Docoh
Loading...

QEGY Quantum Energy

Filed: 27 Jul 21, 2:05pm
 
 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended May 31, 2021

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

Commission file number 333-225892

 

Quantum Energy, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

98-0428608

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  

3825 Rockbottom

North Las Vegas, NV  

89030

(Address of principal executive offices)

(Zip Code)

 

Registrant's telephone number, including area code: 702-323-6455

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange
on Which Registered

Common stock, $0.001 Par Value

QEGY

OTC.PK

 

Securities registered pursuant to Section 12(g) of the Act:
None

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically on its corporate Website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit filed). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer     

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

The number of shares of issuer’s common stock, par value $0.001 per share, outstanding as of May 31, 2021 was approximately 48,491,485.

 

Page 1

 

 

Contents

 

PART I - FINANCIAL INFORMATION

3

  

ITEM 1. FINANCIAL STATEMENTS

3

  

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.

15

  

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

19

  

ITEM 4.   CONTROLS AND PROCEDURES

19

  

PART II - OTHER INFORMATION

20

  

ITEM 1.   LEGAL PROCEEDINGS.

20

  

ITEM 1A.   RISK FACTORS.

20

  

ITEM 2.   RECENT SALES OF UNREGISTERED SECURITIES.

20

  

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

21

  

ITEM 4.   MINE SAFETY DISCLOSURES.

21

  

ITEM 5.   OTHER INFORMATION.

21

  

ITEM 6. EXHIBITS.

21

 

Page 2

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

QUANTUM ENERGY, INC.

 
 

CONDENSED CONSOLIDATED BALANCE SHEETS  UNAUDITED

 

 

  

May 31,

  

February 28,

 
  

2021

  

2021

 
         

ASSETS

        

Current Assets

        

Cash

 $1,353,848  $47 
         

Total Current Assets

  1,353,848   47 
         

Investment - IEC

  3,630,000    
         

Total Assets

 $4,983,848  $47 
         
         

LIABILITIES AND STOCKHOLDERS' DEFICIT

        
         

Current Liabilities

        

Accounts Payable and Accrued Expenses

 $210,740  $220,140 

Accounts Payable and Accrued Expenses - Related Parties

  677,311   343,770 

Common Stock Payable

  6,180,170   200,000 

Convertible Note Payable

     67,500 

Derivative Liability

     116,399 

Promissory Notes Payable

  76,305   76,305 

Promissory Notes Payable - Related Parties

  106,015   106,015 
         

Total Current Liabilities

  7,250,541   1,130,129 
         

Total Liabilities

  7,250,541   1,130,129 
         
         
         

Stockholders' Deficit

        

Common Stock - $0.001 Par; 495,000,000 Shares Authorized, 48,491,485 Issued and Outstanding, Respectively

  48,491   48,491 

Additional Paid-In-Capital

  11,449,681   11,449,681 

Accumulated Deficit

  (13,764,865)  (12,628,254)
         

Total Stockholders' Deficit

  (2,266,693)  (1,130,082)
         

Total Liabilities and Stockholders' Deficit

 $4,983,848  $47 

 

The accompany notes are an integral part of these financial statements.

 

Page 3

 

 

QUANTUM ENERGY, INC.

 
 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED

 

 

  

For the Three Months Ended

 
  

May 31,

  

May 31,

 
  

2021

  

2020

 
         

Sales - Related Party

 $541,211  $ 
         

Operating Expenses

        

Advertising and Marketing

      

Management Fees and Consulting

  56,250    

General and Administrative

  335,667    

Professional Fees

  881,721    
         

Total Operating Expenses

  1,273,638    
         

Loss Before Other Income and (Expense)

  (732,427)   
         

Other Income and (Expense)

        

Gain on Debt Conversion

  140,395    

Gain on Derivative

     20,441 

Interest Expense

  (3,368)  (7,379)
         

Total Other Income and (Expense)

  137,027   13,062 
         

Income (Loss) Before Income Tax Expense

  (595,400)  13,062 
         

Income Tax Expense

      
         

Net Income (Loss) for the Period

 $(595,400) $13,062 
         

Weighted Average Number of Common Shares -

        

Basic and Diluted

  48,491,485   48,491,485 
         

Net Income (Loss) for the Period Per Common Shares -

        

Basic and Diluted

 $(0.01) $0.00 

 

The accompany notes are an integral part of these financial statements.

