U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q10-Q/A
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2020August 31, 2021
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
Commission file number 333-225892
Quantum Energy, Inc. |
|
Nevada | 98-0428608 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 89030 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: |
Securitiesregisteredpursuant to Section12(b) of theAct:
TitleofEachClass | TradingSymbol | Name of EachExchange |
Common stock, $0.001 Par Value | QEGY | OTC.PK |
Securitiesregisteredpursuant to Section12(g) of theAct:
None
Indicate by check mark whether the issuer (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 on its corporate Website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit filed). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | ||
Smaller reporting company | ☒ | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 issuer’s common stock, par value $0.001 per share, outstanding as of November 30, 2020August 31, 2021 was approximately 48,491,485.49,491,498.
Contents
PART I - FINANCIAL INFORMATION | 3 |
ITEM 1. FINANCIAL STATEMENTS | 3 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION. |
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 19 |
ITEM 4. CONTROLS AND PROCEDURES | 19 |
PART II - OTHER INFORMATION | 20 |
ITEM 1. LEGAL PROCEEDINGS. | 20 |
ITEM | 20 |
ITEM | 20 |
ITEM |
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ITEM | 21 |
ITEM | 21 |
ITEM | 21 |
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Explanatory Note: This amendment is being filed solely for the purpose of including the XBRL Exhibits.
PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
QUANTUM ENERGY, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED |
February 28, | ||||||||||||||||
November 30, | February 29, | August 31, | 2021 | |||||||||||||
2020 | 2020 | 2021 | (Restated) | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash | $ | 47 | $ | 47 | $ | 4,875,889 | $ | 1,969,508 | ||||||||
Stock Buyback Account | 90,296 | — | ||||||||||||||
Work in Progress | 179,336 | — | ||||||||||||||
Total Current Assets | 47 | 47 | 5,145,521 | 1,969,508 | ||||||||||||
Deposits | — | — | ||||||||||||||
Deposits - Related Party | 7,530,000 | 1,200,000 | ||||||||||||||
Total Assets | $ | 47 | $ | 47 | $ | 12,675,521 | $ | 3,169,508 | ||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Accounts Payable and Accrued Expenses | $ | 158,959 | $ | 147,888 | $ | 136,522 | $ | 220,140 | ||||||||
Accounts Payable and Accrued Expenses - Related Parties | 191,837 | 176,837 | 326,889 | 305,170 | ||||||||||||
Deferred Revenue - Related Parties | 1,149,671 | — | ||||||||||||||
Common Stock Payable | 200,000 | 200,000 | 200,000 | 200,000 | ||||||||||||
Convertible Note Payable | 67,500 | 67,500 | — | 67,500 | ||||||||||||
Derivative Liability | 160,157 | 138,185 | — | 116,399 | ||||||||||||
Promissory Notes Payable | 76,305 | 76,305 | 76,305 | 76,305 | ||||||||||||
Promissory Notes Payable - Related Parties | 106,015 | 106,015 | 106,015 | 106,015 | ||||||||||||
Total Current Liabilities | 960,773 | 912,730 | 845,731 | 1,091,529 | ||||||||||||
Total Liabilities | 960,773 | 912,730 | 845,731 | 1,091,529 | ||||||||||||
Stockholders' Deficit | ||||||||||||||||
Common Stock - $0.001 Par; 495,000,000 Shares Authorized, 48,491,485 Issued and Outstanding, Respectively | 48,491 | 48,491 | ||||||||||||||
Stockholders' Equity | ||||||||||||||||
Common Stock - $0.001 Par; 495,000,000 Shares Authorized, 49,491,485 and 48,491,485 Issued and Outstanding, Respectively | 49,491 | 48,491 | ||||||||||||||
Common Stock Subscribed | 14,972,604 | 3,619,828 | ||||||||||||||
Additional Paid-In-Capital | 11,449,681 | 11,449,681 | 11,129,944 | 11,449,681 | ||||||||||||
Accumulated Deficit | (12,458,898 | ) | (12,410,855 | ) | (14,321,282 | ) | (13,040,021 | ) | ||||||||
Treasury Stock - 967,567 Shares at Par $0.001 | (967 | ) | — | |||||||||||||
Total Stockholders' Deficit | (960,726 | ) | (912,683 | ) | ||||||||||||
Total Stockholders' Equity | 11,829,790 | 2,077,979 | ||||||||||||||
Total Liabilities and Stockholders' Deficit | $ | 47 | $ | 47 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 12,675,521 | $ | 3,169,508 | ||||||||||||
The accompany notes are an integral part of these financial statements.
QUANTUM ENERGY, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
August 31, | August 31, | August 31, | August 31, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Operating Expenses | ||||||||||||||||
General and Administrative | $ | 444,095 | $ | 0 | $ | 779,234 | $ | 0 | ||||||||
Professional Fees | 302,596 | 0 | 635,686 | 0 | ||||||||||||
Total Operating Expenses | 746,691 | 0 | 1,414,920 | 0 | ||||||||||||
Loss Before Other Income and (Expense) | (746,691 | ) | 0 | (1,414,920 | ) | 0 | ||||||||||
Other Income and (Expense) | ||||||||||||||||
Gain on Debt Settlement | 0 | 0 | 140,395 | 0 | ||||||||||||
Loss on Derivative | 0 | (275,097 | ) | 0 | (254,656 | ) | ||||||||||
Interest Expense | (3,368 | ) | (6,780 | ) | (6,736 | ) | (14,159 | ) | ||||||||
Total Other Income and (Expense) | (3,368 | ) | (281,877 | ) | 133,659 | (268,815 | ) | |||||||||
Income (Loss) Before Income Tax Expense | (750,059 | ) | (281,877 | ) | (1,281,261 | ) | (268,815 | ) | ||||||||
Income Tax Expense | 0 | 0 | 0 | 0 | ||||||||||||
Net Loss for the Period | $ | (750,059 | ) | $ | (281,877 | ) | $ | (1,281,261 | ) | $ | (268,815 | ) | ||||
Weighted Average Number of Common Shares - Basic and Diluted | 49,415,398 | 48,491,485 | 48,953,442 | 48,491,485 | ||||||||||||
Net Loss for the Period Per Common Shares - Basic and Diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | ||||
The accompany notes are an integral part of these financial statements.
QUANTUM ENERGY, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
November 30, | November 30, | November 30, | November 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Operating Expenses | ||||||||||||||||
Advertising and Marketing | — | — | — | 888 | ||||||||||||
Management Fees and Consulting | — | — | — | 11,750 | ||||||||||||
General and Administrative | — | 1,684 | — | 34,555 | ||||||||||||
Professional Fees | 4,854 | 54,461 | 4,854 | 183,930 | ||||||||||||
Total Operating Expenses | 4,854 | 56,145 | 4,854 | 231,123 | ||||||||||||
Other Income and (Expenses) | ||||||||||||||||
Bad Debts | — | — | — | (30,000 | ) | |||||||||||
Gain (Loss) on Derivative | 232,685 | 27,245 | (21,972 | ) | (114,736 | ) | ||||||||||
Interest Expense | (7,058 | ) | (6,180 | ) | (21,217 | ) | (38,385 | ) | ||||||||
Interest Expense - Warrants | — | — | — | (453,261 | ) | |||||||||||
Total Other Income and (Expenses) | 225,627 | 21,065 | (43,189 | ) | (636,382 | ) | ||||||||||
Total Income (Expenses) | 220,773 | (35,080 | ) | 48,043 | (867,505 | ) | ||||||||||
Income (Loss) Before Income Tax Expense | 220,773 | (35,080 | ) | (48,043 | ) | (867,505 | ) | |||||||||
Income Tax Expense | — | — | — | — | ||||||||||||
Net Income (Loss) for the Period | $ | 220,773 | $ | (35,080 | ) | $ | (48,043 | ) | $ | (867,505 | ) | |||||
Weighted Average Number of Common Shares - Basic and Diluted | 48,491,485 | 48,491,485 | 48,491,485 | 48,491,485 | ||||||||||||
Net Income (Loss) for the Period Per Common Shares - Basic and Diluted | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.02 | ) | |||||
For the Six Months Ended August 31, | 2021 | 2020 | ||||||
Cash Flows from Operating Activities | ||||||||
Net Loss for the Period | $ | (1,281,261 | ) | $ | (268,815 | ) | ||
Non-Cash Adjustments: | ||||||||
Loss on Derivative | 0 | 254,656 | ||||||
Gain on Debt Settlement | (140,395 | ) | — | |||||
Changes in Assets and Liabilities: | ||||||||
Stock Buyback Account | (90,296 | ) | — | |||||
Work in Progress | (179,336 | ) | — | |||||
Accounts Payable and Accrued Expenses | (59,622 | ) | 14,159 | |||||
Accounts Payable and Accrued Expenses - Related Parties | 21,719 | — | ||||||
Net Cash Flows Used In Operating Activities | (1,729,191 | ) | — | |||||
Cash Flows from Investing Activities | ||||||||
Cash Purchase of Treasury Stock | (559,704 | ) | — | |||||
Deposits - Related Party | (6,330,000 | ) | — | |||||
Net Cash Flows Used In Investing Activities | (6,889,704 | ) | 0 | |||||
Cash Flows from Financing Activities | ||||||||
Cash Received for Common Stock Subscriptions | 11,592,776 | — | ||||||
Repayment of Convertible Note Payable | (67,500 | ) | — | |||||
Net Cash Flows Provided By Financing Activities | 11,525,276 | 0 | ||||||
Net Change in Cash | 2,906,381 | 0 | ||||||
Cash - Beginning of Period | 1,969,508 | 47 | ||||||
Cash - End of Period | $ | 4,875,889 | $ | 47 | ||||
Cash Paid During the Period for: | ||||||||
Interest | $ | 2,500 | $ | — | ||||
Income Taxes | $ | — | $ | — | ||||
The accompany notes are an integral part of these financial statements.
|
|
For the Nine Months Ended | ||||||||
November 30, | November 30, | |||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities | ||||||||
Net Loss for the Period | $ | (48,043 | ) | $ | (867,505 | ) | ||
Non-Cash Adjustments: | ||||||||
Bad Debts | — | 30,000 | ||||||
Deposits Written Off | — | 7,822 | ||||||
Loss on Derivative | 21,972 | 114,736 | ||||||
Interest on Default of Convertible Note | — | 22,500 | ||||||
Interest Expense on Convertible Note Warrants | — | 453,261 | ||||||
Changes in Assets and Liabilities: | ||||||||
Notes Receivable | — | (30,000 | ) | |||||
Accounts Payable and Accrued Expenses | 11,071 | 57,205 | ||||||
Accounts Payable and Accrued Expenses - Related Parties | 15,000 | (516 | ) | |||||
Net Cash Flows Used In Operating Activities | — | (212,497 | ) | |||||
Cash Flows from Investing Activities | ||||||||
Investment in Joint Venture | — | (150,000 | ) | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from Notes Payable | — | 93,299 | ||||||
Proceeds from Stock Subscription | 200,000 | |||||||
Cash Proceeds Received from Convertible Note Payable | — | 45,000 | ||||||
Proceeds from Notes Payable - Related Parties | — | 31,715 | ||||||
Net Cash Flows Provided by Financing Activities | — | 370,014 | ||||||
Net Change in Cash | — | 7,517 | ||||||
Cash - Beginning of Period | 47 | 1,578 | ||||||
Cash - End of Period | $ | 47 | $ | 9,095 | ||||
Cash Paid During the Period for: | ||||||||
Interest | $ | — | $ | — | ||||
Income Taxes | $ | — | $ | — | ||||
The accompany notes are an integral part of these financial statements.
QUANTUM ENERGY, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE AND |
Common Stock | Common | Additional | Treasury Stock | Total | ||||||||||||||||||||||||||||
$0.001 Par | Stock | Paid-In | Accumulated | $0.001 Par | Stockholders' | |||||||||||||||||||||||||||
For the Three Months Ended August 31, 2020 | Shares | Amount | Subscribed | Capital | Deficit | Shares | Amount | Deficit | ||||||||||||||||||||||||
Balance - June 1, 2020 | 48,491,485 | $ | 48,491 | $ | — | $ | 11,449,681 | $ | (12,397,793 | ) | — | $ | — | $ | (899,621 | ) | ||||||||||||||||
Net Income for the Period | — | — | — | — | (281,877 | ) | — | — | (281,877 | ) | ||||||||||||||||||||||
Balance - August 31, 2020 | 48,491,485 | $ | 48,491 | $ | — | $ | 11,449,681 | $ | (12,679,670 | ) | — | $ | — | $ | (1,181,498 | ) | ||||||||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||
Subscription | $0.001 Par | Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||
For the Three Months Ended November 30, 2019 | Receivable | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||
Balance - September 1, 2019 | $ | (200,000 | ) | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,191,732 | ) | $ | (893,560 | ) | ||||||||||
Proceeds from Stock Subscription | 200,000 | — | — | — | — | 200,000 | ||||||||||||||||||
Net Loss for the Period | — | — | — | — | (35,080 | ) | (35,080 | ) | ||||||||||||||||
Balance - November 30, 2019 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,226,812 | ) | $ | (728,640 | ) | |||||||||||
Common Stock | Common | Additional | Treasury Stock | Total | ||||||||||||||||||||||||||||
$0.001 Par | Stock | Paid-In | Accumulated | $0.001 Par | Stockholders' | |||||||||||||||||||||||||||
For the Three Months Ended August 31, 2021 | Shares | Amount | Subscribed | Capital | Deficit | Shares | Amount | Deficit | ||||||||||||||||||||||||
Balance - June 1, 2021 | 48,491,485 | $ | 48,491 | $ | 6,220,170 | $ | 11,449,681 | $ | (13,571,223 | ) | — | $ | — | $ | 4,147,119 | |||||||||||||||||
Common Stock Subscriptions | — | — | 8,992,434 | — | — | — | — | 8,992,434 | ||||||||||||||||||||||||
Common Stock Issued from Subscriptions | 1,000,000 | 1,000 | (240,000 | ) | 239,000 | — | — | — | — | |||||||||||||||||||||||
Cash Purchase of Treasury Stock | — | — | — | (558,737 | ) | — | 967,567 | (967 | ) | (559,704 | ) | |||||||||||||||||||||
Net Loss for the Period | — | — | — | — | (750,059 | ) | — | — | (750,059 | ) | ||||||||||||||||||||||
Balance - August 31, 2021 | 49,491,485 | $ | 49,491 | $ | 14,972,604 | $ | 11,129,944 | $ | (14,321,282 | ) | 967,567 | $ | (967 | ) | $ | 11,829,790 | ||||||||||||||||
Common Stock | Common | Additional | Treasury Stock | Total | ||||||||||||||||||||||||||||
$0.001 Par | Stock | Paid-In | Accumulated | $0.001 Par | Stockholders' | |||||||||||||||||||||||||||
For the Six Months Ended August 31, 2020 | Shares | Amount | Subscribed | Capital | Deficit | Shares | Amount | Deficit | ||||||||||||||||||||||||
Balance - March 1, 2020 | 48,491,485 | $ | 48,491 | $ | — | $ | 11,449,681 | $ | (12,410,855 | ) | — | $ | — | $ | (912,683 | ) | ||||||||||||||||
Net Loss for the Period | — | — | — | — | (268,815 | ) | — | — | (268,815 | ) | ||||||||||||||||||||||
Balance - August 31, 2020 | 48,491,485 | $ | 48,491 | $ | — | $ | 11,449,681 | $ | (12,679,670 | ) | — | $ | — | $ | (1,181,498 | ) | ||||||||||||||||
Common Stock | Common | Additional | Treasury Stock | Total | ||||||||||||||||||||||||||||
$0.001 Par | Stock | Paid-In | Accumulated | $0.001 Par | Stockholders' | |||||||||||||||||||||||||||
For the Six Months Ended August 31, 2021 | Shares | Amount | Subscribed | Capital | Deficit | Shares | Amount | Deficit | ||||||||||||||||||||||||
Balance - March 1, 2021 | 48,491,485 | $ | 48,491 | $ | 3,619,828 | $ | 11,449,681 | $ | (13,040,021 | ) | — | $ | — | $ | 2,077,979 | |||||||||||||||||
Common Stock Subscriptions | — | — | 11,592,776 | — | — | — | — | 11,592,776 | ||||||||||||||||||||||||
Common Stock Issued from Subscriptions | 1,000,000 | 1,000 | (240,000 | ) | 239,000 | — | — | — | — | |||||||||||||||||||||||
Cash Purchase of Treasury Stock | — | — | — | (558,737 | ) | — | 967,567 | (967 | ) | (559,704 | ) | |||||||||||||||||||||
Net Loss for the Period | — | — | — | — | (1,281,261 | ) | — | — | (1,281,261 | ) | ||||||||||||||||||||||
Balance - August 31, 2021 | 49,491,485 | $ | 49,491 | $ | 14,972,604 | $ | 11,129,944 | $ | (14,321,282 | ) | 967,567 | $ | (967 | ) | $ | 11,829,790 | ||||||||||||||||
The accompany notes are an integral part of these financial statements.
