Premier Product Group, Inc. - Quarter Report: 2015 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For Quarter Ended:   March 31, 2015

Commission File Number 000-51232

VALLEY HIGH MINING COMPANY

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

(713) 260-9605

(Registrant's telephone number, including area code)

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 past 90 days: Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions 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

The number of shares of the registrant’s only class of common stock issued and outstanding as of June 19, 2015, was 88,245,691 shares.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Valley High Mining Company

March 31, 2015 and 2014

Index to the 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

March 31, 2015

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying financial statements have been prepared by Valley High Mining Company (the “Company”) without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2014 audited financial statements included in the Company’s Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission (the “SEC”) on June 19, 2015.  The results of operations for the period ended March 31, 2015 are not necessarily indicative of the operating results for the full year.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has a working capital deficit and has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.

These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it consummates a business combination. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic No. 740, “Accounting for Income Taxes” (“ASC Topic No. 740”). This statement requires an asset and liability approach for accounting for income taxes. The Company adopted the provisions of ASC Topic No. 740, 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, 2014 and 2013 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, 2014 and 2013, the Company recognized interest accruals of $4,868 and $8,416, 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.

VALLEY HIGH MINING COMPANY

Notes to the Financial Statements

March 31, 2015

(unaudited)

Recently Issued Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

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. 

VALLEY HIGH MINING COMPANY

Notes to the Financial Statements

March 31, 2015

(unaudited)

NOTE 4 – RELATED PARTY PAYABLES

Management Compensation

For the period ended March 31, 2015, the Company paid its CEO, President, and CFO an aggregate of $150,000 as compensation of which $150,000 remained unpaid at March 31, 2015. This included a signing bonus to our President in the amount of $30,000.

For the period ended March 31, 2014, the Company paid its CEO/President/CFO an aggregate of $24,000 as compensation of which $24,000 remained unpaid at March 31, 2015.

Office Space

Effective October 15, 2012, the Company subleased approximately 300 square feet of executive office space in Centennial, CO at a rate of $200 per month on a month to month basis.

Effective March 1, 2014, the Company subleases, from a company under the control of our current 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. 

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.

NOTE 5 – ADVANCES AND NOTES PAYABLE TO RELATED PARTIES

Advances and notes payable to related parties at March 31, 2015 and 2014 had an outstanding balance of $16,813 and $16,577, respectively. The notes bear interest of 6%, and are due on demand.

NOTE 6 – SHARES RESERVED FOR ISSUANCE

In December 2014, we entered into an agreement with Lazgro Holdings Sdn. Bhd. (1010158-V) (“Lazgro”), under which Lazgro has agreed to purchase from us, under a Regulation S Stock Purchase Agreement, 20,000,000 shares of our common stock, up to $350,000, during an initial six month period (which has been extended for an additional six months) commencing on December 22, 2014. We will sell these shares to Lazgro at a price equal to $0.0175 per share. As part of the agreement with Lazgro, we transferred 20,000,000 shares of our common stock to Lazgro. We will receive proceeds when Lazgro is able to sell these shares. If Lazgro does not sell any all or a portion of the shares during the Agreement period, these shares will be returned to us at the end of the 12 month extended contractual period, as Lazgro would not have legally possession of the shares. Accordingly, there is a ($20,000) impact to Paid-in capital to account for the stock issuance until such time that the Company either receives the proceeds of the sale of the stock is returned to the Company.

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. The transaction was accounted for as follows with a balance effective March 31, 2015:

VALLEY HIGH MINING COMPANY

Notes to the Financial Statements

March 31, 2015

(unaudited)

NOTE 8 – NOTES PAYABLE AND DERIVATIVE LIABILITY

Notes Payable

At the three months ended March 31, 2015, the Company had third party notes payable and accrued interest in the amount of $116,546, compared to December 31, 2014 of $73,951. The current notes included notes to seven unaffiliated parties at interest rates of between 6% and 8% per year. The notes expire during the 2015 fiscal year and are not secured by collateral of the Company. The notes are convertible into common stock, at the election of the holder, at discounts of between 40% and 50%, with two of the notes, totaling $22,500.00, are convertible into common stock of the Company at $0.001.

