrease in professional fees of $35,687, and a decrease in general and administrative expense of $8,609.
Additionally, the Company experienced changes in other income and expense effecting the net loss, which included a loss on derivative liability of $215,873, gain on write off of liabilities of 21,531, and interest expense of $27,986.
As a result, we incurred a net loss of $763,000 (approximately $0.00 per share) for the fiscal year ended December 31, 2020, compared to a net loss of $101,814 during our fiscal year ended December 31, 2019 (approximately $0.00 per share).
Liquidity and Capital Resources
As of December 31, 2020, we had cash or cash equivalents of $0.
Net cash used in operating activities was $31,600 during our fiscal year ended December 31, 2020, compared to $51,559 during our fiscal year ended December 31, 2019.
Cash flows provided or used in investing activities were $-0- provided for the year ended December 31, 2020 and $0.00 used during our fiscal year ended December 31, 2019. Net cash flows provided by financing activities was $31,600 during our fiscal year ended December 31, 2020, compared to $51,559 during our fiscal year ended December 31, 2019.
During 2020 we borrowed $31,600 from related parties. As of December 31, 2020, net borrowing from related parties totaled $173,532. These loans carry interest of 6% and are due upon demand within the next 12 months. We utilized these funds from these loans to cover operating expenses during the fiscal year.
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during our fiscal year ended December 31, 2020.
Critical Accounting Policies and Estimates
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Leases – We follow the guidance in SFAS No. 13 “Accounting for Leases,” as amended, which requires us to evaluate the lease agreements we enter into to determine whether they represent operating or capital leases at the inception of the lease.
Recently Adopted Accounting Standards
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
FASB ASU 2018-03 “Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” – In August 2018, the FASB issued ASU 2018-13. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that this update will have on its financial statements and related disclosures.
FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15. Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU will not have a significant impact on our statement of cash flows.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We hold a derivative warrant instruments which is accounted for on a quarterly basis and reflected as a loss or gain on our income statement with the balance of the liability reflected on our balance sheet. We do not engage in any other hedging activities.
Item 8. Financial Statements and Supplementary Data.
Our financial statements are contained in pages F-1 through F-13 which appear at the end of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .
None.
Item 9A. Controls and Procedures .
(a) Evaluation of Disclosure and Control Procedures
Our management, with the participation of our Chief Executive Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Report.
These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO to allow timely decisions regarding required disclosure.
Based on this evaluation, our current CEO has concluded that our disclosure controls and procedures were effective as of December 31, 2020, at the reasonable assurance level. We believe that our financial statements presented in this annual report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.
(b) Management’s Assessment of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
|
|
·
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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|
|
|
|
|
|
·
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and
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|
|
|
|
|
|
·
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the company’s assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) of 2013.
Based on management’s assessment, management believes that, as of December 31, 2020, our internal control over financial reporting presented a material weakness. The assessment is based on the changes in management throughout the year. We also did not effectively implement comprehensive entity level internal controls and were unable to adequately segregate duties within the accounting department due to an insufficient number of staff, and implement appropriate information technology controls.
Inherent Limitations
Our management, including our Chief Executive Officer/Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
On December 20, 2020, the holder of 51 shares of Series B Preferred Stock, constituting 51% voting control of the Company, voted out the then existing Board of Directors and all officers of the Company (Christian Richards, Edward Y. Lee, and Arnold F. Sock), and replaced them with an appointment of Terry L. Stein.
The following table and biographical summaries set forth information, including principal occupation and business experience, about our director and executive officer at December 31, 2020 (Please note, as of report date of 11/6/20 Terry Stein was no longer an officer of the Company:
The following table sets forth, as of today’s date 11/6/2020, certain information regarding the beneficial ownership of the shares of Common Stock by: (i) each person who, to the Company’s knowledge, beneficially owns 5% or more of the shares of Common Stock and (ii) each of the Company’s directors and “named executive officers.”
|
Title of Class
|
|
Name and address of beneficial owner
|
|
Amount and nature of beneficial ownership
|
|
|
Percent of
Class (1)
|
|
|
|
|
Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
Old Sawmill Partners, LLC
|
|
|
51
|
*
|
|
*100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
Edward Y. Lee, Tony Hicks & Wilford Hicks
|
|
|
51
|
(1)
|
|
|
100.
|
%
|
|
Total Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
51
|
|
|
|
100
|
%
|
_______
* Old Sawmill Partners LLC sold all of his 51 shares of the Company’s Preferred Stock, effective September 21, 2020, and now owns 0% of Preferred
(1) The 51 shares of Series B Preferred Stock are held in the name Edward Y. Lee, Director of Premier Products Group, Inc. Tony Hicks, Chairman and Wilford Hicks, Director of Premier Products Group, Inc.