Common Stock | Additional | Total | ||||||||||||||||||||||
Subscription | $0.001 Par | Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||
For the Three Months Ended November 30, 2020 | Receivable | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||
Balance - September 1, 2020 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,679,670 | ) | $ | (1,181,498 | ) | |||||||||||
Net Income for the Period | — | — | — | — | 220,773 | 220,773 | ||||||||||||||||||
Balance - November 30, 2020 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,458,897 | ) | $ | (960,725 | ) | |||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||
Subscription | $0.001 Par | Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||
For the Nine Months Ended November 30, 2019 | Receivable | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||
Balance - March 1, 2019 | $ | — | 48,491,485 | $ | 48,491 | $ | 10,996,420 | $ | (11,359,307 | ) | $ | (314,396 | ) | |||||||||||
Value of Subscription Receivable | (200,000 | ) | — | — | — | — | (200,000 | ) | ||||||||||||||||
Proceeds from Stock Subscription | 200,000 | — | — | — | — | 200,000 | ||||||||||||||||||
Value of Warrants for Convertible Note | — | — | — | 453,261 | — | 453,261 | ||||||||||||||||||
Net Loss for the Period | — | — | — | — | (867,505 | ) | (867,505 | ) | ||||||||||||||||
Balance - November 30, 2019 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,226,812 | ) | $ | (728,640 | ) | |||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||
Subscription | $0.001 Par | Paid-In | Accumulated | Stockholders' | ||||||||||||||||||||
For the Nine Months Ended November 30, 2020 | Receivable | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||
Balance - March 1, 2020 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,410,855 | ) | $ | (912,683 | ) | |||||||||||
Net Loss for the Period | — | — | — | — | (48,043 | ) | (48,043 | ) | ||||||||||||||||
Balance - November 30, 2020 | $ | — | 48,491,485 | $ | 48,491 | $ | 11,449,681 | $ | (12,458,898 | ) | $ | (960,726 | ) | |||||||||||
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 1 - NATURE OF OPERATIONS
QUANTUM ENERGY INC. (“the Company”) was incorporated under the name “Boomers Cultural Development Inc.” under the laws of the State of Nevada on February 5, 2004. On May 18, 2006, the Company changed its name to Quantum Energy, Inc.
The Company is a development stage diversified holding company with an emphasis in land holdings, refinery and fuel distribution.
The Company is domiciled in the Unites States of America and trades on the OTC market under the symbol QEGY.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated balance sheet has been derived from the February 29, 2020 28, 2021 audited financial statements and the unaudited condensed consolidated financial statements as of November 30, 2020 August 31, 2021 and 2019,2020, have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Article 8 of Regulation S-X.S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements and related footnotes included in our Annual report on Form 10-K10-K for the year ended February 29, 28, 2021 (the “2020 (the “2019 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for fair condensed consolidated financial statements presentation. Operating results for the three and nine months ended November 30, 2020, August 31, 2021, are not necessarily indicative of the results of operations expected for the year ending February 28, 2021. 2022.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries FTPM Resources Ltd. and Dominion Energy Processing Group, Inc. after elimination of the intercompany accounts and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
Risks and uncertainties
The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued
Fair value of financial instruments
The Company's financial instruments include cash and cash equivalents, promissory notes payable, and promissory notes payable - related parties. All instruments are accounted for on a cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2020 August 31, 2021 and February 29, 2020, 28, 2021, respectively.
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.
At November 30, 2020 August 31, 2021 and February 29, 2020, 28, 2021, the Company had no assets or liabilities accounted for at fair value on a recurring basis.
Long-Lived Assets
The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.
Stock-based Compensation
The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-yearten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.
Related Parties
In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued
New Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including the new lease standard. The Company does not have any leases and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Reclassifications
In the prior accompanying unaudited financial statements Investments – IEC have been reclassified to Deposits – Related Party. These reclassifications had no effect on previously reported financial statements. See Note 5.
NOTE 3 – GOING CONCERN
These condensed consolidated financial statements have been prepared in accordance with U.S. GAAP to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.
As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of November 30, 2020 August 31, 2021 and February 29, 2020, 28, 2021, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at November 30, 2020 August 31, 2021 and February 29, 2020. 28, 2021. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, generate revenue from current and planned business operations, and control costs. The Company plans to fund its future operations by joint venturing, obtaining additional financing from investors, and/or lenders, and attaining additional commercial revenue. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists.
NOTE 4 – EARNINGS PER SHARE
Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.
The dilutive effect of outstanding securities as of MayAugust 31, 2020 2021 and February 29, 2020, 28, 2021, respectively, would be as follows:
November 30, 2020 | February 29, 2020 | August 31, 2021 | February 28, 2021 | |||||||||||||
Warrants | 3,925,000 | 3,925,000 | 2,425,000 | 2,925,000 | ||||||||||||
TOTAL POSSIBLE DILUTION | 3,925,000 | 3,925,000 | 2,425,000 | 3,925,000 | ||||||||||||
At November 30, 2020 August 31, 2021 and February 29, 2020, 28, 2021, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.
NOTE 5 – OTHER ASSETS
Peconic Note Receivable
On April 17, 2019, the Company loaned funds under a secured convertible promissory note (“Peconic Note”) to Peconic Energy, Inc. (“Peconic”) for the principal amount of $30,000 with the principal balance and all accrued interest being due and payable 18 months from the date of the note. Interest shall be accrued at rate of 12% per annum or 40% of the gross revenues generated by the maker, whichever is greater. The Peconic Note is secured by 100% of the Peconic’s assets and is convertible at any time during the term of the note into 40% of the Peconic’s assets. For the period ended May 31, 2019, it was determined that it was highly unlikely that the Company would collect this note receivable. Therefore, the Company allowed for this note in the amount of $30,000 on $30,000 at May 31, 2019.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 5–OTHER ASSETS - continued
Deposit on land purchase
On December 5, 2016, the Company executed a Farm Contract of Purchase and Sale with a landowner in Stoughton, Saskatchewan (“the Stoughton Agreement”). The purchase price of the property is $500,000 (Canadian) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farmland Review board, the Company completing various test for hydrology and land suitability, the proposed refinery project meeting all requirements of various Saskatchewan government laws and bylaws, and full approval by all levels of provincial government and agencies. The Company paid $7,822 as a deposit on the property.