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 0.00%, grant dates at March 31, 2015 and December 31, 2014, 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 $0.0081 to $1.02, and the computed measure of the Company’s stock volatility, ranging from 264% to 470%. 

Included in the March 31, 2015 and December 31, 2014 financial statements is a derivative liability in the amount of $5,049 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 quarter ended March 31, 2014 and year ended December 31, 2014 are $1,184 and $295,563 in change of fair value of derivative in non-cash charges pertaining to the derivative liability as it pertains to the gain (loss) on derivative liability and debt discount, respectively.

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

For the three months ended March 31, 2015, the Company recorded accounts payable and accrued expenses in the amount of $402,812, compared to the year ended December 31, of $254,782. The accounts payable and accrued expenses include $70,400 in legal and professional fees, $5,016 to third parties for rents, and $300,781 to related parties for work performance.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Contingent Liabilities

The Company recorded contingent liabilities for the three months ended March 31, 2015 in the amount of $275,200.05. 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 $150,200.05 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 a third party.  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. The matter is still open, however, a preliminary agreement was reached in April 2015 during arbitration, pending final documentation. The Company has recorded a contingent liability in the amount of $125,000 to account for liability they will likely incur.

VALLEY HIGH MINING COMPANY

Notes to the Financial Statements

March 31, 2015

(unaudited)

Legal proceedings

In October 2013, the Company filed a complaint in the United States District Court for the District of Colorado against Gandolf Holdings, Inc. (“Gandolf”), Cox General Accounting, Inc. and Brian Cox, individually, Civil Action No. 1:13-cv-02959-MSK, to recover the principal amount of $75,000 which the Company put on deposit as part of the terms of a fuel brokerage transaction.  The relevant agreement required the Company to deposit $75,000 to cover the storage fees applicable to the sale of 119 million gallons of diesel fuel.  These funds were to be held in trust until such time as the buyer of the fuel tested the fuel to insure that the quality was satisfactory.  Once the buyer confirmed that the quality was acceptable, these funds were to be used for storage of the fuel pending closing.  If the quality was not satisfactory to the buyer, the agreement provided for return of these funds to the Company.

After the Company paid the $75,000, upon information and belief, Brian Cox, who was then the Chief Financial Officer of Gandolf, authorized the release of the funds without the Company’s consent.  Also upon information and belief, the sale of the fuel was not consummated.  Brian Cox ceased all communication with the Company at that time.  The Company contacted Gandolf, who agreed to execute a demand promissory note for the $75,000 in favor of the Company.  In September 2013, the Company tendered a demand upon Gandolf to repay these funds. Gandolf failed and refused to pay the Company pursuant to the note.

The Company successfully served the complaint upon Gandolf, but has been unable to locate Brian Cox or Cox General Accounting, Inc.  Gandolf failed to answer the complaint within the prescribed time period, and in December 2013, the Company filed a Motion for Default with the court.  In March 2014, the Company assigned the judgement to our former CEO, Andrew Telsey, as part of a settlement agreement with him.

In March 2014, the Company entered into a settlement agreement with a third party.  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. The matter is still, however, a preliminary agreement was reached in April 2015 during arbitration, pending final documentation. The Company has recorded a contingent liability in the amount of $125,000 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.

NOTE 11 – CAPITAL STOCK

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

The Company has authorized 51 shares of preferred stock (Series B) with a par value of $0.001.  At March 31, 2015, the Company had 51 shares issued and outstanding.

There were no issuances during the three months ended March 31, 2015.

