Notes
to the Financial Statements
September
30, 2016
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
PREMIER
PRODUCTS GROUP, INC. (the Company”) has prepared the accompanying financial statements without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows for all periods presented herein, have been made.
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,
2015 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 May 18, 2016. The results of operations for the period ended September
30, 2016 are not necessarily indicative of the operating results for the full year.
NOTE
2 – GOING CONCERN
The
Company’s financial statements are prepared using generally accepted accounting principles in the United States of America
applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course
of business. The Company has a working capital deficit and has not yet established an ongoing source of revenues sufficient to
cover its operating costs and allow it to continue as a going concern.
These
factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The ability of the Company
to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it consummates
a business combination. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s
plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient
to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances
that the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic No. 740, “Accounting for Income Taxes.” This statement
requires an asset and liability approach for accounting for income taxes. The Company adopted the provisions of ASC Topic No.
740, “Accounting for Income Taxes,” on January 1, 2007. As a result of the implementation of ASC Topic No. 740, the
Company recognized no liability for unrecognized tax liabilities. The Company has no tax positions at December 31, 2015 and 2014
for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Interest
Accruals
The
Company recognizes interest accrued related to unrecognized tax liabilities in interest expense and penalties in operating expenses.
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.
PREMIER
PRODUCTS GROUP, INC.
Notes
to the Financial Statements
September
30, 2016
(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, 2014. 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 September 30, 2016, 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.
PREMIER
PRODUCTS GROUP, INC.
Notes
to the Financial Statements
September
30, 2016
(Unaudited)
When
the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement
is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company
conducts a review of fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs
may result in a reclassification for certain financial assets or liabilities.
|
|
|
Balance
|
|
|
Balance forward, January 1, 2015
|
|
$
|
(6,233
|
)
|
|
Total gains (losses) included in earnings, FY 2015
|
|
|
5,552
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
$
|
(681
|
)
|
|
Total gains (losses) included in earnings, three months ended March, 31, 2016
|
|
|
(8,913
|
)
|
|
|
|
|
|
|
|
Ending balance, September 30, 2016
|
|
$
|
(9,510
|
)
|
NOTE
4 – RELATED PARTY TRANSACTIONS
Management
Compensation
For
the three months ended September 30, 2016, the Company paid its CEO, President, and CFO an aggregate of $10,500 as compensation
of which $31,500 remained unpaid at September 30, 2016.
For
the three months ended June 30, 2015, the Company paid its CEO/President/CFO an aggregate of $210,000 as compensation of which
$90,000 remained unpaid at September 30, 2016.
Office
Space
Effective
January 12, 2016, the Company subleased approximately 200 square feet of executive office space in Silver Spring MD at a rate
of $250 per month on a month-to-month basis.
Effective
December 1, 2014, the Company subleased, from a company under the control of our then current CFO, approximately 1,000 square
feet of executive office space in Silverdale, WA at a rate of $500 per month on a month-to-month basis. The lease terminated on
June 30, 2015.
Effective
December 1, 2014, the Company relocated its headquarters to 10777 Westheimer Road, Suite 1100, Houston, TX 77042, where we rented
executive suites on a monthly basis at $1,600 per month. Effective December 31, 2015, the tenancy was terminated.
Effective
December 1, 2014, the Company rents yard space in Houston, Texas for it is grow pods from an individual on a month to month basis
at a rate of $450 per month. Effective December 31, 2015, the tenancy was terminated.
NOTE
5 – ADVANCES AND NOTES PAYABLE TO RELATED PARTIES
Advances
and notes payable to related parties at September 30, 2016 and 2015 had an outstanding balance of $0 and $16,819, respectively.
The notes bear interest of 6%, and were due on demand.
During
the quarter ended September 30, 2016, the prior CEO, Richard Johnson, converted $273,774 in Accounts Payable to himself, and other
payables he was responsible for, into a note payable. Following this event and Mr. Johnson’s departure, the Company took
over control of the note and subsequently retired the debt in the amount of $273,774, resulting in a gain on discharge of debt
on the Statement of Operations.
PREMIER
PRODUCTS GROUP, INC.
Notes
to the Financial Statements
September
30, 2016
(Unaudited)
NOTE
6 – 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:
|
Purchase of asset
|
|
$
|
129,000
|
|
|
Less: Impairment
|
|
|
(79,000
|
)
|
|
Value of asset as of 12/31/2014
|
|
$
|
50,000
|
|
|
Add: Improvements
|
|
|
1,000
|
|
|
Less: Depreciation
|
|
|
(3,000
|
)
|
|
Less: Impairment
|
|
|
(48,000
|
)
|
|
Value of asset as of 12/31/2015
|
|
$
|
-
|
|
|
Value of asset as of 09/30/2016
|
|
$
|
-
|
|
NOTE
7 – NOTES PAYABLE AND DERIVATIVE LIABILITY
Notes
Payable
At
the period ended September 30, 2016, the Company had third party notes payable and accrued interest in the amount of $342,878
compared to $337,109 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 2015 and 2016 fiscal year and are not secured by collateral of the Company. Several
of these notes are in default and the Company is in communication with the holders to resolve these outstanding issues. The notes
are convertible into common stock, at the election of the holder, at discounts of between 40% and 50%. Two additional notes, totaling
$11,250 are convertible into common stock of the Company at $0.001. The two notes payable are contingent liability that are either
in dispute or the Company is unable to substantiate.
