UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

QUANTUM ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 1311 98-0428608

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 (IRS Employer Identification Number)

 

SEC File No. 333-118138

 

60 East Rio Salado Parkway,218 N. Jefferson Street, Suite 900400

Tempe, Arizona 85281Chicago, Illinois 60661

 (Address, including zip code and telephone number, including area code, of principal executive offices)

 

Nevada Agency and Trust Company

50 West Liberty Street, Suite 880

_______________Reno, NV 89501_______________

(Name, address and telephone number of agent for service)

 

with copies to:

Brunson Chandler & JonesJerold N. Siegan

175 South Main218 N. Jefferson Street

Suite 1410400

Salt Lake City, Utah 84111Chicago, Illinois 60661

(801) 303-5730(312) 560-7228

 

Approximate date of commencement of proposed sale to the public: As soon as practicable and from time to time after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]

 

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

 

Large accelerated filer[ ]Accelerated Filer[ ]
Non-accelerated filer[ ]Smaller reporting company[X]

 

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CALCULATION OF REGISTRATION FEE

 

Title of each class of securities to be registeredAmount to be registeredProposed maximum offering priceper shareProposed maximum aggregate offering price

Amount of registration fee

(1)

Amount to be registeredProposed maximum offering priceper shareProposed maximum aggregate offeringprice

Amount of registration fee

(1)

Newly Issued Common Stock to be registered as part of a Primary Offering (as defined herein)41,333,125$0.20$8,266,625$958.102,000,000$0.__$____$
Common Stock Issued and Outstanding to be registered as a part of a Secondary Offering by certain Selling Security Holders (as defined herein)20,653,040(2)$0.20$4,130,608$478.74
Common Stock Issued and Outstanding to be registered as a part of a Secondary Offering by certain Selling Stockholders (as defined herein)21,563,669 (2)$0.065$1,401,638$174.50
TOTAL61,986,165$0.20$12,397,233$1,436.8423,563,669$0.__$_____$_____

 

(1) The fee is calculated by multiplying the aggregate offering amount by .0001159,.000124500, pursuant to Rule 457.

(2) Represents certain common sharesCommon Stock currently outstanding to be sold by the Selling Security Holders.selling stockholders.

 

THE OFFERING PRICE OF THE COMMON STOCK HAS BEEN ARBITRARILY DETERMINED AND BEARS NO RELATIONSHIP TO ANY OBJECTIVE CRITERION OF VALUE. THE PRICE DOES NOT BEAR ANY RELATIONSHIP TO OUR ASSETS, BOOK VALUE, HISTORICAL EARNINGS OR NET WORTH.

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL WE WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

 

The information in this preliminary prospectus is not complete and may be changed. The securities registered hereunder, including those held by selling stockholders, may not be sold until this registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted under applicable law.

 

SUBJECT TO COMPLETION, Dated FebruaryJune __, 20172018

 

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PROSPECTUS

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to but these securities in any jurisdiction where the offer or sale is not permitted.

 

Quantum Energy, Inc.

 

41, 333,1252,000,000 shares of Common SharesStock in Primary Offering

20,653,04021,563,669 shares of Common SharesStock in Secondary Offering

 

This prospectus relates to the sale of up to 41,333,1252,000,000 shares of common stockCommon Stock being sold at $0.20$0.___(USD) per share pursuant to the Primary Offering and 20,653,040 shares of common stock being offered at $0.20 per share by the Selling Security Holders pursuant to the Secondary Offering, of Quantum Energy, Inc. (“we,” “us,” or the “Company”). and 21,563,669 shares of Common Stock being offered at $0.065 (USD) per share by the selling stockholders pursuant to the Secondary Offering of their shares of our Common Stock.

 

Per ShareSale TotalPer Share (USD)Sale Total (USD)
Public Offering Price$0.20$8,266,625$0.__$________
Underwriting Discounts and Commissions$0.00$0$0.0
Proceeds to Quantum Energy, Inc.$0.20$8,266,625$_____$________

 

The Company isWe are offering for sale a maximum of 41,333,1252,000,000 shares of its common stock,our Common Stock, par value $0.001 per share (the “Common Stock”), in a direct offering (the “Primary Offering”). These shares will be offered at a fixed price of $0.20$0.__ (USD) per share.  There is no minimum number of shares that must be sold by us for the Primary Offering to proceed and therefore we may receive no proceeds or very minimal proceeds from the Primary Offering.  In the event we do not raise sufficient capital to implement our planned operations, your entire investment could be lost. We will retain the proceeds from the sale any shares sold under the Primary Offering.

 

We will receive approximately $8,266,625$________ (USD) in gross proceeds if we sell all of the shares of Common Stock in the Primary Offering, and we will receive estimated net proceeds (after paying certain expense related to the offering process) of approximately $8,266,625,$________(USD), if we sell all of those shares.

 

Additionally, certain Selling Security Holdersselling stockholders named in this prospectus are offering for sale 20,653,040 common21,563,669 shares of Common Stock (the “Secondary Offering”). The CompanyWe will not receive any proceeds from the sale of shares being sold by these Selling Security Holdersselling stockholders under the Secondary Offering. The price at which the Selling Security Holders may sellselling stockholders will offer their shares will be determined by the prevailing marketat a fixed price as then-quoted on OTCMarkets,of $0.065 (USD) per share, or at such other price agreeable to the Selling Security Holder and a prospective purchaser. No underwriting arrangements have been entered into by any of the Selling Security Holders.selling stockholders. The Selling Security Holdersselling stockholders and any intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended (“the “Securities Act”), with respect to the securities offered and any profits realized or commissions received may be deemed underwriting compensation.

 

The offering will commence on the effective date of this prospectus and will terminate upon the earliest of (i) such time as all of the common stockCommon Stock available hereunder has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus.

 

We will sell the common sharesCommon Stock in the Primary Offering ourselves and do not plan to use underwriters or pay any commissions. We will be selling our common sharesCommon Stock using our best efforts and no one has agreed to buy any of our common shares.shares of Common Stock. There is no minimum amount of common sharesCommon Stock we must sell so no money raised from the sale of such common sharesCommon Stock will go into escrow, trust or another similar arrangement. We will bear the all of the costs associated with this offering.

 

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We were incorporated in the State of Nevada on February 5, 2004 as “Boomers Cultural Development.” On May 18, 2006 the companyWe changed itsour name to Quantum Energy, Inc. when we acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas. Today, ouron May 18, 2006. Our business strategy is to develop, construct and operate a “state-of-the art”, energy efficient, 40,000 BPD full slate crude oil processing facilities that includefacility in Stoughton, Saskatchewan, Canada. We may decide to develop, construct and operate additional refineries in the Bakken field of North Dakota, Montana and Saskatchewan, Canada.other locations.

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Our auditors have indicated in their opinion on our financial statements as of and for the period from inception to February 28, 20162018 that there exists substantial doubt as to our ability to continue as a going concern. Moreover, weWe are an early stage venture with limitedno operating history.As such, this offering is highly speculative, and the common stockCommon Stock being offered for sale involves a high degree of risk and should be considered only be persons who can afford the loss of their entire investment. Readers are encouraged to reference the section entitled “Risk Factors” herein for additional information regarding the risks associated with our company and common stockCommon Stock

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

Our common stockCommon Stock is quoted on OTC Pink under the ticker symbol “QEGY.”  There is a limited trading market for our common shares.Common Stock. Our most recent closingbid and asked stock price,prices, as of February 17, 2017, was $0.15________, 2018, were $0.__(USD) per share.share and $0.__(USD) per share, respectively.

 

The information in this prospectus is not complete and may be changed. This prospectus is included in the registration statement that was filed by us with the Securities and Exchange Commission. We may not sell these securities until the registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

The date of this prospectus is February __, 2017

June________, 2018

 

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PROSPECTUS SUMMARY

 

As used in this prospectus, references to the “Company,” “we,” “our,” “us,” or “Quantum” refer to Quantum Energy, Inc. unless the context indicates otherwise.

 

You should carefully read all information in the prospectus, including the financial statements and their explanatory notes, under the Financial Statements prior to making an investment decision.

 

The Company

 

 Organization:The registrant wasWe were incorporated in the State of Nevada on February 4, 2004.5, 2004 as “Boomers Cultural Development”.  On May 18, 2006, our name was changed to Quantum Energy, Inc., because we changed our business strategy to focus on the energy industry. Our principal executive offices are located at 60 East Rio Salado Parkway,218 N. Jefferson Street, Suite 900 Tempe, Arizona 85281.400, Chicago Illinois 60661.

 

 Management:Our Chief Executive Officer is Mr. Stanley Wilson.Management consists of Jeffrey J. Mallmes, our Chairman of the Board, President, Treasurer and director and Andrew J. Kacic, our Secretary and director, and William J. Hinz, director.

 

 Plan of Operations:The CompanyOur business strategy is principally engaged in the development ofto develop a “state-of-the art”, energy processing facilities to refine the light crude in the Bakken field of North Dakota, Montana and Canada.

Historical Operations:Starting in May 2006, the Company decided to embark on a new business path in oil and gas exploration and acquisitions. The Company acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas. After the initial success of the Barnett Shale leases, the production program in the Barnett Shale area encountered substantial difficulties. Numerous wells throughout this extensive area experienced production difficulties. In addition to the production problems was the severe drop in natural gas prices. All of the wells in which the Company had interests were suspended and all marginal wells have been capped, resulting in the Company abandoning the Company's interest in the Barnett Shale area.

Current Operations:We are currently focused on the development, construction and operation of aefficient, 40,000 BPD full slate refinery in Stoughton, Saskatchewan, Canada through our 100% owned Canadian subsidiary, Dominion Energy Processing Group, Inc.(the “Stoughton Refinery”) to refine the light shale crude oil from the Bakken formation of the Viewfield oil field area of Saskatchewan, Canada.

 

Going Concern:

Letter of Intent with

Inductance Energy Corporation

Our independent auditor has expressed substantial doubt about our ability to continue as a going concern given our lack of operating history and the fact to date have had no significant revenues.operating revenues to date. Potential investors should be aware that there are difficulties associated with being a new venture, and the high rate of failure associated with this fact. We have an accumulated deficit of $11,017,516 at and have had no significant revenues to date.February 28, 2018. Our future is dependent upon our ability to obtain the substantial financing to develop, construct and upon futureoperate the Stoughton Refinery and our ability to achieve profitable operations from our operations.operating the Stoughton refinery. These factors raise substantial doubt that we will be able to continue as a going concern.

On April 15, 2018, we entered into a conditional binding letter of intent with Inductance Energy Corporation a Wyoming corporation (“IEC”), pursuant to which if all of the conditions contained in the letter of intent are satisfied, (a) we will be merged with a newly formed subsidiary of IEC with us being the surviving company, (b) we will issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) IEC will provide to us as the surviving company up to $50,000,000(USD), a portion of which (estimated at $7,500,000 CAD) we intend to use to (i) validate the viability and suitability of the development of the Stoughton Refinery on the land (“Land”) for intended sight in Stoughton Saskatchewan Canada, which will include obtaining environmental and engineering studies to validate the viability and suitability of the intended site for the Stoughton Refinery, and (ii) if the site is determined to be viable and suitable, we will commence the process of obtaining the required permits to build the Stoughton Refinery and (iii) we will acquire the Land, and (iv) we will pay other related costs. See the section titled “Certain Relationships and Related Transactions - Related Party Transaction” herein for a more detailed explanation of this transaction.No assurances can be given that the conditions to the letter of intent with IEC will be satisfied or that the transactions or financing, including the estimated $7,500,000(CAD), contemplated in the letter of intent will be consummated.

 

The Company has no present plans to be acquired or to merge with another company nor does the registrant, or any of its shareholders, have any plans to enter into a change of control or similar transaction.

 

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THE OFFERING

 

Type of Securities Offered: Common StockTHE OFFERING

 

Common Shares Being Sold

In this Offering: 41,333,125

Offering Price: The Company will offer its common shares at $0.20 per share.

Common Shares Outstanding

Before the Offering: 59,911,683

 Type of Securities Offered:Common Stock
Common Stock Being Sold In this Offering:2,000,000 shares of Common Stock in the Primary Offering and 21,563,669 shares of Common Stock in the Secondary Offering
Offering Price: We are offering our Common Stock in the Primary Offering at $0.__(USD) per share. The Selling Stockholders are offering their shares of Common Stock at $0.065(USD) per share.
Shares of Common Stock Outstanding Before the Offering:48,491,485
Shares of Common Stock Outstanding After the offering:50,491,485 if all 2,000,000 shares offered in the Primary Offering are sold. The sale of shares by the Selling Stockholders in the Secondary Offering will not change the number of shares of Common Stock Outstanding after the Offering. 

Termination of the Offering:

The Primary Offering will commence as of the effective date of this prospectus and will terminate upon the earliest of (i) such time as all of the common stockCommon Stock available thereunder has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus.

The Secondary Offering will commence as of the effective date of this prospectus and will terminate upon the earliest of (i) such times as all of the common stockCommon Stock available thereunder has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus.

Although we do not presently intend to do so, we have the right to amend the terms of the offering. Our Board of Directors may cancel the offering at any time.

 

 Best efforts offering:We are offering our common stockCommon Stock in the Primary Offering on a “best efforts” basis through our Chief Executive OfficerOfficers and President,Directors, who will not receive any discounts or commissions for selling the shares. There is no minimum number of shares of Common Stock that must be sold in order to close this offering.

 

 Use of proceeds:

We will receive approximately $8,266,625$________ (USD) in gross proceeds if we sell all of the shares in the Primary Offering, however, there is not guarantee that we will receive any proceeds from this offering.the Primary Offering. We willintend to use the proceeds of the Primary Offering, if any, to first cover administrative expenses in connection with this offering.  We planoffering and to usefund the remaining proceeds, if any, to develop clean energy centers throughout the Bakken Field with each to include a diesel refinery, separate adjacent processing plant, and the latest CO2 capture technology to reduce emissions. We will receive nonecommencement of the proceeds fromdevelopment of the saleStoughton Refinery including: validating the viability and suitability of shares by the Selling Security Holdersdevelopment of the Stoughton Refinery on the intended sight in Stoughton Saskatchewan Canada, which will include obtaining environmental and engineering studies to validate the Secondary Offering.viability and suitability of the intended site for the Stoughton Refinery. If the site is determined to be viable and suitable, the Company intends to commence the process of obtaining the required permits to build the Stoughton Refinery and pay other related costs (collectively the “Predevelopment Work”); and purchasing the Land and paying other related costs. See the section titled “Use of Proceeds” herein for a more detailed explanation of how proceeds from the Primary Offering will be used. Substantial additional financing will be required to construct the Stoughton Refinery and obtain required governmental permits. If we raise less than $_____ (CAD) from this Primary Offering will need to obtain additional substantial financing to cover the balance of the costs for the Predevelopment Work and the purchase of the Land. Also,we have entered into a conditional binding letter of intent from IEC which provides that if the stated conditions in the letter of intent are satisfied we will receive the necessary funds (estimated at $7,500,000(CAD)) to complete the Predevelopment Work and the purchase of the Land.See “Letter of Intent with Inductance Energy” and the section titled “Certain Relationships and Related Transactions-Related Party Transaction” herein for a more detailed explanation of this transaction.

We will receive none of the proceeds from the sale of Common Stock by the selling stockholders in the Secondary Offering.

 

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 Market for our Common Stock:Our common stock isCommon Stock currently tradedtrades on OTC Pink under the ticker symbol “QEGY.” We anticipate applying for quoting of our common sharesCommon Stock on the OTC Markets or OTCQB uponas soon as practicable after the effectiveness of the registration statement of which this prospectus forms a part. There can be no assurance that a market maker will agree to file the necessary documents with the Financial Industry Regulatory Authority (“FINRA”), which operatesregulates the OTC Markets and OTCQB, nor can there be any assurance that such application for quotation will be approved.

 

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 Common Stock Control:owned by Directors and Officers:Stanley Wilson,Jeffrey Mallmes, our Chairman, President, Secretary, Treasurer, and Director,director owns 15.64% of our issued and outstanding Common Stock, and Kandy LP, controlled by Andrew J. Kacic, currently control a majorityour Secretary and director, owns 18.66% of our issued and outstanding common stock voting rightsCommon Stock and William J Hinz owns 0% of the Company,our issued and will continue to own sufficient votes to control the operations of the Company after this offering, irrespective of its outcome.outstanding Common Stock.

 

 Penny Stock“penny stock” Regulation:The liquidity of our common stockCommon Stock is restricted as the registrant’s common stockour Common Stock falls within the definition of a penny stock. These requirements“penny stock”. The restrictions applicable to a “penny stock” may restrictlimit or deter the ability or desirability of broker/dealers to sell the registrant's common stock,our Common Stock and may affect the ability of our stockholders to resell the registrant's common stocktheir shares of our Common Stock.

  

RISK FACTORS

 

In addition to the other information provided in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock.Common Stock.  All material risks are discussed in this section.

 

Risks Related to our Company

 

Our lack of operating history and our having generated no revenues from operations makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.prospects.

 

As of the yeardate of this Prospectus, we have not commenced operations of our intended Stoughton Refinery, and as of ended February 28, 2016,2018 we havehad generated no revenues and incurred an operating loss of $1,446,062.$449,613. Also, we have not confirmed the viability and suitability of the land for the Stoughton Refinery, commenced the permitting process, purchased the land for the Stoughton Refinery, or commence the development or construction of the Stoughton Refinery. As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data.  Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues and expenses.  If we make poor budgetary decisions as a result of unreliable data, we may never become profitable, or incur losses, which may result in a decline in our stock price.

 

We may be unable to continue paying the costs of being a reporting public company.

The costs of being a public reporting company under the Securities Exchange Act of 1934 may be substantial and the Company may not be able to absorb the costs of being a public company which may cause us to cease being publicAlso, we have no track record in the future or require additional fundraising in order to remain in business. We estimate that in the future, costs for legal and accounting will be $25,000 per year.

Our lack of operating history makes evaluatingexecuting our business difficult.

We aremodel and as a relatively new entrantconsequence, it is difficult, if not impossible to the refinery development and operation field. As a result, we have a limited operating historyjudge our ability to execute our business strategy effectively and we may not attain or sustain profitability in the future. To attain and sustain profitability, we must:

 

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·develop viable oil processing properties;raise sufficient capital to validate the land, commence the permitting process, purchase the land, and substantial capital to commence the development and construction of the Stoughton Refinery and to complete the development of the construction of the Stoughton Refinery;
·attract, integrate, and motivate highly qualified professionals and third partythird-party contractors to expand operations;
·raise sufficient capital to expand operations;develop, construct and operate the Stoughton Refinery; and
·process oil in such amounts so as to becomebe profitable.

 

We may not be successful in accomplishing any of these objectives. Further,Our future success depends on our lack of operating history makes it difficultability to evaluateaccomplish these objectives and execute our business and prospects.strategy effectively. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in highly competitive industries such as mineral mining. The historical information in this report may not be indicative of our future financial condition and future performance. For example, we expect that our future annual growth rate in revenues will be moderate and likely be less than the growth rates experienced in the early part of our history.industries.

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We depend heavily on key personnel, and turnover of key senior management could harm our business.

Our future business and results of operations depend in significant part upon the continued contributions of our Chief Executive Officer Stanley F. Wilson. If we lose his services or if he failswill require substantial additional capital to perform in his current position, or if we are not able to attract and retain skilled employees as needed,implement our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend onstrategy regarding the skills and abilities of these key employees in managing the product acquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.

The risks associated with exploration and, if applicable, mining could cause personal injury or death, environmental damages, delays in mining, monetary losses and possible legal liability.

We are engaged in the processing of crude oil through thedevelopment, construction and operation of refinery facilities. There areour Stoughton Refinery.

We estimate that we will require approximately $600,000,000(CAD)to implement our business strategy, including validating the viability and suitability of the Land, commencing the permitting process, purchasing the Land, completing the development and construction of the Stoughton Refinery and commencing the operation of the Stoughton Refinery. At the present time, we have not made any arrangements or received any unconditional commitments to raise additional cash offering or to otherwise obtain the significant operational risks associated with such operations. Wefinancing that we will require. If we do not presently carry property and liability insurance. Cost effective insurance contains exclusions and limitations on coverage and mayraise such significant amount of capital, it is unlikely that we will be unavailable in some circumstances.

Our auditor has indicated in its report that there is substantial doubt aboutable to complete our ability to continue as a going concern as a resultbusiness strategy or commence operations of our lack of revenuesStoughton Refinery and ifin such event, we will either have to suspend our development efforts or our operations until we do raise the capital or cease operations entirely.

If our estimates related to expenditures and cash flow from operations are erroneous, and we are unable to generate significant revenuesell additional equity securities or secureotherwise obtain financing, weour business could fall short of expectations and you may be required to cease or curtail our operations.lose your entire investment.

 

Our auditor has indicatedfinancial success is dependent in its report thatpart upon the accuracy of our lackmanagement's estimates of revenues raises substantial doubt about our abilityexpenditures required to continue as a going concern.  The financial statements do not include adjustments that might resultvalidate the viability and suitability of the Land, commencing the permitting process, purchasing the Land, completing the development and construction of the Stoughton Refinery and commencing the operation of the Stoughton Refinery and estimates of cash flow from the outcome of this uncertainty.operations. If wesuch estimates are unable to generate significant revenuematerially erroneous or secure financinginaccurate, we may not be requiredable to cease or curtailcarry out our operations.business strategy, which could, in a worst-case scenario, result in the failure of our business and you losing your entire investment.

Because we have a limitedno history of operationsoperating a refinery we may not be able to successfully implement our business plan.

 

We have less than three years ofno operational history in our industry. Accordingly, our operations are subject to the risks inherent in the establishment of a new business enterprise, including access to capital, successful implementation of our business plan and limited revenue from operations. We cannot assure you that our intended activities or plan of operation will be successful or result in revenue or profit to us and any failure to implement our business plan may have a material adverse effect on our business.

Our auditor has indicated in its report that there is substantial doubt about our ability to continue as a going concern as a result of our lack of revenues. If we are unable to generate sufficient revenue or secure the businesssubstantial financing that will be required in order to develop, construct and commence the operation of the Company.Stoughton Refinery, we may be required to cease or curtail our operations.

 

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Our future results and reputationauditor has indicated in its report that our lack of revenues raises substantial doubt about our ability to continue as a going concern.  The financial statements do not include adjustments that might result from the outcome of this uncertainty. If we are unable to generate significant revenue or secure the needed substantial financing, we may be affected by litigationrequired to cease or other liability claims.curtail our operations.

The risks associated with processing of crude oil could cause personal injury or death, environmental damages, monetary losses and possible legal liability.

 

We haveintend to engage in the processing of crude oil through the development, construction and operation of the Stoughton Refinery facility. There are significant operational risks associated with such operations. We do not procured a generalpresently carry property and liability insurance policy for our business.insurance. To the extent that we suffer a loss of a type which would normally be covered by general liability, we would incur significant expenses in defending any action against us and in paying any claims that result from a settlement or judgment against us. AdverseCost effective insurance may contain exclusions and limitations on coverage and may be unavailable in some circumstances. Additionally, we will require substantial capital to afford the cost of property and liability insurance.

Our future results and reputation may be affected by litigation or other liability claims.

We have not procured a general liability insurance policy for our business. The costs of defending any action against us and in paying any claims that result from a settlement or judgment against us could result in adverse publicity, which in turn could result in a loss of consumer confidence in our business or our securities.

 

We depend heavily on key personnel, and turnover of key senior management could harm our business.

Our ability to execute our business strategy and our future business and, once operational our results of operations will depend in significant part upon the continued contributions of our senior executive management team including Jeffrey Mallmes, our Chairman, President, Treasurer and director and Andrew J. Kacic, our Secretary and director and William J. Hinz, our director. If we lose the services of any of them or if they fail to perform in their current positions, or if we are not able to attract and retain skilled employees as needed, our ability to complete the Predevelopment Work or commence our refinery operations and our business (if we can commence our refinery operations) could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our senior management team. We depend on the skills and abilities of these key employees in managing the Predevelopment Work, the development, construction and operation of the Stoughton Refinery, and the marketing and sales aspects of our business, any part of which could be harmed by turnover.

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Our Articles of Incorporation and Bylaws limit the liability of, and provide indemnification for, our officers and directors.

 

Our Articles of Incorporation generally limit our officers’ and directors’ personal liability to the Companyus and itsto our stockholders for breach of fiduciary duty as an officer or director except for breach of the duty of loyalty or acts or omissions not made in good faith or which involve intentional misconduct or a knowing violation of law. Our Articles of Incorporation and Bylaws, provide indemnification for our officers and directors to the fullest extent authorized by the Nevada Revised Statutes against all expense, liability, and loss, including attorney's fees, judgments, fines, excise taxes or penalties and amounts to be paid in settlement reasonably incurred or suffered by an officer or director in connection with any action, suit or proceeding, whether civil or criminal, administrative or investigative to which the officer or director is made a party or is threatened to be made a party, or in which the officer or director is involved by reason of the fact that he is or was an officer or director of the Company, or is or was serving at the request of the Company whether the basis of the proceeding is an alleged action in an official capacity as an officer or director, or in any other capacity while serving as an officer or director. Thus, the Companywe may be prevented from recovering damages for certain alleged errors or omissions by theour officers and directors for liabilities incurred in connection with their good faith acts for the Company.  Such an indemnification payment might deplete the Company'sour assets. Stockholders who have questions regarding the fiduciary obligations of theour officers and directors of the Company should consult with independent legal counsel. It is

With regard to the positionforegoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, that exculpation from andsuch indemnification for liabilities arising underis against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the rules and regulations thereunderevent that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the Common Stock being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and therefore unenforceable.will be governed by the final adjudication of such case.

 

If our estimates related to expenditures and cash flow from operations are erroneous, and we are unable to sell additional equity securities, our business could fall short of expectations and you may lose your entire investment.

Our financial success is dependent in part upon the accuracy of our management's estimates of expenditures and cash flow from operations. If such estimates are erroneous or inaccurate, we may not be able to carry out our business plan, which could, in a worst-case scenario, result in the failure of our business and you losing your entire investment.

Implications of Being an Emerging Growth Company.

 

As a company with less than $1.0 billion in revenue during its last fiscal year, we are considered an "emerging growth company" as defined in the JOBS Act.Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies.  These provisions include:

 

·Aa requirement to have only two years of audited financial statements and only two years of related management's discussion and analysis included in an initial public offering registration statement;
·an exemption to provide less than five years of selected financial data in an initial public offering registration statement;
·an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal controls over financial reporting;
·an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;
·an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and
·reduced disclosure about the emerging growth company's executive compensation arrangements

 

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An emerging growth company is also exempt from Section 404(b) of Sarbanes OxleySarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) which requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. Similarly, as a Smaller Reporting Company we are exempt from Section 404(b) of the Sarbanes-Oxley Act and our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until such time as we cease being a Smaller Reporting Company.

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As an emerging growth company, we are exempt from Section 14A (a) and (b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) which require the shareholderstockholders’ approval of executive compensation and golden parachutes.

 

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.  In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.  We have elected to take advantage of the benefits of this extended transition period.  Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

 

We would cease to be an emerging growth company upon the earliest of:

 

·the last day or our first fiscal year following the fifth anniversary of this offering,
·the firstlast day of our fiscal year after ourduring which we had annual gross revenues are $1 billion or more,
·the date on which we have, during the previous three-year3-year period, issued more than $1 billion in non-convertible debt securities, or
·the date on which we are deemed to be a “large accelerated filer”, as defined in section 240.12b-2 of the endtitle 46, Code of Federal Regulations, or any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.successor thereto.

 

You may have limited access to information regarding our business because our obligations to file periodic reports with the SEC could be automatically suspended under certain circumstances.  

 

As of effectiveness of our registration statement of which this prospectusProspectus is a part, we will be required to file periodic reports with the SEC which will be immediately available to the public for inspection and copying (see “Where You Can Find More Information” elsewhere in this prospectus)Prospectus).  Except during the year that our registration statement becomes effective, these reporting obligations may (in our discretion) be automatically suspended under Section 15(d) of the Exchange Act if we have less than 300 shareholdersstockholders and do not file a registration statement on Form 8A (which we have no current plans to file).8-A under the Exchange Act.  If this occurs after the year in which our registration statement becomes effective, we will no longer be obligated to file periodic reports with the SEC and your access to our business information would then be even more restricted.  After thisthe registration statement on Form S-1(of which this Prospectus is a part) becomes effective, we will be required to deliver periodic reports to security holders.  However, we will not be required to furnish proxy statements to security holders and our directors, officers and principal beneficial owners will not be required to report their beneficial ownership of securities to the SEC pursuant to Section 16 of the Exchange Act.  Previously, a company with more than 500 shareholdersstockholders of record and $10 million in assets had to register under the Exchange Act.  However, the JOBS Act raisesraised the minimum shareholderstockholders threshold from 500 to either 2,000 persons or 500 persons who are not "accredited investors" (or 2,000 persons in the case of banks and bank holding companies).  The JOBS Act excludes securities received by employees pursuant to employee stock incentive plans for purposes of calculating the shareholderstockholder threshold.  This means that access to information regarding our business and operations will be limited.

We may be unable to continue paying the costs of being public.

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The costs of being a public company may be substantial and we may not be able to absorb the costs of being a public company which may cause us to cease being public in the future or require additional fundraising in order to remain in business or remain a public company. We estimate that in the future, costs for legal and accounting at $150,000 per year.

Risks Related to our Business

 

CrudeThe volatility of the prices of crude oil prices and other feedstocks, blendstocks, refined fuel prices are volatileproducts and a decline in refined fuel prices and an increase in oil pricesutility services could materially and adversely affect our financial results and impede our growth.

 

Our revenue,If we are able to successfully develop, construct and commence operating the Stoughton Refinery, our revenues, profitability, cash flows and cash flowliquidity from refinery operations will depend uponprimarily on the prices and demand for refined fuels and the margin above operating expenses (including the cost of refinery feedstocks, such as crude oil. The markets for these commoditiesoil, and products blended into refined products) at which we are veryable to sell refined products. Refining is primarily a margin-based business and, to increase profitability, it is important to maximize the yields of high value finished products while minimizing the costs of feedstock and operating expenses. When the margin between refined product prices and crude oil and other feedstock costs tightens, our earnings, profitability and cash flows will be negatively affected. Refining margins historically have been volatile, and even relatively modest dropsare likely to continue to be volatile, as a result of a variety of factors, including fluctuations in the prices of crude oil, other feedstocks, refined products and fuel and utility services. An increase or decrease in the price of crude oil will likely result in a similar increase or decrease in prices can significantly affectfor refined products; however, there may be a time lag in the realization, or no such realization, of the similar increase or decrease in prices for refined products. The effect of changes in crude oil prices on our financial resultsrefining margins therefore depends in part on how quickly and impedehow fully refined product prices adjust to reflect these changes.

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In addition, the nature of our growth. business will require us to maintain substantial crude oil, feedstock and refined product inventories. Because crude oil, feedstock and refined products are commodities, we will have no control over the changing market value of these inventories. Our crude oil, feedstock and refined product inventories will be valued at the lower of cost or market value under the last-in-first-out (“LIFO”), inventory valuation methodology. If the market value of our crude oil, feedstock and refined product inventories were to decline to an amount less than our LIFO cost, we would record a write-down of inventory and a non-cash charge to cost of sales.

Prices forof refined fuels and crude oil, may fluctuate widely in response toother feedstocks, blendstocks, and refined products depend on numerous factors including a variety of additional factorseconomic, market, environmental and political conditions that are beyond our control, such as:

 

·changes in global supply and demand for natural gas and oil;
·commodity processing, gathering, and transportation availability;
·domestic and global political and economic conditions;
·the ability of members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;
·weather conditions, including hurricanes;conditions;
·technological advances affecting energy consumption;
·domestic and foreign governmental regulations; and
·the price and availability of alternative fuels.

