UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

 (Amendment No. 1)

 

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

 

For the fiscal year ended September 30, 2019

 

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

 

For the transition period from [     ] to [    ]

 

Commission file number 1-03319

  

Quad M Solutions, Inc

 (Exact Name of Registrant as Specified in Its Charter)

   

Idaho

 

82-0144710

(State or Other Jurisdiction ofIncorporation or Organization)

 

(I.R.S. Employer Identification Number)

 

Quad M Solutions, Inc

122 Dickinson Ave

Toms River, New Jersey 08753

(723) 423-5520

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

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

Title of each class to be so registered:

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ¨       No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨       No x

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x      No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

  

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x

Smaller reporting company

x

 

Emerging growth company

x

 

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 x

 

The registrant had 70,357,650 shares of Common Stock outstanding on December 31, 2019. The aggregate market value of the 11,971,733 shares of Common Stock held by non-affiliated shareholders of the Registrant on March 29, 2019, the last trading day of the second fiscal quarter, was approximately $1,486,470 based on a $0.1250 average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

Indicate the number of shares outstanding of the registrant’s common stock as of the latest practicable date: 70,357,650 shares of common stock as of January 10, 2020.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 
 
 
 

   

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

 

Forward Looking Statement

 

3

 

PART I

 

 

 

 

 

 

 

 

Item 1.

Business

 

4

 

Item 1A.

Risk Factors

 

8

 

Item 1B.

Unresolved Staff Comments

 

14

 

Item 2.

Properties

 

15

 

Item 3.

Legal Proceedings

 

15

 

Item 4.

Mine Safety Disclosures

 

15

 

 

 

 

PART II

 

 

 

 

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

15

 

Item 6.

Selected Financial Data

 

18

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

18

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

 

20

 

Item 8.

Financial Statements and Supplementary Data

 

F-1

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

21

 

Item 9A.

Controls and Procedures

 

21

 

Item 9B.

Other Information

 

22

 

 

 

 

PART III

 

 

 

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

 

22

 

Item 11.

Executive Compensation

 

28

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

29

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

 

30

 

Item 14.

Principal Accounting Fees and Services

 

32

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

 

33

 

Item 16.

Form 10–K Summary

 

34

 

 

 

 

SIGNATURES

 

35

  

 
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FORWARD-LOOKING STATEMENTS

 

The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, including risks described in “Risk Factors” and elsewhere in this Annual Report.

 

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in “Risk Factors” and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

 

The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

 

 
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ITEM 1. BUSINESS

 

You should read this entire Annual Report carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included elsewhere in this Annual Report, before making an investment decision. The Company was engaged in mining operations from its formation in 1932 through the divestiture of 75% of its mining subsidiaries, as discussed under “Company Information” below. As a result, the disclosure contained in this Annual Report on Form 10-K has enhanced disclosure on its new business operations and the former mining operations are discussed under “Discontinued Operations.”

 

Company Information

 

Quad M Solutions, Inc. (hereinafter “Quad M”, the “Company” or “We”) was incorporated under the laws of the State of Idaho on August 4, 1932 as Mineral Mountain Mining and Milling Company. On March 22, 2019, the Company’s board of directors, consisting of Sheldon Karasik, Michael Miller and Felix Keller, and its sole executive officer, Sheldon Karasik, in furtherance of the Company’s plan to diversify its business beyond its historic mining operations (the “MMMM Mining Operations”), as disclosed in the Company registration statement on Form S-1 that was declared effective by the SEC on March 8, 2019, Registration No. 333-227839, caused the Company to enter into two Share Exchange Agreements (“SEA’s”) with: (i) PR345, Inc., a newly organized Texas corporation (“PR345”); and (ii) NuAxess 2, Inc., a newly organized Delaware corporation (NuAxess”). Pursuant to the SEA’s, which were filed as Exhibits 2.1 and 2.2 to the Company’s March 27, 2019 Form 8-K, the Company agreed to acquire all of the capital stock of P345 and NuAxess as discussed more fully below.

 

In connection with the April 16, 2019 closing of the SEA’s (the “Closing”), PR345 and NuAxess became wholly-owned subsidiaries of the Company in exchange for the issuance of 400,000 shares of newly designated Series C Convertible Preferred Stock (the “Series C Shares”) as follows: (i) 200,000 Series C Shares to Sunlight Financial, LLC (“Sunlight”), a Texas limited liability company and the 75% control shareholder of PR345; and (ii) 200,000 Series C Shares to IDH Holdings 2, Inc. (“IDH Holdings”), a Delaware corporation and the 75% control shareholder of NuAxess. In addition, the Company also issued the minority shareholders of PR345 and NuAxess 400,000 shares of newly designated Series D Convertible Preferred Stock (“the Series D Shares”) as follows: (i) 200,000 Series D Shares to Draper, Inc (“Draper”), a Nevada corporation: and (ii) 200,000 Series D Shares to Carriage House, Inc (“Carriage House”), a Delaware corporation, in exchange for their respective 12.5% equity interests in NuAxess and PR345.

 

The Series C and Series D Preferred Stock represent 92.5% of the outstanding capital stock of the Company at the date of Closing. The outstanding common stock holders of the Company at the Closing retained 7.5% of the issued and outstanding common stock, par value $0.001 (the “Common Stock”), which Common Stock will be subject to dilution upon the conversion on existing convertible notes and subsequently issued convertible note issued for the purpose of funding the MMMM Mining Operations, subject to certain anti-dilution protections as set forth in the SEA’s.

 

In addition, shortly after the Closing, Sheldon Karasik, the former CEO and Chairman, transferred and assigned to Pat Dileo, the Company’s new CEO, interim CEO and Chairman, the one outstanding share of Series B Super Voting Preferred Stock (the “Super Voting Shares”), entitled to that number of votes equal to 51% of the total number of voting capital stock of the Company, on a fully diluted basis. The Super Voting Preferred Stock was transferred by Mr. Karasik to Mr. Dileo in consideration for the payment of $100,000 to Aurum, LLC, a newly organized private Nevada corporation (“Aurum”) formed and controlled by Mr. Karasik, the Company’s former CEO and Chairman. The Company’s newly constituted Board was informed by Mr. Karasik that the purpose of the $100,000 payment was to fund the MMMM Mining Operations which upon the Closing, became 75% owned subsidiaries of Aurum, with the Company retaining a 25% minority interest. Reference is made to the Company’s Form 8-K filed with the SEC on April 24, 2019 and the disclosure that effective on April 16, 2019, the Company entered into an agreement with Aurum, LLC, an entity formed and controlled by Sheldon Karasik and the management of the MMMM Mining Subsidiaries headed by Sheldon Karasik, pursuant to which the Company sold, transferred and assigned to Aurum, in consideration for the payment by Aurum of $10 and the assumption of the liabilities of the MMMM Mining Subsidiaries, a number of shares equal to 75% of the shares of capital stock of the MMMM Mining Subsidiaries with the Company retaining 25% of the capital stock of the MMMM Mining Subsidiaries. See the discussion under “Discontinued Mining Operations” below.

 

 
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On May 13, 2019, the Company changed its name from Mineral Mountain Mining & Milling Company to Quad M Solutions, Inc. and on June 7, 2019, the Company filed Articles of Amendment with the State of Idaho to implement the name change. The purpose of the name change was to reflect the Company’s new operations related to NuAxess and PR345. PR345 was formed to provide staffing services to a variety of industries as well as back office services including accounting, payroll and a full complement of HR benefits in its role as a Professional Employer Organization (“PEO”). NuAxess serves as a full service financial, employee benefit and insurance consulting company providing health plans and comprehensive benefits to employees of small and medium size businesses. Reference is made to the disclosure under “The Company’s New Business” below.

 

The Company’s principal executive offices are located at 122 Dickinson Ave, Toms River, NJ 08753, and our telephone number is (732) 423-5520. Any information on, or that may be accessed through, any websites (other than government websites) is not incorporated by reference into this Annual Report and should not be considered a part of this Annual Report. The Company is a publicly traded company subject to quotation on the OTC and our common stock is traded under the symbol “MMMM.” On January 7, 2020 the closing sale price of the Common Stock on the OTC was $0.03 per share.

 

The Company is a “smaller reporting company,” as defined by applicable rules of the Securities and Exchange Commission (“SEC”) pursuant to § 229.10(f)(1), in the Securities Act of 1933. As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations regarding executive compensation. We will remain a smaller reporting company until we have a public offering, or value attributable to stock held by non-affiliates, of at least $250 million, as measured on the prior March 31st.

 

New Business Development

 

The Company, through its two operating subsidiaries, NuAxess and PR345 business, is engaged in providing a full spectrum of benefit and insurance consulting services, principally to smaller and mid-sized employer, offering innovative means of providing their employees with multiple levels of employee benefits including major medical health insurance, as well as providing financial and business consulting services. The Company has entered into third-party agreements with select strategic partners to provide comprehensive programs administered through its vendor relationship agreements. The Company offers programs that include innovative and affordable major medical health insurance plans and other employee benefit products and services. The NuAxess Smart Healthcare Plan is a proprietary health plan that is an ERISA-qualified, self-insured plan, that includes wellness and prevention programs, among other features. Our primary markets are small and mid-size group employers, sometimes referred to as the ‘gig’ economy.

 

Through its employer of record (EOR) staffing companies and its use of contracted professional employer organization services and health saving account administration, the Company is able to provide employers with valuable aggregated HIPAA compliant data that can be used to analyze and evaluate services used to support the Company’s medical reinsurance stop-loss risk taking business via captive reinsurance companies. The Company’s services support a transparent, single administrative program that is comprehensive and easy to manage by employers, encompassing comprehensive HR and payroll service that includes workers’ compensation insurance, risk and compliance controls, medical stop loss reinsurance, health savings account administration, financial services, real-time employee healthcare support, and employee and employer retirement benefit programs mostly through the use of employee owned health saving accounts (HSA). The NuAxess Smart Healthcare plan embraces the national effort to provide mental health parity in health insurance coverages and, for example, through the use of telemedical health programs, we believe that many new and innovative methods are being and will be developed to better treat opioid addiction, PTSD and increase adherence to mental health treatment protocols as well as lessen the percentage of patient appointment no-shows all producing better outcomes for patients.

 

Our Strategy and Opportunity

 

The Company, through its subsidiaries and joint ventures, is able to market its health insurance related products and services and a variety of third-party products and services to employers, employees and disparate classes of workers who are classified as small group and today many describe as the growing ‘gig’ economy. The primary emphasis of the Company is to provide support to employers and employees to facilitate access and achieve a sustainable way to provide their employees a quality comprehensive major medical health insurance programs and services that complies with local, state, and federal regulations. Using Employee Retirement Income Security Act of 1974 (ERISA), a U.S. federal statute that protects the retirement assets of Americans by establishing rules to prevent fiduciaries from misuse of plan assets, and through partially self-funded/level funded health insurance plans, small employers, that historically have not used or been able to use traditional health insurance plans from the status quo carriers can benefit, as large group employers have benefitted for decades.

 

 
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More than 80% of small group employers, because of an historic lack of alternatives, still must use traditional fully insured health insurance plans despite the premium costs nearly doubling since 2010, during which time plan benefits were reduced and deductibles rose. Conversely, more than 90% of large group employers use ERISA qualified plans. Despite the small group employer market need and size which is estimated at approximately 60 million workers and growing, this market has not been readily equipped either financially or through its management’s lack of experience, to properly achieve using ERISA plans despite their apparent need and resolve to adhere to all the rules, regulations and laws. We also believe that to implement many of these self-insured ERISA programs, our target market also requires typically unavailable technology platforms and trained personnel to implement the actual tasks involved to administer and effectively use these plans.

 

As a result, the Company’s business plan involves providing a full range of healthcare, technology, financial, and insurance services thereby enabling small group employers to provide full-service solutions in obtaining quality health benefits and insurance for its employees while minimizing financial risk from catastrophic medical claims through the use of medical stop loss reinsurance policies offered by A.M.Best rated carriers. It is generally recognized that small group employers do not have the financial capabilities to fund catastrophic liability risk so their use of medical stop-loss reinsurance is mandatory. The medical stop-loss reinsurance business is a complex global industry and, at its basic level, is simply liability insurance and is not even deemed medical insurance. The Company and its third-party strategic vendor partners have developed and possess the experience and skills necessary to underwrite employees and place medical stop-loss reinsurance coverages on compliant health plans developed specifically for the small group employer market. The health plans covering these workers are classified as comprehensive major medical health insurance plans with reinsurance stop-loss coverage to safeguard against catastrophic losses when they occur. The Company chose not to recommend the use of short-term medical plans, indemnity plans, and minimum essential coverage (MEC) plans as alternatives and certainly not solutions for small employers to give up fully insured major medical plans. They come with risk that should a catastrophic risk occur; they typically are capped benefit policies and will not pay above the cap amount. The single largest group filing for bankruptcy in the United States declare the cause for their indebtedness and bankruptcy filing is due to health and medical claims/charged and even when they had some form of health insurance coverage.

 

It is important to note that over the past decade many small group employers and employees, besides purchasing health insurance from Blue Cross, Aetna, Anthem, Cigna and United Health ( BUCA), and other regional fully insured health insurance carriers, are also purchasing health plans that are indemnity plans and not comprehensive major medical plans. These plans are called hospitalization, accident and critical illness plans, are not comprehensive major medical health insurance plans, but rather cover costs associated with ever increasing high deductible major medical plan coverages. .

 

The Company believes that by being able to provide comprehensive major medical health insurance program solutions for the small group employer market from a one-stop-shop source that this highly desirable target market will positively respond for its services. The reasons for the Company’s belief in its ability to penetrate this target market is the fact that historically, more than 80% of small group employers have been forced to use non-competitive traditional major medical health plans at unsustainable high premium rate costs with ever-increasing member high deductible limits, that uses coinsurance, copays, and often providing less benefit coverages, especially mental health and drug formularies. Our strategy has been to develop and provide transparency to health insurance benefits that includes: (i) a consumer driven health care model with value-based health plans that share financial rewards with our members and their providers; (ii) use prevention and wellness programs that complement our major medical health plans and use when possible pre-tax dollars; and (iii) provide funding directly, indirectly and through third parties each employees qualified high deductible health plans health saving accounts ( HSA). The Company’s focus and primary emphasis is to assist the small group employer market fund employee HSA which, despite considerable tax advantages and benefits to employers and employees have since their inception in 2004 by the US Congress been largely ignored by the BUCA’s. HSA have not been well funded despite more that 50 million employees owning HSA plans. Annual HSA contribution limits in 2019 were set at $3,500 for single employee plans and $7,000 for a family plan. Presently, a House of Representative Bill sits that if and when Congress brings to the floor is intending to double the annual contribution limits bring it closer in line with 401-K retirement plans.

 

The Company has implemented several new sales and marketing programs to directly reach the small group employer market largely through its use of third-party staffing and support staff companies, and until the Company operates its own staffing business. As BUCA health insurance premium costs increase its supporting a new interest in self-insuring for the small group employer market. The Company plans are to offer with its self-insured health plans more support and customer service through strategic partnerships with technology platforms that possess such products and services. It is our belief despite being undercapitalize still that we shall begin to generate revenue beginning in 2020. The key elements in determining which sales channel and markets to pursue are dependent on our ability to contract with third party vendors that provide our products and services and will commit resources in offering our products and services to their clients. States in which we have targeted to commence sales and pursue our targeted small group employer markets are Texas, Florida, and many southern states whose laws and regulations favor our business strategy of competing with the established Blue Cross, Aetna, Anthem, Cigna and United Health ( BUCA), and other regional fully insured health insurance carriers. The Company has a special interest in rural communities in those states with rural hospitals who are having difficulties operating and where some hospitals are planned to be closed. The Company plans to create with rural hospitals ‘community health exchanges’ whereby the hospitals contract with the Company to provide their services and the Company establishes its staffing business and hires local employees and provides them with all necessary employee services including major medical health insurance and financial programs.

 

 
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We believe, but cannot be assured, that a substantial opportunity to sell and brand our services with rural hospitals will work to keep rural hospitals from closing unless it includes establishing an Account Receivable (A/R) funding program for rural hospital BUCA and CMS receivables. The Company has had preliminary discussions with several funding sources interested in an A/R program for investment grade rural hospital medical receivable financing.

 

The Company believes that there exists a critical need for small business employers to be able to offer quality and sustainable employee benefits, especially with millennials, principally as a result of the fact that the federal government has not produced effective and affordable new health insurance programs for America’s small businesses. Since the 2008 financial crisis, small businesses have also been adversely affected by the fact that the banking institutions and particularly the large banks that have not been providing small business employers with access to credit markets. We believe that this lack of reliable credit and access to capital resources has resulted in the inability of small businesses to innovate and grow, which we believe is essential for small businesses to grow at a time that the American economy to continues to show signs of strength. Without access to adequate debt and/or equity capital, it is widely understood that small businesses have had to rely on their cash flow to manage their largest expenses which specifically include payroll, taxes and employee benefits, the latter of which has become increasingly unsustainable. The Company’s objective is to provide and facilitate the availability to small businesses of employee benefits and health insurance at manageable costs to reduce the unsustainable annual increases.

 

Despite the fact that in many states existing insurance and labor laws and regulations are more than adequate to support small group employers and their benefit and health insurance programs, the fact remains that the virtual monopoly of the large and established carriers’ monopoly has had the effect of stifling alternative insurance and employee benefit solutions. The Company’s management believes that its small employer benefits, self-insurance, and financial programs are now market ready and provide advantages not offered by established major insurance and employee benefits carriers that are not focusing on the small and mid-sized employer/business market, which we firmly believe is and will increasingly be both very large and potentially very lucrative. It is estimated that on an annual basis, small group employer premiums have exceeded $375 billion during the past several years, which we believe may be one of the largest markets lacking consumer/customer involvement and lacking transparency and competition. Our business plan is to service this market with transparency, providing small group employer market, largely through its use of third-party staffing and support staff companies, and directly through the Company’s own staffing business as it develops.