Derivative
Liability
The
Company entered into an agreement, which has been accounted for as a derivative. The Company has recorded a loss contingency associated
with this agreement because it is both probable that a liability had been incurred and the amount of the loss can reasonably be
estimated. The main factors that will affect the fair value of the derivative are the number of the Company’s shares outstanding
post acquisition or post offering and the resulting market capitalization.
ASC
Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair
value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not
readily available, fair values are determined using market based pricing models incorporating readily observable market data and
requiring judgment and estimates.
PREMIER
PRODUCTS GROUP, INC.
Notes
to the Financial Statements
September
30, 2016
(Unaudited)
The
Company issued warrants and has evaluated the terms and conditions of the conversion features contained in the warrants to determine
whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined
that the conversion features contained in the warrants represent freestanding derivative instruments that meet the requirements
for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the warrants
is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the
warrants was measured at the inception date of the warrants and each subsequent balance sheet date. Any changes in the fair value
of the derivative financial instruments are recorded as non-operating, non-cash income, or expense at each balance sheet date.
The
Company valued the conversion features in its warrants using the Black-Scholes model. The Black-Scholes model values the embedded
derivatives based on a risk-free rate of return of 0.0131%, grant dates at September 30, 2016 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 $0.0017 to $0.0980, and the computed measure of the Company’s stock volatility, ranging from 220% to 580%.
Included
in the September 30, 2016 and December 31, 2015 financial statements is a derivative liability in the amount of $2,620 and $681,
respectively, to account for this transaction. It is revalued quarterly henceforth and adjusted as a gain or loss to the consolidated
statements of operations depending on its value at that time.
Included
in our Consolidated Statements of Operations for the six months ended September 30, 2016 and year-end December 31, 2015 are $6,974
and $1,118 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
8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
For
the nine months ended September 30, 2016, the Company recorded accounts payable and accrued expenses in the amount of $348,365,
compared to the year ended December 31, 2015 of $768,022. The accounts payable and accrued expenses include $191,885 in legal
and professional fees and $144,000 to related parties for work performance.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Contingent
Liabilities
The
Company recorded contingent and legal liabilities for the period ending September 30, 2016 for $242,283. The legal liability includes
$167,283 for settlement of an arbitration dispute plus accrued interest and fees, and contingent liability of a $75,000 note payable,
as further defined below. Also included in contingent liability are two additional prior notes payable in the amount $10,000 and
$140,200.
The
Company recorded contingent and legal liabilities for the period ended September 30, 2016 for $392,483. The legal liability includes
$167,283 for settlement of an arbitration dispute as further defined below. Additional contingent liabilities have been accounted
for in the amount of $150,200 and $75,000 for notes payable. These notes date back to the purchase of the mineral properties with
a related party. The Company believes that these notes are to be discharged, however, until additional research and agreements
have been reached, the Company is treating the amount as a contingent liability.
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 has been closed as of September 2016, with the Company recording a legal liability in the
amount of $125,000, plus $42,283 in accrued penalties and fees, to account for liability they have incurred.
PREMIER
PRODUCTS GROUP, INC.
Notes
to the Financial Statements
September
30, 2016
(Unaudited)
Legal
proceedings
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 has been closed as of September 2016, with the Company recording a legal liability in the
amount of $125,000, plus $42,283 in accrued penalties and fees, to account for liability they have incurred.
On
February 24, 2015, the Company was named a defendant in a complaint filed by John Michael Coombs in the Third Judicial District
Court in and For Salt Lake County, State of Utah, alleging, among other things, Breach of Contract, in connection with a Warrant
Agreement issued by the Company to Mr. Coombs in 2010. Management has informed Mr. Coombs that it fully intends to honor the Warrant
Agreement and is in discussions to settle this matter.
NOTE
10 – CAPITAL STOCK
The
Company has authorized unlimited number of shares of common stock with a par value of $0.00001. At September 30, 2016, the Company
had 393,122,046 shares issued and outstanding.
The
Company has authorized 51 shares of preferred stock (Series B) with a par value of $0.001. At September 30, 2016, the Company
had 51 shares issued and outstanding.
During
the nine months ended September 30, 2016, a total of 65,911,130 shares of common stock for issued the retirement of $37,415 in
debt and accrued interest. The Company recognized a combined loss of $109,938 on the conversions.
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 entered 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.
NOTE
11 – SUBSEQUENT EVENTS
On
September 18, 2016, the Company entered into a definitive letter of intent to acquire Satic, Inc. (“Satic USA”)
www.saticusa.com
,
an American manufacturer of a proprietary line of trademarked clean power solar products and other patented energy saving products
and lighting. Terms of the letter of intent have not been finalized pending due diligence. The previously announced acquisition
of GEAR Sports Nutrition has been terminated. After final due diligence, a closer look revealed GEAR’s primary business
relationships not up to standard and therefore not in the shareholders’ best interest. From the outcome of those findings,
we terminated the acquisition and management sought to explore other opportunities prior to the resolving the closing, which lead
to the discovery of the exciting and revenue producing Satic USA. Concurrent with the termination of the GEAR transaction, 225
million shares of the Company’s common stock will be returned to treasury, reducing the outstanding shares by over 50%;
effective October 2016.
