Premier Product Group, Inc. - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 2015

or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ☐ No þ

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 þ

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 þ 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 þ 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on May 4, 2016, based on a closing price of $0.0045 was approximately $1,680,939. As of May 4, 2016, the registrant had 373,542,046 shares of its common stock, par value $0.00001 per share, outstanding.

Documents Incorporated By Reference: None.

VALLEY HIGH MINING COMPANY

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2015

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Included in this Annual Report on Form 10-K are “forward-looking” statements, as well as historical information. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements. Important factors that could cause our actual results, performance or achievements to differ from these forward-looking statements include the following:

All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise unless required by applicable law.

PART I

Item 1. Business.

Company History

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.

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 determined 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. This grow pod is a template for many to be built and deployed into culture centers (between 20 and 40 pods). The grow pod is a steel shipping container 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. Each of our pods requires only seven to ten hours of attending weekly. Our pods are capable of growing leafy green vegetables, herbs, mushrooms, cherry tomatoes and certain types of berries all year without regard to weather and free from pests and disease. These crops may be harvested up to thirty times a year. The Company has tried unsuccessfully throughout fiscal year ended December 31, 2015 to adequately capitalize its transition to the organic food market. As such, we will continue to explore this market and others moving into 2016.

Our principal place of business is located at 1325 Cavendish Drive, Suite 201, Silver Spring, MD 20905. Our phone number is (301) 202-7762 and our website address is www.valleyhighmining.com.

Government Regulations

Domestic mineral exploration operations are subject to extensive federal regulation and, with respect to federal leases, to interruption or termination by governmental authorities on account of environmental and other considerations.  The trend towards stricter standards in environmental legislation and regulation could increase our costs and others in the industry.  Mineral lessees are subject to liability for the costs of clean-up of pollution resulting from a lessee’s operations, and may also be subject to liability for pollution damages.  We do not intend to obtain insurance against costs of clean-up operations as we do not intend to continue in the mining industry, rather, we are transitioning to organic food and nutraceutical.

Estimate of the Amount Spent on Research and Development

Research and development expenses were $0 and $0 in 2015 and 2014, respectively.

Employees

As of December 31, 2015, we have two (2) full-time employees, our 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

Growth in organic agricultural production is taking place in both developed and developing countries worldwide, and the competition for major consumer markets in developed countries is increasing. U.S. producers have been challenged to keep pace with growing consumer demand for organic products for over a decade, and new statistics from the U.S. Department of Commerce show that organic imports play a key role in meeting U.S. demand. Many of the top imported organic products are tropical and subtropical crops, including bananas and coffee, which the U.S. does not produce in large quantities. However, among all organic product imports lettuce, a primary crop we are targeting, is the fastest growing.

Patents, Trademarks, Licenses, Royalty Agreements or Labor Contracts

None.

Available information

Our website address is www.valleyhighmining.com. We do not intend our website address to be an active link or to otherwise incorporate by reference the contents of the website into this Report. 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 1A. Risk Factors.

Risks Relating to Our Business and Company

WE HAVE A LIMITED OPERATING HISTORY FROM WHICH YOU CAN EVALUATE OUR PERFORMANCE.

Since we have a limited operating history, it will be difficult for investors and securities analysts to evaluate our business and prospects and predict future revenue. Because we have a limited operating history, we will encounter risks, expenses and difficulties of which we are unaware, and may be challenging to overcome. There can be no assurance that our efforts will be successful or that we will reach profitability.

OUR CURRENT CASH WILL NOT BE SUFFICIENT TO FUND OUR BUSINESS AS CURRENTLY PLANNED FOR THE NEXT 12 MONTHS. WE WILL NEED ADDITIONAL FUNDING, EITHER THROUGH EQUITY OR DEBT FINANCINGS OR PARTNERING ARRANGEMENTS THAT COULD NEGATIVELY AFFECT US AND OUR STOCK PRICE.

We will need significant additional funds to continue operations, which we may not be able to obtain. We estimate that we must raise approximately $500,000 over the next 12 months to fund our anticipated capital requirements and obligations.  Although we have entered into an equity line which may provide a substantial portion of the funds needed, there is no assurance that all of such funds will be available when needed for our operations.

We have historically satisfied our working capital requirements through the private issuances of equity securities and convertible notes.  We will continue to seek additional funds through such channels and from collaboration and other arrangements with corporate partners.  However, we may not be able to obtain adequate funds when needed or funding that is on terms acceptable to us. If we fail to obtain sufficient funds, we may need to delay, scale back or terminate some or all of our mining exploration programs.

BECAUSE WE ARE HIGHLY DEPENDENT ON OUR KEY EXECUTIVE OFFICERS FOR THE SUCCESS OF OUR BUSINESS PLAN AND MAY BE DEPENDENT ON THE EFFORTS AND RELATIONSHIPS OF THE PRINCIPALS OF FUTURE ACQUISITIONS AND MERGERS, IF ANY OF THESE INDIVIDUALS BECOME UNABLE TO CONTINUE IN THEIR ROLE, OUR BUSINESS COULD BE ADVERSELY AFFECTED.

We believe our success will depend, to a significant extent, on the efforts and abilities of President and Chief Executive Officer. If we lost our President and/or Chief Executive Officer, the Company would be forced to expend significant time and money in the pursuit of a replacement(s), which would result in both a delay in the implementation of our business plan and the diversion of limited working capital. We can give you no assurance that we could find a satisfactory replacement for President and Chief Executive Officer at all, or on terms that are not unduly expensive or burdensome.

If we grow and implement our business plan, we will need to add managerial talent to support our business plan. There is no guarantee that we will be successful in adding such managerial talent. These professionals are regularly recruited by other companies and may choose to change companies. Given our relatively small size compared to some of our competitors, the performance of our business may be more adversely affected than our competitors would be if we lose well-performing employees and are unable to attract new ones.

JOINT VENTURES AND OTHER PARTNERSHIPS IN RELATION TO OUR PROPERTIES MAY EXPOSE US TO RISKS.

In the future we may enter into joint ventures or other partnership arrangements with other parties in relation to the exploration, development and production of the properties in which we have an interest.  Joint ventures can often require unanimous approval of the parties to the joint venture or their representatives for certain fundamental decisions such as an increase or reduction of registered capital, merger, division, dissolution, amendments of documents, and the pledge of joint venture assets, which means that each joint venture party may have a veto right with respect to such decisions which would lead to deadlock in the operations of the joint venture or partnership.  Further, we may be unable to exert control over strategic decision made in respect of such properties. Any failure of such other companies to meet their obligations to us or to third parties, or any disputes with respect to the parties’ respective rights and obligations, could have a material adverse effect on the joint ventures or their properties and, therefore, could have a material adverse effect on our results of operations, financial performance, cash flows and share price.

WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES. OUR FAILURE TO MANAGE GROWTH CAN CAUSE A DISRUPTION OF OUR OPERATIONS THAT MAY RESULT IN THE FAILURE TO GENERATE REVENUES AT LEVELS WE EXPECT.

In order to maximize potential growth in our current markets, we may have to expand our operations. Such expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.

INSIDERS HAVE SUBSTANTIAL CONTROL OVER US, AND THEY COULD DELAY OR PREVENT A CHANGE IN OUR CORPORATE CONTROL EVEN IF OUR OTHER STOCKHOLDERS WANT IT TO OCCUR.

As of the date of this filing, our executive officers, directors, and principal stockholders who beneficially own 5% or more of our outstanding common stock, own in the aggregate, approximately 60% of our outstanding common stock. These stockholders are able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with our Company even if our other stockholders want it to occur.

Risks Relating to the Industry

PLANNED EXPANSION AND LEASING OF EQUIPMENT OUT OF OUR CONTROL INVOLVE A HIGH DEGREE OF RISK.

We cannot assure you of the success of our planned operations.   The costs of purchasing, building, development and leasing activities are subject to numerous variables that could result in substantial cost overruns.  The deployment and leasing of grow pods for organic farming may involve unprofitable efforts, and may not produce sufficient net revenues to return a profit after accounting for development, operating and other costs.

Our operations may be curtailed, delayed or cancelled as a result of numerous factors, many of which are beyond our control, including economic conditions, mechanical problems, title problems, weather conditions, compliance with governmental requirements and shortages or delays of equipment and services.  If our activities are not successful, we will experience a material adverse effect on our future results of operations and financial condition.

There is a substantial risk that the properties and pods that we produce will not eventually be productive or may decline in productivity over time. We do not insure against all risks associated with our business because insurance is either unavailable or its cost of coverage is prohibitive.  The occurrence of an event that is not covered by insurance could have a material adverse effect on our financial condition.

DECLINE IN FOOD PRICES MAY MAKE IT COMMERCIALLY INFEASIBLE FOR US TO DEVELOP OUR PODS AND MAY CAUSE OUR STOCK PRICE TO DECLINE.

The value and price of your investment in our common shares, our financial results, and our exploration, development and leasing activities may be significantly adversely affected by declines in the price of produce and other organic material. Produce prices can fluctuate widely and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, global and regional supply and demand, and the political and economic conditions of farming countries throughout the world.  The price of produce fluctuates in response to many factors, which are beyond anyone’s prediction abilities.  The prices used in making the estimates in our plans differ from daily prices quoted in the news media.  Because farming occurs over a number of years, it may be prudent to continue producing for some periods during which cash flows are temporarily negative for a variety of reasons.  Such reasons include a belief that the low price is temporary, and/or the expense incurred is greater when permanently closing production.

Risks Relating to Being a Public Company

WE WILL INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We will incur significant costs associated with our public company reporting requirements and costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on the Company’s board of directors (the “Board”) or as executive officers. We may be wrong in our prediction or estimate of the amount of additional costs we may incur or the timing of such costs.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, OUR ABILITY TO ACCURATELY AND TIMELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD MAY BE ADVERSELY AFFECTED AND INVESTOR CONFIDENCE MAY BE ADVERSELY IMPACTED.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the SEC adopted rules requiring public companies to include a report of management on the Company’s internal controls over financial reporting in their annual reports. Under current SEC rules, our management may conclude that our internal controls over our financial reporting are not effective. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In the event that we are unable to have effective internal controls, investors and others may lose confidence in the reliability of our financial statements and our ability to obtain equity or debt financing as needed could suffer.

Risks Related to Our Common Stock

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTC MARKETS, WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.

Our common stock is quoted on the OTC Pink. The quotation of our shares on the OTC Pink may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.

THERE IS LIMITED LIQUIDITY ON THE OTC PINK, WHICH ENHANCES THE VOLATILE NATURE OF OUR EQUITY.

When fewer shares of a security are being traded on the OTC Pink, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in shares of our common stock, there may be a lower likelihood that orders for shares of our common stock will be executed, and current prices may differ significantly from the price that was quoted at the time of entry of the order.

OUR COMMON STOCK IS CONSIDERED A “PENNY STOCK,” AND IS SUBJECT TO ADDITIONAL SALE AND TRADING REGULATIONS THAT MAY MAKE IT MORE DIFFICULT TO SELL.

Our common stock is considered to be a “penny stock” since it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act. Our common stock is a “penny stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq Stock Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million.

The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

WE ARE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE OUR SECURITIES MORE DIFFICULT TO SELL.

We are subject to the SEC’s “penny stock” rules because our securities sell below $5.00 per share.  The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account.  In addition, the bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

Furthermore, the penny stock rules require that prior to a transaction; the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for our securities.  As long as our securities are subject to the penny stock rules, the holders of such securities will find it more difficult to sell their securities.

IN ORDER TO RAISE SUFFICIENT FUNDS TO EXPAND OUR OPERATIONS, WE MAY HAVE TO ISSUE ADDITIONAL SECURITIES AT PRICES WHICH MAY RESULT IN SUBSTANTIAL DILUTION TO OUR SHAREHOLDERS.

If we raise additional funds through the sale of equity or convertible debt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the value of our common shares outstanding. We may also have to issue securities that may have rights, preferences and privileges senior to our common stock.

WE ARE NOT LIKELY TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

During the fiscal year ended December 31, 2014, the Company subleased, from a company under the control of our then current Chief Financial Officer, approximately 1,000 square feet of executive office space located at 4550 NW Newberry Hill Road, Suite 202, Silverdale, WA 98383, at a rate of $1,000 per month on a month to month basis. Effective December 1, 2014, the monthly rent was reduced to $500 and subsequently discontinued in 2015.