 

Employees

 

The Company has 3 full-time employees, including its Chairman, CEO and Interim CFO, none of whom are under employment agreements. From time to time, the Company uses independent contractors and contract services for administrative functions such as legal, clerical, and bookkeeping services and expects to do so for the foreseeable future, until it generates positive cash flow from operations, of which there can be no assurance.

 

Government Regulations

 

The Company’s health insurance and employee benefits activities and financial services are subject to extensive federal, state and, to a lesser extent, local regulations. Each of the 50 States in the U.S. has adopted, by state statutes, laws and regulations, including those by the applicable State Departments of Insurance, Labor, Treasury, Health, Secretaries of State, among others. State laws and regulations govern health insurance and the issuance of insurance licensing to entities that offer medical and health insurance, sell health insurance and to otherwise provide insurance to the public, except for certain federal laws. The two most significant federal laws affecting health insurance and overriding state law are the 1974 ERISA law and the 2010 Affordable Care Act. However, state laws are so embedded and protected that despite the past fifty years of America’s industrial growth as the largest world economy, relatively few companies, given the size of the U.S. economy, are licensed to offer health insurance to businesses under the laws of the 50 states, without any meaningful oversight nor being subject to federal Sherman Act rules and regulations dealing with monopolistic practices. Furthermore, the Company believes that state law does not consider insurance companies to be deemed national enterprises subject to potential anti-trust regulations. In fact, more than thirty state licensed Blue Cross-Blue Shield companies, many of which are classified as not for profit entities, are deemed to exist as separate entities under each state jurisdiction, and therefore are not considered a monopoly.

 

Potential Advantages for the Company

 

The complexity of insurance regulations and lack of transparency to businesses in general and small businesses in particular, often require small and even mid-sized business to require outside professional assistance. For the small group businesses who utilize federal ERISA law and with the technology advances that have developed for consumers via the internet revolution and smart phones, the Company believes that it is now an opportune time for innovation and change being offered by the Company’s insurance and employee benefits programs, providing the potential of compete successfully with the BUCA’s and for small group employers to switch from fully insured plans to self-insured plans. With the creation of the health saving account (HSA) in 2004, health and wealth can be driven when consumers drive health care with their money. Providers must be paid fair, fast and transparently and only consumers can accomplish this goal. Government cannot realistically or affordably displace 160,000,000 American worker’s from their private health insurance but it can encourage and support a private system where consumers are joined with their chosen doctors and have access to their medical records and can use pretax dollars for health expenses and save dollars tax advantaged for their retirement.

 

 
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Discontinued Mining Operations

 

As disclosed under “Company Information” above and the Company’s Form 8-K filed on April 24, 2019, effective on April 16, 2019, the Company entered into an agreement with Aurum, LLC, an entity formed and controlled by Sheldon Karasik and the management of the MMMM Mining Subsidiaries headed by Sheldon Karasik, pursuant to which the Company sold, transferred and assigned to Aurum a number of shares equal to 75% of the shares of capital stock of the MMMM Mining Subsidiaries in consideration for the payment by Aurum of $10 and the assumption of the liabilities of the mining subsidiaries, with the Company retaining 25% of the capital stock of the MMMM Mining Subsidiaries. Effective on September 15, 2019, the Company sold, transferred and assigned to an unaffiliated third party 6% of its equity interest in the MMMM Mining Subsidiaries to an unaffiliated third party for $1,000, evidenced by a promissory note due on September 30, 2020. As a result, at September 30, 2019, the Company owned 19% of the former MMMM Mining Subsidiaries and deems the former mining operations to be discontinued.

 

ITEM 1A. RISK FACTORS

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all the other information in this Annual Report, including “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” and the consolidated financial statements and the related notes included elsewhere in this Annual Report, before deciding whether to invest in shares of our common stock. If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Unless otherwise indicated, references to our business being seriously harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue, and future prospects. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

 

Risks Related to our Business

 

We never generated profits from our former mining operations and lack any significant operating history in our new business operations. During our fiscal year ended September 30, 2019 we have had no revenues. As such we don’t know if we will ever generate revenues Investment in our securities may result in the total loss of your investment.

 

The Company, f/k/a Mineral Mountain Mining and Milling Company, was formerly engaged, without success, in identifying and investing in mining properties. The Company was not successful in its efforts to engage in mining operations and, as a result, determined to diversify its business operations. On April 16, 2019, the Company completed an exchange of shares for 100% of the capital stock of NuAxess 2 and PR345 and changed Mineral Mountain’s business focus from mining to business services principally related to offering self-insured health insurance, reinsurance medical stop-loss, supplemental insurance, financial services, and employee benefits and retirement services to the small group employer market. In connection with the closing of the share exchange agreements (SEA), the Company divested 75% of its equity in its former wholly-owned mining subsidiaries to an entity controlled by its former chairman and CEO.

 

As a result of the divestiture of control of its former mining subsidiaries and the recent commencement of business activities of the Company’s new wholly-owned subsidiaries, NuAxess and PR345, there have been no recent profitable operating history upon which an evaluation of our future success or failure can be made.

 

 Our ability to achieve and maintain profitability and positive cash flow depends on:

 

 

· Managements abilities to retain and recruit talented people including securing joint venture and strategic partnerships

 

 

 

 

· Obtain substantial funding from various sources for operations, compliance, marketing and sales, and expand innovating new products and services of the enterprise to meet the growing needs of the millennial marketplace.

 

 

 

 

· Develop ways to convert small employers and especially the growing gig economy to abandon their reliance on the status quo insurance carriers to provide them with major medical health insurance coverage and embrace self-funded insurance programs and investing in health savings accounts.

 

 

 

 

· Develop the methods to encourage and promote direct to provider payments by employee/patients using referenced based pricing tools to negotiate and obtain transparent and competitive pricing for provider services especially for diagnostic testing and drugs. .

 

 

 

 

· Raise substantial funds to own and operate a licensed medical stop loss reinsurance company (a captive) and develop the technology to underwrite individual insureds including aggregating HIPAA compliant data and create the data analytics to measure risk and take risk at competitive premium pricing.

  

 
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Based on current business plans, we expect to incur operating losses and negative cash flows from consolidated operations in future periods until such time as our new agreements in the staffing and PEO businesses can start to utilize the Company’s self-funded health insurance programs and employee benefit operations to generate revenues. The expenses associated with SG&A will continue to rise faster than we can generate revenue from sales. The costs and expenses associated with developing any new business in new markets are likely to continue to stretch our limited resources including management until we can determine the right business market that will quickly utilize our programs and see the opportunity to innovate their faulty unsustainable programs._ As a result, we may not generate sufficient revenues, profits or positive net cash flows in the near future, and failure to generate significant revenues or positive cash flows from operating activities could cause us to suspend or cease operations.

 

We will be dependent on our ability to raise debt, equity and generate revenues from our new operations as well as find alternate sources of capital, during our transition to find, develop, sell and support our small group employer customers with our ERISA based self- funded health insurance program and employee benefits services that must also encourage providers to accept the change to a consumer driven healthcare market where patients negotiate and pay their providers directly and supported by a new company with no track record.

 

We anticipate that our operating expenses will increase substantially in the foreseeable future as we devote all of our efforts and resources to establishing our new staffing business and self-funded health insurance and employee benefits operations. The Company is not able to use marketing and branding in any meaningful way to compete with a state dominated market monopoly of well financed large insurance carriers. Once finding the markets to disrupt we must still finance how to broaden our end-customer base, expand our operations, hire additional employees in order to implement our comprehensive business plan, and support members. There can be no assurance that funding will be obtained and be available to operate after we complete sales. . Since our change in control and commencement of new business operations, we have been dependent upon proceeds from convertible notes at terms acceptable to the Company and there can be no assurance that we will be able to continue to raise funds in adequate amounts from convertible notes to finance our operations until we generate positive cash flow from operations, of which there can be no assurance. These efforts may prove more expensive than we currently anticipate, and we may not succeed in establishing and increasing our revenues sufficiently, or at all, to offset these higher expenses.

 

If the market does not adopt our self-funding of employer sponsored health insurance and benefits in a large enough manner to absorb the costs both past and future, we will not grow as quickly as anticipated, or at all, and our business, results of operations and financial conditions, would be detrimentally harmed.

 

The Company may find that the new and innovative health insurance and employee benefits programs, including self-funded plans offered and to be offered by the Company may not readily find acceptance from its target small and mid-sized employer market. As a result, we must be able to adjust our products and services in order to achieve and maintain market acceptance, of which there can be no assurance. Further, if we achieve market acceptance, there can be no assurance that we will be able to fulfill demand if such demand exceeds our staffing capabilities. In fact, there can be no assurance that demand for our self-funding of employer sponsored health insurance and benefits will ever develop. We expect that we will be dependent on third party staffing for the foreseeable future but at present have no firm arrangements to fund our own staffing, notwithstanding our plans. If we are unable to provide enhancements and new features for our self-funding of employer sponsored health insurance and benefits and any future insurance and employee benefits products and services, our business could be adversely affected.

 

We are subject to all of the risks inherent in the highly competitive health insurance and employee benefit services sectors, including, without limitation, the following:

 

 

· The Company’s inability to obtain A rated A.M. Best reinsurance stop-loss coverage for its self-funded plans

 

 

 

 

· The total reliance of the use of technology platforms with venders not controlled by the Company

 

 

 

 

· Small group employers are dominated by the insurance brokers who are paid well by the traditional fully insured carriers to keep the business in force or lose considerable commission fees.

 

 

 

 

· Providers can be resistant to accepting a new payment methodology especially since most have signed network agreements with the main traditional insurance carriers who have tremendous sway over the providers and the providers patients.

 

 

 

 

· Any change in law that limits self-funding in the small group marketplace, and changes by state or federal rulings on how staffing of employees to employers using self-insurance ERISA plans.

 

 

 

 

· Lawsuits brought against the Company and its Management by the competition especially the traditional insurance carriers and benefit brokers.

 

 

 

 

· The successful appeal of the Affordable Care Act by the Trump Administration to eliminate the individual mandate and how small employers may eliminate providing employer health plans and adopting the Health Reimbursement Accounts where employees can expense their health insurance premiums and buy health insurance direct.

 

 

 

 

· Staffing companies may come under attack by state government if it decides employees of small groups must use fully insured health plans

 

 

 

 

· There can be no assurance that we will be able to acquire assets sufficient to qualify for up listing to larger public stock exchanges which could have a detrimental trading effect on our stock.

 

 
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If we fail to manage growth, if any, effectively, our business would be harmed.

 

Our operating structure and plan of operations has been altered completely during the 2019 fiscal year, from unsuccessful mining operations to entry into the highly competitive health insurance and employee services sectors, and any changes or future growth will place significant demands on our management, employees, infrastructure and other limited and stretched resources. We will also need to continue to improve our financial and management controls and reporting systems and procedures which require additional new personnel and platforms. We may encounter delays or difficulties in implementing our business plans and manage our growth, of which there can be no assurance. Additionally, to manage any future change, we will need to hire, train, integrate and retain a number of highly skilled and motivated employees, the failure of which could materially adversely impact our financial conditions and potential to succeed, of which there can be no assurance. If we do not effectively hire, train, integrate and retain sufficient highly qualified personnel to support any future growth, and if we do not effectively manage the associated increases in expenses, our business, results of operations and financial condition would be harmed.

 

Our growth will be affected by many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties over which we may have little or no control.

 

We may acquire or enter into other businesses or joint venture agreements which could require significant management attention, disrupt our business and potentially adversely affect our operating results.

 

As part of our business strategy, we may enter into or make investments in complementary companies, products, or technologies and/or enter into agreement with third parties related to our staffing, health insurance and employee benefits businesses. We are a small organization and our ability to acquire and integrate other companies or implement joint ventures and third-party arrangements in a successful manner is unproven. If we are unable to complete acquisitions or enter into other business ventures, we may not ultimately strengthen our competitive position or achieve our goals. Furthermore, there can be no assurance that we shall have adequate resources to properly integrate and manage these new businesses and operations successfully or at terms and conditions satisfactory to the Company. We may have to pay cash, incur debt or issue convertible securities to fund any such acquisitions or joint ventures, each of which could adversely affect our financial condition or the value of our common stock. The sale of equity or issuance of convertible debt to finance any such efforts could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

 

Our revenue will be dependent upon acceptance of our innovative health insurance and employee benefit services and products by small and mid-sized U.S. businesses.

 

The use of partially self-funded health insurance plans, while not necessarily new, has not been actively marketed to the small group employer (SGE). The SGE has been historically dominated by fully-insured BUCA carrier plans. Despite the fact that the price of insurance premiums has increased by approximately 100% since 2010, combined with reduced benefits and higher deductibles, approximately 83% of small employers still do not self-insure, notwithstanding the fact that approximately 90% of large employers self-insure. There can be no assurance that the innovations offered by the Company’s plans, including elimination of middleman brokers and other factors that increase premium costs, will result in acceptance or profitability. Nor can there be any assurance that our plan to offer a transparent program showing small employers all the costs incurred and, at the same time seeking to share with providers profits that are achieved by lowering claim losses will result in the success of our business model.

 

The failure of such acceptance will adversely affect our ability to generate significant revenues and develop a presence in these competitive markets.

 

We are uncertain whether our health insurance and employee benefits programs, services and products will be accepted by our target market of small and mid-sized business employers in the U.S. and become commercial success. A number of factors may limit the market acceptance of our services and products, including:

 

 

·

the availability of alternative health and benefit solutions;

 

·

the competitiveness of fees using our services relative to alternative service providers;

 

·

competition from other locally or internationally recognized virtual marketplaces;

 

·

market demand for our health insurance and employee benefits programs, services and products prove to be smaller than we expect;

 

·

business user friendliness of our services and products in comparison to competitors;

 

·

research and development are more costly and/or more time-consuming than anticipated; and

 

·

change in regulatory environment may make our health insurance and employee benefits programs, services and products uneconomical.

 

 
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We may not be able to realize substantial streams of revenue from our health insurance and employee benefit services and products if we cannot gain a market share from the currently dominant market forces.

 

At present and historically, the health insurance and employee benefits industries have been dominated by major companies including Blue Cross, Cigna, Aetna, Anthem, United Health Group and regional insurance carriers who use major selling brokerages and have significant impact on federal and state insurance law and regulations. Our future activities in the areas of developing our own staffing company, joint venturing with or acquiring staffing companies and developing self-funded health insurance and employee benefits could be subject to laws and regulations which may materially adversely affect our future operations. Notwithstanding the Company’s belief that its group employer health insurance programs are not dependent on any new laws or regulations to succeed, there can be no assurance new laws and regulations will not be established or that the Company will be successful in offering its self-funded programs to small group employers.

 

We have three full-time employees and are dependent on our directors, officers and third-party contractors.

 

We have three full-time employee and rely heavily and are wholly dependent upon the personal efforts and abilities of our officers and directors, each of whom devotes less than all of his time and efforts to our operations. The loss of any one of these individuals could adversely affect our business. We do not have written employment agreements with any of our officers or directors or maintain insurance on any of them. We may not be able to hire and retain such personnel in the future.

 

We depend on key personnel who would be difficult to replace, and our business plans will likely be harmed if we lose their services or cannot hire additional qualified personnel.

 

Our success depends substantially on the efforts and abilities of our senior management, including Pat Dileo, our CEO, Chairman and controlling shareholder, and certain key personnel. The competition for qualified management and key personnel is intense. The loss of services of one or more of our key employees, or the inability to hire, train, and retain key personnel, could delay the development and sale of our services and products, disrupt our business, and interfere with our ability to execute our intended business plan.

 

We plan to grant stock options or other forms of equity awards in the future as a method of attracting and retaining employees, motivating performance and aligning the interests of employees with those of our stockholders. There are currently no options and/or equity awards outstanding. If we are unable to adopt, implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to retain our existing employees and attract additional qualified personnel. If we are unable to retain our existing employees, including qualified technical personnel, and attract additional qualified candidates, our business and results of operations could be adversely affected.

 

We will need to raise capital in order to realize our business plan, the failure of which could adversely impact our operations.

 

We are currently not profitable. For the fiscal year ended September 30, 2019 and as of the date of this report, we assessed our financial condition and concluded that we will need to raise additional capital to fund business operations for the next 12 months from the date of the report. Our auditor’s report for the year ended September 30, 2019, includes a going concern opinion on the matter. We had a net loss of $3,883,874 for the year ended September 30, 2019 compared to a net loss of $463,334 for the same period of the prior year. However, these net loss results are not comparable because during the year-ended September 30, 2018, our operations were limited to very inactive mining operations and principally represented limited general and administrative expenses and officers’ fees, while our general and administrative expense, professional fees, interest expense and loss on the issuance of convertible debt, largely incurred during the period from the change in control in April 2019 through September 30, 2019, represented a significant portion of the increase in net loss. Management is unable to predict if and when we will be able to generate significant positive cash flow or achieve profitability. Until we generate positive cash flow from operations, we will continue to be dependent upon our ability to raise funds through the issuance of convertible notes, of which there can be no assurance. Without adequate funding or significant revenue from operations, which have only recently commenced subsequent to the end of the September 30, 2019 fiscal year, we may not be able to fully-implement our plan of operations and expand business development efforts and other strategic initiatives.

 

We expect to continue to finance our operations, acquisitions and develop strategic relationships, primarily by issuing equity or convertible debt securities, which could significantly reduce the percentage ownership of our existing stockholders. Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing common stock. Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on existing stockholders’ ownership interest, which could cause the market price of our common stock to decline. We may also issue securities in our subsidiaries, and these securities may have rights or privileges senior to those of our common stock.

 

 
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We may have difficulty obtaining additional funds as and when needed, and we may have to accept terms that would adversely affect our stockholders. In addition, any adverse conditions in the credit and equity markets may adversely affect our ability to raise funds when needed. Any failure to achieve adequate funding will delay our business plan executions and could lead to abandonment of one or more of our initiatives, as well as prevent us from responding to competitive pressures or take advantage of unanticipated acquisition opportunities. Any additional equity financing will likely be dilutive to stockholders, and certain types of equity financing, if available, may involve restrictive covenants or other provisions that would limit how we conduct our business or finance our operations.

