EDGAR 10-K Filing

Company CIK: 1295961
Filing Year: 2021
Filename: 1295961_10-K_2021_0001437749-21-009779.json

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ITEM 1. BUSINESS
ITEM 1.
Business.
General
We, Quantum Energy Inc., are a Nevada corporation. We were originally incorporated as Boomers Cultural Development, Inc. (“Boomers”) on February 5, 2004, in the State of Nevada to be a service-oriented firm that would integrate the cultural interests of baby boomers with destination learning, by packaging onsite personal growth, education, and entertainment seminars with a variety of vacation destinations. On May 18, 2006, our name was changed to Quantum Energy, Inc. and our business focus was changed to concentrate on the energy industry and, in particular, the oil and gas portions of the energy industry. We currently have two 100% owned subsidiaries: Dominion Energy Processing Group, Inc. (“DEPG”), a Canadian Federal business corporation, which is our 100% owned Canadian subsidiary and FTPM Resources, Inc., a Texas corporation.
In connection with our efforts in the energy industry, we acquired interests in various oil & gas properties in the Barnett Shale area of West Texas. After the initial success of the Barnett Shale leases, the production program in the Barnett Shale area encountered substantial difficulties. Numerous wells throughout this extensive area experienced production difficulties. In addition to the production problems was the severe drop in natural gas prices. As a result, all of the wells in which we had interests were suspended and all marginal wells were capped, and we abandoned our interest in the Barnett Shale area. From 2008 through 2010, we planned, when and if funding became available, to acquire high-quality oil and gas properties, primarily proven producing and proven undeveloped reserves as well as exploring low-risk development drilling and work-over opportunities with experienced, well-established operators. However, the needed substantial finding for these for opportunities was not available. From 2010 to 2017, we continued to consider and explore other energy industry opportunities. We focused on the development and operation of an oil refinery to refine oil from the Bakken formation. In 2013, we entered into various transactions in pursuit of the financing needed for the development of such a refinery and we pursued other potential energy related opportunities. However, we were not able to raise the substantial funding that would be needed to acquire the land, obtain the required permits, and developing and operating such a refinery. During the period from October 2017 to April 2019, among other things: we reviewed all of the outstanding agreements and transactions that we had entered into between August 2013 and November 2017 and we began to renegotiate, rescind or settle all of those agreements that had proven not to be in our best interest or in the best interest of our stockholders. In this regard, the shares of our common stock that had been issued in connection with such cancelled transactions were returned to us and shares of our Series B Preferred Stock that had been issued were returned and cancelled.
Since December 5, 2016, we have continued to pursue energy opportunities, including alternative energy opportunities, as well as, the substantial financing needed by such energy opportunities as follows:
(i) Provided substantial financing is available, we focused on developing a smaller “state-of-the art”, energy efficient, 40,000 BPD full slate refinery in Stoughton (southeastern) Saskatchewan, Canada (the “Stoughton Refinery”) in the heart of the Viewfield oil field area of the Bakken formation. The Stoughton Refinery was to be designed to use light sweet crude feedstock from the Bakken formation in the Viewfield oil field area of the Province of Saskatchewan, Canada to produce a limited number of products for the local market. We planned to utilize Bakken crude as our feedstock since it would be the most plentiful crude slate in the Viewfield oil field area where the Stoughton Refinery was to be located. We planned to refine and sell a variety of refined products to our customers, including natural gas liquids, gasoline, jet fuel, diesel, drilling mud oil, ultra-low sulfur fuel oil, and sulfur and feedstocks. In this regard, on August 2, 2016, we formed our Canadian subsidiary, Dominion Energy Processing Group, Inc. for purposes of the pre-development work, construction and operation of the Stoughton Refinery.
In connection with our efforts regarding developing and operating the Stoughton Refinery, we identified a 480-acre site in Stoughton, Saskatchewan (the “Land”) on which to construct the Stoughton Refinery provided various tests to confirm the validity and suitability of the hydrology and the Land for the construction and operation of the Stoughton Refinery. The Land is located approximately 100 kilometers north of the Canadian USA border in southeastern Saskatchewan in the regional municipality of Tecumseth in the heart of the Viewfield oil field area of the Bakken formation. The Land has sufficient acreage to accommodate expansion of the Stoughton Refinery facilities to included future ethanol and rail-car load and unload facilities. According to a 2015 report from the National Energy Board (an independent economic regulatory agency created in 1959 by the Government of Canada, the unconventional, marketable resources of the Bakken in the Viewfield oil field area are expected to be 74 million m³ (464 million barrels) (see “The Ultimate Potential for Unconventional Petroleum from the Bakken Formation of Saskatchewan - Energy Briefing Note” April 2015 of the National Energy Board (an independent economic regulatory agency created in 1959 by the Government of Canada, http://www.nebone.gc.ca/nrg/sttstc/crdlndptrlmprdct/rprt/2015bkkn/2015bkkneng. pdf).
On December 5, 2016, we executed a Farm Contract of Purchase and Sale (the “Land Contract”) with the landowner. The purchase price of the Land under the Land Contract was $500,000(CAD). We paid $10,000(USD) ($7,822(CAD)) as a deposit on the Land. Our obligation to purchase the Land under the Land Contract is subject to certain terms and conditions including: (1) the completion of the various tests to confirm the validity and suitability of the hydrology and the Land for the construction and operation of the Stoughton Refinery; (2) the proposed Stoughton Refinery meeting all requirements of various Saskatchewan government laws, and bylaws and being fully approved by all levels of the Saskatchewan government and agencies; and (3) the Land purchase being approved the Saskatchewan Farm Land Security Board (collectively the “Predevelopment Work”). The Land Contract had an initial expiration date of December 15, 2017, however, we have negotiated several extensions of the Land Contract until October 31, 2019 (unless further extended), for removal of all terms and conditions to the purchase of the Land and the purchase price of the Land under the Land Contract was increased to $525,000(CAD). No assurances can be given that we will be able to obtain all required governmental approvals.
If the viability and suitability of the Land for the development, construction and operation of the Stoughton Refinery is validated, and provided we have obtained the required substantial capital, and provided substantial funding is available, we intend to commence the process of obtaining necessary permits and approvals to develop, construct and operate the Stoughton Refinery.
As of the date of this report, we have been unable to raise the substantial funds required to acquire the Land or complete the predevelopment work or to construct the proposed Stoughton Refinery. No Assurances can be given that we will obtain the needed substantial capital to acquire and validate the suitability of the Land or to develop, construct and operate the Stoughton Refinery.
(ii) On April 15, 2018, we entered into a (conditional) binding letter of intent (the “IEC LOI”) with Inductance Energy Corporation Energy Corporation, a Wyoming corporation (“IEC”), which purports to have developed an alternative source of energy through the invention and development of magnetic “earth engines”. Pursuant to the IEC LOI , if all of the conditions contained in the IEC LOI are satisfied, (a) we would merge with a newly formed subsidiary of IEC with us being the surviving company, (b) we would issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) IEC would provide to us, as the surviving company, up to $50,000,000(USD), a portion of which (estimated at $7,500,000 CAD) we would use to validate the viability and suitability of the development of the Stoughton Refinery on the land (“Land”) for intended sight in Stoughton Saskatchewan Canada, which would include obtaining environmental and engineering studies to validate the viability and suitability of the intended site for the Stoughton Refinery, and if the site is determined to be viable and suitable, we would commence the process of obtaining the required permits to build the Stoughton Refinery and we would acquire the Land, and (c) we would pay other related costs. The conditions to the IEC LOI were not satisfied and on April 23, 2019, we entered into a Mutual Agreement with IEC to cancel and rescind the IEC LOI. The parties agreed that the mutual cancellation/rescission is based on the inability of the parties to reach an agreement that serves their respective best interests and priorities, and that the cancellation/rescission of the IEC LOI will enable each party to pursue its unique opportunities and interests.
(iii) On April 2, 2019, we and our wholly owned subsidiary FTPM Resources, Inc. entered into non-binding Letter of Intent with Easy Energy systems Inc. (“EESI”) to form a joint venture the purpose of developing and marketing of clear glucose using EESI’s patented Modular Energy Production System technology (“MEPS®”). EESI’s Modular Energy Production Systems are small-scale modular biorefineries for the production of alternative liquid biofuels and other products from various feedstocks. MEPS® modules are fully automated, self-contained shipping container sized modules (the “Modules”) that contain a specific scientific process to process energy based on the particular targeted Feedstock. The Modules are factory-built and can be connected together in a matter of weeks to convert different forms of Feedstock into different forms of renewable energy and other high value products. The Modules can be shipped to remote villages and cities all over the world. That joint venture was to have been owned 33% by FTPM and 67% by EESI.
On June 28, 2019, we and EESI modified that proposed joint venture transaction and we entered into a Binding Letter of Intent (the June 28, 2019 Binding Letter of Intent”) with EESI to form a joint venture (hereinafter referred to as “JV-1”) for the purpose of creating and funding multiple operating joint venture limited liability companies (each an “Operating JV”) each of which to be focused on a different vertical market feedstock utilizing the MEPS® technology to create energy. Each Operating JV is expected to be assigned exclusive distribution rights based on a territory and/or specified Feedstock, and each of which will be financed by the funding source of that Operating JV. Each Operating JV would be owned 50% by that funding source for the particular LLC and the remaining 50% by JV-1 (which will be split equally between us and EESI).
(iv) On April 8, 2019, we entered into a non-binding memorandum of understanding (“Peconic MOU”) with Peconic Energy Inc., a Wyoming corporation. Peconic is presently engaged in the business of exploring for oil, gas and other hydrocarbons within the State of Texas and is the owner of certain lands located in Gonzales and Wilson counties Texas, which lands are considered by Peconic to be prospective for finding oil, gas and other hydrocarbons. Pursuant to the Peconic MOU, if the parties negotiated and executed a binding agreement, we would acquire 100% of Peconic for shares of newly created preferred stock and we were to contribute to Peconic a loan of $500,000 and an additional $150,000 of bridge financing from a funding source introduced by Peconic.
Also, on April 17, 2019, we loaned $30,000 to Peconic Energy, Inc. (“the Peconic Loan”). This loan is evidenced by a secured convertible promissory note (“Peconic Note”) which provides for interest which shall accrue at rate of 12% per annum or 40% of the gross revenues generated by the maker, whichever is greater, the principal balance and all accrued interest being due and payable 18 months from the date of the note. The Peconic Note is secured by 100% of the Peconic’s assets and is convertible at any time during the term of the note into 40% of the Peconic’s assets (see (v) below regarding Power Up Lending Group Ltd.).
Pursuant to the Peconic MOU, if definitive agreements were not executed by the close of business on April 22, 2019, the Peconic MOU would be automatically rescinded. Definitive agreements were not executed and the proposed transaction with Peconic was automatically rescinded. As of the date of this report, no further action is anticipated relating to the Peconic MOU.
(v) In connection with the Peconic MOU (see (iv) above), on April 9, 2019 we entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Power Up”) providing for the issuance of a Convertible Promissory Note (the “Power Up Note”) in the principal amount of $45,000. From this loan, we in turn loaned $30,000 to Peconic. The Power Up Note bears 12% interest with the principal balance and all accrued interest being due and payable on April 9, 2020. The Power Up Note provides for default interest at 22%, in the event of default. The Power Up Note contains conversion terms whereby Power Up has the right to convert the Power Up Note into shares of the Company’s common stock at a 39% discount on the lowest closing price of the Company’s common stock during the prior 20 trading day period. The conversion option expired on October 7, 2020. On June 18, 2019, we received a default notice from Power Up stating that we are in default under the Power Up Note because, among other reasons, we 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. We are currently seeking to reach a settlement of this matter with Power Up but as of the date of this report no settlement has been reached.
(vi) On April 16, 2019, we entered into a Non-Binding Memorandum of Understanding (“EESI Infrastructure MOU”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”). The prospective EESI Infrastructure acquisition, if consummated as contemplated in the EESI Infrastructure MOU, would provide an Engineering, Procurement and Construction (“EPC”) guarantee for the construction of an addition to the existing $11.2 million plant of EESI Systems in Emmetsburg, Iowa. This addition would add a 9.3 Mega Watt dual gas power plant to EESI Systems’ Emmetsburg facility at an anticipated cost of approximately $10 million dollars. The EPC guarantee would provide a Warranty Bond Guarantee to ensure the plant will remain operational for 18 months after completion of the Emmetsburg facility Power Plant. The EESI Infrastructure MOU also contemplated that we would issue shares of newly authorized preferred stock and that cash would be paid to EESI Infrastructure. Upon signing the EESI Infrastructure MOU, we advanced $25,000 to the EESI Infrastructure. As of the date of this report, the transactions contemplated by the EESI Infrastructure MOU have not been consummated, we are currently seeking to get a refund from EESI Infrastructure of the $25,000 we advanced to EESI Infrastructure and no further action is anticipated relating to the EESI Infrastructure MOU.
(vii) Effective May 24, 2019, we entered into an Asset for Stock Swap Agreement (“Swap Agreement”) with the Looper Family Office, LLC, a Texas limited liability company and Quay View Partners, LLC (“Sellers”) pursuant to which the Sellers agreed to convey to us 100% of their rights, titles and interests in and to certain identified oil and gas producing properties in exchange for 100,000 shares of a newly created Series W Preferred Convertible Preferred Stock and a $250,000 loan from us to the Sellers. Pursuant to the Swap Agreement, if consummated, we would own the leases through a wholly owned subsidiary to be formed and the Series W Preferred Convertible Stock would be issued to secure debt and or equity for such subsidiary. We were also to contribute a loan of $250,000 to the Sellers, funded in two installments as follows: the first upon the execution of the Swap Agreement and the second on or before June 7, 2019. We were not able to obtain the funding of such loan. On June 21, 2019, the Sellers notified us that the Swap Agreement was cancelled because we had not provided the consideration required under the Swap Agreement. No payments were made by the Company, no assets were transferred to the Company and no shares of Series W Preferred Stock were issued to the Sellers. As of the date of this report, no further action is anticipated relating to the Swap Agreement;
(viii) In connection with the June 28, 2019, Binding Letter of Intent with EESI and to monetize the distribution rights to EES’ modular Technologies, (a) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with Raul Factor BV (“RF”) pursuant to which the RF and JV-1 created a new joint venture to be named Easy Energy Systems - Europe (“EES-E”) and pursuant to which the EES-E Operating JV purchased the distribution rights for the EESI “MEPS®” technology for the territory of the European Union, and (b) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with RF pursuant to which the parties created a new joint venture to be named Easy Energy Turf & Carpet (“EETC”) and pursuant to which the EETC Operating JV purchased the global distribution rights to EESI’s MEPS® technology for turf & carpet feedstock. Each of EES-E and EETC is owned 25% by us, 25% by EES and 50% by Raul Factor The aggregate purchase price paid for the licensing and distribution for EES-E and EETC was $150,000 (US).