Effective December 1, 2014, the Company relocated its headquarters to 10777 Westheimer Road, Suite 1100, Houston, TX 77042, where we rent executive suites on a monthly basis at $1,600 per month.

Effective December 1, 2014, the Company rents yard space in Houston, Texas for its grow pods from an individual on a month to month basis at a rate of $450 per month.

As of this filing, the Company has relocated its headquarters to 1325 Cavendish Drive, Suite 201, Silver Spring, MD 20905

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. The Company has recorded a liability in the amount of $125,000, plus accrued interest and fees, to account for liability they will likely incur.

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 liability, which amounted to $681 at the fiscal year ended December 31, 2015.

Item 4. Mine Safety Disclosures.

Not Applicable.

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 “VHMC”.

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.

(b) Holders

As of May 4, 2016, a total of 373,542,046 shares of the Company’s common stock are currently outstanding held by 1,102 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 Austi Pkwy, Suite 300, Las Vegas, NV 89119. Their phone number is (702) 361-3033.

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2015, 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 retired 20,000,000 shares of common stock pursuant to a failed Regulation S Stock Purchase Agreement.

The Company issued 27,965,227 shares of common stock for the retirement of debt and accrued interest totaling $49,452. The Company recognized a loss of $216,234 on the transactions.

The Company issued 6,000,000 shares of common stock for services in the amount of $27,000.

Rule 10B-18 Transactions

During the years ended December 31, 2014 and 2015, 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 OUR PLAN OF OPERATION AND 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.

Plan of Operation

As of the date of this Report, the Company has been positioning itself as an incubator for companies in the pharmaceutical, nutraceutical and medical spaces offering products for all ages from newborns to seniors. The Company’s goal is to identify revolutionary products and create a corporate infrastructure, set up management teams, bring in design professionals both on the development side and marketing side to introduce these offerings to the marketplace. Being part of the new Company team will allow entrepreneurs to flourish without having the constraints of day to day corporate issues, as well provides an easier access to capital and credit lines for growth and expansion of the business. The Company is working to build a strong portfolio of companies to drive revenues and value with an intent that once these companies mature from all aspects inclusive of management, revenues and controls they will have the ability to operate independent of the conglomerate. We are not limiting our search to any specific geographic region. Our plan of operation for the twelve months following the date of this annual report is to continue to review potential acquisitions in the pharmaceutical, nutraceutical and medical sectors. Currently, we are in the process of completing due diligence investigation of various opportunities in the pharmaceutical, nutraceutical and medical sector. We do not have enough funds on hand to cover our administrative expenses for the next 12 months. We will need to raise funds for administration as well as additional funding for the review, acquisition and development of the business once the same is identified. We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock or debt financing.

Results of Operations

Comparison of Results of Operations for the fiscal years ended December 31, 2015 and 2014

Total expenses, which included general and administrative expenses for our fiscal year ended December 31, 2015 were $617,755, compared to $514,001 during our fiscal year ended December 31, 2014, an increase of $103,754. This increase included increases in depreciation expense of $3,000 (in addition to depreciation expense, there was an additional $48,000 Other expense for Impairment on the asset due to the currently unknown whereabouts of the Pod), management expense of $97,000, professional fees of $35,165, travel and entertainment of $843, and general and administrative expense of $8,265. This was offset by decreases in administrative expense of $25,000, and payroll expense of $15,519. Additionally, the Company experienced net other income and expense of ($400,282).

As a result, we incurred a net loss of $1,018,036 (approximately $0.01 per share) for the fiscal year ended December 31, 2015, compared to a net loss of $692,723 during our fiscal year ended December 31, 2014 (approximately $0.03 per share).

Liquidity and Capital Resources

As of December 31, 2015, we had cash or cash equivalents of $119.

Net cash used in operating activities was $84,700 during our fiscal year ended December 31, 2015, compared to $253,888 during our fiscal year ended December 31, 2014.

Cash flows provided or used in investing activities were $1,000 provided for the year ended December 31, 2015 and $129,000 used during our fiscal year ended December 31, 2015. Net cash flows provided by financing activities was $83,756 during our fiscal year ended December 31, 2015, compared to $382,951 during our fiscal year ended December 31, 2014.