The purchase contract originally expired on December 15, 2017; however, the contract was amended to extend the closing date to July 10, 2018 for removal of all terms and conditions to the purchase.
On June 8, 2018, the Company amended the Stoughton Agreement to a purchase price of $525,000 (Canadian) and extended the option to purchase the property until December 31, 2018 for no additional consideration. The Stoughton Agreement expired on December 31, 2018.
On June 3, 2019, by mutual agreement of the parties, the Stoughton Agreement was extended until October 31, 2019 for no additional consideration. At the date of the report for the period ended May 31, 2019, the Stoughton Agreement had been terminated. (Note 13)13). Due to the termination of the agreement, the Company reclassed this deposit of $7,822 to accounts payable related party as the deposit was refunded but the money was given to a related party to pay amounts due him.
Stock Buyback Account
The Company is holding $90,296 in a separate investment account specifically for the use in buying back additional treasury stock at market rates.
Work in Progress
Work in progress consists of partially manufactured and raw rare earth metal products used in production in the amount of $179,336 at August 31, 2021.
Deposits – Related Party
Deposits – Related Party consist of deposits made to a related party that share board members of the Company. A with a letter of intent signed on October 12,2021 calls for the purchase of shares of common stock of the related party to obtain a majority stake at $2.10 for up to eighteen (18) months with closing on December 15, 2022. The letter of intent is non-binding and if the majority shares are not obtained the deal is terminated and the money is refunded. Hence, the classification of deposits of $7,530,000 at August 31, 2021. The Company is expecting to acquire majority ownership by the closing date.
NOTE 6 – PROMISSORY and CONVERTIBLE NOTES PAYABLE
The Company’s outstanding notes payable are summarized as follows:
November 30, 2020 | February 29 2020 | August 31, 2021 | February 28, 2021 | |||||||||||||
0% unsecured note payable - December 2013, due on demand | $ | 2,000 | $ | 2,000 | $ | 2,000 | $ | 2,000 | ||||||||
0% unsecured note payable - November 2015, due on demand | 980 | 980 | 980 | 980 | ||||||||||||
8% unsecured note payable - October 2018, due on demand | 5,000 | 5,000 | 5,000 | 5,000 | ||||||||||||
6% unsecured note payable – April 2019, due on demand | 3,325 | 3,325 | 3,325 | 3,325 | ||||||||||||
8% unsecured notes payable - October 2019, due on demand | 65,000 | 65,000 | 65,000 | 65,000 | ||||||||||||
Total Notes Payable | $ | 76,305 | $ | 76,305 | $ | 76,305 | $ | 76,305 | ||||||||
Interest expense for the three months ended November 30, 2020 August 31, 2021 and 20192020 was $1,451$1,455 and $753,$1,453, respectively. Interest expense for the ninesix months ended November 30, 2020 August 31, 2021 and 20192020 was $4,357$2,910 and $1,121,$2,906, respectively.
Convertible note payable consists of one note payable in the amount of $-0- and $67,500 at November 30, 2020 August 31, 2021 and February 29, 2020, 28, 2021, respectively. The note which was issued in April 2019 for $45,000 accruesaccrued interest at an annual rate of 12% and maturesmatured in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%. Interest expense for the three months ended November 30, 2020 and 2019 was $3,713 and $3,713, respectively. Interest expense for the nine months ended November 30, 2020 and 2019 was $11,139 and $7,931, respectively. Due to the conversation features of this note the Company calculated a derivative utilizing a Black Scholes method. This method used the following inputs to obtain the derivative value on November 30, 2020. Stock value of $0.28, discounted exercise price of 39% of the lowest stock market price 20 days prior to the valuation date, volatility of 438.81%. Discount Bond equivalent yield of 0.110%. At November 30, 2020 derivative liability was $160,157 and gain on derivatives for the three months ended November 30, 2020 and 2019 was $232,685 and $27,245, respectively. Loss on derivatives for the nine months ended November 30, 2020 and 2019 was $21,972 and $114,736, respectively.
NOTE 6 – PROMISSORY and CONVERTIBLE NOTES PAYABLE - continued
The conversion option expiresexpired on October 7, 2020.
On June 18, 2019, the Company received a default notice from Power Up stating that the Company iswas in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company reached a settlement of this matter with Power Up as of April 2021 in the amount of $70,200. Included in gain on debt conversion of $140,395 for the six months ended August 31, 2021, is $23,996 of accrued interest that was not paid and $116,399 of derivative liability.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 7 – PROMISSORY NOTES PAYABLE, RELATED PARTY AND OTHER RELATED PARTY TRANSACTIONS
The Company’s outstanding notes payable, related party are summarized as follows:
November 30, 2020 | February 29, 2020 | August 31, 2021 | February 28, 2021 | |||||||||||||
0% unsecured note payable - October 2015, due on demand | $ | 2,300 | $ | 2,300 | $ | 2,300 | $ | 2,300 | ||||||||
0% unsecured note payable – November 2015, due on demand | 2,000 | 2,000 | 2,000 | 2,000 | ||||||||||||
8% unsecured note payable - October 2018, due on demand | 60,000 | 60,000 | 60,000 | 60,000 | ||||||||||||
6% unsecured note payable – April 2019, due on demand | 15,825 | 15,825 | 15,825 | 15,825 | ||||||||||||
6% unsecured note payable – April 2019, due on demand | 15,890 | 15,890 | 15,890 | 15,890 | ||||||||||||
8% unsecured note payable - October 2019, due on demand | 10,000 | 10,000 | 10,000 | 10,000 | ||||||||||||
TOTAL | $ | 106,015 | $ | 106,015 | $ | 106,015 | $ | 106,015 | ||||||||
Interest expense for the three months ended November 30, 2020 August 31, 2021 and 20192020 was $1.894$1,913 and $1,714,$1,614, respectively. Interest expense for the ninesix months ended November 30, 2020 August 31, 2021 and 20192020 was $5,721$3,826 and $6,834,$3,827, respectively.
Starting January 1, 2019, the Company began accruing a monthly management fee of $15,000 due to an advisory company owned by Andrew J. Kacic, the Company’s former chief executive officer (“CEO”). During the year ended February 28, 2019, the Company recognized management fees of $30,000 under this agreement which amount is included in “Accounts payable and accrued liabilities, related parties” on the consolidated balance sheet at February 28, 2019. Since February 28, 2019, no0 additional management fees have been accrued since the parties are in dispute. There were no similar management fees due the CEO prior to December 31, 2018. Certain directors and officers of the Company dispute the management fee asserting that no consulting agreement has been executed. It is possible that the amount ultimately paid to the advisory company will be other than the accrued balance of $30,000 due to continuing negotiations between the board of directors and the former CEO. The disputed amount as of the date of these financials is $150,000, which is the remaining 10 (ten) (ten) months of the management fee for the calendar year ended 2019. Amounts due to Andrew Kacic at November 30, 2020 August 31, 2021 and February 29, 2020 28, 2021 were $17,868$107,868 and $17,868, respectively.
Certain officers, directors and directorsother related parties of the Company hadhave paid various expenses on behalf of the Company. Balances due to the officers, directors and a related company for reimbursement of these expenses were $173,969$198,801 and $158,969$197,302 at November 30, 2020 and August 31, 2021andFebruary 29, 2020, 28, 2021, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the condensed consolidated balance sheets.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 8 – COMMON STOCK
Common stock
The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one1 vote for each share owned at any Shareholders’ meeting.