 

Page 4

 

 

QUANTUM ENERGY, INC.

 
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

 

  

For the Three Months Ended

 
  

May 31,

  

May 31,

 
  

2021

  

2020

 
         

Cash Flows from Operating Activities

        
         

Net Income (Loss) for the Period

 $(595,400) $13,062 
         

Non-Cash Adjustments:

        

Gain on Derivative

     (20,441)

Gain on Debt Conversion

  (140,395)   

Changes in Assets and Liabilities:

        

Accounts Receivable

  (541,211)   

Accounts Payable and Accrued Expenses

  14,596   7,379 

Accounts Payable and Accrued Expenses - Related Parties

  333,541    
         

Net Cash Flows Used In Operating Activities

  (928,869)   
         

Cash Flows from Investing Activities

        

Cash Paid for Investment

  (3,630,000)   
         

Net Cash Flows Used In Investing Activities

  (3,630,000)   
         

Cash Flows from Financing Activities

        

Cash Received for Stock Payable

  5,980,170    

Repayment of Convertible Note Payable

  (67,500)   
         

Net Cash Flows Provided By Financing Activities

  5,912,670    
         

Net Change in Cash

  1,353,801    
         

Cash - Beginning of Period

  47   47 
         

Cash - End of Period

 $1,353,848  $47 
         

Cash Paid During the Period for:

        

Interest

 $2,500  $ 

Income Taxes

 $  $ 

 

The accompany notes are an integral part of these financial statements.

 

Page 5

 

 

QUANTUM ENERGY, INC.

 
 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE ENDED MAY 31, 2021 AND 2020  UNAUDITED

 

 

  

Common Stock

  

Additional

      

Total

 
  

$0.001 Par

  

Paid-In

  

Accumulated

  

Stockholders'

 
  

Shares

  

Amount

  

Capital

  

Deficit

  

Deficit

 
                     

Balance - March 1, 2020

  48,491,485  $48,491  $11,449,681  $(12,410,855) $(912,683)
                     

Net Income for the Period

           13,062   13,062 
                     

Balance - May 31, 2020

  48,491,485  $48,491  $11,449,681  $(12,397,793) $(899,621)
                     
                     
                     

Balance - March 1, 2021

  48,491,485  $48,491  $11,449,681  $(12,628,254) $(1,130,082)
                     

Net Loss for the Period

           (595,400)  (595,400)
                     

Balance - May 31, 2021

  48,491,485  $48,491  $11,449,681  $(13,223,654) $(1,725,482)

 

Page 6

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

 

NOTE 1 - NATURE OF OPERATIONS

 

QUANTUM ENERGY INC. (“the Company”) was incorporated under the name “Boomers Cultural Development Inc.” under the laws of the State of Nevada on February 5, 2004. On May 18, 2006, the Company changed its name to Quantum Energy, Inc.

 

The Company is a development stage diversified holding company; with operations centered on the refining of rare earth materials and the production of magnets and magnetic assemblies including an emphasis in real estate holdings, refinery assets, and related waste water treatment assets and operations.

 

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

 

 

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed consolidated balance sheet has been derived from the February 28, 2021 audited financial statements and the unaudited condensed consolidated financial statements as of May 31, 2021 and 2020, have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements and related footnotes included in our Annual report on Form 10-K for the year ended February 28, 2021 (the “2021 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for fair condensed consolidated financial statements presentation. Operating results for the three months ended May 31, 2021, are not necessarily indicative of the results of operations expected for the year ending February 28, 2021. 

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company after elimination of the intercompany accounts and transactions.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Risks and uncertainties

 

The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.

 

Cash and cash equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.

 

Page 7

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued

 

Fair value of financial instruments

 

The Company's financial instruments include cash and cash equivalents, promissory notes payable, and promissory notes payable - related parties. All instruments are accounted for on a cost basis, which, due to the short maturity of these financial instruments, approximates fair value at May 31, 2021 and February 28, 2021, respectively.

 

When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

 

At May 31, 2021 and February 28, 2021, the Company had no assets or liabilities accounted for at fair value on a recurring basis.

 

Long-Lived Assets

 

The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.

 

Stock-based Compensation

 

The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.