 

The Company, as a reporting company under the Exchange Act, continues to require resources and management’s attention to fulfill its obligations under the Exchange Act.

 

As a reporting company, the Company is subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations promulgated by the United States Securities and Exchange Commission (“SEC”) thereunder, which entail significant accounting, legal and financial compliance costs at the same time the Company seeks to develop and implement its new business plan involving innovative health insurance and employee benefits programs. These costs have made, and will continue to make, some activities more difficult, time consuming or costly and may place significant strain on its personnel, systems and resources

 

Risks Related to the Ownership of our Stock

 

If we issue additional shares in the future, it will result in the dilution of our existing stockholders.

 

Our articles of incorporation authorize the issuance of up to 900,000,000 shares of common stock, par value of $0.001 (“Common Stock”). As of January 13, 2020, we had approximately 70,357,650 shares of Common Stock outstanding, excluding shares reserved for issuance underlying convertible notes. Our Board of Directors may choose to issue some or all of such shares for business acquisition and for funding of operations without stockholder approval. The issuance of any such shares will reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change of control of our company.

 

Our articles of incorporation authorize the issuance of up to 10,000,000 shares of our preferred stock with a par value of $0.10 per share. The board of directors is authorized to provide for the issuance of these unissued shares of preferred stock in one or more series, and to fix the number of shares and to determine the rights, preferences and privileges thereof. Accordingly, the board of directors may issue preferred stock which may convert into large numbers of shares of Common Stock and consequently lead to further dilution of other shareholders.

 

We may experience volatility in our stock price, which could negatively affect your investment, and you may not be able to resell your shares at or above the offering or current market prices.

 

The price of our common stock may vary substantially from time-to-time and the liquidity in our trading market cannot be assured. You may not be able to readily sell shares of our common stock. The market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including:

 

 

· quarterly variations in operating results;

 

 

 

 

· changes in financial estimates by securities analysts;

 

 

 

 

· changes in market valuations of other similar companies;

 

 

 

 

· announcements by us or our competitors of new products or of significant technical innovations, contracts, acquisitions, strategic partnerships or joint ventures;

 

 

 

 

· additions or departures of key personnel;

 

 

 

 

· any deviations in net revenue or in losses from levels expected by securities analysts; and

 

 

 

 

· future sales of common stock.

 

In addition, the stock market has experienced volatility that has often been unrelated to the performance of particular companies. These market fluctuations may cause our stock price to fall regardless of our performance.

 

Because our securities trade on the OTC Market, your ability to sell your shares in the secondary market may be limited.

 

The shares of our common stock are subject to quotation on the OTC Market. Because our securities currently trade on the OTC, they are subject to the rules promulgated under the Exchange Act, which impose additional sales practice requirements on broker-dealers that sell securities governed by these rules to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual individual income exceeding $200,000 or $300,000 jointly with their spouses). For such transactions, the broker-dealer must determine whether persons that are not established customers or accredited investors qualify under the rule for purchasing such securities and must receive that person’s written consent to the transaction prior to sale. Consequently, these rules may adversely affect the ability of purchasers to sell our securities and otherwise affect the trading market in our securities.

 

 
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Because our shares are deemed “penny stocks,” you may have difficulty selling them in the secondary trading market.

 

The Securities and Exchange Commission has adopted regulations which generally define a “penny stock” to be any equity security that has a market price (as therein defined) less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Additionally, if the equity security is not registered or authorized on a national securities exchange or NASDAQ, the equity security also would constitute a “penny stock.” As our common stock falls within the definition of penny stock, the ability of broker/dealers to sell our common stock and the ability of shareholders to sell our common stock in the secondary market would be limited. As a result, the market liquidity for our common stock would be severely and adversely affected. Trading in our common stock may be subject to these or other regulations in the future, which would negatively affect the market for our common stock.

 

A large number of shares will be eligible for future sale and may depress our stock price.

 

Our shares that are eligible for future sale, principally as a result of the conversion of outstanding convertible notes, may have an adverse effect on the price of our stock. Sales of substantial amounts of common stock, or a perception that such sales could occur, and the conversion of convertible notes and exercise of options or warrants to purchase shares of common stock at prices that are or may be below the then current market price of the common stock, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities.

 

We do not have cumulative voting, one person owns super-voting preferred stock and, as a result, can control our Company, which could limit your ability to influence the outcome of shareholder votes.

 

Our shareholders do not have the right to cumulative votes in the election of our directors. Cumulative voting, in some cases, could allow a minority group to elect at least one director to our board. Because there is no provision for cumulative voting, and as a result of the fact that our CEO and Chairman own the one outstanding share of Series B Preferred Stock that have super-voting rights entitling him to that number of votes equal to 51% of the total number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis. Accordingly, our CEO and Chairman, as the holder of the super-voting Series B Preferred Stock, is able to elect all of the members of our board of directors.

 

Our Articles of Incorporation contain provisions that discourage a change of control.

 

Our articles of incorporation contain provisions that could discourage an acquisition or change of control without our board of directors’ approval. Our articles of incorporation authorize our board of directors to issue common or preferred stock without shareholder approval. Pursuant to resolutions of the board of directors dated November 5, 2018, authorized and approved the Certificate of Designation for the Series B Preferred Stock entitled to that number of votes equal to 51% of the total number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis. On March 21, 2019, the Company’s board of directors approved the issuance of the Series B Preferred Stock to Sheldon Karasik and in April 2019, the Series B Super Voting Preferred Stock were transferred and assigned to Pat Dileo, our CEO and Chairman in connection with the change in control transaction.

 

We are a smaller reporting company, and any decision on our part to comply only with certain reduced or scaled reporting and disclosure requirements applicable to smaller companies could make our common stock less attractive to investors.

 

We are a smaller reporting company, and, for as long as we continue to be a smaller reporting company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “smaller reporting companies,” including but not limited to:

 

 

·

not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;

 

 

·

reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

 

 

·

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

 

·

any action asserting a breach of fiduciary duty;

 

 

·

any action asserting a claim against us arising under the Idaho general corporation law, our certificate of incorporation, or our bylaws; and

 

 

·

any action asserting a claim against us that is governed by the internal-affairs doctrine.

 

 
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Risks Related to the Equity Financing Agreement

 

Pursuant to the terms of the Equity Purchase Agreement, a large number of shares may be eligible for future sale and may depress our stock price or dilute the value of outstanding shares.

 

The Company anticipates receiving proceeds from our initial sale of shares to CBP pursuant to the Equity Financing Agreement. The Company may sell shares to CBP at a price equal to 75% of the lesser of (1) the lowest traded price of our Common Stock during the fifteen (15) consecutive trading day period beginning on the date on which we deliver a put notice to CBP (the “Market Price”) or (2) the lowest traded price of our Common Stock during the fifteen (15) consecutive trading day period following the Clearing Date of the put notice (“Valuation Price”). To the extent that the shares are sold at a discount of 25% to the fair market value, the use of the equity line could result in the dilution of the value of the outstanding common shares or in the depression of the stock price.

 

Pursuant to the terms of the Equity Purchase Agreement, the Company may not have the capacity to draw the full amount of $5 million from the equity line.

 

The Company anticipates receiving proceeds from our initial sale of shares to CBP pursuant to the Equity Financing Agreement. The Company may sell shares to CBP at a price equal to 75% of the lesser of (1) the lowest traded price of our Common Stock during the fifteen (15) consecutive trading day period beginning on the date on which we deliver a put notice to CBP (the “Market Price”) or (2) the lowest traded price of our Common Stock during the fifteen (15) consecutive trading day period following the Clearing Date of the put notice (“Valuation Price”). There is a minimum of twenty (20) trading days between purchases. Furthermore, there is a cap of the lesser of $100,000 or 150% average daily trading value (the average trading volume during the fifteen (15) trading days preceding the date of the put notice multiplied by the lowest trading price during this period) for each equity line draw down. Over the 24-month term of the equity line, the Company may not have the ability to fully draw and utilize the entire $5 million credit line due to the terms, conditions and limitations in the Equity Purchase Agreement.

 

We have broad discretion in how we may use the net proceeds from the equity credit line, and we may not entirely use them for mining activities.

 

The Company has received numerous inquiries relating to mineral and non-mineral business opportunities, including but not limited to mergers and acquisitions. The Company investigates and evaluates all such inquiries. The net proceeds of the revolving credit line from the sale of the Securities to CBP which this Annual Report relates is intended by the Company to be used for, among other things, general corporate purposes, which may include: (i) acquisitions; (ii) refinancing or repayment of indebtedness; (iii) capital expenditures and working capital; (iv) investing in equipment and property development (which may include funding associated with exploration); and (v) pursuing other business opportunities, both related and unrelated to our existing mining activities. In the event that we seek to pursue new business opportunities unrelated to our existing activities using proceeds from the Equity Purchase Agreement, or from other sources, whether through debt or equity, of which there can be no assurance, we may be required to engage the services of third-parties to assist us in pursuing any potential new opportunities. Any such efforts will be undertaken with a view toward generating cash flow from new operations.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

  

Not applicable.

 

 

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ITEM 2. PROPERTIES

 

The Company, at present, has its executive offices, consisting of 300 square feet, located at 122 Dickinson Avenue, Toms River, NJ 08753, which it uses on a rent-free basis. These facilities are suitable for the near term and the Company believes will be sufficient for the foreseeable future.

 

ITEM 3. LEGAL PROCEEDINGS

 

At September 30, 2019, the Company was not a party to nor are we aware of any threatened or ongoing legal proceedings against the Company. Nonetheless, it is possible that from time to time in the ordinary course of business we may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. However, we are not aware of any such legal proceedings or investigations and, in the opinion of our Board of Directors, legal proceedings are not expected to have a material adverse effect on our financial position or results of operations. Subsequent to the year ended September 30, 2019, the Company has received a letter from attorneys representing Sheldon Karasik, claiming that the Company did not fulfill its obligations under the Share Exchange and Purchase Agreement with an entity formed and controlled by Sheldon Karasik, pursuant to which the Company, in an agreement executed on its behalf by Mr. Karasik, sold, transferred and assigned 75% of the Company’s former MMMM Mining Subsidiaries to an entity controlled by Mr. Karasik for $10 plus the assumption of the liabilities of the former MMMM Mining Subsidiaries. The Company believes that it has meritorious defenses to any claims by Mr. Karasik and, indeed, has affirmative defenses in connection with any such claims. The Company believes that there will be no material adverse consequences in connection with any claims by or on behalf of Mr. Karasik.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

The Company does not currently operate any mines related to the claims of its former mining subsidiaries and, in fact, divested 75% of its equity interest in its MMMM Mining Subsidiaries effective on April 16, 2019. As a result, mine safety disclosures are not applicable.

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

(a) Market Information

 

Our common stock trades on the OTC Market under the symbol MMMM. The following table sets forth the quarterly high and low sales prices per share for our common stock, as reported by the OTC Market exchange for the respective periods

 

 

 

High

 

 

Low

 

Fiscal 2019:

 

 

 

 

 

 

Fourth Quarter

 

$ 0.10

 

 

$ 0.02

 

Third Quarter

 

$ 0.25

 

 

$ 0.07

 

Second Quarter

 

$ 0.30

 

 

$ 0.10

 

First Quarter

 

$ 0.41

 

 

$ 0.10

 

 

 

 

 

 

 

 

 

 

Fiscal 2018:

 

 

 

 

 

 

 

 

Fourth Quarter

 

$ 0.20

 

 

$ 0.065

 

Third Quarter

 

$ 0.21

 

 

$ 0.06

 

Second Quarter

 

$ 0.20

 

 

$ 0.55

 

First Quarter

 

$ 0.26

 

 

$ 0.05

 

  

(b) Holders of Common Stock

 

As of September 30, 2019, there were 69,575,734 shares outstanding held by approximately 1304 shareholders.

 

(c) Dividends

 

In the future we intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Common Stock will be the sole discretion of the board of directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant.

 

(d) Securities Authorized for Issuance under Equity Compensation Plans

 

Stock Options

 

There are no Stock Options open as of September 30, 2019.

 

Warrants

 

There are 7,200,769 warrants outstanding, including Board-approved 260,000 warrants for directors’ fees in 2018. Holders of the warrants have no voting rights, no liquidation preference and no dividends will be declared on the warrants.

 

 
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(e) Recent Sales of Unregistered Securities

 

There were sales of unregistered equity securities by the Company during the fiscal year ending September 30, 2019. Specifically, reference is made to the Company’s Forms 8-K as follows: (i) the Form 8-K filed on March 27, 2019 with respect to the filing of a Certificate of Designation on March 21, 2019 with respect to the authorization of the Series B Super Voting Preferred Stock that was issued to Sheldon Karasik; (ii) the Form 8-K filed on March 27, 2019 with respect to the entry into the Share Exchange Agreements discussed more fully under “Company Information” above and the agreement to issue shares of the newly authorized Series C and Series D Preferred Stock pursuant to the SEAs; and (iii) the Form 8-K filed on April 24, 2019, disclosing the closing of the SEAs and the issuance of 400,000 shares of Series C Preferred Stock and 400,000 shares of Series D Preferred Stock to the shareholders of the Company’s new operating subsidiaries, NuAxess and PR345.

 

Issuance of Common Shares

 

There have been private placements of unregistered common shares during the fiscal year ending September 30, 2018 which are exempt from registration pursuant to Section 4(2) of the Act and Regulation D promulgated the SEC thereunder. The sales have not exceeded $1 million in value in any given 12-month period and fewer than 35 investors have been purchasers of the shares. The shares in the offering are restricted securities subject to six-month minimum holding period provided by Rule 144 under the Act. The Company has also made its SEC reports available on its website and the private placements have not been subject to any general advertising. The Company further believes that all investors would qualify as accredited investors or sophisticated financial investors.

 

There were sales of common equity securities by the Company through private placements with accredited or financially sophisticated investors during the quarter ending December 31, 2017 as identified below. By Board resolution, the following shares were issued and sold in the quarter ending December 31, 2017 for a price up to $0.05 per share, to each of the following:

 

Date of Sale

 

Recipient Name

 

Aggregate Offering Price

 

Consideration Received by Registrant

 

 

Shares

Issued

 

10/25/2017

 

Sheldon Karasik

 

common at .01 per share

 

$ 10,000

 

 

 

1,000,000

 

11/5/2017

 

Jonathan Ogle

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

11/7/2017

 

Jacob Karasik

 

common at .05 per share

 

$ 5,000

 

 

 

100,000

 

11/7/2017

 

Jeffery Ogle

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

12/4/2017

 

Jeffery Ogle

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

12/20/2017

 

Manuel Reyero

 

common at .05 per share

 

$ 100,000

 

 

 

2,000,000

 

 

 

 

 

Total 

 

$ 145,000

 

 

 

3,700,000

 

 

Through this private placement, the securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

 
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There were additional private placement sales of common equity securities by the Company during the year ending September 30, 2018 as identified below (from January 1, 2018 to September 30, 2018). The sales were completed pursuant to a Form D offering filed on or about February 25, 2018. By Board resolution, the following shares sold in the year ending September 30, 2018 for a price up to $0.05 per share, to each of the following:

 

Date of Sale

 

Recipient Name

 

Aggregate Offering Price

 

Consideration Received by Registrant

 

 

Shares

Issued

 

2/9/2018

 

Felix Keller

 

common at .03 per share

 

$ 13,200

 

 

 

440,000

 

2/15/2018

 

Richard Schaper

 

common at .05 per share

 

$ 5,000

 

 

 

100,000

 

2/28/2018

 

Adam Burlock

 

common at .05 per share

 

$ 1,000

 

 

 

20,000

 

3/8/2018

 

Jacob Karasik

 

common at .05 per share

 

$ 5,000

 

 

 

100,000

 

4/10/2018

 

Jacob Karasik

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

5/2/2018

 

Sheldon Karasik

 

common at .05 per share

 

$ 25,000

 

 

 

500,000

 

6/21/2018

 

Sheldon Karasik

 

common at .05 per share

 

$ 25,000

 

 

 

500,000

 

6/21/2018

 

Jonathan Ogle

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

6/30/2018

 

Sheldon Karasik

 

common at .01 per share

 

$ 5,000

 

 

 

500,000

 

8/20/2018

 

Stillmont Advisors (1)

 

common at .04 per share

 

$ 25,000

 

 

 

625,000

 

8/30/2018

 

Jonathan Ogle (1)

 

common at .05 per share

 

$ 10,000

 

 

 

200,000

 

9/12/2018

 

Francia Gomez (1)

 

common at .05 per share

 

$ 30,000

 

 

 

600,000

 

9/13/2018

 

Encore Tickets (1)

 

common at .04 per share

 

$ 10,000

 

 

 

250,000

 

 

 

 

 

Total (as of September 30, 2018) 

 

$ 164,200

 

 

 

2,560,000

 

 

 

 

 

Total (issued after September 30, 2018) 

 

 

--

 

 

 

1,675,000

 

 

(1)

The Shares were purchased on the dates shown but the shares were not issued until after September 30, 2018.

 

The Company filed and claimed an exemption from registration for the issuances described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

The following shares were issued in the fiscal years ending September 30, 2018 for director, officer and/or consultant services rendered as follows:

 

Date of Issue

 

Recipient Name

 

Aggregate Price Per Share

 

Approximate Value of Services

Received by

Registrant

 

 

Shares

Issued

 

1/5/2018

 

Peter Papasavas – legal services

 

common at .001 par value

 

$ 40,000

 

 

 

250,000

 

2/9/2018

 

Felix Keller - conversion of warrant

 

common at .02 per share

 

$ 8,999

 

 

 

60,000

 

4/24/2018

 

Peter Papasavas – legal services

 

common at .001 par value

 

$ 5,500

 

 

 

50,000

 

 

 

 

 

Total

 

$ 54,499

 

 

 

360,000

 

 

The following shares were issued from October 1, 2018 through to December 31, 2018 for director, officer and/or consultant services rendered as follows:

 

Date of Issue

 

Recipient Name

 

Aggregate Price Per Share

 

Approximate Value of Services

Received by Registrant

 

 

Shares

Issued

 

11/08/2018

 

Peter Papasavas – legal services

 

common at .001 par value

 

$ 50,000

 

 

 

200,000

 

11/08/2018

 

Michael Miller - director

 

common at .001 par value

 

$ 8,000

 

 

 

40,000

 

11/08/2018

 

Ulises de la Garza - director

 

common at .001 par value

 

$ 6,000

 

 

 

30,000

 

11/08/2018

 

Felix Keller - director

 

common at .001 par value

 

$ 8,000

 

 

 

40,000

 

11/27/2018

 

Sheldon Karasik

 

common at .02 per share

 

$ 80,000

 

 

 

4,000,000

 

 

 

 

 

 Total

 

$ 152,000

 

 

 

4,310,000

 

 

By Board resolution, the following shares were issued and sold from October 1, 2018 through to December 31, 2018 for a price of up to $0.05 per share, to each of the following:

 

Date of Sale

 

Recipient Name

 

Aggregate Offering Price

 

Consideration Received by Registrant

 

 

Shares

Issued

 

10/1/2018

 

Francia Gomez

 

common at .05 per share

 

$ 20,000

 

 

 

400,000

 

10/22/2018

 

Stillmont Advisors

 

common at .04 per share

 

$ 25,000

 

 

 

625,000

 

10/22/2018

 

Jonathan Ogle

 

common at .05 per share

 

$ 20,000

 

 

 

400,000

 

10/24/2018

 

Jeffery Ogle

 

common at .05 per share

 

$ 20,000

 

 

 

400,000

 

11/08/2018

 

Jeffery Ogle

 

common at .05 per share

 

$ 20,000

 

 

 

400,000

 

11/21/2018

 

Encore Tix

 

common at .04 per share

 

$ 10,000

 

 

 

250,000

 

11/27/2018

 

Ray Kohn

 

common at .05 per share

 

$ 1,000

 

 

 

20,000

 

11/27/2018

 

Stillmont Advisors

 

common at .04 per share

 

$ 25,000

 

 

 

625,000

 

 

 

 

 

Total

 

$ 141,000

 

 

 

3,100,000

 

 

 
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The Company filed and claimed an exemption from registration for the issuances described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”; and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuances and grant and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

The above-mentioned shares were issued pursuant to Section 4(a) (2) of the Securities Act of 1933, as amended (the “Act”). No underwriters were retained to serve as placement agents for the sale. The shares were sold directly through our management. There was no advertisement or general solicitation made in connection with this Offer and Sale of Shares. 

 

Issuer Purchases of Equity Securities

 

We did not repurchase any of our equity securities during the years ended September 30, 2019 and September 30, 2018.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Financial Statements and Supplementary Data” and our consolidated financial statements, related notes, and other financial information appearing in this Annual Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in “Risk Factors” and “Forward-Looking Statements.”

 

Overview

 

The Company, through its two operating subsidiaries, NuAxess and PR345 business, is engaged in providing a full spectrum of benefit and insurance consulting services, principally to smaller and mid-sized employer, offering innovative means of providing their employees with multiple levels of employee benefits including major medical health insurance, as well as providing financial and business consulting services. The Company has entered into third-party agreements with select strategic partners to provide comprehensive programs administered through its vendor relationship agreements. The Company offers programs that include innovative and affordable major medical health insurance plans and other employee benefit products and services. The NuAxess Smart Healthcare Plan is a proprietary health plan that is an ERISA-qualified, self-insured plan, that includes wellness and prevention programs, among other features. Our primary markets are small and mid-size group employers, sometimes referred to as the ‘gig’ economy.

 

Material Developments During Fiscal 2019

 

Results of Operations

 

Comparison of the fiscal year ended September 30, 2019 to the fiscal year ended September 30, 2019

 

Note: In April 2019, as disclosed in the Company’s Form 8-K reports filed with the SEC on March 27, 2019 and April 24, 2019, the Company ceased operating its MMMM Mining Subsidiaries and commenced operations of its health insurance and employee benefits subsidiaries, PR345, Inc., a newly organized Texas corporation and NuAxess 2, Inc., a newly organized Delaware corporation. As a result, the Results of Operations for the years ended September 30, 2019 and September 30, 2018 are not comparable.

 

 
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Revenue

 

The Company generated no revenues from its former mining operations during the two fiscal years ended September 30, 2019 and 2019. In April 2019, the Company experienced a change in control transaction, as reported in its Forms 8-K filed in March and April 2019, referenced above, as a result of which it divested 75% of the MMMM Mining Subsidiaries to an entity formed and controlled by the Company’s former CEO and Chairman, Sheldon Karasik. At the same time, the Company commenced operations of its health insurance and employee benefits subsidiaries. Reference is made to Item 1. Business and specifically to the disclosure under the subcaptions “Company Information” and “New Business Developments” above

 

Expenses

 

Marketing expenses for the fiscal year ended September 30, 2019 was $11,550 compared to $0 for the same period of the prior year, when the Company’s mining operations were not active and, in any event, did not require any marketing expenses.

 

Operating expenses for the fiscal year ended September 30, 2019 were $1,591,331 compared to $ 455,682 for the same period of the prior year, representing an increase of 249%, due principally to an increase in general and administrative expense, legal expense, and travel expense. The main components of general and administrative expenses in fiscal 2019 consisted of approximately $686,452 in consulting fees, approximately $19,400 in shares issued for services, and approximately $19,400 in investor relations fees. Included in the shares issued for services was only a minimal amount for the Series B preferred shares issued to the CEO for 51% of the voting control of the Company. The legal and professional fees are primarily fees related to the Company’s registration statement on Form S-1 declared effective on March 8, 2019, which registration statement was initially filed with the SEC on October 15, 2018, after the end of the fiscal year ended September 30, 2018. In addition, the Company incurred legal and professional fees of 418,917. During the prior year, the Company’s legal and professional fees were minimal 74,662.

 

Working Capital

 

The Company’s net loss for the years ended September 30, 2019 and September 30, 2018 were $4,053,212 and $463,334, respectively. The $3,589,878 increase in net loss for fiscal year 2019, as compared to fiscal year 2018, is due primarily to an increase in non-cash gains and losses related to new convertible debt financings and acquisition and disposal of subsidiaries and also to an increase in general and administrative expenses, legal and professional fees, and travel as a result of the change in business focus.

 

During the fiscal year ended September 30, 2019, our principal sources of liquidity included cash received from convertible notes payable and sales of our common stock. During the fiscal year ended September 30, 2018 our principal source of liquidity included proceeds from sales of our common stock. We intend to use new capital in the form of new equity or debt to further advance objectives. Net cash used by operating activities totaled $1,087,437 and $283,411 for the years ending September 30, 2019 and 2018, respectively. The $804,027 increase between 2019 and 2018 is primarily attributed to the increase in non-cash costs associated with new convertible debt and acquisitions and disposals and an increase in overall spending of the Company during 2019. Net cash provided by financing activities totaled $1,100,237and $280,300 for the years ending September 30, 2019 and 2018, respectively. The change between 2019 and 2018 is primarily attributed to an increase in convertible debt financing and issuances of common stock for cash in 2019 as compared to 2018. The cash increased to $14,700 at September 30, 2019 from $1,900 at September 30, 2018, principally reflecting the net cash used by operations during the period, offset by the sales of common stock.

 

As reflected in our accompanying financial statements, other than approximately $950,000 received from the issuance of convertible notes during the fiscal year ended September 30, 2019, we have limited cash, negative working capital, no revenues and an accumulated deficit of $7,079,690 and $3,026,479 for the years ending September 30, 2019 and September 30, 2018, respectively. Notwithstanding our belief that we will be able to continue to raise capital through the issuance of convertible notes at terms and condition acceptable to the Company, of which there can be no assurance, these factors indicate that we may be unable to continue in existence in the absence of receiving additional funding. In addition to our operating expenses which average approximately $165,000 per month, management’s plans for the next twelve months include approximately $2.5 million of cash expenditures for development and expansion of our health insurance and employee benefits business operations. While there can be no assurance, the Company believes that it will be able to generate su

 

Dividend Policy

 

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on any of our capital stock. We do not anticipate paying any dividends in the foreseeable future, and we currently intend to retain all available funds and any future earnings for use in the operation of our business and to finance the growth and development of our business. Future determinations as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Our loan agreements limit our ability to pay dividends or make other distributions or payments on account of our common stock, in each case subject to certain exceptions.

 

 
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Off-Balance Sheet Arrangements

 

The Company has not undertaken any off-balance sheet transactions or arrangements.

 

Recent Accounting Pronouncements

 

Recent accounting pronouncements which may affect the Company are described in Note 2 — Summary of Significant Accounting Policies, subsection “New Accounting Requirements and Disclosures” in the annual financial statements below.

 

Limitations on Liability and Indemnification Matters

 

We intend to amend our bylaws to contain provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Idaho law. Any limitation of liability pursuant to Idaho law does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

 

Our amended bylaws will further authorize us to indemnify our directors, officers, employees, and other agents to the fullest extent permitted by Idaho law. We intend our amended bylaws also to provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee, or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Idaho law. We expect to enter into agreements to indemnify our directors, executive officers, and other employees as determined by the board of directors. With certain exceptions, these agreements will provide for indemnification for related expenses including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these amended bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

 

The intended limitation of liability and indemnification provisions in our amended bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, executive officers, or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

 
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Index to Financial Statements

Table of Contents

 

 

 

Page

 

Financial Statements

 

 

 

Report of Independent Registered Public Accounting Firm

 

F-2

 

Consolidated Balance Sheets of the Company as of September 30, 2019 and 2018

 

F-3

 

Consolidated Statements of Operations of the Company for the years ended September 30, 2019 and 2018

 

F-4

 

Consolidated Statement of Stockholder’s Equity of the Company for the years ended September 30, 2019 and 2018

 

F-5

 

Consolidated Statements of Cash Flows of the Company for the years ended September 30, 2019 and 2018

 

F-6

 

Notes to Financial Statements

 

F-7

 

  

 
F-1
 
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Quad M Solutions, Inc.

 

Opinions on the Financial Statements and Internal Control over Financial Reporting

 

We have audited the accompanying balance sheets of Quad M Solutions, Inc. (the Company) as of September 30, 2018 and 2019, and the related statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two year periods ended September 30, 2018 and 2019, and the related notes  (collectively referred to as the financial statements). We also have audited the Company’s internal control over financial reporting as of September 30, 2018 and 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2018 and 2019, and the results of its operations and its cash flows for each of the years in the two periods ended September 30, 2018 and 2019, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2018 and 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

 

Basis for Opinion

 

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying report. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting 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 in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

Our audits of the financial statements included performing procedures to assess the risks of material 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 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s 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 the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

January 15, 2020

   

 
F-2
 
Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka) MINERAL MOUNTAIN MINING AND MILLING COMPANY

CONSOLIDATED BALANCE SHEETS

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

(Restated)

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$ 14,700

 

 

$ 1,900

 

Total Current Assets

 

 

14,700

 

 

 

1,900

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Other Assets

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 14,700

 

 

$ 1,900

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$ 34,710

 

 

$ 21,084

 

Accrued interest

 

 

39,312

 

 

 

8,002

 

Deferred payroll

 

 

-

 

 

 

74,257

 

Notes payable – related party

 

 

58,128

 

 

 

57,000

 

Convertible debt, net

 

 

351,275

 

 

 

-

 

Derivative liability

 

 

1,509,792

 

 

 

-

 

Accrued expense

 

 

283,833

 

 

 

-

 

Aurum payable

 

 

400,000

 

 

 

-

 

Total Current Liabilities

 

 

2,677,050

 

 

 

160,343

 

TOTAL LIABILITIES

 

 

2,677,050

 

 

 

160,343

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $.10 par value, 10,000,000 shares authorized, 800,001 and 0 shares issued and outstanding

 

 

80,000

 

 

 

-

 

Common stock, $0.001 par value, 100,000,000 shares authorized;

 

 

 

 

 

 

 

 

68,977,733 and 60,436,162 shares issued and outstanding

 

 

68,978

 

 

 

60,436

 

Additional paid-in capital

 

 

4,271,462

 

 

 

2,752,600

 

Shares to be issued

 

 

-

 

 

 

55,000

 

Subscription receivable

 

 

(3,100 )

 

 

 

 

Accumulated deficit

 

 

(7,079,690 )

 

 

(3,026,479 )

Total Stockholders’ Deficit

 

 

(2,662,350 )

 

 

(158,443 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$ 14,700

 

 

$ 1,900

 

 

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

 

 
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QUAD M SOLUTIONS, INC.

(fka) MINERAL MOUNTAIN MINING AND MILLING COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

Year Ended September 30

 

 

 

2019

 

 

2018

 

 

 

 

 

(Restated)

 

REVENUES

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Professional fees

 

 

418,917

 

 

 

74,662

 

General and administrative

 

 

838,418

 

 

 

127,747

 

Payroll expense

 

 

147,966

 

 

 

140,742

 

Mineral property expense

 

 

42,301

 

 

 

47,261

 

Travel

 

 

121,729

 

 

 

65,270

 

Directors’ fees

 

 

22,000

 

 

 

-

 

TOTAL OPERATING EXPENSES

 

 

1,591,331

 

 

 

455,682

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(1,591,331 )

 

 

(455,682 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

Interest expense

 

 

(639,881 )

 

 

(5,652 )

Financing Fees

 

 

(37,500 )

 

 

-

 

Loss on issuance of convertible debt

 

 

(1,920,719 )

 

 

-

 

Gain on revaluation of derivative liabitilty

 

 

646,389

 

 

 

-

 

Loss on extinguishment of debt

 

 

(29,943 )

 

 

-

 

Loss on disposal of subsidiary

 

 

(403,327 )

 

 

-

 

Loss on acquisition of subsidiaries

 

 

(76,900 )

 

 

-

 

Other expense

 

 

-

 

 

 

(2,000 )

TOTAL OTHER INCOME (EXPENSES)

 

 

(2,461,881 )

 

 

(7,652 )

 

 

 

 

 

 

 

 

 

LOSS BEFORE TAXES

 

 

(4,053,212 )

 

 

(463,334 )

 

 

 

 

 

 

 

 

 

INCOME TAXES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (4,053,212 )

 

$ (463,334 )

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

 

$ (0.06 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED

 

 

67,824,590

 

 

 

58,750,329

 

 

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

 

 
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QUAD M SOLUTIONS, INC

(fka) MINERAL MOUNTAIN MINING AND MILLING COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

Paid in

 

 

Accumulated

 

 

Stock to be issued and

Shares to be

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Issued

 

 

Equity

 

Balance, September 30, 2017

 

 

53,816,162

 

 

$ 53,816

 

 

 

 

 

$

 

 

$ 2,444,186

 

 

$ (2,563,145 )

 

$ -

 

 

$ (65,143 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

 

 

5,760,000

 

 

 

5,760

 

 

 

 

 

 

 

 

 

218,340

 

 

 

 

 

 

 

55,000

 

 

 

55,000

 

Common stock issued for services

 

 

300,000

 

 

 

300

 

 

 

 

 

 

 

 

 

45,200

 

 

 

 

 

 

 

 

 

 

 

45,500

 

Common stock issued for reimbursement of mineral claims

 

 

500,000

 

 

 

500

 

 

 

 

 

 

 

 

 

4,540

 

 

 

 

 

 

 

 

 

 

 

5,040

 

Warrants issued for directors’ fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39,194

 

 

 

 

 

 

 

 

 

 

 

39,194

 

Exercise of warrants

 

 

60,000

 

 

 

60

 

 

 

 

 

 

 

 

 

1,140

 

 

 

 

 

 

 

 

 

 

 

1,200

 

Net income for period ending September 30, 2018

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

-

 

 

 

(463,333 )

 

 

-

 

 

 

(463,333 )

Balance, September 30, 2018 (Restated)

 

 

60,436,162

 

 

 

60,436

 

 

 

 

 

 

 

 

 

2,752,600

 

 

 

(3,026,478 )

 

 

55,000

 

 

 

(158,442 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

 

 

5,683,000

 

 

 

5,683

 

 

 

 

 

 

 

 

 

232,317

 

 

 

 

 

 

 

(55,000 )

 

 

183,000

 

Common stock issued for services

 

 

1,400,000

 

 

 

1,400

 

 

 

 

 

 

 

 

 

298,000

 

 

 

 

 

 

 

 

 

 

 

299,400

 

Common stock issued for officers & directors’ fees

 

 

4,330,000

 

 

 

4,330

 

 

 

 

 

 

 

 

 

102,670

 

 

 

 

 

 

 

 

 

 

 

107,000

 

Rescinded shares

 

 

(4,300,000 )

 

 

(4,300 )

 

 

 

 

 

 

 

 

4,300

 

 

 

 

 

 

 

 

 

 

 

-

 

Common stock issued for financing fees

 

 

1,428,571

 

 

 

1,429

 

 

 

 

 

 

 

 

 

98,571

 

 

 

 

 

 

 

 

 

 

 

100,000

 

Preferred shares issued for subsidiaries

 

 

 

 

 

 

 

 

 

 

800,000

 

 

 

80,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,000

 

Retirement of derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

275,423

 

 

 

 

 

 

 

 

 

 

 

275,423

 

Subscription receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,100 )

 

 

(3,100 )

Warrants issued for convertible debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

507,581

 

 

 

 

 

 

 

 

 

 

 

507,581

 

Net income for period ending September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,053,212 )

 

 

 

 

 

 

(4,053,212 )

Balance, September 30, 2019

 

 

68,977,733

 

 

$ 68,978

 

 

 

800,000

 

 

$ 80,000

 

 

$ 4,271,462

 

 

$ (7,079,690 )

 

$ (3,100 )

 

$

(2.662.350

)

 

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

 

 
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QUAD M SOLUTIONS, INC

(fka) MINERAL MOUNTAIN MINING AND MILLING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

   

 

 

Year Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

(Restated)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$ (4,053,212 )

 

$ (463,334 )

Adjustments to reconcile net income (loss) to net cash

 

 

 

 

 

 

 

 

provided (used) by operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

533,749

 

 

 

-

 

Amortization of financing fees

 

 

100,000

 

 

 

-

 

Common stock issued for services

 

 

299,400

 

 

 

45,500

 

Common stock issued for officers’ and directors’ fees

 

 

107,000

 

 

 

-

 

Common stock issued for reimbursement of mineral claim fees

 

 

-

 

 

 

5,040

 

Loss on issuance of convertible debt

 

 

1,791,189

 

 

 

-

 

Gain on revaluation of derivative liability

 

 

(646,389 )

 

 

-

 

Loss on extinguishment of debt

 

 

55,703

 

 

 

-

 

Loss on disposal of subsidiary

 

 

303,327

 

 

 

-

 

Loss on acquisition of subsidiary

 

 

76,900

 

 

 

-

 

Warrants issued for directors’ fees

 

 

-

 

 

 

39,194

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase (decrease) in accounts payable

 

 

40,416

 

 

 

10,283

 

Increase (decrease) in accrued interest

 

 

35,183

 

 

 

5,650

 

Increase (decrease) in deferred payroll

 

 

(14,536 )

 

 

74,256

 

Increase (decrease) in accrued expense

 

 

283,833

 

 

 

-

 

Net cash used by operating activities

 

 

1,087,437

 

 

 

(283,411 )

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

-

 

 

 

-

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock and warrants

 

 

193,000

 

 

 

279,100

 

Proceeds from convertible debt, net

 

 

948,944

 

 

 

-

 

Proceeds from note payable-related party

 

 

1,293

 

 

 

-

 

Payment of convertible debt

 

 

(43,000 )

 

 

-

 

Proceeds from conversion of warrants

 

 

-

 

 

 

1,200

 

Net cash provided by financing activities

 

 

1,100,237

 

 

 

280,300

 

INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

12,800

 

 

 

(3,111 )

Cash, beginning of period

 

 

1,900

 

 

 

5,011

 

Cash, end of period

 

$ 14,700

 

 

$ 1,900

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Interest paid

 

$ -

 

 

$ -

 

Income taxes paid

 

$ -

 

 

$ -

 

Derivative liabilities

 

$ 835,415

 

 

 

 

 

 

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

 

 
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QUAD M SOLUTIONS, INC

Consolidated Notes to Financial Statements

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Quad M Solutions, Inc (“the Company”), f/k/a Mineral Mountain Milling and Mining Company, was incorporated under the laws of the State of Idaho on August 4, 1932 for the purpose of mining and exploring for non-ferrous and precious metals, primarily silver, lead and copper. Until April 16, 2019, the Company had two wholly owned subsidiaries, Nomadic Gold Mines, Inc., an Alaska corporation, and Lander Gold Mines, Inc., a Wyoming corporation (the “MMMM Mining Subsidiaries”). On April 16, 2019, the Company divested itself of seventy-five percent of the MMMM Mining Subsidiaries to Aurum, LLC, a newly organized Nevada corporation (“Aurum”) formed by Sheldon Karasik, the Company’s former CEO, for the purpose of entering into the MBO Agreement and operating the Company’s formerly wholly-owned mining subsidiaries. Reference is made to Recent Developments-Former MMMM Mining Subsidiaries under Note 3 – MINING CLAIMS AND LAND, below.

 

On March 22, 2019 the Company entered into two separate Share Exchange Agreements pursuant to which it agreed to acquire 100% of the capital stock of two newly organized entities, NuAxess 2, Inc., a Delaware corporation, and PR345, Inc., a Texas corporation, both private companies, in consideration for the issuance of 400,000 shares of Series C Preferred Stock, issued to the control shareholders of each of NuAxess and PR345, and 400,000 shares of Series D Preferred Stoc, issued to the minority, non-control shareholders of the two entities. The closing of the two Share Exchange Agreements occurred on April 16, 2019, at which date NuAxess and PR345 became wholly-owned subsidiaries of the Company.

 

On May 13, 2019, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of implementing the following corporate actions: (i) the increase in the authorized shares of common stock from 100 million shares to 900 million shares (the “Authorized Common Stock Share Increase”); and (ii) change the name of the Company from Mineral Mountain Mining & Milling Company to Quad M Solutions, Inc. (the “Name Change”).

 

On June 7, 2019, the Company filed Articles of Amendment to its Articles of Incorporation with the Secretary of State of the State of Idaho effecting the Name Change. On June 14, 2019 the Company filed Articles of Amendment to its Articles of Incorporation with the Secretary of State of the State of Idaho effecting the Authorized Common Stock Share Increase. In addition, effecting the Authorized Common Stock Share Increase. In addition, on July 19, 2019, the Company obtained the requisite approval from FINRA for the Name Change.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of Quad M Solutions, Inc and its two wholly owned subsidiaries is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.

 

Basis of Presentation

 

The consolidated financial statements incorporate the accounts of Quad M Solutions, Inc and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The accounts have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

 

Accounting Method

 

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

 

Earnings (Losses) Per Share

 

Basic earnings per share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the year. Fully-diluted earnings per share is computed by dividing net income (loss) by the sum of the weighted-average number of common shares outstanding and the additional common shares that would have been outstanding if potential common shares had been issued. Potential common shares are not included in the computation of fully diluted earnings per share if their effect is anti-dilutive.

 

 
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Cash Equivalents

 

The Company considers cash, certificates of deposit, and debt instruments with a maturity of three months or less when purchased to be cash equivalents.

 

Estimates

 

The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of operations.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments as defined by ASC 825-10-50, include cash, receivables, accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2019 and 2018.

 

The standards under ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

Level 1. Observable inputs such as quoted prices in active markets;

 

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3. Unobservable inputs in which there is little of no market data, which require the reporting entity to develop its own assumptions.

 

At September 30, 2019 and 2018 the Company did not have any assets measured at fair value other than cash and deposits. At September 30, 2019 the Company had conversion features embedded in its convertible notes payable. The fair value measurement of those derivatives, using a Binomial valuation model, was $1,509,792 at September 30, 2019 and is reported as derivative liability on the balance sheet. At September 30, 2018 the Company did not have any liabilities measured at fair value.

 

Going Concern

 

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of September 30, 2019, the Company has limited financial resources with which to achieve its objectives and attain profitability and positive cash flows from operations. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $7,079,690. The Company’s working capital deficit is $2,662,350.

 

Achievement of the Company’s objectives will depend on its ability to obtain additional financing, to generate revenue from current and planned business operations, and to effectively operating and capital costs.

 

The Company plans to fund its future operations by potential sales of its common stock or by issuing debt securities. However, there is no assurance that the Company will be able to generate sufficient equity and/or debt capital at terms and conditions satisfactory of the Company.

 

 
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Provision for Taxes

 

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset. See Note 5.

 

New Accounting Pronouncements

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The ASU will be effective for annual periods beginning after December 15, 2018 and interim periods within that fiscal year, early adoption is permitted. We do not believe the adoption of ASU 2018-07 materially impacted our consolidated financial statements.

 

The Company has evaluated the authoritative guidance issued subsequent to September 30, 2018 and does not expect the adoption of these standards to have a material effect on its financial position or results of operations.

 

NOTE 3 – RESTATEMENT OF FINANCIAL STATEMENTS

 

In November 2018, information came to the attention of Company management that led it to investigate whether one of the Company’s property and mineral leases, its Alaska Mineral Lease, qualified for early adoption of ASU No. 2016-02, resulting in the recognition of a right of use asset and lease liability in accordance with ASC 842, was the absolute best accounting practice or whether the scope exception applied and the lease payments should have been expensed as incurred in accordance with the scope exception of ASC 842. Company management concluded on February 14, 2019 and notified the Board that a portion of its financial statements should no longer be relied upon because of an error in such financial statements. Company management further concluded that the Company could properly early adopt ASC 842, but that we determined the scope exception applied and that it should account for the Alaska Mineral Lease payments as expenses as incurred pursuant the scope exception of ASC 842. On February 15, 2019, the Company’s independent registered public accounting firm, Fruci & Associates II, PLLC (“Fruci”), concurred with these conclusions and that the financial statements, including the fiscal years ended September 30, 2017 and September 30, 2018, should be restated and amended to reflect this change.

 

The Company determined that it had made an error in how it implemented ASU No. 2016-02, Leases as it relates to the Alaska Mineral Lease and Option to Purchase. The ASU-842-10-15 scope exception states that the topic does not apply to “Leases to explore for or use minerals, oil, natural gas, and similar nonregenerative resources. This includes rights to explore for those natural resources and rights to use the land in which those natural resources are contained (that is, unless those rights of use include more than the right to explore for natural resources), but not equipment used to explore for the natural resources”. The Company believed that there was an infrastructure asset present on the Company’s leased property in the form of unpaved roads and an exclusive right to use that infrastructure pursuant to the terms of the Alaska Mineral Lease that met the requirement that the lease include more than the right to explore for natural resources. Company Management has since determined that this infrastructure asset may not meet that criteria, and as a result the Company has restated the accompanying financial statements to reflect this change.

 

The cumulative effect of the change on retained earnings at October 1, 2016 was an increase of $331,332.

  

 
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The effects of the error correction are as follows:

 

 

 

Originally

 

 

Restatement

 

 

As

 

Consolidated Balance Sheets

 

Reported

 

 

Adjustment

 

 

Restated

 

As of September 30, 2018

 

 

 

 

 

 

 

 

 

Investment in mineral lease

 

$ 336,000

 

 

$ (336,000 )

 

$ -

 

Mineral lease, net

 

$ 101,498

 

 

$ (101,498 )

 

$ -

 

Long term mineral lease liability

 

$ 216,817

 

 

$ (216,817 )

 

$ -

 

Accumulated deficit

 

$ (2,805,798 )

 

$ (220,681 )

 

$ (3,026,479 )

Earnings per share

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originally

 

 

Restatement

 

 

As

 

Consolidated Statements of Operations

 

Reported

 

 

Adjustment

 

 

Restated

 

For the year ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Mineral Property Expense

 

$ 79,321

 

 

$ (59,819 )

 

$ 19,502

 

Total operating expenses

 

$ 515,501

 

 

$ (59,819 )

 

$ 455,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originally

 

 

Restatement

 

 

As

 

Consolidated Statements of Cash Flows

 

Reported

 

 

Adjustment

 

 

Restated

 

For the year ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of mineral lease

 

$ 50,833

 

 

$ (50,833 )

 

$ -

 

 

NOTE 4 – MINING CLAIMS AND LAND

 

On April 24, 2019, the Company filed a Form 8-K reporting that on April 16, 2019, the Company entered into a Share Exchange and Assignment Agreement (the “MBO Agreement”) between the Company and Aurum, LLC, a newly organized Nevada corporation (“Aurum”) formed by Sheldon Karasik, the Company’s former CEO, for the purpose of entering into the MBO Agreement and operating the Company’s formerly wholly-owned mining subsidiaries. Pursuant to the MBO Agreement, the Company sold, transferred and assigned to Aurum a number of shares equal to 75% of the shares of capital stock of the MMMM Mining Subsidiaries with the Company retaining 25% of the capital stock of the MMMM Mining Subsidiaries. Effective on June 3 2019, the Company divested 6% of its equity interest in the MMMM Mining Subsidiaries to an unaffiliated third party for nominal consideration in the amount of $2000, represented by a note payable.

 

Alaska Mineral Lease and Option to Purchase

 

On April 5, 2016, the Company signed a Lease Agreement with Option to Purchase thirty contiguous mining claims known as the Caribou Mining Claims consisting of 4,800 acres in the State of Alaska. The agreement consists of two parts, an Option to Purchase and until such time as the Option to Purchase is exercised, the Agreement is considered a lease. The Company has chosen to make an early adoption of ASC 842-Lease, as a result the Company initially recognized an Investment in Mineral Lease asset of $336,000, and a Mineral Lease liability of $336,000, based on the discounted future lease payments. The balance of the Mineral Lease liability was $216,817 at September 30, 2018 and $212,318 at September 30, 2017. This was a related party transaction.

 

 
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Table of Contents

   

Option to Purchase

 

The Option to Purchase may be exercised without pre-payment penalty at any time prior to the ninth anniversary of the effective date of the agreement which would be April 5, 2025 by remitting $5,000,000. In order to maintain the Option to Purchase the Company must make expenditures for work on the property as follows:

 

Work Expenditure Commitments

Due Before

 

Amount

 

December 1, 2019

 

$ 150,000

 

December 1, 2020

 

 

250,000

 

December 1, 2021

 

 

500,000

 

December 1, 2022

 

 

1,000,000

 

December 1, 2023

 

 

1,000,000

 

December 1, 2024

 

 

1,000,000

 

Total

 

$ 3,900,000

 

 

Lease

 

In order to maintain the Option to Purchase the Company shall make the following lease payments.

 

Lease Payment Obligations

Date Due

 

Amount

 

 

 

 

 

April 5, 2016

 

$ 20,000

 

April 5, 2016

 

 

5,000

 

April 5, 2019

 

 

10,000

 

April 5, 2020

 

 

20,000

 

April 5, 2021

 

 

40,000

 

April 5, 2022

 

 

70,000

 

April 5, 2023

 

 

100,000

 

 

 

 

 

 

Total

 

$ 265,000

 

 

 

 

 

 

Paid during year ended September 30, 2016

 

 

25,000

 

Balance at September 30, 2016

 

$ 240,000

 

Paid during year ended September 30, 2017

 

 

0

 

Balance at September 30, 2017

 

$ 240,000

 

Paid during year ended September 30, 2018

 

 

0

 

Balance at September 30, 2018

 

$ 240,000

 

 

There was additional consideration of 11,200,000 shares of common stock valued at $336,000 recorded as investment in mineral lease.

 

We determined that the scope exception in ASC 842-10-15-1(b) did not apply because not only does the Iditarod Project Agreement grant the right to explore for minerals and to use the land but in Section 6(b) it states “further grants the exclusive right to use structures facilities, equipment, non-public roadways, haulageways and all other appurtenances installed on the subject property.” Furthermore, the property contains and the lease provides use of road infrastructure on the property.

 

In addition, under the agreement a royalty equal to two percent (2%) of the net smelter returns derived by the Company shall be payable, without regard to whether the Option to Purchase has been exercised. No royalties have been incurred as of September 30, 2018 or 2017.

 

On August 17, 2018, the Company agreed to an amendment to Lease Agreement with Option to Purchase, with effect on April 18, 2016, for the Caribou Mining Claims modifying the payment schedules for the lease payments and option to purchase to accommodate the Company’s efforts to secure additional capital investment for the Caribou Mining Claims resulting in significant savings and flexibility to the Company.

 

Lewis Mineral Lease and Option to Purchase

 

On December 18, 2017, the Company signed a Lease Agreement with Option to Purchase sixteen unpatented mining claims known as the Lewiston Claims and three patented mining claims known as the Hidden Hand, Morris and Casselton Claims, located in the State of Wyoming. The agreement consists of two parts, an option to purchase and until such time as the Option to Purchase is exercised, the Agreement is considered a lease.

 

 
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Option to Purchase

 

The Option to Purchase may be exercised without pre-payment penalty at any time prior to the seventh anniversary of the effective date of the agreement which would be December 14, 2024 by remitting $1,000,000. In order to maintain the Option to Purchase the Company must make six annual payments all of which will be credited to the purchase price beginning on December 14, 2018 and continuing until December 14, 2023.

 

Lease

 

In order to maintain the Option to Purchase the Company shall make the following lease payments.

 

Lease Payment Obligations

Date Due

 

Amount

 

June 14, 2018

 

$ 20,000

 

December 14, 2018

 

 

30,000

 

December 14, 2019

 

 

30,000

 

December 14, 2020

 

 

30,000

 

December 14, 2021

 

 

30,000

 

December 14, 2022

 

 

30,000

 

December 14, 2023

 

 

30,000

 

 

 

 

 

 

Total

 

$ 200,000

 

 

There was additional consideration of 500,000 warrants to purchase shares of common stock value.

 

In addition, under the agreement a royalty equal to three percent (3%) of the net smelter returns derived by the Company shall be payable, without regard to whether the Option to Purchase has been exercised. No royalties have been incurred as of September 30, 2018.

 

The parties to the lease amended the payment schedule to defer $7,500 in lease payments indefinitely.

 

Helen G Mineral Lease

 

On March 8, 2018, the Company signed a Lease Agreement for three patented mining claims known as the Helen G. (a/k/a Allen G), Mill and Star Lode Claims, located in the State of Wyoming.

 

Under the agreement a royalty shall be paid as follows:

 

 

· If the monthly average per troy ounce of gold is over $1,500 the royalty shall be 3.5% of net smelter returns.

 

 

 

 

· If the monthly average per troy ounce of gold is greater than $1,400 but less than $1,500, the royalty shall be 3.0% of net smelter returns.

 

 

 

 

· If the monthly average per troy ounce of gold is greater than $1,300 but less than $1,400, the royalty shall be 2.5% of net smelter returns.

 

 

 

 

· If the monthly average per troy ounce of gold is $1,300 or less the royalty shall be 2.0% of net smelter returns.

   

No royalties have been incurred as of September 30, 2018.

 

Lease

 

In order to maintain its lease, the Company shall make a $2,500 advance royalty payment at execution of the agreement and on each yearly anniversary for as long as the agreement is in effect. These advance royalty payments will be credited to the production royalty payments owed above. The failure of the Company to timely tender the advance royalty payment may terminate this lease.

 

 
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NOTE 5 – EQUITY PURCHASE AGREEMENT

 

The Company entered into an Equity Purchase Agreement, dated as of October 1, 2018 (the “Equity Purchase Agreement”), by and between the Company and Crown Bridge Partners, LLC (the “Crown Bridge”) pursuant to which the Company has agreed to issue to Crown Bridge shares of the Company’s Common Stock, $0.001 par value (the “Common Stock”), in an amount up to Five Million Dollars ($5,000,000.00) (the “Shares”), in accordance with the terms of the Equity Purchase Agreement. In connection with the transactions contemplated by the Equity Purchase Agreement, the Company is required to register with the SEC the following shares of Common Stock: (1) 8,000,000 Put Shares to be issued to the Investors upon purchase from the Company by the Investors from time to time pursuant to the terms and conditions of the Equity Purchase Agreement; (2) 1,428,571 shares of Common Stock to be issued by the Company to the Investors as a commitment fee pursuant to the Equity Purchase Agreement; and (3) the Company also has entered into a Registration Rights Agreement, of even date with the Equity Purchase Agreement with the Investors (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Put Shares under the Securities Act of 1933, as amended (the “Securities Act”) relating to the resale of the Put Shares.

 

The Company intends to use the proceeds of the revolving credit line for general corporate purposes, which may include (i) acquisitions, (ii) refinancing or repayment of indebtedness, (iii) capital expenditures and working capital, (iv) investing in equipment and property development (which may include funding associated with exploration), and (v) pursuing other business opportunities both related and unrelated to our existing mining activities.

 

NOTE 6 – ACQUISTION OF WHOLLY OWNED SUBSIDIARIES

 

On April 16, 2019, the Company completed the closing of two separate Share Exchange Agreements with unaffiliated third parties, dated March 22, 2019, pursuant to which the Company acquired 100% of the capital stock of NuAxess 2, Inc., a newly-organized Delaware corporation, and PR345, Inc., a newly organized Texas corporation. Pursuant to these Agreements, the Company acquired all of the capital stock of NuAxess and P3R45 in exchange for the issuance to the shareholders of NuAxess and PR345 shares of newly authorized Series C and D Convertible Preferred Stock, par value $0.10 per share (the “New Preferred Stock”). The Shares of Series D Convertible Preferred Stock have beneficial ownership limitation provisions. The transaction was valued at $80,000 and as a result a loss on acquisition in the amount of $76,900 was recorded.

 

NOTE 7 – SHARE EXCHANGE AND ASSIGNMENT AGREEMENT

 

On April 16, 2019, the Company entered into a Share Exchange and Assignment Agreement (the “MBO Agreement”) with Aurum, LLC (“Aurum”), a newly formed Nevada corporation organized by Sheldon Karasik for the purpose of entering into the MBO Agreement thereby acquiring 75% of the capital stock of the MMMM Mining Subsidiaries from the Company. On the date of closing, the Company made a payment of $100,000 to Aurum for the operations of the MMMM Mining Subsidiaries, and agreed to make an additional payment subject to the terms and conditions of the MBO Agreement. In connection with the MBO Agreement, Aurum agreed to assume all of the liabilities of the MMMM Mining Subsidiaries, which were disclosed to the Company as totaling approximately $96,673. As a result of this transaction, a loss of $403,327 was recorded.

 

NOTE 8 – CONVERTIBLE DEBT

 

On or about November 27, 2018, the Company issued a convertible promissory note to an institutional investor for the principal sum of $63,000.00, together with interest at 12% per annum, with a maturity date of November 27, 2019 (the “Note”). The Note was convertible at any time during the period beginning 180 days following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into shares of Common Stock at a Variable Conversion Price, which is equal to 58% multiplied by the Market Price (as defined below), representing a discount rate of 42% Market Price” is defined as the average of the lowest two (2) Trading Prices for the Company’s Common Stock during the preceding 15 trading day period prior to the Conversion Date. The Company paid $3,000 as a fee which is recorded as a debt discount and being amortized over the life of the loan.

 

 
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The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1770 was $131,158 using a binomial pricing model and was calculated as a derivative liability discount to the Note. That amount is recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs and amounts discussed immediately below), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the Note. Because of the derivative nature of the $131,158 valuation of the conversion feature, $71,158 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt. An accredited investor acquired the note from the institutional investor, with the consent of the Company, in consideration for the payment of the outstanding principal, accrued interest and prepayment penalty in the aggregate amount of $96,816. The Company then issued a replacement convertible promissory note payable to acquiring institutional investor for the principal sum of $96,816 with identical terms to the original note (interest at 12% per annum, maturity date of November 27, 2019, conversion rights and conversion price.) This transaction was treated as an extinguishment and reissuance of the original note and resulted in accelerated recognition of interest expense for original issue discount debt discount of $1,471, interest expense for derivative liability debt discount of $26,425 and a loss on extinguishment in the amount of $29,943.

 

The conversion feature of the replacement note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1775 was $292,344 using a binomial pricing model and was calculated as a derivative liability discount to the Note. That amount is recorded as a new contra-note payable amount, but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the Note. Because of the derivative nature of the $292,344 valuation of the conversion feature, $195,528 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the year ended September 30, 2019, $3,756 of regular interest and $63,823 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about February 22, 2019, the Company issued a second convertible promissory note to the same institutional investor for the principal sum of $43,000, together with interest at the rate of 12%per annum, with a maturity date of February 22, 2020. The institutional investor had the right at any time during the period beginning 180 days following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 58% multiplied by the Market Price (representing a discount rate of 42%), in which Market Price is the average of the lowest two (2) Trading Prices for the Company’s Common Stock during the preceding 15 trading day period prior to the Conversion Date. The Company paid $3,000 as a fee which it recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.116 was $76,918 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs and amounts discussed immediately below), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $76,918 valuation of the conversion feature, $36,918 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt. The outstanding principal and accrued interest in the amount of approximately $45,460 and a prepayment penalty in the amount of $19,350 was paid on August 14, 2019.

 

During the year ended September 30, 2019, $3,198 of regular interest, $3,000 of original issue discount, and $40,000 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On August 14, 2019, the Company prepaid the entire principal and accrued interest on the $43,000 note. On September 12, 2019, the Company received a confirmation letter from the institutional investor/holder stating that “Since the Note has been fully satisfied, we are returning to you the original Note marked “PAID.” 

 

On or about April 25, 2019, the Company issued a convertible promissory note to another third-party institutional investor for the principal sum of $75,000, together with interest at the rate of 12%per annum, with a maturity date of April 25, 2020. The investor had the right at any time during the period beginning 180 days following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price equal 58% multiplied by the Market Price, representing a discount rate of 42%, in which Market Price is the average of the lowest two Trading Prices for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $1,250 in original issue discount and $3,000 as a fee both of which are recorded as a debt discount and being amortized over the life of the loan.

 

 
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The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1062 was $139,348 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $139,348 valuation of the conversion feature, $69,348 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $3,896 of regular interest, $2,158 of original issue discount, and $30,219 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about April 29, 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $66,000, together with interest at the rate of 12% per annum, with a maturity date of April 29, 2020. Jefferson has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 58% multiplied by the Market Price (representing a discount rate of 42%), in which Market Price is the average of the lowest two Trading Prices for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $6,000 in original issue discount and $3,000 as a fee both of which are recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1510 was $175,334 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $175,334 valuation of the conversion feature, $118,334 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $3,388 of regular interest, $3,787 of original issue discount, and $23,984 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about May 7, 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $50,000, together with interest at the rate of 12% per annum, with a maturity date of May 7, 2020. The investor had the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 60% multiplied by the Market Price (representing a discount rate of 40%), in which Market Price is the average of the lowest two Trading Prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date. The Company paid $3,500 as a fee which is recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1607 was $131,162 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded OID and transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $131,162 valuation of the conversion feature, $84,662 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $2,416, of regular interest, $1,396 of original issue discount, and $18,549 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

 
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On or about May 17, 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $50,000, together with interest at the rate of 12% per annum, with a maturity date of February 17, 2020. The investor has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 58% multiplied by the Market Price, representing a discount rate of 42%, in which Market Price is the lowest bid price for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $5,000 as a fee which is recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0902 was $76,989 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $76,989 valuation of the conversion feature, $31,989 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $2,236, of regular interest, $2,464 of original issue discount, and $22,174 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about May 21, 2019, the Company issued a convertible promissory note to an institutional investor for the principal sum of $110,000, together with interest at the rate of 8% per annum, with a maturity date of November 21, 2019. The investor has the right at any time during the period beginning 180 days following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 60% multiplied by the Market Price, representing a discount rate of 40%, in which Market Price is the lowest bid price for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $5,000 as a fee which is recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0765 was $138,861 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $138,861 valuation of the conversion feature, $38,861 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $3,182, of regular interest, $7,174 of original issue discount, and $71,739 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about June 11, 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $70,000, together with guaranteed interest at the rate of 15% per annum with a six-month minimum, with a maturity date of September 11, 2019. The investor has the right if the note is defaulted to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 50% multiplied by the Market Price, representing a discount rate of 50%, in which Market Price is the lowest trading price for the Company’s Common Stock during the preceding 30 trading day period prior to the Conversion Date. The Company paid $20,000 in original issue discount which is recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0631 was $122,694 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $122,694 valuation of the conversion feature, $72,694 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $5,250, of regular interest, $20,000 of original issue discount, and $50,000 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

 
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On September 25, 2019, a third-party institutional investor acquired the $70,000 note dated June 11, 2019, with the consent of the Company, paying the outstanding principal, accrued interest and prepayment penalty in the aggregate amount of $95,760. The Company then issued a replacement convertible promissory note payable to third-party purchaser for the principal sum of $95,760 with interest at 10% per annum, a maturity date of September 25, 2020, granting the purchaser the right at any time to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal to the lesser of 60% multiplied by the average of the two lowest trading prices during the 20 trading days preceding the date of the note, or the average of the two lowest trading prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date. This transaction was treated as an extinguishment of the original note and resulted in recognition a loss on extinguishment in the amount of $49,762.

 

The conversion feature of this replacment note represents an embedded derivative. A derivative liability with an intrinsic value of $0.04407 was $145,522 using a binomial pricing model and was calculated as a derivative liability discount to the Note. That amount is recorded as a new contra-note payable amount, but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the Note. Because of the derivative nature of the $145,522 valuation of the conversion feature, $49,762 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the year ended September 30, 2019, $133 of regular interest and $3,050 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about July 1 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $112,500, together with interest at the rate of 12% per annum with a maturity date of December 25, 2020, which investor has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 60% multiplied by the Market Price, representing a discount rate of 40%, in which Market Price is the average of the two lowest trading prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date. The Company paid fees of $122,500 which was recorded as a debt discount and being amortized over the life of the loan

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0696 was $182,517 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $182,517 valuation of the conversion feature, $82,517 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $3,588, of regular interest, $3,975 of original issue discount, and $15,902 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about July 12 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $75,000, together with interest at the rate of 12% per annum with a maturity date of April 12, 2020, which investor has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 50% multiplied by the Market Price, representing a discount rate of 50%, in which Market Price is the lowest trading price (average of the two lowest closing bid prices) for the Company’s Common Stock during the preceding 25 trading day period prior to the Conversion Date. The Company paid $7,500 in original issue discount, fees of $2,750 and issued warrants valued at $27,911 all of which are recorded as a debt discount and being amortized over the life of the loan

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0416 was $91,496 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $91,496 valuation of the conversion feature, $54,656 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

 
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During the period ended September 30, 2019, $2,000, of regular interest, $12,985 of original issue discount, and $10,717 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about August 13 2019, the Company issued a convertible promissory note to an institutional investor for the principal sum of $225,000, together with interest at the rate of 10% per annum with a maturity date of February 13, 2020, which investor has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal to the lower of $0.08 and 60% of the average of the two lowest closing bid prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date. The Company paid $22,500 in original issue discount and fees of $7,500 which are recorded as a debt discount and being amortized over the life of the loan. Additionally, the Company issued warrants valued at $479,670, this amount is also recorded as a debt discount, but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. As a result of this cap, $284,670 is recorded as an expense and reported as a loss on issuance of convertible debt.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0754 was $642,857 using a binomial pricing model and was calculated as a derivative liability discount to the note. Because the entire note now was fully discounted by the amounts above, the $642,857 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $3000, of regular interest and $58,696 of original issue was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

On or about August 29 2019, the Company issued a convertible promissory note to an institutional investor for the principal sum of $55,000, together with interest at the rate of 8% per annum with a maturity date of August 28, 2020, which investor has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is 60% of the average of the two lowest closing bid prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date. The Company paid $5,000 in original issue discount and fees of $2,500 which are recorded as a debt discount and being amortized over the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.05368 was $84,403 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $84,403 valuation of the conversion feature, $36,903 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended September 30, 2019, $403, of regular interest and $676 of original issue and $4,283 of derivative liability discount was expensed was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

NOTE 9 – COMMON STOCK AND PREFERRED STOCK

 

Upon formation the authorized capital of the Company was 2,000,000 shares of common stock with a par value of $.05, in 1953 the Company increased the authorized capital to 3,000,000 shares of common stock, in 1985 the authorized capital was again increased to 10,000,000 shares of common stock, and in 2014 the Company increased the authorized capital to 100,000,000 shares of common stock with a par value of $.001 and 10,000,000 shares of preferred stock with a par value of $.10.

 

 
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During the year ended September 30, 2018, the Company issued 5,760,000 shares of common stock for cash of $224,100; 1,275,000 shares of common stock for cash of $55,000 that were unissued as of September 30, 2018;300,000 shares of common stock for services valued at $45,500; and 500,000 shares of common stock for reimbursement of mineral claim fees. Additionally, 280,000 warrants were issued for directors’ fees at an exercise price of $0.02 and a term of two years. The fair value of the warrants was estimated using the Black Scholes Option Price Calculation. The following assumptions were made to value the warrants on the date of issuance: strike price of $0.02, risk free interest rate of 1.99%, expected life of two years, and expected volatility of 495.28%. The fair value of the warrants totaled $39,194 at the issuance date and this amount was recorded as equity. Also, during the period 60,000 options were exercised at a price of $.02 for cash in the amount of $1200.

 

During the three month period ended December 31, 2018, the Company issued 2,650,000 shares of common stock for cash of $119,000; 1,275,000 shares that were paid for but unissued as of September 30, 2018; 200,000 shares of common stock for services valued at $50,000; 110,000 shares for directors’ fees valued at $22,000; and 4,000,000 shares for settlement of accumulated officers’ fees valued at $80,000.

 

During the three-month period ended March 31, 2019, the Company issued 1,958,000 shares of common stock for cash of $74,000; 1,000,000 shares of common stock for services valued at $230,000; 200,000 shares for officers’ fees valued at $4,000 and 1,428,571 shares valued at $100,000 for prepaid financing fees.

 

Additionally, in 2016, former management of the Company negotiated a contract with M6 Limited, a stock promotion company, in which M6 would collectively receive an advanced payment of 4.3 million shares of Company common stock for certain promotional services. M6 itself received 2 million shares, an affiliated company, Maximum Harvest LLC, received 1.3 million shares and an affiliate of M6, Hahn M. Nguyen, received 1 million shares. In 2018, current management determined that it was not in the best interest of the Company to pursue the services and therefore terminated the contract with M6. The 4.3 million shares of common stock have been rescinded and returned.

 

On March 21, 2019, the Company filed a Certificate of Designation amending the Articles of Incorporation and designating the rights and restrictions of 1 share of Series B Super Voting Preferred Stock, par value $0.10 per share (the “Series B Preferred Stock”), pursuant to resolutions approved by the Board of Directors (the “Board”) on November 5, 2018. On March 21, 2019, the Company issued to Sheldon Karasik, the Chief Executive Officer, President and Chairman of the Board, the one share of Series B Preferred Stock in exchange for $0.16, which price was based on the closing price of the Company’s Common Stock as of November 5, 2018 of $0.16, the date the issuance was approved by the Board. Sheldon Karasik, as the holder of the Series B Preferred Stock, is entitled to vote together with the holders of the Company’s Common Stock upon all matters that may be submitted to holders of Common Stock for a vote, and on all such matters, the share of Series Voting Preferred Stock shall be entitled to that number of votes equal to 51% of the total number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis. The Company filed the Certificate of Designation with the Secretary of State of Idaho on March 21, 2019.

 

On April 2, 2019, the Company filed two Certificates of Designation amending the Articles of Incorporation and designation the rights and restrictions of 400,000 shares of Series C Convertible Preferred Stock, par value $0.10 and 400,000 shares of Series D Convertible Preferred Stock, par value $0.10 pursuant to two separate Share Exchange Agreements. In accordance with the Share Exchange Agreements all of the preferred shares in each series was issued, see Note 5.

 

On April 8, 2019, the Company filed a Certificate of Designation amending the Articles of Incorporation and designation the rights and restrictions of 25,000 shares of Series E Convertible Preferred Stock, par value $0.10.

 

On August 14, 2019, the Company issued 200,000 shares of stock valued at $19,400 for investor relations.

 

The following warrants were outstanding at September 30, 2019:

 

Warrant Type

 

Warrants

Issued and Unexercised

 

 

Exercise

Price

 

 

Expiration

Date

 

Warrants

 

 

1,000,000

 

 

$ 0.05

 

 

December 2021

 

Warrants

 

 

500,000

 

 

$ 0.10

 

 

December 2021

 

Warrants

 

 

220,000

 

 

$ 0.02

 

 

January 2020

 

Warrants

 

 

535,714

 

 

$ 0.07

 

 

July 2024

 

Warrants

 

 

4,945,055

 

 

$ 0.08

 

 

August 2024

 

 

 
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The following warrants were outstanding at September 30, 2018:

 

Warrant Type

 

Warrants

Issued and Unexercised

 

 

Exercise

Price

 

 

Expiration

Date

 

Warrants

 

 

1,000,000

 

 

$ 0.05

 

 

December 2021

 

Warrants

 

 

500,000

 

 

$ 0.10

 

 

December 2021

 

Warrants

 

 

220,000

 

 

$ 0.02

 

 

January 2020

 

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

During the year ended September 30, 2016 the Company issued a note payable to a family member of an officer in the amount of $15,000. $3,000 was converted to 300,000 shares of common stock and $5,000 was repaid in cash. The note bears interest at a rate of 10% beginning on July 24, 2016, the balance of principal and interest at September 30, 2017 and 2016 was $8,443 and $7,227, respectively.

 

Also, during the year ended September 30, 2016, the Company through its wholly owned subsidiary, Nomadic Gold Mines, Inc, entered into a lease agreement with option to purchase with Ben Porterfield, a related party. See Note 3.

 

During the year ended September 30, 2017 the Company issued two notes payable to Premium Exploration Mining in the amount of $35,000 and $15,000 each having an interest rate of 5%, the balance of principal and interest at September 30, 2017 was $50,907, the companies have directors in common.

 

A family member of an officer provides investor relations consulting services and other administrative functions to the Company, during the period ended September 30, 2018, $44,400 was paid in cash for consulting; during the period ended September 30, 2017, $13,950 was paid in cash and $3,000 in common stock for consulting; and during the period ended September 30, 2016, $7,000 was paid in cash.

 

On March 21, 2019, the Company filed a Certificate of Designation amending the Articles of Incorporation and designating the rights and restrictions of 1 share of our Series B Super Voting Preferred Stock, par value $0.10 per share (the “Series B Preferred Stock”), pursuant to resolutions approved by the Board of Directors (the “Board”) on November 5, 2018.On March 21, 2019, the Company issued to Sheldon Karasik, the Chief Executive Officer, President and Chairman of the Board, the one share of Series B Preferred Stock in exchange for $0.16,which price was based on the closing price of the Common Stock as of November 5, 2018 of $0.16, the date the issuance was approved by the Board. Sheldon Karasik, as the holder of the Series B Preferred Stock, is entitled to vote together with the holders of the Common Stock upon all matters that may be submitted to holders of Common Stock for a vote, and on all such matters, the share of Series Voting Preferred Stock shall be entitled to that number of votes equal to 51% of the total number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis. The Company filed the Certificate of Designation with the Secretary of State of Idaho on March 21, 2019.

 

NOTE 11 – INCOME TAXES

 

Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2018 the Company had taken no tax positions that would require disclosure under ASC 740.

 

The Company files income tax returns in the U.S. federal jurisdiction and the State of Idaho. The Company is currently in arrears in filing their federal and state tax returns, both jurisdictions statute of limitations of three years does not begin until the tax returns are filed.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.

 

 
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Significant components of the deferred tax assets at an anticipated tax rate of 21% for the period ended September 30, 2019 and September 30, 2018 are as follows:

 

 

 

September 30,

2019

 

 

September 30,

2018

 

 

 

 

 

 

(Restated)

 

Net operating loss carryforwards

 

 

7,079,690

 

 

 

3,025,479

 

Deferred tax asset

 

 

1,819,944

 

 

 

968,769

 

Valuation allowance for deferred asset

 

 

(1,819,944 )

 

 

(968,769 )

Net deferred tax asset

 

 

-

 

 

 

-

 

 

At September 30, 2019 and September 30, 2018, the Company has net operating loss carryforwards of approximately $7,079,691 and $3,025,479 which will begin to expire in the year 2031. The change in the allowance account from September 30, 2018 to September 30, 2019 was $851,175.

 

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowered the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company computed its income tax expense for the December 31, 2017 fiscal year using a Federal Tax Rate of 21%. The remeasurement of the deferred tax assets resulted in a $68,010 reduction in tax assets to $885,961 from an estimate of $953,971 that the assets would have been using a 35% effective tax rate.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On or about October 1, 2019, the Company issued a convertible promissory note to Kinerjapay Corp (“KPay”) for the principal sum of $94,000, together with interest at the rate of 10% per annum with a maturity date of September 30, 2020. KPay has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal 60% multiplied by the Market Price (representing a discount rate of 50%), in which Market Price is the lowest closing bid price for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.04487 was $210,363 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $210,363 valuation of the conversion feature, $116,363 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

On or about November 12, 2019, the Company issued a convertible promissory note to Jefferson Street Capital LLC (“Jefferson”) for the principal sum of $59,400, together with interest at the rate of 12% per annum with a maturity date of November 12, 2020. Jefferson has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal to the lesser of 60% multiplied by the Market Price (representing a discount rate of 50%), in which Market Price is the average of the two lowest closing bid prices for the Company’s Common Stock during the 20 trading day period prior to the date of the note, or 60% multiplied by the Market Price (representing a discount rate of 40%), in which Market Price is the average of the two lowest closing bid prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0483 was $125,504 using a binomial pricing model and was calculated as a derivative liability discount to the note. That amount is recorded as a new contra-note payable amount (similar to the recorded transaction costs), but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. Because of the derivative nature of the $125,504 valuation of the conversion feature, $75,504 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

On or about December 20, 2019, the Company issued a convertible promissory note to Cavalry Fund I, LP (“Cavalry”) for the principal sum of $33,333, together with interest at the rate of 10% per annum with a maturity date of February 13, 2020. Cavalry has the right has the right at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal to the lower of $0.02 and 60% of the average of the two lowest closing bid prices for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $8,333 in original issue discount and fees which are recorded as a debt discount and being amortized over the life of the loan. Additionally, the Company issued warrants valued at $98,000, this amount is also recorded as a debt discount, but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. As a result of this cap, $73,000 is recorded as an expense and reported as a loss on issuance of convertible debt.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.0179 was $29,833 using a binomial pricing model and was calculated as a derivative liability discount to the note. Because the entire note now was fully discounted by the amounts above, the $29,833 is recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

 
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ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None. Reference is made the Company’s Forms 8-K filed on August 16, 2019 and January 6, 2020 with respect to the appointment of our new independent auditors, Slack & Co,.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

We are evaluating, developing and implementing “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(f) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We continue to conduct an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”), who also serves on an interim basis as our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this continuing Evaluation, our Chief Executive Officer has concluded that the Company’s disclosure controls and procedures were not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below in Management’s Annual Report on Internal Control over Financial Reporting, which we view as an integral part of our disclosure controls and procedures.

 

Changes in Internal Control

 

We have also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls as of September 30, 2019.

 

Limitations on the Effectiveness of Controls

 

Our management, including our CEO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

  

 
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The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

CEO/CFO Certifications

 

Appearing immediately following the Signatures section of this report there are Certifications of the CEO, who also serves as interim CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our 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.

 

The management of the Company assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on this assessment, management determined that, during the fiscal year ended September 30, 2018, our internal controls and procedures require improvement due to deficiencies in the design or operation of the Company’s internal controls. Management identified the following areas of improvement in internal controls over financial reporting:

 

1. The Company did not have a written internal control procedurals manual which outlines the duties and reporting requirements of the Directors and any staff to be hired in the future. This lack of a written internal control procedurals manual does not meet the requirements of the SEC or good internal controls.

 

2. The Company should improve maintenance and access to a centralized location for current and historical business records.

 

Management believes that areas of improvement set forth in items 1 and 2 above did not have an effect on the Company’s financial results. The Company and its management will endeavor to correct the above noted weaknesses in internal controls once it has adequate funds to do so.

 

Management will continue to monitor and evaluate the effectiveness of the Company’s internal controls and procedures and its internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our executive officer is Pasquale (Pat) Dileo, CEO and Chairman and Interim CFO. Mr. Dileo devotes 100% of his time to the affairs of the Company.

 

On October 23, 2017, Sheldon Karasik was elected to the Board of Directors. On October 23, 2017, Felix Keller was elected to the Board of Directors as an independent director. On December 28, 2017, Michael Miller and Ulises De la Garza were elected to the Board of Directors as independent directors. On October 31, 2018, James Baughman resigned from his positions with the Company as Vice President, Chief Geologist and a member of the Board of Directors and John P. Ryan resigned from his positions with the Company as Vice President, Secretary, Treasurer and a member of the Board of Directors. On April 8, 2019 Felix Keller resigned from the Board of Directors. On April 17, Pat Dileo, Carl Dorvil and Derrick Chambers were appointed to the Board of Directors. On October 17, 2019, Sheldon Karasik resigned from the Board of Directors. On October 18, 2019, Michael S Miller resigned from the Board of Directors

 

 
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The new Officers and directors of the Company are listed below. Directors are elected to hold offices for a three-year term or until their successors are elected or appointed and qualified. Officers are appointed by the board of directors until a successor is elected and qualified or until resignation, removal or death.

 

Name

 

Age

 

Position and Tenure

Pat Dileo

 

67

 

Chairman of the Board, Chief Executive Officer and Interim CFO

Carl Dorvil

 

36

 

Director

Derrick Chambers

 

42

 

Director

Sheldon Karasik (Resigned October 17, 2019

 

67

 

Former CEO and Director

Michael Miller (Resigned October 18, 2019)

 

53

 

Former Director

Ulises De la Garza (Resigned January 23, 2019)

 

52

 

Former Director

 

Pat Dileo, age 67, Chairman, CEO and Interim CFO: Pat Dileo has over 25 years of proven entrepreneurial, financial and management experience in both guiding his own companies and providing strategic advice and guidance to the CEOs of various public and private corporations. Since 2018, Mr. Dileo has served as President of NuAxess 2, Inc., a Delaware corporation that uses its reference-based medical provider pricing method for its proprietary Health Benefit Plans (HBP) and reinsurance risk assessment for small to midsize employer groups and their employees.

 

Mr. Dileo was also a founder of Consumer Care Solutions, Inc., a company he created in August 2004, as Essential Planning Group, and whose former chairman was the late Gerald (‘Jerry’) Tsai, Jr., a world-renowned Wall Street fund manager and financier who pioneered the use of performance funds in money management during the 1950s and 1960s, and later turned American Can Company into the financial services giant Primerica for Citigroup.

 

Prior to Consumer Care Solutions, Inc. Mr. Dileo was part of the management team active in establishing a patented technology for making municipal biosolids a recyclable fertilizer material via U.S. E.P.A. and was an owner and secretary of the private company that purchased a fertilizer company in Arkansas and acquired several long-term municipal biosolid contracts, including New York City DEP and Yonkers, NY. This company was subsequently sold to the largest national public company that ran municipal waste facilities throughout America.

 

From 1995 to 1998, Mr. Dileo was a vice president and director of Compost America Holding Company, Inc., a municipal solid waste and organic recycling company which became a public reporting company traded on OTCBB: CAHC in 1996.

 

Carl Dorvil, age 35, Director: Mr. Dorvil served as the Chief Executive Officer and Chairman of the Board of GEX Management, Inc., OTCQB: GXXM (“GEX”), a reporting public company engaged in the business of offering PEO services, from 2004 until October 15, 2018, at which date his employment agreement with GEX ended. While Mr. Dorvil’s position as CEO and Chairman of GEX ended on or about October 15, 2018, he continues to provide limited consulting services to GEX. Mr. Dorvil founded Group Excellence, LLC, a tutoring and mentoring company, in 2004, growing Group Excellence to more than six hundred employees. In 2011, Group Excellence was on Inc. 500’s annual list of the 500 fastest growing private companies in the United States. In response to rapid growth, Mr. Dorvil developed GEX to provide back-office functions to Group Excellence, together with human resources, IT and accounting/bookkeeping services. In 2016 GEX revised its business model to provide staffing and back-office services to a wide variety of industries in order to expand GEX’s business. On February 23, 2018, the US Secretary of Commerce, Wilbur Ross, mentioned at the “African American Leaders in the White House: Education, Business and Policy” that Dorvil was “the youngest African American CEO ever to take a company public in U.S. history.”

 

 
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From 2011 to 2018, Mr. Dorvil also served as a managing partner at P413 Management, LLC, a strategy and consulting firm that focuses on non-profit entities and consulting related to the expansion of corporate community outreach programs, and from 2013 to 2016, he served as Managing Partner at Vicar Capital Advisors, LLC, a capital advisory firm.

 

Mr. Dorvil graduated from Southern Methodist University in 2005 with three majors -- Public Policy, Economics, and Psychology, all with Distinction. Mr. Dorvil continued his education post undergraduate studies at SMU and received his MBA from the Cox School of Business.

 

Derrick Chambersage 41, Director: From 2016 to the present, Derrick Chambers has served as Director of the University of Florida Gator Boosters, responsible for fundraising and donations for the University’s Athletic Department. From 2011 to the present, Mr. Chambers has been the owner and founder of DCMG LLC, a New York based company engaged in independent consulting specializing in financial services in the areas of high net worth, professional sports and education. Mr. Chambers was a captain of the University of Florida NCAA Division 1 football team for two years under renowned Coach Steve Spurrier and played in the NFL for three years with the Carolina Panthers and Jacksonville Jaguars. Following his NFL career, he studied University of Oxford in England, studying politics, philosophy, and history. He was a member of the Oxford Rugby team at St. Peter’s College. Thereafter, Mr. Chambers studies at Princeton Seminary where he served as a Princeton Academic-Athletic fellow at Princeton. The academic-athletic fellows are made up of faculty and administrators who mentor student athletes at Princeton. 

 

As a member of the National Football League Players Association (NFLPA), Derrick is focused on financial literacy and advisory services for professional athletes and entertainers. Derrick is a Board member of the Youth Leadership foundation of Washington, D.C.

 

(a) Director Compensation

 

Prior to the change in control transaction in April 2019, the Company compensated directors, as described below. The Company no longer has a director compensation program.

 

Beginning in fiscal year ending September 30, 2018, the Company compensated directors with an annual warrant to convert 50,000 shares common stock at .02 per share. An additional annual warrant to convert into common stock 10,000 shares at .02 per share will be awarded to independent directors serving on the audit committee. Our Chairman generally will not receive compensation from us for service on the board of directors.

 

In connection with the change in control transaction in April 2019 and the resignations for the former members of the board of directors, the Company terminated the director compensation plan. Prior to its termination, the former directors during the year ended September 30, 2019 were awarded warrants, as set forth below

 

All members of the board of directors will be reimbursed for reasonable costs and expenses incurred in attending board of directors or committee meetings.

 

Name

 

Fees earned or

paid in cash ($)

 

 

Stock

awards ($)

 

 

Option

awards ($)

 

 

Non-equity incentive

plan compensation ($)

 

 

Nonqualified deferred

compensation earnings ($)

 

 

All other

compensation ($)

 

 

Total ($)

 

Fiscal Year Ending September 30, 2018

 

Sheldon Karasik

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

John Ryan (1)

 

 

0

 

 

 

0

 

 

 

8,399

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

8,399

 

James Baughman (4)

 

 

0

 

 

 

0

 

 

 

6,999

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

6,999

 

Felix Keller (2)

 

 

0

 

 

 

0

 

 

 

8,399

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

8,399

 

Michael Miller (3)

 

 

0

 

 

 

0

 

 

 

8,399

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

8,399

 

Ulises De la Garza (4)

 

 

0

 

 

 

0

 

 

 

6,999

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

6,999

 

  

(1)

Consists of warrants for 50,000 shares of common stock as annual compensation as a member of the board of directors and 10,000 shares of common stock as an annual fee as a member on the audit committee, both of which are convertible at .02 per share.

   

(2)

Consists of warrants for 50,000 shares of common stock as annual compensation as a member of the board of directors and 10,000 shares of common stock as an annual fee as a member on the audit committee, both of which are convertible at .02 per share. Mr. Keller exercised the warrant on 2/9/2018.

 

(3)

Consists of warrants for 50,000 shares of common stock as annual compensation as a member of the board of directors and 10,000 shares of common stock as an annual fee as a member on the audit committee, both of which are convertible at .02 per share.

 

 

(4)

Consists of a warrant for 50,000 shares of common stock as annual compensation as a member of the board of directors, convertible at .02 per share.

 

 
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The Company, in the future, may also adopt a director compensation plan but, at present, there is no plan nor is any plan contemplated.

 

(b) Identification of Certain Significant Employees and Consultants

 

None.

 

(c) Family Relationships.

 

Not applicable.

 

(d) Involvement in Certain Legal Proceedings.

 

None of our executive officers or directors has been involved in any of the following events during the past ten years:

 

 

(1)

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;

 

 

(2)

any conviction in a criminal proceeding or being a named subject to a pending criminal proceeding (excluding traffic violations and minor offenses);

 

 

(3)

being 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 his involvement in any type of business, securities or banking activities;

 

 

(4)

being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law;

 

 

(5)

being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

 

(6)

being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section (1)(a)(40) of the Commodity Exchange Act), or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.

 

 
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Description of Securities

 

General

 

The following description of our capital stock and certain provisions of our certificate of incorporation and bylaws are summaries and are qualified by reference to the certificate of incorporation and the bylaws that will be in effect on the closing of this registration. Copies of these documents have been filed with the SEC as exhibits to our Annual Report, of which this Annual Report forms a part. The descriptions of the common stock reflect changes, if any, to our capital structure that will be in effect on the closing of this registration.

 

Our authorized capital stock consists of 910,000,000 shares of capital stock consisting of: (i) 900,000,000 shares of common stock, par value $.001 per share and (ii) 10,000,000 shares of preferred stock, par value $0.10 per share. As September 30, 2019, we had 69,575,734 shares of common stock issued and outstanding and as of December 31, 2019, we had 70,357,650 shares of common stock outstanding. Of these shares, 13,821,733 are public floating shares as of December 31, 2019. Included below is a summary description of our capital stock.

 

Common Stock

 

The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election. Holders of common stock are entitled to receive ratably such dividends as may be declared by the Board out of funds legally available therefore. In the event of our liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in the assets remaining after payment of liabilities. Holders of common stock have no preemptive, conversion or redemption rights. All of the outstanding shares of common stock are fully-paid and non-assessable.

 

Our Board of Directors may, without shareholder approval, establish and issue shares of one or more classes or series of common stock having the designations, number of shares, dividend rates, liquidation preferences, redemption provisions, sinking fund provisions, conversion rights, voting rights and other rights, preferences and limitations that our Board may determine. The Board may authorize the issuance of common stock with voting, conversion and economic rights similar to the common stock so that the issuance of common stock could adversely affect the market value of the common stock.

 

Preferred Stock

 

On March 21, 2019, the Company filed with the Secretary of State of the State of Idaho the Certificate of Designation for Series B Super Voting Preferred Stock, 1 share of which was authorized and was issued to Sheldon Karasik, the Company’s former CEO and Chairman. Reference is made to Exhibit 99.1, the Certificate of Designation of the Series B Super Voting Preferred Stock, for the Preferences, Rights, Limitations, Qualifications and Restrictions of the Series B Super Voting Preferred Stock, which was filed as Exhibit 99.1 to the Company’s Form 8-K filed on March 21, 2019. On March 27, 2019, the Board of Directors authorized the issuance of: (i) 400,000 shares of newly designated Series C Convertible Preferred Stock to IDH Holdings 2 and Sunlight Financial, the 75% owners of NuAxess and PR345, respectively, with 200,000 shares of Series C Preferred Stock issuable to each; and (ii) 400,000 shares of newly designated Series D Convertible Preferred Stock to Draper, Inc., a Nevada corporation, and Carriage House, Inc., a Delaware corporation, with 200,000 shares issuable to each, in exchange for their shares in NuAxess and PR345, respectively. The Company contemplates the filing with the Secretary of State of Idaho of the Certificates of Designation for the Series C and Series D Preferred Stock prior to the Closing, which filings will constitute an amendment to the Company’s Articles of Incorporation. (see Exhibits 99.2 and 99.3 to the Company’s Form 8-K filed with the SEC on March 27, 2019, for the terms of the Series C Convertible Preferred Stock and Series D Convertible Preferred Stock). 

 

Warrants

 

The warrants issued by the Company are common stock warrants issued to the selling stockholders. The common stock warrants are exercisable at an exercise price of $0.02 to $0.10 per share. The warrants may be exercised in whole or in part, subject to the limitations provided in the warrants. Any warrant holders who do not exercise their warrants prior to the conclusion of the exercise period will forfeit the right to purchase the shares of common stock underlying the warrants and any outstanding warrants will become void and be of no further force or effect. If at any time while any of the warrants are outstanding, Mineral Mountain issues common stock, or securities convertible into common stock, to any person at a price per share of common stock less than the exercise price of the warrants, the per share exercise price of the warrants will be reduced to the purchase price per share of the subsequent issuance.

 

 
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Election and Removal of Directors

 

Each of our directors serves for a term of three years or until his successor is elected and qualified if there is no annual meeting. At each annual meeting of shareholders, the successors to the then current directors whose terms are expiring are elected to serve for one-year terms. Directors may be removed at any special meeting of our shareholders upon a vote of two-thirds of the outstanding shares of stock entitled to vote for directors. Holders of our common stock vote together for directors.

 

Shareholder Meetings

 

Our bylaws provide that special meetings of shareholders may be called by our board of directors. In addition, upon the request of shareholders holding one-fifth of the voting power of all shareholders, the Secretary of our company is required to call a meeting of the shareholders. Finally, if no annual meeting of shareholders has taken place for a period of more than eighteen months, any shareholder may call a meeting of the shareholders of our company.

 

Rule 144

 

In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, an eligible stockholder is entitled to sell such shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. To be an eligible stockholder under Rule 144, such stockholder must not be deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144, subject to the expiration of the lock-up agreements described below.

 

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

 

Director Independence

 

The Company has two independent directors: Carl Dorvil and Derrick Chambers.

 

Code of Ethics

 

The Company adopted a Code of Business Conduct and Ethics that specifically addresses, among other things, potential conflicts of interest among employees, officers and directors. A copy of the Code of Business Conduct and Ethics will be provided to any person, without charge, upon written request sent by email to Pat Dileo, Chairman (pdileo@nuaxess.com).

  

 
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ITEM 11. EXECUTIVE COMPENSATION

 

Summary of Cash and Certain Other Compensation

 

The following sets forth the annual and long-term compensation for services in all capacities to the Company for the fiscal years ended September 30, 2019 and 2018 paid to our former officers.

 

Summary Compensation Table

 

 

 

 

 

Annual Compensation

 

 

Long Term Compensation

 

Name and Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Other

Annual

($)

 

 

Restricted

Stock

Awards ($)

 

 

Securities

Under-Lying Options/SARs (#)

 

 

LTIP

Payouts($)

 

 

All Other Compensation($)

 

Pat Dileo,

 

2019

 

 

48,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim CEO and Chairman

 

2018

 

 

-0-

 

 

 

-0-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

 

Sheldon Karasik,

 

2019

 

 

147,500

 

 

 

-0-

 

 

 

-0-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

former CEO and Chairman (resigned April 17, 2019)

 

2018

 

 

195,000

 

 

 

-0-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

 

 

James Baughman,

former Vice President, Chief Geologist and Director (resigned as of October 31, 2018)

 

2018

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

6.999

 

John P. Ryan,

former Vice President, Secretary, Treasurer and Director (resigned as of October 31, 2018)

 

2018

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

 

-N/A-

 

 

Warrant Grants

 

During the fiscal years ended September 30, 2019 and 2018, the Company did not grant any warrants in compensation for executive position duties.

 

 
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

 

The following table sets forth, as of December 31, 2019, certain information regarding the ownership of voting securities of Mineral Mountain by each stockholder known to our management to be (i) the beneficial owner of more than 5% of our outstanding common stock, (ii) our directors, (iii) our current executive officers named in the Summary Compensation Table, and (iv) all executive officers and directors as a group. We believe that, except as otherwise indicated, the beneficial owners of the common stock listed below, based on information furnished by such owners, have sole investment and/or voting power with respect to such shares.

 

Name of Beneficial Owner

 

Common Stock Beneficially

Owned (1)

 

 

Percentage of Common Stock Owned (1)

 

Sheldon Karasik, Former CEO, Chairman and Director

 

 

10,200,000

 

 

 

14.66 %

13 Bow Circle, Suite 170

 

 

 

 

 

 

 

 

Hilton Head, South Carolina 29928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ben Porterfield

 

 

11,200,000

 

 

 

16.10 %

Box 11527

 

 

 

 

 

 

 

 

Anchorage, AK 99511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quest Minerals Corporation

 

 

5,600,000

 

 

 

8.05 %

254 W Hanley Avenue, Suite A

 

 

 

 

 

 

 

 

Coeure d’ Alene, ID 83815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James G. Baughman

 

 

4,200,000

 

 

 

6.04 %

91000 E. Florida Ave, 1-201

 

 

 

 

 

 

 

 

Denver, CO 80246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pat Dileo, CEO and Chairman

 

 

35,483,624

(2

 

51.00 %

122 Dickinson Avenue

 

 

 

 

 

 

 

 

Toms River, NJ 08753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carl Dorvil, Director

 

 

-0-

 

 

 

0 %

122 Dickinson Avenue

 

 

 

 

 

 

 

 

Toms River, NJ 08753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derrick Chambers, Director

 

 

-0-

 

 

 

0 %

122 Dickinson Avenue

 

 

 

 

 

 

 

 

Toms River, NJ 08753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nancy Martin

 

 

5,500,000

 

 

 

7.90 %

13 Bow Circle, Suite 170

 

 

 

 

 

 

 

 

Hilton Beach, SC 29928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Directors and Officer (3 person)

 

 

35,483,624

(2

)

 

51.00 %

_________________  

(1)

Applicable percentage ownership is based on 70,357,650 shares of Common Stock outstanding as of December 31, 2019. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock that are currently exercisable or exercisable within 60 days of December 31, 2019 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

(2)

Represents one (1) share of Series B Super Voting Preferred Stock, which is entitled to vote together with the holders of our Common Stock upon all matters that may be submitted to holders of our Common Stock for a vote, and on all such matters, the share of Series B Super Voting Preferred Stock shall be entitled to that number of votes equal to 51% of the total number of votes that all issued and outstanding shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted basis. At December 31, 2019, the Record Date, the Series B Super Voting Preferred Stock was entitled to 35,882,402 votes, representing 51% of the 70,357,650 shares of Common Stock outstanding on such Record Date.

 

 
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Related Party Transactions

 

As a smaller reporting company, we are required to disclose certain transactions to which we are or will be a party and in which any of our directors, executive officers, or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest in the event the amount of such transaction exceeds the lesser of $120,000 or 1% of the average of our total assets at year- end for the last two completed fiscal years. The average of our 2017 and 2018 year-end assets multiplied by 1% is less than $120,000.

 

In addition to the compensation arrangements with our directors and executive officers, including those discussed in the section titled “Management and Executive Compensation,” the following is a description of each transaction since September 30, 2015 and each currently proposed transaction in which:

 

 

·

we have been or are to be a participant;

 

 

·

the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of the assets of the Company on the last day of the two prior fiscal years; and

 

 

·

any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.

 

Sales of Securities

 

From October 1, 2015 through December 31, 2018, the Company issued and sold an aggregate of 49,003,571 shares of our common stock at a purchase price of $0.0572 per share for aggregate consideration of approximately $2,803,000. During the fiscal year ended September 30, 2018, the Company issued and sold an aggregate of 7,895,000 shares of our common stock at an average issuance price of $0.04 per share for aggregate consideration of approximately $330,840.

 

The participants in this common stock financing included certain holders of more than 5% of our capital stock, one of our executive officers, certain members of our board of directors and as applicable, their affiliates. The following table sets forth the aggregate number of shares of common stock issued to these related parties in this stock financing:

 

Stockholders

 

Shares of

Common Stock

 

 

Total

Purchase

Price

 

5% Stockholders:

 

 

 

 

 

 

Ben Porterfield(1)

 

 

11,200,000

 

 

$ 324,800

 

Directors and Executive Officers:

 

 

 

 

 

 

 

 

Sheldon Karasik and related entities(2)

 

 

12,600,000

 

 

$ 272,000

 

John Ryan (resigned 10/31/2018) and related entities(3)

 

 

3,000,000

 

 

$ 3,000

 

James Baughman (resigned 10/31/2018)(4)

 

 

4,200,000

 

 

$ 4,200

 

Felix Keller

 

 

540,000

 

 

$ 30,199

 

Michael Miller

 

 

40,000

 

 

$ 8,000

 

Ulises de la Garza

 

 

30,000

 

 

$ 6,000

 

 

(1)

Consists of shares of common stock issued as additional consideration for Alaska Iditarod Project lease which was related to a former mining subsidiary.

 

(2)

Consists of 5,000,000 shares of common stock Mr. Karasik purchased before becoming an officer or director of the Company, 400,000 shares of common stock purchased by Jacob Karasik, Mr. Karasik’s son, and 700,000 shares of common stock purchased by Nancy Martin, who later became Mr. Karasik’s wife in May, 2018.

 

(3)

Consists of 3,000,000 shares of common stock issued to ILVG LLC as payment in satisfaction of $3,000 of a promissory note for which Mr. Ryan’s son is an officer.

 

(4)

Consists of 4,200,000 shares of common stock issued to Mr. Baughman in satisfaction of $4,200 of consulting services.

 

 
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Other Transactions

 

From October 1, 2015 through December 31, 2018, the Company compensated Nancy Martin, Mr. Karasik’s wife, in the aggregate of $68,350 for investor relations consulting services and other administrative functions, including $7,000 in 2016, $16,950 in 2017 and $44,400 in 2018.

 

Ben Porterfield

 

Through its former wholly owned subsidiary, Nomadic Gold Mines, Inc., the Company entered into a lease agreement with an option to purchase with Ben Porterfield, a related party, for exclusive rights to explore, acquire, develop and exploit mineral resources on 30 State of Alaska mining claims located in the Iditarod Project property The consideration paid was 11,200,000 restricted shares of common stock and a series of cash payments to be paid to Porterfield so long as the lease-option remained in effect. As of September 30, 2018, $240,000 in lease payments for the remaining 5-year term of the lease is owed. During this same 5-year period, an additional $3,900,000 in Work Commitment payments from the Company to Ben Porterfield might be owed in lieu of work being conducted at the Iditarod Project site. Subsequent to the execution of the lease agreement, the Company staked an additional 36 State of Alaska mining claims which by the terms of the lease-option agreement, become part of the leased and optioned property and subject to numerous terms of the agreement. In total, the Iditarod Project now consists of 66 Alaska state mining claims covering 16.5 square miles. Mr. Porterfield became an affiliated person by reason of the transfer of the 11,200,000 shares (more than 10% of outstanding shares) in this transaction.

 

Notes Payable-Shareholders

 

The following is a listing of loan amounts (all of which are unsecured) due to related parties (each of whom is a shareholder or related to a shareholder of Mineral Mountain Mining & Milling Company) and the dates that these loans were made to the Company:

 

Name

 

Date

 

As of

September 30,

2019,

Amount

 

 

As of

September 30,

2017

Amount

 

 

As of

September 30,

2017

Amount

 

Premium Exploration

 

03/27/17

 

 

15,000

 

 

 

15,000

 

 

 

15,000

 

 

 

08/02/17

 

 

35,000

 

 

 

35,000

 

 

 

35,000

 

John J. Ryan, son of a former officer and director

 

2/23/2016

 

 

7,000

 

 

 

7,000

 

 

 

7,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total notes payable - shareholders

 

 

 

$ 57,000

 

 

$ 57,000

 

 

$ 57,000

 

 

The loan from John J. Ryan bears interest at 10% per annum and is due upon demand. $3,000 was converted to 300,000 shares of common stock and $5,000 was repaid in cash. The note bears interest at a rate of 10% beginning on July 24, 2016, the balance of principal and interest at September 30, 2019 was $9,727.

 

The loans from Premium Exploration bear interest at 5% and 10% per annum and are due on July 1, 2019. The balance of principal and interest at September 30, 2019 was $58,772.

 

Investments

 

The Company does not have any investments as of the date of this Form 10-K for the fiscal year ended September 30, 2019.

 

Employment Agreements

 

The Company has not entered into any written Employment Agreements as of the date of Form 10-K for the fiscal year ended September 30, 2019.

 

Indemnification Agreements

 

Our amended and restated bylaws will provide that Mineral Mountain will indemnify each of our directors and officers to the fullest extent permitted under Idaho law. Our amended and restated bylaws will also provide our board of directors with discretion to indemnify our employees and other agents when determined appropriate by the board. In addition, we have entered into an indemnification agreement with each of our directors and executive officers, which requires us to indemnify them.

 

 
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Policies and Procedures for Transactions with Related Persons

 

The Company anticipates adopting a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the approval or ratification of our board of directors or our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $50,000 and such person would have a direct or indirect interest, must be presented to our board of directors or our audit committee for review, consideration, and approval. In approving or rejecting any such proposal, our board of directors or our audit committee is to consider the material facts of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The Board of Directors has established an audit committee. The Board of Directors and the audit committee have the responsibility of reviewing our financial statements, exercising general oversight of the integrity and reliability of our accounting and financial reporting practices, and monitoring the effectiveness of our internal control systems. The Board of Directors and the audit committee also recommend selection of the auditing firm and exercise general oversight of the activities of our independent auditors, principal financial and accounting officers and employees and related matters.

 

Aggregate fees for professional services rendered to the Company by Slack & Co. for the years ended September 31, 2019 and 2018 were as follows:

 

 

 

Years Ended

 

 

 

September 30

 

Item

 

2019

 

 

2018

 

Audit fees

 

 

19,694

 

 

$ 19,264

 

Audit-related fees

 

 

 

 

 

 

2,370

 

Tax fees

 

 

 

 

 

 

-

 

All other fees

 

 

 

 

 

 

-

 

Total

 

 

19,694

 

 

$ 21,634

 

 

Slack & Co, audited our consolidated financial statements at September 30, 2019 and 2018.

 

Aggregate fees for professional services rendered to the Company by $15,000 for the year ended September 31, 2019 were as follows:

 

 

 

Years Ended

 

 

 

September 30

 

Item

 

2019

 

 

2018

 

Audit fees

 

 

30,000

 

 

 

-

 

Audit-related fees

 

 

 

 

 

 

-

 

Tax fees

 

 

 

 

 

 

-

 

All other fees

 

 

 

 

 

 

-

 

Total

 

 

30,000

 

 

 

-

 

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is Pacific Stock Transfer Company, 6725 Via Austi Pkwy, Suite 300, Las Vegas, NV 89119 (telephone 800-785-7782, facsimile 702-433-1979).

 

 
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1) Financial Statements

 

The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules on page F-1 and included on pages F-2 through F-9.

 

(2) Financial Statement Schedules

 

All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.

 

(3) Exhibits. 

 

Exhibit No.

 

Description

3.1

 

Amended and Restated Certificates of Incorporation of Quad M Solutions, Inc., filed with the Form S-1/A on November 27, 2018

3.2

 

Amended Bylaws of Quad M Solutions, Inc., filed with the Form S-1/A on November 27, 2018

21.1

 

List of Subsidiaries of Quad M Solutions, Inc.

31.1

 

Certification of Principal Executive Officer (Section 302)

31.2

 

Certification of Principal Financial Officer (Section 302)

32.1

 

Certification of Principal Executive Officer (Section 906)

32.2

 

Certification of the Principal Financial Officer (Section 906)

 

 
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ITEM 16. FORM 10-K SUMMARY

 

None.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed this Annual Report with the SEC. This Annual Report does not contain all of the information included in the exhibits and schedules thereto as permitted by the rules and regulations of the SEC. For further information with respect to Quad M Solutions, Inc., please refer to the Annual Report, including its exhibits and schedules. Statements contained in this Annual Report as to the contents of any contract or other document referred to herein are not necessarily complete and, where the contract or other document is an exhibit to the Annual Report, each such statement is qualified in all respects by the provisions of such exhibit, to which reference is hereby made. Upon completion of the Annual Report, we are subject to the information and reporting requirements of the Securities Exchange Act of 1934 and, in accordance therewith, we will file annual, quarterly and special reports, proxy statements and other information with the SEC.

 

You can read our SEC filings, including the Annual Report, over the Internet at the SEC’s web site at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

 

QUAD M SOLUTIONS, INC.

 

By:

/s/ Pat Dileo

 

Pat Dileo

 

Chief Executive Officer and Chairman and Interim Chief financial Officer

 

(Principal Executive Officer and Principal Financial and Principal Accounting Officer)

 

Date:

January 15, 2020

 

By:

/s/ Carl Dorvil

 

Carl Dorvil

 

Director

 

Date:

January 15, 2020

 

By:

/s/ Derrick Chambers

 

Derrick Chambers

 

Director

 

Date:

January 15, 2020

  

 

 35

Quad M Solutions (PK) (USOTC:MMMM)
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From Oct 2020 to Nov 2020 Click Here for more Quad M Solutions (PK) Charts.
Quad M Solutions (PK) (USOTC:MMMM)
Historical Stock Chart
From Nov 2019 to Nov 2020 Click Here for more Quad M Solutions (PK) Charts.