During our fiscal year ended December 31, 2015, net borrowing from related parties totaled ($15,504). During our fiscal year ended December 31, 2014 certain of our shareholders provided us with loans aggregating $53,919. These loans carry interest of between 6% and 8% 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, 2015.

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 – As of November 1, 2011, we adopted new guidance on the testing of goodwill impairment that allows the option to assess qualitative factors to determine whether performing the two step goodwill impairment assessment is necessary. Under the option, the calculation of the reporting unit's fair value is not required to be performed unless as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than the unit's carrying amount. The adoption of this guidance impacts testing steps only, and therefore adoption did not have an impact on our consolidated financial statements. As of November 1, 2011, we adopted new guidance regarding disclosures about fair value measurements. The guidance requires new disclosures related to activity in Level 3 fair value measurements. This guidance requires purchases, sales, issuances, and settlements to be presented separately in the rollforward of activity in Level 3 fair value measurements. There were various other accounting standards and interpretations issued during 2010 and 2011, none of which are expected to have a material impact on our consolidated financial position, operations or cash flows.

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/ Chief Financial 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/CFO to allow timely decisions regarding required disclosure.

Based on this evaluation, our current CEO/CFO has concluded that our disclosure controls and procedures were effective as of December 31, 2015, 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:

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, 2015. 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).

Based on management’s assessment, management believes that, as of December 31, 2015, our internal control over financial reporting presented a material weakness. The assessment is based on the nature of the acts taken by the prior CEO, Mr. Johnson, leading up to his quick departure. 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.

The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at April 30, 2016:

Following is biographical information of our current management:

Clifford Pope, 65, has over 35 years of experience in Information Technologies (IT), business development and providing a variety of related services and products.  Over the past 25 years as a CEO/President, was the founder of five businesses providing technical support services and IT products to the USA military and federal government agencies. His background includes marketing research, developing business plans, creating and establishing business infrastructures, computer manufacturing, managing business development campaigns; implementing various IT operations from network Operating Centers, Voice over Internet Protocol services, Help Desk Operations, software development, medical diagnostic testing devices, and business process re-engineering. Mr. Pope has been the CEO/President of public a company since 2003, very knowledgeable of financial statements, producing disclosure and financial statements, cost accounting, federal government practices, protocols, and private industry practices.  Has a working experience in corporate mergers, stock exchanges, and the formation of public entities and very knowledgeable of the corporate governance requirements of the Sarbanes-Oxley Act.

Family Relationships

There are no family relationships among our directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers. None of our directors or executive officers or their respective immediate family members or affiliates are indebted to us.

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, 2015, 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

Employment Agreements

Mr. Pope was awarded a six (6) month employment agreement at the beginning of his service, January 13, 2016, which is subsequent to the two years reported. The agreement is a non-exclusive service agreement that pays Mr. Pope a base salary of $3,500 per month and entitles him to 1,000,000 shares of restricted common stock per month. Additionally, Mr. Pope is reimbursed for accountable direct expenses in connection with the performance of his duties.

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. 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 May X, 2016, by (i) each person known to us to own more than 5% of our outstanding common 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.

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 Transactions

During the fiscal year ended December 31, 2014, the Company subleased, from a company under the control of our then current Chief Financial Officer, approximately 1,000 square feet of executive office space located at 4550 NW Newberry Hill Road, Suite 202, Silverdale, WA 98383, at a rate of $1,000 per month on a month to month basis. Effective December 1, 2014, the monthly rent was reduced to $500 and subsequently discontinued in 2015.

During the year ended December 31, 2014, the Company borrowed $15,919 in related party advances.

On December 4, 2014, the Company entered into an Agreement and Bill of Sale by and between the Company, as purchaser, and our then current Chief Executive Officer, Richard Johnson, as seller, pursuant to which the Company purchased certain machinery and equipment in exchange for 16,125,000 shares of the Company’s common stock.

During the fiscal year ended December 31, 2015, the then current CEO, Richard Johnson, executed what current management has determined to be Management Fraud and an Illegal Act under SOX 404. During the fiscal year, Johnson issued to himself a Loan in the amount of $16,000, cash withdrawals of $5,000 and $2,000 during the 4^th quarter, and additional $5,000 and $2,000 payments in November to RJM Consulting, a company owned by Johnson. In rebuilding the accounting, management has attributed a net amount of $14,131 taken as a loan and subsequently has written that off as uncollectable. The Company reserves the right to pursue Johnson at a later date.