 

Related Parties

 

In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Page 8

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued

 

New Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including the new lease standard. The Company does not have any leases and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

 

 

NOTE 3GOING CONCERN

 

These condensed consolidated financial statements have been prepared in accordance with U.S. GAAP to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

 

As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of May 31, 2021 and February 28, 2021, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at May 31, 2021 and February 28, 2021. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, generate revenue from current and planned business operations, and control costs. The Company plans to fund its future operations by joint venturing, obtaining additional financing from investors, and/or lenders, and attaining additional commercial revenue. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists.

 

 

 

NOTE 4EARNINGS PER SHARE

 

Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.

 

The dilutive effect of outstanding securities as of May 31, 2021 and February 28, 2021, respectively, would be as follows:

 

  

May 31,

2021

  

February 28,

2021

 

Warrants

  2,425,000   2,925,000 

TOTAL POSSIBLE DILUTION

  2,425,000   2,925,000 

 

At May 31, 2021 and February 28, 2021, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.

 

 

 

NOTE 5OTHER ASSETS

 

Peconic Note Receivable

On April 17, 2019, the Company loaned funds under a secured convertible promissory note (“Peconic Note”) to Peconic Energy, Inc. (“Peconic”) for the principal amount of $30,000 with the principal balance and all accrued interest being due and payable 18 months from the date of the note. Interest shall be accrued at rate of 12% per annum or 40% of the gross revenues generated by the maker, whichever is greater. The Peconic Note is secured by 100% of the Peconic’s assets and is convertible at any time during the term of the note into 40% of the Peconic’s assets. For the period ended May 31, 2019, it was determined that it was highly unlikely that the Company would collect this note receivable. Therefore, the Company allowed for this note in the amount of $30,000 on May 31, 2019.

 

Page 9

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 5OTHER ASSETS - continued

 

Deposit on land purchase

 

On December 5, 2016, the Company executed a Farm Contract of Purchase and Sale with a landowner in Stoughton, Saskatchewan (“the Stoughton Agreement”). The purchase price of the property is $500,000 (Canadian) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farmland Review board, the Company completing various test for hydrology and land suitability, the proposed refinery project meeting all requirements of various Saskatchewan government laws and bylaws, and full approval by all levels of provincial government and agencies. The Company paid $7,822 as a deposit on the property.

 

The purchase contract originally expired on December 15, 2017; however, the contract was amended to extend the closing date to July 10, 2018 for removal of all terms and conditions to the purchase.

 

On June 8, 2018, the Company amended the Stoughton Agreement to a purchase price of $525,000 (Canadian) and extended the option to purchase the property until December 31, 2018 for no additional consideration. The Stoughton Agreement expired on December 31, 2018.

 

On June 3, 2019, by mutual agreement of the parties, the Stoughton Agreement was extended until October 31, 2019 for no additional consideration. At the date of the report for the period ended May 31, 2019, the Stoughton Agreement had been terminated. (Note 13). Due to the termination of the agreement, the Company reclassed this deposit of $7,822 to accounts payable related party as the deposit was refunded but the money was given to a related party to pay amounts due him.

 

 

 

NOTE 6PROMISSORY and CONVERTIBLE NOTES PAYABLE

 

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

 

  

May 31,

2021

  

February 28

2021

 

0% unsecured note payable - December 2013, due on demand

 $2,000  $2,000 

0% unsecured note payable - November 2015, due on demand

  980   980 

8% unsecured note payable - October 2018, due on demand

  5,000   5,000 

6% unsecured note payable – April 2019, due on demand

  3,325   3,325 

8% unsecured notes payable - October 2019, due on demand

  65,000   65,000 
         

Total Notes Payable

 $76,305  $76,305 

 

Interest expense for the three months ended May 31, 2021 and 2020 was $1,913 and $1,953, respectively. Interest expense for the three months ended May 31, 2021 and 2019 was $4,357 and $1,121, respectively.

 

Convertible note payable consists of one note payable in the amount of $-0- and $67,500 at May 31, 2021 and February 28, 2021, respectively. The note which was issued in April 2019 for $45,000 accrues interest at an annual rate of 12% and matures in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%.

 

Page 10

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 6PROMISSORY and CONVERTIBLE NOTES PAYABLE - continued

 

The conversion option expires on October 7, 2020.

 

On June 18, 2019, the Company received a default notice from Power Up stating that the Company is in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company reached a settlement of this matter with Power Up as of April 2021 in the amount of $70,200.