NOTE 12 - SUBSEQUENT EVENTS

None.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly report on Form 10-Q and other reports filed by Valley High Mining Company (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Plan of Operation

As of the date of this Report, we are a mining company that is currently seeking a viable prospect to develop.  We are not limiting our search to any specific geographic region.  Our plan of operation for the twelve months following the date of this Report is to continue to review potential acquisitions in the resource sector.  Currently, we are in the process of completing due diligence investigation of various opportunities in the base metal and mineral sector.  We do not have enough funds currently on hand to cover our administrative expenses for the next 12 months and therefore we will need additional funding for the review, acquisition and development of a mining property 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 three months ended March 31, 2015 and 2014

Total operating expenses, which included general and administrative expenses incurred during the three month period ended March 31, 2015 were $188,894 compared to $41,808 during the similar period in 2014, an increase of $147,086.   This increase was as a result of increases in depreciation expense of $750, management expense of $126,000, professional fees of $12,102, travel, meals, and entertainment of $730, and an increase in general and administrative expense of $7,503.  Additionally, we recorded $1,184 for the three months ended March 31, 2015 in non-cash gains arising from a gain on derivative liability, compared to $295,563 for the three months ended March 31, 2014.  We are currently actively engaged in transitioning our business, incurring costs associated with identifying businesses and expanding our current organic grow pods.

As a result, we incurred a net loss of $189,840, approximately ($0.00) per share, during our three month period ended March 31, 2015, compared to a net gain of $250,650, approximately $0.01 per share, during the three month period ended March 31, 2014.

Liquidity and Capital Resources

As of March 31, 2015, we had cash or cash equivalents of $634.

Net cash used in operating activities was $42,244 during the three month period ended March 31, 2015, compared to $2,500 for the three month period ended March 31, 2014.  The increase is due to the change in business operations during the three months ended March 31, 2015, specifically increases in management and professional fees.   We anticipate that overhead costs in current operations will continue to increase in the future once we identify and acquire additional business opportunities to develop.

Cash flows from financing activities were $41,815 for the three month period ended March 31, 2015, compared to $2,500 during the three months ended March 31, 2014 as a result of our issuance of debt instruments.  Cash flows provided by investing activities were ($1,000) for the three months ended March 31, 2015, compared to $0 for the three month period ended March 31, 2014.

Certain of our shareholders have provided us with loans and contributions aggregating $41,815 as of March 31, 2015.  These loans bare interest of 6% to 8% and are due upon demand.  We utilized the funds from these loans to cover our costs for working capital.

We are not generating revenue from our operations, and our ability to implement our new business plan for the future will depend on the future availability of financing.  Such financing will be required to enable us to identify and develop alternative growing methods, new business acquisition opportunities, and continue operations.  We intend to raise funds through private placements of our Common Stock and through short-term borrowing from our shareholders.  Because we have not identified or secured a specific acquisition as of the date of this report we cannot estimate how much capital we will need to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital.  Our inability to obtain sufficient funds from external sources when needed will have a material adverse effect on our plan of operation, results of operations and financial condition.  We need to raise additional funds in order to continue our existing operations, to initiate new projects and to finance our plans to expand our operations for the next 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 the three-month period ended March 31, 2015.

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 3.  Quantitative and Qualitative Disclosures About Market Risk..

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

ITEM 4.  CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and 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 Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of March 31, 2015, at the reasonable assurance level.  We believe that our financial statements presented in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for all periods presented herein.

Inherent Limitations

Our management, including our Chief Executive Officer and 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.

(b) 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 quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  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.

Other than described above and as previously disclosed, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A.  Risk Factors.

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on June 19, 2015.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of the Company’s equity securities during the quarter ended March 31, 2015, that were not otherwise disclosed in a Current Report on Form 8-K.

Item 3.  Defaults Upon Senior Securities.

There has been no default in payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4.   Mine Safety Disclosures.

Not Applicable.

Item 5.  Other Information.

There is no other information required to be disclosed under this item that has not previously been reported.

Item 6.  Exhibits.

*Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

9