Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
PREMIER
PRODUCTS GROUP, INC. (the Company”) has prepared the accompanying financial statements without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows for all periods presented herein, have been made.
As
filed on 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 effected 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”).
As
of the effective time of the Merger and in connection with the Holding Company Reorganization, all duly authorized outstanding
shares of common stock and preferred stock of the Predecessor were automatically converted into identical shares of common stock
or preferred stock, as applicable, of the Holding Company on a one-for-one basis, and the Predecessor’s existing stockholders
and other holders of equity instruments, became stockholders and holders of equity instruments, as applicable, of the Holding
Company in the same amounts and percentages as they were in the Predecessor prior to the Holding Company Reorganization.
The
executive officers and board of directors of the Holding Company are the same as those of the Predecessor in effect immediately
prior to the Holding Company Reorganization.
For
purposes of Rule 12g-3(a), the Holding Company is the successor issuer to the Predecessor, now as the sole shareholder of the
Predecessor. Accordingly, upon consummation of the Merger, the Holding Company’s common stock was deemed to be registered
under Section 12(b) of the Securities Exchange Act of 1934, as amended, pursuant to Rule 12g-3(a) promulgated thereunder.
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.
The
common stock of the Holding Company trades on OTCMarkets under the symbol “PMPG” under which the common stock of the
Predecessor was previously listed and traded. As a result of the Holding Company Reorganization, the common stock of the Predecessor
will no longer be publicly traded.
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
Based
on the preceding action, the Company is presenting the financial statements as consolidated financial statements, but also including
exhibits representing the respective income statement and balance sheet items associated with the new parent Holding Company and
the wholly- owned Predecessor company.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31,
2018 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the United States
Securities and Exchange Commission (the “SEC”) on April 15, 2019. The results of operations for the period ended June
30, 2020 are not necessarily indicative of the operating results for the full year.
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 – SIGNIFICANT ACCOUNTING POLICIES
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 at December 31, 2019 and 2018
for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Interest
Accruals
The
Company recognizes interest accrued related to unrecognized tax liabilities in interest expense and penalties in operating expenses.
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.
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
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 2016-02 “Leases Topic 842)” – In February 2016, the FASB issued Accounting Standards Update No. 2016-02,
Leases (Topic 842), which amended the existing accounting standards for lease accounting to increase transparency and comparability
among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet.
We
adopted the standard effective January 1, 2019 and have elected to use January 1, 2019 as our date of initial application. Consequently,
financial information will not be updated, and disclosures required under the new standard will not be provided for periods presented
before January 1, 2019 as these prior periods conform to the Accounting Standards Codification 840. We elected the package of
practical expedients permitted under the transition guidance within the new standard. By adopting these practical expedients,
we were not required to reassess (1) whether an existing contract meets the definition of a lease; (2) the lease classification
for existing leases; or (3) costs previously capitalized as initial direct costs. As of June
30, 2020 we are not a lessor or lessee under any lease arrangements.
FASB
ASU 2018-02 “Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from
Accumulated Other Comprehensive Income” – Effective for all entities for fiscal years beginning after December
15, 2018, and interim periods within those fiscal years. The amendments in this Update allow a reclassification from accumulated
other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently,
the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of
information reported to financial statement users. However, because the amendments only relate to the reclassification of the
income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws
or rates be included in income from continuing operations is not affected. The adoption of this update does not have a material
effect on the Company.
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.
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.
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
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.
|
Balance
|
Balance forward, December
31, 2019
|
|
$
|
(5,941
|
)
|
Total
gains (losses) included in earnings, three months ended June 30, 2020
|
|
|
3,439
|
|
|
|
|
|
|
Ending balance,
June 30, 2020
|
|
$
|
(2,502
|
)
|
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
NOTE
4 – RELATED PARTY TRANSACTIONS
Management
Compensation
For
the three and six months ended June 30,
2020, the Company paid its CEO, President, and CFO an aggregate of $0 as compensation. For the three and six
months ended June 30, 2019, the Company paid its CEO/President/CFO an aggregate
of $0 as compensation.
NOTE
5 – ADVANCES AND NOTES PAYABLE TO RELATED PARTIES
Advances
and notes payable to related parties at June 30, 2020 and December 31, 2019 had an outstanding balance of $168,630 and $163,916,
respectively.
NOTE
6 – NOTES PAYABLE AND DERIVATIVE LIABILITY
Notes
Payable
At
the period ended June 30, 2020, the Company had third party notes payable and accrued interest in the amount of $490,523 compared
to $476,659 in the prior fiscal year ended December 31, 2019. The notes included notes to four unaffiliated parties at interest
rates of between 6% and 8% per year. The notes expired during the 2016 fiscal year 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 (3) 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.
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
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 June 30, 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 $0.0063 to $0.011, and the computed measure of the Company’s stock volatility, ranging from at 240.90%.
Included
in the June 30, 2020 and December 31, 2019 financial statements is a derivative liability in the amount of $2,502 and $5,951,
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 six months ended June 30, 2020 and year-end December 31, 2019 are $3,439
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.
NOTE
7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
For
the six months ended June 30, 2020, and the year ended December 31, 2019, the Company recorded accounts payable and accrued expenses
in the amount of $268,099. The accounts payable and accrued expenses include $261,543 in legal and professional fees.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Contingent
Liabilities
The
Company recorded contingent liabilities for the six months ended June
30, 2020 in the amount of $422,483. The contingent liability includes $197,283 for settlement of an arbitration plus accrued
interest. Additional contingent liabilities has been accounted for in the amount of $150,200 and $75,000 for notes payable. These
notes date back to the purchase of the mineral properties with a related party. The Company believes that these notes are to be
discharged, however, until additional research and agreements have been reached, the Company is treating the amount as a contingent
liability.
PREMIER
PRODUCTS GROUP, INC.
Notes to the
Consolidated Financial Statements
June 30, 2020
(Unaudited)
Legal
proceedings
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.
NOTE
9 – CAPITAL STOCK
The
Company has authorized 500,000,000 number of shares of common stock with a par value of $0.00001. At June 30, 2020, the Company
had 285,555,606 shares issued and outstanding.
The
Company has authorized 51 shares of preferred stock (Series B) with a par value of $0.001. At June
30, 2020, the Company had 51 shares issued and outstanding.
During
the six months ended June 30, 2020, no shares of common or preferred shares were issued by the Company.
NOTE
10 – SUBSEQUENT EVENTS
None.