Attached files
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| EX-31 - CERTIFICATION - SILVER HILL MINES INC | ex31.htm |
| EX-32 - CERTIFICATION - SILVER HILL MINES INC | ex32.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ending June 30, 2015
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission file number 000-53236
SILVER HILL MINES, INC.
(Name of Small Business Issuer in its Charter)
NEVADA |
| 91-1257351 |
(State of Incorporation) |
| (IRS Employer identification No.) |
One Rockefeller Plaza 10th Floor, New York, NY |
| 10020 |
(Address of principal executive offices) |
| (Zip Code) |
Issuer's telephone number: (212) 935-8400
---------------------------------------------------------
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 x 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 o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o, Accelerated filer o, Non-accelerated filer o, Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes x No o
As of August 3, 2015 we had 22,422,311 shares of common stock issued and outstanding.
1
SILVER HILL MINES, INC.
FORM 10-Q
For the Quarter Ended June 30, 2015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
Item 3. Defaults upon Senior Securities.
Item 4. Mine Safety Disclosures.
2
3
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Silver Hill Mines, Inc. Balance Sheet | ||||
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| (Unaudited) |
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| June 30, 2015 |
| December 31, 2014 |
Assets |
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Current assets |
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Cash and cash equivalents | $ | - | $ | - |
Total current assets |
| - |
| - |
Deposit on acquisition |
| 78,000 |
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Total assets | $ | 78,000 | $ | - |
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Liabilities and Stockholders' Deficit |
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Current liabilities |
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Accounts payable and accrued expenses | $ | 47,995 | $ | 19,227 |
Accounts payable – Related party |
| - |
| 0 |
Total current liabilities |
| 47,995 |
| 19,227 |
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Stockholders' equity (deficit) |
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Preferred stock, 50,000,000 shares authorized, par value $.001, 10,000,000 shares issued and outstanding |
| 10,000 |
| 10,000 |
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Common stock, 250,000,000 shares authorized, par value $.0001, 25,422,311 and 499,234 shares issued and outstanding June 30, 2015 and December 31, 2014 |
| 2,542 |
| 50 |
Additional paid-in capital |
| 1,609,723 |
| 964,215 |
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Retained earnings |
| (1,592,260) |
| (993,492) |
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Total stockholders' equity (deficit) |
| 30,005 |
| (19,227) |
Total liabilities and stockholders' equity | $ | 78,000 | $ | - |
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See accompanying notes to financial statements
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Silver Hill Mines, Inc. Statements of Operations (Unaudited) | ||||||||
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| For the three months ended |
| For the six months ended | ||||
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| June 30, 2015 |
| June 30, 2014 |
| June 30, 2015 |
| June 30, 2014 |
Revenues | $ | - | $ | - | $ | - | $ | - |
Interest Income | $ | - | $ | - | $ | - | $ | - |
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General and administrative expenses | $ | 582,683 | $ | - | $ | 598,768 | $ | - |
Loss from operations | $ | (582,683) | $ | - | $ | (598,768) | $ | - |
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Other Income - Relieved Debt | $ | - | $ | - | $ | - | $ | 11,500 |
Net income (loss) | $ | (582,683) | $ | - | $ | (598,768) | $ | 11,500 |
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Basic and diluted loss per common share | $ | (0.034) | $ | - |
| (0.068) |
| 0.023 |
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Weighted average number of common shares used in per share calculations |
| 17,114,619 |
| 499,234 |
| 8,806,926 |
| 499,234 |
See accompanying notes to financial statements
5
Silver Hill Mines, Inc. Statements of Cash Flows (Unaudited) | ||||
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| For the six months ended | ||
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| June 30, 2015 |
| June 30, 2014 |
Cash flows for Operating Activities |
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Net Income(loss) | $ | (598,768) | $ | 11,500 |
Adjustment to reconcile net income to net cash provided by: |
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Operating activities (Accounts Payables) |
| - |
| (12,000) |
Change in operating assets and liabilities: |
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Decrease in Accounts Payable |
| 28,768 |
| (93,653) |
Short Term Loan – Related party |
| - |
| 500 |
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Cash flows for Operating Activities |
| (570,000) |
| (93,653) |
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Cash flows for Financing Activities: |
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| - |
| - |
Capital Stock |
| 648,000 |
| - |
Additional paid-in capital (assumption of liability by former Shareholder) |
| - |
| 93,653 |
Deposit on investment |
| (78,000) |
| - |
Preferred Stock |
| - |
| - |
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Cash flows for Financing Activities |
| 570,000 |
| 93,653 |
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Increase in cash and cash equivalents |
| - |
| - |
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Cash and cash equivalents - Beginning of period |
| - |
| - |
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Cash and cash equivalents - End of period | $ | - | $ | - |
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Supplemental Disclosures regarding cash flows |
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Interest paid | $ | - | $ | - |
Income taxes paid | $ | - | $ | - |
See accompanying notes to financial statements
6
Silver Hill Mines, Inc.
