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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the Quarterly Period Ended June 30, 2021

 

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)

     
115 River Road, Suite 151, Edgewater, NJ   07020
(Address of Principal Executive Offices)   (Zip Code)

 

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

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbols   Name of each exchange on which registered
N/A   N/A   N/A

 

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 August 18, 2021, there were 54,892,004 shares of the issuer’s common stock outstanding.

 

 

 

 

 

 

Table of Contents

 

    Page
Part I. Financial Information  
     
Item 1. Financial Statements  
  Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and September 30, 2020 3
  Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2021 and 2020 (unaudited) 4
  Condensed Consolidated Statement of Stockholder’s Equity (unaudited) Ended June 30, 2021 and 2020 (unaudited) 5
  Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended June 30, 2021 and 2020 6
  Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
Item 3. Quantitative and Qualitative Disclosures about Market Risk 33
Item 4. Controls and Procedures 33
     
Part II. Other Information  
     
Item 1. Legal Proceedings 34
Item 1A. Risk Factors 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
Item 3. Defaults upon Senior Securities 35
Item 4. Mine Safety Disclosures 35
Item 5. Other Information 35
Item 6. Exhibits 35
     
Signatures 36

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

    June 30, 2021     September 30, 2020  
    (unaudited)        
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 845,504     $ 463,874  
Prepaid interest     4,717          
Prepaid financing fees     -       15,000  
Short term loan receivable     90,000       -  
Total Current Assets     940,221       478,874  
                 
OTHER ASSETS                
Investments     2,981       -  
Total Other Assets     2,981       -  
                 
TOTAL ASSETS   $ 943,202     $ 478,874  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
CURRENT LIABILITIES                
Accounts payable   $ 9,221     $ 12,191  
Accrued interest     69,627       81,468  
Notes payable - related party     59,790       59,790  
Convertible debt, net     116,000       818,596  
Derivative liability     258,949       3,763,090  
Accrued expense     730,172       690,334  
Aurum payable     400,000       400,000  
Note payable     4,135,000       -  
Due to preferred shareholders     1,700,000       -  
Accrued revenue     -       5,315  
Total Current Liabilities     7,478,759       5,830,783  
                 
TOTAL LIABILITIES     7,478,759       5,830,783  
                 
COMMITMENTS AND CONTINGENCIES     -       -  
                 
STOCKHOLDERS’ EQUITY                
Preferred stock, $.10 par value, 10,000,000 shares authorized, 2,717,638 issued and outstanding     230,454       271,764  
Common stock, $0.001 par value, 900,000,000 shares authorized; 47,676,046 and 20,121,010 shares issued and outstanding     47,676       20,121  
Additional paid-in capital     15,582,669       11,014,932  
Shares to be issued     202,800       254,500  
Subscription receivable     (3,100 )     (3,100 )
Accumulated deficit     (22,596,056 )     (16,910,125 )
Total Stockholders’ Equity     (6,535,557 )     (5,351,909 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 943,202     $ 478,874  

 

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

 

3

 

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

    2021     2020     2021     2020  
    Three Months Ended June 30     Nine Months Ended June 30  
    2021     2020     2021     2020  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
REVENUES   $ 10,630,064       4,731,316       28,719,911       10,044,022  
                                 
COST OF SALES     9,547,713       4,542,031       27,221,784       9,676,191  
GROSS PROFIT     1,082,351       189,285       1,498,127       367,831  
                                 
OPERATING EXPENSES                                
Insurance expense     -       65,466       -       260,862  
Professional fees     47,706       74,000       195,408       77,028  
General and administrative     500,034       360,548       1,007,599       885,795  
Research and development     1,595,075       -       1,595,075       -  
Officers’ fees     49,000               149,000       -  
Payroll expense     247,058               578,488       -  
Sales expense     117       46,508       351       104,312  
Travel     25,566       26       64,383       39,948  
Stock compensation     -       -       -       40,000  
TOTAL OPERATING EXPENSES     2,464,556       546,548       3,590,304       1,407,945  
                                 
LOSS FROM OPERATIONS     (1,382,205 )     (357,263 )     (2,092,177 )     (1,040,114 )
                                 
OTHER INCOME (EXPENSES)                                
Interest expense     (536,565 )     (387,779 )     (1,508,211 )     (1,126,087 )
Interest income     13               16          
Financing fees     -       (255,124 )     (35,740 )     (355,995 )
Gain (loss) on issuance of convertible debt     (11,020 )     (498,402 )     (438,092 )     (1,532,579 )
Gain (loss) on revaluation of derivative     (108,010 )     559,970       1,137,449       129,048  
Gain (loss) on assignment of receivable             -       -       (35,699 )
Gain (loss) on extinguishment of debt     (2,659,738 )     -       (2,659,738 )     -  
Prepayment/default premium     (115,675 )     -       (115,675 )        
Gain (loss) on securities     20,139       -       39,846       -  
Unrealized gain (loss) on available for sale securities     (2,737 )             (2,053 )     -  
Other income (expense)     (11,556 )     691       (11,556 )     (8,828 )
TOTAL OTHER INCOME (EXPENSES)     (3,425,149 )     (580,644 )     (3,593,754       (2,930,140 )
                                 
LOSS BEFORE TAXES     (4,807,354 )     (937,908 )     (5,685,931       (3,970,225 )
                                 
INCOME TAXES     -       -       -       -  
                                 
NET LOSS   $ (4,807,354 )     (937,908 )     (5,685,931 )     (3,970,225 )
                                 
NET LOSS PER COMMON SHARE, BASIC AND DILUTED   $ (0.12 )     (0.15 )     (0.18 )     (1.52 )
WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED     39,162,822       7,125,207       32,270,897       2,867,684  

 

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

 

4

 

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

 

    Shares     Amount     Shares     Amount     Capital     Deficit     Receivable     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, 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 )
                                                                 
Common stock issued for services     200,000       200       -                66,300               5,500       72,000  
Common stock issued for convertible debt     8,970,724       8,972       -                739,396                       748,367  
Conversion of warrants     1,074,302       1,074       -                (1,074 )                     -  
Conversion of preferred stock     3,217,500       3,218       (6,920 )     (692 )     7,474                       10,000  
Retirement of derivative liability                                     1,799,899                       1,799,899  
Preferred stock issued for financing fees                                     205,425                       205,425  
Net Income for period ending, June 30, 2020                                             (937,908 )             (937,908 )
Balance, June 30, 2020     14,336,966     $ 14,338       808,830     $ 80,883     $ 7,580,020     $ (11,049,945 )   $ 43,958     $ (3,330,747 )
                                                                 