In connection with and as part of the foregoing joint venture transactions with JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 additional restricted shares of our common stock and warrants to purchase 1,000,000 restricted shares (at an exercise price of $0.25 per share) of our common stock, and pursuant to the EES-E and EETC Joint Ventures we agreed to use the proceeds from the sale of such shares and warrants to purchase from EESI the above mentioned EES-E and EETC distribution rights for an aggregate price of $150,000, and we then assigned such distribution rights to EES-E and EETC respectively. Raul Factor also 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;
Pursuant to this June 28, 2019, Binding Letter of Intent, the parties agreed to, among other things, that within 90 days from the date of the Binding Letter of Intent, we would raise $10,000,000 in capital for use by EESI. As of the date of this report, we were not able to raise such capital. In connection therewith, on October 29, 2019, delivered to us the terms of a proposed termination of the June 28, 2019 Binding Letter of Intent. As of the date of this report this the terms of such termination have not been finalized.
We intend to continue to pursue business opportunities in the energy and alternative energy industries, as well as other industries that we believe are viable and to obtain the financing needed for such opportunities. Our ability to pursue any future plan of operation is dependent upon our ability to obtain financing. To date, our primary sources of financing have been sales of our debt and equity securities.
Effective Registration Statement
On June 26, 2018, we filed a Registration Statement on Form S-1 to register 2,000,000 shares of our common stock for sale by us (the “Primary Offering”) and 21,563.669 shares of common stock for sale by our stockholders (the “Secondary Offering”). On December 21, 2018, that registration statement became effective. As of the date of this report, none of the 2,000,000 shares of our common stock in the Primary Offering have been sold.
Changes in Management and the Board of Directors
During period from February 28, 2018 to April 23, 2019, there were various changes in our management and board of directors. (See Part III, Item 10. Directors, Executive Officers and Corporate Governance).
In connection with the April 10, 2018, Conditional Binding Letter of Intent (“LOI”) between the Company and Inductance Energy Corporation (“IEC”), William J. Hinz, Richard K. Ethington and Pamela L. Bing were appointed as independent members of our Board of Directors and Mr. Ethington and Ms. Bing were appointed as independent directors on our Audit Committee. In connection with the April 23, 2019, agreement between the Company and IEC cancelling/rescinding the LOI, Mr. Hinz, Mr. Ethington and Ms. Bing each resigned as a director of the Registrant effective April 23, 2019. Their resignations were not a result of any disagreement with the Company regarding any, matter relating to the Registrant’s operations, policies or practices or otherwise, and none of them were removed for cause from the board of directors.
On April 23, 2019: (i) Andrew J. Kacic, then our director, Secretary, and member of our Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of our Board was also appointed as our Co-Chairman of the Board and Chief Executive Officer; (ii) Jeffrey Mallmes, then our director and our Chairman of Board, President, Treasurer and member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the our Board, ceased to be our Chairman and as a member of our Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee, and he was also appointed President of our wholly owned Canadian subsidiary Dominion Energy Processing Group, Inc.; (iii) Raleigh C. Kone, one of our stockholders was appointed as a director, and our Co-Chairman of the Board, and Executive Vice-President; and (iv) Michael Ballmann, was appointed as an independent director and an independent member of our Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee.
On October 6, 2019 Michael Ballmann resigned as a director. Mr. Ballmann’s resignation was not a result of any disagreement with the Company regarding any, matter relating to the Company’s operations, policies or practices or otherwise, and he was not removed for cause from the board of directors.
Consulting Agreement
On April 9, 2019, we entered into a Consulting Agreement with Windsor Consulting Group to provide services related to our fund-raising efforts. Pursuant to this agreement, the Consultant agreed to make introductions to private “accredited investors”, but will not act in the capacity of selling agent or broker on behalf of the Company and the Consultant will not assist in the preparation of any offering documents or materials to be used in the solicitation of potential investors. On the successful completion of a financing transaction introduced by the Consultant, we agreed to compensate the Consultant as follows: in connection with equity financing, up to $220,000, including a $10,000 payment upon execution of the Consulting Agreement and a 3-year warrant to purchase 210,000 shares of the Company’s common stock at an exercise price of $1.00 per share; and in connection with debt financing, up to $60,000 plus a 3-year warrant to purchase up to 60,000 shares of the Company’s common stock at an exercise price of $1.00 per share. This agreement expired on October 7, 2020. No equity or debt financing transactions have been completed as of the date of this report.
Crowdfunding Agreement
On August 29, 2019, we entered into a month-to-month Listing and Marketing Agreement with Funding OTC (“FOTC”) to establish a crowd funding investment platform to raise approximately $1,000,000. We paid $15,000 for the initial engagement with FOTC. We plan to use funds received under the crowdfunding arrangement to further develop an “Ocean Clean-Up” initiative to use the Easy Energy Systems, Inc technology to convert plastic to fuel. For its services, FOTC will receive $37,500 per month - $15,000 from the Company and $22,500 from funds received under the agreement. In the event that the crowdfunding campaign is unsuccessful, we will bear no obligation or liability to otherwise pay the $22,500 to FOTC. As of the date of this report, no crowdfunding transaction has commenced, no funds have been raised under this agreement and no money is owed to FOTC pursuant to the terms of Listing and Marketing Agreement.
Competition
If we are able to obtain the substantial financing needed to develop, construct and operate the Stoughton Refinery in the Bakken region of Stoughton, Saskatchewan Canada, as a new entrant to the refining industry, we believe that we will face significant competition and barriers to entry from larger companies such as Valero Energy Corp and BP and others. Because of their geographic diversity, larger and more complex refineries, integrated operations and greater resources, some of our competitors may be better able to withstand volatile market conditions, to compete on the basis of price, to obtain crude oil in times of shortage, and to bear the economic risk inherent in all phases of the refining industry. Because we have not yet commenced the development or operation of the Stoughton Refinery, we have not commenced competing with other refineries or distributors of refined oil products.
Also, if we can commence operating the Stoughton Refinery and/or the Operating JVs commence operations, we will be competing with alternative energy sources, including, in particular, electricity. Electric utilities offer electricity as a rival energy source and compete for the space heating, water heating and cooking markets. Promotional incentives, improved equipment efficiencies and promotional rates all contribute to the acceptability of electrical equipment. The principal means to compete against alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential, commercial and industrial markets.
Employees
We have no employees as of the date of this report.
Intellectual Property
As of the date of this report, we do not own any patents, trademarks, licenses, franchises, concessions, and royalty agreements, or other intellectual property contracts.
Available Information
Our Periodic Reports including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports, and amendments to those reports, and other forms that we file with or furnish to the Securities and Exchange Commission (SEC) are available to review on the SEC’s EDGAR website.
Corporate Governance
In accordance with and pursuant to relevant related rules and regulations of the SEC, the Board of Directors of the Company has established and periodically updated our Corporate Governance Guidelines and Code of Conduct, which is applicable to all directors, officers and employees of the Company. We have established an audit committee of our board of directors. We intend to appoint three directors to our audit committee and least one of the appointees shall be independent and shall be an audit committee financial expert.

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ITEM 1A. RISK FACTORS
ITEM 1A.
Risk Factors.
Not applicable to a smaller reporting company.
ITEM 2.
Properties.
Our corporate headquarters are comprised of 10,000 square feet of floor space located at 3825 Rockbottom, Henderson, NV 89030. The building is owned by a shareholder, we have no lease, and we pay no rent.
ITEM 3.
Legal Proceedings.
None.
ITEM 4.
Mine Safety Disclosures.
Not applicable.
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is currently available for trading on the OTC Pink (over-the-counter pink sheets) under the trading symbol “QEGY.” The following table sets forth the high and low bid prices (USD) for our Common Stock per quarter as reported by the OTC Markets based on our fiscal year end February 28, 2018, 2019, and 2020 and our fiscal quarterly periods in 2019. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
Fiscal Year 2020
HIGH
LOW
First Quarter (Mar. 1, 2019 - May 31, 2019)
$ .18
$ .15
Second Quarter (June 1, 2019 - August 31, 2019)
.14
.09
Third Quarter (Sept. 1, 2019 - Nov. 30, 2019)
.13
.05
Fourth Quarter (Dec. 1, 2019 - Feb. 28, 2020)
.27
.06
Fiscal Year 2019
First Quarter (Mar. 1, 2018 - May 31, 2018)
$ 0.25
$ 0.106
Second Quarter (June 1, 2018 - August 31, 2018)
0.75
0.20
Third Quarter (Sept. 1, 2018 - Nov. 30, 2018)
Fourth Quarter (Dec. 1, 2018 - Feb. 28, 2019)
Fiscal Year 2018
First Quarter (Mar. 1, 2017 - May 31, 2017)
0.309
0.15
Second Quarter (Jun. 1, 2017- Aug. 31, 2017)
0.229
0.10
Third Quarter (Sept. 1, 2017 - Nov. 30, 2017)
0.165
0.153
Fourth Quarter (Dec. 1, 2017 - Feb. 28, 2018)
0.175
0.066
Holders
As of April 1, 2020, there were 58 holders of record of our common stock.
Dividends
We have not declared any cash dividends on our Common Stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Securities authorized for issuance under equity compensation plans
We have not adopted an equity compensation plan and no securities have been authorized or reserved for issuance under any equity compensation plan.
Description of Securities
The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws have been filed with the SEC as exhibits to our registration statement on Form S-1.
Common Stock
We are authorized to issue 495,000,000 shares of Common Stock with $0.001 par value per share. As of our fiscal year ended February 29, 2020, there were 48,491,485 shares of Common Stock issued and outstanding and 3,688,524 shares reserved for issuance upon the exercise of issued and outstanding options.
Each share of Common Stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the holders of our Common Stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our Common Stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or windup, the holders of our Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.
Our stock transfer agent is Pacific Stock Transfer, located at 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock, par value $0.001 per share. As of our fiscal year ended February 29, 2020, and as of the date of this report, no shares of preferred stock were issued and outstanding and no designation of rights and preferences of the preferred stock adopted. Our preferred stock is not quoted on any market or system and there is currently no market for our preferred stock.
Promissory Notes
In April 2019, the Company borrowed $12,500 from Jeffrey Mallmes, President, Treasurer, and director of the Company, and $12,500 from Raleigh Kone, Co-Chairman of the Company’s board of directors, Executive Vice President, and director of the Company. These loans are evidenced by promissory demand notes which bear interest at the rate of 6% per annum, computed on the basis of actual number of days based upon a 360-day year. Each lender also received warrants to purchase 225,000 shares of the Company’s common stock. The warrants have an exercise price of $0.25 and expire three years after issuance. The principal and interest due under these notes are outstanding as of the issuance of these financial statements.
Separately in April 2019, the Company borrowed $3,325 from Raleigh Kone and John Provacek, which loans are evidenced by demand promissory notes that bear interest at the rate of 6% per annum. In connection with the loan from Mr. Provacek, the Company also issued to Mr. Provacek a warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.25, which warrant expires three years after issuance. The Company also borrowed $3,390, from Jeffrey Mallmes, which loan is evidenced by a demand promissory note that bears interest at the rate of 6% per annum.
On October 22, 2019 and October 23, 2019, the Company borrowed approximately $90,0000 from six of its current stockholders in reliance on the Regulation D and Regulation S exemptions from the securities registration requirement of the Securities Act of 1933, as amended. These loans are evidenced by promissory notes that bear interest at the rate of 8% per annum and are convertible into shares of the Company’s common stock, at $0.05 per share.
Issuance of Units
In connection with and as part of the joint venture transactions with JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 Units a price of $0.20 per Unit. Each Unit consisting of one restricted share of our common stock and a warrant to purchase one restricted share at an exercise price of $0.25 per share. The sale of the Units to 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.
Emerging Growth Company
We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:
1.
the last day of our first fiscal year following the fifth anniversary of the Company’s S-1 Registration which was declared effective on December 26, 2018;
2.
the last day of our fiscal year during which we had annual gross revenues are $1 billion or more;
3.
the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt securities; or
4.
the date on which we are deemed to be a “large accelerated filer”, as defined in section 240.12b-2 of title 46, Code of Federal Regulations, or any successor thereto.
As an emerging growth company, we are exempt from Section 404(a) and (b) of Sarbanes Oxley. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company, we are also exempt from Section 14A(a) and (b) of the Exchange Act, which require the stockholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
ITEM 6.
Not applicable to a smaller reporting company.
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
INTRODUCTION
This section provides management’s discussion of the financial condition, changes in financial condition and results of operations of Quantum Energy Inc. with specific information on results of operations and liquidity and capital resources. It includes management’s interpretation of our financial results, the factors affecting these results, the major factors expected to affect future operating results and future investment and financing plans. This discussion should be read in conjunction with our consolidated financial statements and notes thereto.
Several factors exist that could influence our future financial performance, some of which are described in Item 1A above, “Risk Factors”. They should be considered in connection with evaluating forward-looking statements contained in this report or otherwise made by or on behalf of us since these factors could cause actual results and conditions to differ materially from those set out in such forward-looking statements.
Cautionary Statement for the Purposes of the Safe Harbor under the Private Securities Litigation Reform Act of 1995
The statements contained in this Annual Report on Form 10-K may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report are forward-looking statements made in good faith by us and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this Report, or any other of our documents or oral presentations, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “objective”, “plan”, “projection”, “seek”, “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements relating to our strategy, operations, markets, services, and other factors all of which are difficult to predict and many of which are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, we undertake no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.
Results of Operations
Year Ended February 29, 2020 Compared to Year Ended February 28, 2019.
Operating expenses for the year ended February 29, 2020 was $234,359 compared to $341,791 for the year ended February 28, 2019. The decrease in operating expenses was due to a decrease in professional fees of $89,860. There was also a decrease in management fees and consulting of $$18,250. Other expenses for the year ended February 29, 2020 was $817,189 compared to $-0- for the year ended February 28, 2019. During the year ended February 29, 2020 the Company had $30,000 in bad debts, $138,185 loss on derivative for a convertible note payable, incurred $45,743 in interest expense, $453,261 in interest expense - warrants and a joint venture write off of $150,000.
Net Loss
Net loss for the years ended February 29, 2020 and February 28, 2019 was $1,051,548 and $341,791, respectively. The increase in loss of $709,757 was due to the increase in other expenses as mentioned above.
Liquidity and Capital Resources:
As of February 29, 2020, our assets totaled $47 which consisted of cash of $47. The Company's total liabilities were $912,730 which consisted of accounts payable and accrued expenses, accounts payable and accrued expenses - related parties, convertible note payable, derivative liability, promissory notes payable and promissory notes payable - related parties. As of February 29, 2020, the Company had an accumulated deficit of $12,410,855 and working capital deficit of $912,683.
The Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As indicated herein, we need capital for the implementation of our business plan, and we will need additional capital for continuing our operations. We do not have sufficient revenues to pay our operating expenses at this time. Unless the Company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan. For the next 12 months the Company has an oral commitment from its CEO to advance funds as necessary to meeting our operating requirement.
Cash (Used in) Operating Activities
Net cash used in operating activities for the years ended February 29, 2020 and February 28, 2019 were $206,571 and $83,286, respectively. The increase amount was attributed to interest expense on convertible note warrants, joint venture write off and loss on derivative.
Cash from Investing Activities
Net cash used in investing activities was $150,000 and $-0- for the years ended February 29, 2020 and February 28, 2019, respectively. The $150,000 in investing activities for the year ended February 29, 2020 was cash paid to initiate a joint venture.