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, 2015 and to Terry L Johnson, CPA during our fiscal year ended 2014. BF Borgers CPA PC performed a two (2) year audit for the Company in 2015 that covered both fiscal years ended December 31, 2014 and 2015:

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, 2015 and 2014 and reviews of our interim financial statements included in our Quarterly Reports on Forms 10-Q.

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.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are included herewith:

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Valley High Mining Company:

We have audited the accompanying balance sheets of Valley High Mining Company (“the Company”) as of December 31, 2015 and 2014 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit. 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinions. 

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Valley High Mining Company, as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.

The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting.  Accordingly, we express no such opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ B F Borgers CPA PC

B F Borgers CPA PC
Lakewood, CO
May 17, 2016

VALLEY HIGH MINING COMPANY

Balance Sheets

The accompanying notes are an integral part of these financial statements. 

VALLEY HIGH MINING COMPANY

Statements of Operations

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

VALLEY HIGH MINING COMPANY

Notes to the Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Valley High Mining Company (“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 Company, 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.

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, 2015 and 2014 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax liabilities in interest expense and penalties in operating expenses. During the years ended December 31, 2015 and 2014, the Company recognized interest accruals of $10,186 and $4,868, respectively.  

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.

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.

On June 10, 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10,  Development Stage Entities (Topic 915):  Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, consolidation,  which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. For the first annual period beginning after December 15, 2014, the presentation and disclosure requirements in Topic 915 will no longer be required for the public business entities. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted the amendment as of fiscal year ended December 31, 2014.

There are several new accounting pronouncements issued by the FASB which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of December 30, 2014, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.

Impact of New Accounting Standards

The FASB periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. The Company has reviewed the recently issued pronouncements.  During this review the Company decided to early adopt ASU 2014-10 which eliminates the definition of a development stage entity, eliminates the development stage presentation and disclosure requirements under ASC 915, and amends provisions of existing variable interest entity guidance under ASC 810.

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. 

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 – RELATED PARTY TRANSACTIONS

Management Compensation

For the fiscal year ended December 31, 2014, the Company paid or accrued to its CEOs and President an aggregate of $152,000 in compensation and $201,000 in stock bonuses.

For the fiscal year ended December 31, 2015, the Company paid or accrued to its CEO, CFO, and President an aggregate of $420,000 in compensation and $30,000 in bonuses.

Office Space

Effective March 1, 2014, the Company subleased, from a company under the control of our then current CEO/CFO, approximately 1,000 square feet of executive office space in Silverdale, WA at a rate of $1,000 per month on a month to month basis. Effective December 1, 2014, the rent was reduced to $500 per month and subsequently discontinued at the end of fiscal year ended December 31, 2014.

NOTE 4 – MINERAL PROPERTIES

Effective September 8, 2012, the Company entered into a Joint Venture Agreement with Corizona Mining Partners, LLC (“Corizona”). The purpose of the agreement is to operate and develop certain mineral properties in Peru. As of December 31, 2012, the Company has made a capital contribution of $314,570 as part of its total funding commitment of $2,000,000. During the year ended December 31, 2013, the Company elected to terminate the joint venture.

During the year ended December 31, 2013, the Company received $20,000 as a refund on payments previously made on mineral properties.

During the year ended December 31, 2014, the Company recognized the funds provide in the transaction as a receivable per the Joint Venture Agreement. With little to no communication and no additional funds received, the Company has written off the outstanding amount as a loss on asset.

Accounting for the transaction is as follows:

NOTE 5 – ADVANCES AND NOTES PAYABLE TO RELATED PARTIES

Advances and notes payable to related parties at December 31, 2015 and 2014 had an outstanding balance of $0 and $16,577, respectively. The notes bear interest of 6%, and were due on demand.

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.

NOTE 6 – INVESTMENT RECEIVABLE

In June 2014, the Company entered into a Regulation S Stock Purchase Agreement with a third party for the investment and purchase of $225,000 in common stock of the Company at $0.015 per share. After the 6-month term of the agreement expired without execution of the investment by the third party, the Company canceled the agreement and canceled the underlying shares on December 2014.