Common stock issued for services     10,000       10       -                5,490               (5,500 )     -  
Common stock issued for convertible debt     2,267,183       2,267       -                200,913                       203,180  
Conversion of preferred stock     3,395,000       3,395       (959,010 )     (95,901 )     93,756                       1,250  
Preferred stock issued in exchange of warrants     -                2,851,318       285,132       (285,132 )                     -  
Preferred stock issued for cash     -                5,000       500       24,500                       25,000  
Preferred stock issued for services     -                11,500       1,150       731,622               212,942       945,714  
Retirement of derivative liability                                     835,511                       835,511  
Warrants issued with convertible debt                                     252,800                       252,800  
Warrant down-round                                     1575,068       (1,575,068 )             -  
Excess shares issued with split     111,860       112       -                (112 )                     -  
Net income for period ending September 30, 2020                                             (4,285,112 )             (4,285,112 )
Balance, September 30, 2020     20,121,010     $ 20,121       2,717,638     $ 271,764     $ 11,014,932     $ (16,910,125 )   $ 251,400     $ (5,351,909 )
                                                                 
Common stock issued for services     -                -                                45,050       45,050  
Common stock issued for convertible debt     5,276,643       5,278       -                315,737                       321,015  
Common stock issued with convertible debt     164,155       164       -                32,524                       32,688  
Common stock issued for financing fees     20,000       20       -                4,320                       4,340  
Conversion of preferred stock     2,881,250       2882       (6,675 )     (668 )     (2,214 )                     -  
Preferred stock issued for cash     -                10,300       1,030       101,970                       103,000  
Preferred stock issued for services     -                4,500       450       123,300               (123,750 )     -  
Retirement of derivative liability                                     990,980                       990,980  
Conversion of warrants     2,199,073       2,199       -                (2,199 )                     -  
Net Income for period ending December 31, 2020                                             (178,317 )             (178,317 )
Balance, December 31, 2020     30,662,131     $ 30,662       2,725,763     $ 272,576       12,579,352     $ (17,088,442 )   $ 172,700       (4,033,151 )
                                                                 
Stock to be issued for services                                                     27,000       27,000  
Common stock issued for convertible debt     6,409,503       6,410       -                303,340                       309,750  
Conversion of preferred stock     6,699,733       6,700       (12,288 )     (1,230 )     (4,220 )                     1,250  
Preferred stock issued for services     -                18,182       1,818                               1,818  
Retirement of derivative liability                                     773,056                       773,056  
Net Income for period ending March 31, 2021                                             (700,260 )             (700,260 )
Balance, March 31, 2021     43,771,367       43,771       2,731,657       273,166       13,651,529       (17,788,702 )     199,700       (3,620,536 )
                                                                 
Common stock issued for convertible debt     2,054,679       2,059       -                113,965                       116,019  
Common stock issued for cancellation of preferred shares     2,000,000       2,000       (16,902 )     (1,690 )     417,345                       417,655  
Reversal of preferred shares     (150,000 )     (150 )     85       8       142               -        -  
Retirement of preferred shares                     (410,300 )     (41,030 )     176,721                       135,691  
Retirement of derivative liability                                     1,222,966                       1,222,966  
Net Income for period ending June 30, 2021                                             (4,807,354 )             (4,807,354 )
Balance, June 30, 2021     47,676,046       47,674       2,304,540       230,454       15,582,669       22,596,056       199,700       (6,535,557 )

 

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

 

5

 

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    2021     2020  
    Nine Months Ended June 30,  
    2021     2020  
    (unaudited)     (unaudited)  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss)   $ (5,685,931 )   $ (3,970,255 )
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:                
Amortization of debt discount     1,181,185       960,267  
Amortization of prepaid financing fees     15,000       -  
Common stock issued for services     72,050       114,158  
Loss on issuance of convertible debt     405,079       1,532,579  
Common stock issued for financing fees     4,340       -  
Preferred stock issued for services     1,819       -  
Loss (gain) on revaluation of derivative liability     (1,137,449 )     (129,048 )
Loss (gain) on extinguishment of debt     2,618,223       -  
Loss on assignment of debt     -       (35,699 )
Preferred stock issued for financing fees     -       207,500  
Financing fees     -       354,500  
Common stock issued for conversion of preferred stock     1,251       -  
Loss on marketable securities     2,737       -  
Changes in assets and liabilities:                
Decrease (increase) in prepaids     -        -   
Increase (decrease) in accounts payable     (2,970 )     (25,490 )
Increase (decrease) in accrued interest     (9,601 )     31,912  
Increase (decrease) in prepaid revenue     (5,315 )        
Increase (decrease) in accrued expense     39,838       375,000  
Increase (decrease) in due to preferred shareholders     (300,000 )     -  
Net cash used by operating activities     (2,799,744 )     (513,178 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Available for sale securities     (5,718 )        
Short term loan     (90,000 )        
Net cash used by investing activities     (95,718 )        
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from sale of preferred stock     103,000          
Proceeds from convertible debt, net     204,852       725,152  
Proceeds from short term loan     -        -   
Payment on convertible debt     (615,760 )     (49,000 )
Proceeds from note payable-related party             1,662  
Proceeds from note payable     3,585,000       250,000  
Proceeds from assignment of receivables             59,851  
Payment on assignment of receivables             (95,550 )
Net cash provided by financing activities     3,277,092       892,115  
                 
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS     381,630       378,937  
Cash, beginning of period     463,874       14,700  
Cash, end of period   $ 845,504     $ 393,637  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Interest paid   $   -         -   
Income taxes paid   $ -        -   
Common stock issued for convertible debt   $ 735,764     $ 1,015,792  
Derivative liabilities   $ 2,987,005     $ 1,799,899  

 

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

 

6

 

 

QUAD M SOLUTIONS, INC

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2021

 

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 March 22, 2019 the Company entered into two separate Share Exchange Agreements (“SEAs”) pursuant to which it agreed to acquire 100% of the capital stock of two newly-organized, privately-held third party entities, NuAxess 2, Inc., a Delaware corporation (‘NuAxess”), and PR345, Inc., a Texas corporation n/k/a OpenAxess, Inc. (“OpenAxess”). In consideration for the separate SEAs, the Company agreed upon the closing of the SEA to issue 400,000 shares of Series C Preferred Stock to the control shareholders of NuAxess and PR345, n/k/a OpenAxess and issued 400,000 shares of Series D Preferred Stock to the minority, non-control shareholders of the NuAxess and PR345, n/k/a OpenAxess.

 

The closing of the two SEAs occurred on April 16, 2019, at which date NuAxess and PR345, n/k/a as OpenAxess became wholly owned subsidiaries of the Company. In addition, on April 16, 2019, the Company sold 75% of its equity interests in the MMMM Mining Subsidiaries to Aurum, LLC, a newly organized Nevada corporation (“Aurum”) formed and controlled by Sheldon Karasik, the Company’s former CEO, Chairman and a principal shareholder, pursuant to the terms of a Share Exchange and Assignment Agreement (the “MBO Agreement”) for nominal consideration of $10, and the assumption by Aurum of all of the liabilities of the MMMM Mining Subsidiaries. In addition, as a condition to the closing of the SEAs, NuAxess and/or PR345 shall make a payment of $100,000 into an account designated by Aurum as working capital for the operations of the MMMM Mining Subsidiaries. The $100,000 was funded by an institutional investor in consideration for the issuance of 18,182 shares of Series E Convertible Preferred Stock. See Notes 6 and 8 below.