 

Lower refined fuel prices and an increase in crude oil prices may not only decrease our revenue on a per share basis, but also may reduce the amount of refined fuel that we can produce economically.

 

Our direct operating expense structure will also impact our profitability. When our Stoughton Refinery is operational, our major direct operating expenses will include employee and contract labor, maintenance and energy. We maybelieve that an important variable direct operating cost will be unable to continue paying theenergy, which is comprised primarily of fuel and other utility services. The volatility in costs of being public.

The costsfuel, principally natural gas, and other utility services, principally electricity, used by our Stoughton Refinery and other operations will affect our operating costs. Fuel and utility prices have been, and will continue to be, affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets. Natural gas prices have historically been volatile and, typically, electricity prices fluctuate with natural gas prices. Future increases in fuel and utility prices may have a negative effect on our revenues, profitability and cash flows. We intend to explore and, if feasible, use alternative sources of being a public company may be substantial andenergy to operate the Company may not be able to absorb the costs of being a public company which may cause us to cease being public in the future or require additional fundraisingStoughton Refinery in order to remain in business. We estimatelower our Stoughton Refinery operating costs, however no assurances can be given that insuch alternative sources of energy will be feasible or provided sufficient power for operating the future, costs for legal and accounting at $20,000 per year.Stoughton Refinery or will lower our Stoughton Refinery operating costs.

 

Competition in the crude oil refining industry is intense, which mayfrom companies who produce their own supply feedstocks, have extensive retail outlets, make alternative fuels or have greater financial and other resources than we do could materially and adversely affect our ability to succeed.business and results of operations.

 

The crude oil refining industry is intensely competitive,competitive. Assuming we are able to successfully develop, construct and wecommence operating the Stoughton Refinery, our refining operations will compete with domestic refiners and marketers in regions of Canada and the United States in which we intend to operate, as well as with domestic refiners in other regions and foreign refiners that import products into Canada and the United States. In addition, we will compete with producers and marketers in other industries that supply alternative forms of energy and fuels to satisfy the requirements of our industrial, commercial and individual consumers. Certain of our competitors have larger and more complex refineries and may be able to realize lower per-barrel costs or higher margins per barrel of throughput. Several of our principal competitors, including but not limited to integrated national or international oil companies, thatare larger and have substantially greater resources than we do. Manydo and access to proprietary sources of controlled crude oil production. Unlike these companiescompetitors, we will obtain substantially all of our feedstocks from unaffiliated sources. Currently we are not engaged in the petroleum exploration and production business and therefore do not produce any of our crude oil feedstocks. We do not have refining, processinga retail business and gatheringtherefore we will be dependent upon others for outlets for our refined products. Because of their integrated operations and larger capitalization, these competitors may be more flexible in responding to volatile industry or market petroleumconditions, such as shortages of crude oil supply and other products on a regional, nationalfeedstocks or worldwide basis. Our largerintense price fluctuations. Some of our competitors have been operating in the Bakken formation and have demonstrated the ability to operate through industry cycles. Also, some of our competitors may be able to absorb the burden of present and future federal, provincial, state, local and other laws and regulations more easily than we can. Our ability to develop or acquire additional properties will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Some of our competitors have been operating in the Bakken region much longer than we have and have demonstrated the ability to operate through industry cycles. Any of these competitive disadvantages could adversely affect our business, financial condition and results of operations.

 

Although we intend to develop the Stoughton Refinery as a “state-of-the-art” energy efficient facility, even newer or upgraded refineries that may be developed in the future may be more efficient than the Stoughton Refinery, which may put us at a competitive disadvantage. We intend to take necessary measures to maintain the Stoughton Refinery including, when needed, the installation of new equipment and redesigning older equipment to improve our operations. Over time, the Stoughton Refinery may become obsolete, or be unable to compete, because of the construction of new, more efficient facilities by our competitors. Although we believe that the design of the Stoughton Refinery will allow us to quickly and efficiently upgrade that refinery, no assurances can be given that we will be able to do so if and when needed.

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Continued economic turmoil in the global financial system has had and may in the future have an adverse impact on the refining industry.

Our business and profitability will be affected by the overall level of demand for our products, which in turn will be affected by factors such as overall levels of economic activity and business and consumer confidence and spending. Declines in global economic activity and consumer and business confidence and spending (such as those that occurred during the 2009 global recession) may significantly reduce the level of demand for our products. Reduced demand for our products may have an adverse impact on our business, financial condition, results of operations and cash flows. In addition, downturns in the economy may impact the demand for refined fuels and, in turn, result in excess refining capacity. Refining margins are impacted by changes in domestic and global refining capacity, as increases in refining capacity can adversely impact refining margins, earnings and cash flows.

Renewable fuels mandates may reduce demand for the refined fuels we intend to produce, which could have a material adverse effect on our results of operations and financial condition.

Pursuant Canadian and U.S. laws, the Canadian and U.S. governments have issued regulations that mandate blended renewable fuels into the petroleum fuels produced and sold in Canada and the United States, as applicable. These regulations specify the volume of renewable fuels that obligated refineries must blend into their finished petroleum fuels. In addition, certain provinces and states have passed legislation that requires minimum biodiesel blending in finished distillates. Existing laws and regulations could change, and the minimum volumes of renewable fuels that must be blended with refined petroleum fuels may increase. Because we do not produce renewable fuels, increasing the volume of renewable fuels that must be blended into our products will displace an increasing volume of our Stoughton Refinery’s product pool, potentially resulting in lower earnings and profitability. In addition, in order to meet certain of these current and future requirements, we may need to purchase renewable identification numbers credits (which area fungible, tradable regulatory currency that represents a qualifying renewable fuel), known as “RIN” credits which have fluctuating costs.

We are exposed to the credit risks, and certain other risks, of our customers, and any material nonpayment or nonperformance by our customers could reduce our ability to operate or operate profitably.

We are subject to the risks of loss resulting from nonpayment or nonperformance by our customers. If any of our most significant customers default on their obligations to us, our financial results could be adversely affected. Our customers may be highly leveraged and subject to their own operating and regulatory risks. Also, we may have a limited pool of potential customers and may be unable to replace any existing customer that defaults on its obligations to us. Therefore, any material nonpayment or nonperformance by our customers could reduce our ability to operate or to operate profitably. Our business is also indirectly exposed to risks faced by our suppliers and other business partners. The impact on these constituencies of the risks posed by economic turmoil in the global financial system and markets and the unrest and turmoil in foreign governments and countries have included or could include interruptions or delays in the performance by counterparties to our contracts, reductions and delays in customer purchases, delays in or the inability of customers to obtain financing to purchase our products and the inability of customers to pay for our products. Any of these events may have an adverse impact on our business, financial condition, results of operations and cash flows.

We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.

 

SignificantIf we are able to commence refining operations, significant growth in the size and scope of our operations could place a strain on our financial, technical, operational and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrences of unexpected expansion difficulties, including the failure to recruit and retain experienced managers, geologists, engineers and other professionals in the natural gas and oil industry could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plans.

Compliance with and changes in environmental, health and safety laws and regulations will have a cost impact on our business, and failure to comply with such laws and regulations could have an impact on our assets, costs, revenue generation and growth opportunities. In addition, our customers are also subject to environmental laws and regulations, and any changes in these laws and regulations could result in significant added costs to comply with such requirements and delays or curtailment in pursuing production activities, which could reduce demand for our services. Changes in laws, regulations, policies and obligations relating to climate change, including carbon pricing, could also impact us by adversely affecting the demand for our customers’ products.

 

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We

When we commence development, construction and operation of the Stoughton Refinery and while we are operating the Stoughton Refinery, we will be subject to complex federal, state, localextensive environmental, worker health and safety, and other applicable safety laws and regulations, including those relating to the discharge and remediation of materials in the environment, waste management, natural resource protection and preservation, pollution prevention, pipeline integrity and other safety-related regulations and characteristics and composition of fuels. Canadian and U.S. governmental authorities, and analogous provincial and state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, oftentimes requiring difficult and costly response actions. Our operations also will pose risks of environmental liability due to leakage, migration, releases or spills from our operations to surface or subsurface soils, surface water or groundwater. Certain Canadian environmental laws impose strict as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations. There can be no assurances that our operating policies and procedures will adequately identify all process safety, personal safety and environmental risks or that all our operating activities will be conducted in conformance with these requirements.

Failure to comply with these laws, regulations and permits may result in joint and several or strict liability or the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, and/or the issuance of injunctions limiting or preventing some or all of our operations. In addition, we may experience a delay in obtaining or retaining or be unable to obtain or retain required permits or approvals for projects related to the Stoughton Refinery, which may cause us to lose potential and current customers, interrupt our operations and limit our growth and revenues, which in turn could affect our business, financial condition, results of operations, cash flows and ability to make cash distributions. As new environmental laws and regulations are enacted, the level of expenditures required for environmental matters could increase. Current and future legislative action and regulatory initiatives could result in changes to operating permits, material changes in operations, increased capital expenditures and operating costs, increased costs of the goods we transport, and decreased demand for products we handle that cannot be assessed with certainty at this time. We may be required to make expenditures to modify operations or install pollution control equipment or release prevention and containment systems that could materially and adversely affect our business, financial condition, and results of operations.operations and liquidity if these expenditures, as with all costs, are not ultimately reflected in the tariffs and other fees we receive for our products and services.

 

Our crude oil refining operationsWe expect that our customers are also subject to complex and stringent laws and regulations. In order to conduct our operations in compliance with theseenvironmental laws and regulations we must obtainthat affect their businesses, and maintain numerous permits, approvalschanges in these laws or regulations could materially adversely affect their businesses or prospects. Any changes in laws, regulations, policies or obligations that impose significant costs or liabilities on our customers, that result in delays, curtailments or cancellations of their projects, or that reduce demand for their products, could reduce their demand for our products and certificates from various federal, stateservices and local governmental authorities. materially adversely affect our results of operations, financial position or cash flows.

We may incur substantial costs in ordercannot predict the potential impact of changes to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing lawsclimate change legislation and regulations are revisedto address greenhouse gas (“GHG”) emissions in Canada or reinterpreted or if new laws and regulations become applicable to our operations. These costs could have a material and adverse effectin the United States on our business,future consolidated financial condition, and results of operations. Moreover,operations or cash flows, however changes in laws, regulations, policies and obligations relating to climate change, including carbon pricing, could impact our failure to comply with these lawsassets, costs, revenue generation and regulations, as interpreted and enforced, could have a material adverse effect on our business, financial condition and results of operations.growth opportunities.

 

Refinery activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.

In general, our refinery activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and ourand/or to operate profitability.

 

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in Canada or the United States or any other applicable jurisdiction, may be changed, applied or interpreted in a manner which willmay fundamentally alter theour ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or ourto operate profitably.

 

The marketability of refined fuel products will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital to be profitable or viable.

 

The marketability of refined fuel products will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, new technology, new sources of energy, land tenure, land use, regulation concerning the importing and exporting of oil and gasrefined products and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of some or all of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

 

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We do not yet have substantial assets or any revenues and we are largely dependent upon the proceeds of this offeringPrimary Offering and other sources for the substantial amount of capital we will need to develop, construct and operate the Stoughton Refinery to fully fund our business. If we do notIn addition to the sellsale so our shares in this offeringthe Primary Offering, we maywill have to seek alternativesubstantial additional financing to complete our business model or abandon them.our business strategy.

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We have limited capital resources. To date, the Company haswe have funded itsour operations from limited funding from private investors and haswe have not generated sufficient cash from operations to be profitable. Unless we are able to obtain the company beginssubstantial financing needed to develop, construct and operate the Stoughton Refinery, and then begin to generate sufficient revenues to finance operations as a going concern, we may experience liquidity and solvency problems. Such liquidity and solvency problems may forforce us to cease operations if additional financing is not available. No knownWe are not aware of any available alternative or additional sources of funds are available to the Company in the event it does not have adequate proceeds from this offering. However, the Company believes that the net proceeds of this offering will be sufficientus to satisfy operating requirements for the next twelve monthsfund our business strategy.

 

The CompanyWe may not be able to attain profitability without additional funding, which may be unavailable.

 

The Company hasWe have limited capital resources. Unless we can obtain the Company beginssubstantial additional financing needed to develop, construct and operate the Stoughton Refinery and then to begin to generate sufficient revenues to finance our operations as a going concern, the Company maywe will experience liquidity and solvency problems. SuchWithout such financing, we will not be able to commence our refining operations. Also, such liquidity and solvency problems may force the Companyus to cease any refinery operations if additional financing iswe have commenced. We are not available. No knownaware of any available alternative resourcessources of funds are available in the event we do not generate sufficient funds from operations.to us to address these matters.

Our operations could be disrupted if our information systems fail, causing increased expenses and loss of sales.

 

Our generating minimal revenues from operations makes it difficult for us to evaluateAt such time as our futureStoughton Refinery is operating, our business prospectswill be highly dependent on financial, accounting and make decisions based on those estimatesother data processing systems and other communications and information systems. We will rely upon the proper functioning of our future performance.computer systems. If a key system was to fail or experience unscheduled downtime for any reason, even if only for a short period, our operations and financial results could be affected adversely. Our systems could be damaged or interrupted by a security breach, fire, flood, power loss, telecommunications failure or similar event. Currently, we have no formal disaster recovery plan in place.

 

AsWe intend to enter into non-binding letters of February 28, 2016, we have generated minimal revenues and incurred a lossintent with potential customers regarding the purchase of $1,446,062. As a consequence,the finished products from the Stoughton Refinery once it is difficult, if not impossible,fully operational.

When the Stoughton Refinery is fully operational, and we start to forecast our future results based upon our historical data.  Becauseproduce refined products, we intend to obtain good faith, non-binding letters of intent with customers to purchase refined products from the related uncertainties,Stoughton Refinery. Due to the non-binding nature of such letters of intent, no assurances can be given that we will enter into definitive agreements with such customers or that such customers will purchase the products as specified in such definitive agreements.

We may be hindered inunable to obtain or renew permits necessary for our operations or for growth and expansion projects, which could inhibit our ability to anticipatedo business.

Our Stoughton Refinery will require a number of Canadian and timely adaptprovincial permits, licenses and approvals with terms and conditions containing a significant number of prescriptive limits and performance standards in order to increasesoperate. In addition, we may implement maintenance, growth and expansion projects as necessary to pursue business opportunities, and these projects often require similar permits, licenses and approvals. These permits, licenses, approval limits and standards may require a significant amount of monitoring, record keeping and reporting in order to demonstrate compliance with the underlying permit, license, approval limit or decreasesstandard. In some instances, for construction permits, extensive environmental assessments or impact analyses must be completed before a permit can be obtained, which has the potential to result in sales, revenuesadditional operational delays. Failure to obtain required permits or expenses.  If we make poor budgetary decisionsnoncompliance or incomplete documentation of our compliance status with any permits that are obtained may result in the imposition of fines, penalties and injunctive relief.

Any political instability, military strikes, sustained military campaigns, terrorist activity, or changes in foreign policy could have a material adverse effect on our business, results of operations and financial condition.

Any political instability, military strikes, sustained military campaigns, terrorist activity, or changes in foreign policy in areas or regions of the world may affect our business in unpredictable ways, including forcing us to increase security measures and causing disruptions of supplies and distribution markets. We may also be subject to Canadian and United States trade and economic sanctions laws, which change frequently as a result of unreliable data, we may never become profitable or incur losses,foreign policy developments, and which may resultnecessitate changes to our crude oil acquisition activities. Further, like other industrial companies, our facilities may be the target of terrorist activities. Any act of war or terrorism that resulted in damage to the Stoughton Refinery or third-party facilities upon which we are dependent for our business operations could have a declinematerial adverse effect on our business, results of operations and financial condition.

Terrorist or cyber-attacks and threats, or escalation of military activity in response to these attacks, could have a material adverse effect on our stock price. business, financial condition or results of operations.

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Terrorist attacks and threats, cyber-attacks, or escalation of military activity in response to these attacks, may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business. A breach or failure of our digital infrastructure due to intentional actions such as cyber-attacks, negligence or other reasons, could seriously disrupt our operations and could result in the loss or misuse of data or sensitive information, injury to people, disruption to our business, harm to the environment or our assets, legal or regulatory breaches and potential legal liability.

Strategic targets, such as energy-related assets and transportation assets, may be at greater risk of future terrorist or cyber-attacks than other targets in Canada. We do not expect to obtain or maintain specialized insurance for possible liability or loss resulting from a cyber-attack on our assets that may shut down all or part of our business. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital including our ability to repay or refinance debt. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition and results of operations.

Crisis management and business continuity-potential disruption to our business and operations could occur if we do not address an incident effectively.

Our business and operating activities could be disrupted if we do not respond, or are perceived not to respond, in an appropriate manner to any major crisis or if we are not able to restore or replace critical operational capacity.

Debt we incur in the future may limit our flexibility to obtain financing and to pursue other business opportunities.

Our future level of debt could have important consequences to us, including the following:

a significant portion of our cash flow from operations will be dedicated to the payment of principal of, and interest on, our indebtedness and will not be available for other purposes;

covenants contained in our debt arrangements may limit our ability to borrow additional funds, dispose of assets and make certain investments;

such covenants may also require us to meet or maintain certain financial tests, which may affect our flexibility in planning for, and reacting to, changes in our industry, such as being able to take advantage of acquisition opportunities when they arise;

our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited;

we may be at a competitive disadvantage to those of our competitors that are less leveraged; and we may be more vulnerable to adverse economic and industry conditions.

our funds available for operations and any future business opportunities will be reduced by that portion of our cash flow required to make interest payments on our debt;

such financing may contain covenants that limit our ability to declare dividends to our stockholders; and

our flexibility in responding to changing business and economic conditions may be limited.

Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service any future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, investments or capital expenditures, selling assets or issuing equity. We may not be able to effect any of these actions on satisfactory terms or at all.

We may have capital needs for which our internally generated cash flows and other sources of liquidity may not be adequate.

If we cannot generate sufficient cash flows or otherwise secure sufficient liquidity to support our short-term and long-term capital requirements, we may not be able to meet our payment obligations in connection with the development and construction and operation of the Stoughton Refinery, or our future debt obligations, comply with certain deadlines related to environmental regulations and standards, or pursue our business strategies, in which case our operations may not perform as we currently expect. We have substantial short-term capital needs and substantial long-term capital needs. If we are able to develop, construct and operate the Stoughton Refinery we expect that our short-term working capital needs will be primarily related to financing certain of our refined products inventory that will not be covered by our various products off-take agreements we intend to enter into with customers. In addition to our long-term capital need to finance the development, construction and operation of the Stoughton Refinery, we expect our long-term needs for cash will include those to support ongoing capital expenditures for crude oil and other feedstocks, equipment maintenance and upgrades during turnarounds at the Stoughton Refinery and to complete our routine and normally scheduled maintenance, regulatory and security expenditures. We will likely incur substantial compliance costs in connection with new or changing environmental, health and safety regulations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our liquidity will affect our ability to satisfy any of these needs or obligations.

15

Risks Related to our Common Stock

  

We are subject to penny stock“Penny Stock” regulations and restrictions and you may have difficulty selling shares of our common stock.Common Stock.

 

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions.  We anticipate that our common stock will becomeCommon Stock would be considered a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule.” This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

 

For any transaction involving a penny stock,“penny stock”, unless exempt, the rules require delivery, prior to any transaction in a penny stock,“penny stock”, of a disclosure schedule prepared by the SEC relating to the penny stock“penny stock” market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock“penny stock” held in the account and information on the limited market in penny stock.“penny stock”.

 

We do not anticipate that our common stockCommon Stock will qualify for exemption from the Penny Stock“penny stock” Rule. In any event, even if our common stockCommon Stock were exempt from the Penny Stock“penny stock” Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock,“penny stock”, if the SEC finds that such a restriction would be in the public interest.

 

You will experience an immediate and substantial dilution in the net tangible book value of our Common Stock you purchase in this offering.

The initial public offering price per share of our Common Stock in the Primary Offering is substantially higher than the pro forma net tangible book value per share of our Common Stock immediately after this offering. As a result, you may pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. Investors who purchase Common Stock in this offering will be diluted by $___(USD) per share after giving effect to the sale of shares of Common Stock in this offering at the offering price of $___(USD) per share. If we grant options in the future to our employees, and those options are exercised or other issuances of Common Stock are made, there will be further dilution.

The initial public offering price of our Common Stock may not be indicative of the market price of our Common Stock after this offering and our stock price may be highly volatile.

The initial public offering price of our Common Stock in the Primary Offering is based on numerous factors and may not be indicative of the market price of our Common Stock after this offering. The market price may be affected by such factors as:

variations in actual or anticipated operating results;

changes in, or failure to meet, earnings estimates of securities analysts;

market conditions in the oil refining industry;

regulatory actions;

general economic and stock market conditions; and

the availability for sale, or sales, of a significant number of shares of our Common Stock in the public market.

These and other factors may cause the market price of our Common Stock to decline below the initial public offering price, which in turn would adversely affect the value of your investment.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which could significantly harm our profitability and reputation.

 

11

16
 

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our Common Stock, our stock price and trading volume could decline.

The trading market for our Common Stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our Common Stock or publish inaccurate or unfavorable research about our business, our Common Stock price would likely decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our Common Stock price or trading volume to decline and our Common Stock to be less liquid.

Sales of our common stockCommon Stock under Rule 144 could reduce the market price of our stock.Common Stock.

 

ThereWe are 41,333,125registering 2,000,000 newly issued shares are being registered in this offering, however allPrimary Offering and we are registering 21,563,669 shares to be sold by our selling stockholders. All of our remaining restricted shares will still be subject to the resale restrictions of Rule 144.  All of our remaining restricted shares will still be subject to the resale restrictions of Rule 144.  In general, persons holding(i) a person (who is not an affiliate) who holds restricted securities, including affiliates,shares of a reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”) and has held the shares or a period of six from the date of purchase, such person may sell an unlimited number of his/her shares provided that the current public information requirement under Rule 144 is satisfied, and if that person has held the shares for one year from the date of purchase, the person may sell an unlimited number of shares under Rule 144 and need not comply with any other Rule 144 requirements, (ii) a person (who is not an affiliate) who holds shares of a company that is not a reporting company under the Exchange Act must hold theirthe shares for a period of at leastone year and then may sell an unlimited number of shares under Rule144 and need not comply with any other Rule 144 requirements, (iii) a person who is an affiliate and the Company is a reporting company under the Exchange Act must hold his/her shares for a period of six months may not sell more than one percentfrom the date of the total issuedpurchase and outstanding shares in any 90-day period, and mustthen may resell the shares in accordance with all Rule 144 requirements and (iv) a person who is an unsolicited brokerage transaction ataffiliate and the market price.Company is not a reporting company under the Exchange Act must hold the shares for one year and then may resell the shares in accordance with all Rule 144 requirements.  The availability for sale of substantial amounts of common stockCommon Stock under Rule 144 could reduce prevailing market prices for our securities.

 

Because weWe currently do not have anindependent directors on our audit or compensation committee, shareholderscommittees. Accordingly, until we do, stockholders will have to rely on the entire board of directors, none of which are independent, to perform these functions.

 

We do not currently have an audit or compensation committee comprised of independent directors.    Indeed, we do not have anyThese functions of our audit orcommittee and compensation committee.  These functionscommittee are performed by the board of directors as a whole.   No members of the board of directors are independent directors.  Thus, there is a potential conflict of interest in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions. We intend to have independent directors in the future.  

 

We may, in the future, issue additional shares of common stock,Common Stock, which would reduce investors’ percent of ownership and may dilute our share value.

 

Our Articles of Incorporation, as amended, authorize the issuance of 295,000,000495,000,000 shares of common stock.Common Stock.  As of February 23, 2017, the Company hasJune 6, 2018, we had issued and outstanding 59,911,68348,491,485 shares of common stock.Common Stock. Accordingly, we are authorized to issue additional shares of common stockCommon Stock and may elect to do so in due course.the future. The future issuance of common stockCommon Stock may result in substantial dilution in the percentage of our common stockCommon Stock held by our then existing shareholders.stockholders. We may value any common stockCommon Stock issued in the future on an arbitrary basis. The issuance of common stockCommon Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.Common Stock.

 

We are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.

 

We may offer to sell our common stockCommon Stock to investors pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as well as those of variousapplicable Canadian and provincial, and/or U.S. and state securities laws. The basis for relying on such exemptions is factual; that is, the applicability and availability of such exemptions depends upon, among other things, the disclosures we provide to prospective investors and our conduct and thatthe conduct of those persons contacting prospective investors and making the offering. We may not seek any legal opinion to the effect that any such offering would be exempt from registration under any federal or stateapplicable law. Instead, we may elect to relay upon the operative facts as the basis for our reliance on such exemption, including information provided by investors themselves.

 

If any such offering did not qualify for suchthe intended exemption in the applicable jurisdiction, an investor wouldmay have the right to rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration in reliance on the partial preemption from the registrationIf one or qualification provisions of such state statutes under the National Securities Markets Improvement Act of 1996. Ifmore investors were successful in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions upon which it haswe have relied, we may become subject to significant fines and penalties imposed by the SEC and state securitiesapplicable governmental agencies.

 

12

Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of the Company.

17

 

Though not now, we may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of who are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

 

The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.

 

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.

 

Nevada’s control share law may have the effect of discouraging takeovers of the corporation.

 

In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

 

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of the Company.

 

13

Because we do not intend to pay any cash dividends on our common stock,Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.their shares.

 

We intend to retain any future earnings to finance the development, expansion and expansionoperation of our business. We do not anticipate paying any cash dividends on our common stockCommon Stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.their shares. There is no assurance that stockholders will be able to sell their shares when desired.

 

Opt-in right for emerging growth company.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

FORWARD-LOOKING INFORMATION

 

This prospectus contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results.  Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of real estatecrude oil and refined oil prices, the possibility that our marketing efforts will not be successful in identifying sources of crude oil and buyers of real estate,refined oil products, the Company’s need for and ability to obtain additional financing, and, other factors over which we have little or no control.

18

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

USE OF PROCEEDS

 

Our offeringPrimary Offering is being made on a self-underwritten basis: no minimum number of shares must be sold in order for the offeringPrimary Offering to proceed. The offering price per share is $0.20.$__.00(USD). The following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100%, respectively, of the securitiesCommon Stock offered for sale by the Companyus in the Primary Offering. There is no guarantee that we will receive any proceeds from the offering.Primary Offering.

 

14

100% of

Offering Sold

75% of

Offering Sold

50% of

Offering Sold

25% of

Offering Sold

100% of

Offering Sold

75% of

Offering Sold

50% of

Offering Sold

25% of

Offering Sold

Offering Proceeds$8,266,625$6,199,969$4,133,313$2,066,656$__,000,000$_000,000
Shares Sold41,333,12530,999,84420,666,56310,333,2812,000,0001,500,0001,000,000500,000
Gross Proceeds$8,266,625$6,199,969$4,133,313$2,066,656$__,000,000$__000,000$___000,000
Total Before Expenses$8,266,625$6,199,969$4,133,313$2,066,656$__,000,000$__000,000$___000,000
  
Offering Expenses  
Accounting10,00060,000
Legal30,00075,000
Publishing/EDGAR  5,0005,000  1,000
Transfer Agent  5,0005,000  3,000
SEC Filing Fee1,437  1,437
Total Expenses51,437140,437
  
Net Offering Proceeds8,215,1886,148,5324,081,8762,015,219 
  
Expenditures  
Stoughton Engineering and Permitting 
Engineering and Permitting: 
Phase I2,464,5561,844,5601,224,563604,566   500,000
Phase II5,750,6324,303,9722,857,3131,410,6532,000,000
Licensing5,000,000
Total Expenditures7,500,000
  
Total Expenditures8,266,6256,199,9694,133,3132,066,656
Net Remaining Proceeds00

 

The above figures represent only estimated costs. This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the status of and results from operations. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offeringPrimary Offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering.Primary Offering. Furthermore, even if we anticipate thatsell all 2,000,000 shares in the Primary Offering, we will need to secure additional substantial funding forto commence and complete the Predevelopment Work. Also, if we are able to complete the Predevelopment Work we will need additional substantial funding to purchase the Land and then we will need further substantial funding to construct the Stoughton Refinery and fully implement our business plan.

 

In the event we are not successful in selling all of the securities under the Primary Offering, we would utilize any available funds raised in the following order of priority:

19

 

·for general and administrative expenses, including legal and accounting fees and administrative support expenses incurred in connection with our reporting obligations with the SEC;
·for sales and marketing;
·office lease expenses and office equipment; and
·salariesto obtain environmental and engineering studies performed by independent experts to validate the viability and suitability of the land for our Chief Executive Officerthe development and President andoperation of the hiring of 1-2 additional full-time employees.Stoughton Refinery.

 

15

The Company leases office space at 60 East Rio Salado Parkway, Suite 900, Tempe, Arizona 85281 as itsOur corporate headquarters are currently located at a monthly rentthe offices of $230.our legal counsel, Jerold N. Siegan, at 218 N. Jefferson street, Suite 400, Chicago, Illinois 60661. Currently, there are not costs to the Company for using this location.

 

DETERMINATION OF OFFERING PRICE

 

Our management has determined the offering price for the common sharesCommon Stock being sold in the Primary Offering, which was arbitrarily determined and bears no relationship whatsoever to our assets, earnings, results of operations, book value or to any other generally accepted criteria of value. Notwithstanding this arbitrary price, we did consider certain factors in determining the offering price:

 

·our lack of significant revenues;
·our business model, and our lack of comparable publicly held companies with which to compare our model; and
·the price we believe a purchaser is willing to pay for our stock.Common Stock.

 

The offering price does not bear any relationship toCurrently, our assets, results of operations, or book value, or to any other generally accepted criteria of valuation. Prior to this offering, there has been no market for our securities.Common Stock trades on the OTC market.

 

DIVIDEND POLICY

 

We have never paid or declared any cash dividends on our common stock,Common Stock, and we do not anticipate paying any cash dividends on our common stockCommon Stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

 

DILUTION

DILUTION

 

If you purchase any of the shares offered by this prospectus, your ownership interest will be diluted to the extent ofDilution represents the difference between the initial public offeringOffering price per share and the pro forma as adjusted net tangible book value per share immediately after completion of this Offering. Net tangible book value is the amount that results from subtracting total liabilities and intangible assets from total assets. Dilution arises mainly as a result of our arbitrary determination of the Offering price of the shares being offered. Dilution of the value of the shares you purchase is also a result of the lower book value of the common stock immediately after this offering. Dilution results from the fact that the initial public offering price per share is substantially in excess of the book value per share attributable to theheld by existing stockholder for the presently outstanding stock. shareholders.

As of November 30, 2016, ourFebruary 28, 2018, the net tangible book value was $817,929 or $0.01 per share of common stock. Net tangible book value per share represents the amount of our total tangible assets (excluding deferred offering costs) less total liabilities, divided by 59,991,683, the number of shares of common stock outstanding at January 31, 2017.  was approximately ($87,012) or approximately ($0.002) per share based on 47,361,683 shares outstanding.

 

The following table sets forth as of February 23, 2017,June 6, 2018, the number of shares of common stockCommon Stock purchased from us and the total consideration paid by our existing stockholder and by new investors in this offering if new investors purchase 25%, 50%, 75% or 100% of the offering,Primary Offering, after deduction of offering expenses, assuming a purchase price in this offering of $0.20$0.__(USD) per share of common stock.Common Stock.