Notes to Financial Statements
NOTE A - Organization and Description of Business
The Company was originally incorporated in the State of Washington on March 27, 1961, for the primary purpose of acquiring and developing mining properties. The Company has not attained commercial mining operations since its inception.
On May 11, 2007 the shareholders approved changing the corporate domicile Washington to Nevada. On June 21, 2007, Silver Hill Mines, Inc., a Nevada corporation, was organized as the merger partner. On September 5, 2007, the change in domicile was completed by merging Silver Hill Mines, Inc., the Washington corporation into Silver Hill Mines, Inc., the Nevada Corporation. Silver Hill Mines, Inc., the Nevada corporation, was the surviving corporation.
NOTE B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has adopted a year-end of December 31.
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
NOTE C - Summary of Significant Accounting Policies
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Use of estimates
In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses in the statement of operations. Actual results could differ from those estimates.
Fair Value Measurements
For certain financial instruments, including accounts receivable, accounts payable, accrued expenses, interest payable, advances payable and notes payable, the carrying amounts approximate fair value due to their relatively short maturities.
On January 1, 2008, the Company adopted ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
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Silver Hill Mines, Inc.
Notes to Financial Statements
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair value in accordance with ASC 815.
In February 2007, the FASB issued ASC 825-10 “Financial Instruments.” ASC 825-10 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. ASC 825-10 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company adopted ASC 825-10 on January 1, 2008. The Company chose not to elect the option to measure the fair value of eligible financial assets and liabilities.
The carrying amounts of cash and current liabilities approximate fair value due to the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments in the management of foreign exchange, commodity price, or interest rate market risks.
Income taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.
Basic and diluted net loss per share
The Company computes net income (loss) per share in accordance with ASC 260-10, “Earnings Per Share.” The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis. For the years ended December 31, 2014, and 2013 there were no potential dilutive securities.
8
Silver Hill Mines, Inc.
Notes to Financial Statements
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company places its cash with high quality financial institutions and at times may exceed the FDIC insurance limit
Special purpose entities
The Company does not have any off-balance sheet financing activities.
Impairment or Disposal of Long-Lived Assets
The Company follows ASC 360-10, “Property, Plant, and Equipment,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Through December 31, 2014, the Company had not experienced impairment losses on its long-lived assets.
Stock Based Compensation
Effective January 1, 2006, the Company adopted the fair value recognition provisions of ASC 718 “Compensation-Stock Compensation,” using the modified-prospective transition method. Under this method, stock-based compensation expense is recognized in the consolidated financial statements for stock options granted, modified or settled after the adoption date. In accordance with ASC 718, the unamortized portion of options granted prior to the adoption date is recognized into earnings after adoption. Results for prior periods have not been restated, as provided for under the modified-prospective method.
Under ASC 718, stock-based compensation expense recognized is based on the value of the portion of share-based payment awards that are ultimately expected to vest during the period. Based on this, our stock-based compensation is reduced for estimated forfeitures at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. Assumptions used in the Black-Scholes models are based upon the following data:
(1) The expected life of the option, estimated by considering the contractual term of the option, the vesting period of the option, the employees’ expected exercise behavior and the post-vesting employee turnover rate.
(2) The expected stock price volatility of the underlying shares over the expected term of the option, based upon historical share price data.
(3) The risk free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options.
(4) Expected dividends, based on historical dividend data and expected future dividend activity.
(5) The expected forfeiture rate, based on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.
In accordance with ASC 718, the benefits of tax deductions in excess of the compensation cost recognized for options exercised during the period are classified as financing cash inflows rather than operating cash inflows.