Preferred stock
The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-parno-par value per share with no designation of rights and preferences.
Common shares issued for cashTreasury Stock
On February 28, 2018, During the six months ended August 31, 2021 the Company closed a private placementbought back 967,567 shares of its securities (the “2018 Offering). The 2018 Offering consistedstock in the amount of the sale of “units” of the Company’s securities at the per unit price of $0.15. Each unit consisted of one share of common stock$559,704 and one warrant to purchase an additional share of common stock. Warrants issued pursuant to the 2018 Offering entitled the holders to purchase shares of common stock for the price of $0.15 per share. The term of each warrant is for twenty-four months from date of issuance. Total proceeds of $125,000 for the sale of 833,333 units were received prior to February 28, 2018 but the shares of common stock had not been issued until after that date. Thus, the proceeds are classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.placed it in treasury.
Common stock retirement
On January 27, 2018, the former chairman of the Company’s board of directors and a current director of the Company’s board of directors each agreed to return 5,000,000 shares of the Company’s common stock for an aggregate total of 10,000,000 common shares for consideration of $Nil. The shares are held by the Company as authorized but unissued treasury shares as of November 30, 2020.
NOTE 9 - WARRANTS
On July 10, 2017, in conjunction with a Private Placement, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.21 per share expiring in one year. In March 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.21 per share to $1.00 per share and extended the expiration date to June 9, 2020.
On March 20, 2019 and April 17, 2019, the Company issued 1,250,000 and 675,000 warrants respectively to purchase 1,925,000 additional shares of its common stock to eight investors. Each warrant is for thirty-six months from date of issuance with an exercise price of $0.25. The value of the warrants calculated at March 20 and April 17, 2019 was $200,439 and $76,243 for a combined total of $276,682 and is in included in interest expense -warrants on the condensed consolidated statements of operations for the three months ended May 31, 2019. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, a volatility of 228% and a discount bond equivalent range of 2.34% - 2.37%.
NOTE 9 – WARRANTS - continued
The following is a summary of the Company’s warrants issued and outstanding:
November 30, 2020 | February 28, 2020 | August 31, 2021 | February 28, 2021 | |||||||||||||||||||||||||||||
Warrants | Price (a) | Warrants | Price (a) | Warrants | Price (a) | Warrants | Price (a) | |||||||||||||||||||||||||
Beginning balance | 3,925,000 | $ | .25 | 2,129,802 | $ | 1.00 | 2,925,000 | $ | .25 | 3,925,000 | $ | .25 | ||||||||||||||||||||
Issued | –– | –– | 2,925,000 | .19 | 0 –– | 0 –– | 0 –– | 0 –– | ||||||||||||||||||||||||
Exercised | –– | –– | –– | –– | 0 –– | 0 –– | 0 –– | 0 –– | ||||||||||||||||||||||||
Expired | –– | –– | (1,129,802 | ) | –– | (500,000 | ) | 0 –– | (1,000,000 | ) | 0 –– | |||||||||||||||||||||
Ending balance | 3,925,000 | $ | 0.25 | 3,925,000 | $ | .25 | 2,425,000 | $ | 0.25 | 2,925,000 | $ | .25 | ||||||||||||||||||||
(a) | Weighted average exercise price per shares |
The following table summarizes additional information about the warrants granted by the Company as of November 30, 2020 August 31, 2021 and February 29, 2020:28, 2021:
Date of Grant | Warrants | Warrants | Price | Remaining term | ||||||||||||
July 10, 2017 | 500,000 | 500,000 | .25 | .27 | ||||||||||||
March 20, 2019 | 1,250,000 | 1,250,000 | .25 | .55 | ||||||||||||
April 17, 2019 | 675,000 | 675,000 | .25 | .63 | ||||||||||||
Total warrants | 2,425,000 | 2,425,000 | $ | .25 | .52 | |||||||||||
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
Date of Grant | Warrants | Warrants | Price | Remaining term | ||||||||||||
November 19, 2016 | 500,000 | 500,000 | $ | .25 | 0.47 | |||||||||||
July 10, 2017 | 500,000 | 500,000 | .25 | 1.02 | ||||||||||||
March 20, 2019 | 1,250,000 | 1,250,000 | .25 | 1.30 | ||||||||||||
April 17, 2019 | 675,000 | 675,000 | .25 | 1.38 | ||||||||||||
June 28, 2019 | 1,000,000 | 1,000,000 | .25 | .07 | ||||||||||||
Total warrants | 3,925,000 | 3,925,000 | $ | .25 | .84 | |||||||||||
NOTE 10 – OTHER MATTERS- Joint Venture
Easy Energy Systems Inc. Memorandums of Understanding
On April 2, 2019, the Company and its subsidiary FTPM Resources, Inc. entered into a Non-Binding Memorandum of Understanding (“MOU-1”MOU-1”) with Easy Energy Systems, Inc. (“EESI Systems”). Pursuant to the MOU-1,MOU-1, if certain conditions are met, including the availability of financing: (i) EESI Systems and FTPM will enter into a joint venture, which would be owned 33% by FTPM and 67% by EESI Systems, for the purpose of developing and marketing of “clear glucose”; FTPM will have a 90-day option beginning April 30, 2019, to merge with EESI Systems, whereby EESI Systems will be the surviving entity; EESI Systems will have the right to acquire shares of preferred stock of the Registrant, with such rights and preferences as the parties shall agree; and EESI Systems will have the right to appoint members to the board of directors of the Registrant. EESI Systems designs, manufacturers, operates and sells its patented 1M,2M, and 5M gallon per year, small-scale, modular biorefineries for the production of alternative liquid biofuels from organic waste streams.
On April 16, 2016 the Company entered into a separate Non-Binding Memorandum of Understanding (“MOU-2”MOU-2”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”). The prospective EESI Infrastructure acquisition, if consummated as provided in the MOU-2,MOU-2, would provide a guarantee for the construction of an addition to the existing plant of EESI Systems in Emmetsburg, Iowa. This addition will add a 9.3 Mega Watt dual gas power plant to EESI Systems’ Emmetsburg facility at an anticipated cost of approximately $10 million. Upon signing the MOU-2,MOU-2, the Company paid $25,000 to the EESI Infrastructure. Due to the uncertainty of this agreement, the $25,000 deposit has been expensed in General and Administrative expenses for the year ended February 29,2020.
As of May 9, 2021, no action has been performed under either MOU.
NOTE 10 – OTHER MATTERS- Joint Venture - continued
Private Placement – Raul Factor
In furtherance of the June 28, 2019, Binding Letter of Intent with EESI and to monetize the distribution rights to EES’ modular Technologies, (a) on July 8, 2019, JV-1JV-1 entered into a License and Operating Agreement – Major Terms Summary with Raul Factor BV (“RF”) pursuant to which the RF and JV-1JV-1 created a new joint venture to be named Easy Energy Systems – Europe (“EES-E”) and pursuant to which the EES-E joint venture purchased the distribution rights for the EESI “MEPS®” technology for the territory of the European Union, and (b) on July 8, 2019, JV-1JV-1 entered into a License and Operating Agreement – Major Terms Summary with RF pursuant to which the parties created a new joint venture to be named Easy Energy Turf & Carpet (“EETC”) and pursuant to which the EETC joint
venture purchased the global distribution rights to EESI’s MEPS® technology for turf & carpet feedstock. Each of EES-E and EETC is owned 25% by us, 25% by EES and 50% by Raul Factor The aggregate purchase price paid for the licensing and distribution for EES-E and EETC was $150,000 (US). At February 29,2020, the purchase price for the joint venture was expensed as it was determined that the joint venture was not viable.