  100% of Offering Sold  75% of Offering Sold  50% of Offering Sold  

25% of

Offering Sold

Number of current shares held             48,491,485            48,491,485            48,491,485            48,491,485
Number of new shares issued             2,000,000              1,500,000              1,000,000              500,000
Total number of shares held             50,491,485            49,991,485            49,491,485            48,991,485
            
Net tangible book value before this offering $   $   $   $ 
Net proceeds to the company           
Net tangible book value after this offering $   $   $   $ 
            
Assumed public offering price per share $   $   $   $ 
Net tangible book value per share before this offering $   $   $   $ 
Increase attributable to new investors $   $   $   $ 
Net tangible book value per share after this offering $   $   $   $ 
Dilution per share to new stockholders $   $   $   $ 

 

 

16

20
 

 

100% of

Offering Sold

75% of

Offering Sold

50% of

Offering Sold

25% of

Offering Sold

Offering Price Per Share $0.20 $0.20 $0.20 $0.20
     
Gross Offering Proceeds $8,266,625 $6,199,969 $4,133,313 $2,066,656
Anticipated Net Offering Proceeds$8,215,188$6,148,532$4,081,876$2,015,219
     
Total Shares Issued and Outstanding Before Offering59,911,68359,911,68359,911,68359,911,683
Total Shares Issued via Offering41,333,12530,999,84420,666,56310,333,281
Total Shares Issued and Outstanding After Offering101,244,80890,911,52780,578,24670,244,964
# of Shares After Offering Held by Public Investors86,144,80875,811,52765,478,24655,141,683
     
% of Shares – Purchasers After Offering40.8%34.1%25.7%14.7%
% of Shares – Existing Shareholder After Offering59.2%65.9%74.3%85.3%
 100.0%100.0%100.0%100.0%
     
Pre-Offering Net Tangible Book Value   ** $817,929 $817,929 $817,929 $817,929
Post Offering Net Tangible Book Value 9,033,117 6,966,461 4,899,805 2,833,148
Increase (Decrease) Net Tangible Book Value After Offering for Original Shareholder $8,215,188 $6,148,532 $4,081,876 $2,015,219
     
     
Pre-Offering Net Tangible book Value Per Share $0.01 $0.01 $0.01 $0.01
Post Offering Net Tangible Book Value Per Share $0.09 $0.08 $0.06 $0.04
Increase (Decrease) Net Tangible Book Value Per Share After Offering for Original Shareholder $0.08 $0.07 $0.05 $0.03
     
     
Dilution Per Share for New Shareholders    
Percentage Dilution Per Share for New Shareholders40.8%34.1%25.7%14.7%
Capital Contribution by Purchasers of Shares $8,266,625 $6,199,969 $4,133,313 $2,066,656
Capital Contribution by Existing Shares $-    $-    $-    $-   
% Contribution by Purchasers of Shares100.0%100.0%100.0%100.0%
% Contribution by Existing Shareholder0.0%0.0%0.0%0.0%
     

 

Assuming we sell all 41,333,1252,000,000 shares for sale through the Primary Offering and after deducting estimated offering expenses payable by us, our as adjusted net tangible book value as of November 30, 2016February 28, 2018 would have been $9,033,117$________ (USD) or $0.09$____(USD) per share. This amount represents an immediate increase in the as adjusted net tangible book value of $0.08$____(USD) per share to our existing stockholders and an immediate dilution in the as adjusted net tangible book value of approximately $0.11$____(USD) per share to new investors purchasing common sharesCommon Stock in this offering.the Primary Offering. We determine dilution by subtracting the as adjusted net tangible book value per share after the offering from the amount of cash that a new investor paid for a share of common stock.Common Stock.

  

SELLING SECURITY HOLDERSSTOCKHOLDERS

 

The following table sets forth the shares beneficially owned, as of February 23, 2017,June __, 2018, by the Selling Security Holdersselling stockholders prior to the offering contemplated by this prospectus, the number of shares each Selling Security Holder is offering by this prospectus, and the number of shares which each would own beneficially if all such offered shares are sold.

 

17

Beneficial ownership is determined in accordance with Securities and Exchange Commission rules. Under these rules, a person is deemed to be a beneficial owner of a security if that person or his/her spouse has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.

 

None of the Selling Security Holderselling stockholders is a registered broker-dealer or an affiliate of a registered broker-dealer. Each of the Selling Security Holdersselling stockholders acquired his, her or its shares pursuant to an employment or consulting contract or pursuant to a private placement solely for investment and not with a view to or for resale or distribution of such securities.

 

The percentages below are calculated based on 59,911,68348,491,485 shares of our common stockCommon Stock issued and outstanding as of February 23, 2017.June __, 2018.

As of that date the total outstanding shares included 40,670,967 shares of restricted stock, and 7,820,518 shares of unrestricted.

 

Name of Selling Security HolderNumber of Shares Owned by the Selling Security HolderNumber of Shares Offered by the Selling Security HolderNumber of Shares Held After the OfferingPercentage of Total Issued and Outstanding After the Offering (1)
Stanley F. Wilson15,100,0001,500,00013,6000,00022.70%
Kandy LP14,500,0001,500,00013,000,00021.70%
Robert C. Henry3,000,0001,500,0001,500,0002.50%
The Big Barge Company Inc.2,000,0001,500,000500,0000.83%
Lorne K. Stemler2,000,0001,500,000500,0000.83%
Oopik Holdings LTD1,773,1251,500,000273,1250.46%
Raleigh C. Kone900,000900,00000%
Jeff Malmes825,840825,84000%
Robby J. Nichols & Jacalyn Nichols820,000820,00000%
Glenn Moradian & Merri Moradian750,000750,00000%
Landmark Oil & Gas LLC560,000560,00000%
Gravity Holdings Inc.500,000500,00000%
Kevin Holinaty500,000500,00000%
Janice Mallmes500,000500,00000%
Buddy Keith Green500,000500,00000%
Mainstar Trust FBO Chiles300,000300,00000%
Tiger-Hawk Oil300,000300,00000%
RKT LLC452,200452,20000%
Consortium LLC400,000400,00000%
Trevor Scott MacNeil200,000200,00000%
Brunson Chandler & Jones, PLLC150,000150,00000%
Renewable Energy Now LLC120,000120,00000%
KWCO PC115,000115,00000%
Mainstar Trust FBO Beck100,000100,00000%
Mainstar Trust Rafferty100,000100,00000%
Brandee Corwin Knox100,000100,00000%
William K Davis100,000100,00000%
Andrew G McGregor100,000100,00000%
Raymond Johnson50,00050,00000%
Donald A. MacNeil50,00050,00000%
Gordon Zelko50,00050,00000%
Debra Millet Gilmore20,00020,00000%
Marc Litle20,00020,00000%
Donald J. MacNeil10,00010,00000%
Laine A. MacNeil10,00010,00000%
JT Morgan10,00010,00000%
Total46,986,16520,653,04029,373,12549.03%
Name of Selling Security HolderNumber of Shares Owned by the Selling Security HolderNumber of Shares Offered by the Selling Security HolderNumber of Shares Held After the Offering (1)Percentage of Total Issued and Outstanding After the Offering (1)
Kandy LP (2)9,050,0002,000,0007,050,00014.54%
Jeffrey Mallmes (3)7,232,298(3)(4)2,000,0005,584,39511.52%
Stanley F. Wilson(5)3,000,0001,000,0002,000,0004.09%
Robert C. Henry3,000,0001,000,0002,000,0004.09%
Robert Udy2,000,0001,000,0001,000,0002.05%
John Suprock1,825,0001,000,000825,0001.69%
Mountain Top Properties Inc.1,700,0001,000,000700,0001.43%
Raleigh C. Kone1,300,0001,000,000300,0000.61%
Steven J. Hammer1,000,0001,000,00000.00%
John Suprock & Laurie Suprock JT Ten850,000850,00000.00%
Robby J. Nichols & Jacalyn Nichols820,000820,00000.00%
Glenn Moradian & Merri Moradian750,000750,00000.00%
Kevin Holinaty750,000750,00000.00%
Landmark Oil & Gas LLC560,000560,00000.00%
Gravity Holdings Inc.500,000500,00000.00%
Janice Mallmes (3)500,000500,00000.00%
Buddy Keith Green500,000500,00000.00%
Mainstar Trust FBO Chiles300,000300,00000.00%
Tiger-Hawk Oil300,000300,00000.00%
RKT LLC452,200452,00000.00%
Consortium LLC400,000400,00000.00%
Steve A Montgomery400,000400,00000.00%
Laurie Suprock325,000325,00000.00%
Mainstar Trust FBO Chiles300,000300,00000.00%

 

 

18

21
 

Tiger-Hawk Oil300,000300,00000.00%
Haaije De Jong250,000250,00000.00%
David Skilling250,000250,00000.00%
Caron Skilling250,000250,00000.00%
Aspir Corporation250,000250,00000.00%
Robert D Stubbins250,000250,00000.00%
Jerold N. Siegan233,333233,33300.00%
Koko Petroleum225,000225,00000.00%
Trevor Scott MacNeil200,000200,00000.00%
KWCO PC115,000115,00000.00%
Katherine Sturgeon100,000100,00000.00%
Mainstar Trust FBO Beck100,000100,00000.00%
Mainstar Trust Rafferty100,000100,00000.00%
Brandee Corwin Knox100,000100,00000.00%
William K Davis100,000100,00000.00%
Andrew G McGregor100,000100,00000.00%
Kevin Turko63,13663,13600.00%
Raymond Johnson50,00050,00000.00%
Donald A. MacNeil50,00050,00000.00%
Gordon Zelko50,00050,00000.00%
Debra Millet Gilmore20,00020,00000.00%
Marc Litle20,00020,00000.00%
Donald J. MacNeil10,00010,00000.00%
Laine A. MacNeil10,00010,00000.00%
JT Morgan10,00010,00000.00%
Total40,670,967(4)21,563,66919,107,29839.40%

(1)Assumes all of the Primary Offering and Secondary Offering shares of Common Stock offered in this prospectus are sold and no other shares of Common Stock are sold or issued during this offering period. Based on 48,491,485 shares of Common Stock issued and outstanding as of June __, 2018, and 50,491,485shares of Common Stock issued and outstanding assuming all shares in the Primary Offering are sold.

(1) Assumes all of the Primary Offering and Secondary Offering shares of common stock offered in this prospectus are sold and no other shares of common stock are sold or issued during this offering period. Based on 59,911,683 shares of common stock issued and outstanding as of February 23, 2017, and 59,911,683 shares of common stock issued and outstanding after completion of the offering.

(2)Kandy, L.P. is owned by Andrew J. Kacic our Secretary and director.
(3)Jeffrey Mallmes, our Chairman, President, Treasurer and director, beneficially owns directly and indirectly an aggregate of 7,584,395 shares of our Common Stock as follows: directly, 3,459,173 restricted shares and 352,097 unrestricted shares; indirectly 2,000,000 restricted shares in the name of The Big Barge Company Inc. (which is owned by Mr. Mallmes); and indirectly 1,773,125 restricted shares in the name of Oopik Holdings LTD ((which is owned by Mr. Mallmes). Mr. Mallmes also owns a stock purchase warrant to purchase 333,333 shares of our Common Stock at $1.00 per share which stock purchase warrant expires on February 28, 2020. Mr. Mallmes disclaims any beneficial ownership of shares owned by Janice Mallmes, his wife.
(4)Does not include 352,097 unrestricted shares owned by Mr. Mallmes.
(5)M. Wilson is our former chairman, president, secretary and director.
(6)Mountain Top Properties is - voting power, material relationship with QEGY over past 3 years
(7)Landmark Oil and Gas LLC
(8)Gravity Holdings Inc.
(9)The Company has only one class of stock outstanding, the common stock. Each share of Common Stock entitles the beneficial owner to cast one vote on all matters submitted to a vote of the Stockholders. Accordingly, the percentage of the total shares of common stock represents each beneficial owner’s voting power.

 

We may require the Selling Security Holdersselling stockholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus, or the related registration statement, untrue in any material respect, or that requires the changing of statements in these documents in order to make statements in those documents not misleading. We will file a post-effective amendment to this registration statement to reflect any material changes to this prospectus.

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PLAN OF DISTRIBUTION

 

This prospectus relates to the sale of 41,333,125 common shares2,000,000 Common Stock to be sold by the Company as part of the Primary Offering and 20,653,040 common shares21,563,669 Common Stock to be sold by Selling Security Holdersselling stockholders as part of the Secondary Offering.

 

We will sell the Primary Offering shares ourselves and do not plan to use underwriters or pay any commissions. We will be selling our common sharesCommon Stock using our best efforts and no one has agreed to buy any of our common shares.Common Stock. This prospectus permits our officers and directors to sell the common sharesCommon stock directly to the public, with no commission or other remuneration payable to them for any common sharesCommon Stock they may sell. There is no plan or arrangement to enter into any contracts or agreements to sell the common sharesCommon Stock with a broker or dealer. Our officers and directors will sell the common sharesCommon Stock and intend to offer them to friends, family members and business acquaintances. There is no minimum amount of common sharesCommon Stock we must sell, so no money raised from the sale of our common sharesCommon Stock will go into escrow, trust or another similar arrangement.

 

The Primary offering and the Secondary Offering will commence on the effective date of this prospectus and will terminate upon the earliest of (i) such time as all of the common stock hasCommon Stock have been sold pursuant to the registration statementthis prospectus or (ii) 365 days from the effective date of this prospectus.

 

There are no finders.

Under the rules of the Securities and Exchange Commission, our common stock will comeCommon Stock comes within the definition of a “penny stock” because the current price of our common stockCommon Stock is below $5.00$5.00(USD) per share. As a result,Although we intend to sell our common stockshares at $__00(USD) per share, no assurances can be given that we will be able to sell our Common Stock at such price. Accordingly, if we are not able to sell our Common Stock at the $__.00(USD) price, our Common Stock will remain subject to the "penny stock" rules and regulations. Broker-dealers who sell penny stocks“penny stocks” to certain types of investors are required to comply with the Commission’s regulations concerning the transfer of penny stock.“penny stock”. These regulations require broker-dealers to:

 

·make a suitability determination prior to selling penny stock“penny stock” to the purchaser;
·receive the purchaser’s written consent to the transaction; and
·provide certain written disclosures to the purchaser.

 

These “penny stock” requirements may restrict the ability of broker/dealers to sell our common stock,Common Stock and may affect the ability to resell our common stock.Common Stock and may result in be lower trading volume than for “non-penny stock”.

 

OTC Markets Considerations

 

The OTC Markets is separate and distinct from the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTC Markets. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Markets. Although the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not meeting those standards, the OTC Markets has no listing standards.

 

Our common stock isCommon Stock currently listed for tradingtrades on the OTC MarketsPINK Market under the trading symbol “QEGY.” Investors may have greater difficulty in getting orders to purchase or sell our common stockCommon Stock filled because it currently trades on the OTC MarketsPINK Market rather than on NASDAQ. Investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively as with NASDAQ-listed securities.securities and the frequency of trades may be sporadic.

 

Because analysts do usually not follow stocks traded on OTC Markets,PINK Market, there may be lower trading volume than for NASDAQ-listed securities.

 

Blue Sky Law Considerations

 

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TheOur Common Stock is currently traded on the OCT PINK Market. There is no guarantee that our Common Stock will continue to be traded on the OTC PINK Market. If our Common Stock ceases to be trade on the OTC PINK market, the holders of our shares of common stockCommon Stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the Shares available for trading on the OTC Markets, investors should considerbe aware that any secondary market for the Company's securities toCommon Stock will likely be a limited one. There is no guarantee that our stock will ever be quoted on the OTC Markets. We intend to seek coverage and publication of information regarding the companyCompany in an accepted publication which permits a "manual exemption”. This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a non issuernon-issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

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We currently do not intend to, and may not be able to, qualify securitiesour Common Stock for resale in other states which require shares to be qualified before they can be resold by our shareholders.stockholders.

 

DESCRIPTION OF SECURITIES TO BE REGISTERED

 

The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws.  The Articles of Incorporation and Bylaws have been filed as exhibits to the registration statement of which this prospectus is a part.


Common Stock


We are authorized to issue 295,000,000495,000,000 shares of common stockCommon Stock with $0.001 par value per share. As of February 23, 2017,June __, 2018, there were 59,911,68348,491,485 shares of common stockCommon Stock issued and outstanding.

 

Each share of common stockCommon Stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders.stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the shareholdersholders of our common stockCommon Stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stockCommon Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.

 

Holders of common stockCommon Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.

 

Holders of our common stockCommon Stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or windup, the holders of our common stockCommon Stock will be entitled to share ratably in the net assets legally available for distribution to shareholdersstockholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.

 

Our stock transfer agent is Pacific Stock Transfer, located at 4045 S. Spencer Street,6725 Via Austi Pkwy, Suite 403,300, Las Vegas, Nevada 89119.

 

Preferred Stock

 

We are authorized to issue 5,000,000 shares of preferred stock, par value $0.001. As of the date of this registration statement, there are 1,000,000no shares of our Series A Preferred Stockpreferred stock issued and zerooutstanding and no designations, rights or preferences for the preferred stock are adopted.

Stock Options

We have issued and outstanding stock options to purchase an aggregate of 988,888 shares of our Series B PreferredCommon Stock issued.at $1.00 per share, all of which options expire on December 31, 2018.

 

Each one (1)Stock Purchase Warrants

We have issued and outstanding stock purchase warrants to purchase an aggregate of 2,129,802 shares of our Common Stock at $1.00 per share, which expire as follows: a warrant to purchase 500,000 shares expires December 19, 2019; warrants to purchase an aggregate of Series A Preferred1,129,802 expire on February 28, 2020; and warrants to purchase an aggregate of 500,000 expire on June 9, 2020. The number of shares of Common Stock is convertible into common shares atregistered in the optionSecondary Offering include all of the holder at a 1:100 ratio and carries with itshares issuable upon the right to one vote for each shareexercise of commonsaid stock into which the shares of Series A Preferred could be converted. Each (1) share of Series B Preferred stock shall have no voting rights until such shares are converted into common stock. Each share of Series B Preferred Stock is convertible to common stock at a ratio of 1:1.25 if converted within the first twelve months of the purchase agreement; 1:1.15 if converted within the second twelve months from purchase agreement; and 1:1 if converted twenty-five months or more after the date of the purchase agreement. Holders of Series B Preferred shares are entitled to dividends before distribution to any other junior securities.warrants.

20

Emerging Growth Company

 

We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:

24

 

 

1.

Thethe last day or our first fiscal year following the fifth anniversary of this offering;
2.the last day of theour fiscal year of the issuer during which itwe had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000)are $1 billion or more;

 

 2.The last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement;

3.Thethe date on which such issuer has,we have, during the previous 3-year period, issued more than $1,000,000,000$1 billion in non-convertible debt;debt securities; or

 

 4.Thethe date on which such issuer iswe are deemed to be a ‘large“large accelerated filer’filer”, as defined in section 240.12b-2 of title 46, Code of Federal Regulations, or any successor thereto.

 

As an emerging growth company, we are exempt from Section 404(b)404(a) and (b) of Sarbanes Oxley. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting.

 

As an emerging growth company, we are also exempt from Section 14A(a) and (b) of the Securities Exchange Act, of 1934, which require the shareholderstockholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

LEGAL MATTERS

The validity of our common stock offered hereby will be passed upon for us by the law firm of Brunson Chandler & Jones, PLLC, of Salt Lake City, Utah.

INTEREST OF NAMED EXPERTS AND COUNSEL

The audited financial statements for the Company for the year ended February 29, 2016 included in this prospectus have been audited by AMC Auditing, an independent registered public accounting firm, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

The legality of the shares offered under this registration statement is being passed upon by the law firm of Brunson Chandler & Jones, PLLC. The law firm of Brunson Chandler & Jones, PLLC owns 150,000 restricted shares of common stock of the Company. These shares are being registered hereunder and will be available for sale through the Secondary Offering when this registration statement is deemed effective.

21

Where You Can Find MORE Information

For further information about us and the shares of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The registration statement and other information filed with the SEC are also available at the web site maintained by the SEC at www.sec.gov.

INFORMATION WITH RESPECT TO THE REGISTRANTCOMPANY

 

General

 

Quantum Energy Inc.Our business strategy is engagedto develop a “state-of-the art”, energy efficient, 40,000 BPD full slate refinery in Stoughton, Saskatchewan, Canada (the “Stoughton Refinery”) to refine the acquisition and explorationlight shale crude oil primarily from the Viewfield oil field of gas and oil properties. The Company was incorporated as “Boomers Cultural Development, Inc.” on February 5, 2004,the Bakken formation in the State of Nevada, and subsequently changed its name to “Quantum Energy, Inc.” on May 18, 2006. The Company’sSaskatchewan, Canada. Our principal executive offices now are located at 60 East Rio Salado Parkway218 N. Jefferson Street, Suite 900, Tempe, AZ 85281.400, Chicago, Illinois 60661. The Company’s telephone number is (480) 366-5884.(312) 560-7228.  Our website is www.quantum-e.com and is not part of this prospectus.

Historical Operations

 

In 2005,We were originally incorporated as Boomers Cultural Development, Inc. (“Boomers”) on February 5, 2004, in the Company was working towards becomingState of Nevada to be a service-oriented firm intending to profit from integratingthat 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.

In On May of18, 2006, our name was changed to Quantum Energy, Inc. and our business focus was changed to focus on the Company decided to embark on a new business pathenergy industry and in particular the oil and gas exploration and acquisitions. The Company acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas. After the initial successsegments of the Barnett Shale leases, the production program in the Barnett Shale area encountered substantial difficulties. Numerous wells throughout this extensive area experienced production difficulties. In addition to the production problems was the severe drop in natural gas prices. All of the wells in which the Company had interests were suspended and all marginal wells have been capped, resulting in the Company abandoning the Company's interest in the Barnett Shale area.

energy industry. From 2008 through 2010, the Companywe 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. Given that newHowever, the anticipated funding opportunities did not otherwise materialize, effective July 30, 2010, the Board of Directors authorized a 1,000-for-1 reverse stock split of the Company's issued common stock whereby each one thousand (1,000) common shares then-issued and outstanding were reverse split into one (1) new issued and outstanding common share.materialize.

 

On June 20,October 30, 2017, Mr. Wilson, our then sole director and principal shareholder, appointed Jeffrey J. Mallmes and Andrew J. Kacic as directors and on November 8, 2017, our directors appointed Jeffrey J. Mallmes as our chairman, president, treasurer and director, Andrew J. Kacic as our secretary and director and Lorne Keith Stemler as our vice-president and director. At or about this time, we focused our business strategy 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 from the Bakken formation of the Viewfield oil field area of Saskatchewan, Canada.

25

Also, at or about this time, Mr. Mallmes, our chairman and president, reviewed all of the outstanding agreements and transactions that we had entered into between August 2013 and November 2017. Mr. Mallmes began to renegotiate, rescind or settle all of those agreements that had proven not to be in our best interest or the Company’s majority shareholders appointedbest interest of our stockholders. As a result of Mr. Mallmes’ efforts (i) a total of 39,699,800 shares of our Common Stock were returned to us (consisting of (a) 14,699,800 shares of Common Stock that were returned to us pursuant to an October 26, 2017 cancellation and settlement of a July 21, 2015 agreement with Native Son Refining LLC, (b) 10,000,000 shares of Common Stock that were returned to us in connection with the January 24, 2017 mutual rescission and cancellation of the July 2016 agreement with Mountain Top Properties, Inc. relating to the acquisition of partnership interests in New Tex Petroleum IV, LP; (c) 5,000,000 shares of Common Stock that were returned to us in connection with the January 15, 2018 mutual rescission of a July 2016 agreement with Mountain top Properties, Inc. relating the acquisition of a working interest in a heavy oil project in Missouri; (d) 5,000,000 shares of Common Stock that were returned to us from Stanley F. Wilson at the request of Mr. Mallmes; and (e) 5,000,000 shares of Common Stock that were returned to fillus from Andrew J. Kacic at the request of Mr. Mallmes), (ii) at the request of Mr. Mallmes, Mr. Wilson and Mr. Kacic each returned to us 500,000 shares of Series A Preferred Stock (which were convertible into Common Stock at a vacancy on1 for 100 ratio) were cancelled and returned to our treasury and the board asdesignation of rights and preferences of the Series A Preferred Stock was rescinded, and in consideration we issued 500,000 shares of our Common stock to each of Mr. Wilson and Mr. Kacic, (iii) the certificate evidencing shares of our Series B Preferred Stock (which had previously been converted into Common Stock) was returned to us and the designation of rights and preferences of the Series B Preferred Stock was rescinded, (iv) the exercise prices for our outstanding unexpired warrants and stock options, which had exercise prices ranging from $0.13(USD) per share to $0.40(USD) per share, were all renegotiated and reset at $1.00(USD) per share, (v) several outstanding promissory notes evidencing loans to Sierra Global in 2016 in the aggregate amount of $67,500(USD) were determined by management to be not collectable and we recognized an expense of $67,500(USD) for the year ended February 28, 2018, (vi), various land purchase option agreements with various landowners in and around the States of Montana and North Dakota encompassing approximately 1,150 acres were cancelled or expired. The Land Contract for the purchase of the Land (480 acres) for the intended site of the Stoughton Refinery in the Province of Saskatchewan is discussed below.

Effective May 11, 2017, Mr. Wilson then our sole director and approvedofficer appointed Robert L. Monday (who at the board appointmenttime was the managing principal of Mr. WilsonNative Son Holdings LLC), as the president, secretary,our CEO and treasurer.director and as CEO of, and our subsidiary FTMP Resources, Inc. On June 25, 2013, the shareholders approved the board action for the acquisitionOctober 26, 2017, Robert L Monday resigned as our CEO and director and as CEO of 100%our subsidiary FTMP Resources, Inc.

On February 24, 2018, Lorne Keith Stemler, resigned as a director and officer of the common stockCompany and all subsidiaries.

On February 28, Stan Wilson, resigned as a director and officer of the Company.

On April 12, 2018, William J. Hinz was appointed as a director of the Company.

We currently have two subsidiaries:Dominion Energy Processing Group, Inc. (“DEPG”), a Canadian Federal business corporation, which isour 100% owned Canadian subsidiary through with we intend to develop, construct and operate the Stoughton Refinery; and FTPM Resources, Inc., a Texas corporation engaged in the fuel trading and petroleum marketing business since 2009. With the change in management and the acquisition of FTPM Resources, Inc., the Company redirected its oil and gas efforts to the Williston, North Dakota region and the Bakken formation through the consulting services of Advisory Services, Inc. under the direction of its President, Andrew J. Kacic,which is a seasoned oil and gas executive and investment banker with offices in Williston, North Dakota. In March 2014, Mr. Kacic became a board member and CEO of Quantum and has since assisted Quantum in its efforts to develop refinery and rail transload facilities in the region through existing relationships he has with various such projects in different stages of development. Mr. Kacic resigned from the board of directors and as an officer of the Company on July 1, 2016.dormant company.

22

Current & Planned Operations

The Company is currently engagedOur current and planned operations are to develop, construct and operate a “state-of-the-art”, energy efficient, full slate oil refinery includinga storage tank farm and associated facilities in identifying site locations for its planned refineries in or near Stoughton, Saskatchewan, Canada Berthold, North Dakota, Stanley, North Dakota, Baker, Montana, and Fairview, Montana, which includes, among other actions, obtaining the required zoning and other permits necessary for our planned refinery operations. To such end, the Company has entered into various agreements to purchase certain properties as described herein:

(the Stoughton Saskatchewan

·December 5, 2016 – 480 acres; contract for the purchase and sale of land

Berthold, North Dakota

·October 8, 2014 – 140 acres, option
·November 12, 2014 – 125 acres, option
·December 12, 2014 – 75 acres, option

Fairview, Montana

·August 26, 2014 – 80 acres, option
·August 26, 2014 – 74 acres, option

Stanley, North Dakota

·October 24, 2014 – 260 acres, option

Baker, Montana

·August 22, 2014 – 400 acres, option

On September 15, 2014, the Company announced a Joint Development Agreement with Bilfinger Westcon of Bismarck, ND forming a strategic alliance for the development of multiple energy centers throughout the Bakken. Bilfinger Westcon is the ECP Contractor and Project Manager of the diesel refinery constructed in Dickinson, ND.

On July 21, 2015, the Company entered into a 50/50 joint venture with Native Son Refinery, LLC with the formation of Quantum Native Processing Partners, LLC and the signing of an Operating Agreement which was later amended on August 3, 2015. On July 29, 2015, the parties submitted an application for a construction permit with the state of North Dakota to construct a complete refinery for 40,000 bpd to be constructed on land under option by Company in the Berthold, North Dakota area.

OnRefinery”). In this regard, on August 2, 2016, the Companywe formed a wholly ownedour Canadian subsidiary, corporation in Canada, Dominion Energy Processing Group, Inc.

Bakken Refineries (Stoughton Saskatchewan, Canada; Berthold, ND)

23

Stoughton, Saskatchewan, CA:

On August 2, 2016, Quantum formed Dominion Energy Processing Group, Inc. (DEPG), a Canadian Federal business corporation for purposes of the pre-development, construction and operation of a complete oil refinery inthe Stoughton SK, CA. AsRefinery. The Stoughton Refinery, when fully developed and operating, will be designed be a result of a feasibility study and further due diligence, DEPG is proposing a refinery facility sized at 40,000 barrel per day facility utilizing Bakken sweet crude produced from the Bakken and Three Forks’ formationsformation in the province of Saskatchewan province.

We haveidentified a 480-acre site in Stoughton Saskatchewan (the “Land”) on which we intend to construct the Stoughton Refinery. The Land is located in southeastern Saskatchewan in the regional municipality of Tecumseth in the heart of the Viewfield oil field area of the Bakken formation. The unconventional, marketable resources of the Bakken in the Viewfield oil field area are expected to be developed and constructed and anchored by the DEPG refinery, storage tank farm and associated facilities.

74 million m³ (464 million barrels) (see. The cost associated with the construction and initial operationLand is approximately 100 kilometers north of the refinery is approximately $575,000,000.

DEPG is in the process of submitting an application for a construction permit with the Saskatchewan governmental authorities on the land under purchase contract in Stoughton.Canadian USA border. The land consists of 480 acres thatLand has the land, rail, water, power, and the accesssufficient acreage to crude that are suitable for a refinery of this size. The location would also accommodate expansion of the refineryStoughton Refinery facilities to included future ethanol and rail car load and unload facilities.

 

Horizontal drillingOn December 5, 2016, we executed a Farm Contract of Purchase and new technologiesSale (the “Land Contract”) with the landowner. The purchase price of the Land under the Land Contract was $500,000(CAD). We paid $10,000(USD) ($7,822(USD)) as a deposit on the Land. Our obligation to purchase the Land under the Land Contract is subject to certain terms and conditions including the completion of the various tests to confirm the validity and suitability of the hydrology and the Land for “fracking” (fracturing the shale formationconstruction and operation of the Stoughton Refinery, the proposed Stoughton refinery meeting all requirements of various Saskatchewan government laws, and bylaws and being fully approved by all levels of the Saskatchewan government and agencies, and the Land purchase being approved the Saskatchewan Farm Land Review Board (collectively the “Predevelopment Work”). The Land Contract had an expiration date of December 15, 2017, however, we have negotiated an extension of the Land Contract until December 31, 2018 (unless further extended), for removal of all terms and conditions to the purchaseof the Land and the purchase price of the Land under the Land Contract was increased to $525,000(CAD).

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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.