 

Reference is made to Recent Developments-Former MMMM Mining Subsidiaries under Note 3 – Former Mining Operations, and Note 6 – Share Exchange and Assignment Agreement, below. The purpose of entering into the MBO Agreement was to transfer all control of the Company’s former wholly-owned MMMM Mining Subsidiaries to Aurum with the Company retaining 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.

 

On May 13, 2019, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of implementing corporate actions to: (i) increase the authorized shares of common stock, par value $0.001 (“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, on July 19, 2019, the Company obtained the requisite approval from FINRA for the Name Change.

 

7

 

 

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, 2020. 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 nine-month period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of Quad M Solutions, Inc and its two wholly owned subsidiaries, NuAxess and Open Axess, 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.

 

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, 2020 and June 30, 2021.

 

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 $116,000 measured at fair value at June 30, 2021.

 

    June 30, 2021    

Quoted Prices in Active Markets for Identical Assets

(Level 1)

   

Significant Other Observable Inputs

(Level 2)

   

Significant Unobservable Inputs

(Level 3)

 
Derivative liability     -       -       -     $ 258,949  
                                 
Total     -       -       -     $ 258,949  

 

8

 

 

The Company has convertible debt of $818,962 measured at fair value at September 30, 2020.

 

    September 30, 2021    

Quoted Prices in Active Markets for Identical Assets

(Level 1)

   

Significant Other Observable Inputs

(Level 2)

   

Significant Unobservable Inputs

(Level 3)

 
Derivative liability     -       -       -      $ 3,763,090  
                                 
Total     -       -        -      $ 3,763,090  

 

Going Concern

 

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of June 30, 2021, 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 $22,596,056. The Company’s working capital deficit is $6,538,538

 

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.

 

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.

 

Prior Period Reclassifications

 

Certain prior period amounts have been reclassified to conform to current period presentation in this Report.

 

9

 

 

NOTE 3 – FORMER MINING OPERATIONS

 

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 formed by Sheldon Karasik, the Company’s former CEO, Chairman and principal shareholder 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 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 19% equity interest, the Company has no control nor any involvement in the management or operations of the former MMMM Mining Subsidiaries nor are the financial results of the former MMMM Mining Subsidiaries included in the accompanying interim financial statements.

 

NOTE 4 – ACQUISITION 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 Delaware corporation, and PR345, Inc. n/k/a OpenAxess, Inc., a Texas corporation. Pursuant to these Agreements, the Company acquired all of the capital stock of NuAxess and PR345 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 “Series C and Series D Preferred”). Pursuant to the respective Certificates of Designation, as amended, applicable to the Series C and Series D Preferred, the holders of said shares are subject to, among other provisions, beneficial ownership limitations which provide that none of the holders of Series C and Series D Preferred nor any affiliates can exercise their conversion rights if, as a result of such conversions, a holder (including any affiliates) would own in excess of 4.99% of the Company’s outstanding shares. The Share Exchange Agreement transactions were valued at $80,000 and, as a result, a loss on acquisition in the amount of $76,900 was recorded

 

NOTE 5 – 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, the Company’s former CEO, Chairman and a principal shareholder for the purpose of acquiring 75% of the capital stock of the MMMM Mining Subsidiaries from the Company for cash consideration of $10 plus the assumption by Aurum of all of the liabilities of the Mining Subsidiaries. On the date of closing of the MBO Agreement, the Company made a payment of $100,000 to Aurum, which proceeds were to be used by Aurum to fund the operations of the MMMM Mining Subsidiaries. The $100,000 was funded by an institutional investor in consideration for the issuance of 18,182 shares of Series E Convertible Preferred Stock.

 

The MBO Agreement also required the Company to allocate 20% of the proceeds received by the Company under the Crown Bridge Equity Line, if any, to pay Aurum for the operations of the MMMM Mining Subsidiaries, among other terms and conditions. In connection with the MBO Agreement, Aurum assumed 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.

 

10

 

 

NOTE 6 – INVESTMENTS

 

Investments in debt and marketable securities, other than investments accounted for under the equity method, are classified as trading, available-for-sale or held-to-maturity. Our marketable equity investments are classified as either trading or available-for-sale with their cost basis determined by the specific identification method. Our investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading securities and realized gains and losses on available-for-sale securities are included in net income. Unrealized gains and losses, net of deferred taxes, on available-for-sale securities are included in our consolidated balance sheets as a component of AOCI, except for the change in fair value attributable to the currency risk being hedged.

 

Available for Sale Securities and Held to Maturity

 

As of June 30, 2021 and 2020, our available for sale securities had a fair value of $2,981 and $0, respectively, and consisted primarily of equity securities. The Company had net unrealized gains on available for sale securities of $2,737 and $0 as of June 30, 2021 and 2020, respectively. The Company did not have any held to maturity securities.

 

Trading Securities

 

As of June 30, 2021 and 2020, the Company had no outstanding trading securities. The Company’s trading securities primarily consist of the short term trading of options. The company had net realized income from trading securities of $19,707 and $0 for the period ended June 30, 2021 and 2020, respectively.

 

NOTE 7 – NOTE PAYABLE

 

On April 9, 2021, the Company entered into a Master Senior Loan Agreement (“MSLA”) with BeachStar Partners, LLC as Lender and Administrative Agent. Pursuant to the MSLA, the Company borrowed the initial sum of $4,200,000, which sum has been received by the Company in full. A Promissory was issued at closing, the Note bears interest at 18% per annum based on a 360-day year and is due eighteen months from the funding day. The Company pays interest monthly in the amount greater of $63,000 or 4% of the collections received by the Company. The Company has authorized the lender to apply the portion of each collections payment that exceeds the monthly interest amount to future monthly interest amount scheduled through the maturity date, at which time such excess payments shall be applied to the principle of the loan The MSLA is not convertible to the Company’s stock unless in the event of a material uncured default of the MSLA. The MSLA further provides for additional incremental loans in tranches of $1,000,000 per every 500 insured lives added by the Company, up to a maximum of 65,000 insured lives, or $130,000,000

 

NOTE 8 – CONVERTIBLE DEBT

 

On or about November 27, 2018, the Company issued a convertible promissory note to an institutional investor for the principal sum of $63,000.00, together with interest at 12% per annum, with a maturity date of November 27, 2019 (the “Note”). The Note was convertible at any time during the period beginning 180 days following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into shares of Common Stock at a Variable Conversion Price, which is equal to 58% multiplied by the Market Price 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, 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 the 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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

11

 

 

On or about November 29, 2019, the Company and the institutional investor entered into a Note Extension Agreement (“Extension Agreement”). Pursuant to the Extension Agreement the maturity date was extended to November 30, 2020.

 

During the period ended June 30, 2021, $0 of regular interest and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $14,371 of regular interest and $32993 of derivative liability discount was expensed.

 

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 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 as an expense and reported as a loss on issuance of convertible debt.