In connection with and as part of the foregoing joint venture transactions with JV-1JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 additional restricted shares of our common stock and warrants to purchase 1,000,000 restricted shares (at an exercise price of $0.25$0.25 per share) of our common stock, and pursuant to the EES-E and EETC Joint Ventures the Company agreed to use the proceeds from the sale of such shares and warrants to purchase from EESI the above mentioned EES-E and EETC distribution rights for an aggregate price of $150,000,$150,000, and the Company then assigned such distribution rights to EES-E and EETC respectively. Raul Factor also agreed to invest the required reasonable funding as determined by the board of directors of EETC for the startup, working capital, specific module development and required 6 months of economic demonstration of carpet and artificial turf into energy or value-added products for EETC. Also, EES agreed to contribute its module technologies developed by or available via license agreements from others to EES further on to EES-E via license agreements conforming to the terms set forth in these License and Operating Agreements. Raul Factor also agreed to fund additional capital requirements.
QUANTUM ENERGY, INC.
CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED
AUGUST 31, 2021
NOTE 10 – OTHER MATTERS- Joint Venture - continued
Pursuant to this June 28, 2019, Binding Letter of Intent, the parties agreed to, among other things, that within 90 days from the date of the Binding Letter of Intent, the Company would raise $10,000,000 in capital for use by EESI. As of the date of this report, the Company was not able to raise such capital. In connection therewith, on October 29, 2019, delivered to us the terms of a proposed termination of the June 28, 2019 Binding Letter of Intent. As of the date of this report this the terms of such termination have not been finalized.
Pursuant to these two License and Operating Agreements, the principals of Raul Factor BV agreed to provide an aggregate of $200,000 (USD) to purchase an aggregate of 1,000,000 units of Quantum at a price of $0.20 per Unit, (for an aggregate of 1,000,000 shares of the Company’s common stock plus 18 month warrants to purchase an aggregate of 1,000,000 shares of the Company’s common stock at a price of $0.25$0.25 per share. Pursuant to these transactions, the Company agreed to use $150,000$150,000 of the proceeds from the sale of the Units to purchase the distribution rights of EES-E and EETC and in turn the Company would assign such distribution rights to EES-E and EETC respectively. Also, Raul Factor agreed to invest the required reasonable funding as determined by the board of directors of EETC for the startup, working capital, specific module development and required 6 months of economic demonstration of carpet and artificial turf into energy or value-added products for EETC. Also, EES agreed to contribute its module technologies developed by or available via license agreements from others to EES further on to EES-E via license agreements conforming to the terms set forth in these License and Operating Agreements. Raul Factor also agreed to fund additional capital requirements.
Private Placement – Raul Factor – continued
Also, as part of the transactions contemplated by these agreements: (i) the stock purchase warrant issued on November 20, 2016, to Kevin Holinaty to purchase 500,000 shares of the Company’s common stock (“Warrant No.002”) was amended to extend the exercise period of the warrant through May 19, 2021 and to change the exercise price to $0.25$0.25 per share; (ii) the stock purchase warrant issued to Kevin Holinaty issued on June 9, 2017, and amended on March 15, 2018, to purchase 250,000 shares of the Company’s common stock (“Warrant No.003”) was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25$0.25 per share; (iii) the stock purchase warrant issued to Haaye de Jong to purchase 250,000 shares of the Company’s common stock was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25$0.25 per share; (iv) the Company issued a warrant to Kevin Holinaty to purchase 500,000 shares of the common stock at a price of $0.25$0.25 per share, which warrant has an exercise period until December 20, 2020; (v)(v) the Company issued a warrant to Haaye de Jong to purchase 500,000 shares of the common stock at a price of $0.25$0.25 per share, which warrant has an exercise period until December 20, 2020. (See(See Note 9)9).
The sale of the Units and the warrants to Kevin Holinaty and Haaye de Jong, the principals of Raul Factor, who have represented that they are “accredited investors” and non-U.S. citizens and in offshore transactions, was made in reliance on Rule 506 of Regulation D and on Regulation S.
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION. |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
Any statement that expresses or involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
● | Risks related to government regulation; |
● | Risks related to |
● | Risks related to |
● | Risks related to the Company’s |
● | Risks related to the |
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● | Risks related to the Company’s shares of common stock. |
This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections “Description of Business” and “Management’s Discussion and Analysis and Plan of Operation” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Quantum Energy, Inc. disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Quantum Energy, Inc. qualifies all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statement.
Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect,” and similar expressions include the Company’s expectations and objectives regarding its future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis and Plan of Operation” and elsewhere in this Quarterly Report.
As used in this Quarterly Report, the terms “we,” “us,” “our,” “Quantum Energy,”, “Quantum” and the “Company”, mean Quantum Energy, Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.
The following statements may be forward-looking in nature and actual results may differ materially.
Corporate BackgroundOFFICES
Our business strategy is to develop a “state-of-the art”, energy efficient, 40,000 BPD full slate refinery in Stoughton, Saskatchewan, Canada (the “Stoughton Refinery”) to refine the light shale crude oil primarily from the Viewfield oil field of the Bakken formation in Saskatchewan, Canada. Our principal executive offices are located at 38253805 Rockbottom, Henderson, Nevada. The Company’s telephone number is (702) 323-6455.(877) 355-1277. Our website is www.quantum-e.comwww.qegy.energy and is not part of this Quarterly Report.
Historical Operations
We wereThe Company originally incorporated as Boomers Cultural Development, Inc. (“Boomers”) on February 5, 2004, in the State of Nevada to be a service-oriented firm that would integrate the cultural interests of baby boomers with destination learning, by packaging onsite personal growth, education, and entertainment seminars with a variety of vacation destinations. On May 18, 2006, ourits name was changed to Quantum Energy, Inc. and our business plans were changed to focus on the energy industry and in particular the oil and gas segments of the energy industry. From 2008 through 2010, wethe Company planned, when and if funding became available, to acquire high-quality oil and gas properties, primarily proven producing and proven undeveloped reserves as well as exploring low-risk development drilling and work-over opportunities with experienced, well-established operators. However, the anticipated funding opportunities did not materialize.
We currently have two subsidiaries: Dominion Energy Processing Goup, Inc. (“DEPG”), a Canadian FederalThe business corporation, which isplan from 2008 to 2020 included our 100% owned Canadian subsidiary through with we intend to develop, construct and operate the Stoughton Refinery; and FTPM Resources, Inc., a Texas corporation which is a dormant company.
Overview of Current Operations
Our current and planned operations areplan to develop, construct and operate a “state-of-the-art”, energy efficient, full slate oil refinery including a storage tank farm and associated facilities in Stoughton, Saskatchewan, Canada (the Stoughton Refinery”). In this regard, on August 2, 2016, wethe Company formed oura Canadian subsidiary, Dominion Energy Processing Group, Inc. for purposes of the Pre-development work, construction and operation of the Stoughton Refinery. The Stoughton Refinery, when fully developed and operating, will be designed to produce up to 40,000 barrels of oil per day to be drawn from the Bakken formation in the province of Saskatchewan.
We haveThe Company previously identified a 480-acre site in Stoughton Saskatchewan (the “Land”) on which we intendit planned to construct the Stoughton Refinery. However, we never obtained the necessary funding to build the finery and so in 2020, it we gave up on that idea.
The Land is locatedCompany partnered with and form a strategic alliance with Inductance Energy Corporation in southeastern Saskatchewan2019 finding tactical advantages through solutions in mining, producing, trading, and manufacturing components and working instruments from rare earth metals and oxides. Within this alliance the two companies also found leadership and specialized talent advantages, thereby fulfilling the Company’s long past due SEC compliance and raising investors interest and awareness to the need and opportunity within the solving cost reduction rare earth production and manufacturing innovative devices for keeping up technology over the next era of energy supply and demand.