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Silver Hill Mines, Inc.
Notes to Financial Statements
Business segments
ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one operating segment as of December 31, 2014 and 2013.
Recently issued accounting pronouncements
On June 10, 2014, the FASB issued , Development Stage Entities (Topic 915) – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. The Company has elected early adoption of this new standard.
NOTE D - Going Concern Uncertainty
The Company has had no significant operations, assets or liabilities since 1993 and, accordingly, is fully dependent on either future sales of securities or upon its current management and/or advances or loans from significant stockholders or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity. Because of these factors, our auditors have issued an audit opinion for the Company which includes a statement describing our going concern status. This means, in our auditor's opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.
The Company's continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.
The Company anticipates offering future sales of equity securities. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.
If no additional operating capital is received during the next twelve months, the Company will be forced to rely upon additional funds loaned by management and/or significant stockholders to preserve the integrity of the corporate entity at this time. In the event, the Company is unable to acquire advances from management and/or significant stockholders, the Company's ongoing operations would be negatively impacted.
It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.
In such a restricted cash flow scenario, the Company would be unable to complete our business plan steps, and would, instead, delay all cash intensive activities. Without necessary cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds could be raised in the equity securities market.
While the Company is of the opinion that good faith estimates of the Company's ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
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Silver Hill Mines, Inc.
Notes to Financial Statements
NOTE E - Income Taxes
Due to the change in majority ownership in 2012 and under the limitations of the Internal Revenue Code, there are no benefits to losses incurred that can be carried forward from prior years.
The amount and availability of the net operating loss carry forwards may be subject to limitations set forth by the Internal Revenue Code. Factors such as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of the carry forwards.
NOTE F - Related Party Transactions
Ending March 31, 2014, Matthew Maza, as principal shareholder of the Company, sold his interest in the Company and is no longer a related party.
Consulting shares were issued to management during the quarter. A total of 20,000,000 restricted common shares to Silver Hill Management, Inc. for consulting services valued at $0.026 Cents per share or $520,000.
NOTE G – Capital Structure
On June 30, 2015, there are 50,000,000 preferred Series "A" shares authorized with a par value of $0.001 and 10,000,000 shares issued and outstanding.
On June 30, 2015 there are 250,000,000 common shares authorized with a par value of $0.0001 and 25,422,311 shares issued and outstanding.
NOTE H - Common Stock
On May 28, 2015, the Board of Directors authorized the issuance of the following shares of common stock:
(1)
1,923,077 restricted common shares to Assured Investments, LLC for $50,000.
(2)
20,000,000 restricted common shares to Silver Hill Management, Inc. for consulting services valued at $0.026 Cents per share or $520,000.
(3)
Three Million (3,000,000) common shares in the name of ISME Institute fur Sport, Medizin & Ernahrung, GmbH, a company organized under the Federal Republic of Germany as partial consideration for the Asset Purchase Agreement dated May 16, 2015. The shares are valued at $1.00 each for a total consideration of $3,000,000 Dollars. ISME's address is Weingartenstrasse 2, 64546 Morffelden-Walldorf, German.
NOTE I – Deposit
The Company is in the due diligence process of finalizing their transaction with ISME Institute. The current fair market value of the shares being issued has been as a deposit on our balance sheet until the audited value of the acquired assets is fully determined.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
When used in this Form 10-Q and in our future filings with the Securities and Exchange Commission, the words or phrases will likely result, management expects, or we expect, will continue, is anticipated, estimated or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. These statements are subject to risks and uncertainties, some of which are described below. Actual results may differ materially from historical earnings and those presently anticipated or projected. We have no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect anticipated events or circumstances occurring after the date of such statements.
Results of Operations
The Company intends to operate its business primarily through its two main segments, as described above, as well as entities that may be formed or acquired in the future. The table below is meant to give the reader some overall additional information into the detail of some of the line items presented in the financial statements.
Results of Operations 2015-2014
Analysis of the six months ended June 30, 2015 and 2014.
Revenues
The Company has not generated any income since inception including the periods presended here.
G & A Expenses
G&A expense increased to $598,768 for the six months ended June 30, 2015 from $0 for the six months ended June 30, 2014, an increase of $598,768. The majority of the expenses, $520,000 was Company incurred consulting cost paid to the management team in restricted stock.