The above table reflects share ownership as of the Record Date, and after giving effect to the Change of Control approved on September 21, 2020. On September 21, 2020 the then constitute board appointed the following directors and officers:
|
Name
|
|
Age
|
|
Position(s)
|
|
Tony Hicks
|
|
57
|
|
Chairman
|
|
Darryl Calloway
|
|
59
|
|
Interim Chief Executive Officer
|
|
Edward Y. Lee
|
|
51
|
|
Director
|
|
Arnold F. Sock
|
|
66
|
|
Secretary & Interim Chief Financial Officer
|
|
Wilford Hicks
|
|
56
|
|
Director
|
Following is biographical information of our current management:
Tony Hicks, Chairman: Age 57, For over twenty-five years, Mr. Hicks has been an active Senior Partner with Trai Beverly Hills, where he remodeled 250+ residential homes around the country. For ten years, he owned and managed a successful residential and commercial mortgage lending company. Most recently, he has partnered with World Heavyweight Champion and multi-million dollar pitch man George Foreman as the founder and creator of the Choosing Independence Visa Debit Card program, a global initiative focused on helping students eliminate student loan debt.
Arnold F. Sock Esquire, Secretary & Interim Chief Financial Officer: Age 66, Mr. Sock holds degrees from Roger Williams University-B.S. in Accounting; The University of West Los Angeles School of Law - Juris Doctor; and Golden Gate University School of Law - Master of Laws. He is a member of the State Bar of California and was admitted to practice in June 1995. Mr. Sock has held the positions of President, Chief Financial Officer, and Secretary in public and private companies since 1983, in addition to directorships in public and private companies.
Darryl Calloway, Interim Chief Executive Officer: has twenty-six plus years of experience in real estate development and urban land economics. Proven history of providing insightful market analysis on a strong understanding of financial trends and patterns to problem solve and provide optimal advice and identify commercial opportunities. Darryl has advanced communication and creative problem-solving skills, with a sound background in delivering project support for all the stages from initial design to final occupancy to property operations.
Edward Y. Lee, Board of Director: Age 49, Mr. Lee, is and has been a licensed attorney since 1994, specializing in the areas of personal injury and civil litigation. Mr. Lee has recently earned the distinction of being certified as a Who’s Who Top Attorney of North America. Additionally, as an individual, and his law firm, the Law Offices of Edward Y. Lee, has been ranked among the ten best by both the American Institute of Personal Injury Attorneys and Attorney and Practice Magazine for two consecutive years. Mr. Lee is a member of the Consumer Attorneys Association of Los Angeles and the American Association for Justice and has appeared on CBS, ABC, NBC, The Glenn Beck Show, and On the Record with Greta Van Susteren providing legal commentary.
Wilford Hicks, Director: Age 56, Mr. Hicks is a real estate investor for the last 20 years. Mr. Hicks has over 20 years of growing organics. Mr. Hicks specialty is Farm production and operations.
Item 10A. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding the ownership of common stock as of 11/6/20, by (i) each person known to us to own more than 5% of our outstanding common stock and or preferred stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power.
|
Title of Class
|
|
Name and Address Of Beneficial Owner
|
|
Amount and Nature
Of Beneficial Ownership
|
|
|
Percent
Of Class (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
Tony Hicks, Edward Y. Lee and Wilford Hicks
|
|
|
51
|
*
|
|
|
100
|
%
|
_________
*The 51 shares of Series B Preferred Stock are held in the name Edward Y. Lee, Director of Premier Products Group, Inc. Tony Hicks, Chairman and Wilford Hicks, Director of Premier Products Group, Inc.
Family Relationships
Tony Hicks and Wilford Hicks are siblings. Committees of the Board of Directors
We do not have a standing nominating, compensation or audit committee. Rather, our full Board performs the functions of these committees. Also, we do not have a “audit committee financial expert” on our Board as that term is defined by Item 401(d)(5)(ii) of Regulation S-K. We do not believe it is necessary for our Board to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making. Additionally, because our Common Stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.
Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to our present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2020, were timely.
Code of Business Conduct and Ethics
As of the date of this Information Statement, we have not adopted a corporate code of business conduct and ethics.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Stock
Awards ($)
|
|
|
All Other Compensation ($)
|
|
|
Total
Compensation ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry L. Stein
|
|
2020
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
CEO (1)
|
|
2019
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
_________
(1) On December 20, 2020, the holder of 51 shares of Series B Preferred Stock, constituting 51% voting control of the Company, voted out the then existing Board of Directors and all officers of the Company (Christian Richards, Edward Y. Lee, and Arnold F. Sock), and replaced them with an appointment of Terry L. Stein.
Employment Agreements
The Company has not entered into any material plan, contract or arrangement (whether or not written) with its new director. Outstanding Equity Awards
The Company has no stock option, retirement, pension, or profit-sharing programs for the benefit of directors, officers or other employees, but the Board may recommend adoption of one or more such programs in the future.
No officer or director holds any unexercised options, stock that had not vested, or equity incentive plan awards as of the date of this Report. Director Compensation
The Company has not paid compensation to its members of the Board for serving as such. The Board may in the future decide to award the members of the Board cash or stock-based consideration for their services to the Company, which awards, if granted shall be in the sole determination of the Board.
Item 12. Changes in Control
We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Party Transactions
During the year ended December 31, 2020, the company booked $173,532 in related party advances. During the year ended December 31, 2019, the Company borrowed $163,916. in related party advances.
During the year ended December 31, 2014, the Company borrowed $15,918.58 in related party advances and the Company accrued interests for these loans in the amount of $658.60. The Company transferred $150,200 in related party loans to contingent liability during this same period to account for the potential liability of loans in question by current management from insider transactions in 2012 and 2013.
There are no other related party transactions that are required to be disclosed pursuant to Regulation S-K promulgated under the Securities Act of 1933, as amended.
Director Independence
The common stock of the Company is currently quoted on the OTC Pink, quotation systems which currently do not have director independence requirements. On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K. Following completion of these disclosures, the Board will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy the criteria for the Nasdaq. The Board has determined that there are no members that are independent under such standards.
Item 14. Principal Accounting Fees and Services.
The following table presents fees for professional audit services rendered by BF Borgers, CPA PC during our fiscal year ended December 31, 2020 and 2019.
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Audit Fees
|
|
$
|
13,500
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
13,500
|
|
|
$
|
—
|
|
Audit Fees. Consist of amounts billed for professional services rendered for the audit of our annual financial statements included in our Annual Reports on Forms 10-K for our fiscal years ended December 31, 2020 and 2019 and reviews of our interim financial statements included in our Quarterly Reports on Forms 10-Q. Please note: Audit fees for 2019 were paid in October 2020.
Tax Fees. Consists of amounts billed for professional services rendered for tax return preparation, tax planning and tax advice.
All Other Fees. Consists of amounts billed for services other than those noted above.
We do not have an audit committee and as a result our entire Board performs the duties of an audit committee. Our Board evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.
Notes to the Consolidated Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Premier Products Group. Inc (“the Company”) was organized under the laws of the State of Utah on November 14, 1979 as Valley High Oil, Gas & Minerals, Inc. In April 2004, the Company reincorporated into the state of Nevada by merging with Valley High Mining, Inc, a Nevada corporation and wholly owned subsidiary of the Company, which was incorporated on February 27, 2004. The Nevada corporation was the surviving entity. The Company changed its domicile to the state of Wyoming on February 3, 2016 and changed its name to Premier Products Group, Inc. in April 2016. The Company changed its domicile to the state of Delaware in February of 2018.
Use of Estimates
The preparation of 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic No. 740, “Accounting for Income Taxes”. This statement requires an asset and liability approach for accounting for income taxes. The Company adopted the provisions of ASC Topic No. 740, “Accounting for Income Taxes,” on January 1, 2007. As a result of the implementation of ASC Topic No. 740, the Company recognized no liability for unrecognized tax liabilities. The Company has no tax positions on December 31, 2020 and 2019 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Loss Per Share
The computation of loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with ASC Topic No. 260, “Earnings Per Share.”