 

During the period ended June 30, 2021, $0 of regular interest and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $7,031, of regular interest, $0 of original issue and $70,307 of derivative liability discount was expensed.

 

On or about September 1, 2020, the Company entered into a Note Modification Agreement (“Modification”) in which the above two notes in the amount of $96,816 of principal and $20,403 of accrued interest and another note in the amount of $94,000 in principal and $8,627 of accrued interest (described below) were superseded and consolidated into a single new long-term note in the principal amount of $250,000. The new note bears interest at a rate of 8% per annum and has a maturity date of December 31, 2021.

 

In December 2020, the investor converted $96,000 of Principal due under the Modification into 2,400,000 shares of common stock. In January 2021, the investor converted the remaining $134,000 into 3,350,000 shares of common stock and fully retired the note.

 

During the period ended June 30, 2021, $4,910 of regular interest and $225,993 of derivative liability discount was expensed, there was no corresponding expense during the period ended June 30, 2020

 

On or about April 25, 2019, the Company issued a convertible promissory note to an 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.

 

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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

12

 

 

Between December 2019 and June 2020, the investor converted all of the outstanding principal and interest in the amount $75,000 of principal and $10,580 of accrued interest into 615,293 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $6,684 of regular interest, $2,842 of original issue discount, and $39,781 of derivative liability discount was expensed.

 

On or about April 29, 2019, the Company issued a convertible promissory note to an 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. 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 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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

During the period ended June 3, 2021, $7,898 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $7,291 of regular interest, $5,213 of original issue discount, and $33,016 of derivative liability discount was expensed. 

 

On or about May 7, 2019, 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 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 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended June 30, 2021, $5,485 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $5,244, of regular interest, $2,104 of original issue discount, and $27,951 of derivative liability discount was expensed.

 

On April 5, 2021 the investor converted the outstanding principal of $50,000 into 925,930 shares of common stock.

 

On or about May 17, 2019, 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 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.

 

13

 

 

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 was recorded was an expense and reported as a loss on issuance of convertible debt.

 

On January 21, 2020, the May 17, 2019 note was assigned to another investor with the original terms of the note remaining unchanged.

 

During the period ended June 30, 2021, $5,984 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $6,707, of regular interest, $2,536 of original issue discount, and $22,826 of derivative liability discount was expensed.

 

On April 16, 2021, the Company paid the outstanding principal and interest at a discount in the amount of $37,410 to fully extinguish the debt and recorded a gain on extinguishment in the amount of $30,541

 

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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

Between May 2020 and June 2020, the investor converted all of the outstanding principal and interest in the amount $110,000 of principal and $19,222 of accrued interest into 1,495,119 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $16,039, of regular interest, $2,826 of original issue discount, and $28,261 of derivative liability discount was expensed.

 

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

 

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

 

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

 

The conversion feature of this 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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

Between January 2020 and May 2020, the investor converted all of the outstanding principal and interest in the amount $95,760 of principal and $5,644 of accrued interest into 705,850 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $5,511 of regular interest and $92,710 of derivative liability discount was expensed.

 

On or about July 1, 2019, the Company issued a convertible promissory note to an 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 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 was recorded aas an expense and reported as a loss on issuance of convertible debt.

 

On April 1, 2020, the investor assigned $62,541 of principal and interest to another investor. Between April 2020 and May 2020, that investor converted all of the assigned principal into 840,024 post-split shares of common stock.

 

Between April 2020 and May 2020, the investor also converted the remaining $62,541 of principal and $2,551 of accrued interest into 761,862 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $12,015, of regular interest, $18,525 of original issue discount, and $74,098 of derivative liability discount was expensed.

 

On or about July 12 2019, the Company issued a convertible promissory note to an 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 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

 

15

 

 

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 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

Between January 2020 and June 2020, the investor converted the outstanding $75,000 of principal and $6,149 of accrued interest into 754,604 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $6,091, of regular interest, $31,651 of original issue discount, and $26,122 of derivative liability discount was expensed.

 

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 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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On February 13, 2020, the note entered a maturity date default resulting in a default premium of $94,600 being added to the principal of the note and the interest rate increasing to 18%.

 

Between February 2020 and June 2020, the investor converted the outstanding $225,000 of principal, $94,600 of default premium and $27,656 of accrued interest into 2,943,441 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $24,656, of regular interest and $166,304 of original issue was expensed.

 

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 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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

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Between March 2020 and May 2020, the investor converted the outstanding $55,000 of principal and $2,828 of accrued interest into 353,123 post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $2,424, of regular interest, $6,824 of original issue and $43,217 of derivative liability discount was expensed.

 

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 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 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

Between May 2020 and June 2020, the investor converted the outstanding principal of $59,400 and accrued interest of $3,564 into 639,021 of post-split shares of common stock.

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $3,564, of regular interest, $9,400 of original issue and $50,000 of derivative liability discount was expensed

 

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 at any time following the date of the Note to convert all or any part of the outstanding and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at a Variable Conversion Price which is equal to the lower of $0.02 and 60% of the average of the two lowest closing bid prices for the Company’s Common Stock during the preceding 20 trading day period including the Conversion Date. The Company paid $8,333 in original issue discount and fees which are recorded as a debt discount and being amortized over the life of the loan. Additionally, the Company issued warrants valued at $98,000, this amount is also recorded as a debt discount, but only for an amount not in excess of and thus capped by the otherwise undiscounted amount of the note payable. As a result of this cap, $73,000 is recorded as an expense and reported as a loss on issuance of convertible debt.

 

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

 

During the period ended June 30, 2020, the Company paid this note in full.

 

17

 

 

During the period ended June 30, 2021, $0 of regular interest, $0 of original issue discount and $0 of derivative liability discount was expensed. During the period ended June 30, 2020, $15,667, of regular interest, $33,333 of original issue and $0 of derivative liability discount was expensed.

 

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 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 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

During the period ended June 30, 2021, $1,140 of regular interest was recaptured as a result of over expensing in the prior quarter and $2,052 of derivative liability discount was expensed. During the period ended June 30, 2020, $2,260, of regular interest, $0 of original issue and $30,784 of derivative liability discount was expensed.

 

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.

 

Between July 2020 and September 2020, the investor converted the outstanding $115,000 of principal and $5,008 of accrued interest into 849,788 post-split shares of common stock.

 

During the period ended June 30, 2021, $0, of regular interest, $0 of original issue discount and $0 of derivative liability was expensed. During the period ended June 30, 2020, $4,114, of regular interest, $6,598 of original issue discount and $43,989 of derivative liability was expensed.

 

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 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 $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 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On September 15, 2020, the investor converted $55,193 of principal and $7,228 of accrued interest into 917,395 of post-split shares of common stock.

 

During the period ended December 31, 2020 the investor converted the remaining principal of $57,557, $670 of accrued interest and $1,500 in financing fee into 1,203,822 shares of common stock

 

During the period ended June 30, 2021, $244 of regular interest, $18,971 of original issue discount and $28,600 of derivative liability discount was expensed. During the period ended June 30, 2020, $4,472, of regular interest, $14,660 of original issue and $22,100 of derivative liability discount was expensed.