We estimate that costs to complete the Predevelopment Work and the purchase of the Land will be approximately $7,500,000(CAD). We intend to use the proceeds from this Primary Offering to pay for a portion of the Predevelopment Work. If we raise less than $7,500,000(CAD) from this Primary Offering will need to obtain additional financing to cover the balance of the costs for the Predevelopment Work and the purchase of the Land. Also,we have entered into a conditional binding letter of intent which provides that if the stated conditions in the letter of intent are satisfied we will receive the necessary funds (estimated at $7,500,000 CAD) to complete the Predevelopment Work and the purchase of the Land. See, “Letter of Intent with high pressure injectionInductance Energy Corporation” and “Certain Relationships and Related Transactions.” However, no assurances can be given that the conditions of fluidsthe letter of intent will be satisfied or that we will obtain the financing needed to complete the Predevelopment Work and injecting sand (proppants) to hold the fractures open) has created tremendous reservespurchase of the Land.

The Stoughton Refinery

When completed, the Stoughton Refinery will be a smaller, “state-of-the-art”, energy efficient refinery 40,000 BPD refining facility locatedsoutheastern Saskatchewan in the regional municipality of Tecumseth in the heart of the Viewfield oil fromfield area of the Bakken and Three Forks formations. A study of shale formations in the Bakken estimates that the Bakken formation contains between 400formation. The Stoughton Refinery will bedesigned to 600 billion barrels of oil “in place”. Potential recoverable oiluse light sweet crude feedstock from the Bakken formation has been estimated at about 4.5in the Viewfield oil field area to 8 billion barrels. Someproduce a limited number of products for the producers have estimatedlocal market. We intend to utilize Bakken crude as our feed stock since it would be the most plentiful crude slate in the Viewfield oil field area where the Stoughton Refinery will be located. We intend to refine and sell a potentialvariety of uprefined products to 24 billion barrels of recoverableour customers, including natural gas liquids, gasoline, jet fuel, diesel, drilling mud oil, from the Bakken.ultra-low sulfur fuel oil, and sulfur and feedstocks.

 

The amount of oil being produced andWe intend to reduce emissions at the tremendous recent increase in production has created many opportunities for the refining business throughout the Bakken field. Most of the products from the proposed DEPG refinery can be sold in the Saskatchewan province. According to DEPG engineers, minor source emissions standard can be accomplishedStoughton Refinery by utilizing modern technologies:technologies as follows:

 

·Installing ultra-low NOx heating elements in burners & boilers.
·Utilizing new technologies that are on the market for sulfur removal systems.
·Procuring hydrogen from a separate source provider or onsite with state of the art technology limiting emissions.
·Utilizing the low sulfur “sweet” Bakken crude oil as a feed source.
·Installing vapor recovery systems on all tanks in the tank farm.
·Capturing the CO2 emissions.
·Installing quality air monitoring sensors and controls.
·Utilizing SCR and oxidizing catalysts to reduce NOx, CO and VOC emissions from selected process heaters.

 

Product Line QuantitiesWe believe the gasoline and diesel that we refine at the Stoughton Refinery will be less expensive because we will be able to reduce the transportation costs of shipping crude from outside this area and then having to pay for the “return” shipping of the refined products. However, no assurances can be given that we will be able to reduce the transportation costs so that our refined products will be less expensive than our competitors.

 

DEPG has preliminarily decidedCapital Costs and Startup

We estimate that the capital cost of developing and constructing the Stoughton Refinery will be approximately $525,000,000(CAD), which includes the Pre-development Work, Land acquisition, permitting, engineering, ISBL (inside battery limit) plant equipment and site work. We estimate that initial working capital and the cost of initial crude will add approximately $75,000,000(CAD), for a total of $600,000,000(CAD). It is our intent that this total amount will also include financing fees, reserves, taxes, wages, insurance, and other contingency expenses. No assurances can be given that the actual capital costs and startup capital will not exceed these estimates. No assurances can be given that such financing will be available at all or, if available, on terms that will be acceptable to utilize Bakken crude as its feed stock since it wouldus. We currently have no agreements or source or commitments for such financing.

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 the Primary Offering will be used to commence only the most plentiful crude slate. Based onvery early stages of this process. If we raise the assays available utilizingmaximum amount of funds from this crude slate,Primary Offering, we will be able to commence the estimateprocess of obtaining the studies to validate the viability and suitability of the output was based upon a 40,000 barrel per day refining process. The followingLand for the purpose of building the Stoughton Refinery and obtain the environmental permit and purchase the Land. If the Land is an estimatedetermined to be viable and suitable, we will need financing, in addition to the proceeds from this Primary Offering, to do the balance of the output based on a 360 day year:

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 Predevelopment Work.

 

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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.

Location of the Stoughton Refinery reducing Logistics Costs

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.

Use of Alternative Energy to Run the Stoughton Refinery. We believe that an important variable direct operating cost of operating the Stoughton Refinery will be energy, which will be comprised primarily of fuel and other utility services. The volatility in costs of fuel, principally natural gas, and other utility services, principally electricity, that will be used by the Stoughton Refinery and other operations will affect our operating costs. Fuel and utility prices have been, and we expect will continue to be, affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets. Natural gas prices have historically been volatile and, typically, electricity prices fluctuate with natural gas prices. Future increases in fuel and utility prices may have a negative effect on our revenues, profitability and cash flows. We intend to explore and, if feasible, use alternative sources of energy to operate the Stoughton Refinery to lower our operating costs. No assurances can be given that alternative sources of energy will be available or sufficient to operate all of any portion of the Stoughton Refinery or that the use of alternative sources of energy will lower our operating costs.

Product Line Quantities

We believe that the amount of crude oil being produced through new horizontal drilling and hydraulic fracking techniques and technologies and the recent increases in the price of refined oil has created many opportunities for the refining business throughout the Bakken area. We believe that most of the products from our proposed Stoughton Refinery can be sold in the Saskatchewan province.

Based on operating the Stoughton refinery on a 360-day year of operations and refining at a capacity of 40,000 BPD, with crude from the Viewfield oil field area, we estimate the Stoughton Refinery product output as follows:

Product Yield in barrels per day, gallons per day, and total gallons per year

 

·Barrels Per DayGallons Per DayTotal Gallons Per Year
Gasoline18,400 barrels; barrels772,800 gallons; gallons278,208,000 gallons
·#2 Diesel13,200 barrels; barrels554,400 gallons; gallons200,000,000 gallons
·#1 Diesel5,600 barrels; barrels235,200 gallons; gallons84,672,000 gallons
·AGO/bottoms2,800 barrels; barrels117,600 gallons; gallons42,336,000 gallons

 

These yields are estimates only and do not take into consideration that the yield per barrel increases about 2.6 gallons when refined. A 42 gallonrefined 42-gallon barrel can yield 44.6 gallons of product due to molecular expansion and light gas off-take. Products yield of the C1 to C4s are not considered, but can be produced for consumption. TheseOther products can include ethane, propane, isobutane, n-butane, isopentane, n-pentane, and hexanes, with the largest volumes of these products being butane and propane. There will also be elemental sulfur that is a sellable product. These projectionsestimates do not include the additional gasoline produced by refining an additional 10,000 barrels per day of raw naphtha into gasoline. No assurances can be given that we will be able to achieve such estimated product yields or to achieve a 360-day year of operations.

 

Although gasoline and diesel are expected to be the major products derived from the refining process there are at least, 6,000 or morethe Stoughton Refinery, we expect that additional products can be manufactured from refined byproducts. Such items as plastics, building materials, clothing, cosmeticsby-products including jet fuel, heavy fuel oil, asphalt, lubricants and numerous othermany more products that are produced every day from refined crude oil..

Marketing and Sales

 

The DEPG refineryStoughton Refinery will have an estimated life of 75 to 100 years. By placing a refinery in this area, gasoline and diesel will be less expensive due to the elimination of transportation costs of shipping crude from this area and then having to pay for the “return” shipping of the refined products. There is an estimated 200 to 500 years supply of crude that can be accessed in the Bakken field region.

Marketing and Sales

The DEPG refinery must have access to a rail spur and must haverequire truck loading and unloading facilities for the crude supply and the refined products. MostWe believe that most of the gasoline and diesel can be sold at the site or “rack” and be transported by truck. Some of the product willmay also be shipped by rail tanker car to other refineries or processing plants for the particular product.

 

Part ofWe expect that the AGO (atmospheric gas and oil) and bottoms will be sold locally to the drilling industry for their diesel based drilling fluids and the fluids that are utilized when they turn horizontal should equal the price of about $.05 per gallon lower than #2 diesel at a service station. The balance can be easily sold to Gulf Coast Refineries to utilize their heavy oil conversion units or for ultra-low sulfur ship fuel.

The price of the gasoline and the diesel per gallon will follow the “rack” prices in the nearby cities. These prices are posted on a daily basis at reporting groups such as OPIS.

OPIS (oil price information service).

 

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Capital Costs and Startup

 

The capital cost of the DEPG refinery and associated storage tank farm facilities is planned in two phases. The total cost of phases I and II is approximately $500,000,000. This includes pre-development costs, land acquisition, permitting, engineering, ISBL plant equipment, site work and storage tanks and building. Working capital and the cost of initial crude will add approximately $75,000,000, for a total of $575,000,000. This will include pre-development costs, financing fees, reserves, taxes, wages, insurance, and other contingency expenses.

Financial Projections

Projected income is based on operating 360 days per year although most refineries operate 365 days per year. The new DEPG refinery should not have a “turn around” or stoppage for repair and/or maintenance for the first 2We intend to 5 years. The total projected revenue per year will be approximately $796,994,402 with an EBIDTA in an amount of approximately $272,154,539. The capital commitment to build the facility is estimated at $575,000,000. The estimated output of the primary products from the crude processing facility in barrels per day based on a 360-day operating year include 18,400 bpd of gasoline; 13,200 bpd of diesel #2; 5,600 bpd of diesel #1 and 2,800 bpd of AGO/bottoms.

What is the DEPG Stoughton refinery?

A partial refinery to supply a local market
Limited products
Small quick-to-market refinery
Minimum Investment
Light Sweet Crude Feed
Smaller Land Area & Tank Farm

Technology – 40,000 BBLPD =

18,400 BBLPD retail gasoline
18,800 BBLPD Jet & Diesel
2,800 BBLPD

Oil-based drilling mud/ultra low sulfur fuel oil. Does not include the additional gasoline from refining raw Naphtha.

Primary Products

NGL’s
Gasoline
Jet Fuel
Diesel
Drilling mud oil
Ultra low sulfur fuel oil
Sulfur
Carbon Dioxide

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Berthold, North Dakota

Through a 50/50 joint venture with Native Son Refining, LLC, Quantum has formed Quantum Native Processing Partners, LLC (QNPP), a Texas domiciled limited liability company, for purposes of the pre-development, construction and operation of a complete oil refinery in Berthold, North Dakota. As a result of a feasibility study and further due diligence, QNPP is proposing a refinery facility sized at 40,000 barrel per day utilizing Bakken sweet crude produced from the Bakken and Three Forks’ formations to be developed and constructed within a master planned “Industrial Complex” anchored by the QNPP refinery, storage tank farm and associated facilities.

The cost associated with the construction and initial operation of the refinery is approximately $674,000,000.

QNPP has submitted an application for a construction permit with the state of North Dakota on the land under Option in the Berthold area. There have been several locations identified that have the land, rail, water, power, and the access to crude that are suitable for a refinery of this size. Each of the locations would also accommodate expansion of the refinery facilities.

Horizontal drilling and new technologies for “fracking” (fracturing the shale formation with high pressure injection of fluids and injecting sand (proppants) to hold the fractures open) has created tremendous reserves of oil from the Bakken and Three Forks formations. A study of shale formations in the Bakken estimates that the Bakken formation contains between 400 to 600 billion barrels of oil “in place”. Potential recoverable oil from the Bakken formation has been estimated at about 4.5 to 8 billion barrels. Some of the producers have estimated a potential of up to 24 billion barrels of recoverable oil from the Bakken.

The amount of oil being produced and the tremendous recent increase in production has created many opportunities for the refining business throughout the Bakken field. Most of the products from the proposed QNPP refinery can be sold in western North Dakota or eastern Montana. According to QNPP engineers, minor source emissions standard can be accomplished by utilizing modern technologies:

·Installing ultra-low NOx heating elements in burners & boilers.
·Utilizing new technologies that are on the market for sulfur removal systems.
·Procuring hydrogen from a separate source provider or onsite with state of the art technology limiting emissions.
·Utilizing the low sulfur “sweet” Bakken crude oil as a feed source. Installing vapor recovery systems on all tanks in the tank farm.
·Capturing the CO2 emissions.
·Installing quality air monitoring sensors and controls.
·Utilizing SCR and oxidizing catalysts to reduce NOx, CO and VOC emissions from selected process heaters.

Adopting these control standards will allow the QNPP refinery to meet or exceed the minor source emission requirements and QNPP to expand to a larger system (enhanced “throughput”/capacity) in the future.

Product Line Quantities

QNPP has preliminarily decided to utilize Bakken crude as its feed stock since it would be the most plentiful crude slate. Based on the assays available utilizing this crude slate, the estimate of the output was based upon a 40,000 barrel per day refining process. The following is an estimate of the output based on a 360-day year:

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Product Yield in barrels per day, gallons per day, and total gallons per year

Gasoline - 18,400 barrels; 772,800 gallons; 278,208,000 gallons

#2 Diesel 13,200 barrels; 554,400 gallons; 200,000,000 gallons

#1 Diesel 5,600 barrels; 235,200 gallons; 84,672,000 gallons

AGO/bottoms 2,800 barrels; 117,600 gallons; 42,336,000 gallons

These yields are estimates only and do not take into consideration that the yield per barrel increases about 2.6 gals when refined. A 42-gallon barrel can yield 44.6 gallons of product due to molecular expansion and light gas off-take. Products yield of the C1 to C4s are not considered, but can be produced for consumption. These products can include ethane, propane, iso-butane, n-butane, iso-pentane, n-pentane, hexanes with the largest volumes of these products being Butane and Propane. There will also be elemental sulfur that is a saleable product. These projections do not include the additional gasoline produced by refining an additional 10,000 barrels per day of raw naphtha into gasoline.

Although gasoline and diesel are the major products derived from the refining process, there are at least, 6,000 or more products manufactured from refined byproducts. Such items as plastics, building materials, clothing, cosmetics and numerous other products that are produced every day from refined crude oil.

The QNPP refinery will have an estimated life of 75 to 100 years. By placing a refinery in this area, gasoline and diesel will be less expensive due to the elimination of transportation costs of shipping crude from this area and then having to pay for the “return” shipping of the refined products. There is an estimated 200 to 500 years supply of crude that can be accessed in the Bakken field region.

Marketing and Sales

The site to be chosen for the QNPP refinery must have access to a rail spur and must have truck loading and unloading facilities for the crude supply and the refined products. Most of the gasoline and diesel can be sold at the site or “rack” and be transported by truck. Some of the product will be shipped by rail tanker car to other refineries or processing plants for the particular product.

Partsell part of the AGO (atmospheric gas and oil) and bottoms will be sold locally to the drilling industry for their diesel baseddiesel-based drilling fluids and the fluids that are utilized when they turn horizontal should equalhorizontal. We also intend to sell the price of about $.05 per gallon lower than #2 diesel at a service station. The balance can be easily sold to Gulf Coast Refineriesother refineries to utilize their heavy oil conversion units or for ultra-low sulfur ship fuel.

 

The priceIEC Letter of Intent

On April 15, 2018, we entered into a conditional binding letter of intent with Inductance Energy Corporation a Wyoming corporation (“IEC”), pursuant to which if all of the gasoline and diesel per gallon will follow the “rack” pricesconditions contained in the nearby cities. These pricesletter of intent are posted onsatisfied, (a) we will be merged with a daily basisnewly formed subsidiary of IEC with us being the surviving company, (b) we will issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) IEC will provide to us as the surviving company up to $50,000,000(USD), a portion of which (estimated at reporting groups such as OPIS.

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Capital Costs$7,500,000 CAD) we intend to use to (i) validate the viability and Startup

The capital costsuitability of the QNPP refinery and associated storage tank farm facilities is planneddevelopment of the Stoughton Refinery on the intended sight in two phases. The total cost of phases I and II is approximately $599,000,000. This includes the per-development costs, land acquisition, permitting, engineering, ISBL plant equipment, site work and storage tanks and building. Working capital, cost of initial crude will add approximately $75,000,000, for a total of: $674,000,000. ThisStoughton Saskatchewan Canada, which will include pre-development costs, financing fees, reserves, taxes, wages, insurance,obtaining environmental and other contingency expenses.

Financial Projections

Projected income is based on operating 360 days per year although most refineries operate 365 days per year. The new QNPP refinery should not have a “turn around” or stoppage for repair and/or maintenanceengineering studies to validate the viability and suitability of the intended site for the first 2Stoughton Refinery, and (ii) if the site is determined to 5 years. The total projected revenue per yearbe viable and suitable, we will be approximately $1,123,000,000 with an EBIDTA in an amountcommence the process of approximately $345,000,000. The capital commitmentobtaining the required permits to build the facility isStoughton Refinery and (iii) we will acquire the Land, and (iv) we will pay other related costs. No assurances can be given that the conditions to the letter of intent with IEC will be satisfied or that the transactions or the financing, including the estimated at $645,000,000. The estimated output$7,500,000(CAD), contemplated in the letter of intent will be consummated.

Long Range - Additional Operations

If we are able to obtain sufficient financing to complete the Predevelopment Work and complete the development and construction of the primary productsStoughton Refinery and commence the operation of the Stoughton Refinery, and if we can obtain additional substantial financing, our long range plan is to expand the Stoughton facility on the Land to include (i) a bio-ethanol plant with an initial capacity of approximately 65,000 tons per year that will provide ethanol for blending the product gasoline from the crude processing facility in barrels per day based on a 360-day operating year includes 18,400 bpd of gasoline, 13,200 bpd of diesel #2, 5,600 bpd of diesel #1, and 2,800 bpd of AGO/bottoms.

What is a QNPP Topping Plant?

A partial refinery to supply a local market
Limited products
Small quick-to-market refinery
Minimum Investment
Light Sweet Crude Feed
Smaller Land Area & Tank Farm

Technology – 40,000 BBLPD =

18,400 BBLPD retail gasoline
18,800 BBLPD Jet & Diesel
2,800 BBLPD

Oil based Drilling mud/ultra low sulfur fuel oil. Does not include the additional gasoline from refining raw naphtha.

Primary Products

NGL’s
Gasoline
Jet Fuel
Diesel
Drilling mud oil
Ultra low sulfur fuel oil
Sulfur
Carbon Dioxide

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Growth Strategy

We have implemented several initiatives that we believe will further our business, the objective being to build our firstStoughton refinery. Our goal is to increase stockholder value by executing our strategic plan. The principal elements of this plan are:

Identify and Execute Selected Site Acquisitions. Our management team has demonstrated its ability to identify strong potential locations for our refinery, consummate acquisitions on favorable terms, obtain acquisition financing and integrate acquired assets. We believe that this offering will enhance our ability to execute this strategy.

Identify and Attract Growth Capital.We are dependent in large part upon the success of this offering for executing our growth strategy. We estimate that our Stoughton refinery will cost approximately $575,000,000 to build. Should we complete this offering and raise sufficient funds, we will commence with building operations immediately.

Increase Refinery Throughput. As we commence building operations for our Stoughton refinery and the refinery comes online, we will seek to increase crude oil throughput. We expect that the Stoughton refinerymain feedstock for this plant will be wheat/barley/flax straw sourced from the local market and (ii) a rail line extension project that will allow us and local grain producers to transport products to the boarder by using only one carrier. No assurances can be given that we will be able to process upobtain such additional substantial financing to approximately 40,000 barrels per day.expand our Stoughton facility to include a bio-ethanol plant or to develop a rail line extension. We currently have no agreements or source or commitments for such financing and no assurances can be given that such financing will be available at all or if available on terms that will be acceptable to us.

Competition

Products

 

We intend to sell a variety of refined products to our customers, including gasoline, diesel fuel, jet fueldevelop, construct and feedstocks.

Competition

We operate the Stoughton refinery in the Bakken region of North Dakota andStoughton, Saskatchewan Canada. RefinedCurrently, refined products are supplied from the region’s existing refineries as well as from refineries located in other regions, including the Midwest via interstate pipelines. TheWe believe that the principal competitive factors affectingthat will affect us are costs of crude oil and other feedstocks, refinery efficiency, refinery product mix and costs of product distribution and transportation. As a new entrant to the refining industry, we will face significant competition and barriers to entry from larger companies such as Valero Energy Corp and BP PLC.and others. Because of their geographic diversity, larger and more complex refineries, integrated operations and greater resources, some of our competitors may be better able to withstand volatile market conditions, to compete on the basis of price, to obtain crude oil in times of shortage, and to bear the economic risk inherent in all phases of the refining industry.

 

Intellectual Property

 

At present, we do not have any patents, trademarks, licenses, franchises, concessions, and royalty agreements, labor contracts or other proprietary interests.

 

Research and Development

 

We are not currently conducting any research and development activities.

 

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Governmental RegulatioRegulationn

 

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; the emission and discharge of materials into the environment; waste management; and characteristics and composition of gasoline and diesel fuels. 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-sulfurultra-low-sulfur diesel regulations.

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The EPACanada has adopted the Canadian Environmental Protection Act 1999 (“CEPA”) and the U.S. Environmental Protection Agency has adopted regulations under the Clean Air Act 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 to 30 ppm in January 1, 2004, with full compliance by January 1, 2006, and require reductions in sulfur content in diesel to 15 ppm beginning in June 1, 2006, with full compliance by January 1, 2010.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 EPA low-sulfur gasolineStoughton Refinery designed and ultra low-sulfur diesel programs.

As a small refiner underengineered to adhere to all required regulations of CEPA. No assurances can be given that the EPA rules,Stoughton Refinery we qualify for designation as a small refiner under tax legislation. This legislation allows uswill adhere to immediately deduct up to 75%all required regulations of the ultra low-sulfur diesel compliance costs when incurred for tax purposes. Furthermore, the law allows the remaining 25% of ultra low-sulfur diesel compliance costs to be recovered as tax credits with the commencement of ultra low-sulfur diesel manufacturing.      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.

 

There have recently been various discussions of legislation, which, if passed, could affect our financial condition and operations. Following the recent Gulf Coast hurricanes, there have been increasing legislative discussions about the need to increase U.S. refining capacity and ease the regulatory restrictions that have limited the construction of new refineries and expansion of existing refineries in the U.S. If such legislation is adopted, our costs of regulatory compliance could decrease and, as a result of new refinery construction and existing refinery expansion, competition in our industry may increase. There has also been discussion about legislation to increase taxes or impose price controls on refined products, which, if adopted, could have an adverse effect on our financial condition

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Employees

With the exception of Stanley Wilson we have no employees. We have no employment agreements with any of our management. Mr. Wilson will devote their full efforts and as much time as needed when operations and funding are available. We anticipate hiring additional employees in the next twelve months on as business activity warrants.

Waste Handling

 

The Resource ConservationCanadian federal government and Recovery Act, as amended, ("RCRA") and comparable stateprovincial statutes and regulations promulgated thereunder, affect oil and natural gas exploration, development and production activities by imposing requirements regarding the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. With federalapplicable approval, the individual statesprovinces administer some or all of the provisions of RCRA,such laws, sometimes in conjunction with their own, more stringent requirements. Although most wastes associated withNo assurances can be given the exploration, development and production of crude oil and natural gas are exempt from regulation as hazardous wastes under RCRA, such wastes may constitute "solid wastes" that are subject to the less stringent requirements of non-hazardous waste provisions. However, we cannot assure you that the EPACEPA or stateapplicable provincial or local governments will not adopt more stringent requirements for the handling of non-hazardous wastes or categorize some non-hazardous wastes as hazardous for future regulation. Indeed, legislationLegislation has been proposed from time to time in Congressthe Canadian Parliament to re-categorize certain oil and natural gas exploration, development and production wastes as "hazardous wastes." Any such changes in the laws and regulations could have a material adverse effect on our capital expenditures and operating expenses.

 

Other RegulationRegulations 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 increaseswill increase our cost of doing business and, consequently, affectswill affect our profitability, we believe that these burdens generally dowill 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 interstateinter-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 FederalCanadian National Energy Regulatory Commission ("FERC"). Federal and stateBoard. Canadian regulations govern the price and terms for access to oil and natural gas pipeline transportation. FERC's regulations for interstateRegulations covering inter-provincial oil and natural gas transmission in some circumstances may also affect the intrastateintra-provincial transportation of oil and natural gas.

 

Although oil and natural gas prices are currently unregulated, Congressthe 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 Congressthe 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 NGLsnatural gas liquids (“NGLs”) are not currently regulated and are made at market prices.

Employees

With the exception of Jeffrey Mallmes, our Chairman, President, and Treasurer and Andrew J. Kacic, our Secretary, we currently have no other employees. We have no employment agreements with any of our management. Mr. Mallmes, Mr. Kacic and Mr. Hinz are devoting their full efforts and as much time as needed to move the Company forward. We anticipate hiring additional employees as business activity warrants. We intend to use independent consultants to assist in the development, construction and initial operations of the Stoughton Refinery.

 

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Drilling and Production

Our operations may be subject to various types of regulation at the federal, state and local level. These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations. State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of oil and natural gas properties. Some states allow forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of oil and natural gas we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within its jurisdiction. States do not regulate wellhead prices or engage in other similar direct regulation, but we cannot assure you that they will not do so in the future. The effect of such future regulations may be to limit the amounts of oil and natural gas that may be produced from our wells, negatively affect the economics of production from these wells or to limit the number of locations we can drill.

Legal Proceedings

 

In the ordinary conduct of our business, we may be subject to periodic lawsuits, investigations and claims, including environmental claims and employee-related matters. There are no material current legal proceedings pending against us.

Properties

 

Our current corporate offices are located 60 East Rio Salado Parkwayat our attorney’s office at 218 N. Jefferson street Suite 900, Tempe, Arizona 85281, and are leased from Regus PLC400, Chicago, Illinois, 60661 at a rate of $230 per month.no cost to the Company.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form S-1.Prospectus.

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking.  Forward-looking statements are, by their very nature, uncertain and risky.  These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filingfilings with the Securities and Exchange Commission.

 

33

Although the forward-looking statements in this Registration StatementProspectus reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them.  Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.  You are urged to carefully review and consider the various disclosures made by us in this reportProspectus and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Overview

 

We are engaged in the development, construction and operation of energy processing facilities that will include crude oil refinery facilities. We were incorporated in the State of Nevada on February 5, 2004 as “Boomers Cultural Development”. On May 18, 2006, the companyCompany’s name was changed its name to Quantum Energy, Inc. We acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas which ceased operations in 2008. In 2013 we shifted our focus to the Bakken field area of North Dakota and Canada and began to pursue the development, construction and operation of crude oil refineries. From 2014 through 2016 the Company explored various opportunities and entered into various agreements and relationships with third-party firms regarding the development and/or acquisition of refineries in North Dakota and Saskatchewan Canada. Those agreements and relationships have been abandoned and/or rescinded by the parties, except for the land Contract for the purchase of the Land for the intended site of the Stoughton Refinery. In November 2017, we changed the focused of our business strategy 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 from the Bakken formation of the Viewfield oil field area of Saskatchewan, Canada.

 

Plan of Operation

 

The Company is currently engaged in identifyingWe have identified a 480-acre site locations for its planned refineries in or around Stoughton, Saskatchewan, Canada, Berthold, North Dakota, Stanley, North Dakota, Baker, Montana, and Fairview, Montana, which includes, among other actions, obtaining required zoning and other permits necessary for our planned refinery operations. To such end, the Company has entered into various agreements to purchase certain properties as described herein:

Stoughton, Saskatchewan

·December 5, 2016 – 480 acres; contract for the purchase and sale of land

Berthold, North Dakota

·October 8, 2014 – 140 acres, option
·November 12, 2014 – 125 acres, option
·December 12, 2014 – 75 acres, option

Fairview, Montana

·August 26, 2014 – 80 acres, option
·August 26, 2014 – 74 acres, option

Stanley, North Dakota

·October 24, 2014 – 260 acres, option

Baker, Montana

·August 22, 2014 – 400 acres, option

On September 15, 2014, the Company announced a Joint Development Agreement with Bilfinger Westcon of Bismarck, ND forming a strategic alliance with Bilfinger Westcon for the development of multiple energy centers throughout the Bakken. Bilfinger Westcon isStoughton Refinery. On December 5, 2016, we executed a Farm Contract of Purchase and Sale (the “Land Contract”) with the ECP Contractor and Project Managerlandowner. The purchase price of the dieselLand under the Land Contract was $500,000 (CAD) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farm Land Review Board, our completion of various test for hydrology and land suitability, the proposed refinery constructedproject meeting all requirements of various Saskatchewan government laws and bylaws, and full approval by all levels of provincial government and agencies. We paid $10,000(CAD) ($7,822(USD)) as a deposit on the Land. The Land Contract had an expiration date of December 15, 2017, however, we have negotiated an extension of the Land Contract until December 31, 2018 (unless further extended), for removal of all terms and conditions to the purchaseof the Land and the purchase price of the Land under the Land Contract was increased to $525,000 (CAD). Our obligation to purchase this property is subject to our obtaining environmental and engineering reports to confirm that the Land is viable and suitable for the construction and operation of the Stoughton Refinery. If the viability and suitability of the Land is validated, we will commence the process of obtaining permitting and governmental approval for the develop of the refinery on this location. We have participated in Dickinson, ND.

discussions with the provincial government in Saskatchewan regarding the development, construction and operation of the Stoughton Refinery.

 

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31
 

On July 21, 2015, the Company entered into a 50/50 joint venture with Native Son Refinery, LLC with the formation of Quantum Native Processing Partners, LLC and the signing of an Operating Agreement which was later amended on August 3, 2015. On July 29, 2015, the parties submitted an application for a construction permit with the state of North Dakota to construct a complete refinery for 40,000 bpd to be constructed on land under option by Company in the Berthold, North Dakota area.

 

On August 2, 2016, the Companywe formed a wholly owned subsidiary corporation in Canada, Dominion Energy Processing Group, Inc. through with we intend to develop, construct and operate the Stoughton Refinery.

 

Our plan with respect to identifyingThe following tables set forth the siteactivities and deliverables, the estimated time duration (weeks) and cost estimates we anticipate will be required for our refinery, securing controlphase 1 and phase 2 of such site and building the refinery is as follows:initial development of the Stoughton Refinery.

 

Phase I: Obtain Necessary Zoning approval, Permits and Government Approvals Mos. 1-3

and Engage an Engineer of Record Hatch Engineering;to conduct permitting process.process Mos. 1-3

 

Table 1-1; Phase 1 Deliverables and Duration

 

PhaseActivities/DeliverablesDuration (weeks)
Phase 1a

Kickoff

35Crude oil sample collection and assay report

4
Business report4
Phase 1b

Flowsheet report

Site selection and regulatory roadmap report

Preliminary project design basis

Financial analysis report

6
Phase 1c

Project design basis

Detailed financial analysis report

8

Table 1-3: Phase 1 Cost Estimate Summary

Cost BasisPhase 1a (CAD)Phase 1b (CAD)Phase 1c (CAD)Phase 1 Total (CAD)
Estimated price$140,946$211,419550,000$902,365

 Phase I Estimated cost: $902,365(CAD) = $684,804(USD)

 

Phase II:

Table 1-2: Phase 2 Deliverables and Duration

PhaseActivities/DeliverablesDuration (weeks)
Phase 2Design basis memorandum20

Cost BasisPhase 2 (CAD)
Reimbursable (Budgetary range)$2,100,000 to $2,450,000

Estimated Cost: ($2,450,000(CAD) = $1,880,781(USD)

 

Estimated G&A: $1,100,000USD

Phase 2 estimate activities are also expected to include licensor fees in the range $5,000,000(CAD) = $3,850,000(USD).