Current Business Strategy
On September 22, 2020 the Company entered into a joint development agreement with MP Special Purpose Corporation to enter into the business of mining and refining rare earth materials.
The Company developed a straightforward strategic and tactical business plan that could be executed around 3 basic business segments: Mining, Minerals and Magnets. These 3 segments would become a highly focused center of work for the Company.
Various work at the Company by its technical committee had shown that the Company could enter the mining industry through a very unique path of recovering rare earth and ferrite magnet material from discarded appliances, computers, and other sources in the regional municipalityUnited States and Canada. Secondly, the Company would concentrate its efforts on the recovery of Tecumsethrare earth materials from other waste streams including fly ash and fly bottom waste streams from combusted coal burning power plants in the heartUnited States and Canada. It is estimated that over 1 billion tons of the Viewfield oil field areathis material exists and dumpsites, and far greater than 4 billion pounds of the Bakken formation. The unconventional, marketable resources of the Bakkenthis material is still generated from coal burning power plants and other sources in the Viewfield oil field area are expected to be 74 million m³ (464 million barrels) (see “The Ultimate Potential for Unconventional Petroleum from the Bakken Formation of Saskatchewan – Energy Briefing Note” April 2015 of the National Energy Board (an independent economic regulatory agency created in 1959 by the Government of Canada,http://www.nebone.gc.ca/nrg/sttstc/crdlndptrlmprdct/rprt/2015bkkn/2015bkkn-eng.pdf). The Land is approximately 100 kilometers north of the Canadian USA border. The Land has sufficient acreage to accommodate expansion of the Stoughton Refinery facilities to included future ethanolUnited States alone each and rail carload and unload facilities.
If the viability and suitability of the Land for the development, construction and operation of the Stoughton Refinery is validated, and provided we have the required capital, we intend to commence the process of obtaining necessary permits and approvals to develop, construct and operate the Stoughton Refinery.
Business Strategy
We have implemented several initiatives that we believe will further our business strategy to build and operate the Stoughton Refinery. The principal elements of our business strategy are:
Identify and Attract Growth Capital. In order to execute our business strategy, we will require a significant amount of financing. Any proceeds we receive from financing will be used to commence only the very early stages of this process. If we raise the maximum amount of funds necessary to complete the project, we will be able to commence the process of obtaining the studies to validate the viability and suitability of the Land for the purpose of building the Stoughton Refinery and obtain the environmental permit and purchase the Land. If the Land is determined to be viable and suitable, we will need financing, in addition to the proceeds from our Primary Offering, to do the balance of the Predevelopment Work and to purchase the Land. Also, we estimate that the Stoughton Refinery will cost approximately $600,000,000(CAD) to build and commence operations. Accordingly, we intend to seek the necessary substantial financing to for the construction of the Stoughton Refinery after completion of the Pre-development Work.every year.
Increase Refinery Throughput. As we commence building operations for the Stoughton Refinery and the Stoughton Refinery comes online, we will seek to increase crude oil throughput. We intend to construct the Stoughton Refinery to be able to process up to approximately 40,000 barrels per day.Successful recovery from these waste streams are described as follows;
Location of the Stoughton Refinery reducing Logistics Costs
1. | Rare Earth and Ferrite (Iron) Magnets that are used in a wide variety of appliances and electronics that can be recovered, that were disposed of in the United States and Canada. These appliances include; televisions, computers, refrigerators, microwaves, dishwashers, as well as motor vehicles, and used electrical motors. Quantum is working with a wide variety of returned merchandise centers, landfills, and other recycling businesses to secure these resources. These types of magnet resources can be mechanically gathered, and reprocessed for use by IEC, and other customers. |
2. | Fly ash and fly bottom waste streams. Fly ash and fly bottom waste streams are the remaining byproduct of coal combustion. There are billions of pounds of fly ash and fly bottom waste that are produced each and every year in the United States and Canada, as well as foreign countries. Currently Quantum has two large developmental projects to recover and test both fly ash and fly bottom waste streams for their rare earth content. These two sources currently produce just over 1.4 billion pounds of fly ash and fly bottom waste on an annual basis. Well-known resource testing shows that most fly ash, as well as fly bottom waste streams on average contain about 1.85% rare earth material. |
Because of the location of the Stoughton Refinery, we believe that the logistics costs will be reduced due to the proximity of the supply of feed stock and the consumption of our refined products by our intended customers.
3. | Coal and other mining resources. Currently in the United States and Canada, the mining of coal to be consumed in coal power plants is in rapid decline. Coal producing states such as Wyoming, Kentucky, and West Virginia must move from a coal-based economy or continue to face declining royalty revenues from these natural resources. Rare earth minerals could be one answer to this problem. It is well known from a wide variety of Department of Energy studies that coal, and coal byproducts contain high concentrations of rare earth materials. Quantum is in negotiations with several operating and now defunct coal bearing properties in order to secure rights to process and refine rare earth materials. |
Governmental Regulation
All of our contemplated operations and properties are and will be subject to extensive Canadian and U.S. federal, provincial, state and local environmental and health and safety regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum and hazardous substances;rare earth minerals; the emission and discharge of materials into the environment; waste management; and characteristics and composition of gasoline and diesel fuels.management. Our operations also require numerous permits and authorizations under various environmental and health and safety laws and regulations. Failure to comply with these permits or environmental laws generally could result in fines, penalties or other sanctions or a revocation of our permits. We will have to make significant capital and other expenditures related to environmental and health and safety compliance, including with respect to our air permits and the low-sulfur gasoline and ultra-low-sulfur diesel regulations.
Canada has adopted the Canadian Environmental Protection Act 1999 (“CEPA”) and the U.S. Environmental Protection Agency has adopted regulations that require significant reductions in the sulfur content in gasoline and diesel fuel. These regulations required most refineries to begin reducing sulfur content in gasoline. However, we believe we may qualify for what is known as “small refiner status” under such regulations which would provide us some relief from some of such regulations. We intend to have the Stoughton Refinery designed and engineered to adhere to all required regulations of CEPA. No assurances can be given that the Stoughton Refinery we will adhere to all required regulations of CEPA.
Certain environmental laws hold current or previous owners or operators of real property liable for the costs of cleaning up spills, releases and discharges of petroleum or hazardous substances, even if these owners or operators did not know of and were not responsible for such spills, releases and discharges. These environmental laws also assess liability on any person who arranges for the disposal or treatment of hazardous substances, regardless of whether the affected site is owned or operated by such person.
In addition to clean-up costs, we may face liability for personal injury or property damage due to exposure to chemicals or other hazardous substances that we may have manufactured, used, handled or disposed of or that are located at or released from our refinery or otherwise related to our current or former operations. We may also face liability for personal injury, property damage, natural resource damage or for clean-up costs for the alleged migration of petroleum or hazardous substances from our refinery to adjacent and other nearby properties.
Other Regulations of the Oil and Natural Gas Industry
The oil and natural gas industry is extensively regulated by numerous Canadian federal, provincial, state and local authorities. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal, provincial and state, are authorized by statute to issue rules and regulations that are binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the oil and natural gas industry will increase our cost of doing business and, consequently, will affect our profitability, we believe that these burdens generally will not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.
The availability, terms and cost of transportation significantly affect sales of oil and natural gas. The inter-provincial transportation and sale for resale of oil and natural gas is subject to federal and provincial regulation, including regulation of the terms, conditions and rates for interstate transportation, storage and various other matters, primarily by the Canadian National Energy Board. Canadian regulations govern the price and terms for access to oil and natural gas pipeline transportation. Regulations covering inter-provincial oil and natural gas transmission in some circumstances may also affect the intra-provincial transportation of oil and natural gas.
Although oil and natural gas prices are currently unregulated, the Canadian Parliament historically has been active in the area of oil and natural gas regulation. We cannot predict whether new legislation to regulate oil and natural gas might be proposed, what proposals, if any, might actually be enacted by the Canadian Parliament or the various provincial or state legislatures, and what effect, if any, the proposals might have on our operations. Sales of condensate, oil and natural gas liquids (“NGLs”) are not currently regulated and are made at market prices.
Results of Operations
Three Months EndedNovember 30, 2020August 31, 2021 Compared to Three Months Ended November 30, 2019.August 31, 2020.
Operating expenses for the three months ended November 30, 2020August 31, 2021 was $4,854$746,691 compared to $56,145$-0- for the three months ended November 30, 2019.August 31, 2020. The decreaseincrease in operating expenses was due to the fact that the Company had no cash to operateavailable and therefore all activity ceased.was able to resume operations and their SEC filings. Other incomeexpense for the three months ended November 30, 2020August 31, 2021 was $225,627$3,368 compared to $21,065$281,877 for the three months ended November 30, 2019.August 31, 2020. This increasedecrease in incomeother expense was due to an increasea decrease in gainlosses on derivativederivatives of $205,440.$275,097.
Net Loss
Net income (loss)loss for the three months ended November 30,August 31, 2021 and 2020 was $750,059 and 2019 was $220,773 and $(35,080),$281,877, respectively. The increase in net incomeloss of $255,853$468,182 was due to the decreaseincrease in operating expenses of $51,291$746,691 and increasedecrease in gainlosses on derivativederivatives of $205,440.$275,097.
NineSix Months Ended November 30, 2020August 31, 2021 Compared to NineSix Months Ended November 30, 2019.August 31, 2020.
Operating expenses for the ninesix months ended November 30, 2020August 31, 2021 was $4,854$1,414,920 compared to $231,123$-0- for the ninesix months ended November 30, 2019.August 31, 2020. The decreaseincrease in operating expenses was due to the fact that the Company had no cash to operateavailable and therefore all activity ceased.was able to resume operations and their SEC filings. Other expensesincome and (expenses) for the ninesix months ended November 30, 2020August 31, 2021 was $43,189$133,659 compared to $636,382($268,815) for the ninesix months ended November 30, 2019.August 31, 2020. During the ninesix months ended November 30,August 31, 2021 the Company had $140,395 in gain on debt settlement and ($6,736) in interest expense, compared to the six months ended August 31, 2020, where the Company had $-0- in bad debts, $21,972gain on debt settlement, $(254,656)a loss on derivative for a convertible note payable, and incurred $21,217($14,159) in interest expense and had $-0- in interest expense – warrants, compared to the nine months ended November 30, 2019 the Company had $30,000 in bad debts, $114,736 loss on derivative for a convertible note payable, incurred $38,385 in interest expense and had $453,261 in interest expense – warrants.
Net Loss
Net loss for the ninesix months ended November 30, 2020August 31, 2021 and 2019 was $48,043$1,281,261 and $867,505,$268,815, respectively. The decreaseincrease in loss of $819,462$1,012,446 was due to the decreaseincrease in operating expenses of $226,269$1,414,920 and the changes to other expensesincome and (expenses) as mentioned above.
Liquidity and Capital Resources:
As of November 30, 2020,August 31, 2021, our assets totaled $47$13,734,896 which consisted of cash.$4,875,889 in cash, $1,149,671 accounts receivable, $179,336 in deferred cost of sales and $7,530,000 in deposits - related party. The Company's total liabilities were $960,773,$1,995,402, which consisted of accounts payable and accrued expenses, accounts payable and accrued expenses – related parties, common stock payable, convertible notedeferred revenue – related parties, common stock payable, derivative liability, promissory notes payable and promissory notes payable – related parties. As of November 30, 2020,August 31, 2021, the Company had an accumulated deficit of $12,458,898$14,321,282 and working capital deficit of $960,726.$11,739,494
The Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As indicated herein, we need capital for the implementation of our business plan, and we will need additional capital for continuing our operations. We do not have sufficient revenues to pay our operating expenses at this time. Unless the Company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan. For the next 12 months the Company has an oral commitment from its CEO to advance funds as necessary to meeting our operating requirement.
Cash (Used in)Used in Operating Activities
Net cash used in operating activities for the ninesix months ended November 302020August 31, 2021 and 2019 were2020 was $1,638,895 and $-0- and $212,497,, respectively. The decreaseincrease in the amount used was attributed to interest expense on convertible note warrants and loss on derivative.the resumption of operations.
Cash from Investing Activities
Net cash used in investing activities was $-0-$6,980,000 and $150,000$-0- for the ninesix months ended November 30,August 31, 2021 and 2020, respectively due to the purchase of treasury stock of $650,000 and 2019, respectively.deposits to a related party of $6,330,000.
Cash from Financing Activities
Net cash provided by financing activities was $11,525,276 and $-0- for the ninesix months ended November 30,August 31, 2021 and 2020, and was $370,014 for nine months ended November 30, 2019,respectively, which was all due to cash received from notes payable.the sale of common stock of $11,592,776, and repayment of a convertible note in the amount of $67,500.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company does not hold any derivative instruments and does not engage in any hedging activities.
ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2020.August 31, 2021.
Our management, with the participation of our president (our principal executive officer, principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer, principal accounting officer and principal financial officer) has concluded that, as of the end of such period, our disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our president (our principal executive officer and our principal accounting officer and principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.
1) | We have an inadequate number of administrative personnel. |
2) | We do not have sufficient segregation of duties within our accounting functions. |
3) | We have insufficient written policies and procedures over our disclosures. |
The reason for this deficiency relates to the fact that our management is relying on external consultants for purposes of preparing our financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.
Evaluation of Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our Company’s assets that could have a material effectaffect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has conducted, with the participation of our president, our principal executive officer and our principal accounting officer and principal financial officer, an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2020August 31, 2021 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of November 30, 2020,August 31, 2021, our Company’s internal control over financial reporting was not effective based on present Company activity. Our Company is in the process of adopting specific internal control mechanisms. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over Company activities as well as more stringent accounting policies to track and update our financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation described above during the quarter ended November 30, 2020August 31, 2021 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS. |
Quantum Energy, Inc. is not a party to any material legal proceedings and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of Quantum Energy, Inc. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to Quantum Energy, Inc. or has a material interest adverse to Quantum Energy, Inc. in reference to pending litigation.
ITEM 1A. | RISK FACTORS. |
Not applicable.
ITEM 2. | RECENT SALES OF UNREGISTERED SECURITIES. |
None.On June 7, 2021 the Company issued 1,000,000 shares of its common stock in consideration for cancellation of a debt in the amount of $190,000.00. These shares were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. The issuance was not a public offering as defined in Section 4(2) due to the limited number of persons that received the shares, and the manner of the issuances. In addition, the transferees of the common stock represented that they had the necessary investment intent as required by Section 4(2) and agreed to receive share certificates or book entry shares containing a legend that states the securities were restricted pursuant to Rule 144 of the Securities Act.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None
ITEM 4. | MINE SAFETY DISCLOSURES. |
None
ITEM 5. | OTHER INFORMATION. |
None
ITEM 6. | EXHIBITS. |
Exhibit | |
Number | Description of Exhibits |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | Inline XBRL Instance |
| Inline XBRL Taxonomy Extension Schema |
| Inline XBRL Taxonomy Extension Calculation |
| Inline XBRL Taxonomy Extension Definition |
| Inline XBRL Taxonomy Extension Labels |
| Inline XBRL Taxonomy Extension Presentation |
| Cover Page Interactive Data File (formatted as Inline XBRL |
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.
QUANTUM ENERGY, INC. | |||||
Date: | 10/21/2021 | By: | /s/ HARRY EWERT | ||
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