 

 

 

NOTE 7PROMISSORY NOTES PAYABLE, RELATED PARTY AND OTHER RELATED PARTY TRANSACTIONS

 

The Company’s outstanding notes payable, related party are summarized as follows:

 

  

May 31,

2021

  

February 28,

2021

 

0% unsecured note payable - October 2015, due on demand

 $2,300  $2,300 

0% unsecured note payable – November 2015, due on demand

  2,000   2,000 

8% unsecured note payable - October 2018, due on demand

  60,000   60,000 

6% unsecured note payable – April 2019, due on demand

  15,825   15,825 

6% unsecured note payable – April 2019, due on demand

  15,890   15,890 

8% unsecured note payable - October 2019, due on demand

  10,000   10,000 

TOTAL

 $106,015  $106,015 

 

Interest expense for the three months ended May 31, 2021 and 2019 was $1.894 and $1,714, respectively. Interest expense for the three months ended May 31, 2021 and 2019 was $5,721 and $6,834, respectively.

 

Certain officers and directors of the Company had paid various expenses on behalf of the Company. Balances due to the officers, directors and a related company for reimbursement of these expenses were $173,969 and $158,969 at May 31, 2021 and February 28, 2021, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the condensed consolidated balance sheets.

 

Page 11

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

 

NOTE 8COMMON STOCK

 

Common stock

 

The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting.

 

Preferred stock

 

The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-par value per share with no designation of rights and preferences.  

 

Common shares issued for cash

 

On February 28, 2018, the Company closed a private placement of its securities (the “2018 Offering). The 2018 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.15. Each unit consisted of one share of common stock and one warrant to purchase an additional share of common stock. Warrants issued pursuant to the 2018 Offering entitled the holders to purchase shares of common stock for the price of $0.15 per share. The term of each warrant is for twenty-four months from date of issuance. Total proceeds of $125,000 for the sale of 833,333 units were received prior to February 28, 2018 but the shares of common stock had not been issued until after that date. Thus, the proceeds are classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.

 

On March 01, 2021, the Company a private placement of its securities (the “2021 Offering”). The 2021 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.25. 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 2021 Offering entitled the holders to purchase shares of common stock for the price of $0.25 per share. The term of each warrant is for twenty-four months from date of issuance. Total proceeds of $2,570,925 was received with no issuance has been rendered to datre. Thus, the proceeds are classified as “Common Stock Payable” as of May 31, 2021. The Company intends to issue these shares sometime in the second to third quarter of its fiscal year.

 

Common stock retirement

 

On January 27, 2018, the former chairman of the Company’s board of directors and a current director of the Company’s board of directors each agreed to return 5,000,000 shares of the Company’s common stock for an aggregate total of 10,000,000 common shares for consideration of $Nil. The shares are held by the Company as authorized but unissued treasury shares as of May 31, 2021.

 

 

 

NOTE 9 - WARRANTS

 

On July 10, 2017, in conjunction with a Private Placement, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.21 per share expiring in one year. In March 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.21 per share to $1.00 per share and extended the expiration date to June 9, 2020.

 

On March 20, 2019 and April 17, 2019, the Company issued 1,250,000 and 675,000 warrants respectively to purchase 1,925,000 additional shares of its common stock to eight investors. Each warrant is for thirty-six months from date of issuance with an exercise price of $0.25. The value of the warrants calculated at March 20 and April 17, 2019 was $200,439 and $76,243 for a combined total of $276,682 and is in included in interest expense -warrants on the condensed consolidated statements of operations for the three months ended May 31, 2019. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, a volatility of 228% and a discount bond equivalent range of 2.34% - 2.37%.

 

Page 12

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 9WARRANTS - continued

 

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

 

  

May 31, 2021

  

February 28, 2021

 
  

Warrants

  

Price (a)

  

Warrants

  

Price (a)

 

Beginning balance

  2,925,000  $.25   3,925,000  $.25 

Issued

 

 

––  

 

––  

 

––  

 

–– 

Exercised

 

 

––  

 

––  

 

––  

 

–– 

Expired

  (500,000) 

 

––   (1,000,000) 

 

–– 

Ending balance

  2,425,000  $0.25   2,925,000  $.25 

 

 

(a)

Weighted average exercise price per shares

 

The following table summarizes additional information about the warrants granted by the Company as of May 31, 2021 and February 28, 2021:

 

Date of Grant

 

Warrants
outstanding

  

Warrants
exercisable

  

Price

  

Remaining

term
(years)

 

July 10, 2017

  500,000   500,000   .25   0.58 

March 20, 2019

  1,250,000   1,250,000   .25   0.80 

April 17, 2019

  675,000   675,000   .25   0.88 

Total warrants

  2,425,000   2,425,000  $.25   .77 

 

 

 

NOTE 10OTHER MATTERS- Joint Venture

 

Easy Energy Systems Inc. Memorandums of Understanding

On April 2, 2019, the Company and its subsidiary FTPM Resources, Inc. entered into a Non-Binding Memorandum of Understanding (“MOU-1”) with Easy Energy Systems, Inc. (“EESI Systems”).