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist principally of cash, amounts due to a related party, accounts payable and accrued expenses, and derivative liabilities. ASC 820, Fair Value Measurements and Disclosures, and ASC 825, Financial Instruments, establish a framework for measuring fair value, establish a fair value hierarchy based on the quality of inputs used to measure fair value, and enhance disclosure requirements for fair value measurements.
The Company utilizes various types of financing to fund its business needs, including warrants not indexed to the Company’s stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815.
The fair value of the derivative instruments are determined based on “Level 3” inputs, which consist of inputs that are both unobservable and significant to the overall fair value measurement. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
The Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
Financial assets and liabilities recorded on the balance sheet are categorized based on the inputs to the valuation techniques as follows:
Level 1 Financial assets and liabilities for which values are based on unadjusted quoted prices for identical assets or liabilities in an active market that management has the ability to access.
Level 2 Financial assets and liabilities for which values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (commodity derivatives and interest rate swaps).
Level 3 Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.
When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company conducts a review of fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities.
Recently Issued Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
FASB ASU 2018-03 “Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” – In August 2018, the FASB issued ASU 2018-13. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that this update will have on its financial statements and related disclosures.
FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – In August 2016, the FASB issued 2016-15. Stakeholders indicated that there is a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Adoption of this ASU will not have a significant impact on our statement of cash flows.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.
NOTE 2 – GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a working capital deficit and has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it consummates a business combination. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – NON-CONSOLIDATED FINANICAL INFORMATION
ASSETS & LIABILITIES – Year Ended December 31, 2020
|
|
|
PARENT
|
|
|
SUBSIDIARY
|
|
|
ASSETS
|
|
|
Current Assets
|
|
|
|
|
|
|
|
Cash
|
|
|
—
|
|
|
|
—
|
|
|
Total Current Assets
|
|
|
—
|
|
|
|
—
|
|
|
Fixed Assets
|
|
|
—
|
|
|
|
—
|
|
|
TOTAL ASSETS
|
|
|
—
|
|
|
|
—
|
|
|
Liabilities
|
|
Accounts payable and accrued expenses
|
|
$
|
63,504
|
|
|
$
|
205,119
|
|
|
Contingent liability – legal
|
|
|
—
|
|
|
|
197,283
|
|
|
Contingent liability – notes
|
|
|
—
|
|
|
|
225,200
|
|
|
Derivative liability – warrants
|
|
|
—
|
|
|
|
221,814
|
|
|
Notes payable – related parties
|
|
|
173,532
|
|
|
|
—
|
|
|
Notes payable
|
|
|
31,500
|
|
|
|
309,682
|
|
|
Total Current Liabilities
|
|
|
268,536
|
|
|
|
1,159,098
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
268,536
|
|
|
$
|
1,159,098
|
|
STATEMENTS OF OPERATION – Year Ended December 31, 2019
|
|
|
PARENT
|
|
|
SUBSIDIARY
|
|
|
REVENUES
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOOD
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Administrative expense
|
|
|
8,091
|
|
|
|
—
|
|
|
Professional Fees
|
|
|
24,033
|
|
|
|
—
|
|
|
Share based compensation
|
|
|
508,547
|
|
|
|
—
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
540,672
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(540,672
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
Gain (loss) on derivative liability
|
|
|
—
|
|
|
|
(215,873
|
)
|
|
Gain on write off of liabilities
|
|
|
21,531
|
|
|
|
—
|
|
|
Interest expense
|
|
|
(7,777
|
)
|
|
|
(20,209
|
)
|
|
Total Other Income (Expense)
|
|
|
13,754
|
|
|
|
(236,082
|
)
|
|
GAIN (LOSS) BEFORE INCOME TAXES
|
|
|
(526,918
|
)
|
|
|
(236,082
|
)
|
|
Provision for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
NET INCOME (LOSS)
|
|
$
|
(526,918
|
)
|
|
$
|
(236,082
|
)
|
NOTE 4 – RELATED PARTY TRANSACTIONS
Management Compensation
For the fiscal years ended December 31, 2020 and 2019, the Company paid or accrued to its CEO, CFO, and President an aggregate of $0 in compensation and bonuses.
Office Space
For the fiscal years ended December 31, 2020 and 2019, the utilized approximately 400 square feet of executive office space in Silver Spring, MD, without charge, on a month to month basis from the CEO.