Net income (loss)
Net loss was $598,768 for the six months ended June 30, 2015 from a net loss of $0 for the six months ended June 30, 2014, an increase of $598,768. The increase was the result of above details.
Results of Operations 2015-2014
Analysis of the three months ended June 30, 2015 and 2014.
Revenues
The Company has not generated any income since inception including the periods presended here.
G & A Expenses
G&A expense increased to $582,683 for the six months ended June 30, 2015 from $0 for the six months ended June 30, 2014, an increase of $582.683. The majority of the expenses, $520,000 was Company incurred consulting cost paid to the management team in restricted stock.
Net income (loss)
Net loss was $582,683 for the six months ended June 30, 2015 from a net loss of $0 for the six months ended June 30, 2014, an increase of $582,683. The increase was the result of above details.
12
Plan of Operation
We have had no operations and have not produced any revenue in the last two years.
We intend to seek to acquire the assets or shares of an entity actively engaged in business in exchange for our securities through a business combination transaction. While we will attempt to obtain audited financial statements of a business combination candidate, there is no assurance that such audited financial statements will be available. The Board of Directors does intend to obtain certain assurances of value of the candidate entity's assets prior to consummating such a transaction. We have no full time employees. Presently, our officers have agreed to allocate a portion of their time to our activities without compensation. However, we may compensate them in stock for services rendered at some future date. Management anticipates that our business plan can be implemented by an officer devoting an aggregate of approximately 5 hours per week to our business affairs. Consequently, conflicts of interest may arise with respect to the limited time commitment by such officers. In addition, our officers and directors may, in the future, become involved with other companies, which have a business purpose similar to that of ours. As a result, additional conflicts of interest may arise in the future.
Any business combination or transaction will likely result in a significant issuance of shares and substantial dilution to our present stockholders.
Management has identified a number of business opportunities in the form of a health and beverage products. The target opportunities are in evaluation stages of business opportunity development. No definitive agreements have yet been executed.
Asset Purchase Agreement
On May 16, 2015, the Company entered into an Asset Purchase Agreement (the “Agreement”) with ISME Institut fur Sport, Medizin & Ernahrung, GmbH, a corporation organized under the laws of the Federal Republic of Germany (“ISME”).
ISME is engaged in the business of developing functional food products represented by the “Cantio” concept product line assets described in the Agreement. The Cantio concept product lines include 41° C High Performance Sports Drink, 55 bpm Regeneration Sports Drink and IQ Plus Mind Bar.
The Company has agreed to purchase the ISME assets for Three Million Six Hundred Thousand ($3,600,000) Dollars. The purchase price will be payable as follows:
·
Three Million (3,000,000) Company common shares valued at One Dollar ($1.00) per share to be issued and delivered to ISME upon execution of this Agreement;
·
Six Hundred Thousand ($600,000) Dollars, plus applicable German Value Added Tax (VAT) estimated to be $114,000 Dollars to be paid to ISME on, or before August 31, 2015.
ISME agreed to grant the Company a first right of refusal to repurchase the 3,000,000 shares prior to selling the shares by way of any future offer. Additionally, the Company has granted ISME an irrevocable option to buy back (Put Option) up to 3,000,000 shares for $3,000,000. The Company has agreed to grant ISME a security interest in all of the purchased assets securing the Company’s put option performance. If the Company fails to perform the put option, the $600,000 will be forfeited to ISME.
General Business Plan
Based on the lack of Company business activities since 1993, our Company is classified as a "shell" company by the Securities and Exchange Commission SEC). The term shell company means a Company, other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB (§ 229.1101(b) of that chapter), that has:
(1) No or nominal operations; and
(2) Either:
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(i) No or nominal assets;
(ii) Assets consisting solely of cash and cash equivalents; or
(iii) Assets consisting of any amount of cash and cash equivalents and nominal other assets.
Searching for Business Combination Candidate
The Company is undercapitalized. The current majority shareholder intends to advance funds to the Company or on behalf of the Company in order to (1) maintain the integrity of the corporate entity, and (2) pay general and administrative expenses related to transfer agency fees, financial accounting and auditing, and legal fees associated with initiating and preserving the corporate standing as an Securities and Exchange Commission reporting company.