Cash from Financing Activities
Net cash provided by financing activities was $355,040 for the year ended February 29, 2020 and was $65,000 for year ended February 28, 2019.
CRITICAL ACCOUNTING POLICIES
The Company has identified certain accounting policies, described below, that are most important to the portrayal of its current financial condition and results of operations. The Company’s significant accounting policies are disclosed in the notes to the audited financial statements included in this Annual Report.
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold any derivative instruments and does not engage in any hedging activities.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements:
Audited financial statements as of February 28, 2020, including:
1.
Report of Independent Registered Public Accounting Firm;
2.
Consolidated Balance Sheets as of February 29, 2020 and 2019;
3.
Consolidated Statements of Operations for the years ended February 29, 2020 and 2019;
4.
Consolidated Statement of Changes in Stockholders’ Deficit for the years ended February 29, 2020 and 2019;
5.
Consolidated Statements of Cash Flows for the years ended February 29, 2020 and 2019;
6.
Consolidated Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Quantum Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Quantum Energy, Inc. (the "Company") as of February 29, 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
April 26, 2021
QUANTUM ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
February 29, 2020
February 28, 2019
ASSETS
CURRENT ASSETS:
Cash
$
$ 1,578
TOTAL CURRENT ASSETS
1,578
Deposits
--
7,822
TOTAL ASSETS
$
$ 9,400
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities
$ 147,888
$ 68,331
Accounts payable and accrued liabilities, related parties
176,837
183,185
Common stock payable
200,000
--
Convertible note payable
67,500
--
Derivative liability
138,185
--
Promissory notes payable
76,305
7,980
Promissory notes payable, related parties
106,0155
64,300
-
TOTAL CURRENT LIABILITIES
912,730
323,796
TOTAL LIABILITIES
912,730
323,796
STOCKHOLDERS' DEFICIT
Common Stock, $.001 par value; 495,000,000 shares authorized; 48,491,485 shares issued and outstanding, respectively
48,491
48,491
Additional paid-in capital
11,449,681
10,996,420
Accumulated deficit
(12,410,855
)
(11,359,307
)
TOTAL STOCKHOLDERS' DEFICIT
(912,683
)
(314,396
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
$ 9,400
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended
February 29, 2020
February 28, 2019
OPERATING EXPENSE
Advertising and marketing
$
$
Management fees and compensation
11,750
30,000
General and administrative
37,791
37,705
Professional fees
183,930
273,790
TOTAL OPERATING EXPENSES
234,930
341,791
Other Expenses
Bad Debts
30,000
-
Loss on derivative
138,185
-
Interest expense
45,743
-
Interest expense - warrants
453,261
-
Joint Venture - write off
150,000
-
Total Other Expenses
817,189
Total Expenses
1,051,548
341,791
Loss before income tax expense
(1,051,548
)
(341,791 )
Income tax expense
-
-
NET LOSS
(1,051,548
)
(341,791
)
Weighted Average Number of Common shares
Basic and diluted
$ 48,491.485
$ 48,383,148
Net Loss per common shares
Basic and diluted loss per share
$ 0.02
)
$ 0.01
)
Basic and diluted weighted average number shares outstanding
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the years ended February 29, 2020 and 2019
Common shares
Number
Par value
Additional
Paid-In Capital
Accumulated
(Deficit)
Total
Balance at March 1, 2018
47,361,683
$ 47,362
$ 10,828,079
$ (11,017,516
)
$ (142,075 )
Issuance of common shares for common stock payable
1,014,655
1,014
151,184
-
152,198
Common stock issued for professional services
115,147
17,157
-
17,272
Net loss
-
-
-
(341,791
)
(341,791
)
Balance at February 28, 2019
48,491,485
$ 48,491
$ 10,996,420
$ (11,359,307
)
$ (314,396
)
Value of Warrants for convertible note
-
-
453,261
-
453,261
Net loss
-
-
-
(1,051,548
)
(1,051,548
)
Balance at February 29, 2020
48,491,484
$ 48,491
$ 11,449,681
$ (12,410,855
)
$ (912,683
)
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended
February 29, 2020
February 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (1,051,548
)
$ (341,791
)
Non Cash Adjustments
Stock based compensation
-
-
Common stock issued for professional services
-
17,272
Bad debts
30,000
-
Deposits written off
7,822
-
Loss on derivative
138,185
-
Interest on default of convertible note
22,500
-
Interest expense on convertible note warrants
453,261
-
Joint venture - write off
150,000
-
Changes in assets and liabilities:
Prepaid expenses
-
37,500
Notes receivable
(30,000 )
-
Accounts payable and accrued liabilities
79,557
48,992
Accounts payable and accrued liabilities, related parties
(6,348 )
154,741
Net Cash Flows Used in Operating Activities
(206,571
)
(83,286
)
Cash Flows from Investing Activities
Investment in Joint Venture
(150,000 )
Net Cash Flows Used in Investing Activities
(150,000 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable
68,325
5,000
Proceeds from stock subscription
200,000
-
Cash proceeds received from convertible note payable
45,000
-
Proceeds from notes payable, related party
41,715
60,000
Net cash provided by financing activities
355,040
65,,000
Net Change in Cash
(1,531 )
18,286
Cash Beginning of Year
1,578
19,864
CASH End of Year
$
$ 1,578
Cash Paid During the Year for:
Interest
$ -
$ -
Income Taxes
-
-
Supplemental Disclosures of non cash investing and financing activities:
$ -
$ -
Common stock issued to pay common stock payable
-
-
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
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
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
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 29, 2020 and February 28, 2019, respectively.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued
Fair value measurements
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 29, 2020 and February 28, 2019, the Company had no assets or liabilities accounted for at fair value on a recurring basis.
Long-Lived Assets
The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.
Stock-based Compensation
The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.
Related Parties
In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
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.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 3 - GOING CONCERN - continued
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 29, 2020 and February 28, 2019, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at February 29, 2020 and February 28, 2019. 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 29, 2020 and February 28, 2019, respectively, would be as follows:
February 29, 2020
February 28, 2019
Warrants
5,054,802
2,129,802
TOTAL POSSIBLE DILUTION
5,054,802
2,129,802
At February 29, 2020 and February 28, 2019, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.
NOTE 5 - OTHER ASSETS
Peconic Note Receivable
On April 17, 2019, the Company loaned funds under a secured convertible promissory note (“Peconic Note”) to Peconic Energy, Inc. (“Peconic”) for the principal amount of $30,000 with the principal balance and all accrued interest being due and payable 18 months from the date of the note. Interest shall be accrued at rate of 12% per annum or 40% of the gross revenues generated by the maker, whichever is greater. The Peconic Note is secured by 100% of the Peconic’s assets and is convertible at any time during the term of the note into 40% of the Peconic’s assets. At the date of the report for the period ended May 31, 2019, it was determined that it was highly unlikely that the Company would collect this note receivable. Therefore, the Company allowed for this note in the amount of $30,000 at May 31, 2019. It is included it in bad debts in the statement of operations for the year ended February 29, 2020.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 5 - OTHER ASSETS - continued
Deposit on land purchase
On December 5, 2016, the Company executed a Farm Contract of Purchase and Sale with a landowner in Stoughton, Saskatchewan (“the Stoughton Agreement”). The purchase price of the property is $500,000 (Canadian) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farmland Review board, the Company completing various test for hydrology and land suitability, the proposed refinery project meeting all requirements of various Saskatchewan government laws and bylaws, and full approval by all levels of provincial government and agencies. The Company paid $7,822 as a deposit on the property.
The purchase contract originally expired on December 15, 2017; however, the contract was amended to extend the closing date to July 10, 2018 for removal of all terms and conditions to the purchase.
On June 8, 2018, the Company amended the Stoughton Agreement to a purchase price of $525,000 (Canadian) and extended the option to purchase the property until December 31, 2018 for no additional consideration. The Stoughton Agreement expired on December 31, 2018.
On June 3, 2019, by mutual agreement of the parties, the Stoughton Agreement was extended until October 31, 2019 for no additional consideration. At the date of the report for the period ended May 31, 2019, the Stoughton Agreement had been terminated. (Note 13). Due to the termination of the agreement, the Company reclassed this deposit of $7,822 to accounts payable related party as the deposit was refunded but the money was given to a related party to pay amounts due him.
NOTE 6 - PROMISSORY and CONVERTIBLE NOTES PAYABLE
The Company’s outstanding notes payable are summarized as follows:
February 29,
February 28,
0% unsecured note payable - December 2013, due on demand
$ 2,000
$ 2,000
0% unsecured note payable - November 2015, due on demand
8% unsecured note payable - October 2018, due on demand
5,000
5,000
6% unsecured note payable - April 2019, due on demand
3,325
--
8% unsecured notes payable - October 2019, due on demand
65,000
--
Total Notes Payable
$ 76,305
$ 7,980
Interest expense for the years ended February 29, 2020 and February 28, 2019 was $2,805 and $-0-, respectively.
Convertible note payable consists of one note payable in the amount of $67,500 and $-0-, at February 29, 2020 and February 28,2019, respectively. The note which was issued in April 2019 for $45,000 accrues interest at an annual rate of 12% and matures in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%. Interest expense for the year ended February 29, 2020 and February 28, 2019 was $34,144 and $-0-, respectively. Due to the conversation features of this note the Company calculated a derivative utilizing a Black Scholes method. This method used the following inputs to obtain the derivative value on February 29, 2020. Stock value of $0.0399, discounted exercise price of 39% of the lowest stock market price 20 days prior to the valuation date, volatility of 304.41%. Discount Bond equivalent yield of 1.60%. At February 29, 2020 derivative liability was $138,185 and loss on derivatives for the years ended February 29, 2020 and February 28, 2019 was $138,185 and $-0-, respectively.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 6 - PROMISSORY and CONVERTIBLE NOTES PAYABLE - continued
The conversion option expires on October 7, 2020. On June 18, 2019, the Company received a default notice from Power Up stating that the Company is in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company is currently seeking to reach a settlement of this matter with Power Up but as of the date of this report no settlement has been reached.
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 29, 2020
February 28, 2019
0% unsecured note payable - October 2015, due on demand
$ 2,300
$ 2,300
0% unsecured note payable - November 2015, due on demand
2,000
2,000
8% unsecured note payable - October 2018, due on demand
60,000
60,000
6% unsecured note payable - April 2019, due on demand
15,825
-
6% unsecured note payable - April 2019, due on demand
15,890
-
8% unsecured note payable - October 2019, due on demand
10,000
-
TOTAL
$ 106,015
$ 64,300
Interest expense for the years ended February 29, 2020 and February 28, 2019 was $8,794 and $-0-, 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 February 29, 2020 and February 28, 2019 were $17,868 and $30,000, respectively.
Certain officers and directors of the Company had paid various expenses on behalf of the Company. Balances due to the officers and directors for reimbursement of these expenses were $158,969 and $153,185 at February 29, 2020 and February 28, 2019, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the consolidated balance sheets.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 8 - COMMON STOCK - continued
Common stock
The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting.
Preferred stock
The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-par value per share with no designation of rights and preferences.
Common shares issued for cash
On February 28, 2018, the Company closed a private placement of its securities (the “2018 Offering). The 2018 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.15. Each unit consisted of one share of common stock and one warrant to purchase an additional share of common stock. Warrants issued pursuant to the 2018 Offering entitled the holders to purchase shares of common stock for the price of $0.15 per share. The term of each warrant is for twenty-four months from date of issuance. Total proceeds of $125,000 for the sale of 833,333 units were received prior to February 28, 2018 but the shares of common stock had not been issued until after that date. Thus, the proceeds are classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.
Common shares issued for services
During the fiscal year ended February 28, 2018, the Company authorized the issuance of 181,323 shares of its common stock to two service providers in lieu of cash payment for accounts payable pursuant to the terms of the 2018 Offering. Based on a share price of $0.15, the fair value of the shares issued was $27,198. The shares of common stock were not issued as of February 28, 2018 and thus were classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.
On April 4, 2018, the Company issued 115,147 shares of its common to a service provider in lieu of cash for professional services provided during March and April 2018. Based on a share price of $0.15, the fair value of the shares issued was $17,272.
Common stock retirement
On January 27, 2018, the former chairman of the Company’s board of directors and a current director of the Company’s board of directors each agreed to return 5,000,000 shares of the Company’s common stock for an aggregate total of 10,000,000 common shares for consideration of $Nil. The shares are held by the Company as authorized but unissued treasury shares as of February 29, 2020.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 9 - WARRANTS
On July 10, 2017, in conjunction with a Private Placement, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.21 per share expiring in one year. In March 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.21 per share to $1.00 per share and extended the expiration date to June 9, 2020.
On February 28, 2018, the Company issued 833,333 warrants to purchase an additional 833,333 shares of its common stock to two investors pursuant to the “2018 Offering”. The term of each warrant is for twenty-four months from date of issuance with an exercise price of $1.00.
On February 28, 2018, the Company issued 296,469 warrants to purchase an additional 296,469 shares of its common stock to two service providers in lieu of cash payment for accounts payable for their participation in the 2018 Offering.
On March 15, 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.13 per share to $1.00 per share.
On March 20, 2019 and April 17, 2019, the Company issued 1,250,000 and 675,000 warrants respectively to purchase 1,925,000 additional shares of its common stock to eight investors. Each warrant is for thirty-six months from date of issuance with an exercise price of $0.25. The value of the warrants calculated at March 20 and April 17, 2019 was $200,439 and $74,250 for a combined total of $274,689 and is in included in interest expense -warrants on the consolidated statements of operations for the year ended February 29, 2020. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, a volatility of 228% and a discount bond equivalent range of 2.34% - 2.37%.
On June 28, 2019, the Company issued 1,000,000 warrants with an exercise price of $0.25. On the same date the Company also extended the term of 1,000,000 warrants and adjusted the exercise price of these warrants to $0.25. The term of the new warrants are for eighteen months from date of issuance. The extended warrants term is 500,000 for two years and 500,000 for two and a half years. The value of the warrants calculated was $176,579 and is in included in interest expense -warrants on the consolidated statements of operations for the year ended February 29, 2020. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, volatility of 360.99%, 351.88% and 339.45% and a discount bond equivalent of 1.75 and 1.71%.
The following is a summary of the Company’s warrants issued and outstanding:
February 29, 2020
February 28, 2019
Warrants
Price (a)
Warrants
Price (a)
Beginning balance
2,129,802
$ 1.00
2,129,802
$ 0.61
Issued
2,925,000
.19
--
--
Exercised
--
--
--
--
Expired
(1,129,802 )
--
--
--
Ending balance
3,925,000
$ 0.25
2,129,802
$ 1.00
(a)
Weighted average exercise price per shares
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 9 - WARRANTS - continued
The following table summarizes additional information about the warrants granted by the Company as of February 29, 2020 and February 28, 2019:
Date of Grant
Warrants
			outstanding
Warrants
			exercisable
Price
Remaining
term
			(years)
November 19, 2016
500,000
500,000
$ .25
1.22
July 10, 2017
500,000
500,000
.25
1.83
March 20, 2019
1,250,000
1,250,000
.25
2.05
April 17, 2019
675,000
675,000
.25
2.13
June 28, 2019
1,000,000
1,000,000
.25
.83
Total warrants
3,925,000
3,925,000
$ .25
1.41
NOTE 10 - OTHER MATTERS- Joint Venture
Easy Energy Systems Inc. Memorandums of Understanding
On April 2, 2019, the Company and its subsidiary FTPM Resources, Inc. entered into a Non-Binding Memorandum of Understanding (“MOU-1”) with Easy Energy Systems, Inc. (“EESI Systems”). Pursuant to the MOU-1, if certain conditions are met, including the availability of financing: (i) EESI Systems and FTPM will enter into a joint venture, which would be owned 33% by FTPM and 67% by EESI Systems, for the purpose of developing and marketing of “clear glucose”; FTPM will have a 90-day option beginning April 30, 2019, to merge with EESI Systems, whereby EESI Systems will be the surviving entity; EESI Systems will have the right to acquire shares of preferred stock of the Registrant, with such rights and preferences as the parties shall agree; and EESI Systems will have the right to appoint members to the board of directors of the Registrant. EESI Systems designs, manufacturers, operates and sells its patented 1M, 2M, and 5M gallon per year, small-scale, modular biorefineries for the production of alternative liquid biofuels from organic waste streams.
On April 16, 2016 the Company entered into a separate Non-Binding Memorandum of Understanding (“MOU-2”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”). The prospective EESI Infrastructure acquisition, if consummated as provided in the MOU-2, would provide a guarantee for the construction of an addition to the existing plant of EESI Systems in Emmetsburg, Iowa. This addition will add a 9.3 Mega Watt dual gas power plant to EESI Systems’ Emmetsburg facility at an anticipated cost of approximately $10 million. Upon signing the MOU-2, the Company paid $25,000 to the EESI Infrastructure. Due to the uncertainty of this agreement, the $25,000 deposit has been expensed in General and Administrative expenses for the year ended February 29, 2020.
As of January 22, 2021, no action has been performed under either MOU.
Private Placement - Raul Factor
In furtherance of the June 28, 2019, Binding Letter of Intent with EESI and to monetize the distribution rights to EES’ modular Technologies, (a) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with Raul Factor BV (“RF”) pursuant to which the RF and JV-1 created a new joint venture to be named Easy Energy Systems - Europe (“EES-E”) and pursuant to which the EES-E joint venture purchased the distribution rights for the EESI “MEPS®” technology for the territory of the European Union, and (b) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with RF pursuant to which the parties created a new joint venture to be named Easy Energy Turf & Carpet (“EETC”) and pursuant to which the EETC joint venture purchased the global distribution rights to EESI’s MEPS® technology for turf & carpet feedstock. Each of EES-E and EETC is owned 25% by us, 25% by EES and 50% by Raul Factor The aggregate purchase price paid for the licensing and distribution for EES-E and EETC was $150,000 (US). At February 29, 2020, the purchase price for the joint venture was expensed as it was determined that the joint venture was not viable.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 10 - OTHER MATTERS - continued
Private Placement - Raul Factor - continued
In connection with and as part of the foregoing joint venture transactions with JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 additional restricted shares of our common stock and warrants to purchase 1,000,000 restricted shares (at an exercise price of $0.25 per share) of our common stock, and pursuant to the EES-E and EETC Joint Ventures the Company agreed to use the proceeds from the sale of such shares and warrants to purchase from EESI the above mentioned EES-E and EETC distribution rights for an aggregate price of $150,000, and the Company then assigned such distribution rights to EES-E and EETC respectively. Raul Factor also 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.
Pursuant to this June 28, 2019, Binding Letter of Intent, the parties agreed to, among other things, that within 90 days from the date of the Binding Letter of Intent, the Company would raise $10,000,000 in capital for use by EESI. As of the date of this report, the Company was not able to raise such capital. In connection therewith, on October 29, 2019, delivered to us the terms of a proposed termination of the June 28, 2019 Binding Letter of Intent. As of the date of this report this the terms of such termination have not been finalized.
Pursuant to these two 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.
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 9).
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.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
For the years ended February 28, 2020 and 2019 there were no disagreements with our auditors on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. For the years ended February 28, 2020 and 2019, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision of and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a - 15(e) and Rule 15d - 15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the Company’s internal control of financial reporting as discussed below.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (including its consolidated subsidiaries) and all related information appearing in our Annual Report on Form 10-K. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of the end of the period covered by this report, based on the criteria in a framework developed by the Company’s management pursuant to and in compliance with the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, walkthroughs of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management has concluded that our internal control over financial reporting was not effective, because management identified a material weakness in the Company’s internal control over financial reporting related to the segregation of duties as described below.
While the Company does adhere to internal controls and processes that were designed and implemented based on the COSO report, it is difficult with a very limited staff to maintain appropriate segregation of duties in the initiating and recording of transactions, thereby creating a segregation of duties weakness. Due to: (i) the significance of segregation of duties to the preparation of reliable financial statements; (ii) the significance of potential misstatement that could have resulted due to the deficient controls; and (iii) the absence of sufficient other mitigating controls, we determined that this control deficiency resulted in more than a remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements may not be prevented or detected.
Management’s Remediation Initiatives.
Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of our organization at the current time. Management expects to continue to use reasonable care in following and seeking improvements to effective internal control processes that have been and continue to be in use at the Company
Changes in internal controls over financial reporting
There were no changes in the Company’s internal control over financial reporting that occurred prior to the Company’s most recent financial quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
Other Information.
Not applicable.
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance.
EXECUTIVE OFFICERS OF THE REGISTRANT
The board of directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each director shall be elected for the term of one year, and until her successor is elected and qualified, or until her earlier resignation or removal. The following table sets forth certain information as of February 28, 2020 and as of January 1, 2021, regarding the executive officers of the Company. It is followed by a brief description of the business experience of each executive officer.
Name
Age
Position at February 28, 2020
Position at January 1, 2021
Jeffrey Mallmes*
Director, Chairman, President and Treasurer
Director, President and Treasurer
Andrew J. Kacic*
Director and Secretary
Director, Co-Chairman of the Board,
Raleigh C Kone**
--
Chief Executive Officer and Secretary
*Jeffrey Mallmes - Currently a Director, President and Treasurer
As of February 28, 2020, Mr. Mallmes was a director, the Chairman, President and Treasurer of the Company. On April 23, 2019, Mr. Mallmes, a current director and then a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board, and the Chairman, President and Treasurer of the Registrant ceased to be Chairman of the Registrant and as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant. He will continue to serve as director, President and Treasurer of the Registrant and he has also been appointed President of the Registrant’s subsidiary Dominion Energy Processing Group, Inc. He will serve in those positions until his successor is duly elected or appointed and qualified.
Mr. Mallmes has been a prolific entrepreneur having successfully owned, operated and financially backed several profitable and growth-oriented companies in Western Canada, in the welding, fabrication and auto parts businesses in British Columbia and Alberta. Mr. Mallmes business experience also involved working in and manufacturing for the oil industry. However, he has no experience in developing, constructing and operating an oil refinery.
Mr. Mallmes’ private sector business successes enabled him to enter the public sector in 2014 when he was elected as a Councilor of the Sicamous, BC District Council, the governing body of the District of Sicamous, BC. Mr. Mallmes’ platform focused on economic development through fiscally responsible capital projects and community driven initiatives including, researching and building district energy systems, establishing advanced technology to improve forest conservation (Community Forest), developing water shed modules, and working with local stakeholders building affordable homes for Canadian Veterans.
Since he became an officer of Quantum, he has successfully negotiated the cancellation of various unprofitable business relationships, the return of 39,699,800 shares of Common Stock to the Company, the return and cancellation of the Company’s outstanding shares of Series A Preferred Stock and the Series B Preferred Stock and he re-negotiated the terms of all outstanding stock options and stock purchase warrants to adjust the applicable per shares exercise prices from either $0.13, $0.21, $0.22, or $0.40, to $1.00 per share.
From March 1997 to the present, Mr. Mallmes has been the president and owner of The Big Barge Company, Sicamous, BC, Canada, which is a holding company through which Mr. Mallmes owns the following businesses: The Big Barge Dock Systems (from 2006 to the present), Sicamous BC, Canada, which designs and builds marinas; and Alberta 1234567 Inc. Land Holding Company (from 2010 to March 2017), that owns and leases a building and land in Calgary, Alberta, Canada, and Oopik Inc., Sicamous, BC, Canada, a holding company that owns shares of our Common Stock. Mr. Mallmes sold his interest in these businesses and is currently an investor in other public and private companies.
*Andrew J Kacic - Currently, Director Co-Chairman, Chief Executive Officer and Secretary
On February 28, 2020, Mr. Kacic was a director and Secretary of the Corporation of the Company. On April 23, 2019, Andrew J. Kacic, a current director and then Secretary of the Company was also appointed as Co-Chairman of the Board and Chief Executive Officer of the Company. He will continue to serve as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Company’s Board. He will serve in those positions until his successor is duly elected or appointed and qualified. Mr. Kacic is an experienced executive with more than 40 years of oil & gas development, exploration and operations and more than 40 years as an investment banker. From 1986 to the present, Mr. Kacic has been the founder and President of Advisory Services, Inc. (ASI), a Scottsdale, Arizona based corporate consulting firm. Through ASI, Mr. Kacic has served as an officer and/or director of various companies for which ASI was engaged as a consultant including the following: from 2014 to 2016, Mr. Kacic served as the CEO and a director of Quantum Energy Inc.; from 1999 to 2001 Mr. Kacic served as CFO of Beaudry Motor Company, Southern Arizona, an automotive and RV retailer with annual sales in excess of $350 million; from 1990 to 1998 Mr. Kacic served as the President of American Resources of Delaware, Inc. (formerly a NASDAQ company) and its subsidiary Southern Gas Company, Versailles Kentucky, an oil, gas and transmission company. From 1980 to 1986 Mr. Kacic served as CEO for the oil and gas companies Proper Power & Energy, Inc. and Barclay Road Inc to assist in their SEC filings and corporate restructuring. From 2011 to 2012 Mr. Kacic served as CEO of Securities Network, Inc., an Arizona based NASD licensed broker-dealer with 22 offices and more than 140 licensed registered representatives. Mr. Kacic is currently based in Bigfork, Montana as a consultant for investment related services, including oil and gas related services.
**Raleigh C. Kone - currently Director, Co-Chairman of the Board and Executive Vice President
On April 23, 2019, Raleigh C. Kone, age 64, a stockholder of the Registrant was appointed as a director, Co-Chairman of the Board, and Executive Vice-President of the Company. Mr. Kone will serve as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board. He will serve in those positions until his successor is duly elected or appointed and qualified. Mr. Kone is a highly experienced investment and life insurance professional. He has been continuously licensed in the Financial Services industry since 1984. From 2018 to the present, he has held positions in Symmetry Insurance Company and for a brief time with Wells Fargo Banking. Mr. Kone served from 2005 to the present as Managing Member of Global Green TK LLC, which is primarily interested in environmentally friendly land development, high tech Green energy sources and waste to energy projects. From 2015 to 2018 he was an independent contractor District Advisor for First Command Financial Services, Headquartered in Ft Worth, TX. He daily coordinated and was responsible for the well-being and fiduciary compliance of 10 advisors who coordinated over 3,000 investors with a combined asset base over $600 million. Additionally, Mr. Kone was directly responsible for developing and managing over $1 Billion in personal lines of insurance coverage. From 2008 to 2015 he served as the Vice President in charge of Development and Training for an area stretching from Atlanta, GA to Fair Banks AK. . Mr. Kone provided guidance and support to over 40 separate Office managers and their financial services teams. Mr. Kone has a Masters of Business Administration from The Golden Gate University, San Francisco, CA; a Master of Telecommunications in Business Administration from The Golden Gate University, San Francisco, CA; a Chartered Leadership Fellow in the American College of Financial Services.
Code of Ethics Policy
In November 2017, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Corporate Governance
In November 2017, we established an audit committee, a compensation committee and a nominating and corporate governance committee and we adopted charters for each of these committees. As of January 1, 2021, each of these committees has three directors, one of which was independent. Mr. Ballmann was appointed as the audit committee financial expert. As of the date of this report, Mr. Ballmann has resigned as a director and as a member of these committees. Also, as of the date of this report, none of these committees have formally met or become functional. In the near future, we intend to appoint a new independent director who will qualify as a financial expert on our audit committee.
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that Mr. Ballmann, who at the time was a member of the audit committee, qualified as an “audit committee financial expert” as defined in item 407(d)(5)(ii) of Regulation S-K and is “independent” as the term is used in item 7(d)(3)(iv) of schedule 14a under the Securities Exchange Act of 1934, as amended. Mr. Ballmann is no longer a director and therefore is no longer a member of the Audit Committee. We intend to appoint a new independent director who will be an audit committee financial expert on our audit committee.
ITEM 11.
Executive Compensation.
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities for the years ending February 28, 2019 and February 28, 2020.
Name and Position
Year
			Ended
			Feb 28
Salary
			($)
Bonus
			($)
			Stock
			Awards
			Option
			Awards
			Non-Equity
Incentive Plan
			Compensation
			Earnings ($)
			Non-Qualified
			Deferred
Compensation
			Earnings
			($)
All Other
Compensation
($)
Total
Stanley F.
-
-
-
-
-
-
-
$
Wilson former CEO
-
-
-
-
-
-
63,500 (1)
$ 63,500
Andrew Kacic, Director
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,000 (2)
$ 33,000
Jeffrey Mallmes, Chairman, President, Treasurer and
-
-
-
-
-
-
-
-
Director(3)
-
-
-
-
-
-
-
-
Harry Ewart, CEO and Director
$ 250,000
-
-
-
-
-
-
-
(1)
Paid as a consulting fee to Mr. Wilson.
(2)
Paid as a consulting fee to Mr. Kacic.
(3)
Mr. Mallmes was appointed our Chairman, President and Treasurer on November 8, 2017 and a director on October 30, 2017. On April 23, 2019, Mr. Mallmes, a current director and then a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board, and the Chairman, President and Treasurer of the Registrant ceased to be Chairman of the Registrant and as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant. He will continue to serve as director, President and Treasurer of the Registrant and he has also been appointed President of the Registrant’s subsidiary Dominion Energy Processing Group, Inc. Mr. Mallmes received no compensation for serving in those positions during the year ended February 28, 2020.
We may elect to award a cash bonus to key employees, directors, officers and consultants based on meeting individual and corporate planned objectives.
We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables set forth, as of the February 28, 2020, the ownership of our Common Stock by each person known by us to be the beneficial owner of more than 5% of our outstanding Common Stock, and by our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
Amount and
Nature of
Beneficial
Ownership
Percent of Class
Name and Address of Beneficial Owner
Title of Class
(1)
(2)
Jeffrey Mallmes (3)
1200 Trans Canada Highway
Sicamous, BC, Canada V0E2VO
Common Stock
7,584,395
15.64
%
Kandy, LP (4)
PO Box 1169
Big Fork, Montana 59911
Common Stock
7,449,622
15.47
%
Robert C. Henry 1742 Carriage
Dr.
Victoria, MN 55386
Common Stock
3,000,000
6.19
%
Stanley Wilson
6711 East Camelback Road, #17
Scottsdale, Arizona, 85251
Common Stock
3,000,000
6.19
%
Security Ownership of Management
Amount and
Nature of
Beneficial
Percent of Class
Name and Address of Beneficial Owner
Title of Class
Ownership (1)
(2)
Jeffrey Mallmes (3)
1200 Trans Canada Highway
Sicamous, BC, Canada V0E2VO
Common Stock
7,584,395
15.64
%
Andrew J. Kacic (4)
PO Box 1169
Big Fork, Montana 59911
Common Stock
7,449,622
15.47
%
Raleigh C. Kone (5)
(address)_____________
Common Stock
1,300,000
2.68
%
All Officers and Directors as a group
(5 person) (3) (4)
Common Stock
16,334,017
33.68
%
(1)
The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.
(2)
Based on 48,491,485 shares of Common Stock issued and outstanding as of February 28, 2020.
(3)
Jeffrey Mallmes, our President, Treasurer and director, beneficially owns directly and indirectly an aggregate of 7,584,395 shares of our Common Stock as follows: directly, 3,459,173 restricted shares and 352,097 unrestricted shares; indirectly 2,000,000 restricted shares in the name of The Big Barge Company Inc. (which is owned by Mr. Mallmes); and indirectly 1,773,125 restricted shares in the name of Oopik Holdings LTD (which is owned by Mr. Mallmes). Mr. Mallmes disclaims any beneficial ownership of shares owned by Janice Mallmes, his wife.
(4)
Andrew J. Kacic beneficially controls the shares held by Kandy, LP. Mr. Kacic is Co- Chairman, CEO, Secretary and a director of the Company. Mr. Kacic also owns indirectly through Kandy, L.P. a 3-year warrant to purchase 1,000,000 shares of our common stock at $0.25 per share.
(5)
Mr. Kone owns a 3 year warrant issued march 20, 2019 to purchase 150,000 shares of common stock and a 3 year warrant to purchase 225,000 shares of common stock.
March 2019 Promissory Note Payable
On March 15, 2019, the Company borrowed $5,000 from Raleigh Kone, a stockholder. This loan is evidenced by a demand promissory note which bears interest at the rate of 8% per annum, computed on the basis of actual number of days based upon a 360-day year. Mr. Kone became a director and co-Chairman of the Company’s board of directors and Executive Vice President on April 23, 2019. The principal and interest due under this note are outstanding as of the date of this filing.
April 2019 Promissory Notes Payable
In April 2019, the Company borrowed $12,500 from Jeffrey Mallmes, President, Treasurer, and director of the Company, and $12,500 from Raleigh Kone, Co-Chairman of the Company’s board of directors, Executive Vice President, and director of the Company. These loans are evidenced by promissory demand notes which bear interest at the rate of 6% per annum, computed on the basis of actual number of days based upon a 360-day year. Each lender also received warrants to purchase 225,000 shares of the Company’s common stock. The warrants have an exercise price of $0.25 and expire three years after issuance. The principal and interest due under these notes are outstanding as of the date of this filing.
Separately in April 2019, the Company borrowed $3,325 from Raleigh Kone and John Provacek. These loans are evidenced by demand promissory notes that bear interest at the rate of 6% per annum. In connection with the loan from Mr. Provacek, the Company also issued to Mr. Provacek a warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.25, which warrant expires three years after issuance. The Company also borrowed $3,390, from Jeffrey Mallmes, which loan is evidenced by a demand promissory note that bears interest at the rate of 6% per annum.
Warrants
In March and April 2019, the Company’s board of directors authorized the issuance of 1,925,000 warrants to purchase shares of the Company’s common stock to officers, directors and other individuals as incentives for said individuals continuing efforts to find opportunities for and provide services to the Company. The warrants have an exercise price of $0.25 and are exercisable for three years.
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence.
Letter of Intent with Inductance Energy Corporation
On April 15, 2018, we entered into a conditional binding letter of intent with Inductance Energy Corporation a Wyoming corporation (“IEC”), pursuant to which if all of the conditions were satisfied, (a) we would be merged with a newly formed subsidiary of IEC with us being the surviving company, (b) we would issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) ) IEC would provide to us as the surviving company up to $50,000,000(USD) (the “IECAZ Financing”), a portion of which (estimated at $7,500,000 (CAD)) as the necessary funds we intend to use to validate the viability and suitability of the development of the Stoughton Refinery on the intended sight in Stoughton Saskatchewan Canada, which would include (i) obtaining environmental and engineering studies to validate the viability and suitability of the intended site for the Stoughton Refinery, and (ii) if the site is determined to be viable, we would acquire the land, and (iii) we would obtain the required permits to build the Stoughton Refinery and (iv) we would pay other related costs.
Jeffrey Mallmes, our director, President, Treasurer and director is a stockholder of WYOTECH the entity that is an affiliate of IEC and owns the technology that is used by IEC and he is also a stockholder of IEC. William Hinz, our former director, is Chairman and CEO and a director of IEC and is also an owner of WYOTECH and IEC. Also, Richard Ethington, our former director, is the Chief Financial Officer of Inductance Energy Corporation. No assurances can be given that the conditions to the letter of intent with IEC will be satisfied or that the transactions or financing contemplated in the letter of intent will be consummated.
On April 23, 2019, the letter of intent with IEC was cancelled by mutual agreement.
Director Independence
Our one independent director, as the term “independent” is defined by the rules of the NASDAQ Stock Market, Mr. Ballmann resigned on October 6, 2019. We intend to appoint a new independent director who will be an audit committee financial expert on our audit committee.
Advances from related parties
Mr. Mallmes and certain stockholders of the Company have advanced to the Company in the aggregate approximately $200,000 which was used to pay legal, accounting and various operating expenses of the Company.
ITEM 14.
Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered for the audit of our annual financial statements for the fiscal years ended December 31, 2020 and 2019 were $ and $ , respectively, with a total for both years of $ .
Audit Related Fees
None.
Tax Fees
The aggregate tax fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered for tax services for the fiscal years ended December 31, 2020 and 2019 was $-0- and $-0-,respectively.
All Other Fees
There were no other fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered during the fiscal years ended December 31, 2020 and 2019, other than as stated under the captions Audit Fees, Audit-Related Fees, and Tax Fees.
Section 16A Beneficial Ownership Reporting Compliance
All Section 16A reporting is current with the filings of both Form 3s and Form 4s.
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules.
(a) 1. and 2. Financial statements and financial statement schedules.
The financial statements and financial statement schedule listed in the Index to Financial Statements in Item 8 are filed as part of this Form 10-K.
3. Exhibits
Exhibit
Number
Description
Page Number or Incorporation
by Reference to
3.1
Articles of Incorporation
Exhibit 3.1 to Form S-1 filed 6.26.18
3.2
Bylaws
Exhibit 3.2 to Form S-1 filed 6.26.18
3.3
Certificate of Amendment to the Articles of Incorporation
Exhibit 3.3 to Form S-1 filed 6.26.18
3.4
Certificate of Amendment to the Articles of Incorporation 5.24.06
Exhibit 3.4 to Form S-1A filed 11.28.18
3.5
Certificate of Amendment to the Articles of Incorporation 6.12.06
Exhibit 3.5 to Form S-1A filed 11.28.18
3.6
Certificate of Amendment to the Articles of Incorporation 9.16.13
Exhibit 3.6 to Form S-1A filed 11.28.18
3.7
Certificate of Amendment to the Articles of Incorporation 3.20.14
Exhibit 3.7 to Form S-1A filed 11.28.18
3.8
Certificate of designation 3.20.14
Exhibit 3.8 to Form S-1Afiled 11.28.18
3.9
Cert of Designation 4.03.14
Exhibit 3.9 to Form S-1A filed 11.28.18
3.10
Cert of Amendment 6.11.18
Exhibit 3.10 to Form S-1A filed 11.28.18
3.11
Cert of withdrawal of designation of certificate designation 11.26.18
Exhibit 3.11 to Form S-1A filed 11.28.18
3.12
Articles of Incorporation 12.05.18
Exhibit 3.12 to Form S-1A filed 12.6.18
10.1
Audit Committee Charter
Exhibit 10.1 to Form S-1 filed 6.26.18
10.2
Compensation Committee charter
Exhibit 10.2 to Form S-1 filed 6.26.18
10.3
Nominating and corporate governance committed charter
Exhibit 10.3 to Form S-1 filed 6.26.18
10.6
Cancellation of Series A Preferred Stock
Exhibit 10.6 to Form S-1 filed 6.26.18
10.7
Cancellation of Series B Preferred Stock
Exhibit 10.7 to Form S-1 filed 6.26.18
Code of Business Conduct and Ethics
Exhibit 14.1 to Form S-1 filed 6.26.18
List of Subsidiaries of Quantum Energy Inc.
Exhibit 21.1 to Form S-1A filed 11.9.18
31.1
Section 302 Certification of Chief Executive Officer
Filed Herewith
31.2
Section 302 Certification of Chief Financial Officer
Filed Herewith
32.1
Section 906 Certification of Chief Executive Officer
Filed Herewith
32.2
Section 906 Certification of Chief Financial Officer
Filed Herewith
99.1
Mutual Agreement to Cancel/Rescind Binding Letter of Intent with IEC dated 4.23.19
Exhibit 99.1 to Form 8-K filed 4.26.19
99.2
Asset Swap Agreement - 5.24.19 w/ Looper and Quay
Exhibit 99.3 to Form 8-K filed 5.31.19
99.3
Form of certificate of Designation, Preferences and Rights of Series W Convertible Preferred Stock (not filed in Nevada)
Exhibit 99.4 to Form 8-K filed 5.31.19
Interactive Data File
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Labels Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
**
These certifications pursuant to 18 U.S.C. Section 1350 by the Company’s Chief Executive Officer and Chief Financial Officer, furnished as Exhibit 32 to this Annual Report on Form 10-K, will not be deemed to be filed with the Securities and Exchange Commission or incorporated by reference into any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such certifications by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
QUANTUM ENERGY INC. (Registrant)
By:
/s/ HARRY EWERT
Date: April 26, 2021
Harry Ewert
CEO

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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ITEM 2. PROPERTIES
ITEM 2.
Properties.
Our corporate headquarters are comprised of 10,000 square feet of floor space located at 3825 Rockbottom, Henderson, NV 89030. The building is owned by a shareholder, we have no lease, and we pay no rent.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
Legal Proceedings.
None.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is currently available for trading on the OTC Pink (over-the-counter pink sheets) under the trading symbol “QEGY.” The following table sets forth the high and low bid prices (USD) for our Common Stock per quarter as reported by the OTC Markets based on our fiscal year end February 28, 2018, 2019, and 2020 and our fiscal quarterly periods in 2019. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
Fiscal Year 2020
HIGH
LOW
First Quarter (Mar. 1, 2019 - May 31, 2019)
$ .18
$ .15
Second Quarter (June 1, 2019 - August 31, 2019)
.14
.09
Third Quarter (Sept. 1, 2019 - Nov. 30, 2019)
.13
.05
Fourth Quarter (Dec. 1, 2019 - Feb. 28, 2020)
.27
.06
Fiscal Year 2019
First Quarter (Mar. 1, 2018 - May 31, 2018)
$ 0.25
$ 0.106
Second Quarter (June 1, 2018 - August 31, 2018)
0.75
0.20
Third Quarter (Sept. 1, 2018 - Nov. 30, 2018)
Fourth Quarter (Dec. 1, 2018 - Feb. 28, 2019)
Fiscal Year 2018
First Quarter (Mar. 1, 2017 - May 31, 2017)
0.309
0.15
Second Quarter (Jun. 1, 2017- Aug. 31, 2017)
0.229
0.10
Third Quarter (Sept. 1, 2017 - Nov. 30, 2017)
0.165
0.153
Fourth Quarter (Dec. 1, 2017 - Feb. 28, 2018)
0.175
0.066
Holders
As of April 1, 2020, there were 58 holders of record of our common stock.
Dividends
We have not declared any cash dividends on our Common Stock since our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.
Securities authorized for issuance under equity compensation plans
We have not adopted an equity compensation plan and no securities have been authorized or reserved for issuance under any equity compensation plan.
Description of Securities
The following description is a summary of the material terms of the provisions of our Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws have been filed with the SEC as exhibits to our registration statement on Form S-1.
Common Stock
We are authorized to issue 495,000,000 shares of Common Stock with $0.001 par value per share. As of our fiscal year ended February 29, 2020, there were 48,491,485 shares of Common Stock issued and outstanding and 3,688,524 shares reserved for issuance upon the exercise of issued and outstanding options.
Each share of Common Stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the holders of our Common Stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our Common Stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or windup, the holders of our Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are not any provisions in our Articles of Incorporation or our Bylaws that would prevent or delay change in our control.
Our stock transfer agent is Pacific Stock Transfer, located at 6725 Via Austi Pkwy, Suite 300, Las Vegas, Nevada 89119.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock, par value $0.001 per share. As of our fiscal year ended February 29, 2020, and as of the date of this report, no shares of preferred stock were issued and outstanding and no designation of rights and preferences of the preferred stock adopted. Our preferred stock is not quoted on any market or system and there is currently no market for our preferred stock.
Promissory Notes
In April 2019, the Company borrowed $12,500 from Jeffrey Mallmes, President, Treasurer, and director of the Company, and $12,500 from Raleigh Kone, Co-Chairman of the Company’s board of directors, Executive Vice President, and director of the Company. These loans are evidenced by promissory demand notes which bear interest at the rate of 6% per annum, computed on the basis of actual number of days based upon a 360-day year. Each lender also received warrants to purchase 225,000 shares of the Company’s common stock. The warrants have an exercise price of $0.25 and expire three years after issuance. The principal and interest due under these notes are outstanding as of the issuance of these financial statements.
Separately in April 2019, the Company borrowed $3,325 from Raleigh Kone and John Provacek, which loans are evidenced by demand promissory notes that bear interest at the rate of 6% per annum. In connection with the loan from Mr. Provacek, the Company also issued to Mr. Provacek a warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.25, which warrant expires three years after issuance. The Company also borrowed $3,390, from Jeffrey Mallmes, which loan is evidenced by a demand promissory note that bears interest at the rate of 6% per annum.
On October 22, 2019 and October 23, 2019, the Company borrowed approximately $90,0000 from six of its current stockholders in reliance on the Regulation D and Regulation S exemptions from the securities registration requirement of the Securities Act of 1933, as amended. These loans are evidenced by promissory notes that bear interest at the rate of 8% per annum and are convertible into shares of the Company’s common stock, at $0.05 per share.
Issuance of Units
In connection with and as part of the joint venture transactions with JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 Units a price of $0.20 per Unit. Each Unit consisting of one restricted share of our common stock and a warrant to purchase one restricted share at an exercise price of $0.25 per share. The sale of the Units to 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.
Emerging Growth Company
We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:
1.
the last day of our first fiscal year following the fifth anniversary of the Company’s S-1 Registration which was declared effective on December 26, 2018;
2.
the last day of our fiscal year during which we had annual gross revenues are $1 billion or more;
3.
the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt securities; or
4.
the date on which we are deemed to be a “large accelerated filer”, as defined in section 240.12b-2 of title 46, Code of Federal Regulations, or any successor thereto.
As an emerging growth company, we are exempt from Section 404(a) and (b) of Sarbanes Oxley. Section 404(a) requires issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures. Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment and the effectiveness of the internal control structure and procedures for financial reporting.
As an emerging growth company, we are also exempt from Section 14A(a) and (b) of the Exchange Act, which require the stockholder approval of executive compensation and golden parachutes. These exemptions are also available to us as a Smaller Reporting Company.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
Not applicable to a smaller reporting company.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
INTRODUCTION
This section provides management’s discussion of the financial condition, changes in financial condition and results of operations of Quantum Energy Inc. with specific information on results of operations and liquidity and capital resources. It includes management’s interpretation of our financial results, the factors affecting these results, the major factors expected to affect future operating results and future investment and financing plans. This discussion should be read in conjunction with our consolidated financial statements and notes thereto.
Several factors exist that could influence our future financial performance, some of which are described in Item 1A above, “Risk Factors”. They should be considered in connection with evaluating forward-looking statements contained in this report or otherwise made by or on behalf of us since these factors could cause actual results and conditions to differ materially from those set out in such forward-looking statements.
Cautionary Statement for the Purposes of the Safe Harbor under the Private Securities Litigation Reform Act of 1995
The statements contained in this Annual Report on Form 10-K may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report are forward-looking statements made in good faith by us and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this Report, or any other of our documents or oral presentations, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “objective”, “plan”, “projection”, “seek”, “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements relating to our strategy, operations, markets, services, and other factors all of which are difficult to predict and many of which are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, we undertake no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.
Results of Operations
Year Ended February 29, 2020 Compared to Year Ended February 28, 2019.
Operating expenses for the year ended February 29, 2020 was $234,359 compared to $341,791 for the year ended February 28, 2019. The decrease in operating expenses was due to a decrease in professional fees of $89,860. There was also a decrease in management fees and consulting of $$18,250. Other expenses for the year ended February 29, 2020 was $817,189 compared to $-0- for the year ended February 28, 2019. During the year ended February 29, 2020 the Company had $30,000 in bad debts, $138,185 loss on derivative for a convertible note payable, incurred $45,743 in interest expense, $453,261 in interest expense - warrants and a joint venture write off of $150,000.
Net Loss
Net loss for the years ended February 29, 2020 and February 28, 2019 was $1,051,548 and $341,791, respectively. The increase in loss of $709,757 was due to the increase in other expenses as mentioned above.
Liquidity and Capital Resources:
As of February 29, 2020, our assets totaled $47 which consisted of cash of $47. The Company's total liabilities were $912,730 which consisted of accounts payable and accrued expenses, accounts payable and accrued expenses - related parties, convertible note payable, derivative liability, promissory notes payable and promissory notes payable - related parties. As of February 29, 2020, the Company had an accumulated deficit of $12,410,855 and working capital deficit of $912,683.
The Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As indicated herein, we need capital for the implementation of our business plan, and we will need additional capital for continuing our operations. We do not have sufficient revenues to pay our operating expenses at this time. Unless the Company is able to raise working capital, it is likely that the Company will either have to cease operations or substantially change its methods of operations or change its business plan. For the next 12 months the Company has an oral commitment from its CEO to advance funds as necessary to meeting our operating requirement.
Cash (Used in) Operating Activities
Net cash used in operating activities for the years ended February 29, 2020 and February 28, 2019 were $206,571 and $83,286, respectively. The increase amount was attributed to interest expense on convertible note warrants, joint venture write off and loss on derivative.
Cash from Investing Activities
Net cash used in investing activities was $150,000 and $-0- for the years ended February 29, 2020 and February 28, 2019, respectively. The $150,000 in investing activities for the year ended February 29, 2020 was cash paid to initiate a joint venture.
Cash from Financing Activities
Net cash provided by financing activities was $355,040 for the year ended February 29, 2020 and was $65,000 for year ended February 28, 2019.
CRITICAL ACCOUNTING POLICIES
The Company has identified certain accounting policies, described below, that are most important to the portrayal of its current financial condition and results of operations. The Company’s significant accounting policies are disclosed in the notes to the audited financial statements included in this Annual Report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold any derivative instruments and does not engage in any hedging activities.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements:
Audited financial statements as of February 28, 2020, including:
1.
Report of Independent Registered Public Accounting Firm;
2.
Consolidated Balance Sheets as of February 29, 2020 and 2019;
3.
Consolidated Statements of Operations for the years ended February 29, 2020 and 2019;
4.
Consolidated Statement of Changes in Stockholders’ Deficit for the years ended February 29, 2020 and 2019;
5.
Consolidated Statements of Cash Flows for the years ended February 29, 2020 and 2019;
6.
Consolidated Notes to Financial Statements.
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Quantum Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Quantum Energy, Inc. (the "Company") as of February 29, 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
April 26, 2021
QUANTUM ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
February 29, 2020
February 28, 2019
ASSETS
CURRENT ASSETS:
Cash
$
$ 1,578
TOTAL CURRENT ASSETS
1,578
Deposits
--
7,822
TOTAL ASSETS
$
$ 9,400
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities
$ 147,888
$ 68,331
Accounts payable and accrued liabilities, related parties
176,837
183,185
Common stock payable
200,000
--
Convertible note payable
67,500
--
Derivative liability
138,185
--
Promissory notes payable
76,305
7,980
Promissory notes payable, related parties
106,0155
64,300
-
TOTAL CURRENT LIABILITIES
912,730
323,796
TOTAL LIABILITIES
912,730
323,796
STOCKHOLDERS' DEFICIT
Common Stock, $.001 par value; 495,000,000 shares authorized; 48,491,485 shares issued and outstanding, respectively
48,491
48,491
Additional paid-in capital
11,449,681
10,996,420
Accumulated deficit
(12,410,855
)
(11,359,307
)
TOTAL STOCKHOLDERS' DEFICIT
(912,683
)
(314,396
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
$ 9,400
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended
February 29, 2020
February 28, 2019
OPERATING EXPENSE
Advertising and marketing
$
$
Management fees and compensation
11,750
30,000
General and administrative
37,791
37,705
Professional fees
183,930
273,790
TOTAL OPERATING EXPENSES
234,930
341,791
Other Expenses
Bad Debts
30,000
-
Loss on derivative
138,185
-
Interest expense
45,743
-
Interest expense - warrants
453,261
-
Joint Venture - write off
150,000
-
Total Other Expenses
817,189
Total Expenses
1,051,548
341,791
Loss before income tax expense
(1,051,548
)
(341,791 )
Income tax expense
-
-
NET LOSS
(1,051,548
)
(341,791
)
Weighted Average Number of Common shares
Basic and diluted
$ 48,491.485
$ 48,383,148
Net Loss per common shares
Basic and diluted loss per share
$ 0.02
)
$ 0.01
)
Basic and diluted weighted average number shares outstanding
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the years ended February 29, 2020 and 2019
Common shares
Number
Par value
Additional
Paid-In Capital
Accumulated
(Deficit)
Total
Balance at March 1, 2018
47,361,683
$ 47,362
$ 10,828,079
$ (11,017,516
)
$ (142,075 )
Issuance of common shares for common stock payable
1,014,655
1,014
151,184
-
152,198
Common stock issued for professional services
115,147
17,157
-
17,272
Net loss
-
-
-
(341,791
)
(341,791
)
Balance at February 28, 2019
48,491,485
$ 48,491
$ 10,996,420
$ (11,359,307
)
$ (314,396
)
Value of Warrants for convertible note
-
-
453,261
-
453,261
Net loss
-
-
-
(1,051,548
)
(1,051,548
)
Balance at February 29, 2020
48,491,484
$ 48,491
$ 11,449,681
$ (12,410,855
)
$ (912,683
)
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended
February 29, 2020
February 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (1,051,548
)
$ (341,791
)
Non Cash Adjustments
Stock based compensation
-
-
Common stock issued for professional services
-
17,272
Bad debts
30,000
-
Deposits written off
7,822
-
Loss on derivative
138,185
-
Interest on default of convertible note
22,500
-
Interest expense on convertible note warrants
453,261
-
Joint venture - write off
150,000
-
Changes in assets and liabilities:
Prepaid expenses
-
37,500
Notes receivable
(30,000 )
-
Accounts payable and accrued liabilities
79,557
48,992
Accounts payable and accrued liabilities, related parties
(6,348 )
154,741
Net Cash Flows Used in Operating Activities
(206,571
)
(83,286
)
Cash Flows from Investing Activities
Investment in Joint Venture
(150,000 )
Net Cash Flows Used in Investing Activities
(150,000 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable
68,325
5,000
Proceeds from stock subscription
200,000
-
Cash proceeds received from convertible note payable
45,000
-
Proceeds from notes payable, related party
41,715
60,000
Net cash provided by financing activities
355,040
65,,000
Net Change in Cash
(1,531 )
18,286
Cash Beginning of Year
1,578
19,864
CASH End of Year
$
$ 1,578
Cash Paid During the Year for:
Interest
$ -
$ -
Income Taxes
-
-
Supplemental Disclosures of non cash investing and financing activities:
$ -
$ -
Common stock issued to pay common stock payable
-
-
The accompanying notes are an integral part of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
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
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
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 29, 2020 and February 28, 2019, respectively.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued
Fair value measurements
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 29, 2020 and February 28, 2019, the Company had no assets or liabilities accounted for at fair value on a recurring basis.
Long-Lived Assets
The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.
Stock-based Compensation
The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.
Related Parties
In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
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.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 3 - GOING CONCERN - continued
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 29, 2020 and February 28, 2019, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at February 29, 2020 and February 28, 2019. 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 29, 2020 and February 28, 2019, respectively, would be as follows:
February 29, 2020
February 28, 2019
Warrants
5,054,802
2,129,802
TOTAL POSSIBLE DILUTION
5,054,802
2,129,802
At February 29, 2020 and February 28, 2019, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.
NOTE 5 - OTHER ASSETS
Peconic Note Receivable
On April 17, 2019, the Company loaned funds under a secured convertible promissory note (“Peconic Note”) to Peconic Energy, Inc. (“Peconic”) for the principal amount of $30,000 with the principal balance and all accrued interest being due and payable 18 months from the date of the note. Interest shall be accrued at rate of 12% per annum or 40% of the gross revenues generated by the maker, whichever is greater. The Peconic Note is secured by 100% of the Peconic’s assets and is convertible at any time during the term of the note into 40% of the Peconic’s assets. At the date of the report for the period ended May 31, 2019, it was determined that it was highly unlikely that the Company would collect this note receivable. Therefore, the Company allowed for this note in the amount of $30,000 at May 31, 2019. It is included it in bad debts in the statement of operations for the year ended February 29, 2020.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 5 - OTHER ASSETS - continued
Deposit on land purchase
On December 5, 2016, the Company executed a Farm Contract of Purchase and Sale with a landowner in Stoughton, Saskatchewan (“the Stoughton Agreement”). The purchase price of the property is $500,000 (Canadian) subject to certain terms and conditions including approval of the purchase by the Saskatchewan Farmland Review board, the Company completing various test for hydrology and land suitability, the proposed refinery project meeting all requirements of various Saskatchewan government laws and bylaws, and full approval by all levels of provincial government and agencies. The Company paid $7,822 as a deposit on the property.
The purchase contract originally expired on December 15, 2017; however, the contract was amended to extend the closing date to July 10, 2018 for removal of all terms and conditions to the purchase.
On June 8, 2018, the Company amended the Stoughton Agreement to a purchase price of $525,000 (Canadian) and extended the option to purchase the property until December 31, 2018 for no additional consideration. The Stoughton Agreement expired on December 31, 2018.
On June 3, 2019, by mutual agreement of the parties, the Stoughton Agreement was extended until October 31, 2019 for no additional consideration. At the date of the report for the period ended May 31, 2019, the Stoughton Agreement had been terminated. (Note 13). Due to the termination of the agreement, the Company reclassed this deposit of $7,822 to accounts payable related party as the deposit was refunded but the money was given to a related party to pay amounts due him.
NOTE 6 - PROMISSORY and CONVERTIBLE NOTES PAYABLE
The Company’s outstanding notes payable are summarized as follows:
February 29,
February 28,
0% unsecured note payable - December 2013, due on demand
$ 2,000
$ 2,000
0% unsecured note payable - November 2015, due on demand
8% unsecured note payable - October 2018, due on demand
5,000
5,000
6% unsecured note payable - April 2019, due on demand
3,325
--
8% unsecured notes payable - October 2019, due on demand
65,000
--
Total Notes Payable
$ 76,305
$ 7,980
Interest expense for the years ended February 29, 2020 and February 28, 2019 was $2,805 and $-0-, respectively.
Convertible note payable consists of one note payable in the amount of $67,500 and $-0-, at February 29, 2020 and February 28,2019, respectively. The note which was issued in April 2019 for $45,000 accrues interest at an annual rate of 12% and matures in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%. Interest expense for the year ended February 29, 2020 and February 28, 2019 was $34,144 and $-0-, respectively. Due to the conversation features of this note the Company calculated a derivative utilizing a Black Scholes method. This method used the following inputs to obtain the derivative value on February 29, 2020. Stock value of $0.0399, discounted exercise price of 39% of the lowest stock market price 20 days prior to the valuation date, volatility of 304.41%. Discount Bond equivalent yield of 1.60%. At February 29, 2020 derivative liability was $138,185 and loss on derivatives for the years ended February 29, 2020 and February 28, 2019 was $138,185 and $-0-, respectively.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 6 - PROMISSORY and CONVERTIBLE NOTES PAYABLE - continued
The conversion option expires on October 7, 2020. On June 18, 2019, the Company received a default notice from Power Up stating that the Company is in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company is currently seeking to reach a settlement of this matter with Power Up but as of the date of this report no settlement has been reached.
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 29, 2020
February 28, 2019
0% unsecured note payable - October 2015, due on demand
$ 2,300
$ 2,300
0% unsecured note payable - November 2015, due on demand
2,000
2,000
8% unsecured note payable - October 2018, due on demand
60,000
60,000
6% unsecured note payable - April 2019, due on demand
15,825
-
6% unsecured note payable - April 2019, due on demand
15,890
-
8% unsecured note payable - October 2019, due on demand
10,000
-
TOTAL
$ 106,015
$ 64,300
Interest expense for the years ended February 29, 2020 and February 28, 2019 was $8,794 and $-0-, 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 February 29, 2020 and February 28, 2019 were $17,868 and $30,000, respectively.
Certain officers and directors of the Company had paid various expenses on behalf of the Company. Balances due to the officers and directors for reimbursement of these expenses were $158,969 and $153,185 at February 29, 2020 and February 28, 2019, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the consolidated balance sheets.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 8 - COMMON STOCK - continued
Common stock
The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting.
Preferred stock
The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-par value per share with no designation of rights and preferences.
Common shares issued for cash
On February 28, 2018, the Company closed a private placement of its securities (the “2018 Offering). The 2018 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.15. Each unit consisted of one share of common stock and one warrant to purchase an additional share of common stock. Warrants issued pursuant to the 2018 Offering entitled the holders to purchase shares of common stock for the price of $0.15 per share. The term of each warrant is for twenty-four months from date of issuance. Total proceeds of $125,000 for the sale of 833,333 units were received prior to February 28, 2018 but the shares of common stock had not been issued until after that date. Thus, the proceeds are classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.
Common shares issued for services
During the fiscal year ended February 28, 2018, the Company authorized the issuance of 181,323 shares of its common stock to two service providers in lieu of cash payment for accounts payable pursuant to the terms of the 2018 Offering. Based on a share price of $0.15, the fair value of the shares issued was $27,198. The shares of common stock were not issued as of February 28, 2018 and thus were classified as “Common Stock Payable” as of February 28, 2018. The Company issued these shares on April 4, 2018.
On April 4, 2018, the Company issued 115,147 shares of its common to a service provider in lieu of cash for professional services provided during March and April 2018. Based on a share price of $0.15, the fair value of the shares issued was $17,272.
Common stock retirement
On January 27, 2018, the former chairman of the Company’s board of directors and a current director of the Company’s board of directors each agreed to return 5,000,000 shares of the Company’s common stock for an aggregate total of 10,000,000 common shares for consideration of $Nil. The shares are held by the Company as authorized but unissued treasury shares as of February 29, 2020.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
February 28, 2020
NOTE 9 - WARRANTS
On July 10, 2017, in conjunction with a Private Placement, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $0.21 per share expiring in one year. In March 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.21 per share to $1.00 per share and extended the expiration date to June 9, 2020.
On February 28, 2018, the Company issued 833,333 warrants to purchase an additional 833,333 shares of its common stock to two investors pursuant to the “2018 Offering”. The term of each warrant is for twenty-four months from date of issuance with an exercise price of $1.00.
On February 28, 2018, the Company issued 296,469 warrants to purchase an additional 296,469 shares of its common stock to two service providers in lieu of cash payment for accounts payable for their participation in the 2018 Offering.
On March 15, 2018, by mutual agreement, the Company amended 500,000 common stock purchase warrants from an exercise price of $0.13 per share to $1.00 per share.
On March 20, 2019 and April 17, 2019, the Company issued 1,250,000 and 675,000 warrants respectively to purchase 1,925,000 additional shares of its common stock to eight investors. Each warrant is for thirty-six months from date of issuance with an exercise price of $0.25. The value of the warrants calculated at March 20 and April 17, 2019 was $200,439 and $74,250 for a combined total of $274,689 and is in included in interest expense -warrants on the consolidated statements of operations for the year ended February 29, 2020. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, a volatility of 228% and a discount bond equivalent range of 2.34% - 2.37%.
On June 28, 2019, the Company issued 1,000,000 warrants with an exercise price of $0.25. On the same date the Company also extended the term of 1,000,000 warrants and adjusted the exercise price of these warrants to $0.25. The term of the new warrants are for eighteen months from date of issuance. The extended warrants term is 500,000 for two years and 500,000 for two and a half years. The value of the warrants calculated was $176,579 and is in included in interest expense -warrants on the consolidated statements of operations for the year ended February 29, 2020. The value of the warrants was calculated utilizing a Black Scholes method which used the market value of the stock based on the issue date, an exercise price of $0.25, volatility of 360.99%, 351.88% and 339.45% and a discount bond equivalent of 1.75 and 1.71%.
The following is a summary of the Company’s warrants issued and outstanding:
February 29, 2020
February 28, 2019
Warrants
Price (a)
Warrants
Price (a)
Beginning balance
2,129,802
$ 1.00
2,129,802
$ 0.61
Issued
2,925,000
.19
--
--
Exercised
--
--
--
--
Expired
(1,129,802 )
--
--
--
Ending balance
3,925,000
$ 0.25
2,129,802
$ 1.00
(a)
Weighted average exercise price per shares
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 9 - WARRANTS - continued
The following table summarizes additional information about the warrants granted by the Company as of February 29, 2020 and February 28, 2019:
Date of Grant
Warrants
			outstanding
Warrants
			exercisable
Price
Remaining
term
			(years)
November 19, 2016
500,000
500,000
$ .25
1.22
July 10, 2017
500,000
500,000
.25
1.83
March 20, 2019
1,250,000
1,250,000
.25
2.05
April 17, 2019
675,000
675,000
.25
2.13
June 28, 2019
1,000,000
1,000,000
.25
.83
Total warrants
3,925,000
3,925,000
$ .25
1.41
NOTE 10 - OTHER MATTERS- Joint Venture
Easy Energy Systems Inc. Memorandums of Understanding
On April 2, 2019, the Company and its subsidiary FTPM Resources, Inc. entered into a Non-Binding Memorandum of Understanding (“MOU-1”) with Easy Energy Systems, Inc. (“EESI Systems”). Pursuant to the MOU-1, if certain conditions are met, including the availability of financing: (i) EESI Systems and FTPM will enter into a joint venture, which would be owned 33% by FTPM and 67% by EESI Systems, for the purpose of developing and marketing of “clear glucose”; FTPM will have a 90-day option beginning April 30, 2019, to merge with EESI Systems, whereby EESI Systems will be the surviving entity; EESI Systems will have the right to acquire shares of preferred stock of the Registrant, with such rights and preferences as the parties shall agree; and EESI Systems will have the right to appoint members to the board of directors of the Registrant. EESI Systems designs, manufacturers, operates and sells its patented 1M, 2M, and 5M gallon per year, small-scale, modular biorefineries for the production of alternative liquid biofuels from organic waste streams.
On April 16, 2016 the Company entered into a separate Non-Binding Memorandum of Understanding (“MOU-2”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”). The prospective EESI Infrastructure acquisition, if consummated as provided in the MOU-2, would provide a guarantee for the construction of an addition to the existing plant of EESI Systems in Emmetsburg, Iowa. This addition will add a 9.3 Mega Watt dual gas power plant to EESI Systems’ Emmetsburg facility at an anticipated cost of approximately $10 million. Upon signing the MOU-2, the Company paid $25,000 to the EESI Infrastructure. Due to the uncertainty of this agreement, the $25,000 deposit has been expensed in General and Administrative expenses for the year ended February 29, 2020.
As of January 22, 2021, no action has been performed under either MOU.
Private Placement - Raul Factor
In furtherance of the June 28, 2019, Binding Letter of Intent with EESI and to monetize the distribution rights to EES’ modular Technologies, (a) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with Raul Factor BV (“RF”) pursuant to which the RF and JV-1 created a new joint venture to be named Easy Energy Systems - Europe (“EES-E”) and pursuant to which the EES-E joint venture purchased the distribution rights for the EESI “MEPS®” technology for the territory of the European Union, and (b) on July 8, 2019, JV-1 entered into a License and Operating Agreement - Major Terms Summary with RF pursuant to which the parties created a new joint venture to be named Easy Energy Turf & Carpet (“EETC”) and pursuant to which the EETC joint venture purchased the global distribution rights to EESI’s MEPS® technology for turf & carpet feedstock. Each of EES-E and EETC is owned 25% by us, 25% by EES and 50% by Raul Factor The aggregate purchase price paid for the licensing and distribution for EES-E and EETC was $150,000 (US). At February 29, 2020, the purchase price for the joint venture was expensed as it was determined that the joint venture was not viable.
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2020
NOTE 10 - OTHER MATTERS - continued
Private Placement - Raul Factor - continued
In connection with and as part of the foregoing joint venture transactions with JV-1 and RF, on July 11, 2019, the principals of RF, who are existing holders of our common stock, purchased for an aggregate price of $200,000, 1,000,000 additional restricted shares of our common stock and warrants to purchase 1,000,000 restricted shares (at an exercise price of $0.25 per share) of our common stock, and pursuant to the EES-E and EETC Joint Ventures the Company agreed to use the proceeds from the sale of such shares and warrants to purchase from EESI the above mentioned EES-E and EETC distribution rights for an aggregate price of $150,000, and the Company then assigned such distribution rights to EES-E and EETC respectively. Raul Factor also 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.
Pursuant to this June 28, 2019, Binding Letter of Intent, the parties agreed to, among other things, that within 90 days from the date of the Binding Letter of Intent, the Company would raise $10,000,000 in capital for use by EESI. As of the date of this report, the Company was not able to raise such capital. In connection therewith, on October 29, 2019, delivered to us the terms of a proposed termination of the June 28, 2019 Binding Letter of Intent. As of the date of this report this the terms of such termination have not been finalized.
Pursuant to these two 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.
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 9).
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.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
For the years ended February 28, 2020 and 2019 there were no disagreements with our auditors on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. For the years ended February 28, 2020 and 2019, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
At the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision of and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a - 15(e) and Rule 15d - 15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Disclosure controls and procedures were not effective due primarily to a material weakness in the segregation of duties in the Company’s internal control of financial reporting as discussed below.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company (including its consolidated subsidiaries) and all related information appearing in our Annual Report on Form 10-K. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America
Management conducted an evaluation of the design and operation of our internal control over financial reporting as of the end of the period covered by this report, based on the criteria in a framework developed by the Company’s management pursuant to and in compliance with the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, walkthroughs of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management has concluded that our internal control over financial reporting was not effective, because management identified a material weakness in the Company’s internal control over financial reporting related to the segregation of duties as described below.
While the Company does adhere to internal controls and processes that were designed and implemented based on the COSO report, it is difficult with a very limited staff to maintain appropriate segregation of duties in the initiating and recording of transactions, thereby creating a segregation of duties weakness. Due to: (i) the significance of segregation of duties to the preparation of reliable financial statements; (ii) the significance of potential misstatement that could have resulted due to the deficient controls; and (iii) the absence of sufficient other mitigating controls, we determined that this control deficiency resulted in more than a remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements may not be prevented or detected.
Management’s Remediation Initiatives.
Management has evaluated, and continues to evaluate, avenues for mitigating our internal controls weaknesses, but mitigating controls to completely mitigate internal control weaknesses have been deemed to be impractical and prohibitively costly, due to the size of our organization at the current time. Management expects to continue to use reasonable care in following and seeking improvements to effective internal control processes that have been and continue to be in use at the Company
Changes in internal controls over financial reporting
There were no changes in the Company’s internal control over financial reporting that occurred prior to the Company’s most recent financial quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
Other Information.
Not applicable.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
Directors, Executive Officers and Corporate Governance.
EXECUTIVE OFFICERS OF THE REGISTRANT
The board of directors elects our executive officers annually. A majority vote of the directors who are in office is required to fill vacancies. Each director shall be elected for the term of one year, and until her successor is elected and qualified, or until her earlier resignation or removal. The following table sets forth certain information as of February 28, 2020 and as of January 1, 2021, regarding the executive officers of the Company. It is followed by a brief description of the business experience of each executive officer.
Name
Age
Position at February 28, 2020
Position at January 1, 2021
Jeffrey Mallmes*
Director, Chairman, President and Treasurer
Director, President and Treasurer
Andrew J. Kacic*
Director and Secretary
Director, Co-Chairman of the Board,
Raleigh C Kone**
--
Chief Executive Officer and Secretary
*Jeffrey Mallmes - Currently a Director, President and Treasurer
As of February 28, 2020, Mr. Mallmes was a director, the Chairman, President and Treasurer of the Company. On April 23, 2019, Mr. Mallmes, a current director and then a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board, and the Chairman, President and Treasurer of the Registrant ceased to be Chairman of the Registrant and as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant. He will continue to serve as director, President and Treasurer of the Registrant and he has also been appointed President of the Registrant’s subsidiary Dominion Energy Processing Group, Inc. He will serve in those positions until his successor is duly elected or appointed and qualified.
Mr. Mallmes has been a prolific entrepreneur having successfully owned, operated and financially backed several profitable and growth-oriented companies in Western Canada, in the welding, fabrication and auto parts businesses in British Columbia and Alberta. Mr. Mallmes business experience also involved working in and manufacturing for the oil industry. However, he has no experience in developing, constructing and operating an oil refinery.
Mr. Mallmes’ private sector business successes enabled him to enter the public sector in 2014 when he was elected as a Councilor of the Sicamous, BC District Council, the governing body of the District of Sicamous, BC. Mr. Mallmes’ platform focused on economic development through fiscally responsible capital projects and community driven initiatives including, researching and building district energy systems, establishing advanced technology to improve forest conservation (Community Forest), developing water shed modules, and working with local stakeholders building affordable homes for Canadian Veterans.
Since he became an officer of Quantum, he has successfully negotiated the cancellation of various unprofitable business relationships, the return of 39,699,800 shares of Common Stock to the Company, the return and cancellation of the Company’s outstanding shares of Series A Preferred Stock and the Series B Preferred Stock and he re-negotiated the terms of all outstanding stock options and stock purchase warrants to adjust the applicable per shares exercise prices from either $0.13, $0.21, $0.22, or $0.40, to $1.00 per share.
From March 1997 to the present, Mr. Mallmes has been the president and owner of The Big Barge Company, Sicamous, BC, Canada, which is a holding company through which Mr. Mallmes owns the following businesses: The Big Barge Dock Systems (from 2006 to the present), Sicamous BC, Canada, which designs and builds marinas; and Alberta 1234567 Inc. Land Holding Company (from 2010 to March 2017), that owns and leases a building and land in Calgary, Alberta, Canada, and Oopik Inc., Sicamous, BC, Canada, a holding company that owns shares of our Common Stock. Mr. Mallmes sold his interest in these businesses and is currently an investor in other public and private companies.
*Andrew J Kacic - Currently, Director Co-Chairman, Chief Executive Officer and Secretary
On February 28, 2020, Mr. Kacic was a director and Secretary of the Corporation of the Company. On April 23, 2019, Andrew J. Kacic, a current director and then Secretary of the Company was also appointed as Co-Chairman of the Board and Chief Executive Officer of the Company. He will continue to serve as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Company’s Board. He will serve in those positions until his successor is duly elected or appointed and qualified. Mr. Kacic is an experienced executive with more than 40 years of oil & gas development, exploration and operations and more than 40 years as an investment banker. From 1986 to the present, Mr. Kacic has been the founder and President of Advisory Services, Inc. (ASI), a Scottsdale, Arizona based corporate consulting firm. Through ASI, Mr. Kacic has served as an officer and/or director of various companies for which ASI was engaged as a consultant including the following: from 2014 to 2016, Mr. Kacic served as the CEO and a director of Quantum Energy Inc.; from 1999 to 2001 Mr. Kacic served as CFO of Beaudry Motor Company, Southern Arizona, an automotive and RV retailer with annual sales in excess of $350 million; from 1990 to 1998 Mr. Kacic served as the President of American Resources of Delaware, Inc. (formerly a NASDAQ company) and its subsidiary Southern Gas Company, Versailles Kentucky, an oil, gas and transmission company. From 1980 to 1986 Mr. Kacic served as CEO for the oil and gas companies Proper Power & Energy, Inc. and Barclay Road Inc to assist in their SEC filings and corporate restructuring. From 2011 to 2012 Mr. Kacic served as CEO of Securities Network, Inc., an Arizona based NASD licensed broker-dealer with 22 offices and more than 140 licensed registered representatives. Mr. Kacic is currently based in Bigfork, Montana as a consultant for investment related services, including oil and gas related services.
**Raleigh C. Kone - currently Director, Co-Chairman of the Board and Executive Vice President
On April 23, 2019, Raleigh C. Kone, age 64, a stockholder of the Registrant was appointed as a director, Co-Chairman of the Board, and Executive Vice-President of the Company. Mr. Kone will serve as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board. He will serve in those positions until his successor is duly elected or appointed and qualified. Mr. Kone is a highly experienced investment and life insurance professional. He has been continuously licensed in the Financial Services industry since 1984. From 2018 to the present, he has held positions in Symmetry Insurance Company and for a brief time with Wells Fargo Banking. Mr. Kone served from 2005 to the present as Managing Member of Global Green TK LLC, which is primarily interested in environmentally friendly land development, high tech Green energy sources and waste to energy projects. From 2015 to 2018 he was an independent contractor District Advisor for First Command Financial Services, Headquartered in Ft Worth, TX. He daily coordinated and was responsible for the well-being and fiduciary compliance of 10 advisors who coordinated over 3,000 investors with a combined asset base over $600 million. Additionally, Mr. Kone was directly responsible for developing and managing over $1 Billion in personal lines of insurance coverage. From 2008 to 2015 he served as the Vice President in charge of Development and Training for an area stretching from Atlanta, GA to Fair Banks AK. . Mr. Kone provided guidance and support to over 40 separate Office managers and their financial services teams. Mr. Kone has a Masters of Business Administration from The Golden Gate University, San Francisco, CA; a Master of Telecommunications in Business Administration from The Golden Gate University, San Francisco, CA; a Chartered Leadership Fellow in the American College of Financial Services.
Code of Ethics Policy
In November 2017, we adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Corporate Governance
In November 2017, we established an audit committee, a compensation committee and a nominating and corporate governance committee and we adopted charters for each of these committees. As of January 1, 2021, each of these committees has three directors, one of which was independent. Mr. Ballmann was appointed as the audit committee financial expert. As of the date of this report, Mr. Ballmann has resigned as a director and as a member of these committees. Also, as of the date of this report, none of these committees have formally met or become functional. In the near future, we intend to appoint a new independent director who will qualify as a financial expert on our audit committee.
Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that Mr. Ballmann, who at the time was a member of the audit committee, qualified as an “audit committee financial expert” as defined in item 407(d)(5)(ii) of Regulation S-K and is “independent” as the term is used in item 7(d)(3)(iv) of schedule 14a under the Securities Exchange Act of 1934, as amended. Mr. Ballmann is no longer a director and therefore is no longer a member of the Audit Committee. We intend to appoint a new independent director who will be an audit committee financial expert on our audit committee.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
Executive Compensation.
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities for the years ending February 28, 2019 and February 28, 2020.
Name and Position
Year
			Ended
			Feb 28
Salary
			($)
Bonus
			($)
			Stock
			Awards
			Option
			Awards
			Non-Equity
Incentive Plan
			Compensation
			Earnings ($)
			Non-Qualified
			Deferred
Compensation
			Earnings
			($)
All Other
Compensation
($)
Total
Stanley F.
-
-
-
-
-
-
-
$
Wilson former CEO
-
-
-
-
-
-
63,500 (1)
$ 63,500
Andrew Kacic, Director
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,000 (2)
$ 33,000
Jeffrey Mallmes, Chairman, President, Treasurer and
-
-
-
-
-
-
-
-
Director(3)
-
-
-
-
-
-
-
-
Harry Ewart, CEO and Director
$ 250,000
-
-
-
-
-
-
-
(1)
Paid as a consulting fee to Mr. Wilson.
(2)
Paid as a consulting fee to Mr. Kacic.
(3)
Mr. Mallmes was appointed our Chairman, President and Treasurer on November 8, 2017 and a director on October 30, 2017. On April 23, 2019, Mr. Mallmes, a current director and then a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant’s Board, and the Chairman, President and Treasurer of the Registrant ceased to be Chairman of the Registrant and as a member of the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee of the Registrant. He will continue to serve as director, President and Treasurer of the Registrant and he has also been appointed President of the Registrant’s subsidiary Dominion Energy Processing Group, Inc. Mr. Mallmes received no compensation for serving in those positions during the year ended February 28, 2020.
We may elect to award a cash bonus to key employees, directors, officers and consultants based on meeting individual and corporate planned objectives.
We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables set forth, as of the February 28, 2020, the ownership of our Common Stock by each person known by us to be the beneficial owner of more than 5% of our outstanding Common Stock, and by our directors, and our executive officers and directors as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.
Amount and
Nature of
Beneficial
Ownership
Percent of Class
Name and Address of Beneficial Owner
Title of Class
(1)
(2)
Jeffrey Mallmes (3)
1200 Trans Canada Highway
Sicamous, BC, Canada V0E2VO
Common Stock
7,584,395
15.64
%
Kandy, LP (4)
PO Box 1169
Big Fork, Montana 59911
Common Stock
7,449,622
15.47
%
Robert C. Henry 1742 Carriage
Dr.
Victoria, MN 55386
Common Stock
3,000,000
6.19
%
Stanley Wilson
6711 East Camelback Road, #17
Scottsdale, Arizona, 85251
Common Stock
3,000,000
6.19
%
Security Ownership of Management
Amount and
Nature of
Beneficial
Percent of Class
Name and Address of Beneficial Owner
Title of Class
Ownership (1)
(2)
Jeffrey Mallmes (3)
1200 Trans Canada Highway
Sicamous, BC, Canada V0E2VO
Common Stock
7,584,395
15.64
%
Andrew J. Kacic (4)
PO Box 1169
Big Fork, Montana 59911
Common Stock
7,449,622
15.47
%
Raleigh C. Kone (5)
(address)_____________
Common Stock
1,300,000
2.68
%
All Officers and Directors as a group
(5 person) (3) (4)
Common Stock
16,334,017
33.68
%
(1)
The number and percentage of shares beneficially owned is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.
(2)
Based on 48,491,485 shares of Common Stock issued and outstanding as of February 28, 2020.
(3)
Jeffrey Mallmes, our President, Treasurer and director, beneficially owns directly and indirectly an aggregate of 7,584,395 shares of our Common Stock as follows: directly, 3,459,173 restricted shares and 352,097 unrestricted shares; indirectly 2,000,000 restricted shares in the name of The Big Barge Company Inc. (which is owned by Mr. Mallmes); and indirectly 1,773,125 restricted shares in the name of Oopik Holdings LTD (which is owned by Mr. Mallmes). Mr. Mallmes disclaims any beneficial ownership of shares owned by Janice Mallmes, his wife.
(4)
Andrew J. Kacic beneficially controls the shares held by Kandy, LP. Mr. Kacic is Co- Chairman, CEO, Secretary and a director of the Company. Mr. Kacic also owns indirectly through Kandy, L.P. a 3-year warrant to purchase 1,000,000 shares of our common stock at $0.25 per share.
(5)
Mr. Kone owns a 3 year warrant issued march 20, 2019 to purchase 150,000 shares of common stock and a 3 year warrant to purchase 225,000 shares of common stock.
March 2019 Promissory Note Payable
On March 15, 2019, the Company borrowed $5,000 from Raleigh Kone, a stockholder. This loan is evidenced by a demand promissory note which bears interest at the rate of 8% per annum, computed on the basis of actual number of days based upon a 360-day year. Mr. Kone became a director and co-Chairman of the Company’s board of directors and Executive Vice President on April 23, 2019. The principal and interest due under this note are outstanding as of the date of this filing.
April 2019 Promissory Notes Payable
In April 2019, the Company borrowed $12,500 from Jeffrey Mallmes, President, Treasurer, and director of the Company, and $12,500 from Raleigh Kone, Co-Chairman of the Company’s board of directors, Executive Vice President, and director of the Company. These loans are evidenced by promissory demand notes which bear interest at the rate of 6% per annum, computed on the basis of actual number of days based upon a 360-day year. Each lender also received warrants to purchase 225,000 shares of the Company’s common stock. The warrants have an exercise price of $0.25 and expire three years after issuance. The principal and interest due under these notes are outstanding as of the date of this filing.
Separately in April 2019, the Company borrowed $3,325 from Raleigh Kone and John Provacek. These loans are evidenced by demand promissory notes that bear interest at the rate of 6% per annum. In connection with the loan from Mr. Provacek, the Company also issued to Mr. Provacek a warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $0.25, which warrant expires three years after issuance. The Company also borrowed $3,390, from Jeffrey Mallmes, which loan is evidenced by a demand promissory note that bears interest at the rate of 6% per annum.
Warrants
In March and April 2019, the Company’s board of directors authorized the issuance of 1,925,000 warrants to purchase shares of the Company’s common stock to officers, directors and other individuals as incentives for said individuals continuing efforts to find opportunities for and provide services to the Company. The warrants have an exercise price of $0.25 and are exercisable for three years.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence.
Letter of Intent with Inductance Energy Corporation
On April 15, 2018, we entered into a conditional binding letter of intent with Inductance Energy Corporation a Wyoming corporation (“IEC”), pursuant to which if all of the conditions were satisfied, (a) we would be merged with a newly formed subsidiary of IEC with us being the surviving company, (b) we would issue to IEC such number of new shares of our Common Stock as shall represent 60% of our then issued and outstanding shares of Common Stock, and (c) ) IEC would provide to us as the surviving company up to $50,000,000(USD) (the “IECAZ Financing”), a portion of which (estimated at $7,500,000 (CAD)) as the necessary funds we intend to use to validate the viability and suitability of the development of the Stoughton Refinery on the intended sight in Stoughton Saskatchewan Canada, which would include (i) obtaining environmental and engineering studies to validate the viability and suitability of the intended site for the Stoughton Refinery, and (ii) if the site is determined to be viable, we would acquire the land, and (iii) we would obtain the required permits to build the Stoughton Refinery and (iv) we would pay other related costs.
Jeffrey Mallmes, our director, President, Treasurer and director is a stockholder of WYOTECH the entity that is an affiliate of IEC and owns the technology that is used by IEC and he is also a stockholder of IEC. William Hinz, our former director, is Chairman and CEO and a director of IEC and is also an owner of WYOTECH and IEC. Also, Richard Ethington, our former director, is the Chief Financial Officer of Inductance Energy Corporation. No assurances can be given that the conditions to the letter of intent with IEC will be satisfied or that the transactions or financing contemplated in the letter of intent will be consummated.
On April 23, 2019, the letter of intent with IEC was cancelled by mutual agreement.
Director Independence
Our one independent director, as the term “independent” is defined by the rules of the NASDAQ Stock Market, Mr. Ballmann resigned on October 6, 2019. We intend to appoint a new independent director who will be an audit committee financial expert on our audit committee.
Advances from related parties
Mr. Mallmes and certain stockholders of the Company have advanced to the Company in the aggregate approximately $200,000 which was used to pay legal, accounting and various operating expenses of the Company.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
Principal Accountant Fees and Services.
Audit Fees
The aggregate fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered for the audit of our annual financial statements for the fiscal years ended December 31, 2020 and 2019 were $ and $ , respectively, with a total for both years of $ .
Audit Related Fees
None.
Tax Fees
The aggregate tax fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered for tax services for the fiscal years ended December 31, 2020 and 2019 was $-0- and $-0-,respectively.
All Other Fees
There were no other fees billed by BF Borgers, Independent Registered Public Accounting Firm, for professional services rendered during the fiscal years ended December 31, 2020 and 2019, other than as stated under the captions Audit Fees, Audit-Related Fees, and Tax Fees.
Section 16A Beneficial Ownership Reporting Compliance
All Section 16A reporting is current with the filings of both Form 3s and Form 4s.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
Exhibits and Financial Statement Schedules.
(a) 1. and 2. Financial statements and financial statement schedules.
The financial statements and financial statement schedule listed in the Index to Financial Statements in Item 8 are filed as part of this Form 10-K.
3. Exhibits
Exhibit
Number
Description
Page Number or Incorporation
by Reference to
3.1
Articles of Incorporation
Exhibit 3.1 to Form S-1 filed 6.26.18
3.2
Bylaws
Exhibit 3.2 to Form S-1 filed 6.26.18
3.3
Certificate of Amendment to the Articles of Incorporation
Exhibit 3.3 to Form S-1 filed 6.26.18
3.4
Certificate of Amendment to the Articles of Incorporation 5.24.06
Exhibit 3.4 to Form S-1A filed 11.28.18
3.5
Certificate of Amendment to the Articles of Incorporation 6.12.06
Exhibit 3.5 to Form S-1A filed 11.28.18
3.6
Certificate of Amendment to the Articles of Incorporation 9.16.13
Exhibit 3.6 to Form S-1A filed 11.28.18
3.7
Certificate of Amendment to the Articles of Incorporation 3.20.14
Exhibit 3.7 to Form S-1A filed 11.28.18
3.8
Certificate of designation 3.20.14
Exhibit 3.8 to Form S-1Afiled 11.28.18
3.9
Cert of Designation 4.03.14
Exhibit 3.9 to Form S-1A filed 11.28.18
3.10
Cert of Amendment 6.11.18
Exhibit 3.10 to Form S-1A filed 11.28.18
3.11
Cert of withdrawal of designation of certificate designation 11.26.18
Exhibit 3.11 to Form S-1A filed 11.28.18
3.12
Articles of Incorporation 12.05.18
Exhibit 3.12 to Form S-1A filed 12.6.18
10.1
Audit Committee Charter
Exhibit 10.1 to Form S-1 filed 6.26.18
10.2
Compensation Committee charter
Exhibit 10.2 to Form S-1 filed 6.26.18
10.3
Nominating and corporate governance committed charter
Exhibit 10.3 to Form S-1 filed 6.26.18
10.6
Cancellation of Series A Preferred Stock
Exhibit 10.6 to Form S-1 filed 6.26.18
10.7
Cancellation of Series B Preferred Stock
Exhibit 10.7 to Form S-1 filed 6.26.18
Code of Business Conduct and Ethics
Exhibit 14.1 to Form S-1 filed 6.26.18
List of Subsidiaries of Quantum Energy Inc.
Exhibit 21.1 to Form S-1A filed 11.9.18
31.1
Section 302 Certification of Chief Executive Officer
Filed Herewith
31.2
Section 302 Certification of Chief Financial Officer
Filed Herewith
32.1
Section 906 Certification of Chief Executive Officer
Filed Herewith
32.2
Section 906 Certification of Chief Financial Officer
Filed Herewith
99.1
Mutual Agreement to Cancel/Rescind Binding Letter of Intent with IEC dated 4.23.19
Exhibit 99.1 to Form 8-K filed 4.26.19
99.2
Asset Swap Agreement - 5.24.19 w/ Looper and Quay
Exhibit 99.3 to Form 8-K filed 5.31.19
99.3
Form of certificate of Designation, Preferences and Rights of Series W Convertible Preferred Stock (not filed in Nevada)
Exhibit 99.4 to Form 8-K filed 5.31.19
Interactive Data File
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Labels Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
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These certifications pursuant to 18 U.S.C. Section 1350 by the Company’s Chief Executive Officer and Chief Financial Officer, furnished as Exhibit 32 to this Annual Report on Form 10-K, will not be deemed to be filed with the Securities and Exchange Commission or incorporated by reference into any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such certifications by reference.