In December 2014, the Company entered into a Regulation S Stock Purchase Agreement with a second third party for the investment and purchase of $350,000 in common stock of the Company at $0.0175 per share. The Company and investor have extended the agreement an additional 6 months to allow for the deposit and full execution of the agreement. However, the investor was unable to complete the agreement and the Company canceled the agreement and canceled the underlying shares on December 2015.

NOTE 7 – FIX ASSETS AND IMPAIRMENTS

In December 2014, the Company acquired a Grow Pod in exchange for 16,125,000 shares of common stock. At the time of the transaction, the common stock of the Company was valued at $0.008 per share for a total booked asset of $129,000. Subsequently, the Company impaired the asset to its current replacement cost valued at $50,000 based on estimates from contractors. The difference between the purchase price and the replacement cost is attributed to the intellectual property applied to the configuration of the asset. During the fiscal year ended December 31, 2015 the Company added electrical improvements to the Pod in the amount of $1,000. As of the filing, and in conjunction with the departure of our prior CEO, the Company is not aware of the current location of the Pod. Therefore, while the Company maintains legal ownership of the Pod, the Company has chosen to fully impair the Pod due to the unknown whereabouts. The transaction has been accounted for as follows:

NOTE 8 – NOTES PAYABLE AND DERIVATIVE LIABILITY

Notes Payable

At fiscal year ended December 31, 2015, the Company had third party notes payable and accrued interest in the amount of $140,964 compared to $73,951 in the prior fiscal year. The notes included notes to four unaffiliated parties at interest rates of between 6% and 8% per year. The notes expire during the 2015and 2016 fiscal year and are not secured by collateral of the Company. Several of these note 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.

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, 2014 and December 31, 2015, 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 $0.0013 to $0.0290, and the computed measure of the Company’s stock volatility, ranging from 220% to 457%. 

Included in the December 31, 2015 and 2014 financial statements is a derivative liability in the amount of $681 and $6,233, 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, 2015 and 2014 are $5,552 and $331,564 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

The following presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at December 31, 2015.  These items are included in “derivative liability” on the consolidated balance sheet.

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 2014 and 2015.

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, 2015 and 2014:

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

For the fiscal year ended December 31, 2015 and 2014, the Company recorded accounts payable and accrued expenses in the amounts of $768,022 and $254,782, respectively. The accounts payable and accrued expenses include $379,522 in legal, professional, and prior management fees, $4,500 to a third party for rents, and $384,060 to related parties for work performance ($245,060 to Richard Johnson, the former CEO and $139,000 to Peter Bianchi, the former President).

NOTE 10 – CAPITAL STOCK

The Company has authorized 500,000,000 shares of common stock with a par value of $0.001. At December 31, 2015 and 2014, the Company had 102,210,918 and 88,245,691 shares issued and outstanding, respectively.

During the year ended December 31, 2014, the Company issued 27,500,000 shares of common stock for services rendered with a fair value of $221,250, which was recorded to professional fees expense and management expense.

During the year ended December 31, 2014, the Company issued 7,500,000 shares of common stock for debt reduction of $7,500.

During the year ended December 31, 2014, the Company issued 15,000,000 shares of common stock towards an investment receivable in the amount of $525,000 pursuant to a Regulation S Stock Purchase Agreement. Due to non-performance of the Agreement, the Company has cancelled the shares.

During the year ended December 31, 2014, the Company issued 168,935 shares of common stock for cash of $168.94, pursuant to the exercise of options.

During the year ended December 31, 2014, the Company issued 16,125,000 shares of common stock for the purchase of assets valued at $129,000.

During the year ended December 31, 2015 the Company issued 27,965,227 shares of common stock for debt reduction of $49,452. The Company recognized a loss of $216,234 on the transactions.

On October 8, 2015, the Company issued 6,000,000 shares of common stock for services rendered with a value of $27,000, which was recorded to professional fees expense.

During the year ended December 31, 2015, the Company issued 20,000,000 shares of common stock towards an investment receivable pursuant to a Regulation S Stock Purchase Agreement. Due to non-performance of the Agreement, the Company has cancelled the shares.

NOTE 11 – 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 34% marginal tax rate by the cumulative net operating losses of $1,744,028. 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, 2015 and 2014 were as follows:  

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 34% to pretax income from continuing operations for the years ended December 31, 2015 and 2014 due to the following:

The Company’s net operating loss carry forwards of approximately $1,744,028 expire in various years through 2034. 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 12 – COMMITMENTS AND CONTINGENCIES

Contingent Liabilities

The Company recorded contingent liabilities for the fiscal year ended December 31, 2015 in the amount of $242,283. The contingent liability includes $167,283 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 recorded contingent liabilities for the fiscal year ended December 31, 2014 in the amount of $275,200. The contingent liability includes $125,000 for settlement of an arbitration dispute as further defined below. Additional contingent liabilities has been accounted for in the amount of $150,200 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.

In March 2014, the Company entered into a settlement agreement with one of its former CEO’s 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. The Company has recorded a liability in the amount of $125,000, plus accrued interest and fees of 42,283, to account for a total liability of $167,283, they will likely incur.

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 thing 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.

During the fiscal year ended December 31, 2015, the then current CEO, Richard Johnson, executed what current management has determined to be Management Fraud and an Illegal Act under SOX 404. During the fiscal year, Johnson issued to himself a Loan and withdrawals netting to $14,131 during the 4^th quarter to RJM Consulting, a company owned by Johnson. In rebuilding the accounting, management has attributed a net amount of $14,131 taken as a loan and subsequently has written that off as uncollectable. The Company reserves the right to pursue Johnson at a later date.

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. The Company carries this liability on its balance sheet as a derivative liability.

Derivative Liability

As described in Note 6, the Company entered into a warrant agreement which has been accounted for as a derivative.  The Company has accrued 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 fair value of this liability is closely linked to whether the Company enters a reverse merger, initiates a public offering of stock or engages in a similar transaction. The Company believes that the realization of one or more of these events in the near future is probable and when realized, it could have a material effect on the value of the derivative liability recorded.

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 utilized the Black-Scholes method in calculating the value of the warrant derivative.

NOTE 13 – SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date these financial statements were issued and determined that there were no material subsequent events that required recognition or additional disclosure in these financial statements, except as follows.

Effective January 13, 2016, Clifford Pope was appointed the Company’s Chief Executive Officer, Chief Financial Officer, and sole director as filed in our Form 8-K on January 14, 2016. In conjunction with Mr. Pope’s appointment, our other two officers and directors, Johnson and Bianchi, either resigned or where relieved of their duties with the Company.

Effective February 3, 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 February 24, 2016, the Company enter into a non-binding Letter of Intent to acquire all of the shares of GEAR Sports Nutrition Inc. (GEAR) and substantially all of the assets and certain liabilities of GEAR, which was subject to certain conditions. Subject to the Definitive Agreement and in connection with the Acquisition, the Company will acquire all of the outstanding capital stock of GEAR in exchange for shares of the Company’s common stock (Common Stock). Upon the closing, the Company will own 100% of GEAR common stock issued and outstanding along with all assets and liabilities of GEAR. GEAR will become a 100% owned subsidiary of the Company. In consideration of the Acquisition, the shareholders of GEAR shall exchange their shares for shares of the Company. In consideration of the execution of the Letter of Intent, the Company has caused to be issued Two Hundred Twenty-Five Million Restricted Shares (225,000,000) of the Company’s common stock on March 8, 2016, which marked the final conditional fulfillment of the Letter of Intent. The final number of shares to be issued is yet to be determined in the Definitive Agreement. The anticipated closing date for the Transactions shall be upon completion of GEAR audited Financial Statements and the filing of an Amended 8-K estimated to be complete within 72 days of the execution of this Letter of Intent or sooner (the Closing Date). Following the Closing Date, the Company will change its name to a mutually agreeable name, or such other name as shall be determined by the Company. In addition, the Company shall take any necessary action to amend and restate its organizational documents and bylaws prior to the Closing as may be required to complete the GEAR acquisition.

In January 2016, the Company’s former CEO, Richard Johnson, converted his accrued payables into a note payable and subsequently sold the note to a third party. In February 2016, the Company entered into Novation Agreement with the third party which returned the note payable to the Company and the Company concurrently extinguished the note. The face value of the note was for $300,000 and the discharge of it will be reflected in our 1^st quarter 2016 filing.

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