QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 þ No o.
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 o
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.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o (Do not check if a
smaller reporting company)
Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
The number of shares of the registrant’s only class of common stock issued and outstanding as of January 9, 2014, was 16,951,886 shares.
The accompanying consolidated 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 consolidated 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, 2012 audited financial statements. The results of operations for the nine months ended September 30, 2013 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 not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it 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 becomes profitable. 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.
The Company’s management reviewed all material events through the date of the issuance of these financial statements to determine if there were any subsequent events to report.
Recent 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.
VALLEY HIGH MINING COMPANY
(An Exploration Stage Company)
Notes to the Financial Statements
September 30, 2013
NOTE 9 – SUBSEQUENT EVENTS
In October 2013, the Company filed a complaint in the United States District Court for the District of Colorado against Gandolf Holdings, Inc., 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 Holdings, Inc., 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 Holdings, 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 Holdings to repay these funds. Gandolf Holdings failed and refused to pay the Company pursuant to the note.
The Company successfully served the complaint upon Gandolf Holdings, but has been unable to locate Brian Cox or Cox General Accounting, Inc. Gandolf Holdings failed to answer the complaint within the prescribed time period, and in December 2013, the Company filed a Motion for Default with the court. As of the date of this report, the Company is awaiting receipt of the judgment against Gandolf.
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview and History
We were incorporated in the State of Utah on November 14, 1979, under the name "Valley High Oil, Gas & Minerals, Inc.," ("VHOGM") for the purpose of engaging in the energy, mining and natural resources business. Following our inception and 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 $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 stock 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 us 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 Agreement and Plan provided, among other things, that for every 35 shares of VHOGM, a shareholder was entitled to receive one (1) share of Valley High Mining Company, a Nevada corporation, the survivor in the merger.
On April 19, 2004, the day that the merger was effective, we entered into a mining lease agreement ("Mining Lease" or "Lease") 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 with Corizona Mining Partners LLC, (“Corizona”), a Minnesota limited liability company (the “Joint Venture”). Prior, on July 20, 2012, we 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, we 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.
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.
Disclosure Controls and 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 CEO/CFO has concluded that our disclosure controls and procedures were not effective as of September 30, 2013, at the reasonable assurance level. This is due to our independent auditors proposing adjustments to our financial statements relating to our derivative liability. We are working with our independent auditors to resolve this issue. 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/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.
Changes in Internal Control over Financial Reporting – There were no changes in our internal control over financial reporting during our three month period ended September 30, 2013, which were identified in conjunction with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, 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
At September 30, 2013, we were not party to any legal action.
In October 2013, we filed a complaint in the United States District Court for the District of Colorado against Gandolf Holdings, Inc., 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 we put on deposit as part of the terms of a fuel brokerage transaction. The relevant agreement required us 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 us.
After we paid the $75,000, upon information and belief, Brian Cox, who was then the Chief Financial Officer of Gandolf Holdings, Inc., authorized the release of the funds without our consent. Also upon information and belief, the sale of the fuel was not consummated. Brian Cox ceased all communication with us at that time. We contacted Gandolf Holdings, who agreed to execute a demand promissory note for the $75,000 in our favor. In September 2013 we tendered a demand upon Gandolf Holdings to repay these funds. Gandolf Holdings failed and refused to pay us pursuant to the note.
We successfully served the complaint upon Gandolf Holdings, but have been unable to locate Brian Cox or Cox General Accounting, Inc. Gandolf Holdings failed to answer our complaint within the prescribed time period and in December 2013 we filed a Motion for Default with the court. As of the date of this report, we are awaiting receipt of the judgment against Gandolf. We are also continuing our efforts to serve Brian Cox and Cox General Accounting, Inc.
ITEM 1A. RISK FACTORS
We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not issue any of our securities during the three months ended September 30, 2013.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES