UNITED STATES SECURITIES AND

EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

 

(Mark One)

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

 

For the Quarterly Period Ended March 31, 2020

 

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 of Incorporation or Organization)

 

(I.R.S. Employer Identification Number)

 

122 Dickinson Avenue, Toms River, NJ

 

08753

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (732) 423-5520

 

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 past 90 days. Yes ☒     No ☐

 

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

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

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

 

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

 

As of May 19, 2020, there were 2,980,393 shares of the issuer’s common stock outstanding.

 

 

 

Table of Contents

 

 

 

 

Page

 

Part I. Financial Information

 

 

 

Item 1.

Financial Statements

 

 3

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and September 30, 2019

 

3

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2020 and 2019 (unaudited)

 

4

 

 

Condensed Consolidated Statement of Stockholder’s Equity (unaudited)

 

5

 

 

Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended March 31, 2020 and 2019 (unaudited)

 

6

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

7

 

Item 2.

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

 

20

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

24

 

Item 4.

Controls and Procedures

 

24

 

 

 

 

 

Part II. Other Information

 

 

 

Item 1.

Legal Proceedings

 

25

 

Item 1A.

Risk Factors

 

25

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

 

Item 3.

Defaults upon Senior Securities

 

25

 

Item 4.

Mine Safety Disclosures

 

25

 

Item 5.

Other Information

 

25

 

Item 6.

Exhibits

 

26

 

 

 

 

 

Signatures

 

27

 

 

 
2

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

March 31,

2020

 

 

September 30,

2019

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$ 10,238

 

 

$ 14,700

 

Total Current Assets

 

 

10,238

 

 

 

14,700

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 10,238

 

 

$ 14,700

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$ 25,710

 

 

$ 34,710

 

Accrued interest

 

 

95,944

 

 

 

39,312

 

Notes payable - related party

 

 

59,790

 

 

 

58,128

 

Convertible debt, net

 

 

1,001,072

 

 

 

351,275

 

Derivative liability

 

 

3,101,735

 

 

 

1,509,792

 

Accrued expense

 

 

533,833

 

 

 

283,833

 

Aurum payable

 

 

400,000

 

 

 

400,000

 

Assigned receivables

 

 

20,982

 

 

 

-

 

Total Current Liabilities

 

 

5,238,767

 

 

 

2,677,050

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

5,238,767

 

 

 

2,677,050

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $.10 par value, 10,000,000 shares authorized, 815,750 issued and outstanding

 

 

81,575

 

 

 

80,000

 

Common stock, $0.001 par value, 100,000,000 shares authorized; 874,441 and 689,777 shares issued and outstanding

 

 

875

 

 

 

690

 

Additional paid-in capital

 

 

4,762,600

 

 

 

4,339,751

 

Shares to be issued

 

 

41,558

 

 

 

-

 

Subscription receivable

 

 

(3,100 )

 

 

(3,100 )

Accumulated deficit

 

 

(10,112,037 )

 

 

(7,079,690 )

Total Stockholders' Equity

 

 

(5,228,529 )

 

 

(2,662,350 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$ 10,238

 

 

$ 14,700

 

 

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

 

 
3

Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31

 

 

March 31

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

REVENUES

 

$ 5,091,348

 

 

$ -

 

 

 

5,312,706

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

 

4,922,783

 

 

 

-

 

 

 

5,134,160

 

 

 

-

 

GROSS PROFIT

 

 

168,565

 

 

 

-

 

 

 

178,546

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance expense

 

 

195,396

 

 

 

287,237

 

 

 

195,396

 

 

 

347,780

 

Professional fees

 

 

3,028

 

 

 

287,237

 

 

 

3,028

 

 

 

347,780

 

General and administrative

 

 

287,385

 

 

 

50,423

 

 

 

525,247

 

 

 

107,014

 

Sales expense

 

 

57,804

 

 

 

-

 

 

 

57,804

 

 

 

-

 

Officers' fees

 

 

-

 

 

 

48,852

 

 

 

-

 

 

 

147,962

 

Mineral property expense

 

 

-

 

 

 

12,500

 

 

 

-

 

 

 

39,801

 

Travel

 

 

22,736

 

 

 

-

 

 

 

39,922

 

 

 

-

 

Stock compensation

 

 

40,000

 

 

 

-

 

 

 

40,000

 

 

 

-

 

Directors' fees

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,000

 

TOTAL OPERATING EXPENSES

 

 

606,349

 

 

 

399,012

 

 

 

861,397

 

 

 

659,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(437,784 )

 

 

(399,012 )

 

 

(682,851 )

 

 

(659,557 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(341,202 )

 

 

(23,827 )

 

 

(738,308 )

 

 

(28,676 )

Financing fees

 

 

(100,871 )

 

 

(25,000 )

 

 

(100,871 )

 

 

(25,000 )

Gain (loss) on issuance of convertible debt

 

 

(739,477 )

 

 

(36,918 )

 

 

(1,034,177 )

 

 

(108,076 )

Gain (loss) on revaluation of derivative

 

 

(697,829 )

 

 

64,848

 

 

 

(430,922 )

 

 

100,601

 

Gain (loss) on assignment of receivable

 

 

-

 

 

 

-

 

 

 

(35,699 )

 

 

-

 

Other expense

 

 

(9,519 )

 

 

-

 

 

 

(9,519 )

 

 

-

 

TOTAL OTHER INCOME (EXPENSES)

 

 

(1,888,898 )

 

 

(20,897 )

 

 

(2,349,497 )

 

 

(61,151 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE TAXES

 

 

(2,326,682 )

 

 

(419,909 )

 

 

(3,032,348 )

 

 

(720,708 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAXES

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (2,326,682 )

 

 

(419,909 )

 

 

(3,032,348 )

 

$ (720,708 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE, BASIC AND DILUTED

 

$ (2.96 )

 

 

(0.64 )

 

 

(4.11 )

 

 

(1.11 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

785,794

 

 

 

655,929

 

 

 

738,089

 

 

 

649,652

 

 

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

 

 
4

Table of Contents

  

QUAD M SOLUTIONS, INC.

 

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

 

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Common Stock

 

 

Preferred Stock

 

 

Additional Paid-in

 

 

 Accumulated

 

 

 Stock to be Issued

or

Subscription

 

 

Total Stockholders'

 

 

 

 Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 Capital

 

 

 Deficit

 

 

 Receivable

 

 

 Equity

 

Balance, September 30, 2018

 

 

604,362

 

 

$ 604

 

 

 

 

 

$

 

 

$ 2,812,432

 

 

$ (3,026,479 )

 

$ 55,000

 

 

$ (158,442 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

 

 

39,250

 

 

 

39

 

 

 

 

 

 

 

 

 

173,961

 

 

 

 

 

 

 

(55,000 )

 

 

119,000

 

Common stock issued for services

 

 

2,000

 

 

 

2

 

 

 

 

 

 

 

 

 

49,998

 

 

 

 

 

 

 

 

 

 

 

50,000

 

Common stock issued for directors’ fees

 

 

1,100

 

 

 

1

 

 

 

 

 

 

 

 

 

21,999

 

 

 

 

 

 

 

 

 

 

 

22,000

 

Common stock issued for officers’ fees

 

 

40,000

 

 

 

40

 

 

 

 

 

 

 

 

 

79,960

 

 

 

 

 

 

 

 

 

 

 

80,000

 

Rescinded shares

 

 

(43,000 )

 

 

(43 )

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

-

 

Net income for period ending December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(300,798 )

 

 

 

 

 

 

(300,798 )

Balance, December 31, 2018 (unaudited)

 

 

643,712

 

 

$ 644

 

 

 

 

 

$

 

 

$ 3,138,393

 

 

$ (3,327,277 )

 

$ -

 

 

$ (188,240 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash

 

 

17,580

 

 

 

18

 

 

 

 

 

 

 

 

 

63,982

 

 

 

 

 

 

 

 

 

 

 

64,000

 

Common stock issued for services

 

 

10,000

 

 

 

10

 

 

 

 

 

 

 

 

 

229,990

 

 

 

 

 

 

 

 

 

 

 

230,000

 

Common stock issued for officers’ fees

 

 

2,200

 

 

 

2

 

 

 

 

 

 

 

 

 

4,998

 

 

 

 

 

 

 

 

 

 

 

5,000

 

Common stock issued for financing fees asset

 

 

14,286

 

 

 

14

 

 

 

 

 

 

 

 

 

99,986

 

 

 

 

 

 

 

 

 

 

 

100,000

 

Net income for period ending March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(419,909 )

 

 

 

 

 

 

(419,909 )

Balance, March 31, 2019 (unaudited)

 

 

687,777

 

 

$ 688

 

 

 

-

 

 

$ -

 

 

$ 3,537,349

 

 

$ (3,747,186 )

 

$ -

 

 

$ (209,150 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares issued for subsidiaries

 

 

 

 

 

 

 

 

 

 

800,000

 

 

 

80,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,000

 

Retirement of derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,372

 

 

 

 

 

 

 

 

 

 

 

60,372

 

Subscription receivable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,100 )

 

 

(3,100 )

Net income for period ending June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,563,631 )

 

 

 

 

 

 

(1,563,631 )

Balance, June 30, 2019 (unaudited)

 

 

687,777

 

 

$ 688

 

 

 

800,000

 

 

$ 80,000

 

 

$ 3,597,721

 

 

$ (5,310,817 )

 

$ (3,100 )

 

$ (1,635,509 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for services

 

 

2,000

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

19,398

 

 

 

 

 

 

 

 

 

 

 

19,400

 

Retirement of derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

215,051

 

 

 

 

 

 

 

 

 

 

 

215,051

 

Warrants issued for convertible debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

507,581

 

 

 

 

 

 

 

 

 

 

 

507,581

 

Net income for period ending September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,768,873 )

 

 

 

 

 

 

(1,768,873 )

Balance, September 30, 2019

 

 

689,777

 

 

 

690

 

 

 

800,000

 

 

 

80,000

 

 

 

4,339,751

 

 

 

(7,079,690 )

 

 

(3,100 )

 

 

(2,662,350 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for convertible debt

 

 

7,819

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

7,452

 

 

 

 

 

 

 

 

 

 

 

7,460

 

Warrants issued for convertible debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

98,000

 

 

 

 

 

 

 

 

 

 

 

98,000

 

Retirement of derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,564

 

 

 

 

 

 

 

 

 

 

 

19,564

 

Stock to be issued

 

 

(2,000 )

 

 

(2 )

 

 

 

 

 

 

 

 

 

 

(19,398 )

 

 

 

 

 

 

21,558

 

 

 

2,158

 

Net income for period ending December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(705,666 )

 

 

 

 

 

 

(705,666 )

Balance, December 31, 2019

 

 

695,596

 

 

 

695

 

 

 

800,000

 

 

 

80,000

 

 

 

4,445,369

 

 

 

(7,785,356 )

 

 

18,458

 

 

 

(3,240,835 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for convertible debt

 

 

130,094

 

 

 

130

 

 

 

 

 

 

 

 

 

 

 

120,940

 

 

 

 

 

 

 

 

 

 

 

121,070

 

Common stock issued for services

 

 

5,000

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

19,995

 

 

 

 

 

 

 

20,000

 

 

 

40,000

 

Retirement of derivative liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

142,376

 

 

 

 

 

 

 

 

 

 

 

142,376

 

Preferred stock issued for financing fees

 

 

 

 

 

 

 

 

 

 

20,750

 

 

 

2,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,075

 

Conversion of preferred stock

 

 

43,750

 

 

 

44

 

 

 

(5,000 )

 

 

(500 )

 

 

1,706

 

 

 

 

 

 

 

 

 

 

 

1,250

 

Warrants issued for convertible debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,214

 

 

 

 

 

 

 

 

 

 

 

32,214

 

Net income for period ending March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,326,681 )

 

 

 

 

 

 

(2,326,681 )

Balance, March 31, 2020

 

 

874,440

 

 

 

874

 

 

 

815,750

 

 

 

81,575

 

 

 

4,762,600

 

 

 

(10,112,037

)

 

 

38,458

 

 

 

(5,228,529

 

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

 

 
5

Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

Six Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$ (3,032,348 )

 

$ (720,708 )

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

653,385

 

 

 

25,244

 

Amortization of prepaid financing fees

 

 

-

 

 

 

25,000

 

Common stock issued for services

 

 

26,908

 

 

 

280,000

 

Common stock issued for officers’ and directors’ fees

 

 

-

 

 

 

107,000

 

Loss on issuance of convertible debt

 

 

688,498

 

 

 

108,076

 

Loss (Gain) on revaluation of derivative liability

 

 

801,601

 

 

 

(100,601 )

Loss on assignment of debt

 

 

35,699

 

 

 

-

 

Preferred stock issued for financing fees

 

 

2,075

 

 

 

-

 

Financing fees

 

 

112,250

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Increase (decrease) in accounts payable

 

 

(8,998 )

 

 

5,805

 

Increase (decrease) in accrued interest

 

 

84,923

 

 

 

3,432

 

Increase (decrease) in deferred payroll

 

 

-

 

 

 

(14,537 )

Increase (decrease) in accrued expense

 

 

250,000

 

 

 

-

 

Net cash used by operating activities

 

 

(386,007 )

 

 

(281,289 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock and warrants

 

 

-

 

 

 

193,000

 

Proceeds from convertible debt, net

 

 

394,599

 

 

 

100,000

 

Proceeds from note payable-related party

 

 

1,662

 

 

 

-

 

Proceeds from assignment of receivables

 

 

59,851

 

 

 

-

 

Payment on assignment of receivables

 

 

(74,568 )

 

 

-

 

Net cash provided by financing activities

 

 

381,544

 

 

 

293,000

 

 

 

 

 

 

 

 

 

 

INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(4,463 )

 

 

11,711

 

Cash, beginning of period

 

 

14,700

 

 

 

1,900

 

Cash, end of period

 

$ 10,237

 

 

$ 13,611

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Interest paid

 

$ -

 

 

$ -

 

Income taxes paid

 

$ -

 

 

$ -

 

Common stock issued for deferred payroll

 

$ -

 

 

$ 80,000

 

Common stock issued for prepaid financing fees

 

$ -

 

 

$ 100,000

 

Common stock issued for convertible debt

 

$ 83,879

 

 

$ -

 

Derivative liabilities

 

$ 161,941

 

 

$ -

 

 

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

 

 
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QUAD M SOLUTIONS, INC

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

MARCH 31, 2020

 

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 – Former Mining Operations, 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 private entities, NuAxess 2, Inc., a Delaware corporation, and PR345, Inc., a Texas corporation n/k/a Openaxess, Inc., 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,n/k/a Openaxess and 400,000 shares of Series D Preferred Stock, 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.

 

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended September 30, 2019. In the opinion of management, the unaudited interim financial statements furnished herein includes all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. Operating results for the six-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending September 30, 2020.

 

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.

 

 
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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 March 31, 2020.

 

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.

 

The Company has convertible debt of $706,066 measured at fair value at March 31, 2020.

 

 

 

June 30, 
2019

 

Quoted Prices in Active Markets for Identical Assets

(Level 1)

 

Significant Other Observable Inputs

(Level 2)

 

Significant Unobservable Inputs

(Level 3)

 

Derivative liability

 

 

 

 

 

 

 

$ 3,101,735

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

$ 3,101,735

 

 

Going Concern

 

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of March 31, 2020, 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 $10,112,037. The Company’s working capital deficit is $5,228,529.

 

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 the operations of its two wholly-owned subsidiaries, NuAxess and PR345, by potential sales of its common stock and/or by issuing debt securities to institutional investors. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists.

 

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 8.

 

 
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Revenue Recognition

 
Sales revenues are generally recognized in accordance with the SAB 104 Public Company Guidance, when an agreement exists and price is determinable, the services are rendered, net of discounts, returns and allowance and collectability is reasonably assured. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In the instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts in deferred or unearned revenue on our consolidated balance sheet.

 

NOTE 3 – FORMER MINING OPERATIONS

 

Recent Developments-Former MMMM Mining Subsidiaries

 

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. Pursuant to the MBO Agreement, the Company sold, transferred and assigned to Aurum 75% of the shares of capital stock of the MMMM Mining Subsidiaries for cash consideration of $10 plus the assumption by Aurum of all liabilities of the MMMM Mining Subsidiaries. The Company retained a 25% equity interest in the MMMM Mining Subsidiaries. Effective on September 15, 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 reducing its equity interest from 25% to 19%. Other than its minority equity interest, the Company has no control nor any involvement in the management or operations of the former MMMM Mining Subsidiaries.

 

NOTE 4 – 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 5 – ACQUISTION OF WHOLLY OWNED SUBSIDIARIES

 

On April 24, 2019, the Company filed a Form 8-K reporting that effective on April 16, 2019, the Company completed the closing of the 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

 

 
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NOTE 6 – 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 additional payments 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 7 – 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.

 

 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 six-months ended March 31,2020, $9,061 of regular interest and $32,993 of derivative liability discount was expensed. During the six-months ended March 31, 2019, $2,527 of regular interest, $995 of original issue discount and $19,890 of derivative liability discount was expensed. 

 

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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On December 5, 2019, the investor elected to convert $7,000 of principal and $460 of accrued interest into 781,916 shares of common stock at a price of $0.009541.

 

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 six-months ended March 31, 2020, $4,243 of regular interest, $2,500 of original issue discount, and $35,000 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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 March 31, 2020, $3,971 of regular interest, $4,500 of original issue discount, and $28,500 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019

 

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 March 31, 2020, $3,008, of regular interest, $1,750 of original issue discount, and $23,250 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

 
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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.

 

On January 21, 2020, another institutional investor assumed this loan.

 

During the period ended March 31, 2020, $3,715, of regular interest, $2,536 of original issue discount, and $22,826 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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 March 31, 2020, $11,518, of regular interest, $2,826 of original issue discount, and $28,261 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

On November 21, 2019, the note entered Maturity Date Default as a result the interest rate on the outstanding balance increased to 18%.

 

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.

 

 
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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.

 

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 replacement 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 period ended March 31, 2020, the holder of the note elected to convert $25,000 in principal and $4,473 of accrued interest into 33,562 shares of common stock

 

 During the period ended March 31, 2020, $4,618 of regular interest and $47,880 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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 March 31, 2020, $6,768, of regular interest, $4,167 of original issue discount, and $33,333 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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

 

 
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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.

 

During the period ended March 31, 2020, $4,485 of regular interest, $27,819 of original issue discount, and $24,515 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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.

 

On February 13, 2020 this note entered into maturity date default. As a result, interest increased to 18% and a default premium principal was added to the outstanding principal in the amount of $94,900 as was recognized as financing fees.

 

During the period ended March 31, 2020, the holder of the note elected to convert $51,188 of default premium principal and 18,963 of accrued interest into 70,942 shares of common stock.

 

During the period ended March 31, 2020, $15,925, of regular interest and $166,304 of original issue was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

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.

 

 
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During the period ended March 31, 2020, $2,237, of regular interest and $3,602 of original issue and $22,815 of derivative liability discount was expensed. There was no corresponding expense during the period ended September 30, 2018.

 

During the period ended March 31, 2020, the holder of the note elected to convert $15,000 of principal and $646 of accrued interest into 15,591 shares of common stock.

 

On or about October 1, 2019, the Company issued a convertible promissory note to an institutional investor 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. The 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 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.

 

During the period ended March 31, 2020, $4,687, of regular interest and $46,871 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019

 

On or about November 12, 2019, the Company issued a convertible promissory note to an institutional investor 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. The 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 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.

 

During the period ended March 31, 2020, $2,772, of regular interest, $3,596 of original issue discount and $19,126 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2019

 

On or about December 20, 2019, the Company issued a convertible promissory note to an institutional investor 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. The 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 $0.02 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.

 

 
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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.

 

During the period ended March 31, 2020, $944, of regular interest and $23,964 of original issue discount was expensed. There was no corresponding expense during the period ended March 31, 2019

 

On or about January 17, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $50,000, together with interest at the rate of 10% per annum with a maturity date of October 11, 2020. The investor has the right has the right at any time following 180 days of 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 50% of the average of the two lowest trading prices for the Company’s Common Stock during the preceding 30 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 $4.94 was $247,000 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 $247,000 valuation of the conversion feature, $197,000 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended March 31, 2020, $1,014, of regular interest and $13,806 of derivative liability was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

On or about January 20, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $115,000, together with interest at the rate of 8% per annum with a maturity date of January 11, 2021. The Company paid $15,000 in original issue discount and fees which are recorded as a debt discount and being amortized over the life of the loan. The 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% of the average of the two lowest closing 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 $4.58 was $438,917 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 $438,917 valuation of the conversion feature, $338,917 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended March 31, 2020, $1,789, of regular interest, $2,869 of original issue discount and $19,126 of derivative liability was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

On or about March 3, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $112,750, together with interest at the rate of 12% per annum, and a default interest amount of 24%, with a maturity date of January 11, 2021. The Company paid $12,750 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 $32,214, 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. The 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% of the average of the two lowest closing prices for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date.

 

 
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The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $3.64 was $271,345 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 $271,345 valuation of the conversion feature, $203,560 is recorded was an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended March 31, 2020, $1,052, of regular interest, $3,449 of original issue discount and $5,200 of derivative liability was expensed. There was no corresponding expense during the period ended March 31, 2019.

 

NOTE 8 – COMMON AND PREFERRED STOCK

 

Upon formation of the Company, the authorized capital consisted of 2,000,000 shares of common stock, par value $0.05. In 1953, the Company increased the authorized capital to 3,000,000 shares of common stock and in 1985, the authorized capital was again increased to 10,000,000 shares of common stock. In 2014 the Company increased the authorized capital stock to 100,000,000 shares of common stock, par value $0.001 and 10,000,000 shares of preferred stock, par value $0.10.

 

On February 23, 2020, the Company implemented a 1 for 100 reverse stock split of its outstanding common stock (the “Reverse Split”).

 

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 $1200.00

 

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.

 

 
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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, see Note 5.

 

On April 8, 2019, the Company filed a Certificates 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 approve for issuance 200,000 shares of stock valued at $19,400 for investor relations, are on the balance sheet as shares to be issued.

 

During the three-month period ended December 31, 2019, the Company authorized for issuance 66,666 shares of common stock valued at $2,158 for investor relations, these are on the balance sheet as shares to be issued.

 

On December 5, 2019, the Company issued 781,916 shares of common stock for the conversion of principal of $7,000 and accrued interest of $460 at a conversion price of $0.009541.

 

During the three month period ended March 31, 2020, The Company issued 5,000 shares of stock for services and recorded an additional 5,000 shares as “to be issued” for a total value of $40,000; 130,094 shares of common stock for the conversion of principal of $68,287, accrued interest of $13,342 and financing fees of $1,750.

 

The following warrants were outstanding at March 31, 2020:

 

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

 

Warrants

 

 

3,333,333

 

 

$ 0.02

 

 

December 2024

 

Warrants

 

 

8,054

 

 

$ 7.00

 

 

March 3, 2025

 

 

NOTE 9 – 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 March 31, 2020 and September 30, 2019 was $9,992 and $9,727, 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 March 31, 2020 and September 30, 2019 was $60,073 and 58,772, respectively, the companies had directors in common at the time of the transaction.

 

 
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A family member of a former officer provided investor relations consulting services and other administrative functions to the Company, $10,000 was paid in cash for consulting during the period ended December 31, 2018, no such payments were made during the period ended March 31, 2020.

 

On March 21, 2019, we filed a Certificate of Designation amending our 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 our Board of Directors (the “Board”) on November 5, 2018. On March 21, 2019, we issued to Sheldon Karasik, our Chief Executive Officer, President and Chairman of the Board, the one share of our Series B Preferred Stock in exchange for $0.16,which price was based on the closing price of our Common Stock as of November 5, 2018 of $0.16, the date the issuance was approved by our Board. Sheldon Karasik, as the holder of our Series B Preferred Stock, 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 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 10 – 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 December31, 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.

 

Significant components of the deferred tax assets at an anticipated tax rate 21% for the period ended March 31, 2020 and September 30, 2019 are as follows:

 

 

 

March 31,

2020

 

 

September 30,

2019

 

Net operating loss carryforwards

 

 

10,112,036

 

 

 

7,079,690

 

Deferred tax asset

 

 

2,456,737

 

 

 

1,819,944

 

Valuation allowance for deferred asset

 

 

(2,456,737 )

 

 

(1,819,944 )

Net deferred tax asset

 

 

-

 

 

 

-

 

 

At March 31, 2020 and September 30, 2019, the Company has net operating loss carryforwards of approximately $10,112,036 and $7,079,690 which will begin to expire in the year 2031. The change in the allowance account from September 30, 2019 to March 31, 2020 was $636,793.

 

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 will compute 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 11 – SUBSEQUENT EVENTS

 

Subsequent to the three-month period ended March 31, 2020, the Company issued approximately 1 million shares of common stock upon the conversion of certain convertible notes discussed under Note 7 above. The Company is not aware of any other material subsequent events through the date of this filing that require disclosure or recognition in these financial statements.

 

 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General

 

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our financial statements and the notes to those statements. In addition to historical financial information, this discussion contains forward-looking statements reflecting our management’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed under the heading “Risk Factors” in our Consolidated Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on January 15, 2019.

 

Risk Factor: The Company relies substantially on small and mid-size business for its products and services. It is expected that small and mid-size businesses, many of which rely on continuing cash flow to fund day-to-day operations, may be particularly hard hit by the COVID-19 pandemic that has not shown an clear indications of abating. The has resulted and may continue to result in forced closures and other preventative measures taken by federal, state or local governments. Although government programs have sought, and may further seek, to provide relief to these types of entities, there can be no assurance that these programs will succeed. Also, governments in affected areas have and may continue to adopt regulations or promulgate executive orders that restrict or limit financial institutions’ ability to take certain actions with these small and mid-size customers, upon which the Company relies, that they would otherwise take in the ordinary course. At the same time, it may be the case that more customers are expected to draw on existing lines of credit or seek additional loans to help finance their business operations including the self-insurance and employee benefit services offered by the Company. In addition, COVID-19, which only became a pandemic during the end of the first quarter of fiscal 2020 in the United States, may adversely affect the Company and its customers in unforeseen ways during the remainder of 2020 and perhaps thereafter.

 

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company” or “our Company,” “Quad M” or “Mineral Mountain” refer to Quad M Solutions, Inc. f/k/a Mineral Mountain Mining & Milling Company, an Idaho corporation.

 

Change in Control Transactions

 

Reference is made to the Form 8-K filed by the Company on March 27, 2019, reporting that the Company entered into two separate Share Exchange Agreements dated March 22, 2019: (i) one with PR345, Inc. (“PR345”) n/k/a Openaxess, Inc., a newly organized Texas corporation; and (ii) one with NuAxess 2, Inc. (“NuAxess”), a newly organized Delaware corporation. Pursuant to these Agreements, the Company agreed to acquire the all of the capital stock of these two entities in exchange of the issuance of newly authorized shares of Series C and D Preferred Stock, par value $0.10 per share, to the shareholders of PR345/Openexess and NuAxess. The entry into the two Agreements was authorized and approved by the Company’s Board then in existence in furtherance of the Company’s plan, as disclosed in its registration statement declared effective by the SEC on March 8, 2019, Registration No. 333-227839 (the “Registration Statement”), to diversify its business beyond its historic mining operations of its two subsidiaries, Nomadic Gold Mines, Inc. and Lander Gold Mines, Inc. (the “MMMM Mining Subsidiaries”). The Company also granted Sheldon Karasik, the Company’s CEO and Chairman at the date of the Agreements (or an entity to be formed by him) to acquire for a nominal amount 75% of the capital stock of the MMMM Mining Subsidiaries, with the Company retaining 25% of its capital stock.

 

Upon the closing of the Agreements, among other conditions, that: (i) Sheldon Karasik shall resign as CEO and Chairman, but shall continue to serve as a director, as will Michael Miller, an independent director; (ii) Felix Keller shall resign as a director; and (iii) Pat Dileo, Carl Dorvil and Derrick Chambers would be appointed to the newly constituted 5 person Board and Pat Dileo would be appointed as CEO and Chairman of the Board.

 

As disclosed in the Company’s Form 8-K filed on April 24, 2019, the Company reported that: (i) on April 16, 2019, it entered into a Share Exchange and Assignment Agreement, also referred to as the ‘MBO Agreement” with Aurum, the entity formed by Sheldon Karasik for the purpose of acquiring 75% of the capital stock of the MMMM Mining Subsidiaries from the Company; (ii) effective April 16, 2019, Felix Keller resigned as a director; (iii) effective April 17, Sheldon Karasik resigned as CEO and Board Chairman (but continued to serve on the Board); (iii) effective April 17, 2019, Pat Dileo was appointed as CEO and Chairman of the Board and Carl Dorvil and Derrick Chambers were appointed to as members of the 5 person Board, joining Sheldon Karasik and Michael Miller; and (v) effective April 16, 2019, Sheldon Karasik transferred and assigned the Series B Super Voting Preferred Stock to Pat Dileo.

 

 
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As a result of the execution of the MBO Agreement and the closing of the March 22, 2019 Share Exchange Agreements, the Company determined that its resources would be devoted to the business operations of NuAxess and PR345, as follows:

 

(i) NuAxess’ business plan is to serve as a full service financial, employee benefit and insurance consulting company offering, either directly or through proven third parties, innovative ways to provide its clients’ employees with affordable and manageable health plans and comprehensive benefits, based upon a new system being developed throughout the country for the rapidly expanding market of small and medium-sized businesses (SMBs) which are experiencing significant problems with their existing programs, to the extent that they even provide programs because of their costs and complexities. NuAxess also intends to create an international professional employer association (IPEA) headquartered in San Juan, Puerto Rico, that will sponsor and provide professional outreach programs offering health insurance, healthcare and financial education to its PEO and financial services members globally; and (iii) additionally, the IPEA will offer these and other services to leading rural hospital providers via a proprietary program called ‘Community Health Exchanges’, which will work directly with SMB employers in rural communities providing access to private insured health plans with contracted medical services through the rural hospitals.

 

(ii) PR345, n/k/a Openaxess, a business enterprise consulting firm, plans to provide: (a) specialized staffing services for a variety of professional industries including, but not limited to, medical, education, financial services, technology and hospitality, among others; (b) specific back office services including accounting, payroll, and a full complement of Human Resource (HR) benefits; and (iii) serve as a Professional Employer Organization (PEO).

 

At the date of the MBO, the Company understood that Aurum would continue to operate the MMMM Mining Subsidiaries. Under the MBO Agreement, the Company retained a 25% equity interest in the Mining Subsidiaries and effective on September 15, 2019, the Company sold, transferred and assigned to an unaffiliated third party 6% of its equity interest in the Mining Subsidiaries to an unaffiliated third party for $1,000, evidenced by a promissory note due on September 30, 2020, reducing the Company’s equity interest in the former Mining Subsidiaries from 25% to 19%.

 

Reference is made to the Company’s Form 8-K and 8-K/A filed with the SEC on October 22, 2019 and December 2, 2019 reporting the resignations of Sheldon Karasik and Michael Miller as members of the Board of Directors.

 

Results of Operations For the Three and Six Months Ended March 31, 2020 compared to the Three and Six Months Ended March 31, 2019

 

Revenue

 

The Company generated no revenues from its former mining operations during the two periods ended March 31, 2020 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.

 

During the three months and six months ended March 31, 2020 the Company’s revenues were $5,091,348 and $5,312,706, respectively principally from staffing revenues and we incurred $4,922,783 and $5,134,160 in expense directly related to these staffing revenues. No such revenue was earned in the three-month and six-month period ended March 31, 2019.

 

Expenses

 

Operating expenses for the three and six-month periods ended March 31, 2020 were $606,349 and $861,397 compared to $399,012 and $659,557 for the same period of the prior year, representing an increase of 52% and 31%.

  

The main components of general and administrative expenses for the three and six-month period ended March 31, 2020 consisted of approximately $230,714 and $392,120 in consulting fees, $195,396 and $195,396 in insurance expense and approximately $17,814 and $17,814 in commissions. During the prior year, the Company’s legal and professional fees were $287,237 and $342,780 for the three and six month-periods.

 

 
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Working Capital

 

The Company’s net loss for the three and six month-periods ended March 31, 2020 was $2,326,683 and $3,032,348 a 454% and 321% increase over the net loss of $419,909 and $720,708 at March 31, 2019. The increase in net loss 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 as a result of the change in business focus.

 

During the three and six-months ended March 31, 2020, our principal sources of liquidity included cash received from convertible notes payable, and assignment of future receivables. During the three and six-months ended March 31, 2019 our principal source of liquidity included proceeds from sales of our common stock and proceeds from convertible debt. 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 $319,764 and $559,140 for the six-months ending March 31, 2020 and 2019, respectively. Net cash provided by financing activities totaled $381,544 and $179,000 for the six-month periods ending March 31, 2020 and 2019, respectively. The change between 2020 and 2019 is primarily attributed to an increase in convertible debt financing and assignment of future receivables in 2020 as compared to 2019. The cash decreased to $10,237 at March 31, 2020 from $14,700 at September 30, 2019.

 

As reflected in our accompanying financial statements, other than approximately $277,750 and $370,483 received from the issuance of convertible notes and assignment of receivables during the three and six month period ended March 31, 2020, we have limited cash, negative working capital, no revenues and an accumulated deficit of $10,112,037 and $7,079,690 for the six month period ending March 31, 2020 and year ended September 30, 2019, 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 sufficient capital from operations, equity and/or debt financing to fully-implement its business plan of offering principally to smaller and mid-sized employers a full spectrum of employee benefit and insurance services enabling employers to offer a variety of plans providing their employees with multiple levels of benefits including major medical health insurance, as well as providing financial and business consulting services

 

Contractual Obligations

 

Other than lease obligations stated above, as of March 31, 2020, we have contractual obligations relating to debt or anticipated debt, as follows:

 

The Company, while operating as Mineral Mountain Mining & Milling 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 ($5,000,000.00) Dollars (the “Equity Line”) 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 relating to the resale of the Put Shares.

 

The Company intention was to use the proceeds of the Equity Line for general corporate purposes for its mining operations, 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. The Company also disclosed in the Registration Statement that as a result of the lack of profitability of the mining operations, it intended to diversify its business endeavors.

 

 
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The following is a listing of the convertible debt principal amounts outstanding at March 31, 2020.

 

Armada

 

$ 50,000

 

Auctus Fund LLC

 

 

75,000

 

Auctus Fund LLC

 

 

112,750

 

BHP Capital NY, Inc

 

 

70,760

 

Cavalry Fund I, LP

 

 

268,413

 

Cavalry Fund I, LP

 

 

33,333

 

GS Capital Partners, LLC

 

 

68,000

 

Harbor Gates Capital, LLC

 

 

110,000

 

Jefferson Street Capital, LLC

 

 

66,000

 

Jefferson Street Capital, LLC

 

 

59,400

 

KinerjaPay Corp

 

 

96,816

 

KinerjaPay Corp

 

 

94,000

 

KinerjaPay Corp

 

 

50,000

 

Labrys Fund, LP

 

 

112,500

 

LG Capital Funding, LLC

 

 

40,000

 

LG Capital Funding, LLC

 

 

115,000

 

Sunshine Equity Partners LLC

 

 

50,000

 

 

 

 

 

 

Total

 

$ 1,471,972

 

 

The following is a listing of loan amounts (all of which are unsecured) due to related parties (each of whom are either 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

March 31,

2020

Amount

 

 

As of

September 30, 

2019

Amount

 

Premium Exploration

 

03/27/17

 

 

15,000

 

 

 

15,000

 

 

 

08/02/17

 

 

35,000

 

 

 

35,000

 

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

 

2/23/2016

 

 

7,000

 

 

 

7,000

 

 

 

 

 

 

 

 

 

 

 

 

Total notes payable - shareholders

 

 

 

$ 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 300,000,000 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 and, in the event of demand for payment, a default interest rate of 15% applies. the balance of principal and interest at March 31, 2020 was $10,254. The loans from Premium Exploration bear interest at 5% and 10% per annum. Pursuant to the terms of the loan agreements, interest on the unpaid balance increase from 5% to 10% for the $35,000 note on August 2, 2018 and interest increased from 5% to 10% for the $15,000 note on September 27, 2018. The outstanding principal and interest are due, upon demand of payment of Premium Exploration, on July 1, 2019. The outstanding principal will continue to earn 10% interest if demand for payment is not made on July 1, 2019 or in the event of default pursuant to the terms of the agreements the balance of principal and interest at March 31, 2020 was $61,361.

 

 
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Off-Balance Sheet Arrangements

 

The Company has not undertaken any off-balance sheet transactions or arrangements. We have no guarantees or obligations other than those which arise out of normal business operations.

 

Critical Accounting Policies and Estimates

 

Our significant accounting policies are more fully described in Note 2 to our Unaudited Condensed Consolidated Financial Statements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As of March 31, 2020, we conducted an evaluation, under the supervision and participation of management including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). 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 six months ended March 31, 2020 our internal controls and procedures require additional 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 further improve maintenance and access to a centralized location for current and historical business records.

 

Changes in Internal Control over Financial Reporting

 

We have 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 March 31, 2020.

 

 
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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company received letter notice dated February 14, 2020 from counsel to Sheldon Karasik, a former director, stating that their belief that the Company owes additional monies to Mr. Karasik or Aurum LLC, and, as a result, the Company should renegotiate certain terms in the Share Exchange and Assignment Agreement dated April 16, 2019, attached as Exhibit 99.4 to the Company’s Form 8-K filed with the SEC on April 24, 2019, in connection with a change in control transaction (the “MBO Agreement”). Pursuant to the MBO Agreement with Mr. Karasik, the Company transferred and assigned 75% of the Company’s former Mining Subsidiaries to Aurum LLC, a newly formed entity controlled by Mr. Karasik, for $10 plus the assumption by Aurum of the liabilities of the Company’s former wholly-owned Mining Subsidiaries. The Company believes that it has meritorious defenses to any claims by Mr. Karasik and Aurum 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.

 

Under the MBO Agreement, the Company retained a 25% equity interest in the Mining Subsidiaries and effective on September 15, 2019, the Company sold, transferred and assigned to an unaffiliated third party 6% of its 25% equity interest in the Mining Subsidiaries to an unaffiliated third party for $1,000, evidenced by a promissory note due on September 30, 2020, reducing the Company’s equity interest to 19% in the former Mining Subsidiaries.

 

Other than as set forth above, 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.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

On or about March 17, 2020, the Company issued 20,750 shares of a newly designated Series F Preferred to an institutional investor for the in exchange for an outstanding note in the original principal amount of $50,000.  A copy of the certificate of designation and exchange agreement are filed together herewith.  The Series F Preferred is convertible at $0.40 as further set forth in the Series F Certificate of Designation, attached as Exhibit 10.2 hereto. Also attached as Exhibit 10.3 hereto is the Securities Purchase Agreement with respect to the issuance and sale of the Series F Preferred Stock.

 

The Company intends to file a post-effective amendment to its registration statement, registration file no. 333-227839, declared effective by the SEC (the “Registration Statement”) on March 8, 2019, for among other purposes of: (i) including its audited financial statements for the years ended September 30, 2019 and 2018 and the interim financial statements for the three months ended December 30, 2019 and 2018; (ii) fully-updating the disclosure of the Company’s new business operations contained in the Company’s Form 10-K filed with the SEC on January 16, 2020; (iii) disclosing the discontinued operations of the former wholly-owned Mining Subsidiaries; and (iv) disclosure of new management and risk factors related to the new business operations, among other material information.

 

Pursuant to the terms of the Registration Statement, which may be amended, we may offer and sell to Crown Bridge Partners, LLC (“CBP”), from time to time, shares of our Common Stock at fixed prices and prevailing market prices at the time of sale, at varying prices, or at negotiated prices. While we will not receive any proceeds from the sale of the shares of our Common Stock by CBP, we will receive proceeds from our initial sale of shares to CBP pursuant to the Equity Financing Agreement. We will 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 will be a minimum of twenty (20) trading days between purchases.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

 
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Item 6. Exhibits

 

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.

 

Exhibit No.

 

 

10.2

 

Series F Certificate of Designation dated March 17, 2020, filed herewith.

10.3

 

Exchange Agreement dated March 17, 2020, filed herewith.

31.1

 

Certification of Principal Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Principal Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Principal Executive Officer Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Principal Executive Officer Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

 

 
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SIGNATURES

 

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

 

 

Quad M Solutions, Inc.

 

 

 

Dated: May 21, 2020

By:

/s/ Pat Dileo

 

 

Pat Dileo

 

 

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

 

 

 

27

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