NOTE 5 – ADVANCES AND NOTES PAYABLE TO RELATED PARTIES
Advances and notes payable to related parties for December 31, 2020 were $173,532. Advances and notes payable to related parties for December 31, 2019 were $163,916.
NOTE 6 – NOTES PAYABLE AND DERIVATIVE LIABILITY
Notes Payable
At fiscal year ended December 31, 2020 and December 31, 2019, the Company had third party notes payable and accrued interest in the amount of $514,714 compared to $476,659, respectively. The notes included notes to eleven unaffiliated parties at interest rates of between 6% and 10% per year. The notes expire between 2015 and 2019 fiscal years and are not secured by collateral of the Company. Several of these notes are in default and the Company is in communication with the holders to resolve these outstanding issues. The notes are convertible into common stock, at the election of the holder, at discounts of between 40% and 50%. Two additional notes, totaling $11,250 are convertible into common stock of the Company at $0.001. Additionally, the Company is carrying $225,200 in notes payable contingent liability representing three prior notes that are either in dispute or the Company is unable to substantiate.
Derivative Liability
The Company entered into an agreement which has been accounted for as a derivative. The Company has recorded a loss contingency associated with this agreement because it is both probable that a liability had been incurred and the amount of the loss can reasonably be estimated. The main factors that will affect the fair value of the derivative are the number of the Company’s shares outstanding post acquisition or post offering and the resulting market capitalization.
ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market-based pricing models incorporating readily observable market data and requiring judgment and estimates.
The Company issued warrants and has evaluated the terms and conditions of the conversion features contained in the warrants to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the warrants represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the warrants is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the warrants was measured at the inception date of the warrants and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense at each balance sheet date.
The Company valued the conversion features in its warrants using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return of 0.0131%, grant dates at December 31, 2020 and December 31, 2019, the term of the warrant extending 3 years from the date of a “reverse merger”, conversion of warrant shares is equal to 0.005% of the then outstanding common stock of the company, the conversion price is $0.001, current stock prices on the measurement date ranging from $0.0007 to $0.1775, and the computed measure of the Company’s stock volatility, ranging from 380% to 600%.
Included in the December 31, 2020 and 2019 financial statements is a derivative liability in the amount of $221,814 and $5,941, respectively, to account for this transaction. It is revalued quarterly henceforth and adjusted as a gain or loss to the consolidated statements of operations depending on its value at that time.
Included in our Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 are $(215,873) and $1,313 in change of fair value of derivative in non-cash charges pertaining to the derivative liability as it pertains to the gain (loss) on derivative liability and debt discount, respectively.
Derivative Liability
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
Estimated number of underlying shares
|
|
|
1,427,780
|
|
|
|
1,427,780
|
|
|
Estimated market price per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
Exercise price per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
Expected volatility
|
|
|
600
|
%
|
|
|
382
|
%
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Expected term (in years)
|
|
|
3.00
|
|
|
|
3.00
|
|
The following presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis on December 31, 2020. These items are included in “derivative liability” on the consolidated balance sheet.
Fair Value Measurements on a Recurring Basis
|
|
|
|
|
|
December 31, 2019
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,941
|
|
|
$
|
5,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,941
|
|
|
$
|
5,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221,814
|
|
|
$
|
221,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
221,814
|
|
|
$
|
221,814
|
|
The main factors that will affect the fair value of the derivative are the number of shares outstanding post acquisition or post offering and the resulting market capitalization. In order to estimate a range for the potential contingent liability, the Company estimated the future number of surviving shares and resulting market cap from a reverse merger based on a sample of reverse mergers completed by OTCBB companies during 2020 and 2019.
The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2020 and 2019:
|
|
|
2020
|
|
|
2019
|
|
|
Beginning balance, January 1,
|
|
$
|
(5,941
|
)
|
|
$
|
(7254
|
)
|
|
Total gains (losses) included in earnings
|
|
|
(215,873
|
)
|
|
|
1,313
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, December 31,
|
|
$
|
(221,814
|
)
|
|
$
|
(5,941
|
)
|
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
For the fiscal year ended December 31, 2020 and 2019, the Company recorded accounts payable and accrued expenses in the amounts of $268,623 and $268,099, respectively. The accounts payable and accrued expenses are a combination of legal and professional fees.