 

On April 16, 2016 the Company entered into a separate Non-Binding Memorandum of Understanding (“MOU-2”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”).

 

As of May 9, 2021, no action has been performed under either MOU.

 

Page 13

 

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

MAY 31, 2021

 

 

NOTE 10OTHER MATTERS- Joint Venture - continued

 

Private Placement Raul Factor

At February 28, 2021, the purchase price for the joint venture was expensed as it was determined that the joint venture was not viable. The Company is currently working on agreeable terms and conditions with the Parties to the failed joint venture and parties therein.

 

Page 14

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

 

Any statement that expresses or involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

 

 

Risks related to government regulation;

 

 

Risks related to environmental concerns;

 

 

Risks related to the Company’s ability to obtain additional required capital

 

 

Risks related to the Company’s insurance coverage for operating risks;

 

 

Risks related to the fluctuation of prices for crude oil;

 

 

Risks related to the competitive oil refinery industry;

 

 

Risks related to the possible dilution of the Company’s common stock from additional financing activities;

 

 

Risks related to potential conflicts of interest with the Company’s management;

 

 

Risks related to the Company’s shares of common stock.

 

This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections “Description of Business” and “Management’s Discussion and Analysis and Plan of Operation” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Quantum Energy, Inc. disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Quantum Energy, Inc. qualifies all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statement.

 

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect,” and similar expressions include the Company’s expectations and objectives regarding its future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis and Plan of Operation” and elsewhere in this Quarterly Report.

 

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Quantum Energy,”, “Quantum” and the “Company”, mean Quantum Energy, Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

 

Page 15

 

The following statements may be forward-looking in nature and actual results may differ materially.

 

OFFICES

 

Our principal executive offices are located at 3825 Rockbottom, Henderson, Nevada. The Company’s telephone number is (702) 323-6455. Our website is www.quantum-e.com and is not part of this Quarterly Report.

 

Historical Operations

 

The Company originally incorporated as Boomers Cultural Development, Inc. (“Boomers”) on February 5, 2004, in the State of Nevada to be a service-oriented firm that would integrate the cultural interests of baby boomers with destination learning, by packaging onsite personal growth, education, and entertainment seminars with a variety of vacation destinations. On May 18, 2006, its name was changed to Quantum Energy, Inc. and business plans were changed to focus on the energy industry and in particular the oil and gas segments of the energy industry. From 2008 through 2010, the Company planned, when and if funding became available, to acquire high-quality oil and gas properties, primarily proven producing and proven undeveloped reserves as well as exploring low-risk development drilling and work-over opportunities with experienced, well-established operators. However, the anticipated funding opportunities did not materialize.

 

The business plan from 2008 to 2020 included our plan to develop, construct and operate a “state-of-the-art”, energy efficient, full slate oil refinery including a storage tank farm and associated facilities in Stoughton, Saskatchewan, Canada (the Stoughton Refinery”). In this regard, on August 2, 2016, the Company formed a Canadian subsidiary, Dominion Energy Processing Group, Inc. for purposes of the Pre-development work, construction and operation of the Stoughton Refinery.

 

The Company previously identified a 480-acre site in Stoughton Saskatchewan (the “Land”) on which it planned to construct the Stoughton Refinery. However, we never obtained the necessary funding to build the finery and so in 2020, it we gave up on that idea.

 

The Company partnered with and form a strategic alliance with Inductanc Energer Corporation in 2019 finding tactical advantages through solutions in mining, producing, trading, and manufacturing components and working instruments from rare earth metals and oxides. Within this alliance the two companies also found leadership and specialized talent advantages, thereby fulfilling the Company’s long past due SEC compliance and raising investors interest and awareness to the need and opportunity within the solving cost reduction rare earth production and manufacturing innovative devices for keeping up technology over the next era of energy supply and demand.

 

Current Business Strategy

 

On September 22, 2020 the Company entered into a joint development agreement with MP Special Purpose Corporation to enter into the business of mining and refining rare earth materials.

 

The Company developed a straightforward strategic and tactical business plan that could be executed around 3 basic business segments: Mining, Minerals and Magnets. These 3 segments would become a highly focused center of work for the Company.

 

Various work at the Company by its technical committee had shown that the Company could enter the mining industry through a very unique path of recovering rare earth and ferrite magnet material from discarded appliances, computers, and other sources in the United States and Canada. Secondly, the Company would concentrate its efforts on the recovery of rare earth materials from other waste streams including fly ash and fly bottom waste streams from combusted coal burning power plants in the United States and Canada. It is estimated that over 1 billion tons of this material exists and dumpsites, and far greater than 4 billion pounds of this material is still generated from coal burning power plants and other sources in the United States alone each and every year.

 

Page 16

 

Successful recovery from these waste streams are described as follows;

 

 

 

1.

Rare Earth and Ferrite (Iron) Magnets that are used in a wide variety of appliances and electronics that can be recovered, that were disposed of in the United States and Canada. These appliances include; televisions, computers, refrigerators, microwaves, dishwashers, as well as motor vehicles, and used electrical motors. Quantum is working with a wide variety of returned merchandise centers, landfills, and other recycling businesses to secure these resources. These types of magnet resources can be mechanically gathered, and reprocessed for use by IEC, and other customers.

 

 

 

2.

Fly ash and fly bottom waste streams. Fly ash and fly bottom waste streams are the remaining byproduct of coal combustion. There are billions of pounds of fly ash and fly bottom waste that are produced each and every year in the United States and Canada, as well as foreign countries. Currently Quantum has two large developmental projects to recover and test both fly ash and fly bottom waste streams for their rare earth content. These two sources currently produce just over 1.4 billion pounds of fly ash and fly bottom waste on an annual basis. Well-known resource testing shows that most fly ash, as well as fly bottom waste streams on average contain about 1.85% rare earth material.

 

 

 

3.

Coal and other mining resources. Currently in the United States and Canada, the mining of coal to be consumed in coal power plants is in rapid decline. Coal producing states such as Wyoming, Kentucky, and West Virginia must move from a coal-based economy or continue to face declining royalty revenues from these natural resources. Rare earth minerals could be one answer to this problem. It is well known from a wide variety of Department of Energy studies that coal, and coal byproducts contain high concentrations of rare earth materials. Quantum is in negotiations with several operating and now defunct coal bearing properties in order to secure rights to process and refine rare earth materials.

 

Governmental Regulation

 

 

All of our contemplated operations and properties are and will be subject to extensive Canadian and U.S. federal, provincial, state and local environmental and health and safety regulations governing, among other things, the generation, storage, handling, use and transportation of rare earth minerals; the emission and discharge of materials into the environment; waste management. Our operations also require numerous permits and authorizations under various environmental and health and safety laws and regulations. Failure to comply with these permits or environmental laws generally could result in fines, penalties or other sanctions or a revocation of our permits. We will have to make significant capital and other expenditures related to environmental and health and safety compliance, including with respect to our air permits and the low-sulfur gasoline and ultra-low-sulfur diesel regulations.

 

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.

 

Page 17

 

Results of Operations

 

Three Months Ended May 31, 2021 Compared to Three Months Ended May 31, 2020. 

 

Operating expenses for the three months ended May 31, 2021 was $4,854 compared to $56,145 for the three months ended May 31, 2020. The decrease in operating expenses was due to the fact that the Company had no cash to operate and therefore all activity ceased. Other income for the three months ended May 31, 2021 was $225,627 compared to $21,065 for the three months ended May 31, 2020. This increase in income was due to an increase in gain on derivative of $205,440.

 

Net Loss

 

Net income (loss) for the three months ended May 31, 2021 and 2019 was $220,773 and $(35,080), respectively. The increase in net income of $255,853 was due to the decrease in operating expenses of $51,291 and increase in gain on derivative of $205,440.

 

Three Months Ended May 31, 2021 Compared to Three Months Ended May 31, 2020. 

 

Operating expenses for the three months ended May 31, 2021 was $4,854 compared to $231,123 for the three months ended May 31, 2020. The decrease in operating expenses was due to the fact that the Company had no cash to operate and therefore all activity ceased. Other expenses for the three months ended May 31, 2021 was $43,189 compared to $636,382 for the three months ended May 31, 2020. During the three months ended May 31, 2021 the Company had $-0- in bad debts, $21,972 loss on derivative for a convertible note payable, incurred $21,217 in interest expense and had $-0- in interest expense – warrants, compared to the three months ended May 31, 2020 the Company had $30,000 in bad debts, $114,736 loss on derivative for a convertible note payable, incurred $38,385 in interest expense and had $453,261 in interest expense – warrants.

 

Net Loss

 

Net loss for the three months ended May 31, 2021 and 2019 was $48,043 and $867,505, respectively. The decrease in loss of $819,462 was due to the decrease in operating expenses of $226,269 and the changes to other expenses as mentioned above.

 

Liquidity and Capital Resources:

 

As of May 31, 2021, our assets totaled $47 which consisted of cash. The Company's total liabilities were $960,773, which consisted of accounts payable and accrued expenses, accounts payable and accrued expenses – related parties, common stock payable, convertible note payable, derivative liability, promissory notes payable and promissory notes payable – related parties. As of May 31, 2021, the Company had an accumulated deficit of $12,458,898 and working capital deficit of $960,726.

 

The Company's significant operating losses raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As indicated herein, we need capital for the implementation of our business plan, and we will need additional capital for continuing our operations.  We do not have sufficient revenues to pay our operating expenses at this time.  Unless the Company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan. For the next 12 months the Company has an oral commitment from its CEO to advance funds as necessary to meeting our operating requirement.

 

Page 18

 

Cash (Used in) Operating Activities

 

Net cash used in operating activities for the three months ended May 31, 2021 and 2020 were $-0- and $212,497, respectively. The decrease amount was attributed to interest expense on convertible note warrants and loss on derivative.

 

Cash from Investing Activities

 

Net cash used in investing activities was $-0- and $150,000 for the three months ended May 31, 2021 and 2019, respectively.

 

Cash from Financing Activities

 

Net cash provided by financing activities was $-0- for the three months ended May 31, 2021, and was $370,014 for three months ended May 31, 2020, which was all due to cash received from notes payable.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company does not hold any derivative instruments and does not engage in any hedging activities.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2021.

 

Our management, with the participation of our president (our principal executive officer, principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer, principal accounting officer and principal financial officer) has concluded that, as of the end of such period, our disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our president (our principal executive officer and our principal accounting officer and principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.

 

 

1)

We have an inadequate number of administrative personnel.

 

2)

We do not have sufficient segregation of duties within our accounting functions.

 

3)

We have insufficient written policies and procedures over our disclosures.

 

The reason for this deficiency relates to the fact that our management is relying on external consultants for purposes of preparing our financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.

 

Evaluation of Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our Company’s assets that could have a material affect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

 

Page 19

 

Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management has conducted, with the participation of our president, our principal executive officer and our principal accounting officer and principal financial officer, an evaluation of the effectiveness of our internal control over financial reporting as of May 31, 2021 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of May 31, 2021, our Company’s internal control over financial reporting was not effective based on present Company activity. Our Company is in the process of adopting specific internal control mechanisms. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over Company activities as well as more stringent accounting policies to track and update our financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above during the quarter ended May 31, 2021 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS.

 

Quantum Energy, Inc. is not a party to any material legal proceedings and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of Quantum Energy, Inc. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to Quantum Energy, Inc. or has a material interest adverse to Quantum Energy, Inc. in reference to pending litigation.

 

ITEM 1A.

RISK FACTORS.

 

Not applicable.

 

ITEM 2.

RECENT SALES OF UNREGISTERED SECURITIES.

 

None.

 

Page 20

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

None

 

ITEM 5.

OTHER INFORMATION.

 

None

 

ITEM 6.

EXHIBITS.

 

Exhibit

 

Number

Description of Exhibits

  

31.1

Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  

31.2

Certification of Principal Accounting Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  

32.1

Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  

32.2

Certification of Principal Accounting Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  

101.INS

XBRL Instance

  

101.SCH*

XBRL Taxonomy Extension Schema

  

101.CAL*

XBRL Taxonomy Extension Calculation

  

101.DEF*

XBRL Taxonomy Extension Definition

  

101.LAB*

XBRL Taxonomy Extension Labels

  

101.PRE*

XBRL Taxonomy Extension Presentation

  

(*)

XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections.

 

Page 21

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

QUANTUM ENERGY, INC.

    
    

Date:

7/27/2021

By:

/s/ HARRY EWERT

   

CEO

 

 

Page 22