The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
NOTE 1 -
|
NATURE OF OPERATIONS
|
QUANTUM ENERGY INC. (“the Company”) was incorporated under the name “Boomers Cultural Development Inc.” under the laws of the State of Nevada on February 5, 2004. On May 18, 2006, the Company changed its name to Quantum Energy, Inc.
The Company is a development stage diversified holding company with an emphasis in land holdings, refinery and fuel distribution.
The Company is domiciled in the Unites States of America and trades on the OTC market under the symbol QEGY.
NOTE 2 -
|
SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries FTPM Resources Ltd. and Dominion Energy Processing Group, Inc. after elimination of the intercompany accounts and transactions.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and uncertainties
The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.
Fair value of financial instruments
The Company's financial instruments include cash and cash equivalents, promissory notes payable, and promissory notes payable - related parties. All instruments are accounted for on a cost basis, which, due to the short maturity of these financial instruments, approximates fair value at February 28, 2022 and 2021, respectively.
When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.
At February 28, 2022 and 2021, the Company had no assets or liabilities accounted for at fair value on a recurring basis.
NOTE 2 -
|
SIGNIFICANT ACCOUNTING POLICIES - continued
|
Long-Lived Assets
The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.
Stock-based Compensation
The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.
Related Parties
In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
New Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including the new lease standard. The Company does not have any leases and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
These consolidated financial statements have been prepared in accordance with U.S. GAAP to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.
As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of February 28, 2022 and 2021, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying consolidated balance sheets and consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at February 28, 2022 and 2021. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, generate revenue from current and planned business operations, and control costs. The Company plans to fund its future operations by joint venturing, obtaining additional financing from investors, and/or lenders, and attaining additional commercial revenue. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists.
NOTE 4 -
|
EARNINGS PER SHARE
|
Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.
The dilutive effect of outstanding securities as of February 28, 2022 and 2021, respectively, would be as follows:
|
|
February 28,
2022
|
|
|
February 28,
2021
|
|
Warrants
|
|
|
1,925,000 |
|
|
|
2,925,000 |
|
TOTAL POSSIBLE DILUTION
|
|
|
1,925,000 |
|
|
|
3,925,000 |
|
At February 28, 2022 and 2021, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.
Work in Progress
Work in progress consists of partially manufactured and raw rare earth metal products used in production in the amount of $118,358 at February 28, 2022.
Deposits – Related Party
Deposits – Related Party consist of deposits made to a related party that share board members of the Company. A with a letter of intent signed on October 12,2021 calls for the purchase of shares of common stock of the related party to obtain a majority stake at $2.10 for up to eighteen (18) months with closing on December 15, 2022. The letter of intent is non-binding and if the majority shares are not obtained the deal is terminated and the money is refunded. Hence, the classification of deposits of $12,005,000 at February 28, 2022. The Company is expecting to acquire majority ownership by the closing date.
NOTE 6 -
|
PROMISSORY and CONVERTIBLE NOTES PAYABLE
|
The Company’s outstanding notes payable are summarized as follows:
|
|
February 28
2022
|
|
|
February 28
2021
|
|
0% unsecured note payable - December 2013, due on demand
|
|
$ |
2,000 |
|
|
$ |
2,000 |
|
0% unsecured note payable - November 2015, due on demand
|
|
|
980 |
|
|
|
980 |
|
8% unsecured note payable - October 2018, due on demand
|
|
|
5,000 |
|
|
|
5,000 |
|
6% unsecured note payable – April 2019, due on demand
|
|
|
3,325 |
|
|
|
3,325 |
|
8% unsecured notes payable - October 2019, due on demand
|
|
|
65,000 |
|
|
|
65,000 |
|
|
|
|
|
|
|
|
|
|
Total Notes Payable
|
|
$ |
76,305 |
|
|
$ |
76,305 |
|
Interest expense for the years ended February 28, 2022 and 2021 was $5,814 and $5,807, respectively.
Convertible note payable consists of one note payable in the amount of $-0- and $67,500 at February 28, 2022 and 2021, respectively. The note which was issued in April 2019 for $45,000 accrued interest at an annual rate of 12% and matured in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%. The conversion option expired on October 7, 2020.
NOTE 6 -
|
PROMISSORY and CONVERTIBLE NOTES PAYABLE - continued
|
On June 18, 2019, the Company received a default notice from Power Up stating that the Company was in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company reached a settlement of this matter with Power Up as of April 2021 in the amount of $70,200. Included in gain on debt conversion of $140,395 for the year ended February 28, 2022, is $23,996 of accrued interest that was not paid and $116,399 of derivative liability.
NOTE 7 -
|
PROMISSORY NOTES PAYABLE, RELATED PARTY AND OTHER RELATED PARTY TRANSACTIONS
|
The Company’s outstanding notes payable, related party are summarized as follows:
|
|
February 28,
2022
|
|
|
February 28,
2021
|
|
0% unsecured note payable - October 2015, due on demand -written off in settlement
|
|
|
––
|
|
|
$ |
2,300 |
|
0% unsecured note payable – November 2015, due on demand – written off in settlement
|
|
|
––
|
|
|
|
2,000 |
|
8% unsecured note payable - October 2018, due on demand – written off in settlement
|
|
|
––
|
|
|
|
60,000 |
|
6% unsecured note payable – April 2019, due on demand
|
|
|
15,825 |
|
|
|
15,825 |
|
6% unsecured note payable – April 2019, due on demand
|
|
|
15,890 |
|
|
|
15,890 |
|
8% unsecured note payable - October 2019, due on demand
|
|
|
10,000 |
|
|
|
10,000 |
|
TOTAL
|
|
$ |
41,715 |
|
|
$ |
106,015 |
|
Interest expense for the years ended February 28, 2022 and 2021 was $7,597 and $7,598, respectively.
Starting January 1, 2019, the Company began accruing a monthly management fee of $15,000 due to an advisory company owned by Andrew J. Kacic, the Company’s former chief executive officer (“CEO”). During the year ended February 28, 2019, the Company recognized management fees of $30,000 under this agreement which amount is included in “Accounts payable and accrued liabilities, related parties” on the consolidated balance sheet at February 28, 2019. Since February 28, 2019, no additional management fees have been accrued since the parties are in dispute. There were no similar management fees due the CEO prior to December 31, 2018. Certain directors and officers of the Company dispute the management fee asserting that no consulting agreement has been executed. It is possible that the amount ultimately paid to the advisory company will be other than the accrued balance of $30,000 due to continuing negotiations between the board of directors and the former CEO. The disputed amount as of the date of these financials is $150,000, which is the remaining 10 (ten) months of the management fee for the calendar year ended 2019. Amounts due to Andrew Kacic at November 30, 2021 and February 28, 2021 were $107,868 and $17,868, respectively. In January 2022, the Company settled their dispute with Andrew Kacic and paid him $88,000. Included in this settlement was $107,868 in accounts payable – related parties, $64,300 in notes payable related parties and $16,573 in accrued interest – related parties. Write off of the notes payable and the accrued interest are included in gain on debt conversion in the amount of $80,873 for the year ended February 28, 2022. Write off of $19,868 of accounts payable related parties is included in professional fees at February 28, 2022.
Certain officers, directors and other related parties of the Company have paid various expenses on behalf of the Company. Balances due to the officers, directors and a related company for reimbursement of these expenses were $198,803 and $197,302 at February 2022 and February 28, 2021, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the consolidated balance sheets.
NOTE 8 -
|
COMMON STOCK PAYABLE
|
Common Stock Payable – for Contracts/Agreements
Common stock payable for contracts/agreements consist of 1 million shares owed to Raul Factor per the joint venture agreement (Note 11) and 1 million shares owed to landlord for rent at February 28, 2021. On June 7, 2021, 6,667 shares were issued to the landlord. These shares were adjusted to its fair value of $600,000 on June 7, 2021, and $150,000 was recognized as unrealized gain on that date. The Company also recognized a gain on the issuance of these shares in the amount of $360,000. At February 28, 2022, the fair value of the remaining shares owed to Raul Factor were adjusted to its fair value of $380,000 based on the closing price of the stock on that date. The Company recognized unrealized gain (loss) on common stock payable of $370,000 and $(1,060,000) during the years ended February 28, 2022 and 2021, respectively. At February 28, 2022 the Company also owed 3,354,037 shares to various people which was valued at the market rate at date of agreement totaling $1,610,107.
Common Stock Payable – Deposits Received on Subscriptions Agreements
Common stock payable for deposits received on stock subscription agreements consist of 48,898,440 shares owed to various investors who have paid for these shares. At February 28, 2022, the fair value of the these shares were adjusted to its fair value of $18,515,734 based on the closing price of the stock on that date. The Company recognized unrealized gain (loss) on common stock payable of $10,246,456 and $(5,748,276) during years ended February 28, 2022 and 2021, respectively.
Common stock
The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting.
On February 23, 2022, the board of directors approved a 150 to 1 reverse stock split. The reverse has been retrospectively accounted for at March 1, 2020 in the statements of changes in stockholders’ deficit.
Preferred stock
The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-par value per share with no designation of rights and preferences. The Company issued 915,000 shares of its preferred stock class D to pay consulting services in the amount of $53,985,000 during the year ended February 28, 2022. These shares have voting rights of 100 to 1. The shares value was based on the market price of the Company’s common stock of $0.59 on the measurement date multiplied by the voting rights of 100. The reverse stock split did not affect preferred stock.
Treasury Stock
During year ended February 28, 2022, the Company bought back 27,914,411 shares of its common stock in the amount of $813,261 and placed it in treasury. On February 23, 2022, the board of directors approved a 150 to 1 reverse stock split. The reverse has been retrospectively accounted for at March 1, 2020 in the statements of changes in stockholders’ deficit.
The following is a summary of the Company’s warrants issued and outstanding:
|
|
February 28, 2022
|
|
|
February 28, 2021
|
|
|
|
Warrants
|
|
|
Price (a)
|
|
|
Warrants
|
|
|
Price (a)
|
|
Beginning balance
|
|
|
2,925,000 |
|
|
$ |
.25 |
|
|
|
3,925,000 |
|
|
$ |
.25 |
|
Issued
|
|
–– |
|
|
–– |
|
|
–– |
|
|
–– |
|
Exercised
|
|
–– |
|
|
–– |
|
|
––
|
|
|
–– |
|
Expired
|
|
|
(1,000,000 |
) |
|
––
|
|
|
|
(1,000,000 |
) |
|
––
|
|
Ending balance
|
|
|
1,925,000 |
|
|
$ |
0.25 |
|
|
|
2,925,000 |
|
|
$ |
.25 |
|
|
(a)
|
Weighted average exercise price per shares
|
The following table summarizes additional information about the warrants granted by the Company as of November 30, 2021 and February 28, 2021:
Date of Grant
|
|
Warrants
outstanding
|
|
|
Warrants
exercisable
|
|
|
Price
|
|
|
Remaining term
(years)
|
|
March 20, 2019
|
|
|
1,250,000 |
|
|
|
1,250,000 |
|
|
|
.25 |
|
|
|
.05 |
|
April 17, 2019
|
|
|
675,000 |
|
|
|
675,000 |
|
|
|
.25 |
|
|
|
.13 |
|
Total warrants
|
|
|
1,925,000 |
|
|
|
1,925,000 |
|
|
$ |
.25 |
|
|
|
.08 |
|
NOTE 11 -
|
OTHER MATTERS- Joint Venture
|
Private Placement – Raul Factor
Pursuant to (2) two prior License and Operating Agreements, the principals of Raul Factor BV agreed to provide an aggregate of $200,000 (USD) to purchase an aggregate of 1,000,000 units of Quantum at a price of $0.20 per Unit, (for an aggregate of 1,000,000 shares of the Company’s common stock plus 18 month warrants to purchase an aggregate of 1,000,000 shares of the Company’s common stock at a price of $0.25 per share. Pursuant to these transactions, the Company agreed to use $150,000 of the proceeds from the sale of the Units to purchase the distribution rights of EES-E and EETC and in turn the Company would assign such distribution rights to EES-E and EETC respectively. Also, Raul Factor agreed to invest the required reasonable funding as determined by the board of directors of EETC for the startup, working capital, specific module development and required 6 months of economic demonstration of carpet and artificial turf into energy or value-added products for EETC. Also, EES agreed to contribute its module technologies developed by or available via license agreements from others to EES further on to EES-E via license agreements conforming to the terms set forth in these License and Operating Agreements. Raul Factor also agreed to fund additional capital requirements. At the date of this report, while the $200,000 was received from Raul Factor, the stock has yet to be issued. As of February 28, 2022, the stock was valued at $380,000 utilizing the closing price on November 30, 2021.
Also, as part of the transactions contemplated by these agreements: (i) the stock purchase warrant issued on November 20, 2016, to Kevin Holinaty to purchase 500,000 shares of the Company’s common stock (“Warrant No. 002”) was amended to extend the exercise period of the warrant through May 19, 2021 and to change the exercise price to $0.25 per share; (ii) the stock purchase warrant issued to Kevin Holinaty issued on June 9, 2017, and amended on March 15, 2018, to purchase 250,000 shares of the Company’s common stock (“Warrant No. 003”) was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25 per share; (iii) the stock purchase warrant issued to Haaye de Jong to purchase 250,000 shares of the Company’s common stock was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25 per share; (iv) the Company issued a warrant to Kevin Holinaty to purchase 500,000 shares of the common stock at a price of $0.25 per share, which warrant has an exercise period until December 20, 2020; (v) the Company issued a warrant to Haaye de Jong to purchase 500,000 shares of the common stock at a price of $0.25 per share, which warrant has an exercise period until December 20, 2020. (See Note 10).
The sale of the Units and the warrants to Kevin Holinaty and Haaye de Jong, the principals of Raul Factor, who have represented that they are “accredited investors” and non-U.S. citizens and in offshore transactions, was made in reliance on Rule 506 of Regulation D and on Regulation S.
NOTE 12 -
|
Risks and Uncertainties
|
Coronavirus Impact (COVID-19)
Due to the recent outbreak of the coronavirus reported in many countries worldwide, local and federal governments have issued travel advisories, canceled large scale public events and closed schools. In addition, companies have begun to cancel conferences and travel plans and require employees to work from home. Global financial markets have also experienced extreme volatility and disruptions to capital and credit markets.
We are unable to predict the impact of the coronavirus on our operations at this time. Adverse events such as health-related concerns about working in our offices, the inability to travel, potential impact on our business partners and customers, and other matters affecting the general work and business environment could harm our business and delay the implementation of our business strategy. The adverse events may also adversely impact our ability to raise capital or to continue as a going concern. We continue to monitor the recent outbreak of the coronavirus on our operations.
Suprock Litigation
On December 10, 2021, the Company filed an action against the Suprock Parties in the United States District Court of the State of Nevada. (See: 2:21-cv-02184-JAD-BNW Quantum Energy Inc. v. PCS Advisors LLC et al). The complaint alleges breach of implied covenant of good faith & fair dealing, unjust enrichment, and breach of contract. The Company is seeking the return of the shares of its common stock and monetary damages.