 

On or about June 4, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $75,000, together with interest at the rate of 12% per annum, and a default interest amount of 18%, with a maturity date of June 4, 2021. The Company paid $2,000 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 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 42% of the lowest closing price for the Company’s Common Stock during the preceding 15 trading day period prior to the Conversion Date.

18

 

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.3637 was $201,137 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 $201,137 valuation of the conversion feature, $128,137 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On December 11, 2020 the investor converted the outstanding principal of $75,000 and $4,512 of accrued interest into 806,413 shares of common stock.

 

During the period ended June 30, 2021, $1,603 of regular interest, $1,353 of original issue discount and $49,400 of derivative liability discount was expensed. During the period ended June 30, 2020, $641 of regular interest, $142 of original issue discount and $5,200 of derivative liability discount was expensed.

 

On or about June 5, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $220,000, together with interest at the rate of 8% per annum, and a default interest amount of 18%, with a maturity date of June 5, 2021. The Company paid $30,000 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 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 of the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date, or $1.00.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.30314 was $479,972 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 $479,972 valuation of the conversion feature, $289,972 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

On December 11, 2020 the investor converted principal of $40,000 into 404,040 shares of common stock.

 

On February 18, 2021 the investor converted principal of $40,000 into 467,836 shares of common stock.

 

On March 5, 2021 the investor converted principal of $55,000 into 572,917 shares of common stock.

 

On April 8, 2021 the investor converted principal of $55,000 into 1,078,431 shares of common stock.

 

On April 15, 2021, the Company paid $30,000 in principle, 12,956 in accrued interest and $4,644 as a prepayment penalty in the total amount of $47,600 to fully extinguish the note.

 

During the period ended March 31, 2021 the investor converted principal of $95,000 into 1,040,750 shares of common stock.

 

During the period ended June 30, 2021, $7,314 of regular interest, $20,384 of original issue discount and $129,096 of derivative liability discount was expensed. During the period ended June 30, 2020, $1,205 of regular interest, $2,055 of original issue discount and $6,849 of derivative liability discount was expensed.

 

On or about June 8, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $44,000, together with interest at the rate of 8% per annum, and a default interest amount of 24%, with a maturity date of June 10, 2021. The Company paid $6,000 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 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 of the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date, or $1.00.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.29498 was $67,600 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 $67,600 valuation of the conversion feature, $29,600 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

19

 

 

On December 16, 2020, the Company signed a Standstill and Revival Agreement with this investor, pursuant to which the debt holder agrees to not tender any notices of conversion for a period of six (6) months from the date of the agreement. In consideration of the agreement, the company issued 20,000 shares of common stock valued at $4,340, and made a cash payment of $21,800. These amounts were recorded as financing fees.

 

On April 13,2021, the Company paid $44,000 in principle, $3,012 in accrued interest and $14,148 as a prepayment penalty in the total amount of $61,160 to fully extinguish the note.

 

During the period ended June 30, 2021, $1,897 of regular interest, $4,126 of original issue discount and $26,132 of derivative liability discount was expensed. During the period ended June 30, 2020, $215 of regular interest, $360 of original issue discount and $2,278 of derivative liability discount was expensed.

 

On or about June 10, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $44,000, together with interest at the rate of 8% per annum, and a default interest amount of 24%, with a maturity date of June 10, 2021. The Company paid $6,000 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 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 of the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period prior to the Conversion Date, or $1.00.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.3603 was $82,569 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 $82,569 valuation of the conversion feature, $44,569 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On December 16, 2020 the investor converted the outstanding principal of $44,000 and $1,774 of accrued interest into 462,368 shares of common stock.

 

During the period ended June 30, 2021, $660 of regular interest, $4,136 of original issue discount and $26,196 of derivative liability discount was expensed. During the period ended June 30, 2020, $196 of regular interest, $329 of original issue discount and $2,082 of derivative liability discount was expensed.

 

On or about July 1, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $173,500, together with interest at the rate of 12% per annum, and a default interest amount of 24%, with a maturity date of June 15, 2021. The Company paid $28,675 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 two warrants valued at $210,092, 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 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 the lowest closing price during the previous 5-day period ending on the latest complete day prior to the date of the note or the Volume Weighted Average Price (“VWAP”) for the 5 trading days prior to the date of conversion.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.3116 was $168,946 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 $168,946 valuation of the conversion feature, $168,946 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On April 13,2021, the Company paid $94,180 in principle, $16,483 in accrued interest and $4,337 as a prepayment penalty in the total amount of $115,000 to fully extinguish the note.

 

During the period ended June 30, 2021, $11,220 of regular interest and $128,261 of original issue discount was expensed. There was no corresponding expense during the period ended June 30, 2020.

 

20

 

 

On or about July 6, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of up to $150,000, together with interest at the rate of 10% per annum, the first twelve months being guaranteed, and a default interest amount of 15%, with a maturity date of twelve months from the effective date of each tranche. The investor has the right at any time following the date of each tranche 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 the lower of 60% of the lesser of the lowest traded price or lowest closing bid price during the previous twenty five day period prior to the date of the note and 60% of the lesser of the lowest traded price or lowest closing bid price during the previous twenty five day period prior to the date of conversion.

 

On or about July 6, 2020, the first tranche of the above convertible promissory note was received by the Company, with a maturity date of July 6, 2021. The Company paid $8,000 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 $27,083, 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 conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.2996 was $89,167 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 $89,167 valuation of the conversion feature, $74,250 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On April 13,2021, the Company paid $50,000 in principle, $3,904 in accrued interest and $28,596 as a prepayment penalty in the total amount of $82,500 to fully extinguish the note.

 

During the period ended June 30, 2021, $2,658 of regular interest, $26,456 of original issue discount and $11,248 of derivative liability discount was expensed. There was no corresponding expense during the period ended June 30, 2020.

 

On or about August 28, 2020, 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 10% per annum, and a default interest amount of 24%, with a maturity date of August 27, 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. Additionally, the Company issued a warrant valued at $15,625, 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 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 60% of the lowest closing price during the previous 20-day period ending on the latest complete day prior to the date of the note.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.2085 was $155,957 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 $155,957 valuation of the conversion feature, $76,582 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On March 2, 2021, the investor converted 80,000 in principle into 2,018,750 shares of common stock

 

On April 13,2021, the Company paid $30,000 in principle, $6,025 in accrued interest and $11,983 as a prepayment penalty in the total amount of $48,008 to fully extinguish the note.

 

During the period ended June 30, 2021, $5,017 of regular interest, $27,849 of original issue discount and $72,179 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2020.

 

On or about April 1, 2020, the Company issued a promissory note to an institutional investor for the principal sum of $150,000, together with interest at the rate of 1.5% per month, subject to a fixed minimum of $2,250 per month. The lender was also granted 4% of collections received by the Company, from which interest would be paid first and any remaining amount would be applied to the outstanding principal.

 

On or about June 1, 2020 the above promissory note was amended to increase the outstanding principal to $300,000, and the fixed minimum was increased to $4,500.

 

On or about September 21, 2020, the above promissory note was amended, restated and consolidated into a convertible debt note in the amount of $600,000, with a maturity date of March 31, 2022. On the first day of each month a fixed minimum interest payment of $9000 is due. 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 $0.30 per share.

 

21

 

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $.0751 was $132,388 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.

 

On April 13,2021, this convertible note was acquired by another investor and is no longer a convertible debt all remaining derivative liability discount was expensed.

 

During the period ended June 30, 2021, $54,000 of regular interest and $130,951 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2020.

 

On or about October 21, 2020, 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 10% per annum, with a maturity date of June 16, 2021. The investor has the right after 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 the lower of $0.20 or the Variable Conversion Price which is equal to 70% multiplied by the Market Price (representing a discount rate of 30%), in which Market Price is the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period preceding the Conversion Date. The Company paid $5,000 in original issue discount and $3,500 as a fee both of which are recorded as a debt discount and being amortized over the life of the loan. Additionally, the Company issued 50,000 shares of common stock valued at $11,000, which was also recorded as a debt discount and is being amortized of the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1883 was $192,143 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 $192,143 valuation of the conversion feature, $156,593 was recorded as an expense in the current period and reported as a loss on issuance of convertible debt.

 

On April 13,2021, the Company paid $55,000 in principle, $7,269 in accrued interest and $3,731 as a prepayment penalty in the total amount of $66,000 to fully extinguish the note.

 

During the period ended June 30, 2021, $7,269 of regular interest, $19,500 of original issue discount and $35,550 of derivative liability discount was expensed. There was no corresponding expense during the period ended June 30, 2020.

 

On or about October 22, 2020, 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 12% per annum, with a maturity date of October 21, 2021. The investor has the right after 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 the lower of $0.20 or the Variable Conversion Price which is equal to 60% multiplied by the Market Price (representing a discount rate of 40%), in which Market Price is the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period preceding the Conversion Date. The Company paid $5,000 in original issue discount and $3,500 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 $0.1951 was $232,262 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 $232,262 valuation of the conversion feature, $185,762 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On April 13,2021, the Company paid $55,000 in principle, $3,110 in accrued interest and $17,057 as a prepayment penalty in the total amount of $71,167 to fully extinguish the note.

 

During the period ended June 30, 2021, $3,110 of regular interest, $8,500 of original issue discount and $46,500 of derivative liability discount was expensed. There was no corresponding expense during the period ended June 30, 2020.

 

22

 

 

On or about November 10, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $116,600, together with interest at the rate of 10% per annum, with a maturity date of August 10, 2021. A lump-sum 10% interest payment was immediately due on the issued date and was added to the principal balance and payable on the maturity date. 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 the Variable Conversion Price which is equal to 60% multiplied by the Market Price (representing a discount rate of 40%), in which Market Price is the lowest closing price for the Company’s Common Stock during the preceding 20 trading day period preceding the Conversion Date. The Company paid $11,660 in original issue discount and $4,940 as a fee both of which are recorded as a debt discount and being amortized over the life of the loan. Additionally, the Company issued 114,155 shares of common stock valued at $21,689, which was also recorded as a debt discount and is being amortized of the life of the loan.

 

The conversion feature of the note represents an embedded derivative. A derivative liability with an intrinsic value of $0.1538 was $163,028 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 $163,028 valuation of the conversion feature, $84,717 was recorded as an expense and reported as a loss on issuance of convertible debt.

 

On April 13,2021, the Company paid $128,260 in principle, $17,051 in accrued interest and $34,253 as a prepayment penalty in the total amount of $179,564 to fully extinguish the note.

 

During the period ended June 30, 2021, $28,711 of regular interest, $38,289 of original issue discount and $78,311 of derivative liability discount was expensed. There was no corresponding expense during the period ended March 31, 2020.

 

NOTE 9 – COMMON AND PREFERRED STOCK

 

On May 13, 2019, the Company filed a Definitive Information Statement on Schedule 14 C for the purpose of increasing the authorized shares of common stock, par value $0.001 (“Common Stock”) from 100,000,000 shares to 900,000,000 shares of Common Stock.

 

Preferred Stock

 

Series B Super Voting Preferred Stock

 

On March 21, 2019, the Company, while under the control of former CEO, Chairman and principal shareholder, Sheldon Karasik, filed a Certificate of Designation amending the Articles of Incorporation and designating the rights and restrictions of one (1) share of newly authorized 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 (1) share of Series B Preferred Stock for $0.16, which price was based on the closing price of the Company’s Common Stock of $0.16 as of November 5, 2018, the date of the issuance, which was approved by the Company’s then Board. Sheldon Karasik, as the holder of the Series B Preferred Stock, was 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. In connection with the closing of the SEAs and the MBO Agreement, Mr. Karasik transferred and assigned the Series B Preferred Stock to Pat Dileo, the Company’s newly appointed CEO and Chairman.

 

Series C and Series D Convertible Preferred Stock

 

On April 2, 2019, the Company filed two Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of 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, which were originally issued pursuant to two separate Share Exchange Agreements, see Note 5. The shares of Series C Preferred Stock may convert into a number of shares of the Company’s Common stock equal to a total of 67.5% of the Company’s outstanding shares of Common Stock on the date of closing on a fully diluted basis provided the beneficial ownership of the holder of Series C Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series C Convertible Preferred Stock as described in the Certificate of Designation. The Series C Holders will not have any voting rights.

 

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During the quarter ended September 30, 2020, a total of 2,080 shares of the Series C Preferred Stock were converted into 950,000 shares of common stock.

 

During the quarter ended December 31, 2020, 3,275 shares of Series C Preferred Stock were converted into 2,000,000 shares of common stock.

 

During the quarter ended March 31, 2021, a total of 3,646 shares of Series C Preferred Stock were converted into 3,650,000 shares of common stock.

 

The shares of Series D Preferred Stock may convert into a number of shares of the Company’s Common stock equal to a total of 25% of the Company’s outstanding shares of Common Stock on the date of closing on a fully diluted basis provided the beneficial ownership of the holder of Series D Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series C Convertible Preferred Stock as described in the Certificate of Designation. The Series D Holders will not have any voting rights.

 

During the quarter ended June 30, 2021, the Company issued 2,000,000 warrants and a note in the amount of 2,000,000 for the extinguishment of the Series D Preferred Stock. A loss on extinguishment was recorded in the amount of $2,238,691.

 

Series E Convertible Preferred Stock

 

On April 8, 2019, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 25,000 shares of Series E Convertible Preferred Stock with par value $0.10 and stated value $10. The shares of Series E Preferred Stock may convert into a number of shares of the Company’s Common stock equal to a total of thirty-three thousandths of a percent (0.00033%) of the Company’s outstanding shares of Common Stock on the date of closing on a fully diluted basis provided the beneficial ownership of the holder of Series E Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series E Convertible Preferred Stock as described in the Certificate of Designation. The Series E Holders will not have any voting rights.

 

On April 8, 2019, the Company issued 18,182 shares of Series E Convertible Preferred Stock (“Series E Preferred”) to an institutional investor in consideration for funding the $100,000 payment made to Aurum pursuant to the MBO Agreement.

 

During the quarter ended March 31, 2021, a total of 1,365 shares of Series E Convertible Preferred stock were converted into 2,150,000 shares of common stock.

 

During the quarter ended June 30, 2021, the Company issued 2,000,000 shares of common stock and 1,000,000 warrants valued at $139,346 for the extinguishment of the Series E Preferred Stock. A loss on extinguishment was recorded in the amount of $417,655.

 

Series F Convertible Preferred Stock

 

On March 9, 2019, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 20,750 shares of Series F Convertible Preferred Stock with par value $0.10 and stated value $10. The shares of Series F Preferred Stock may convert into a number of shares of the Company’s Common stock based on a Conversion Rate calculated as the “Conversion Amount divided by Conversion Price” where Conversion Amount is the sum of the Stated Value of Series F Preferred shares to be converted and $1,250 worth of Common Stock to cover the Preferred Shareholder’s transaction expenses and the Conversion Price is the lower of (i) the lowest Closing Bid Price, or (ii) the Fixed Price equal to $.04 per share, on the date of closing on a fully diluted basis provided the beneficial ownership of the holder of Series F Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series F Convertible Preferred Stock as described in the Certificate of Designation. The Series F Holders will not have any voting rights.

 

During the period ended March 31, 2020, 50 shares of Series F Preferred Stock were converted into 43,750 shares of common stock.

 

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During the period ended June 30, 2020, 11,870 shares of Series F Preferred Stock were converted into 3,217,500 shares of common stock.

 

During the period ended September 30, 2020, 5,430 of the outstanding shares of Series F Preferred Stock were converted into 1,420,000 shares of common stock.

 

On October 2, 2020, the 3,400 remaining outstanding shares of Series F Preferred Stock was converted into 881,250 shares of common stock.

 

13% Series G Cumulative Redeemable Perpetual Preferred Stock

 

On April 27, 2020, the Company filed a Certificate of Designation amending the Articles of Incorporation and designation the rights and restrictions of 2,000,000 shares of 13% Series G Cumulative Redeemable Perpetual Preferred Stock, par value $0.10 and a stated value of $25 per share. The Series G Holders will not have any voting rights. To date, no shares of the Series G Cumulative Redeemable Perpetual Preferred Stock have been issued or are outstanding.

 

Series M Convertible Preferred Stock

 

On April 27, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 50,000 shares of Series M Convertible Preferred Stock with par value $0.10. Each share of Series M Preferred Stock may convert into 50 shares of the Company’s outstanding shares of Common Stock on the date of closing provided the beneficial ownership of the holder of Series M Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series M Convertible Preferred Stock as described in the Certificate of Designation. The Series M Holders will not have any voting rights.

 

On May 28, 2020, the Company’s Board of Directors approved the execution of consulting services agreements with six unrelated persons/entities, none of whom were affiliates of the Company, pursuant to which the Company agreed to the issuance of 11,500 shares of a Series M Convertible Preferred Stock.

 

During the quarter ended September 30, 2020, the Company issued 11,500 shares of Series M Preferred Shares to consultants for services valued at $691,214. One shareholder converted 1,500 shares into 75,000 shares of common stock.

 

During the quarter ended December 31, 2020 the Company issued 4,500 shares of Series M Preferred Shares for 225,000 shares of common shares that had previously been disclosed as “shares to be issued”.

 

During the quarter ended March 31, 2021, a total of 6,000 shares of Series M Convertible Preferred stock were converted into 300,000 shares of common stock.

 

During the quarter ended June 30, 2021, there was no activity.

 

Series A Convertible Preferred Stock

 

On July 2, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 2,851,318 shares of Series A Convertible Preferred Stock with par value $0.10. Each shares of Series M Preferred Stock may convert into 1 share of the Company’s outstanding shares of Common Stock on the date of closing provided the beneficial ownership of the holder of Series M Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series A Convertible Preferred Stock as described in the Certificate of Designation. The Series A Holders will not have any voting rights. The shares were issued in exchange for an outstanding warrant.

 

During the quarter ended September 30, 2020, 950,000 shares of Series A Preferred Stock were converted into 950,000 shares of common stock.

 

During the quarter ended June 30, 2021, there was no activity.

 

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Series H Convertible Preferred Stock

 

On August 28, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 5,000 shares of Series H Convertible Preferred Stock with par value $0.10 and stated value $10. The shares of Series H Preferred Stock may convert into a number of shares of the Company’s Common stock based on a Conversion Rate calculated as the “Conversion Amount divided by Conversion Price” where Conversion Amount is the sum of the Stated Value of Series H Preferred shares to be converted and $1,250 worth of Common Stock to cover the Preferred Shareholder’s transaction expenses and the Conversion Price is the lower of (i) the lowest Closing Bid Price, or (ii) the Fixed Price equal to $.25 per share, on the date of closing on a fully diluted basis provided the beneficial ownership of the holder of Series H Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series H Convertible Preferred Stock as described in the Certificate of Designation. The Series H Holders will not have any voting rights. The shares were issued for cash of $25,000.

 

During the quarter ended March 31, 2021, a total of 1,259 shares of Series H Convertible Preferred stock were converted into 599,733 shares of common stock.

 

During the quarter ended June 30, 2021, there was no activity.

 

7% Series O Cumulative Redeemable Perpetual Preferred Stock

 

On September 28, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and designation the rights and restrictions of 1,000,000 shares of Series O 7% Redeemable Cumulative Preferred Stock, par value $0.10 and a stated value of $12.50. The Series O Holders will not have any voting rights. None of these shares have been issued.

 

9% Series N Convertible Preferred Stock

 

On November 20, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation of the rights and restrictions of 100,000 shares of Series N Convertible Preferred Stock with par value $0.10. Each shares of Series N Preferred Stock may convert into the Company’s outstanding shares of Common Stock on the date of closing at a Variable Conversion Price which is equal to 65% of the average of the lowest three Volume-Weighted Average Price for the Company’s Common Stock (representing a discount rate of 35%) during the ten (10) Trading Days ending on the latest complete Trading Day prior to the Conversion Date, provided the beneficial ownership of the holder of Series N Stock does not exceed 4.99% of the outstanding shares of the Company’s Common Stock upon said conversion and subject to the preference, rights, limitations, qualifications and restrictions of the Series N Convertible Preferred Stock as described in the Certificate of Designation. The Series N Holders will not have any voting rights.

 

On November 27, 2020 the Company issued 10,300 of Series N Preferred Stock for cash of $103,000 and paid $3,000 in fees related to the issuance.

 

During the quarter ended June 30, 2021, the Company paid $136,933 to extinguish the Series N Convertible Preferred Stock. A loss on extinguishment was recorded in the amount of $33,933.

 

The shares of Preferred Stock outstanding at June 30, 2021 and September 30, 2020

 

Preferred Stock Series   June 30, 2021     September 30,2020  
    Period Ended  
Preferred Stock Series   June 30, 2021     September 30,2020  
A     190,981       190,981  
B     1       1  
C     390,981       397,920  
D     -       400,000  
E     -       -  
F     -       3,400  
H     3,741       5,000  
M     8,500       10,000  
N     -       -  
Total     594,204       607,702  

 

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Common Stock

 

On February 23, 2020, the Company implemented a 1 for 100 reverse split of its outstanding common stock (the “Reverse Split”). All issuances for services are valued at market price on the approximate date of service unless otherwise noted.

 

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 disclosed on the balance sheet as shares to be issued.

 

On December 5, 2019, the Company issued 7,819 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; 43,750 shares of common stock for the conversion of 50 shares of Series F Preferred Stock

 

During the three-month period ended June 30, 2020, the Company issued 8,970,724 shares of common stock for the conversion of convertible debt; 1,074,302 shares of common stock for conversion of warrants; 3,217,500 shares of common stock for conversion of 11,870 shares of Series F Preferred Stock and 200,000 shares for services valued at $77,500

 

During the three-month period ended September 30, 2020, the Company issued 2,267,183 shares of common stock for the conversion of convertible debt valued at $203,180; 3,395,000 shares of common stock for conversion of preferred stock (see above); and 10,000 shares of common stock for services that had previously been recorded as “stock to be issued” Additionally, 750,000 shares were recorded as stock to be issued for services in the amount of $255,000.

 

During the three-month period ended December 31, 2020, the Company issued 5,276,643 shares of common stock for the conversion of convertible debt valued at $321,015; 164,155 shares of common stock for the issuance of convertible debt valued at $32,688. The $32,688 was recorded as debt discount and will be amortized over the life of the notes; 20,000 shares of common stock for financing fees valued at $4,340; 2,881,250 for the conversion of preferred stock (see above); and 2,199,073 for conversion of warrants. Additionally, 230,659 shares of common stock were authorized for issuance valued at $45,050, the shares are disclosed in “to be issued”.

 

During the three-month period ended March 31, 2021, the Company issued 2,004,361 shares of common stock for the conversion of convertible debt valued at $105,000 and 50,318 for a commitment share adjustment related to convertible debt valued at $11,020

 

During the three-month period ended June 30, 2021, the Company issued 6,409,503 shares of common stock for the conversion of convertible debt valued at $309,750 and 2,000,000 shares of common stock and 1,000,000 warrants for the conversion of 16,902 shares of Series E Preferred Stock. (see above)

 

The following warrants were outstanding at June 30, 2021:

 

Warrant Type  

Warrants

Issued and

Unexercised

   

Exercise

Price

   

Expiration

Date

Warrants     10,000     $ 5.00     December 2021
Warrants     5,000     $ 10.00     December 2021
Warrants     1,666,667     $ 0.02     December 2024
Warrants     5,837,500     $ 0.40     June 2025
Warrants     1,249,995     $ 0.60     July 2023
Warrants     625,000     $ 0.40     August 2023
Warrants     2,000,000     $ 1.00     June 2024
Warrants     2,000,000     $ 1.00     June 2024

 

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The following warrants were outstanding at June 30, 2020:

 

Warrant Type  

Warrants

Issued and

Unexercised

   

Exercise

Price

   

Expiration

Date

Warrants     10,000     $ 5.00     December 2021
Warrants     5,000     $ 10.00     December 2021
Warrants     5,358     $ 7.00     July 2024
Warrants     49,451     $ 8.00     August 2024
Warrants     33,334     $ 2.00     December 2024
Warrants     8,054     $ 7.00     March 3, 2025

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

During the year ended September 30, 2016 the Company issued a note payable to a family member of a former 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 June 30, 2021 and 2020 was $11,565 and $10,515, respectively.

 

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 June 30, 2021 and June 30, 2020 was $67,797 and 62,649, respectively, the companies had directors in common at the time of the transaction.

 

On March 21, 2019, we filed a Certificate of Designation amending our Articles of Incorporation and designating the rights and restrictions of one (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, who was then our Chief Executive Officer, President and Chairman, the one (1) 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, 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. On or about April 16, 2019, in connection with the closing of the Share Exchange Agreements between the Company and NuAxess and PR345, n/k/a OpenAxess, Sheldon Karasik sold, transferred and assigned his one (1) share of Series B Preferred Stock to Pat Dileo, the Company’s new Chief Executive Officer and Chairman.

 

NOTE 11 – INCOME TAXES

 

Topic 740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At June 30, 2020 the Company had taken no tax positions that would require disclosure under ASC 740.

 

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

 

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

 

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Significant components of the deferred tax assets at an anticipated tax rate 21% for the period ended June 30, 2021 and September 30, 2019 are as follows:

 

    June 30, 2021     September 30, 2020  
Net operating loss carryforwards     22,596,054       16,910,125  
Deferred tax asset     5,078,381       3,884,335  
Valuation allowance for deferred asset     (5,078,381 )     (3,884,335 )
Net deferred tax asset     -       -  

 

At June 30, 2021 and September 30, 2020, the Company has net operating loss carryforwards of approximately $22,596,054 and $16,910,125 which will begin to expire in the year 2031. The change in the allowance account from September 30, 2020 to June 30, 2021 was $1,194,046.

 

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 12 – SUBSEQUENT EVENTS

 

As disclosed in the Company’s Form 8-K filed on August 3, 2021, the Company reported that: (i) effective July 31, 2021, Pat Dileo resigned as CEO, Interim CFO and member of the Board; (ii) Joseph Frontiere was appointed as Interim CEO, Interim CFO and Chairman of the Board and Douglas Cole was appointed to as a member of the Board.

 

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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.

 

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company” or “our Company,” “Quad M” refer to Quad M Solutions, Inc., 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 (“SEAs”) 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 the SEAs, 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/OpenAxess and NuAxess. The entry into the two SEAs 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 SEAs (or an entity to be formed by him) the right to acquire for nominal amount 75% of the capital stock of the MMMM Mining Subsidiaries for nominal consideration of $10, with the Company retaining 25% of capital stock of the MMMM Mining Subsidiaries.

 

Pursuant to the provisions of the closing of the SEAs, among other conditions: (i) Sheldon Karasik agreed to resign as CEO and Chairman, but would continue to serve as a director, together with Michael Miller, an independent director of Mineral Mountain Mining & Milling Company; (ii) Felix Keller agreed to 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 one (1) share of Series B Super Voting Preferred Stock to Pat Dileo. In addition, as a condition to closing the SEAs and the execution of the MBO Agreement, NuAxess and/or PR345 agreed to make a payment of $100,000 into an account designated by Aurum as working capital for the operations of the MMMM Mining Subsidiaries. The $100,000 was funded by an institutional investor in consideration for the issuance of 18,182 shares of Series E Convertible Preferred Stock.

 

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%.