Total Phase II: $6,830,781(USD)

Total Phase I & II: $7,515,585 (USD)

We are highly dependent on the success of this offering to fund the commencement of the initial stages of the development of the Stoughton Refinery and upon our ability to obtain the substantial additional financing that will be needed to execute upon thisour proposed plan of operations. If we are unable to raise sufficient funds through this offering or obtain alternate financing in lieu of funds raised through this offering, we may never complete the acquisition of the land, the development andthe refinery or become profitable.operational. In order to become profitableoperational, we maywill still need to secure substantial additional debt or equity funding above and beyondfinancing to what we are seeking to raise through this offering. To such end, we hope to be able to raise additional funds from an offering of our stock in the future. However, this offering may not occur, or if it occurs, it may not raise the required funding. We do not have any plans or specific agreements for new sources of fundingsuch required financing at present.

 

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Results of Operations

 

For the year ended February 29, 201628, 2018 February 28, 2015,2017, respectively

 

For the year ended February 29 and 28,  For the year ended February 28 and 28,    
2016 2015 $ Change % Change 2018 2017 $ Change % Change
Advertising and marketing$8,128 $                73,844 $ (65,716) (89.0%) $9,551  $7,846  $1,705   21.7 
Management fees 54,200            83,300  (29,100) (34.9%)  —     728,470   (728,470)  (100.0)
Office and administration 69,375 ��           202,552  (133,177) (65.7%)
General and administrative  123,590   43,551   80,039   183.8 
Bad debt expense  —     67,500   (67,500)  (100.0)
Stock option expense 83,461            933,368  (849,907) (91.1%)  83,461   —     83,461   —   
Land option expense 946,075            521,040  425,035 81.6%  120,033   370,488   (250,455)  (67.6)
Impairment of land option agreements 206,573 -  206,573 N/A
Professional fees 78,250  182,522   (104,272) (57.1%)  112,978   89,850   23,128   25.7 
OPERATING EXPENSES 1,446,062 1,996,626  (550,564) (27.6%)  449,613   1,307,705   (858,092)  (65.6)
Loss on conversion of debt - 11,875  (11,875) N/A
Other expense (income) 1,510  156,564   (155,054) (99.0%)
OPERATING LOSS  (449,613)  (1,307,705)  858,092   (65.6)
Other income (expense)  —     (1,240)  1,240   (100.0)
NET LOSS$1,447,572 $2,165,065 $ (717,493) (33.1%) $(449,613) $(1,308,945) $859,332   (65.7)
        

 

For the year ended February 29, 2016,28, 2018, operating expenses decreased $550,564$858,092 to $1,446,062$449,613---- from $1,996,626$1,308,705 for the year ended February 28, 2015.2017.

 

Our cash balance was $81$19,864 as of February 28, 2016,2018, with $18,953 in 207,261 liabilities. Our cash balance is not sufficient to fund our limited levels of operations for any period of time without further revenue or proceeds from this offering.

 

We incurred expenses of $1,446,062$449,613 for the year ended February 29, 2016, which is comprised of advertising and marketing ($8,123), management fees ($54,200), office and administrative ($69,375), land option expense ($946,075) and professional fees including: legal and accounting fees ($78,250). This constitutes an aggregate loss of $1,446,062.28, 2018, as detailed in the table above.

 

The maximum aggregate amount of this offering will be required to fully implement our business plan. If we do not receive any proceeds from the offering, we may be compelled to seek a loan from our Chief Executive Officer, who has informally agreed to advance us funds, however, he has no formal commitment, arrangement or legal obligation to advance or loan funds to the Company.

 

To meet our need for cash we are attempting to raise money from this offering. If we are unable to successfully find customers, we may quickly use up the proceeds from this offering and will need to find alternative sources. At the present time, we have not made any arrangements to raise additional cash, other than through this offering. If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash or cease operations entirely.

 

Income & Operation Taxes

 

We areintend to operate the Stoughton Refinery through our subsidiary Dominion Energy Group Inc. We will be subject to incomeapplicable taxes in the United States of America.and Canada.

 

Disclosure Controls and Procedures

 

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33
 

Net Loss

 

We incurred net losses of ($1,447,572) for the year ended February 28, 2016.

For the three and nine months ended November 30, 2016 and 2015, respectively

 For the three months ended November 30,     
 2016 2015 $ Change % Change
Advertising and marketing$ - $955 $ (955) (100.0%)
Management fees  15,000  7,200   7,800 108.3%
Office and administration  4,093  12,750   (8,657) (67.9%)
Land option expense  60,016  -   60,016 N/A
Professional fees 7,565  800   6,765 845.6%
Other expense (income) 374  -   374 N/A
  NET LOSS$(87,048) $(21,525) $ 65,343 301.1%

Total expenses for the three months ended November 30, 2016 of $87,048 increased $65,353 from total expenses of $21,525 for the comparable period ended January 31, 2016. The increase in expenses was primarily related to non-cash land option expense of $60,016 incurred during the three months ended November 30, 2016.

 For the nine months ended November 30,     
 2016 2015 $ Change % Change
Advertising and marketing$5,736 $ 8,128 $ (2,392) (29.4%)
Management fees 73,200   53,200   20,000 37.6%
Office and administration 17,491   71,684   (54,193) (75.6%)
Land option expense 310,472   164,527   145,945 88.7%
Professional fees 21,465   30,200   (8,735) (28.9%)
Other expense (income) 1,134   -      1,134 N/A
  NET LOSS$429,498 $ 327,739 $ 101,759 31.0%
           

Total expenses for the nine months ended November 30, 2016 of $429,498 increased $101,749 from total expenses of $327,739 for the comparable period ended November 30, 2015. Non-cash land option expense increased $145,945 for the nine months ended November 30, 2016 compared to the nine months ended November 30, 2015.

For the periods ending February 28, 2016 and 2015, respectively

Our cash balance was $81 asAs of February 28, 2016, with $18,953 in liabilities. Our cash balance is2018, we had not sufficientadopted disclosure controls and procedures as specified by Exchange Act Rules. We intend to fund our limited levels of operations for any period ofadopt such controls and procedures that are applicable to “emerging growth companies” at such time without further revenue or proceeds from this offering.as we are required to do so.

 

We incurred expenses of $1,446,062 for the year ended February 29, 2016, which is comprised of advertising and marketing ($8,123), management fees ($54,200), office and administrative ($69,375), land option expense ($946,075) and professional fees including: legal and accounting fees ($78,250). This constitutes an aggregate loss of $1,446,062. The maximum aggregate amount of this offering will be required to fully implement our business plan. If we do not receive any proceeds from the offering, we may be compelled to seek a loan from our Chief Executive Officer, who has informally agreed to advance us funds, however, he has no formal commitment, arrangement or legal obligation to advance or loan funds to the Company.

To meet our need for cash we are attempting to raise money from this offering. If we are unable to successfully find customers we may quickly use up the proceeds from this offering and will need to find alternative sources. At the present time, we have not made any arrangements to raise additional cash, other than through this offering. If we need additional cash and cannot raise it, we will either have to suspend operations until we do raise the cash, or cease operations entirely. 

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Controls and Procedures

We are subject to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The Sarbanes-Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and to strengthen auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act will substantially increase our legal and accounting costs.

Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operations, we may incur significant expense in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.

Once our management’s report on internal controls is complete, we will retain our independent auditors to audit and render an opinion on such report when required under Section 404 of the Sarbanes-Oxley Act. The independent auditors may identify additional issues concerning our operations while performing their audit of internal control over financial reporting.

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

 

As of February 29, 2016,28, 2018, we did not have any off-balance sheet arrangements and did not have any commitments or contractual obligations.

 

Development Stage and Capital Resources

 

Since itsour inception, the Company haswe have devoted substantially all of itsour efforts to business planning, research and development, recruiting management and staff and raising capital. Accordingly, the Company iswe are considered to be in the development stageThe Company has not having generated minimal revenues from operations and therefore lackswe lack meaningful capital reserves.

 

We are attempting to raise funds to proceed with our plan of operation.operation through this Primary Offering and other sources. To proceed with our operations within 12 months, we need a minimum of $3,000,000. We cannot guarantee$2,839,688(CAD) plus $6,525,000(CAD) for licensing fee and Land purchase. No assurances can be given that we will be able to sell all the shares in the Primary Offering or otherwise obtain financing required to satisfy our 12 months12-month financial requirement. If we are successful, anyAny money raised will be applied to the items set forth in the Use of Proceeds section of this prospectus. We will attempt to raise at least the minimum funds in this Primary Offering together with additional funding necessary to proceed with the commencement of our plan of operation. 

 

WhileAs of the date of this prospectus, we have minimalnot had any operating revenues. We do not anticipate to generate any operating revenues as of this date, no substantial revenues are anticipated until we have completed the financing from this offering and implementedobtained the additional funding needed to obtain the environmental and engineering studies to validate the Stoughton Property and to acquire the Stoughton Property and to obtain the necessary permits to commence the development and construction of the Refinery and to commence the development and construction of the Stoughton Refinery and to implement our full plan of operations. We must raise cashexpect it will take approximately 32 months for us to implement our strategy to growcomplete the development and expand per our business plan. Theconstruction of the Stoughton Refinery. We believe the minimum amount of the offering will likely allowenable us to operate for at least one yearcommence the implementation of our business plan and have the capital resources required to cover the material costs with becoming a publicly reporting. The company anticipatesWe anticipate over the next 12 months the cost of being a reporting public company will be approximately $30,000.$150,000.

 

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We are highly dependent upon the success of this offering, as described herein. Therefore, the failure thereof would result in the need to seek capital from other resources such as taking loans, which would likely not even be possible for the Company.us. However, if such financing were available, because we are a development stage company with no operations to date, we would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing. If the Companywe cannot raise additional proceeds via a private placement of itsour equity or debt securities, or secure a loan, the Companywe would be required to cease business operations. As a result,In such event, investors would lose all of their investment.

 

Additionally, the Companywe will have to meet all the financial disclosure and reporting requirements associated with being a publiclypublic reporting company. The Company’sOur management will have to spend additional time on policies and procedures to make sure it iswe are compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement the business plan and may impede the speed of itsour operations.

 

Liquidity

 

 As of February 28, 20162018
Current Ratio*.0021.04(USD)
Total Debt/Equity Ratio**0.07(1.46)(USD)
Total Working Capital***($33,621)$2.301(USD)

 __________

*Current Ratio = Current Assets /Current Liabilities.

** Total Debt/Equity = Total Liabilities/Total ShareholderStockholder Equity.

*** Working Capital = Current Assets – Current Liabilities.

 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

 

The board of directors elects our executive officers annually.  A majority vote of the directors who are in office is required to fill vacancies.  Each director shall be elected for the term of one year, and until her successor is elected and qualified, or until her earlier resignation or removal. Our directors and executive officers are as follows:

 

Name Age Position
Stanley F. Wilson

Jeffrey Mallmes

Andrew J. Kacic

William J. Hinz

 68

61

71

72

 

Chairman, Chief Executive Officer, President, Treasurer and Director

Secretary Treasurer &and Director

Director

 

34

Stanley F. Wilson,Jeffrey Mallmes - Chairman, CEO Secretary,President, Treasurer and Director

Mr. WilsonMallmes has been a prolific entrepreneur having successfully owned, operated and financially backed several profitable and growth-oriented companies in Western Canada, in the welding, fabrication and auto parts businesses in British Columbia and Alberta. His private sector business successes enabled Mr. Mallmes to enter the public sector in 2014 when he was elected as a Councillor of the Sicamous, BC District Council, the governing body of the District of Sicamous, BC. Mr. Mallmes’ platform focuses on economic development through fiscally responsible capital projects and community driven initiatives including, researching and building district energy systems, establishing advanced technology to improve forest conservation (Community Forest), developing water shed modules, and working with local stakeholders building affordable homes for Canadian Veterans.

From November 2017 to the present, Mr. Mallmes has been the Chairman, President, Treasurer and director of Quantum Energy, Inc. Since he became an officer of Quantum, he has successfully negotiated the cancellation of various unprofitable business relationships, the return of 39,699,800 shares of Common Stock to the Company, the return and cancellation of the Company’s outstanding shares of Series A Preferred Stock and the Series B Preferred Stock and he re-negotiated the terms of all outstanding stock options and stock purchase warrants to adjust the applicable per shares exercise prices from either $0.13, $0.21, $0.22, or $0.40, to $1.00 per share.

From March 1997 to the present, Mr. Mallmes has been the president and owner of The Big Barge Company, Sicamous, BC, Canada, which is corporatea holding company through which Mr. Mallmes owns the following businesses: The Big Barge Dock Systems (from 2006 to the present), Sicamous BC, Canada, which designs and builds marinas; and Alberta 1234567 Inc. Land Holding Company (from 2010 to March 2017), that owns and leases a building and land in Calgary, Alberta, Canada, and Oopik Inc., Sicamous, BC, Canada, a holding company that owns shares of our Common Stock.

Andrew J Kacic - Secretary and Director

Mr. Kacic is an experienced executive as wellwith more than 40 years of oil & gas development, exploration and operations and more than 40 years as an M&A securities attorney whose legalinvestment banker.  From 1986 to the present, Mr. Kacic has been the founder and business careerPresident of Advisory Services, Inc.(ASI), a Scottsdale, Arizona based corporate consulting firm.  Through ASI, Mr. Kacic has placed primary emphasisserved as an officer and/or director of various companies for which ASI was engaged as a consultant including the following: from 2014 to 2016, Mr. Kacic served as the CEO and a director of Quantum Energy Inc.; from 1999 to 2001 Mr. Kacic served as CFO of Beaudry Motor Company, Southern Arizona, an automotive and RV retailer with annual sales in business combinations involving small cap publicly tradedexcess of $350 million; from 1990 to 1998 Mr. Kacic served as the President of American Resources of Delaware, Inc. (formerly a NASDAQ company) and its subsidiary Southern Gas Company, Versailles Kentucky, an oil, gas and transmission company; from 1980 to 1986 Mr. Kacic served as CEO for the oil and gas companies acrossProper Power & Energy, Inc. and Barclay Road Inc to assist in their SEC filings and corporate restructuring; from 2011 to 2012 Mr. Kacic served as CEO of Securities Network, Inc., an Arizona based NASD licensed broker-dealer with 22 offices and more than 140 licensed registered representatives. Mr. Kacic is currently based in Bigfork, Montana as a wide range of industriesconsultant investment related services, including oil and gas fuel tradingrelated services.

William J. Hinz – Director

William (Bill) Hinz’ career spans more than 40 years of worldwide leadership in manufacturing, finance, and marketing, telecommunications, specialty finance, insurancethe assignment and retail automotive. This specializationdeployment of human and capital resources at various companies where he has taken many formsserved in a senior executive capacity aschairman, CEO, corporate director, and president, providing financial management, manufacturing entrepreneurship, and restructuring expertise to companies ranging from startups to multi-billions in revenue. Bill has served and continues to serve on a variety of diversified boards, ranging from energy to medical, international and domestic, both public and private, for several multinational companies, including numerous going-public transactions,JCS Vanilla, Kinetic Muscles, and T Gen-Biotechnology, Vodavi and US Positioning. He has advised country leaders and continues as an advisor to industry leaders, heads of state, and universities. Currently, Mr. Hinz is Chairman and CEO of Inductance Energy Corporation, a Scottsdale, Arizona, based energy technology company that is focused on developing magnetic propulsion energy equipment. From 2011 to 2013, he served as CEO of Easy Energy Systems Inc., Scottsdale, Arizona, an enzyme based renewable energy company. From 2007 to 2011, he served as chairman and platform leader of the aerospace and automotive industries for Patriarch Partners, a New York based private equity firm focused on the acquisition and turnarounds of US based manufacturers, such as MD Helicopters, American LaFrance, and Global Automotive Systems. In 2005, he founded BHM Partners, Scottsdale, Arizona a consulting firm focused on bio-technology companies. Also, from 2005 to 2007 he served as CEO and chairman of HB-Medtek (TASE) Inc., a leading aerospace and medical-device fabricator with facilities in Arizona, Connecticut, the Dominican Republic, India, China, and Singapore, including greenfield operations in those countries. From 1996 to 1999, Mr. Hinzserved as Executive Vice President of Operations and then President of Stolper-Fabralloy Company, a Brookfield Wisconsin based aerospace components manufacturer and was instrumental in its sale and acquisition by Triumph Group Inc., an aerospace and industrial gas turbine manufacturer and aftermarket services company. He then joined Triumphin 1999 serving until 2004, as group president and CEO of Triumph Aerospace. His career began in 1967 at AlliedSignal Aerospace (now Honeywell). For 29 years, he rose through the ranks to hold various executive level positions from Senior VP of Repair & Overhaul, President & CEO of European Operations, and finally President and General Counsel to multiple publicly traded holding companies. Mr. Wilson has been an active member of the Nebraska State Bar Association since 1974, was appointed by the Governor as acting Lancaster County Court Judge and served as The Staff Judge Advocate of the 67th Infantry Brigade of the Nebraska Army National Guard with the rank of Captain. Mr. Wilson is Of Counsel with the Tempe, Arizona law firm of Davis, Miles, McGuire Gardner, PLLC.

CEO before retiring in 1996.

 

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Code of Ethics Policy

 

We have not yetIn November 2017, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

 

Corporate Governance

 

There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating committee,November 2017, we currently have no specificestablished an audit committee, a compensation committee and noa nominating and corporate governance committee and we adopted charters for each of these committees. At the time of establishing these committees we have only three directors, one of which were independent. As of the date of this prospectus, none of these committees have formally met or become functional. Also, at this time, we do not have an audit committee financial expert. Based on the fact thatWe intend to fully develop these committees by adding independent directors to add one or more financial experts to our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.audit committee.

 

Family Relationships

 

None.

 

Involvement in Certain Legal Proceedings

 

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:

 

·Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
·Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
·Subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting herhis involvement in any type of business, securities or banking activities;
·Found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
·Any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against themhim as a result of theirhis involvement in any type of business, securities, or banking activity;
·Subject of a pending administrative proceeding related to theirhis involvement in any type of business, securities, or banking activity;
·Any administrative proceeding threatened against themhim related to theirhis involvement in any type of business, securities, or banking activity.

 

41

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) ofWe are not a reporting company pursuant to the Securities Exchange Act of 1934, as amended, requires our executive officer and director and persons who own more than 10% of a registered classAct. Accordingly, none of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our shares of common stock and other equity securities, on Forms 3, 4, and 5, respectively. Executivedirectors or officers directors, and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely on our review of the copies of such forms received by our company, or written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal year ended September 30, 2013, all filing requirements applicable to our officers, directors and greater than 10% beneficial owners as well as our officer, director and greater than 10% beneficial ownershave filed Forms 3, 4 or 5 with the SEC. Upon the effectiveness of our subsidiaries were complied with.the registration statement on Form S-1 (of which this prospectus is a part), such persons will file initial Form 3 reports.

 

Audit Committee and Audit Committee Financial Expert

 

Our board of directors has determined that it does not have a member of its audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.Act.

 

We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated any significant profitabilityoperating revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our directors do not believe that it is necessary to have such committees because they believe the functions of such committees can be adequately performed by our board of directors.

36

Executive Compensation

 

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities for the years ending February 28, 20152017 and February 29, 2016.28, 2018.

 

Name and PositionYear Ended Feb 28

Salary

($)

Bonus

($)

Stock AwardsOption AwardsNon-Equity Incentive Plan Compensation Earnings ($)Non-Qualified Deferred Compensation Earnings ($)

All Other Compensation

($)

Total
Stanley F. Wilson CEO201600000027,100$27,100
201500000041,650$41,650
Name and PositionYear Ended Feb 28

Salary

($)

Bonus

($)

Stock AwardsOption AwardsNon-Equity Incentive Plan Compensation Earnings ($)Non-Qualified Deferred Compensation Earnings ($)

All Other Compensation

($)

Total
Stanley F. Wilson Former CEO2018-------$0
2017------63,500$63,500
          
Andrew Kacic Director2018--------
2017------33,000$33,000

 

We may elect to award a cash bonus to key employees, directors, officers and consultants based on meeting individual and corporate planned objectives.

 

We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.

 

42

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following tables set forth, the ownership, as of the date of this prospectus, the ownership of our common stockCommon Stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock,Common Stock, and by our directors, and our executive officers and directors as a group.  To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted.  There are not any pending or anticipated arrangements that may cause a change in control.

 

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stockCommon Stock listed below have sole voting and investment power with respect to the shares shown.

 

Security Ownership of Certain Beneficial Owners

 

Name and Address of Beneficial OwnerTitle of Class 

Amount and Nature of

Beneficial Ownership (1)

  Percent of Class (2) 

Kandy, LP (3)

60 E. Rio Salado Parkway, Suite 900

Tempe, Arizona 85281

Common  14,500,000   24.20% 

Kandy, LP (3)

60 E. Rio Salado Parkway, Suite 900

Tempe, Arizona 85281

Series A Preferred  500,000   50% 
Name and Address of Beneficial OwnerTitle of Class 

Amount and Nature of

Beneficial Ownership (1)

  Percent of Class (2) 

Jeffrey Mallmes (3)

1200 Trans Canada Highway

Sicamous, BC, Canada V0E2VO

Common Stock  7,584,395   15.64% 

 

Kandy, LP (4)

PO Box 1169

Big Fork, Montana 59911

Common Stock  9,050,000   18.66% 

 

Robert C. Henry

1742 Carriage Dr.

Victoria, MN 55386

 

Common Stock  3,000,000   6.19% 

 

Stanley Wilson

6711 East Camelback Road, #17

Scottsdale, Arizona, 85251

Common Stock  3,000,000   6.19% 

 

37

Security Ownership of Management

 

Name and Address of Beneficial OwnerTitle of Class 

Amount and Nature of

Beneficial

Ownership (1)

  Percent of Class (2) 

Stanley Wilson (4)

60 E. Rio Salado Parkway, Suite 900

Tempe, Arizona 85281

Common  15,100,000   25.20% 
All Officers and Directors as a Group (1 Person)Common  15,100,000   25.20% 

Stanley Wilson (4)

60 E. Rio Salado Parkway, Suite 900

Tempe, Arizona 85281

Series A Preferred  500,000   50% 
All Officers and Directors as a Group (1 Person)Series A Preferred  500,000   50% 
Name and Address of Beneficial OwnerTitle of Class 

Amount and Nature of

Beneficial

Ownership (1)

  Percent of Class (2)

 

 

 

 

 

Jeffrey Mallmes (3)

1200 Trans Canada Highway

Sicamous, BC, Canada V0E2VO

Common Stock  7,584,395   15.64% 

Andrew J. Kacic (4)

PO Box 1169

Big Fork, Montana 59911

Common Stock  9,050,000   18.66%% 

William J. Hinz

6620 E. Stallion Road

Paradise Valley, AZ 85253

-0-  -0-   -0- 
All Officers and Directors as a Group (3 Persons)Common  16,634,395   34.1% 

 

43

(1)The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of common stockCommon Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.
(2)Based on 59,911,68348,491,485 shares of common stock and 1,000,000 shares of preferred stockCommon Stock issued and outstanding as of February 23, 2017.June 6, 2018.
(3)Jeffrey Mallmes, our Chairman, President, Treasurer and director, beneficially owns directly and indirectly an aggregate of 7,584,395 shares of our Common Stock as follows: directly, 3,459,173 restricted shares and 352,097 unrestricted shares; indirectly 2,000,000 restricted shares in the name of The Big Barge Company Inc. (which is owned by Mr. Mallmes); and indirectly 1,773,125 restricted shares in the name of Oopik Holdings LTD (which is owned by Mr. Mallmes). Mr. Mallmes also owns a stock purchase warrant to purchase 333,333 shares of our Common Stock at $1.00 per share which stock purchase warrant expires on February 28, 2020. Mr. Mallmes disclaims any beneficial ownership of shares owned by Janice Mallmes, his wife.
(4)Andrew J. Kacic beneficially controls the shares held by Kandy, LP. Mr. Kacic is Secretary and a former officer and director of the Company.
(4)Stanley Wilson is the Company's chief executive officer, secretary, treasurer, and director.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Letter of Intent with Inductance Energy Corporation

On April 15, 2018, we entered into a conditional binding letter of intent with Inductance Energy Corporation a Wyoming corporation (“IEC”), pursuant to which if all of the conditions are satisfied, (a) we will be merged with a newly formed subsidiary of IEC with us being the surviving company, (b) we will issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) ) IEC will provide to us as the surviving company up to $50,000,000(USD) (the “IECAZ Financing”), a portion of which (estimated at $7,500,000 CAD) as the necessary funds we intend to use to validate the viability and suitability of the development of the Stoughton Refinery on the intended sight in Stoughton Saskatchewan Canada, which will include (i) obtaining environmental and engineering studies to validate the viability and suitability of the intended site for the Stoughton Refinery, and (ii) if the site is determined to be viable, we will acquire the land, and (iii) we will obtain the required permits to build the Stoughton refinery and (iv) we will pay other related costs.

Jeffrey Mallmes, our Chairman, President, Treasurer and director is a stockholder of WYOTECH the entity that is an affiliate of IEC and owns the technology that is used by IEC and a stockholder of IEC. Also, William Hinz, our director, is Chairman and CEO and a director of IEC and is also an owner of WYOTECH and IEC. No assurances can be given that the conditions to the letter of intent with IEC will be satisfied or that the transactions or financing contemplated in the letter of intent will be consummated.

38

Director Independence

 

We do not have anyone independent directors,director, Mr. Hinz, as the term “independent” is defined by the rules of the NASDAQ Stock Market.

Advances from related party

 

None.

 

Related party lease

 

None.

  

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

InsofarOur Articles of Incorporation generally limit our officers’ and directors’ personal liability to us and our stockholders for breach of fiduciary duty as an officer or director except for breach of the duty of loyalty or acts or omissions not made in good faith or which involve intentional misconduct or a knowing violation of law. Our Articles of Incorporation and Bylaws, provide indemnification for liabilities arising underour officers and directors to the Securities Actfullest extent authorized by the Nevada Revised Statutes against all expense, liability, and loss, including attorney's fees, judgments, fines, excise taxes or penalties and amounts to be paid in settlement reasonably incurred or suffered by an officer or director in connection with any action, suit or proceeding, whether civil or criminal, administrative or investigative to which the officer or director is made a party or is threatened to be made a party, or in which the officer or director is involved by reason of the fact that he is or was an officer or director of the Company, or is or was serving at the request of the Company whether the basis of the proceeding is an alleged action in an official capacity as an officer or director, or in any other capacity while serving as an officer or director. Thus, we may be permitted to directors,prevented from recovering damages for certain alleged errors or omissions by the officers and controlling personsdirectors for liabilities incurred in connection with their good faith acts for the Company.  Such an indemnification payment might deplete our assets. Stockholders who have questions regarding the fiduciary obligations of the registrant as provided inour officers and directors should consult with independent legal counsel.

With regard to the foregoing provisions, or otherwise, the registrant haswe have been advised that in the opinion of the SECSecurities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities other(other than the payment by the registrantus of expenses incurred or paid by a director, officer or controlling person of the registrantCorporation in the successful defense of any action, suit or proceeding,proceeding) is asserted by such director, officer or controlling person in connection with the securitiesCommon Stock being registered, the registrantwe will, unless in the opinion of itsour counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by itus is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such.such case.

 

44

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Our common stockCommon Stock is currently available for trading on the OTC LinkPink under the ticker symbol “QEGY.” Despite our common stockCommon Stock being listed public,available for trading, there remains little liquidity with respect to our common stock.Common Stock. The following table sets forth the high and low bid prices (USD) for our common stockCommon Stock per quarter as reported by the OTC Markets based on our fiscal year end November 30, 2016February 28, 2017 and 2015.2018. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.

 

Fiscal Year 2016 High  Low
First Quarter (Mar. 1, 2015 – May 31, 2015)  0.3998   0.135
Second Quarter (Jun. 1, 2015- Aug. 31, 2015)  0.43   0.135
Third Quarter (Sept. 1, 2015 – Nov. 30, 2015)  0.25   0.13
Fourth Quarter (Dec. 1, 2015 – Feb. 29, 2016)  0.195   0.05

Fiscal Year 2015 High  Low
First Quarter (Mar. 1, 2014 – May 31, 2014)  1.43   0.031
Second Quarter (Jun. 1, 2014 – Aug. 31, 2014)  0.68   0.172
Third Quarter (Sept. 1, 2014 – Nov. 30, 2014)  0.54   0.301
Fourth Quarter (Dec. 1, 2014 – Feb. 28, 2015)  0.50   0.1811
Fiscal Year 2018 High  Low
First Quarter (Mar. 1, 2017 – May 31, 2017)  0.309   0.15
Second Quarter (Jun. 1, 2017- Aug. 31, 2017)  0.229   0.10
Third Quarter (Sept. 1, 2017 – Nov. 30, 2017)  0.165   0.153
Fourth Quarter (Dec. 1, 2017 – Feb. 28, 2018)  0.175   0.066

 

Fiscal Year 2017 High  Low
First Quarter (Mar. 1, 2016 – May 31, 2016)  0.15   0.06
Second Quarter (Jun. 1, 2016 – Aug. 31, 2016)  0.15   0.03
Third Quarter (Sept. 1, 2016 – Nov. 30, 2016)  0.16   0.05
Fourth Quarter (Dec. 1, 2016 – Feb. 28, 2017)  0.40   0.13

39

Penny StockStock” Considerations

 

Our shares will beare "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00.  Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.“penny stock”.

 

Under the penny stock“penny stock” regulations, a broker-dealer selling a penny stock“penny stock” to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.

 

In addition, under the penny stock“penny stock” regulations, the broker-dealer is required to:

 

·deliver, prior to any transaction involving a penny stock,“penny stock”, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock“penny stock” market, unless the broker-dealer or the transaction is otherwise exempt;
·disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
·send monthly statements disclosing recent price information pertaining to the penny stock“penny stock” held in a customer’s account, the account’s value, and information regarding the limited market in penny stocks;“penny stocks”; and
·make a special written determination that the penny stock“penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock“penny stock” transaction in the customer’s account.

 

45

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of selling shareholdersstockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market.  These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded.securities.  In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.  Our shares in all probability will be subject to such penny stock“penny stock” rules and our shareholdersstockholders will, in all likelihood, find it difficult to sell their securities.

 

Sales of our common stockCommon Stock under Rule 144

 

There are 24,991,68331,857,090 shares of our common stockCommon Stock held by non-affiliates and 35,000,00016,634,395 shares held by affiliates, which may constitute restricted securities, as those terms are defined by Rule 144.

 

Non-affiliates hold 17,246,16517,563,669 shares to be registered in his offering, while management and their affiliates hold 30,000,0002,000,000 shares to be registered in this offering. However, all of the remaining shares will still be subject to the resale restrictions of Rule 144.  In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price.  The availability for sale of substantial amounts of common stockCommon Stock under Rule 144 could reduce prevailing market prices for our securities.

 

Holders

 

As of the date of this registration statement, we have approximately 46 shareholders.89 stockholders of record including those stockholders who have their shares held in nominee name. This does not include shares held in street name.

 

Dividends

 

We have not declared any cash dividends on our common stockCommon Stock since our inception and do not anticipate paying such dividends in the foreseeable future.  We plan to retain any future earnings for use in our business.  Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

  

Reports to ShareholdersStockholders

40

 

After this offering, the Company will furnish shareholdersstockholders with audited annual financial reports certified by independent accountants, and unaudited quarterly financial reports After this offering, the Company will file periodic and current reports with the Securities and Exchange Commission as required to maintain fully reporting status. The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E., Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company’s SEC filings will also be available on the SEC's Internet site found at http://www.sec.gov.

 

LEGAL MATTERS

The validity of our Common Stock offered hereby will be passed upon for us by our legal counsel, Jerold N. Siegan, Chicago, Illinois.

INTEREST OF NAMED EXPERTS AND COUNSEL

The audited financial statements for the Company for the year ended February 28, 2018 included in this prospectus have been audited by Decoria, Maichel and Teague, an independent certified public accounting firm, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

The legality of the shares offered under this registration statement is being passed upon by our independent legal counsel, Jerold N. Siegan. Mr. Siegan individually owns 233,333 restricted shares of our Common Stock and a Common Stock purchase warrant to purchase 233,333 shares of our Common Stock at any date through February 20, 2020 at a price of $1.00 per share. These shares are being registered hereunder and will be available for sale through the Secondary Offering when the registration statement of which this prospectus is a part is deemed effective.

Where You Can Find MORE Information

For further information about us and the shares of Common Stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto. The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The registration statement and other information filed with the SEC are also available at the web site maintained by the SEC at www.sec.gov.

 

46

41
 

PART II – INFORMATION NOT REQUIRED IN PROSPECTUS

 

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

The following table is an itemization of all expenses, without consideration to future contingencies, incurred or expected to be incurred by our Corporation in connection with the issuance and distribution of the common sharesCommon Stock being offered by this Prospectus. Items marked with an asterisk (*) represent estimated expenses. We have agreed to pay all the costs and expenses of this offering.

 

Item Amount 
SEC Registration Fee $1,437 
Legal Fees and Expenses* $30,000 
Accounting Fees and Expenses* $10,000 
Miscellaneous* $10,000 
Total* $51,437 

Item Amount
SEC Registration Fee $162.45 
Legal Fees and Expenses* $60,000 
Accounting Fees and Expenses* $75,000 
Miscellaneous* $10,000 
Total* $ 

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Pursuant to Section 607.0850 of the Nevada Revised Statutes, we have the power to indemnify any person made a party to any lawsuit by reason of being a director or officer of the Company, or serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Our Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Nevada law.

 

With regard to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the common sharesCommon Stock being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

Prior to this offering, wethe Company offered and sold unregistered securities as described below. None of the issuances involved underwriters, underwriting discounts or commissions. WeThe Company relied upon Section 4(2)(a) of the Securities Act of 1933, as amended andand/or Regulation D or Regulation S promulgated thereunder, for the offer and sale of the securities. None of the issuances involved underwriters, underwriting discounts or commissions.

We believed these exemptions were available because:

 

·We are not a blank check company;
·Sales were made in off-shore transactions to non-United States persons;non-U.S. citizens; or
·As to sales to United States persons: (i) sales were not made by general solicitation or advertising; (ii) all certificates had restrictive legends or an exemption; (iii) sales were made to persons with a pre-existing relationship to our directors or executive officers; and/or (iv) sales were made to investors who represented that they were accredited investors.

 

47

In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:

 

·Access to all our books and records.
·Access to all material contracts and documents relating to our operations.

 

·The opportunity to meet with management and to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information, to the extent we possessed such information or can acquire without unreasonable effort of expense, necessary to verify the accuracy of the information to which the investors were given access. Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business.

42

On March 16, 2015, the Company sold 500,000 shares of common stock to Gravity Holdings, Inc. (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On March 4, 2014, the Company issued 750,000 common shares in conversion of a promissory note.

On March 10, 2014, the Company issued 625,000 common shares in conversion of a promissory note.

On March 19, 2014, the Company issued 250,000 common shares as resolution of a disputed vendor balance for professional services.

On March 25, 2014 the Company accepted a convertible debenture which was converted by the holder to 3,773,125 common shares of the Company.

On June 10, 2014, the Company issued 120,000 shares of common stock in consideration of consulting services rendered.

On September 2, 2014, the Company issued 1,012,000 shares of common stock in consideration of two Land Purchase Option Agreements.

On November 11, 2014, the Company issued 820,000 shares of common stock in consideration of the execution of a Land Purchase Option Agreement.

On September 4,16, 2015, the Company issuedsold 100,000 shares of common stock to Trevor Scott MacNeil (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA

 

On September 4,March 16, 2015, the Company issuedsold 50,000 shares of common stock to Gordon Zelko (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On August 7, 2015, the Company issued 309,118 shares of common stock to Pop Holdings Ltd. (the “Purchaser”) at a price of $1.00 in per share for conversion of debt pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On September 4,3, 2015, the Company sold 100,000 shares of common stock to Trevor Scott MacNeil (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On September 3, 2015, the Company sold 50,000 shares of common stock to Donald Angus MacNeil (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On September 3, 2015, the Company sold 10,000 shares of common stock to Donald James MacNeil (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On September 3, 2015, the Company sold 10,000 shares of common stock to Laine Alexander MacNeil (the “Purchaser”) at a price of $0.20 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On September 3, 2015, the Company issued 10,000 shares of common sharesstock to JT Morgan (the “Purchaser”) at a price of $0.37 per share as settlement of amount owed to prior accountants KWCO PC pursuant to a Stock Purchase Agreement.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On November 18,September 3, 2015, the Company issued 125,000115,000 shares of common sharesstock to two vendorsKWCO PC (the “Purchaser”) at a price of $0.37 per share as settlement of amount owed to prior accountants KWCO PC pursuant to an agreement to resolve disputed professional fees.a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On March 11, 2016, the Company issuedsold 400,000 shares of common sharesstock to Consortium LLC (the “Purchaser”) at a price of $0.50 cash per share pursuant to conversiona Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of 200,000 preferred shares.the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On March 18, 2016, the Company issuedsold 2,500,000 shares of common stock to Robert C Henry (the “Purchaser”) at a price of $0.04cash per share pursuant to a Stock Purchase Agreement.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

43

 

On April 22, 2016, the Company issued 1,000,000sold 500,000 shares of common stock to Robert C Henry (the “Purchaser”) at a price of $0.03cash per share pursuant to a Stock Purchase Agreements.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

48

On April 22, 2016, the Company sold 500,000 shares of common stock to Raleigh C Kone (the “Purchaser”) at a price of $0.04cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On May 19, 2016, the Company issuedsold 200,840 shares of common stock to Jeffrey Mallmes (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement.Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

 

On July 25,29, 2016, the Company sold 500,000 shares of common stock to Janice Mallmes (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On December 6, 2016, the Company sold 500,000 shares of common stock to Kevin Holinaty (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On December 7, 2016, the Company issued 2,000,000 shares of common stock to Lorne Keith Stemler (the “Purchaser”) at a price of $0.05 per share, in consideration for employment services, pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On December 7, 2016, the Company sold 50,000 shares of common stock to Raymond F Johnson (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On December 14, 2016, the Company issued 150,000 shares of common stock to Brunson Chandler & Jones PPLC (the “Purchaser”) at a price of $0.20 per share in consideration for legal services pursuant to an attorney engagement letter agreement. The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the said Agreement.

On January 12, 2017, the Company sold 500,000 shares of common stock to Buddy Keith Green (the “Purchaser”) at a price of $0.10 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On January 24, 2017, the Company sold 100,000 shares of common stock to Mainstar Trust Cust FBO Matthew J Beck IRA (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On January 24, 2017, the Company sold 300,000 shares of common stock to Mainstar Trust Cust FBO William W Chiles Jr Roth IRA (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On January 24, 2017, the Company sold 300,000 shares of common stock to Tiger-Hawk Oil LLC (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On January 27, 2017, the Company sold 100,000 shares of common stock to Brandee Corwin Knox (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On January 27, 2017, the Company sold 100,000 shares of common stock to Mainstar Trust Cust FBO Edwin L Rafferty IRA (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

44

On January 27, 2017, the Company sold 100,000 shares of common stock to Andrew G McGregor (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On February 8, 2017, the Company sold 20,000 shares of common stock to Debra Millet Gilmore (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On February 17, 2017, the Company sold 20,000 shares of common stock to Marc Litle (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On April 12, 2017, the Company issued 850,000 shares of common stock to John L Suprock (the “Purchaser”) at a price of $0.10 share for consulting services pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On July 10, 2017, the Company sold 100,000 shares of common stock to William K Davis (the “Purchaser”) at a price of $0.05 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On July 11, 2017, the Company sold 250,000 shares of common stock to Haajje De Jong (the “Purchaser”) at a price of $0.10 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On July 11, 2017, the Company sold 250,000 shares of common stock to Kevin Holinaty (the “Purchaser”) at a price of $0.10 cash per share pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the SPA.

On December 13, 2017, the Company issued 500,000 shares of common stock pursuant to a Stock Purchase Agreement.

On July 25, 2016,Stanley F. Wilson (the “Purchaser”) in exchange for the Company entered into a contribution agreement whereby it issued 5,000,000cancellation of 500,000 shares of the Company’s common stock.Series A Preferred Stock owned by Mr. Wilson. The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) for this transaction.

 

On November 25, 2016,December 13, 2017, the Company issued 500,000 shares of common stock to Kandy LP (the “Purchaser”) in exchange for the cancellation of 500,000 shares of the Company’s Series A Preferred Stock owned by Kandy LP. The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) for this transaction.

On April 4, 2018, the Companyissued333,333 shares of common stock to Jeffrey J Mallmes (the “Purchaser”) at a price of $0.15 cash per share pursuant to a Subscription Agreement. The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the Subscription Agreement.

On April 4, 2018, the Company issued 500,000 shares of common stock to Steven J Hammer (the “Purchaser”) at a price of $0.15 cash per share pursuant to a Subscription Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the Subscription Agreement.

On April 4, 2018, the Company issued 233,333 shares of common stock to Jerold N Siegan (the “Purchaser”) at a price of $0.15 per share in exchange for $35,000 of legal services based on a rate of $400 per hour pursuant to a Subscription Agreement. The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the Subscription Agreement.

On April 4, 2018, the Company issued 63,136 shares of common stock to Kevin D Turko (the “Purchaser”) at a price of $0.15 per share in consideration for technical services pursuant to a Stock Purchase Agreement (“SPA”). The Company relied on the exemption found in Section 4(a)(2) of the Securities Act of 1933, as amended, (the “1933 Act”) and the “accredited investor” representations made by the Purchaser in the Subscription Agreement.

45

 

On December 20, 2016,AUDITED FINANCIAL STATEMENTS

Index to Financial Statements:

Audited financial statements as of February 28, 2018, including:

1.Report of Independent Registered Public Accounting Firm;
2.Consolidated Balance Sheets as of February 28, 2018 and 2017;
3.Consolidated Statements of Operations for the years ended February 28, 2018 and 2017;
4.Consolidated Statement of Changes in Stockholders’ Equity for the years ended February 28, 2018 and 2017;
5.Consolidated Statements of Cash Flows for the years ended February 28, 2018 and 2017;
6.Notes to Consolidated Financial Statements.

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Quantum Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Quantum Energy, Inc. (“the Company”) as of February 28, 2018 and 2017, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company issued 200,000 sharesas of common stock pursuant to a Stock Purchase Agreement.February 28, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

On December 20, 2016,Consideration of the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company issued 300,000 shareswill continue as a going concern. As discussed in Note 2 to the financial statements, the Company has generated no revenues and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of common stock pursuant to a Stock Purchase Agreement.this uncertainty.

 

On December 20, 2016,Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company issued 100,000 sharesin accordance with the U.S. federal securities laws and the applicable rules and regulations of common stock pursuant to a Stock Purchase Agreement.the Securities and Exchange Commission and the PCAOB.

 

On December 28, 2016,We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company issued 100,000 sharesis not required to have, nor were we engaged to perform, an audit of common stock pursuantits internal control over financial reporting. As part of our audits, we are required to a Stock Purchase Agreement.obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

F-1

 

On December 28, 2016,

Our audits included performing procedures to assess the Company issued 100,000 sharesrisks of common stock pursuantmaterial misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a Stock Purchase Agreement.test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

On December 28, 2016,

We have served as the Company issued 100,000 shares of common stock pursuant to a Stock Purchase Agreement.Company’s auditor since 2018.

 

On December 28, 2016, the Company issued 20,000 shares of common stock pursuant to a Stock Purchase Agreement.Spokane, Washington

On December 29, 2016, the Company issued 100,000 shares of common stock pursuant to a Stock Purchase Agreement.

On January 9, 2017, the Company issued 100,000 shares of common stock pursuant to a Stock Purchase Agreement.

May 11, 2018

 

 

49

F-2
 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETSHEETS

    

  November 30, 2016 February 29, 2016
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $20,380  $81 
Note receivable  67,500   —   
TOTAL CURRENT ASSETS  87,880   81 
OTHER ASSETS  730,049   490,520 
TOTAL ASSETS $817,929  $490,601 
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable and accrued liabilities $35,395  $15,922 
Promissory notes payable  12,980   12,980 
Due to related party  —     4,800 
TOTAL CURRENT LIABILITIES  48,375   33,702 
LONG TERM LIABILITIES:  —     —   
TOTAL LIABILITIES  48,375   33,702 
COMMITMENTS AND CONTINGENCIES (NOTE 7)        
STOCKHOLDERS' EQUITY        
         
Preferred Stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding        
Series A: 3,000,000 shares allocated, 1,000,000 shares issued and outstanding  1,000   1,000 
Series B: 2,000,000 shares allocated, 200,000 and 200,000 shares issued and outstanding  —     200 
Common Stock, $.001 par value; 290,000,000 shares authorized; 56,171,683 and 46,070,843 shares issued and outstanding, respectively  56,172   46,071 
Additional paid-in capital  10,189,923   9,454,781 
Stock subscribed  —     2,890 
Accumulated deficit  (9,477,541)  (9,048,043)
TOTAL STOCKHOLDERS' EQUITY  769,554   456,899 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $817,929  $490,601 
         
  February 28, 2018 February 28, 2017
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $19,864  $20,478 
Prepaid legal fees  37,500   —   
TOTAL CURRENT ASSETS  57,364   20,478 
OTHER ASSETS        
Deposit on land purchase  7,822   7,822 
Land purchase option agreements, net of accumulated amortization  —     120,033 
TOTAL OTHER ASSETS  7,822   127,855 
TOTAL ASSETS $65,186  $148,333 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
CURRENT LIABILITIES:        
Accounts payable $47,783  $51,976 
Promissory notes payable  2,980   2,980 
Loan from related party  4,300   4,300 
TOTAL CURRENT LIABILITIES  55,063   59,256 
LONG-TERM LIABILITIES:        
Common stock payable  152,198   5,000 
TOTAL LONG-TERM LIABILITIES  152,198   5,000 
TOTAL LIABILITIES  207,261   64,256 
STOCKHOLDERS' EQUITY (DEFICIT)        
Preferred Stock, $.001 par value; 5,000,000 shares authorized, none issued and outstanding        
Series A: 3,000,000 shares allocated, Nil and 1,000,000 shares issued and outstanding, respectively  —     1,000 
Common Stock, $.001 par value; 295,000,000 shares authorized; 47,361,683 and 54,911,683 shares issued and outstanding, respectively  47,362   54,912 
Additional paid-in capital  10,828,079   10,596,068 
Accumulated deficit  (11,017,516)  (10,567,903)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)  (142,075)  84,077 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $65,186  $148,333 
         

 

The accompanying notes are an integral part of these consolidated financial statements.

 

50

F-3
 

 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYBALANCE SHEETS

 

 For the three months ended
November 30,
 For the nine months ended
November 30,
 For the year ended
 2016 2015 2016 2015 February 28, 2018 February 28, 2017
OPERATING EXPENSE                        
Advertising and marketing $—    $955  $5,736  $8,128  $9,551  $7,846 
Management fees  15,000   7,200   73,200   53,200 
Office and administration  4,093   12,570   17,491   71,684 
Stock option expense  —     —     —     —   
Land option expense  60,016   —     310,472   164,527 
Management fees and compensation  83,461   728,470 
Office and public company expense  123,590   43,551 
Write-off of promissory note receivable  —     67,500 
Amortization of land purchase option agreements  120,033   370,488 
Professional fees  7,565   800   21,465   30,200   112,978   89,850 
TOTAL OPERATING EXPENSES  86,674   21,525   428,364   327,739   449,613   1,307,705 
LOSS FROM OPERATIONS  (86,674)  21,525   (428,364)  (327,739)  (449,613)  (1,307,705)
OTHER INCOME (EXPENSE)                        
Interest expense  (374)  —     (1,134)  —     —     (1,240)
TOTAL OTHER EXPENSE  (374)  —     (1,134)  —   
TOTAL OTHER INCOME (EXPENSE)  —     (1,240)
NET LOSS BEFORE INCOME TAXES  (87,048)  (21,525)  (429,498)  (327,739)  (449,613)  (1,308,945)
Provision for income tax  —     —     —     —     —     —   
NET LOSS $(87,048) $(21,525)  (429,498)  (327,739)  (449,613)  (1,308,945)
DEEMED DISTRIBUTION TO PREFERRED STOCKHOLDERS ON EXCHANGE OF SHARES FOR COMMON STOCK  (99,000)  —   
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(548,613) $(1,308,945)
Basic and diluted loss per share $(0.00) $(0.00)  (0.01)  (0.01) $(0.01) $(0.02)
Basic and diluted weighted average number shares outstanding  52,383,640   45,316,725   50,620,720   45,316,725   61,607,764   70,730,243 
                        
                

The accompanying notes are an integral part to these financial statements.

51

QUANTUM ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

  For the nine months ended
  November 30, 2016 November 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(429,498) $(327,739)
Adjustments to reconcile net loss to cash used by operating activities        
    Amortization expense, land purchase option agreements  310,472   164,527 
    Issuance of common shares in lieu of cash for operating expense  2,162   —   
Changes in operating assets and liabilities:        
    Promissory notes receivable  (67,500)  —   
    Accounts payable and accrued liabilities  19,473   —   
Net cash used by operating activities  (164,891)  (163,212)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Net cash used in investing activities  —       
CASH FLOWS FROM FINANCING ACTIVITIES:        
    Proceeds from sales of common stock  189,990   —   
    Proceeds from subscription of common stock  —     134,000 
    Proceeds from loan payable  —     10,143 
    Repayment of loan, related party  (4,800)  —   
    Net cash provided by financing activities  185,190   144,143 
Net increase (decrease) in cash and cash equivalents  20,299   (19,069)
CASH AT BEGINNING OF PERIOD  81   18,952 
CASH AT END OF PERIOD $20,380  $(117)
         
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
    Interest paid in cash $—    $—   
         
         

The accompanying notes are an integral part of these consolidated financial statements.

 

52

F-4
 

 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  Preferred shares Common shares        
  Number Par value Number Par value Additional Paid-In Capital Stock subscribed Accumulated (Deficit) Total
Balance at February 29, 2016  1,200,000   1,200   46,070,843  $46,071  $9,665,697  $2,890  $(9,258,958) $456,900 
Issuance of common stock on stock subscribed  —     —     57,800   58   2,832   (2,890)  —     —   
Conversion of preferred shares to common stock  (200,000)  (200)  400,000   400   (200)  —     —     —   
Common stock and warrants issued  —     —     6,139,800   6,140   285,850   —     —     291,990 
Issuance of common shares for management fees and compensation  —     —     2,200,000   2,200   107,800   —     —     110,000 
Stock based compensation  —     —     —     —     531,970   —     —     531,970 
Accounts payable settled with issuance of common stock  —     —     43,240   43   2,119   —     —     2,162 
Net income (loss)  —     —     —         —     —     (1,308,945)  (1,308,945)
Balance at February 28, 2017  1,000,000   1,000   54,911,683  $54,912  $10,596,068  $—    $(10,567,903) $84,077 
Issuance of common shares for common stock payable  —     —     100,000   100   4,900   —     —     5,000 
Conversion of preferred stock to common stock  (1,000,000)  (1,000)  1,000,000   1,000   —     —     —     —   
Common stock and warrants issued  —     —     500,000   500   49,500   —     —     50,000 
Retirement of common stock (Note 9)  —     —     (10,000,000)  (10,000)  10,000   —     —     —   
Issuance of common shares for management fees and compensation  —     —     850,000   850   84,150   —     —     85,000 
Stock based compensation  —     —             83,461   —     —     83,461 
Net income (loss)  —     —     —     —     —     —     (449,613)  (449,613)
Balance at February 28, 2018  —     —     47,361,683  $47,362  $10,828,079  $—    $(11,017,516) $(142,075)
                ��                

The accompanying notes are an integral part of these consolidated financial statements.

F-5

QUANTUM ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

  For the year ended
  February 28, 2018 February 28, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(449,613) $(1,308,945)
Adjustments to reconcile net loss to cash used by operating activities        
    Stock based compensation  83,461   531,970 
    Amortization of land purchase option agreements  120,033   370,488 
    Write-off of promissory note receivable  —     67,500 
    Issuance of common shares for management fees and compensation  85,000   110,000 
Changes in operating assets and liabilities:        
    Accounts payable and accrued liabilities  23,005   38,215 
    Prepaid legal expense  (37,500)  —   
Net cash used by operating activities  (175,614)  (190,772)
CASH FLOWS FROM INVESTING ACTIVITIES:        
    Issuance of promissory note receivable  —     (67,500)
    Deposit on land purchase agreement option  —     (7,822)
Net cash used in investing activities  —     (75,322)
CASH FLOWS FROM FINANCING ACTIVITIES:        
    Proceeds from sales of common stock and warrants  50,000   296,990 
    Proceeds from subscription of common stock  125,000   —   
    Payment of promissory note payable  —     (10,000)
    Payment of loan, related party  —     (500)
 Net cash provided by financing activities  175,000   286,490 
Net increase (decrease) in cash and cash equivalents  (614)  20,396 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  20,478   81 
CASH AND CASH EQUIVALENTS AT END OF YEAR $19,864  $20,477 
         
         
NON-CASH FINANCING AND INVESTING ACTIVITIES:        
    Common stock payable for accounts payable and accrued liabilities $27,198  $2,162 
    Conversion of preferred stock into common stock  1,000   200 
    Retirement of common stock  10,000   —   

The accompanying notes are an integral part of these consolidated financial statements.

F-6

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

 

NOTE 1 - NATURE OF OPERATIONS

 

QUANTUM ENERGY INC. (“the Company”)was incorporatedunderthe name “Boomers CulturalDevelopment Inc.”underthe lawsof the StateofNevadaon February 5, 2004.On May 18, 2006, the companyCompany changed its name to Quantum Energy, Inc.

 

The Company is a development stage diversified holding company with an emphasis in land holdings, refinery and rail transload development, oil and gas exploration, drilling, well completion and fuel distribution.

 

TheCompany is domiciled in the UnitesStatesof America and trades on theOTC market under thesymbol QEGY.

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States.States (“U.S. GAAP”).

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiarysubsidiaries FTPM Resources Ltd. and Dominion Energy Processing Group, Inc. after elimination of the intercompany accounts and transactions.

 

Going Concern

These 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 its next fiscal year.

 

As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of November 30, 2016,February 28, 2018, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $9,477,541$11,017,516 at November 30, 2016. As of November 30, 2016, the Company'sFebruary 28, 2018, and working capital was $39,505.of $2,301. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, to locate profitable mining properties and 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 production.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. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs should the Company be unable to continue as a going concern. In the event the Company is unable to fulfill the terms as specified in the Property Option Agreements (Note 4)5), the Company could default on the agreement(s) and surrender its right to future claims on the respective property.

 

Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to long-lived asset impairments and stock option valuation.stock-based compensation. Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations.

 

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 oil and gas business, including the potential risk of business failure.

 

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F-7
 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

Cash and cash equivalents

 

For the purposes of the statement of cash flows, theThe Company considers all highly liquid investments with originalremaining maturities of three months or less when acquired to be cash equivalents.

 

Financial InstrumentsIncome taxes

The Company accounts for income taxes using the liability method. The liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of (i) temporary differences between financial statement carrying amounts of assets and liabilities and their basis for tax purposes and (ii) operating loss and tax credit carry-forwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when management concludes that it is more likely than not that a portion of the deferred tax assets will not be realized in a future period.

Fair value of financial instruments

 

The Company's financial instruments include cash and cash equivalents and short term notes payable, related party.promissory note payable. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2016February 28, 2018 and February 29, 2016,28, 2017, respectively.

 

Long-Lived Assets

The Company reviews long-lived assets which include a deposit on land purchase and land purchase options 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.

Fair Value Measures

 

The Financial Accounting Standards Board Accounting Standards Codification Topic 820 "Fair Value Measurements" ("ASC 820") requires an entityWhen required to maximizemeasure assets or liabilities at fair value, the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishesCompany uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measureused.  The Company determines the level within the fair value. A financial instrument'svalue 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.   ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1: Level 1 applies to assets or liabilities for which there areuses quoted prices in active markets for identical assets or liabilities.

Level 2:liabilities, Level 2 appliesuses 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. The Company has no financial assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Level 3 appliesadjusted to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.on a recurring basis.

 

At November 30, 2016February 28, 2018 and February 29, 2016,28, 2017, the Company had no assets or liabilities accounted for at fair value on a recurring basis.

 

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 employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), employee 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-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. Compensation expense for equity awards are recognized over the period during which the recipient is required to provide service in exchange for the award.

New Accounting Pronouncement

In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2015-17 Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740). The update is designed to reduce complexity of reporting deferred income tax liabilities and assets into current and non-current amounts in a statement of financial position. ASU No. 2015-17 requires the presentation of deferred income taxes, changes to deferred tax liabilities and assets be classified as non-current in the statement of financial position. The update is effective for fiscal years beginning after December 15, 2016. There was no material impact to the consolidated financial statements upon adoption of this update effective March 1, 2017.

 

 

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F-8
 

Loss Per ShareQUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

 

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 for years ended November 30, 2016 and November 30, 2015, would be as follows:

 November 30, 2016 November 30, 2015
Stock options 3,841,666  5,161,666
Warrants 107,934  107,934
  TOTAL POSSIBLE DILUTION 3,949,600  5,269,600
      

At November 30, 2016 and November 30, 2015, respectively, the effect of the Company's outstanding options and common stock equivalents would have been anti-dilutive.

Income Taxes

The Company recognizes provision for income tax using the liability method. Deferred income tax liabilities or assets at the end of each period are determined using the tax rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.

New Accounting Pronouncement

In August 2014,March 2016, the FASB issued ASU No. 2014-15—Presentation2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies the accounting for stock-based compensation, including income tax consequences and balance sheet and cash flow statement classification of Financial Statements—Going Concern.awards. The guidance requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). If conditions or events exist that raise substantial doubt about an entity’s ability to continue as a going concern, the guidance requires disclosure in the financial statements. The guidance will beupdate is effective for the annual period endingfiscal years beginning after December 15, 2016, with early adoption permitted. There was no material impact to the consolidated financial statements upon adoption of this update effective March 1, 2017.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for annual periodscash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter.  Early application iswithin those fiscal years, with early adoption permitted. The Company has concluded that adoptionis currently evaluating the impact of the standard would have minimal impactimplementing this update on the Company’s financial statements as such disclosure is already included the financial statements.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

NOTE 3 – NOTE RECEIVABLE

On April 7, 2016, the Company entered into a short-term promissory note and loaned $67,500 to an energy company. The note matures on April 7, 2017 and in interest-free. For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter, the monthly installment shall be $2,500 per month until paid in full.

NOTE 4 – LAND PURCHASE OPTION AGREEMENTS

The Company has executed a series of land purchase option agreements with various landowners in and around the State of Montana. In aggregate the land purchase option agreements encompass approximately 1,150 acres. For a period of two years from the respective execution date, the Company has the option to purchase the property for the purpose of evaluating and developing a Clean Energy Center including a diesel refinery, crude processing and natural gas liquid stripping facility and CO2 capture equipment for enhanced oil recovery.

The fair value of consideration given for the exclusive option to purchase has been charged to “Other Assets” and amortized over the respective term of the land purchase option agreement. For the three months and nine months ended November 30, 2016 and February 28, 2015, the Company amortized “Land Option Expense” $946,075 and $521,040, respectively.

The Company recognized an impairment expense of $206,573 relating to certain land purchase option agreements at February 29, 2016. There are no liabilities or future obligations to the Company on any of the impaired land purchase option agreements. Absent notification to or from land owners, the Company retains right to purchase related properties. To date, notification of cancellation has not been communicated by either party. However, in lieu of executed extensions to the land purchase options, the Company accelerated amortization of remaining book value on those properties to which significant cash payments have been delinquent and, therefore, are potentially in default of terms of the purchase option agreement.

55

The following is a summary of the Company’s Other Assets at November 30, 2016:

Option Agreement DateConsiderationNumberFair ValueAccumulated AmortizationAllowance for ImpairmentNet Book Value
August 22, 2014Stock options1,120,000$521,691($521,691)--
August 22, 2014Stock options1,680,000800,217(400,120)-180,049
August 26, 2014Common shares560,000280,000(210,000)(70,000)-
August 26, 2014Common shares452,000226,100(169,575)(56,525)-
October 8, 2014Cash-(1)----
October 24, 2014Common shares820,000336,200(256,152)(80,048)-
November 12, 2014Cash-(1)-- -
December 10, 2014Cash-(1)-- -
   TOTAL  $2,164,208($1,777,586)($206,573)$180,049
       

(1)Consideration to be paid upon exercise of property option agreement. No fair value of option agreement made as of balance sheet date.

The balance of the land purchase option agreements are included in “Other Assets”.

NOTE 5 –EARNINGS PER SHARE EXCHANGE AND CONTRIBUTION AGREEMENT AND PARTIAL RESCISSION

Investment in Subsidiary

On or about July 25, 2016, the Company entered into a share exchange and contribution agreement whereby it acquired 100% of the Partnership Interests of New Tex IV, LP, a Texas limited partnership. The acquisition shall be effective September 1, 2016 and consists of approximately 3,000 acres of and 89 well bores in the Texas panhandle along with an approximate 5% working interest in a heavy oil project in Missouri. In consideration of this acquisition, the Company issued 15,000,000 shares of the Company’s common stock with a fair market value of $1,650,000 on July 25, 2016.

On or about January 24, 2017, the Company executed a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby all provisions of the share exchange and contribution agreement dated July 25, 2016 (Note 4) were revoked. By mutual rescission, Mountain Top Properties, Inc. agreed to the immediate cancellation and surrender of the common stock certificates representing 10,000,000 shares common stock of Quantum Energy, Inc. The Company, therefore, rescinded its acquisition of 100% of the Partnership Interests of New Tex IV, LP, a Texas limited partnership. The fair market value of the common stock rescinded was $1,100,000.

The Company has revised the November 30, 2016 financial statements to reflect the impact of the Mutual Rescission Agreement. The balance sheet as of November 30, 2016 presented in these interim financial statements reflects the change in total assets, common stock and additional paid in capital subsequent to the rescission of a portion of the July 2016 Share Exchange and Contribution Agreement.

56

The previously issued financial statements have been revised as follows:

Balance Sheet at November 30, 2016 As Previously Reported Revision As Revised
          
Total assets $ 1,917,929 $ (1,100,000) $ 817,929
Total liabilities $ 48,375 $ -    $ 48,375
Stockholders' equity         
   Preferred stock   1,000   -      1,000
   Common stock   66,172   (10,000)   56,172
   Additional paid in capital  11,279,923  (1,090,000)  10,189,923
   Accumulated deficit  (9,477,541)   -      (9,477,541)
Total stockholders' equity   1,869,554   (1,100,000)   769,554
Total liabilities and stockholders' equity $ 1,917,929 $ (1,100,000) $ 817,929

NOTE 6 – PROMISSORY NOTES PAYABLE

The Company’s outstanding notes payable and accrued interest payable are summarized as follows:

 November 30, 2016 February 29, 2016
 Note payable Accrued interest Note payable Accrued interest
15% unsecured note payable by the Company due on demand$10,000 $4,894 $10,000 $3,760
TOTAL$10,000 $4,894 $10,000 $3,760

NOTE 7– RELATED PARTY TRANSACTIONS

For the three months ended November 30, 2016 and 2015, respectively, the Company paid management fees including amounts accrued $15,000 and $7,200, respectively, to the Officers of the Company. For the nine months ended November 30, 2016 and 2015, respectively, the Company paid management fees including amounts accrued $73,200 and $53,200, respectively, to the Officers of the Company

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company engaged the services of a government relations advisory group under an agreement in which the payment obligation is subject to the receipt of funding. That agreement is now terminated and disputed as to its enforceability. If or when the subject funding is realized, and if or when the enforceability issue is resolved, the Company may have a contingent liability in the approximate amount of $75,000.

NOTE 9 – COMMON STOCK

Authorized

295,000,000 voting common shares with a par value of $0.001 per share

3,000,000 convertible preferred “A” shares with a par value of $0.001 per share

2,000,000 convertible preferred 6% series “B” shares with a par value of $0.001 per share

57

 RestrictedNon-restrictedNovember 30, 2016 RestrictedNon-restrictedFebruary 29, 2016
Common Shares       
Outstanding at beginning of period 38,830,943   7,239,900     46,070,843 37,576,8257,239,900               44,816,725
   Issued20,100,840                -   20,100,840 1,254,118                  1,254,118
   Rescinded(10,000,000-(10,000,000) ---
Outstanding at end of period 48,931,783   7,239,900     56,171,683 38,830,9437,239,900               46,070,843
        
Preferred Convertible Shares       
Outstanding at beginning of period                -      1,200,000       1,200,000               -    1,200,000                 1,200,000
  Issued Series A                -                   -                      -                  -                                  -   
  Issued Series B                -                   -                      -                  -                                  -   
  Converted Series B                -        (200,000)        (200,000)               -                                  -   
Outstanding at end of period                -      1,000,000       1,000,000               -    1,200,000                 1,200,000

Each of the Series A preferred stock is convertible into common shares, at the option of the holder on a 1:100 basis. Each of the 6% series B preferred stock is convertible into common shares on a 1:1.25 basis if converted within twelve months from the date of purchase and on a 1:1.15 basis if converted within the second twelve months from the date of purchase and on a 1:1 basis if converted in month twenty-five or thereafter from the date of purchase.

Effective July 30, 2010, the Board of Directors authorized a 1,000 for 1 reverse stock split of the Company’s issued common stock. One thousand (1,000) old issued common shares were reverse split into one (1) new issued common share. All references in the accompanying financial statements to the number of common shares issued have been restated to reflect the reverse stock split.

Effective November 15, 2013 the Board of Directors authorized a 150 for 1 forward stock split of the Company’s issued common stock. One (1) old issued common share was forward split into one hundred and fifty (150) new issued common shares. All references in the accompanying financial statements to the number of common shares issued have been restated to reflect the forward stock split.

On March 4, 2014, the Company issued 750,000 common shares in conversion of a promissory note, a transaction that was authorized prior to February 28, 2014 and included in those year-end balances.

On March 10, 2014, the Company issued 625,000 common shares in conversion of a $20,000 promissory note.

On March 19 2014, the Company issued 250,000 common shares with a fair market value of $0.22 per share or $55,000 as resolution of a disputed vendor balance for professional services.

On March 25, 2014 the Company accepted a $150,000 convertible debenture which was converted by the holder to 3,773,125 common shares of the Company.

On June 10, 2014, the Company issued 120,000 common shares with a fair market value of $0.54 per share or $64,680 in consideration of consulting services rendered.

58

On September 2, 2014, the Company issued 1,012,000 common shares in consideration of two Land Purchase Option Agreements, the fair value of which was $505,088 based on a closing price of $0.50 per share.

On November 11, 2014, the Company issued 820,000 common shares in consideration of the execution of a Land Purchase Option Agreement, the fair value of which was $336,200 based on a closing price of $0.41 per share.

The Company received $34,000 in proceeds from stock purchase agreements; Trevor MacNeil $20,000 and Donald MacNeil $14,000 on August 10, 2015 and August 11, 2015 consecutively.

On September 4, 2015, Trevor MacNeil was issued 100,000 common shares - Special Purchase Agreement signed and funds wired on August 10, 2015.

On September 4, 2015, Donald MacNeil was issued 50,000 common shares – Special Purchase Agreement signed and funds wired on August 11, 2015.

On September 4, 2015, Donald MacNeil 10,000 common shares issued to daughter as nominee – Special Purchase Agreement signed and funds wired on August 11, 2015

On November 18, 2015, the Company issued 125,000 to two vendors pursuant to an agreement to resolve disputed professional fees. The fair value of the shares issued was $46,250 based on a closing price of $0.37 per share.

On March 11, 2016, the Company issued 400,000 common shares issued pursuant to conversion of 200,000 preferred shares.

On March 18, 2016, the Company issued 2,500,000 shares of common stock issued at $0.04 per share pursuant to a Special Purchase Agreement signed and funds of $100,000 wired on March 2, 2016.

On April 7, 2016, the Company entered into a short-term promissory note and loaned $60,000 to an energy company. The note matures on April 7, 2017 and in interest-free. For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter, the monthly installment shall be $2,500 per month until paid in full.

On April 22, 2016, the Company issued 1,000,000 shares issued at $0.035 per share pursuant to Special Purchase Agreement signed and funds of $15,000 an $20,000 wired on April 6 and April 7, 2016, respectively.

On May 19, 2016, the Company issued 200,840 shares issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds received February 24 and March 2, 2016 and company expense paid on February 5, 2016.

On July 25, 2016, the Company issued 500,000 shares of common stock issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds of $25,000 received July 25, 2016.

On July 25, 2016, the Company entered into a share exchange and contribution agreement whereby it acquired 100% of the Partnership Interests of New Tex IV, LP, a Texas limited partnership. The acquisition shall be effective September 1, 2016 and consists of approximately 3,000 acres of and 89 well bores in the Texas panhandle along with an approximate 5% working interest in a heavy oil project in Missouri. In consideration of this acquisition, the Company issued 10,000,000 shares of the Company’s common stock with a fair market value of $1,650,000 on July 25, 2016.

59

On November 25, 2016, the Company issued 500,000 shares of common stock issued at $0.05 per share pursuant to a Special Purchase Agreement signed and funds of $25,000 received on November 25, 2016.

NOTE 9 – STOCK OPTIONS

In consideration for the option to purchase property (see Note 4) and various agreements in exchange for consulting services, the Company issued stock options to purchase shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered to be the closing price of the Company's common stock on the issue dates.

The following is a summary of the Company’s options issued and outstanding:

 For the three months ended November 30, 2016 For the three months ended November 30, 2015
  Options Price (a) Options Price (a)
Beginning balance 3,841,666 $0.50  5,161,666 $0.75
   Issued -  -  -  -
   Exercised -  -  -  -
   Expired -  -  -  -
Ending balance 3,841,666 $0.50 5,161,666 $0.75

 For the nine months ended November 30, 2016 For the nine months ended November 30, 2015
  Options Price (a) Options Price (a)
Beginning balance 5,161,666 $0.75  5,161,666 $0.75
   Issued -  -  -  -
   Exercised -  -  -  -
   Expired (1,300,000)  (0.25)  -  -
Ending balance 3,841,666 $0.50 5,161,666 $0.75

The following table summarizes additional information about the options granted by the Company as of November 30, 2016:

Date of GrantOptions outstanding Options exercisablePrice (a) Remaining term  (b) 
        
May 30, 2014375,000 375,000               0.40 0.50 
June 12, 2014875,000 875,0000.40 0.53 
July 21, 2014166,666 166,6660.75 0.64 
August 22, 20141,680,000 1,680,0001.00 0.73 
February 24, 2015745,000 248,3330.40 1.24 
Total options3,841,666 3,344,999$               0.50 0.56 
        
(a)Weighted average exercise price per shares
(b)Weighted average remaining contractual term in years.

As of November 30, 2016, there remains $166,922 of unrecognized stock option expense.

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NOTE 10 - WARRANTS

On June 1, 2014, in consideration for professional and consulting services provided for raising capital for the Company, warrants were issued to purchase shares of the Company’s common stock with an exercise price of $0.90 per share. The warrants expire on May 31, 2017. The Company charged $73,303 to professional fees and consulting which approximated the fair value of the warrants at the grant date.

The Company has estimated the fair value of the warrant grant using the Black-Scholes model with the following information and range of assumptions:

Warrants issued 107,934   
Fair value of warrants granted$73,303   
Exercise price$0.90   
Volatility 376.9%   
Expected term (years) at issuance 3.00   
Risk free rate 0.79%   

The following is a summary of the Company’s warrants issued and outstanding:

 For the years ended February 29, 2016 For the years ended February 28, 2015
  Options Price (a) Options Price (a)
Beginning balance 107,934 $0.90  - $-
   Issued -  -  107,934  0.90
   Exercised -  -  -  -
   Expired -  -  -  -
Ending balance 107,934 $0.90 107,934 $0.90

The following table summarizes additional information about the warrants granted by the Company as of February 29, 2016:

Date of GrantWarrants outstanding Warrants exercisablePrice Remaining term   
        
June 1, 2014107,934 107,9340.90 1.25 
Total warrants107,934 107,934$               0.90 1.25 

NOTE 11 – SUBSEQUENT EVENTS

On or about January 24, 2017, the Company executed a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby all provisions of the share exchange and contribution agreement dated July 25, 2016 (see Note 5) were revoked by mutual rescission, Mountain Top Properties Inc. agreed to the immediate cancellation and surrender of the common stock certificates representing 10,000,000 shares common stock of Quantum Energy, Inc. The Company, therefore, rescinded its acquisition of 100% of the Partnership Interests of New Tex Petroleum IV, LP, a Texas limited partnership.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Quantum Energy, Inc.

We have audited the accompanying balance sheets of Quantum Energy, Inc. as of February 29, 2016 and the related statements of income, stockholders’ equity (deficit), and cash flows for the year ended February 29, 2016. Quantum Energy, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quantum Energy, Inc. as of February 29, 2016 and the related statements of income, stockholders’ equity (deficit), and cash flows for the year ended February 29, 2016 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has no revenues, has negative working capital at February 29, 2016, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ AMC Auditing

AMC Auditing

Las Vegas, Nevada

November 3, 2016

62


QUANTUM ENERGY, INC.

CONSOLIDATED BALANCE SHEET

  February 29, 2016 February 28, 2015
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents $81  $18,953 
TOTAL CURRENT ASSETS  81   18,953 
OTHER ASSETS  490,520   1,643,168 
TOTAL ASSETS $490,601  $1,662,121 
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable and accrued liabilities $15,922  $12,251 
Promissory notes payable  12,980   12,000 
Due to related party  4,800   —   
TOTAL CURRENT LIABILITIES  33,702   24,251 
LONG TERM LIABILITIES:  —     —   
TOTAL LIABILITIES  33,702   24,251 
COMMITMENTS AND CONTINGENCIES (NOTE 4)        
STOCKHOLDERS' EQUITY        
         
Preferred Stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding  —     —   
Series A: 3,000,000 shares allocated, 1,000,000 shares issued and outstanding  1,000   1,000 
Series B: 2,000,000 shares allocated, Nil and 2,000,000 shares issued and outstanding  200   200 
Common Stock, $.001 par value; 300,000,000 shares authorized; 46,070,843 and 44,816,725 shares issued and outstanding, respectively  46,071   44,817 
Additional paid-in capital  9,454,781   8,853,206 
Stock subscribed  2,890   339,118 
Accumulated deficit  (9,048,043)  (7,600,471)
TOTAL STOCKHOLDERS' EQUITY  456,899   1,637,870 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $490,601  $1,662,121 
         

63

QUANTUM ENERGY, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

  For the year ended
  February 29, 2016 February 28, 2015
OPERATING EXPENSE        
Advertising and marketing $8,128  $73,844 
Management fees  54,200   83,300 
Office and administration  69,375   202,552 
Stock option expense  83,461   933,368 
Land option expense  946,075   521,040 
Impairment of land option agreements  206,573   —   
Professional fees  78,250   182,522 
TOTAL OPERATING EXPENSES  1,446,062   1,996,626 
LOSS FROM OPERATIONS  (1,446,062)  (1,996,626)
OTHER INCOME (EXPENSE)        
   Loss on conversion of debt  —     (11,875)
   Interest expense  (1,510)  (156,564)
TOTAL OTHER INCOME (EXPENSE)  (1,510)  (168,439)
NET LOSS BEFORE INCOME TAXES  (1,447,572)  (2,165,065)
Provision for income tax  —     —   
NET LOSS $(1,447,572) $(2,165,065)
Basic and diluted loss per share $(0.03) $(0.05)
Basic and diluted weighted average number shares outstanding  45,730,614   42,667,991 

64

QUANTUM ENERGY, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

 Preferred shares Common shares            
 Number Par value Number Par value Additional Paid-In Capital Stock subscribed Accumulated (Deficit) Total
Balance at February 28, 2013              -                -       7,466,400 $   7,466 $  2,893,649 $                -    $ (5,230,053)  $   (2,328,938)
Issuance on acquisition of FTPM Resources, Inc.              -                -     30,000,000   30,000         94,994                  -                     -           124,994
Issued common shares              -                -          750,000        750         26,750                  -                     -             27,500
Stock subscribed on debt conversion              -                -                    -              -                    -        2,016,135                  -        2,016,135
Net loss for the year ended February 28, 2014              -                -                    -              -                    -                     -         (205,353)       (205,353)
Balance at February 28, 2014              -                -     38,216,400   38,216    3,015,393     2,016,135   (5,435,406)       (365,662)
Issuance of Series A preferred stock 1,000,000        1,000                 -              -       2,016,135   (2,016,135)                  -               1,000
Issuance of Series B preferred stock    200,000           200                 -              -          199,800                  -                     -           200,000
Stock subscribed on conversion of debt              -                -                    -              -                    -           309,118                  -           309,118
Stock subscribed                          -             30,000                  -             30,000
Reversal of stock purchase              -                -          250,000        250         54,750                  -                     -             55,000
Beneficial conversion feature of convertible debenture              -                -                    -              -          150,000                  -                     -           150,000
Conversion of debt              -                -       4,398,125     4,399       183,402                  -                     -           187,801
Issuance of warrants in lieu of cash for consulting and professional services                 73,303                  -                     -             73,303
Issuance of stock options in lieu of cash for consulting and professional services              -                -                    -              -          933,367                  -                     -           933,367
Issuance of stock options for land purchase option agreement              -                -                    -              -       1,321,908                  -                     -        1,321,908

Issuance of common shares in lieu of cash consulting and professional services              -                -          120,000        120         64,680                  -                     -             64,800
Common stock issued at $0.50 per share for land option agreements              -                -       1,012,200     1,012       505,088                  -                     -           506,100
Common stock issued at $0.41 per share for land option agreement              -                -          820,000        820       335,380                  -                     -           336,200
Net income (loss)              -                -                    -              -                    -                     -      (2,165,065)    (2,165,065)
Balance at February 28, 2015 1,200,000        1,200  44,816,725   44,817    8,853,206        339,118   (7,600,471)     1,637,870
Isuance of common stock for stock subscribed          309,118        309       308,809      (309,118)                  -                     -   
Stock subscribed              -                -                    -              -                    -               2,890                  -               2,890
Purchase of common shares at $0.20 per share              -                -          820,000        820       163,180        (30,000)                  -           134,000
Issuance of common shares in lieu of cash consulting and professional services              -                -          125,000        125         46,125                  -                     -             46,250
Stock based compensation              -                -                    -              -            83,461                  -                     -             83,461
Net income (loss)              -                -                    -              -                    -                     -      (1,447,572)    (1,447,572)
Balance at February 29, 2016 1,200,000        1,200  46,070,843 $ 46,071  $   9,454,781 $          2,890 $ (9,048,043)  $       456,899

65

QUANTUM ENERGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

 For the year ended
 February 29, 2016 February 28, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net loss$(1,447,572) $           (2,165,065)
Adjustments to reconcile net loss to cash used by operating activities     
    Stock based compensation                   83,461                  933,368
    Amortization expense, land purchase option agreements  946,075                  521,040
    Impairment of land option agreements  206,573   
    Issuance of common shares in lieu of cash for professional services                   46,250                  120,800
    Issuance of warrants in lieu of cash for professional services -                    73,303
    Loss on conversion of debt                           -                     317,801
Changes in operating assets and liabilities:     
    Accounts payable and accrued liabilities                     3,671                  (10,454)
    Bank indebtedness                           -                          (310)
Net cash used by operating activities               (161,542)                (209,517)
CASH FLOWS FROM INVESTING ACTIVITIES:     
Net cash used in investing activities                           -                               -   
CASH FLOWS FROM FINANCING ACTIVITIES:       
    Proceeds from sales of common stock                 134,000                            -   
    Proceeds from sales of preferred stock                           -                     200,000
    Proceeds from subscription of common stock                     2,890                    30,000
    Proceeds from loan payable                        980                            -   
    Repayment of loan, related party                           -                       (1,530)
    Proceeds from loan, related party                     4,800                            -   
    Net cash provided by financing activities                 142,670                  228,470
Net increase (decrease) in cash and cash equivalents                 (18,872)                    18,953
CASH AT BEGINNING OF PERIOD                   18,953                            -   
CASH AT END OF PERIOD$                         81 $                  18,953
      
      
SUPPLEMENTAL CASH FLOW INFORMATION:     
    Interest paid in cash$- $-
      
NON-CASH FINANCING AND INVESTING ACTIVITIES:     
    Common stock issued for land option agreements$$11-  842,300
    Stock options issued for land option agreements -  1,321,908

66

QUANTUM ENERGY, INC.

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

Period from inception to February 29, 2016

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 rail transload development, oil and gas exploration, drilling, well completion, and fuel distribution.

The Company is domiciled in the Unites States of America, trades on the OTC market under the symbol QEGY.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary FTPM Resources Ltd. after elimination of the intercompany accounts and transactions.

Going Concern

As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of February 29, 2016, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $9,048,043 at February 29, 2016. As of February 29, 2016 the Company's working capital was $33,621. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, to locate profitable mining properties and 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 production. 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. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs should the Company be unable to continue as a going concern. In the event the Company is unable to fulfill the terms as specified in the Property Option Agreements (Note 3), the Company could default on the agreement(s) and surrender its right to future claims on the respective property.

67

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to asset impairments and stock option valuation. Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations.

Cash and cash equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.

Financial Instruments

The Company's financial instruments include cash and cash equivalents, and short term notes payable, related party. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at February 29, 2016 and February 28, 2015, respectively.

Fair Value Measures

The Financial Accounting Standards Board Accounting Standards Codification Topic 820 "Fair Value Measurements" ("ASC 820") requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

At February 29, 2016 and February 28, 2015, the Company had no assets or liabilities accounted for at fair value on a recurring basis.

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 employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), employee 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-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.

68

Loss 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 for years ended February 29, 201628, 2018 and February 28, 2015,2017, would be as follows:

 

February 29, 2016 February 28, 2015 February 28, 2018 February 28, 2017
Stock options 4,961,666  5,161,666  4,100,000   6,691,666 
Warrants 107,934  107,934  2,129,802   1,177,934 
TOTAL POSSIBLE DILUTION 5,069,600  5,269,600  6,229,802   7,869,600 
            

At February 29, 201628, 2018 and February 28, 2015,2017, respectively, the effect of the Company's outstanding options and common stock equivalentswarrants would have been anti-dilutive.

 

Income Taxes

The Company recognizes provision for income tax using the liability method. Deferred income tax liabilities or assets at the end of each period are determined using the tax rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.

New Accounting PronouncementNOTE 4 - NOTES RECEIVABLE

 

In AugustApril 2016, the Company entered into several short-term promissory notes and loaned $67,500 to Sierra Global, an energy company. The notes matured in April 2017 and were interest-free. For the first twelve months, there were no monthly installment payments due to the Company. Thereafter, the monthly installment were to be $2,500 per month until paid in full.

Management reviews notes receivables periodically and reduces the carrying amount by an allowance that reflects management’s best estimate of the amount that may not be collectible. As of February 28, 2017, management determined that the notes were not collectible and recognized an expense of $67,500 for the year ended February 28, 2017.

NOTE 5 – OTHER ASSETS

Land Purchase Option Agreements

Beginning in 2014, the FASB issued ASU No. 2014-15—Presentation of Financial Statements—Going Concern. The guidance requires an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). If conditions or events exist that raise substantial doubt about an entity’s ability to continue as a going concern, the guidance requires disclosure in the financial statements. The guidance will be effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.  Early application is permitted.  The Company has concluded that adoption of the standard would have minimal impact on the Company’s financial statements as such disclosure is already included the financial statements.

NOTE 3 – OTHER ASSETS

The Company has executed a series of land purchase option agreements with various landowners in and around the State of Montana.Montana and the province of Saskatchewan. In aggregate the land purchase option agreements encompassencompassed approximately 1,150 acres. For a period of two years from the respective execution date, the Company hashad the option to purchase the property for the purpose of evaluating and developing a Clean Energy Center including a diesel refinery, crude processing and natural gas liquid stripping facility and CO2carbon dioxide capture equipment for enhanced oil recovery.

F-9

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

 

The Company recognized as a noncurrent asset the fair value of consideration given for the exclusive option to purchase has been charged to “Other Assets”properties and amortizedamortizes the amount over the respective term of the land purchase option agreement. For the years ended February 29, 201628, 2018 and February 28, 2015,2017, the Company amortized “Land Option Expense” $946,075recognized amortization of land purchase option agreements of $120,033 and $521,040,$370,488, respectively.

 

69

The Company recognized an impairment expense of $206,573 relating to certain land purchase option agreements at February 29,28, 2016. There are no liabilities or future obligations to the Company on any of the impaired land purchase option agreements. Absent notification to or from land owners, the Company retains right to purchase related properties. To date, notification of cancellation has not been communicated by either party. However, in lieu of executed extensions to the land purchase options, the Company accelerated amortization of remaining book value on those properties to which significant cash payments have been delinquent and, therefore, are potentially in default of terms of the purchase option agreement.

 

The following is a summary of the Company’s Other AssetsLand Purchase Agreements at February 29, 2016:28, 2017:

 

Option Agreement DateConsiderationNumberFair ValueAccumulated AmortizationAllowance for ImpairmentNet Book Value
August 22, 2014Stock options1,120,000$521,691($391,268)-130,423
August 22, 2014Stock options1,680,000800,217(600,163)-200,054
August 26, 2014Common shares560,000280,000(210,000)(70,000)-
August 26, 2014Common shares452,000226,100(169,575)(56,525)-
October 8, 2014Cash-(1)----
October 24, 2014Common shares820,000336,200(256,152)(80,048)-
November 12, 2014Cash-(1)-- -
December 10, 2014Cash-(1)-- -
   TOTAL  $2,164,208($1,627,158)($206,573)$537,050
       

(2)Consideration to be paid upon exercise of property option agreement. No fair value of option agreement made as of balance sheet date.
Option Agreement DateConsiderationNumberFair ValueAccumulated AmortizationAllowance for ImpairmentNet Carrying Value
August 22, 2014Stock options1,120,000$521,691($521,691)--
August 22, 2014Stock options1,680,000800,217(680,184)-120,033
August 26, 2014Common shares560,000280,000(210,000)(70,000)-
August 26, 2014Common shares452,000226,100(169,575)(56,525)-
October 24, 2014Common shares820,000336,200(256,152)(80,048)-
   TOTAL  $2,164,208($1,837,602)($206,573)$120,033

 

As of February 28, 2018, the Company’s Land Purchase agreements were fully amortized and had a net book value of $Nil.

Deposit on land purchase

On December 5, 2016, the Company executed a Farm Contract of Purchase and Sale with a land owner in Stoughton, Saskatchewan. The purchase price of the property is $500,000 (Canadian) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farm Land 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 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. The Company paid $7,822 as a deposit on the property.

NOTE 46 - ACQUISITIONS

New Tex Acquisition

On July 14, 2016, the Company entered into a share exchange and contribution agreement (“the NewTex Agreement”) with Mountain Top Properties, Inc. (“MTPP”) whereby the Company acquired 100% of the Partnership Interests of New Tex Petroleum IV, LP, (“NTP”) a Texas limited partnership.  The acquisition was effective September 1, 2016 and consisted of approximately 3,000 acres of and 89 well bores in the Texas panhandle.  In consideration of this acquisition, the Company issued 10,000,000 shares of the Company’s common stock with a fair value of $1,100,000 based on the fair value of the Company’s common stock on the transaction date. 

Neither Mountain Top Properties, Inc. nor New Tex Petroleum IV, LP were able to produce adequate accounting and operating statements for the Texas oil operation within a reasonable time following the closing of the transaction. Consequently, the Company requested a nullification of the share exchange and contribution agreement by virtue of misrepresentations by Mountain Top Properties, Inc.

F-10

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

On January 24, 2017, the Company entered into a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby both parties rescinded the New Tex Agreement.  Mountain Top Properties agreed to the immediate cancellation and surrender of stock certificates representing 10,000,000 shares of the Company’s common stock.  On February 22, 2017, 10,000,000 shares of the Company’s common stock were returned by Mountain Top Properties, Inc. and have been cancelled.

Because the transaction was deemed null and void, the consolidated financial statements do not include the acquisition, stock issuance nor the rescission of the shares of common stock.

Bushwhacker Project

On July 14, 2016, the Company entered into a separate share exchange and contribution agreement (“the Missouri Agreement”) with MTTP for an approximate 4.84% working interest in a heavy oil project in Missouri (the “Bushwhacker Project”).  In consideration of this acquisition, the Company issued 5,000,000 shares of the Company’s common stock with a fair value of $550,000 on July 29, 2016 and assumed joint interest liabilities of $33,911.

In 2017, management reviewed its Missouri Bushwhacker project.  Management's outlook for the U.S. oil prices indicated it is unlikely that sufficient price stabilization would materialize in the foreseeable future.  Internal cash flow estimates prepared by management of the Company did not prove significant fair value exists in the properties. Therefore, the undeveloped and unproved Missouri oil properties would have had impairment losses recorded.

Prior to discovering the Bushwhacker property was invalid, on January 1, 2017, the Company sold its interest to Zyrox Mining International, Inc. for $550,000 in exchange for a non-interest bearing promissory note due in full on August 18, 2019. Once the status of the Bushwhacker project was determined to be invalid, the transaction was reversed.

Management ultimately determined Mountain Top Properties improperly assigned its purported interest in the Bushwhacker Project and made incorrect representations in the share exchange and contribution agreement. As a result, the Company requested Mountain Top Properties Inc. nullify the share exchange and contribution agreement.

On February 1, 2018, the Company entered into a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby both parties rescinded the Missouri Agreement. Mountain Top Properties agreed to immediate cancellation and surrender of stock certifications representing 5,000,000 shares of the Company’s common stock. The shares were surrendered and cancelled on February 28, 2018.

Prior to discovering the Bushwhacker property was invalid, on January 1, 2017 the Company sold its interest to Zyrox Mining International, Inc. for $550,000 in exchange for a non-interest bearing promissory note due in full on August 18, 2019.  Once the status of the Bushwhacker project was determined to be invalid, the transaction was reversed.

Because the transaction was deemed null and void, the consolidated financial statements do not include the acquisition, stock issuance, nor the rescission of the shares of common stock.

Native Son Resources Inc Acquisition

On July 21, 2015, the Company formed Quantum Native Processing Partners, LLC, a single purpose entity limited liability company through which the Company entered into a joint venture with Native Son Refining, LLC (“NSR”), to co-develop property in Berthold, North Dakota, and submitted an application for an air quality construction permit with the North Dakota Department of Health for a proposed refinery.

On May 10, 2017, the Company entered into a share exchange agreement whereby it acquired 100% of the issued and outstanding shares of common stock of NSR in exchange for 14,699,800 shares of the Company’s common stock shares. The fair value of the common stock issued was $2,491,430 based on the closing price of the fair value of the Company’s common stock on the transaction date.

F-11

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

On October 26, 2017, various shareholders and directors of the Company entered into a settlement agreement and mutual release with the sole shareholder of NSR whereby the mutual share exchange agreement was rescinded and 14,699,800 shares of common stock returned to and cancelled by the Company.

Because the transaction was deemed null and void, the consolidated financial statements do not include the acquisition, stock issuance, nor the rescission of the shares of common stock. as management believes that it would be misleading to the readers of the financial statements.

NOTE 7 – PROMISSORY NOTES PAYABLE

 

The Company’s outstanding notes payable and accrued interest payable are summarized as follows:

 

 February 29, 2016 February 28, 2015
 Note payable Accrued interest Note payable Accrued interest
15% unsecured note payable by the Company due on demand$10,000 $3,760 $10,000 $2,260
TOTAL$10,000 $3,760 $10,000 $2,260
            
  February 28, 2018 February 28, 2017
0% unsecured notes payable by the Company $2,980  $2,980 
0% unsecured notes payable by the Company, related party  4,300   4,300 
  TOTAL POSSIBLE DILUTION $7,280  $7,280 
         

These notes are all due on demand.

 

NOTE 5–8 – RELATED PARTY TRANSACTIONS

 

For the years ended February 29, 201628, 2018 and February 28, 2015, respectively,2017, the Company paid management fees including amounts accrued since inception of $52,700$Nil and $26,000$196,500, respectively, to the Officers of the Company.

 

On December 7, 2016, the Company issued 2,000,000 shares with a fair value of $100,000 based on the closing price of $0.05 per share to the Chief Executive Officer of the Company’s subsidiary Dominion Energy, Inc. for consulting services.

NOTE 69COMMITMENTSINCOME TAXES

There was no income tax expense for the years ended February 28, 2018 and 2017 due to the Company’s net losses.

The components of the Company's net deferred tax asset are as follows:

  February 28, 2018 February 28, 2017
Land purchase option  —     42,000 
Federal net operating loss carryforward $783,051  $938,926 
  Total deferred tax assets  783,051   938,926 
Deferred tax liability  —     —   
  Net deferred tax asset  783,051   938,926 
Valuation allowance  (783,051)  (938,926)
  $—    $—   
         

Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be realized. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at February 28, 2018 and 2017.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completed the accounting for the effects of the Act during the quarter ended December 31, 2017. The Company’s financial statements for the year ended December 31, 2017 reflect certain effects of the Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes. As a result of the changes to tax laws and tax rates under the Act, the Company’s deferred tax asset was reduced by $522,034 during the year ended February 28, 2018, which consisted primarily of the remeasurement of its deferred tax asset from 35% to 21%.

F-12

QUANTUM ENERGY, INC. AND CONTINGENCIESSUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

A reconciliation between the statutory federal income tax rate and the Company's tax provision is as follows:

  February 28, 2018 February 28, 2017
Amount computed using the statutory rate $(157,365)  (12%) $(458,131)  (29%)
Land purchase option amortization  (238,019)  (18%)  (275,426)  (18%)
Permanent differences  29,225   2%  186,557   12%
Effect of change in the statutory rate  522,034   40%  —     -% 
Non-recognition due to increase in valuation account  (155,875)  (12%)  547,000   35%
   Total income tax benefit $—     -%  $—     -% 

At February 28, 2018, the Company had cumulative federal and state net operating loss carry forwards of approximately $3,728,816 which will expire in fiscal years ending February 28, 2030 through February 28, 2033.

 

The Company engaged the services of a government relations advisory group underdoes not have an agreement in which the payment obligation is subjectaccrual for uncertain tax positions as February 28, 2018 or 2017. If interest and penalties were to the receipt of funding. That agreement is now terminated and disputed as to its enforceability. If or when the subject funding is realized, and if or when the enforceability issue is resolved,be assessed, the Company may have a contingent liability inwould charge interest to interest expense and penalties to other operating expense.  It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the approximate amount of $75,000.reporting date. Fiscal years starting February 28, 2016 through February 28, 2018 are open to examination by federal and state taxing agencies.

 

70

NOTE 710 – COMMON STOCK

 

AuthorizedCommon stock

 

295,000,000 votingThe Company is authorized to issue 495,000,000 shares of its common sharesstock 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 one vote for each share owned at any Shareholders’ meeting.

3,000,000 convertible

Preferred stock

The Company is authorized to issue 5,000,000 shares of its preferred “A” sharesstock with a parno-par value of $0.001 per share

2,000,000 convertible preferred 6% series “B” shares with a par valueno designation of $0.001 per sharerights and preferences.  

 

 RestrictedNon-restrictedFebruary 29, 2016 RestrictedNon-restrictedFebruary 29, 2015
Common Shares       
Outstanding at beginning of period37,576,825   7,239,900               44,816,725  30,976,5007,239,900               38,216,400
   Issued1,254,118                -                    1,254,118    6,600,325              -                    6,600,325
Outstanding at end of period38,830,943   7,239,900               46,070,843  37,576,8257,239,900               44,816,725
        
Preferred Convertible Shares       
Outstanding at beginning of period                -      1,200,000       1,200,000               -    --
  Issued Series A                -                   -                      -                  -   1,000,0001,000,000
  Issued Series B                -                   -                      -                  -   200,000200,000
  Converted Series B                -        (200,000)        (200,000)               -   -                              -   
Outstanding at end of period                -      1,000,000       1,000,000               -    1,200,000                 1,200,000
        

Exchange of preferred stock

 

EachOn March 11, 2016, the Company issued 400,000 common shares issued pursuant to conversion of 200,000 Series B preferred convertible shares. On February 8, 2018, the Company’s Board of Directors cancelled and rescinded the certificate of Designations, Preferences and rights of the Series B Preferred Stock.

On December 13, 2017, the Company issued 1,000,000 shares of its common stock pursuant to a retirement of 1,000,000 shares of convertible Series A preferred stock. On February 6, 2018, the Company’s Board of Directors cancelled and rescinded the certificate of Designations, Preferences and Rights of the Series A Preferred Stock. This exchange resulted in a deemed distribution to the preferred stock is convertible intoshareholders based on the fair value of the common shares atreceived compared to the optioncarrying value of the holder on a 1:100 basis. Each of the 6% series B preferred stock is convertible into common shares on a 1:1.25 basis if converted within twelve months from the date of purchase and on a 1:1.15 basis if converted within the second twelve months from the date of purchase and on a 1:1 basis if converted in month twenty-five or thereafter from the date of purchase.exchanged.

 

Effective July 30, 2010, the Board of Directors authorized a 1,000 for 1 reverse stock split of the Company’s issued common stock. One thousand (1,000) old issued common shares were reverse split into one (1) new issued common share. All references in the accompanying financial statements to the number of commonCommon shares issued have been restated to reflect the reverse stock split.

Effective November 15, 2013 the Board of Directors authorized a 150 for 1 forward stock split of the Company’s issued common stock. One (1) old issued common share was forward split into one hundred and fifty (150) new issued common shares. All references in the accompanying financial statements to the number of common shares issued have been restated to reflect the forward stock split.

On March 4, 2014, the Company issued 750,000 common shares in conversion of a promissory note, a transaction that was authorized prior to 2/28/14 and included in the year-end balance.

services

 

71

F-13
 

On March 10, 2014,QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

In December 2016, the Company issued 625,0002,200,000 shares of its common shares in conversion of a $20,000 promissory note.

On March 19 2014, the Company issued 250,000 common sharesstock with a fair market value of $0.22$110,000 based on the closing price of $0.05 per share or $54,75 as resolution of a disputed vendor balance for professional services.

 

On March 25, 2014April 12, 2017, the Company accepted a $150,000 convertible debenture which was converted by the holder to 3,773,125 commonissued 850,000 shares of its common stock with a fair value of $85,000 based on the Company.closing price of $0.10 per share for professional services.

Common shares issued for cash

For the year ended February 28, 2017, the Company sold 6,139,800 shares of common stock at a weighted average price of $0.05 per share for proceeds of $291,990.

 

On JuneJuly 10, 2014,2017, the Company issued 120,000 common100,000 shares with a fair market value of $0.54 per share or $64,680$5,000 in consideration of consulting services rendered.common stock payable outstanding at February 28, 2016.

 

On September 2, 2014,July 11, 2017, the Company issued 1,012,000500,000 shares of common shares in considerationstock at $0.10 per share pursuant for proceeds of two Land Purchase Option Agreements,$50,000. In conjunction with this offering the fair value of which was $505,088 based on a closingCompany also issued 500,000 warrants to purchase common stock with an exercise price of $0.50$0.21 per share.share and an expiration date of July 10, 2018.

 

On November 11, 2014,February 28, 2018, the Company issued 820,000 common shares in considerationclosed a private placement of its securities (the “2018 Offering). The 2018 Offering consisted of the executionsale of a Land Purchase Option Agreement,“units” of the fair value of which was $336,200 based on a closingCompany’s securities at the per unit price of $0.41$0.15. Each unit consisted of one share of common stock 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. The proceeds of $125,000 for the 2018 Offering are classified as “Common Stock Payable” as of February 28, 2018. The shares were issued on April 4, 2018.

 

The Company received $34,000 in proceeds fromCommon stock purchase agreements; Trevor MacNeil $20,000 and Donald MacNeil $14,000 on August 10, 2015 and August 11, 2015 consecutively.retirement

 

On September 4, 2015, Trevor MacNeil was issued 100,000January 27, 2018, the former chairman of the Company’s board of directors and a current director of the Company’s board of directors agreed to return 5,000,000 shares of the Company’s common stock, respectively for an aggregate total of 10,000,000 common shares - Special Purchase Agreement signed and funds wired on August 10, 2015.for consideration of $Nil. The shares are held by the Company as authorized but unissued treasury shares as of February 28, 2018.

 

On September 4, 2015, Donald MacNeil was issued 50,000 common shares – Special Purchase Agreement signed and funds wired on August 11, 2015.NOTE 10 - STOCK OPTIONS

 

On September 4, 2015, Donald MacNeil 10,000 common sharesOptions issued to daughter as nominee – Special Purchase Agreement signed and funds wired on August 11, 2015

On November 18, 2015, the Company issued 125,000 to two vendors pursuant to an agreement to resolve disputed professional fees. The fair value of the shares issued was $46,250 based on a closing price of $0.37 per share.

NOTE 8 - STOCK OPTIONSfor consulting services

 

In consideration for the option to purchase property (see Note 4) andof various agreements in exchange for consulting services, the Company issued stock options to purchase shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered to betypically the closing price of the Company's common stock on the issue dates.

 

On August 29, 2016, the Company granted 1,000,000 options to purchase shares of its common stock with an exercise price of $0.40 for management fees and compensation. The options contain certain performance conditions. Management has assessed the likelihood of market conditions and the probability of performance conditions being realized and recognize a fair value of $51,322 for the 666,666 options that are expected to vest.

On December 2, 2016, the Company issued 2,100,000 options to purchase shares of its common stock with an exercise price of $0.22 per share for professional services and consulting. The options vest immediately and have a term of 18 months.

The Company has estimated the fair value of these option grants using the Black-Scholes model with the following information and range of assumptions:for the year ended February 28, 2017:

 

Options issued 5,161,666  3,100,000 
Aggregate fair value of options issued$2,505,659
Weighted average exercise price$0.72 $0.28 
Weight average volatility 216.2%
Expected term (years) at issuance 2.24
Weighted average volatility  305.7%
Weighted average expected term  1.98 
Weighted average risk free rate 0.79%  1.05%

 

No options were granted during the year ended February 28, 2018.

The following is a summary of the Company’s options for consulting services issued and outstanding:

 

72

F-14
 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

  For the year ended February 28, 2018 For the year ended February 28, 2017
  Options Price (a) Options Price (a)
Beginning balance  4,845,000  $0.32   3,195,000  $0.42 
   Issued  —     —     3,100,000   0.28 
   Exercised  —     —     —     —   
   Forfeited/expired  (745,000)  (0.40)  (1,450,000)  (0.44)
Ending balance  4,100,000  $0.31   4,845,000  $0.32 
                 

 Total expense under the option grants for consulting services was $83,461 and $531,970, for the years ended February 28, 2018 and 2017, respectively. These costs are classified as office and public company expense. As of February 28, 2018, there was no unrecognized stock option expense for consulting services.

Options issued for land purchase option agreements

In consideration for option agreements to purchase land located in the State of Montana (see Note 6), the Company issue stock options to purchase shares of the Company’s common stock based on "fair market price" which is typically considered the closing price of the Company's common stock on the issue dates.

The following is a summary of the Company’s options issued and outstanding:outstanding in conjunction with land purchase option agreements for the year ended February 28, 2018 and February 28, 2017, respectively:

 

For the years ended February 29, 2016 For the years ended February 28, 2015 For the year ended February 28, 2018 For the year ended February 28, 2017
 Options Price (a) Options Price (a) Options Price (a) Options Price (a)
Beginning balance 5,161,666 $0.75  5,161,666 $0.75  1,846,666  $0.98   2,966,666  $0.99 
Issued - -  - -  —     —     —     —   
Exercised - -  - -  —     —     —     —   
Expired -  -  -  -  (1,846,666) $(0.98)  (1,120,000)  1.00 
Ending balance 5,161,666 $0.75 5,161,666 $0.75  —    $—     1,846,666  $0.98 
                

(a) Weighted average exercise price.

Summary of all options granted

 

The following table summarizes additional information about theall options granted by the Company as of February 29, 2016:28, 2018:

 

Date of GrantOptions outstanding Options exercisablePrice (a) Remaining term  (b) 
        
March 27, 201475,000 75,000$               0.85 0.07 
May 30, 2014375,000 375,000               0.40 1.25 
May 30, 2014125,000 125,0000.60 0.25 
June 12, 2014875,000 875,0000.40 1.28 
July 21, 2014166,666 166,6660.75 1.39 
August 22, 20141,120,000 1,120,0001.00 0.48 
August 22, 20141,680,000 1,680,0001.00 1.48 
February 24, 2015745,000 248,3330.40 1.99 
Total options5,161,666 4,664,999$               0.75 1.23 
        
Date of Grant Options outstanding Options exercisable Price (a) Remaining term (b)
August 13, 2015  1,000,000   666,666   0.40   0.45 
August 29, 2016  1,000,000   666,666   0.40   1.50 
December 2, 2016  2,100,000   2,100,000   0.22   0.26 
Total options  4,100,000   3,433,332   0.29   0.54 
                 
(c)(a)Weighted average exercise price per shares
(d)(b)Weighted average remaining contractual term in years.

 

As of February 29, 2016, there remains $166,922 of unrecognized stock option expense.

NOTE 911 - WARRANTS

 

On June 1, 2014,November 19, 2016, in consideration for professional and consulting services provided for raising capital forconjunction with a Private Placement, the Company issued 500,000 warrants were issued to purchase shares of the Company’s common stock with an exercise price of $0.90$0.13 per share. The warrants expire on May 31, 2017. The Company charged $73,303 to professional fees and consulting which approximated the fair value of the warrants at the grant date.

The Company has estimated the fair value of the warrant grant using the Black-Scholes model with the following information and range of assumptions:

Warrants issued 107,934
Fair value of warrants granted$73,303
Exercise price$0.90
Volatility 376.9%
Expected term (years) at issuance 3.00
Risk free rate 0.79%
   

November 19, 2019.

 

73

F-15
 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

Between December 20, 2016 and January 19, 2017, in conjunction with a Private Placement, the Company issued 570,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.10 per share. The warrants expired one year from their respective date of issuance.

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 $0.10 per share. The warrants expire July 10, 2018.

On February 28, 2018, the Company issued 833,333 warrants to purchase an additional 833,333 shares of its common stock to two investors pursuant to the “2018 Offering. The term of each warrant is for twenty-four months from date of issuance with an exercise price of $1.00.

On February 28, 2018, the Company issued 296,469 warrants to purchase an additional 296,469 shares of its common stock to two service providers in lieu of cash payment for accounts payable for their participation in the 2018 Offering.

The following is a summary of the Company’s warrants issued and outstanding:

 

For the years ended February 29, 2016 For the years ended February 28, 2015 For the year ended February 28, 2018 For the year ended February 28, 2017
 Options Price (a) Options Price (a) Options Price (a) Options Price (a)
Beginning balance 107,934 $0.90  - $-  1,177,934  $0.19   107,934  $0.90 
Issued - -  107,934 0.90  1,629,802   0.76   1,070,000   0.10 
Exercised - -  - -  —     —     —     —   
Expired -  -  -  -  (677,934)  (0.19)  —     —   
Ending balance 107,934 $0.90 107,934 $0.90  2,129,802  $0.61   1,177,934  $0.19 
                

 

The following table summarizes additional information about the warrants granted by the Company as of February 29, 2016:28, 2018:

 

Date of GrantWarrants outstanding Warrants exercisablePrice Remaining term    Warrants outstanding Warrants exercisable Price Remaining term (years)
November 19, 2016  500,000   500,000   0.13   0.40 
July 10, 2017  500,000   500,000   0.21   0.36 
February 28, 2018  1,129,802   1,129,802   1.00   2.00 
Total warrants  2,129,802   1,629,802   0.61   1.55 
                    
June 1, 2014107,934 107,9340.90 1.25 
Total warrants107,934 107,934$               0.90 1.25 

 

NOTE 1012 – SUBSEQUENT EVENTS

In March 2018, by mutual agreement, the Company amended 1,100,000 options to purchase common stock at an exercise price of $0.22 per share to 242,000 options to purchase common stock at an exercise price of $1.00. The expiration date of the options was modified to December 31, 2018.

On March 16, 2018, by mutual agreement, the Company amended 666,666 options to purchase common stock at an exercise price of $0.40 per share to an exercise price of $1.00 per share. The expiration date of the options was extended to December 31, 2018.

On March 23, 2018, 666,666 options to purchase common stock at $0.40 were terminated at the request of the option holder.

On March 15, 2018, by mutual agreement, the Company amended 500,000 stock purchase warrants to an exercise price of $1.00.

On or about March 15, 2018, by mutual agreement, the Company amended 500,000 stock purchase warrants to an exercise price of $1.00 and extended the expiration date to June 9, 2020.

 

On April 7, 2016,4, 2018, the Company enteredissued 296,469 shares of its common stock to two service providers in lieu of cash payment for accounts payable pursuant to the terms of the 2018 Offering. Based on a share price of $0.15, the fair value of the shares issued was $27,198 which approximates the fair value of the consideration given and are classified as “Common Stock Payable” as of February 28, 2018.

F-16

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

On April 4, 2018, the Company issued 115,146 shares of its common stock and warrants to purchase an additional 296,469 shares of its common stock to a service provider in lieu of cash for professional services provided during March and April 2018. Based on a share price of $0.15, the fair value of the shares issued is $17,272.

On April 15, 2018, the Company executed a conditional binding letter of intent, pursuant to which upon satisfaction of certain conditions, IE Arizona, Inc, a privately-held Wyoming corporation and affiliated company of IEC Arizona, Inc (“IEC”), would be merged into a short-term promissory note and loaned $60,000 to an energy company. The note matures on April 7, 2017 and in interest-free. For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter,The proposed merger is conditioned upon, among other things, IEC’s successful completion of its due diligence examination of the monthly installmentCompany, the negotiation and execution of a definitive agreement, and IEC raising in the aggregate up to $50,000,000. Provided such conditions are satisfied including IEC’s funding of the Total Capital Investment, Quantum will issue to IEC such number of shares of Quantum common stock as shall represent 60% of the then issued and outstanding shares of Quantum common stock. Quantum will also, based on valuations yet to be $2,500 per month until paiddetermined, issue additional shares (after the initial issuance to IEC), to additional investors, as necessary to accommodate the closing of the Total Capital Investment. The combined entity will also provide the necessary funds required to prove out the viability of the development of the refinery (the “Refinery”) currently planned to be developed in full.Stoughton Saskatchewan, Canada including (a) obtaining environmental and engineering studies to prove the viability of the intended site, (b) if the site is determined to be viable, to acquire the land, (c) obtain required permits and (d) pay other related costs. The transaction is expected to be completed on or before December 31, 2018.

NOTE 13 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

 

On March 11, 2016,The following unaudited condensed financial information of Quantum Energy, Inc. (“the Company”) included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, the Company issued 400,000 common shares issued pursuantbelieves that the disclosures are adequate to conversion of 200,000 preferred shares.make the information presented not misleading. This financial information should be read in conjunction with the financial statements and notes thereto for the years ended February 28, 2018 and 2017.

 

On March 18, 2016,The financial statements included herein reflect all normal recurring adjustments that, in the Company issued 2,500,000 sharesopinion of common stock issued at $0.04 per share pursuant tomanagement, are necessary for a Special Purchase Agreement signed and funds of $100,000 wired on March 2, 2016.fair presentation.

 

On April 22, 2016, the Company issued 1,000,000 shares issued at $0.035 per share pursuant to Special Purchase Agreement signed and funds of $15,000 an $20,000 wired on April 6 and April 7, 2016, respectively.BALANCE SHEETS (UNAUDITED)

  May 31, 2017 May 31, 2016
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $2,231  $1,504 
Promissory notes receivable  —     67,500 
TOTAL CURRENT ASSETS  2,231   69,004 
OTHER ASSETS        
Deposit on land purchase  7,822   —   
Land purchase option agreements, net of accumulated amortization  60,016   365,293 
TOTAL OTHER ASSETS  67,838   365,293 
TOTAL ASSETS $70,070   434,297 
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable $58,453  $8,290 
Promissory notes payable  2,980   12,980 
Loan from related party  4,300   4,300 
TOTAL CURRENT LIABILITIES  65,733   25,570 
LONG-TERM LIABILITIES:        
Common stock payable  5,000   —   
TOTAL LONG-TERM LIABILITIES  5,000   —   
TOTAL LIABILITIES  70,733   25,570 
STOCKHOLDERS' EQUITY        
Preferred Stock, $.001 par value; 5,000,000 shares authorized, none issued and outstanding        
Series A: 3,000,000 shares allocated, 1,000,000 shares issued and outstanding  1,000   1,000 
Common Stock, $.001 par value; 295,000,000 shares authorized; 55,761,683 and 50,171,683 shares issued and outstanding, respectively  55,762   50,172 
Additional paid-in capital  10,680,218   9,806,838 
Accumulated deficit  (10,737,643)  (9,449,283)
TOTAL STOCKHOLDERS' EQUITY  (663)  408,727 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $70,070  $434,297 

On May 19, 2016, the Company issued 200,840 shares issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds received February 24 and March 2, 2016 and company expense paid on February 5, 2016.

 

74

F-17
 

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

 

EXHIBITS

STATEMENTS OF OPERATIONS (UNAUDITED)

  For the three months ended
  May 31, 2017 May 31, 2016
OPERATING EXPENSE        
Advertising and marketing $1,836  $—   
Management fees and compensation  —     46,500 
Office and public company expense  96,637   10,514 
Amortization of land purchase agreements  60,016   125,228 
Professional fees  11,250   7,500 
TOTAL OPERATING EXPENSES  169,740   189,742 
LOSS FROM OPERATIONS  (169,740)  (189,742)
OTHER INCOME (EXPENSE)        
   Interest expense  —     (583)
   Other income  —     —   
TOTAL OTHER INCOME (EXPENSE)  —     (583)
NET LOSS $(169,740) $(190,325)
Basic and diluted loss per share $(0.00) $(0.00)
Basic and diluted weighted average number shares outstanding  55,364,400   48,857,800 
         

F-18

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

 

STATEMENTS OF CASH FLOWS (UNAUDITED)

  For the three months ended
  May 31, 2017 May 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(169,740) $(190,325)
Adjustments to reconcile net loss to cash used by operating activities        
    Amortization expense, land purchase option agreements  60,017   125,228 
    Issuance of common shares in lieu of cash for services  85,000   —   
Changes in operating assets and liabilities:        
    Accounts payable  6,476   (5,470)
    Promissory notes receivable  —     —   
Net cash used by operating activities  (18,247)  (70,567)
CASH FLOWS FROM INVESTING ACTIVITIES:        
    Issuance of promissory notes receivable  —     (67,500)
Net cash used by investing activities  —     (67,500)
CASH FLOWS FROM FINANCING ACTIVITIES:        
    Proceeds from sales of common stock  —     139,990 
    Repayment of loan, related party  —     (500)
    Net cash provided by financing activities  —     139,490 
Net increase (decrease) in cash and cash equivalents  (18,247)  1,423 
CASH AT BEGINNING OF PERIOD  20,478   81 
CASH AT END OF PERIOD $2,231  $1,504 
         
NON-CASH FINANCING AND INVESTING ACTIVITIES:        
    Common stock payable for accounts payable and accrued liabilities  —     2,162 
    Conversion of preferred stock into common stock  —     200 

F-19

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

BALANCE SHEETS (UNAUDITED)

  August 31, 2017 August 31, 2016
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $6,261  $4,537 
Promissory notes receivable  —     67,500 
TOTAL CURRENT ASSETS  6,261   72,037 
OTHER ASSETS        
Deposit on land purchase  7,822   —   
Land purchase agreements, net of amortization  —     240,065 
Other assets  2,941,430   1,683,910 
TOTAL OTHER ASSETS  2,949,252   1,923,976 
TOTAL ASSETS $2,955,513   1,996,013 
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable and accrued liabilities $31,710  $67,785 
Promissory notes payable  2,980   12,980 
Loan from related party  4,300   4,300 
TOTAL CURRENT LIABILITIES  38,990   85,065 
TOTAL LIABILITIES  38,990   85,065 
STOCKHOLDERS' EQUITY        
Preferred Stock, $.001 par value; 5,000,000 shares authorized, none issued and outstanding        
Series A: 3,000,000 shares allocated, 1,000,000 and 1,000,000 shares issued and outstanding, respectively  1,000   1,000 
Common Stock, $.001 par value; 295,000,000 shares authorized; 76,061,483 and 65,671,683 shares issued and outstanding, respectively  71,061   65,672 
Additional paid-in capital  13,661,348   11,517,661 
Accumulated deficit  (10,816,886)  (9,673,385)
TOTAL STOCKHOLDERS' EQUITY  2,916,523   1,910,948 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,955,513  $1,996,013 

F-20

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

STATEMENTS OF OPERATIONS (UNAUDITED)

  For the three months ended For the six months ended
  August 31, 2017 August 31, 2016 August 31, 2017 August 31, 2016
OPERATING EXPENSE                
Advertising and marketing $5,000  $5,736  $6,836  $5,736 
Management fees and compensation  —     67,322   —     113,822 
Office and public company expense  6,727   4,846   103,364   15,360 
Amortization of land purchase option agreements  60,016   125,228   120,033   250,455 
Professional fees  7,500   20,592   18,750   28,092 
TOTAL OPERATING EXPENSES  79,243   223,723   248,983   413,465 
LOSS FROM OPERATIONS  (79,243)  (223,723)  (248,983)  (413,465)
OTHER EXPENSE                
   Interest expense  —     (378)  —     (961)
TOTAL OTHER EXPENSE  —     (378)  —     (961)
NET LOSS $(79,243) $(224,102) $(248,983) $(414,426)
Basic and diluted loss per share $(0.00) $(0.00) $(0.00) $(0.01)
Basic and diluted weighted average number shares outstanding  68,238,692   56,405,379   61,801,546   52,631,589 
                 

F-21

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

STATEMENT OF CASH FLOWS (UNAUDITED)

  For the six months ended
  August 31, 2017 August 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(248,983) $(414,426)
Adjustments to reconcile net loss to cash used by operating activities        
    Stock based compensation  —     51,322 
    Amortization of land purchase option agreements  120,033   250,455 
    Issuance of common shares for services  85,000   —   
Changes in operating assets and liabilities:        
    Accounts payable and accrued liabilities  (20,267)  20,115 
Net cash used by operating activities  (64,217)  (92,534)
CASH FLOWS FROM INVESTING ACTIVITIES:        
    Issuance of promissory note receivable  —     (67,500)
Net cash used by investing activities  —     (67,500)
CASH FLOWS FROM FINANCING ACTIVITIES:        
    Proceeds from sales of common stock  50,000   164,990 
    Repayment of loan, related party  —     (500)
    Net cash provided by financing activities  50,000   164,490 
Net increase (decrease) in cash and cash equivalents  (14,217)  4,456 
CASH AT BEGINNING OF PERIOD  20,478   81 
CASH AT END OF PERIOD $6,261  $4,538 
         
NON-CASH FINANCING AND INVESTING ACTIVITIES:        
    Common stock payable for accounts payable and accrued liabilities  —     2,162 
    Conversion of preferred stock into common stock  —     200 
         

F-22

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

BALANCE SHEETS (UNAUDITED)

  November 30, 2017 November 30, 2016
ASSETS        
CURRENT ASSETS:        
Cash and cash equivalents $3,982  $12,531 
Promissory note receivable  —     67,500 
TOTAL CURRENT ASSETS  3,982   80,031 
OTHER ASSETS        
Deposit on land purchase  7,822   —   
Land purchase agreements, net of amortization  —     180,049 
Other assets  —     1,683,910 
TOTAL OTHER ASSETS  7,822   1,863,959 
TOTAL ASSETS $11,804   1,943,990 
LIABILITIES AND STOCKHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable and accrued liabilities $85,713  $87,845 
Promissory notes payable  2,980   12,980 
Loan from related party  4,300   4,300 
TOTAL CURRENT LIABILITIES  92,993   105,125 
LONG-TERM LIABILITIES:        
Common stock payable  —     25,000 
TOTAL LONG-TERM LIABILITIES  —     25,000 
TOTAL LIABILITIES  92,993   130,125 
STOCKHOLDERS' EQUITY        
Preferred Stock, $.001 par value; 5,000,000 shares authorized, none issued and outstanding        
Series A: 3,000,000 shares allocated, 1,000,000 shares issued and outstanding, respectively  1,000   1,000 
Common Stock, $.001 par value; 295,000,000 shares authorized; 61,361,683 and 65,671,683 shares issued and outstanding, respectively  56,362   65,672 
Additional paid-in capital  10,734,618   11,517,661 
Accumulated deficit  (10,873,168)  (9,770,468)
TOTAL STOCKHOLDERS' EQUITY  (81,189)  1,813,865 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,804  $1,943,990 

F-23

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

STATEMENTS OF OPERATIONS (UNAUDITED)

  For the three months ended For the nine months ended
  November 30, 2017 November 30, 2016 November 30, 2017 November 30, 2016
OPERATING EXPENSE                
Advertising and marketing $—    $—    $6,836  $5,736 
Management fees and compensation  —     15,000   —     128,822 
Office and public company expense  (371)  14,128   102,993   29,488 
Amortization of land purchase option agreements  —     60,016   120,033   310,472 
Professional fees  56,653   7,565   75,403   35,657 
TOTAL OPERATING EXPENSES  56,282   96,709   305,265   510,174 
LOSS FROM OPERATIONS  (56,282)  (96,709)  (305,265)  (510,174)
OTHER EXPENSE                
   Interest expense  —     (374)  —     (1,335)
TOTAL OTHER EXPENSE  —     (374)  —     (1,335)
NET LOSS $(56,282) $(97,083) $(305,265) $(511,509)
Basic and diluted loss per share $(0.00) $(0.00) $(0.00) $(0.01)
Basic and diluted weighted average number shares outstanding  68,799,975   60,661,025   64,117,390   55,288,602 
                 

F-24

QUANTUM ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2018

STATEMENT OF CASH FLOWS (UNAUDITED)

 For the nine months ended
 November 30, 2017 November 20, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(305,265) $(511,509)
Adjustments to reconcile net loss to cash used by operating activities        
    Amortization of land purchase option agreements  120,033   310,472 
    Issuance of common shares for services  85,000   —   
Changes in operating assets and liabilities:        
    Accounts payable  33,736   40,176 
Net cash used by operating activities  (66,496)  (109,540)
CASH FLOWS FROM INVESTING ACTIVITIES:        
    Issuance of promissory notes receivable  —     (67,500)
Net cash used by investing activities  (67,500)    
CASH FLOWS FROM FINANCING ACTIVITIES:        
    Proceeds from sales of common stock  50,000   189,990 
    Repayment of loan, related party  —     (500)
    Net cash provided by financing activities  50,000   189,490 
Net increase (decrease) in cash and cash equivalents  (16,496)  12,450 
CASH AT BEGINNING OF PERIOD  20,478   81 
CASH AT END OF PERIOD $3,982  $12,531 
NON-CASH FINANCING AND INVESTING ACTIVITIES:        
    Common stock payable for accounts payable and accrued liabilities $$  $2,162 
    Conversion of preferred stock into common stock $—     200 

F-25

Exhibit Index

Exhibit

Number

 

Description of Exhibit

 

Filing

3.013.1Articles of Incorporation*Filed Herewith
3.2By-Laws*Filed Herewith
3.3Amendment to Articles of IncorporationFiled herewith.Herewith
3.025.1Legal Opinion Brunson Chandler Jones, PLLC*Filed Herewith
5.2Legal Opinion of Jerold N. Siegan++To be filed with Amendment
10.1Audit Committee CharterFiled Herewith
10.2Compensation Committee CharterFiled Herewith
10.3BylawsNominating and Corporate Governance Committee CharterFiled herewith.Herewith
3.0310.4Certificate of AmendmentMountain Top Mutua Rescission Agreement dated January 15, 2018Filed herewithHerewith
5.0110.5Legal Opinion of Brunson Chandler & Jones, PLLCNative Son Settlement Agreement and Mutual Release dated October 26, 2017Filed herewith.Herewith
21.0110.6ListCancellation of SubsidiariesSeries A Preferred StockFiled herewith.Herewith
23.0110.7Auditor ConsentCancellation of Series B Preferred StockFiled herewith.Herewith
23.0210.8Resignation of Lorne Keith Stemler as a director and officerFiled Herewith
10.9Resignation of Stanley F. Wilson as a director and officerFiled Herewith
10.10Land Contract and extensionFiled Herewith
14.1Code of Business Conduct and EthicsFiled Herewith
23.2Consent of Brunson ChandlerDeCoria, Maichel & Jones, PLLCTeague, CPAsIncluded in Exhibit 5.01,Filed Herewith
23.3Consent of Jerold N. Siegan++To be filed herewith.with Amendment

 

75

UNDERTAKINGS

The undersigned registrant hereby undertakes:

 

1.To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

i.To include any Prospectusprospectus required by section 10(a)(3) of the Securities Act of 1933;

 

ii.

To reflect in the Prospectusprospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectusprospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

iii.To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

 

2.

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

3.To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

4.That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

F-26

i.

Any Preliminary Prospectuspreliminary prospectus or Prospectusprospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

ii.Any free writing Prospectusprospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

iii.

The portion of any other free writing Prospectusprospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

iv.Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

5. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: Each Prospectusprospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than Prospectusesprospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or Prospectusprospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or Prospectusprospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectusprospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.

76

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized on March 3, 2017.June 26, 2018.  

 

Quantum Energy, Inc.
  
By:

/s/ Stanley F. WilsonJeffrey Mallmes

 
 Stanley F. WilsonJeffrey Mallmes 
 

Chief Executive Officer

(Principal Executive Officer)

 

Quantum Energy, Inc.
  
By:

/s/ Stanley F. WilsonJeffrey Mallmes

 
 Stanley F. WilsonJeffrey Mallmes 
 Principal Financial Officer

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Name Title Date
/s/ Stanley F. WilsonJeffrey Mallmes CEO, Chairman, Secretary,President and Treasurer March 3, 2017June 26, 2018
Stanley F. WilsonJeffrey Mallmes    

 

 

77

F-27