Form of Business Combination
The manner in which the Company participates in business combination will depend upon the nature of the transaction, the respective needs and desires of the Company and the management and shareholders of the candidate company, and the relative negotiating strength of each.
It is likely that the Company will acquire its participation in a business combination through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.
Financing
The Company believes it that can satisfy its cash requirements for the foreseeable future. To the extent that additional funds are needed in the next twelve months in order to pay for financial accounting, auditing, transfer agency or EDGAR filing fees, the majority shareholder intends to advance or loan funds to the company. The Company offers no assurances that it will have the necessary cash to fund business acquisition opportunities, including, but not limited to the Cantio acquisition which requires a $600,000 cash payment on August 31, 2015.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable to Smaller Reporting Companies.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this report, an evaluation was carried out by the Company’s management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of June 30, 2015. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
During the evaluation of disclosure controls and procedures as of June 30, 2015, management identified material weaknesses in internal control over financial reporting, which management considers an integral component of disclosure controls and procedures. Material weaknesses identified include the lack of any segregation of duties, lack of appropriate accounting policies and management’s assessment of internal control over financial reporting. As a result of the material weaknesses identified, management concluded that Company’s disclosure controls and procedures were not effective.
Notwithstanding the existence of these material weaknesses, management believes that the consolidated financial statements in this report on Form 10-Q fairly present, in all material respects, Company’s financial condition as reported, in conformity with United States generally accepted accounting principles (GAAP).
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the chief executive officer and the chief financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with United States generally accepted accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the board of directors; and
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, 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.
The Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified are disclosed below.
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Ineffective Oversight of Financial Reporting. The Company has not provided an appropriate level of oversight of the financial reporting process and has not appropriately monitored the Company’s system of internal control. The Company’s monitoring of management’s assessment of internal control over financial reporting did not result in appropriate actions taken by management to remedy the deficiencies in the process to assess internal control over financial reporting. The Company has no independent audit committee overseeing the financial reporting process.
Failure to Segregate Duties. Management has not maintained any segregation of duties within the Company due to its reliance on individuals to fill multiple roles and responsibilities. Our failure to segregate duties has been a material weakness since inception through this report.
Sufficiency of Accounting Resources. The Company has limited accounting personnel to prepare its financial statements. The insufficiency of our accounting resources has been a material weakness since inception.
As a result of the material weaknesses in internal control over financial reporting described above, the Company's management has concluded that, as of June 30, 2015, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by the COSO.
This report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged the Company’s independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
During the period ended June 30, 2015, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
Limitations
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. 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 breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any pending material legal proceedings.
Item 1A. Risk Factors.
Not Applicable.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
On May 18, 2015, the Company offered and sold 1,923,077 common shares to Assured Investments, LLC, an accredited investor, for $50,000 Dollars or $0.026 Cents per share.
On May 28, 2015, the Board of Directors authorized the issuance of Twenty Million (20,000,000) common shares to Silver Hill Management, Inc., a New York corporation, for consulting fees valued at $0.026 per share or $520,000. George Clair, the Company’s Chief Executive Officer, has voting and dispositive control over the shares owned by Silver Hill Management, Inc.
On May 28, 2015, the Board of Directors authorized the issuance of Three Million (3,000,000) common shares in the name of ISME Institut fur Sport, Medizin & Ernahrung, GmbH, a company organized under the Federal Republic of Germany as partial consideration for the Asset Purchase Agreement dated May 16, 2015. The shares are valued at $1.00 each for a total consideration of $3,000,000 Dollars.
The offer and sale of the common shares above relied on the transaction exemption afforded by Section 4(a)(2) and, or Regulation D and S of the Securities Act of 1933, as amended. The offer and sale is exempt because of the private nature of the transaction which did not involve a public offering of securities.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable
Item 5. Other Information.
None.
Item 6. Exhibits
(a) Exhibits
Exhibit No.
Description
31
Chief Executive/Financial Officer-Section 302 Certification pursuant to Sarbanes-Oxley Act.
32
Chief Executive/Financial Officer-Section 906 Certification pursuant to Sarbanes-Oxley Act.
101
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (iv) Notes to Financial Statements
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 19, 2015
SILVER HILL MINES, INC.
/s/ George Clair
By: _________________________
George Clair
Title: President, Chief Executive Officer
Chief Financial Officer, Chief Accounting Officer
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