NOTE 8 – CAPITAL STOCK
The Company has authorized 500,000,000 shares of common stock with a par value of $0.0001. On December 31, 2020 and 2019, the company had 353,524,425 and 285,555,605 shares issued and outstanding, respectively.
During the year ended December 31, 2020, the Company believes that its the Transfer Agent issued a total of 35,568,820 shares erroneously.
During the year ended December 31, 2018, the Company moved its domicile from Wyoming to Delaware and affirmed its par valued at $0.00001 per share.
During the year ended December 31, 2018 a total of 65,343,669 shares of common stock were issued for the retirement of $45,172 in debt and accrued interest. The Company recognized a combined loss of $ 980,874 on the conversions.
NOTE 9 – INCOME TAXES
ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is calculated by multiplying a 21% marginal tax rate by the cumulative net operating losses of $2,052,107. The total valuation allowance is equal to the total deferred tax asset.
The tax effects of significant items comprising the Company's net deferred taxes as of December 31, 2020 and 2019 were as follows:
|
|
|
2020
|
|
|
2019
|
|
|
Cumulative net operating losses
|
|
$
|
2,197,661
|
|
|
$
|
2,197,661
|
|
|
Deferred tax assets: (21% Federal, 0% Delaware)
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
461,509
|
|
|
|
461,509
|
|
|
Valuation allowance
|
|
|
(461,509
|
)
|
|
|
(461,509
|
)
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The income tax provision differs from the amount of income tax determined by applying the combined U.S. federal and state income tax rates of 21% to pretax income from continuing operations for the years ended December 31, 2020 and 2019 due to the following:
|
|
|
2020
|
|
|
2019
|
|
|
Tax benefit at statutory rate
|
|
$
|
(22,694
|
)
|
|
$
|
(22,694
|
)
|
|
(Gain) loss on derivative liability
|
|
|
(215,873
|
)
|
|
|
1,313
|
|
|
Change in valuation allowance
|
|
|
|
|
|
|
21,381
|
|
|
Actual tax expense
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company’s net operating loss carry forwards of approximately $2,197,661 expire in various years through 2038. The Company has not evaluated the impact of possible limitations on the utilization of its net operating loss carry forwards in future years under Section 382, if any, as a result of any changes in control.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company recorded contingent liabilities for the fiscal year ended December 31, 2018 in the amount of $422,483. The contingent liability includes $197,283 for settlement of an arbitration dispute plus accrued interest and fees, and a $75,000 note payable, as further defined below, and two additional prior notes payable in the amount $10,000 and $140,200.
The Company was notified through its confirmation process that a prior law firm intends to file for the collection of prior fees accrued to them in the amount of $92,000. The Company has included penalties and interest in the amount of $14,884 in its payables to account for the possible loss for a total of $106,884.
Former CEO Fraud / Maleficence
In October 2015, the Company entered into an agreement with Iconic Holdings (“Iconic”) with our then current CEO, Richard Johnson (“Johnson”). The note on the books for $30,000 was intended to go to a law firm for preparing an S-1 in the amount of $5,000,000, according to the executed term sheet. It is known that based on the financial status of Valley High Mining at the time, there was no way a $5,000,000 S-1 was going to get approved. Two things happened during that transaction, 1) Iconic did not send the funds to the law firm as was stated in the Term Sheet, it was sent to the Company whereby Johnson paid some of the funds to himself; and 2) Iconic executed a "2nd Note" of $75,000 as consideration for the S-1, but no real consideration was given, except to say that Iconic would provide the S-1 funding, which was not possible.
The events were all presented to Iconic, including the fact that Johnson signed it as sole director and never had Board consent (from Peter Bianchi, the second director at the time). Iconic agreed that it did not add up. The Company stated that Iconic should not be held accountable for Johnson's potential fraudulent act and that the Company would honor the $30,000 ($25,000 net amount) that Iconic wired to the Company. However, assuming that Iconic is familiar with S-1 filings and the funding in the amount of $5,000,000, they should know that the deal structure was not plausible, and therefore no consideration was being given for the $75,000 second note. Therefore, Iconic should have no claim to the second note and the Company will take legal action to defend (including both notes for fraud if needed). However, an additional second contingency for the face value of the $75,000 note is being added as a legal contingency until the matter is resolved.
NOTE 11 – SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to December 31, 2020 to the date these condensed consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements.