UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
QUANTUM ENERGY, INC.
(Exact name of registrant as specified in its
charter)
Nevada
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1311
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98-0428608
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(State
or other jurisdiction
of
incorporation or organization)
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(Primary
Standard Industrial
Classification
Code Number)
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(IRS
Employer Identification Number)
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SEC File
No. 333-118138
60
East Rio Salado Parkway, Suite 900
Tempe,
Arizona 85281
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(Address,
including zip code and telephone number, including area code, of principal executive offices)
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Nevada Agency and Trust Company
50 West Liberty Street, Suite 880
_______________Reno, NV 89501_______________
(Name, address and telephone
number of agent for service)
with copies to:
Brunson Chandler & Jones
175 South Main Street
Suite 1410
Salt Lake City, Utah 84111
(801) 303-5730
Approximate date of commencement of proposed
sale to the public: As soon as practicable and from time to time after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. [X]
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act Registration Statement
number of the earlier effective Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act Registration Statement
number of the earlier effective Registration Statement for the same offering. [ ]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
Large
accelerated filer
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[
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Accelerated
Filer
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[
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Non-accelerated
filer
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[
]
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Smaller
reporting company
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[X]
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CALCULATION OF REGISTRATION FEE
Title
of each class of securities to be registered
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Amount
to be registered
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Proposed
maximum offering price
per share
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Proposed
maximum aggregate offering
price
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Amount
of registration fee
(1)
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Newly
Issued Common Stock to be registered as part of a Primary Offering (as defined herein)
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41,333,125
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$0.20
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$8,266,625
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$958.10
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Common
Stock Issued and Outstanding to be registered as a part of a Secondary Offering by certain Selling Security Holders (as defined
herein)
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20,653,040
(2)
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$0.20
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$4,130,608
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$478.74
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TOTAL
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61,986,165
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$0.20
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$12,397,233
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$1,436.84
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(1) The fee is calculated by multiplying the
aggregate offering amount by .0001159, pursuant to Rule 457.
(2) Represents certain common shares currently
outstanding to be sold by the Selling Security Holders.
THE OFFERING PRICE OF THE COMMON STOCK HAS
BEEN ARBITRARILY DETERMINED AND BEARS NO RELATIONSHIP TO ANY OBJECTIVE CRITERION OF VALUE. THE PRICE DOES NOT BEAR ANY RELATIONSHIP
TO OUR ASSETS, BOOK VALUE, HISTORICAL EARNINGS OR NET WORTH.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL WE WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT
OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION
8(A), MAY DETERMINE.
The information in this preliminary prospectus
is not complete and may be changed. The securities registered hereunder, including those held by selling stockholders, may not
be sold until this registration statement filed with the United States Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted under applicable law.
SUBJECT TO COMPLETION, Dated February __,
2017
PROSPECTUS
The information in this prospectus is not
complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to but these
securities in any jurisdiction where the offer or sale is not permitted.
Quantum
Energy, Inc
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41, 333,125 Common Shares in Primary Offering
20,653,040 Common Shares in Secondary Offering
This prospectus relates to the sale of up to 41,333,125 shares of common stock
being sold at $0.20 per share pursuant to the Primary Offering and 20,653,040 shares of common stock being offered at $0.20
per share by the Selling Security Holders pursuant to the Secondary Offering, of Quantum Energy, Inc. (“we,”
“us,” or the “Company”).
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Per Share
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Sale
Total
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Public Offering
Price
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$0.20
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$8,266,625
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Underwriting Discounts
and Commissions
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$0.00
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$0
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Proceeds to Quantum
Energy, Inc.
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$0.20
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$8,266,625
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The Company is offering for sale a maximum of 41,333,125 shares of its common
stock, par value $0.001 per share, in a direct offering (the “Primary Offering”). These shares will be offered at
a fixed price of $0.20 per share. There is no minimum number of shares that must be sold by us for the Primary Offering
to proceed and therefore we may receive no proceeds or very minimal proceeds from the Primary Offering. In the event we
do not raise sufficient capital to implement our planned operations, your entire investment could be lost. We will retain the
proceeds from the sale any shares sold under the Primary Offering.
We will receive approximately $8,266,625 in
gross proceeds if we sell all of the shares in the Primary Offering, and we will receive estimated net proceeds (after paying
certain expense related to the offering process) of approximately $8,266,625, if we sell all of those shares.
Additionally, certain Selling Security Holders named in this prospectus are
offering for sale 20,653,040 common shares (the “Secondary Offering”). The Company will not receive any proceeds
from the sale of shares being sold by these Selling Security Holders under the Secondary Offering. The price at which the
Selling Security Holders may sell their shares will be determined by the prevailing market price, as then-quoted on
OTCMarkets, or at such other price agreeable to the Selling Security Holder and a prospective purchaser. No underwriting
arrangements have been entered into by any of the Selling Security Holders. The Selling Security Holders and any
intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the
Securities Act of 1933, as amended, with respect to the securities offered and any profits realized or commissions received
may be deemed underwriting compensation.
The offering will commence on the effective
date of this prospectus and will terminate upon the earliest of (i) such time as all of the common stock available hereunder has
been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus.
We will sell the common shares ourselves and
do not plan to use underwriters or pay any commissions. We will be selling our common shares using our best efforts and no one
has agreed to buy any of our common shares. There is no minimum amount of common shares we must sell so no money raised from the
sale of such common shares will go into escrow, trust or another similar arrangement. We will bear the all of the costs associated
with this offering.
We were incorporated in the State of Nevada
on February 5, 2004 as “Boomers Cultural Development.” On May 18, 2006 the company changed its name to Quantum Energy,
Inc. when we acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas. Today, our business
strategy is to develop, construct and operate crude oil processing facilities that include refineries in the Bakken field of North
Dakota, Montana and Saskatchewan, Canada.
Our auditors have indicated in their opinion
on our financial statements as of and for the period from inception to February 28, 2016 that there exists substantial doubt as
to our ability to continue as a going concern. Moreover, we are an early stage venture with limited operating history.
As such,
this offering is highly speculative and the common stock being offered for sale involves a high degree of risk and should be considered
only be persons who can afford the loss of their entire investment. Readers are encouraged to reference the section entitled “Risk
Factors” herein for additional information regarding the risks associated with our company and common stock
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of
this prospectus. Any representation to the contrary is a criminal offense.
Our common stock is quoted on OTC Pink under
the ticker symbol “QEGY.” There is a limited trading market for our common shares. Our most recent closing stock
price, as of February 17, 2017, was $0.15 per share.
The information in this prospectus is not
complete and may be changed. This prospectus is included in the registration statement that was filed by us with the Securities
and Exchange Commission. We may not sell these securities until the registration statement becomes effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
The date of this prospectus is February __,
2017
PROSPECTUS SUMMARY
As used in this prospectus, references to
the “Company,” “we,” “our,” “us,” or “Quantum” refer to Quantum Energy,
Inc. unless the context indicates otherwise.
You should carefully read all information
in the prospectus, including the financial statements and their explanatory notes, under the Financial Statements prior to making
an investment decision.
The Company
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Organization:
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The
registrant was incorporated in the State of Nevada on February 4, 2004. Our principal executive offices are located at 60
East Rio Salado Parkway, Suite 900 Tempe, Arizona 85281.
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Management:
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Our
Chief Executive Officer is Mr. Stanley Wilson.
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Plan of Operations:
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The
Company is principally engaged in the development of energy processing facilities to refine the light crude in the Bakken
field of North Dakota, Montana and Canada.
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Historical Operations:
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Starting
in May 2006, the Company decided to embark on a new business path in oil and gas exploration and acquisitions. The Company
acquired interests in numerous 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. All of the wells in which the Company had interests were suspended and all marginal wells have
been capped, resulting in the Company abandoning the Company's interest in the Barnett Shale area.
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Current Operations:
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We are
currently focused on the development, construction and operation of a 40,000 BPD full slate refinery in Stoughton, Saskatchewan,
Canada through our 100% owned Canadian subsidiary, Dominion Energy Processing Group, Inc.
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Going Concern:
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Our
independent auditor has expressed substantial doubt about our ability to continue as a going concern given our lack of operating
history and the fact to date have had no significant revenues. Potential investors should be aware that there are difficulties
associated with being a new venture, and the high rate of failure associated with this fact. We have an accumulated deficit
of at and have had no significant revenues to date. Our future is dependent upon our ability to obtain financing and upon
future profitable operations from our operations. These factors raise substantial doubt that we will be able to continue as
a going concern.
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The Company has no present plans to be acquired
or to merge with another company nor does the registrant, or any of its shareholders, have any plans to enter into a change of
control or similar transaction.
THE OFFERING
Type of Securities Offered: Common
Stock
Common Shares Being Sold
In this Offering: 41,333,125
Offering Price: The Company will
offer its common shares at $0.20 per share.
Common Shares Outstanding
Before the Offering: 59,911,683
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Termination of the Offering:
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The
Primary Offering will commence as of the effective date of this prospectus and will terminate upon the earliest of (i) such
time as all of the common stock available thereunder has been sold pursuant to the registration statement or (ii) 365 days
from the effective date of this prospectus. The Secondary Offering will commence as of the effective date of this prospectus
and will terminate upon the earliest of (i) such times as all of the common stock available thereunder has been sold pursuant
to the registration statement or (ii) 365 days from the effective date of this prospectus. Although we do not presently intend
to do so, we have the right to amend the terms of the offering. Our Board of Directors may cancel the offering at any time.
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Best efforts offering:
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We
are offering our common stock on a “best efforts” basis through our Chief Executive Officer and President, who
will not receive any discounts or commissions for selling the shares. There is no minimum number of shares that must be sold
in order to close this offering.
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Use of proceeds:
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We
will receive approximately $8,266,625 in gross proceeds if we sell all of the shares in the Primary Offering, however, there
is not guarantee that we will receive any proceeds from this offering. We will use the proceeds of the Primary Offering, if
any, to first cover administrative expenses in connection with this offering. We plan to use the remaining proceeds,
if any, to develop clean energy centers throughout the Bakken Field with each to include a diesel refinery, separate adjacent
processing plant, and the latest CO
2
capture technology to reduce emissions. We will receive none of the proceeds
from the sale of shares by the Selling Security Holders in the Secondary Offering. See the section titled “Use of Proceeds”
herein for a more detailed explanation of how proceeds from the Primary Offering will be used.
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Market for our Common Stock:
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Our
common stock is currently traded on OTC Pink under the ticker symbol “QEGY.” We anticipate applying for quoting
of our common shares on the OTC Markets or OTCQB upon the effectiveness of the registration statement of which this prospectus
forms a part. There can be no assurance that a market maker will agree to file the necessary documents with the Financial
Industry Regulatory Authority, which operates the OTC Markets and OTCQB, nor can there be any assurance that such application
for quotation will be approved.
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Common Stock Control:
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Stanley
Wilson, our Chairman, President, Secretary, Treasurer, and Director, and Kandy LP, controlled by Andrew J. Kacic, currently
control a majority of issued and outstanding common stock voting rights of the Company, and will continue to own sufficient
votes to control the operations of the Company after this offering, irrespective of its outcome.
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Penny Stock Regulation:
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The
liquidity of our common stock is restricted as the registrant’s common stock falls within the definition of a penny
stock. These requirements may restrict the ability of broker/dealers to sell the registrant's common stock, and may affect
the ability to resell the registrant's common stock
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RISK FACTORS
In addition to the other information provided
in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any
of our common stock. All material risks are discussed in this section.
Risks Related to our Company
Our having generated no revenues from
operations makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of
our future performance.
As of the year ended February 28, 2016, we
have generated no revenues and incurred an operating loss of $1,446,062. As a consequence, it is difficult, if not impossible,
to forecast our future results based upon our historical data. Because of the related uncertainties, we may be hindered
in our ability to anticipate and timely adapt to increases or decreases in revenues and expenses. If we make poor budgetary
decisions as a result of unreliable data, we may never become profitable or incur losses, which may result in a decline in our
stock price.
We may be unable to continue paying
the costs of being a reporting public company.
The costs of being
a public reporting company under the Securities Exchange Act of 1934 may be substantial and the Company may not be able
to absorb the costs of being a public company which may cause us to cease being public in the future or require additional fundraising
in order to remain in business. We estimate that in the future, costs for legal and accounting will be $25,000 per year.
Our lack of operating history makes
evaluating our business difficult.
We are a relatively new entrant to the
refinery development and operation field. As a result, we have a limited operating history and we may not sustain profitability
in the future. To sustain profitability, we must:
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develop
viable oil processing properties;
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attract,
integrate, and motivate highly qualified professionals and third party contractors to
expand operations;
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raise
sufficient capital to expand operations; and
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process
oil in such amounts so as to become profitable.
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We may not be successful
in accomplishing these objectives. Further, our lack of operating history makes it difficult to evaluate our business and prospects.
Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies
in their early stages of development, particularly companies in highly competitive industries such as mineral mining. The historical
information in this report may not be indicative of our future financial condition and future performance. For example, we expect
that our future annual growth rate in revenues will be moderate and likely be less than the growth rates experienced in the early
part of our history.
We depend heavily on key personnel,
and turnover of key senior management could harm our business.
Our future business and results of operations
depend in significant part upon the continued contributions of our Chief Executive Officer Stanley F. Wilson. If we lose his services
or if he fails to perform in his current position, or if we are not able to attract and retain skilled employees as needed, our
business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held
by our existing senior management team. We depend on the skills and abilities of these key employees in managing the product acquisition,
marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.
The risks associated
with exploration and, if applicable, mining could cause personal injury or death, environmental damages, delays in mining, monetary
losses and possible legal liability.
We are engaged in
the processing of crude oil through the construction and operation of refinery facilities. There are significant operational risks
associated with such operations. We do not presently carry property and liability insurance. Cost effective insurance contains
exclusions and limitations on coverage and may be unavailable in some circumstances.
Our auditor has indicated in its report
that there is substantial doubt about our ability to continue as a going concern as a result of our lack of revenues and if we
are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.
Our auditor has indicated in its report that
our lack of revenues raises substantial doubt about our ability to continue as a going concern. The financial statements
do not include adjustments that might result from the outcome of this uncertainty. If we are unable to generate significant revenue
or secure financing we may be required to cease or curtail our operations.
Because we have a limited history of operations we may not
be able to successfully implement our business plan.
We have less than three years of operational
history in our industry. Accordingly, our operations are subject to the risks inherent in the establishment of a new business
enterprise, including access to capital, successful implementation of our business plan and limited revenue from operations. We
cannot assure you that our intended activities or plan of operation will be successful or result in revenue or profit to us and
any failure to implement our business plan may have a material adverse effect on the business of the Company.
Our future results and reputation
may be affected by litigation or other liability claims.
We have not procured a general liability insurance
policy for our business. To the extent that we suffer a loss of a type which would normally be covered by general liability, we
would incur significant expenses in defending any action against us and in paying any claims that result from a settlement or
judgment against us. Adverse publicity could result in a loss of consumer confidence in our business or our securities.
Our Articles
of Incorporation and Bylaws limit the liability of, and provide indemnification for, our officers and directors.
Our Articles of Incorporation
generally limit our officers’ and directors’ personal liability to the Company and its stockholders for breach of
fiduciary duty as an officer or director except for breach of the duty of loyalty or acts or omissions not made in good faith
or which involve intentional misconduct or a knowing violation of law. Our Articles of Incorporation and Bylaws, provide indemnification
for our officers and directors to the fullest extent authorized by the Nevada Revised Statutes against all expense, liability,
and loss, including attorney's fees, judgments, fines excise taxes or penalties and amounts to be paid in settlement reasonably
incurred or suffered by an officer or director in connection with any action, suit or proceeding, whether civil or criminal, administrative
or investigative to which the officer or director is made a party or is threatened to be made a party, or in which the officer
or director is involved by reason of the fact that he is or was an officer or director of the Company, or is or was serving at
the request of the Company whether the basis of the proceeding is an alleged action in an official capacity as an officer or director,
or in any other capacity while serving as an officer or director. Thus, the Company may be prevented from recovering damages for
certain alleged errors or omissions by the officers and directors for liabilities incurred in connection with their good faith
acts for the Company. Such an indemnification payment might deplete the Company's assets. Stockholders who have questions
regarding the fiduciary obligations of the officers and directors of the Company should consult with independent legal counsel.
It is the position of the Securities and Exchange Commission that exculpation from and indemnification for liabilities arising
under the Securities Act of 1933, as amended, and the rules and regulations thereunder is against public policy and therefore
unenforceable.
If our estimates related to expenditures
and cash flow from operations are erroneous, and we are unable to sell additional equity securities, our business could fall short
of expectations and you may lose your entire investment.
Our financial success is dependent in part
upon the accuracy of our management's estimates of expenditures and cash flow from operations. If such estimates are erroneous
or inaccurate, we may not be able to carry out our business plan, which could, in a worst-case scenario, result in the failure
of our business and you losing your entire investment.
Implications of Being an Emerging Growth
Company.
As a company with less than $1.0 billion in
revenue during its last fiscal year, we are considered an "emerging growth company" as defined in the JOBS Act. For
as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other
regulatory requirements that are generally unavailable to other public companies. These provisions include:
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A
requirement to have only two years of audited financial statements and only two years
of related management's discussion and analysis included in an initial public offering
registration statement;
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an
exemption to provide less than five years of selected financial data in an initial public
offering registration statement;
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an
exemption from the auditor attestation requirement in the assessment of the emerging
growth company's internal controls over financial reporting;
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an
exemption from the adoption of new or revised financial accounting standards until they
would apply to private companies;
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an
exemption from compliance with any new requirements adopted by the Public Company Accounting
Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's
report in which the auditor would be required to provide additional information about
the audit and the financial statements of the issuer; and
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reduced
disclosure about the emerging growth company's executive compensation arrangements
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An emerging growth company is also exempt
from Section 404(b) of Sarbanes Oxley which requires that the registered accounting firm shall, in the same report, attest to
and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting. Similarly,
as a Smaller Reporting Company we are exempt from Section 404(b) of the Sarbanes-Oxley Act and our independent registered public
accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting
until such time as we cease being a Smaller Reporting Company.
As an emerging growth company, we are exempt
from Section 14A (a) and (b) of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation
and golden parachutes.
Section 107 of the JOBS Act provides that
an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take
advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to
those of companies that comply with such new or revised accounting standards.
We would cease to be an emerging growth company upon the earliest
of:
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the
first fiscal year following the fifth anniversary of this offering,
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the
first fiscal year after our annual gross revenues are $1 billion or more,
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the
date on which we have, during the previous three-year period, issued more than $1 billion
in non-convertible debt securities, or
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as
of the end of any fiscal year in which the market value of our common stock held by non-affiliates
exceeded $700 million as of the end of the second quarter of that fiscal year.
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You may have limited access to information
regarding our business because our obligations to file periodic reports with the SEC could be automatically suspended under certain
circumstances.
As of effectiveness of our registration statement
of which this prospectus is a part, we will be required to file periodic reports with the SEC which will be immediately available
to the public for inspection and copying (see “Where You Can Find More Information” elsewhere in this prospectus).
Except during the year that our registration statement becomes effective, these reporting obligations may (in our discretion)
be automatically suspended under Section 15(d) of the Exchange Act if we have less than 300 shareholders and do not file a registration
statement on Form 8A (which we have no current plans to file). If this occurs after the year in which our registration statement
becomes effective, we will no longer be obligated to file periodic reports with the SEC and your access to our business information
would then be even more restricted. After this registration statement on Form S-1 becomes effective, we will be required
to deliver periodic reports to security holders. However, we will not be required to furnish proxy statements to security
holders and our directors, officers and principal beneficial owners will not be required to report their beneficial ownership
of securities to the SEC pursuant to Section 16 of the Exchange Act. Previously, a company with more than 500 shareholders
of record and $10 million in assets had to register under the Exchange Act. However, the JOBS Act raises the minimum shareholder
threshold from 500 to either 2,000 persons or 500 persons who are not "accredited investors" (or 2,000 persons in the
case of banks and bank holding companies). The JOBS Act excludes securities received by employees pursuant to employee stock
incentive plans for purposes of calculating the shareholder threshold. This means that access to information regarding our
business and operations will be limited.
Risks Related to our Business
Crude oil prices and refined fuel prices
are volatile and a decline in refined fuel prices and an increase in oil prices could materially and adversely affect our financial
results and impede our growth.
Our revenue, profitability and cash flow depend
upon the prices and demand for refined fuels and the cost of crude oil. The markets for these commodities are very volatile and
even relatively modest drops in prices can significantly affect our financial results and impede our growth. Prices for refined
fuels and crude oil may fluctuate widely in response to a variety of additional factors that are beyond our control, such as:
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changes
in global supply and demand for natural gas and oil;
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commodity
processing, gathering, and transportation availability;
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domestic
and global political and economic conditions;
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the
ability of members of the Organization of Petroleum Exporting Countries to agree to and
maintain oil price and production controls;
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weather
conditions, including hurricanes;
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technological
advances affecting energy consumption;
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domestic
and foreign governmental regulations; and
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the
price and availability of alternative fuels.
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Lower refined fuel prices and an increase
in crude oil prices may not only decrease our revenue on a per share basis, but also may reduce the amount of refined fuel that
we can produce economically.
We may be unable to continue paying
the costs of being public.
The costs of being
a public company may be substantial and the Company may not be able to absorb the costs of being a public company which
may cause us to cease being public in the future or require additional fundraising in order to remain in business. We estimate
that in the future, costs for legal and accounting at $20,000 per year.
Competition in the crude oil refining
industry is intense, which may adversely affect our ability to succeed.
The crude oil refining industry is intensely
competitive, and we compete with companies that have greater resources than we do. Many of these companies have refining, processing
and gathering operations and market petroleum and other products on a regional, national or worldwide basis. Our larger competitors
may be able to absorb the burden of present and future federal, state, local and other laws and regulations more easily than we
can. Our ability to develop or acquire additional properties will be dependent upon our ability to evaluate and select suitable
properties and to consummate transactions in a highly competitive environment. Some of our competitors have been operating in
the Bakken region much longer than we have and have demonstrated the ability to operate through industry cycles. Any of these
competitive disadvantages could adversely affect our business, financial condition and results of operations.
We may have difficulty managing growth
in our business, which could adversely affect our financial condition and results of operations.
Significant growth in the size and scope of
our operations could place a strain on our financial, technical, operational and management resources. The failure to continue
to upgrade our technical, administrative, operating and financial control systems or the occurrences of unexpected expansion difficulties,
including the failure to recruit and retain experienced managers, geologists, engineers and other professionals in the natural
gas and oil industry could have a material adverse effect on our business, financial condition and results of operations and our
ability to timely execute our business plans.
We are subject to complex federal, state, local and other
laws and regulations that could materially and adversely affect our business, financial condition and results of operations.
Our crude oil refining operations are subject
to complex and stringent laws and regulations. In order to conduct our operations in compliance with these laws and regulations,
we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities.
We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs
of compliance may increase if existing laws and regulations are revised or reinterpreted or if new laws and regulations become
applicable to our operations. These costs could have a material and adverse effect on our business, financial condition and results
of operations. Moreover, our failure to comply with these laws and regulations, as interpreted and enforced, could have a material
adverse effect on our business, financial condition and results of operations.
Refinery activities
are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.
In general, our refinery activities are subject
to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and
regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation.
Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically,
we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous
wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the
satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the
ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater
or lesser extent than other companies in the industry.
Any change to government regulation/administrative
practices may have a negative impact on our ability to operate and our profitability.
The laws, regulations, policies or current
administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction,
may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.
The actions, policies or regulations, or changes
thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any
or all of these situations may have a negative impact on our ability to operate and/or our profitably.
The marketability of refined fuel products
will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital
to be profitable or viable.
The marketability of refined fuel products
will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and
demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure,
land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact
effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an
adequate return on invested capital to be profitable or viable.
We do not yet have substantial assets
or revenues and are largely dependent upon the proceeds of this offering to fully fund our business. If we do not the sell shares
in this offering we may have to seek alternative financing to complete our business or abandon them.
We have limited capital resources. To date,
the Company has funded its operations from limited funding and has not generated sufficient cash from operations to be profitable.
Unless the company begins to generate sufficient revenues to finance operations as a going concern, we may experience liquidity
and solvency problems. Such liquidity and solvency problems may for us to cease operations if additional financing is not available.
No known alternative sources of funds are available to the Company in the event it does not have adequate proceeds from this offering.
However, the Company believes that the net proceeds of this offering will be sufficient to satisfy operating requirements for
the next twelve months
The Company may not be able to attain
profitability without additional funding, which may be unavailable.
The Company has limited capital resources.
Unless the Company begins to generate sufficient revenues to finance operations as a going concern, the Company may experience
liquidity and solvency problems. Such liquidity and solvency problems may force the Company to cease operations if additional
financing is not available. No known alternative resources of funds are available in the event we do not generate sufficient funds
from operations.
Our generating minimal revenues from
operations makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of
our future performance.
As of February 28, 2016, we have generated
minimal revenues and incurred a loss of $1,446,062. As a consequence, it is difficult, if not impossible, to forecast our future
results based upon our historical data. Because of the related uncertainties, we may be hindered in our ability to anticipate
and timely adapt to increases or decreases in sales, revenues or expenses. If we make poor budgetary decisions as a result
of unreliable data, we may never become profitable or incur losses, which may result in a decline in our stock price.
Risks Related to our Common Stock
We are subject to penny stock regulations and restrictions and you
may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally
define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. We anticipate that our common stock will become
a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule.”
This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established
customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the
ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the
secondary market.
For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the
SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer
and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent
disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
We do not anticipate that our common stock
will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock
Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person
from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
Sales of our common stock under Rule
144 could reduce the price of our stock.
There are 41,333,125 newly issued shares are
being registered in this offering, however all of the remaining shares will still be subject to the resale restrictions of Rule
144. In general, persons holding restricted securities, including affiliates, must hold their shares for a period of
at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must
resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial
amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.
Because we do not have an audit or compensation
committee, shareholders will have to rely on the entire board of directors, none of which are independent, to perform these functions.
We do not have an audit or compensation committee
comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions
are performed by the board of directors as a whole. No members of the board of directors are independent directors. Thus,
there is a potential conflict in that board members who are also part of management will participate in discussions concerning
management compensation and audit issues that may affect management decisions.
We may, in the future, issue additional
shares of common stock, which would reduce investors’ percent of ownership and may dilute our share value.
Our Articles of Incorporation, as amended,
authorize the issuance of 295,000,000 shares of common stock. As of February 23, 2017, the Company has issued
and outstanding 59,911,683 shares of common stock. Accordingly, we are authorized to issue additional shares of common stock and
may elect to do so in due course. The future issuance of common stock may result in substantial dilution in the percentage of
our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis.
The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the
value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
We are subject to compliance with securities law, which exposes
us to potential liabilities, including potential rescission rights.
We may offer to sell our common stock to investors
pursuant to certain exemptions from the registration requirements of the Securities Act of 1933, as well as those of various state
securities laws. The basis for relying on such exemptions is factual; that is, the applicability of such exemptions depends upon
our conduct and that of those persons contacting prospective investors and making the offering. We may not seek any legal opinion
to the effect that any such offering would be exempt from registration under any federal or state law. Instead, we may elect to
relay upon the operative facts as the basis for such exemption, including information provided by investors themselves.
If any such offering did not qualify for such
exemption, an investor would have the right to rescind its purchase of the securities if it so desired. It is possible that if
an investor should seek rescission, such investor would succeed. A similar situation prevails under state law in those states
where the securities may be offered without registration in reliance on the partial preemption from the registration or qualification
provisions of such state statutes under the National Securities Markets Improvement Act of 1996. If investors were successful
in seeking rescission, we would face severe financial demands that could adversely affect our business and operations. Additionally,
if we did not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties
imposed by the SEC and state securities agencies.
Anti-takeover effects of certain provisions
of Nevada state law hinder a potential takeover of the Company.
Though not now, we may be or in the future
we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it
has more than 200 stockholders, at least 100 of who are stockholders of record and residents of Nevada, and it does business in
Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which
means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to
exercise the following proportions of the voting power of the corporation in the election of directors: (i) one-fifth or more
but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise
such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that
the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred
by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share
law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip
voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not
grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares.
The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling
interest, their shares do not become governed by the control share law.
If control shares are accorded full voting
rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record,
other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such
stockholder’s shares.
Nevada’s control share law may have
the effect of discouraging takeovers of the corporation.
In addition to the control share law, Nevada
has a business combination law which prohibits certain business combinations between Nevada corporations and “interested
stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,”
unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested
stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting
power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time
within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of
the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently
broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to
finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Nevada’s business combination
law is to potentially discourage parties interested in taking control of the Company.
Because we do not intend to pay any
cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to
finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they
sell them. There is no assurance that stockholders will be able to sell shares when desired.
Opt-in right for emerging growth 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.
FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements
which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements
by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or
the negative of these terms or other comparable terminology. These forward-looking statements include, without limitation, statements
about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan,
and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results
may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which
we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking
statements and/or predictions include, among other things: the volatility of real estate prices, the possibility that our marketing
efforts will not be successful in identifying buyers of real estate, the Company’s need for and ability to obtain additional
financing, and, other factors over which we have little or no control.
While these forward-looking statements, and
any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United
States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
USE OF PROCEEDS
Our offering is being made on a self-underwritten
basis: no minimum number of shares must be sold in order for the offering to proceed. The offering price per share is $0.20. The
following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100%, respectively, of the securities offered
for sale by the Company in the Primary Offering. There is no guarantee that we will receive any proceeds from the offering.
|
100%
of
Offering
Sold
|
75%
of
Offering
Sold
|
50%
of
Offering
Sold
|
25%
of
Offering
Sold
|
Offering
Proceeds
|
$8,266,625
|
$6,199,969
|
$4,133,313
|
$2,066,656
|
Shares
Sold
|
41,333,125
|
30,999,844
|
20,666,563
|
10,333,281
|
Gross
Proceeds
|
$8,266,625
|
$6,199,969
|
$4,133,313
|
$2,066,656
|
Total
Before Expenses
|
$8,266,625
|
$6,199,969
|
$4,133,313
|
$2,066,656
|
|
|
|
|
|
Offering
Expenses
|
|
|
|
|
Accounting
|
10,000
|
10,000
|
10,000
|
10,000
|
Legal
|
30,000
|
30,000
|
30,000
|
30,000
|
Publishing/EDGAR
|
5,000
|
5,000
|
5,000
|
5,000
|
Transfer
Agent
|
5,000
|
5,000
|
5,000
|
5,000
|
SEC
Filing Fee
|
1,437
|
1,437
|
1,437
|
1,437
|
Total
Expenses
|
51,437
|
51,437
|
51,437
|
51,437
|
|
|
|
|
|
Net
Offering Proceeds
|
8,215,188
|
6,148,532
|
4,081,876
|
2,015,219
|
|
|
|
|
|
Expenditures
|
|
|
|
|
Stoughton
Engineering and Permitting
|
|
|
|
|
Phase
I
|
2,464,556
|
1,844,560
|
1,224,563
|
604,566
|
Phase
II
|
5,750,632
|
4,303,972
|
2,857,313
|
1,410,653
|
|
|
|
|
|
Total
Expenditures
|
8,266,625
|
6,199,969
|
4,133,313
|
2,066,656
|
Net
Remaining Proceeds
|
0
|
0
|
0
|
0
|
The above figures represent only estimated
costs. This expected use of net proceeds from this offering represents our intentions based upon our current plans and business
conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including
the status of and results from operations. As a result, our management will retain broad discretion over the allocation of the
net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes,
and we will have broad discretion in the application of net proceeds from this offering. Furthermore, we anticipate that we will
need to secure additional funding for the fully implement our business plan.
In the event we are not successful in selling
all of the securities under the Primary Offering, we would utilize any available funds raised in the following order of priority:
|
·
|
for
general and administrative expenses, including legal and accounting fees and administrative
support expenses incurred in connection with our reporting obligations with the SEC;
|
|
·
|
for
sales and marketing;
|
|
·
|
office
lease expenses and office equipment; and
|
|
·
|
salaries
for our Chief Executive Officer and President and the hiring of 1-2 additional full-time
employees.
|
The Company leases office space at 60
East Rio Salado Parkway, Suite 900, Tempe, Arizona 85281 as its corporate headquarters at a monthly rent of $230.
DETERMINATION OF OFFERING PRICE
Our management has determined the offering
price for the common shares being sold in the Primary Offering, which was arbitrarily determined and bears no relationship whatsoever
to our assets, earnings, book value or other criteria of value. Notwithstanding this arbitrary price, we did consider certain
factors in determining the offering price:
|
·
|
our
lack of significant revenues;
|
|
·
|
our
business model, and our lack of comparable publicly held companies with which to compare
our model; and
|
|
·
|
the
price we believe a purchaser is willing to pay for our stock.
|
The offering price does not bear any relationship
to our assets, results of operations, or book value, or to any other generally accepted criteria of valuation. Prior to this offering,
there has been no market for our securities.
DIVIDEND
POLICY
We have never paid or declared any cash dividends
on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend
to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination
to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results
of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other
factors our board of directors deems relevant.
DILUTION
If you purchase any of the shares offered
by this prospectus, your ownership interest will be diluted to the extent of the difference between the initial public offering
price per share and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.
Dilution results from the fact that the initial public offering price per share is substantially in excess of the book value per
share attributable to the existing stockholder for the presently outstanding stock. As of November 30, 2016, our net tangible
book value was $817,929 or $0.01 per share of common stock. Net tangible book value per share represents the amount of our total
tangible assets (excluding deferred offering costs) less total liabilities, divided by 59,991,683, the number of shares of common
stock outstanding at January 31, 2017.
The following table sets forth as of
February 23, 2017, the number of shares of common stock purchased from us and the total consideration paid by our existing stockholder
and by new investors in this offering if new investors purchase 25%, 50%, 75% or 100% of the offering, after deduction of offering
expenses, assuming a purchase price in this offering of $0.20 per share of common stock.
|
100%
of
Offering
Sold
|
75%
of
Offering
Sold
|
50%
of
Offering
Sold
|
25%
of
Offering
Sold
|
Offering
Price Per Share
|
$0.20
|
$0.20
|
$0.20
|
$0.20
|
|
|
|
|
|
Gross
Offering Proceeds
|
$8,266,625
|
$6,199,969
|
$4,133,313
|
$2,066,656
|
Anticipated
Net Offering Proceeds
|
$8,215,188
|
$6,148,532
|
$4,081,876
|
$2,015,219
|
|
|
|
|
|
Total
Shares Issued and Outstanding Before Offering
|
59,911,683
|
59,911,683
|
59,911,683
|
59,911,683
|
Total
Shares Issued via Offering
|
41,333,125
|
30,999,844
|
20,666,563
|
10,333,281
|
Total
Shares Issued and Outstanding After Offering
|
101,244,808
|
90,911,527
|
80,578,246
|
70,244,964
|
#
of Shares After Offering Held by Public Investors
|
86,144,808
|
75,811,527
|
65,478,246
|
55,141,683
|
|
|
|
|
|
%
of Shares – Purchasers After Offering
|
40.8%
|
34.1%
|
25.7%
|
14.7%
|
%
of Shares – Existing Shareholder After Offering
|
59.2%
|
65.9%
|
74.3%
|
85.3%
|
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
|
|
|
|
|
Pre-Offering
Net Tangible Book Value **
|
$817,929
|
$817,929
|
$817,929
|
$817,929
|
Post
Offering Net Tangible Book Value
|
9,033,117
|
6,966,461
|
4,899,805
|
2,833,148
|
Increase
(Decrease) Net Tangible Book Value After Offering for Original Shareholder
|
$8,215,188
|
$6,148,532
|
$4,081,876
|
$2,015,219
|
|
|
|
|
|
|
|
|
|
|
Pre-Offering
Net Tangible book Value Per Share
|
$0.01
|
$0.01
|
$0.01
|
$0.01
|
Post
Offering Net Tangible Book Value Per Share
|
$0.09
|
$0.08
|
$0.06
|
$0.04
|
Increase
(Decrease) Net Tangible Book Value Per Share After Offering for Original Shareholder
|
$0.08
|
$0.07
|
$0.05
|
$0.03
|
|
|
|
|
|
|
|
|
|
|
Dilution
Per Share for New Shareholders
|
|
|
|
|
Percentage
Dilution Per Share for New Shareholders
|
40.8%
|
34.1%
|
25.7%
|
14.7%
|
Capital
Contribution by Purchasers of Shares
|
$8,266,625
|
$6,199,969
|
$4,133,313
|
$2,066,656
|
Capital
Contribution by Existing Shares
|
$-
|
$-
|
$-
|
$-
|
%
Contribution by Purchasers of Shares
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
%
Contribution by Existing Shareholder
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
|
|
|
|
|
Assuming we sell all 41,333,125 shares
for sale through the Primary Offering and after deducting estimated offering expenses payable by us, our as adjusted net tangible
book value as of November 30, 2016 would have been $9,033,117 or $0.09 per share. This amount represents an immediate increase
in the as adjusted net tangible book value of $0.08 per share to our existing stockholders and an immediate dilution in the as
adjusted net tangible book value of approximately $0.11 per share to new investors purchasing common shares in this offering. We
determine dilution by subtracting the as adjusted net tangible book value per share after the offering from the amount of cash
that a new investor paid for a share of common stock.
SELLING SECURITY HOLDERS
The following table sets forth the shares
beneficially owned, as of February 23, 2017, by the Selling Security Holders prior to the offering contemplated by this prospectus,
the number of shares each Selling Security Holder is offering by this prospectus, and the number of shares which each would own
beneficially if all such offered shares are sold.
Beneficial ownership is determined in
accordance with Securities and Exchange Commission rules. Under these rules, a person is deemed to be a beneficial owner of a
security if that person or his/her spouse has or shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed
to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under
the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities,
and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial
interest. Except as noted below, each person has sole voting and investment power.
None of the Selling Security Holder is
a registered broker-dealer or an affiliate of a registered broker-dealer. Each of the Selling Security Holders acquired his, her
or its shares pursuant to an employment or consulting contract or pursuant to a private placement solely for investment and not
with a view to or for resale or distribution of such securities.
The percentages below are calculated
based on 59,911,683 shares of our common stock issued and outstanding as of February 23, 2017.
Name
of Selling Security Holder
|
Number
of Shares Owned by the Selling Security Holder
|
Number
of Shares Offered by the Selling Security Holder
|
Number
of Shares Held After the Offering
|
Percentage
of Total Issued and Outstanding After the Offering (1)
|
Stanley
F. Wilson
|
15,100,000
|
1,500,000
|
13,6000,000
|
22.7
0%
|
Kandy
LP
|
14,500,000
|
1,500,000
|
13,000,000
|
21.7
0%
|
Robert
C. Henry
|
3,000,000
|
1,500,000
|
1,500,000
|
2.5
0%
|
The
Big Barge Company Inc.
|
2,000,000
|
1,500,000
|
500,000
|
0.83%
|
Lorne
K. Stemler
|
2,000,000
|
1,500,000
|
500,000
|
0.83%
|
Oopik
Holdings LTD
|
1,773,125
|
1,500,000
|
273,125
|
0.46%
|
Raleigh
C. Kone
|
900,000
|
900,000
|
0
|
0%
|
Jeff
Malmes
|
825,840
|
825,840
|
0
|
0%
|
Robby
J. Nichols & Jacalyn Nichols
|
820,000
|
820,000
|
0
|
0%
|
Glenn
Moradian & Merri Moradian
|
750,000
|
750,000
|
0
|
0%
|
Landmark
Oil & Gas LLC
|
560,000
|
560,000
|
0
|
0%
|
Gravity
Holdings Inc.
|
500,000
|
500,000
|
0
|
0%
|
Kevin
Holinaty
|
500,000
|
500,000
|
0
|
0%
|
Janice
Mallmes
|
500,000
|
500,000
|
0
|
0%
|
Buddy
Keith Green
|
500,000
|
500,000
|
0
|
0%
|
Mainstar
Trust FBO Chiles
|
300,000
|
300,000
|
0
|
0%
|
Tiger-Hawk
Oil
|
300,000
|
300,000
|
0
|
0%
|
RKT
LLC
|
452,200
|
452,200
|
0
|
0%
|
Consortium
LLC
|
400,000
|
400,000
|
0
|
0%
|
Trevor
Scott MacNeil
|
200,000
|
200,000
|
0
|
0%
|
Brunson
Chandler & Jones, PLLC
|
150,000
|
150,000
|
0
|
0%
|
Renewable
Energy Now LLC
|
120,000
|
120,000
|
0
|
0%
|
KWCO
PC
|
115,000
|
115,000
|
0
|
0%
|
Mainstar
Trust FBO Beck
|
100,000
|
100,000
|
0
|
0%
|
Mainstar
Trust Rafferty
|
100,000
|
100,000
|
0
|
0%
|
Brandee
Corwin Knox
|
100,000
|
100,000
|
0
|
0%
|
William
K Davis
|
100,000
|
100,000
|
0
|
0%
|
Andrew
G McGregor
|
100,000
|
100,000
|
0
|
0%
|
Raymond
Johnson
|
50,000
|
50,000
|
0
|
0%
|
Donald
A. MacNeil
|
50,000
|
50,000
|
0
|
0%
|
Gordon
Zelko
|
50,000
|
50,000
|
0
|
0%
|
Debra
Millet Gilmore
|
20,000
|
20,000
|
0
|
0%
|
Marc
Litle
|
20,000
|
20,000
|
0
|
0%
|
Donald
J. MacNeil
|
10,000
|
10,000
|
0
|
0%
|
Laine
A. MacNeil
|
10,000
|
10,000
|
0
|
0%
|
JT
Morgan
|
10,000
|
10,000
|
0
|
0%
|
Total
|
46,986,165
|
20,653,040
|
29,373,125
|
49.03%
|
(1) Assumes all of the Primary Offering and
Secondary Offering shares of common stock offered in this prospectus are sold and no other shares of common stock are sold or
issued during this offering period. Based on 59,911,683 shares of common stock issued and outstanding as of February 23, 2017,
and 59,911,683 shares of common stock issued and outstanding after completion of the offering.
We may require the Selling Security Holders
to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in
this prospectus, or the related registration statement, untrue in any material respect, or that requires the changing of statements
in these documents in order to make statements in those documents not misleading. We will file a post-effective amendment to this
registration statement to reflect any material changes to this prospectus.
PLAN OF DISTRIBUTION
This prospectus relates to the sale of 41,333,125 common shares sold by the
Company as part of the Primary Offering and 20,653,040 common shares sold by Selling Security Holders as part of
the Secondary Offering.
We will sell the Primary Offering shares ourselves
and do not plan to use underwriters or pay any commissions. We will be selling our common shares using our best efforts and no
one has agreed to buy any of our common shares. This prospectus permits our officers and directors to sell the common shares directly
to the public, with no commission or other remuneration payable to them for any common shares they may sell. There is no plan
or arrangement to enter into any contracts or agreements to sell the common shares with a broker or dealer. Our officers and directors
will sell the common shares and intend to offer them to friends, family members and business acquaintances. There is no minimum
amount of common shares we must sell, so no money raised from the sale of our common shares will go into escrow, trust or another
similar arrangement.
The offering will commence on the effective
date of this prospectus and will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant
to the registration statement or (ii) 365 days from the effective date of this prospectus.
There are no finders.
Under the rules of the Securities and Exchange
Commission, our common stock will come within the definition of a “penny stock” because the price of our common stock
is below $5.00 per share. As a result, our common stock will be subject to the "penny stock" rules and regulations.
Broker-dealers who sell penny stocks to certain types of investors are required to comply with the Commission’s regulations
concerning the transfer of penny stock. These regulations require broker-dealers to:
|
·
|
make
a suitability determination prior to selling penny stock to the purchaser;
|
|
·
|
receive
the purchaser’s written consent to the transaction; and
|
|
·
|
provide
certain written disclosures to the purchaser.
|
These requirements may restrict the ability
of broker/dealers to sell our common stock, and may affect the ability to resell our common stock.
OTC Markets Considerations
The OTC Markets is separate and distinct from
the NASDAQ stock market. NASDAQ has no business relationship with issuers of securities quoted on the OTC Markets. The SEC’s
order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTC Markets. Although
the NASDAQ stock market has rigorous listing standards to ensure the high quality of its issuers, and can delist issuers for not
meeting those standards, the OTC Markets has no listing standards.
Our common stock is currently listed for trading
on the OTC Markets under the trading symbol “QEGY.” Investors may have greater difficulty in getting orders to purchase
or sell our common stock filled because it currently trades on the OTC Markets rather than on NASDAQ. Investors’ orders
may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as
efficiently and effectively as with NASDAQ-listed securities.
Because analysts do usually not follow stocks
traded on OTC Markets, there may be lower trading volume than for NASDAQ-listed securities.
Blue Sky Law Considerations
The holders of our shares of common stock
and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may
be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful
in having the Shares available for trading on the OTC Markets, investors should consider any secondary market for the Company's
securities to be a limited one. There is no guarantee that our stock will ever be quoted on the OTC Markets. We intend
to seek coverage and publication of information regarding the company in an accepted publication which permits a "manual
exemption”. This manual exemption permits a security to be distributed in a particular state without being registered if
the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is
not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers,
and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance
sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information.
Furthermore, the manual exemption is a non issuer exemption restricted to secondary trading transactions, making it unavailable
for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals.
A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals.
The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.
We currently do not intend to, and may not
be able to, qualify securities for resale in other states which require shares to be qualified before they can be resold by our
shareholders.
DESCRIPTION OF SECURITIES TO BE REGISTERED
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 as exhibits to the registration statement of which this prospectus is a part.
Common Stock
We are authorized to issue 295,000,000 shares of common stock with $0.001 par value per share. As of February 23, 2017, there
were 59,911,683 shares of common stock issued and outstanding.
Each share of common stock entitles the holder
to one vote, either in person or by proxy, at meetings of shareholders. The holders are not permitted to vote their shares cumulatively.
Accordingly, the shareholders 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 shareholders 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 4045 S. Spencer Street, Suite 403, Las Vegas, Nevada 89119.
Preferred Stock
We are authorized to issue 5,000,000 shares
of preferred stock, par value $0.001. As of the date of this registration statement, there are 1,000,000 shares of our Series
A Preferred Stock issued and zero shares of our Series B Preferred Stock issued.
Each one (1) share of Series A Preferred Stock
is convertible into common shares at the option of the holder at a 1:100 ratio and carries with it the right to one vote for each
share of common stock into which the shares of Series A Preferred could be converted. Each (1) share of Series B Preferred stock
shall have no voting rights until such shares are converted into common stock. Each share of Series B Preferred Stock is convertible
to common stock at a ratio of 1:1.25 if converted within the first twelve months of the purchase agreement; 1:1.15 if converted
within the second twelve months from purchase agreement; and 1:1 if converted twenty-five months or more after the date of the
purchase agreement. Holders of Series B Preferred shares are entitled to dividends before distribution to any other junior securities.
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 the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is
indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;
|
|
2.
|
The last
day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities
of the issuer pursuant to an effective IPO registration statement;
|
|
3.
|
The date
on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or
|
|
4.
|
The date
on which such issuer is 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(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 Securities Exchange Act of 1934, which require the shareholder 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.
LEGAL MATTERS
The validity of our common stock offered hereby
will be passed upon for us by the law firm of Brunson Chandler & Jones, PLLC, of Salt Lake City, Utah.
INTEREST OF NAMED EXPERTS AND COUNSEL
The audited financial statements for the Company
for the year ended February 29, 2016 included in this prospectus have been audited by AMC Auditing, an independent registered
public accounting firm, to the extent and for the periods set forth in our report and are incorporated herein in reliance upon
such report given upon the authority of said firm as experts in auditing and accounting.
The legality of the shares offered under this registration statement is
being passed upon by the law firm of Brunson Chandler & Jones, PLLC. The law firm of Brunson Chandler & Jones, PLLC
owns 150,000 restricted shares of common stock of the Company. These shares are being registered hereunder and will be
available for sale through the Secondary Offering when this registration statement is deemed effective.
Where
You Can Find MORE Information
For further information about us and the shares
of common stock to be sold in the offering, please refer to the registration statement and the exhibits and schedules thereto.
The registration statement and exhibits may be inspected, without charge, and copies may be obtained at prescribed rates, at the
SEC's Public Reference Room at 100 F St., N.E., Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The registration statement and other information
filed with the SEC are also available at the web site maintained by the SEC at www.sec.gov.
INFORMATION WITH RESPECT TO THE REGISTRANT
General
Quantum Energy Inc. is engaged in the acquisition
and exploration of gas and oil properties. The Company was incorporated as “Boomers Cultural Development, Inc.” on
February 5, 2004, in the State of Nevada, and subsequently changed its name to “Quantum Energy, Inc.” on May 18, 2006.
The Company’s principal executive offices now are located at 60 East Rio Salado Parkway Suite 900, Tempe, AZ 85281. The
Company’s telephone number is (480) 366-5884. Our website is www.quantum-e.com and is not part of this prospectus.
Historical Operations
In 2005, the Company was working towards becoming
a service-oriented firm, intending to profit from integrating the cultural interests of baby boomers with destination learning,
by packaging onsite personal growth, education, and entertainment seminars with a variety of vacation destinations.
In May of 2006, the Company decided to embark
on a new business path in oil and gas exploration and acquisitions. The Company acquired interests in numerous 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. All of the wells in which the
Company had interests were suspended and all marginal wells have been capped, resulting in the Company abandoning the Company's
interest in the Barnett Shale area.
From 2008 through 2010, the Company 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.
Given that new funding opportunities did not otherwise materialize, effective July 30, 2010, the Board of Directors authorized
a 1,000-for-1 reverse stock split of the Company's issued common stock whereby each one thousand (1,000) common shares then-issued
and outstanding were reverse split into one (1) new issued and outstanding common share.
On June 20, 2013, the Company’s majority
shareholders appointed Stanley F. Wilson to fill a vacancy on the board as the sole director, and approved the board appointment
of Mr. Wilson as the president, secretary, and treasurer. On June 25, 2013, the shareholders approved the board action for the
acquisition of 100% of the common stock of FTPM Resources, Inc., a Texas corporation engaged in the fuel trading and petroleum
marketing business since 2009. With the change in management and the acquisition of FTPM Resources, Inc., the Company redirected
its oil and gas efforts to the Williston, North Dakota region and the Bakken formation through the consulting services of Advisory
Services, Inc. under the direction of its President, Andrew J. Kacic, a seasoned oil and gas executive and investment banker with
offices in Williston, North Dakota. In March 2014, Mr. Kacic became a board member and CEO of Quantum and has since assisted Quantum
in its efforts to develop refinery and rail transload facilities in the region through existing relationships he has with various
such projects in different stages of development. Mr. Kacic resigned from the board of directors and as an officer of the Company
on July 1, 2016.
Current & Planned Operations
The Company is currently engaged in identifying
site locations for its planned refineries in or near Stoughton, Saskatchewan, Canada, Berthold, North Dakota, Stanley, North Dakota,
Baker, Montana, and Fairview, Montana, which includes, among other actions, obtaining the required zoning and other permits necessary
for our planned refinery operations. To such end, the Company has entered into various agreements to purchase certain properties
as described herein:
Stoughton,
Saskatchewan
|
·
|
December
5, 2016 – 480 acres; contract for the purchase and sale of land
|
Berthold,
North Dakota
|
·
|
October
8, 2014 – 140 acres, option
|
|
·
|
November
12, 2014 – 125 acres, option
|
|
·
|
December
12, 2014 – 75 acres, option
|
Fairview,
Montana
|
·
|
August
26, 2014 – 80 acres, option
|
|
·
|
August
26, 2014 – 74 acres, option
|
Stanley,
North Dakota
|
·
|
October
24, 2014 – 260 acres, option
|
Baker,
Montana
|
·
|
August
22, 2014 – 400 acres, option
|
On September 15, 2014, the Company announced
a Joint Development Agreement with Bilfinger Westcon of Bismarck, ND forming a strategic alliance for the development of multiple
energy centers throughout the Bakken. Bilfinger Westcon is the ECP Contractor and Project Manager of the diesel refinery constructed
in Dickinson, ND.
On July 21, 2015, the Company entered into
a 50/50 joint venture with Native Son Refinery, LLC with the formation of Quantum Native Processing Partners, LLC and the signing
of an Operating Agreement which was later amended on August 3, 2015. On July 29, 2015, the parties submitted an application for
a construction permit with the state of North Dakota to construct a complete refinery for 40,000 bpd to be constructed on land
under option by Company in the Berthold, North Dakota area.
On August 2, 2016, the Company formed a wholly
owned subsidiary corporation in Canada, Dominion Energy Processing Group, Inc.
Bakken Refineries (Stoughton Saskatchewan,
Canada; Berthold, ND)
Stoughton, Saskatchewan, CA
:
On August 2, 2016, Quantum formed Dominion Energy Processing Group,
Inc. (DEPG), a Canadian Federal business corporation for purposes of the pre-development, construction and operation of a complete
oil refinery in Stoughton, SK, CA. As a result of a feasibility study and further due diligence, DEPG is proposing a refinery
facility sized at 40,000 barrel per day utilizing Bakken sweet crude produced from the Bakken and Three Forks’ formations
to be developed and constructed and anchored by the DEPG refinery, storage tank farm and associated facilities.
The cost associated with the construction and initial operation
of the refinery is approximately $575,000,000.
DEPG is in the process of submitting an application for a construction
permit with the Saskatchewan governmental authorities on the land under purchase contract in Stoughton. The land consists of 480
acres that has the land, rail, water, power, and the access to crude that are suitable for a refinery of this size. The location
would also accommodate expansion of the refinery facilities.
Horizontal drilling and new technologies for
“fracking” (fracturing the shale formation with high pressure injection of fluids and injecting sand (proppants) to
hold the fractures open) has created tremendous reserves of oil from the Bakken and Three Forks formations. A study of shale formations
in the Bakken estimates that the Bakken formation contains between 400 to 600 billion barrels of oil “in place”. Potential
recoverable oil from the Bakken formation has been estimated at about 4.5 to 8 billion barrels. Some of the producers have estimated
a potential of up to 24 billion barrels of recoverable oil from the Bakken.
The amount of oil being produced and the tremendous
recent increase in production has created many opportunities for the refining business throughout the Bakken field. Most of the
products from the proposed DEPG refinery can be sold in the Saskatchewan province. According to DEPG engineers, minor source emissions
standard can be accomplished by utilizing modern technologies:
|
·
|
Installing
ultra-low NOx heating elements in burners & boilers.
|
|
·
|
Utilizing
new technologies that are on the market for sulfur removal systems.
|
|
·
|
Procuring
hydrogen from a separate source provider or onsite with state of the art technology limiting
emissions.
|
|
·
|
Utilizing
the low sulfur “sweet” Bakken crude oil as a feed source.
|
|
·
|
Installing
vapor recovery systems on all tanks in the tank farm.
|
|
·
|
Capturing
the CO2 emissions.
|
|
·
|
Installing
quality air monitoring sensors and controls.
|
|
·
|
Utilizing
SCR and oxidizing catalysts to reduce NOx, CO and VOC emissions from selected process
heaters.
|
Product Line Quantities
DEPG has preliminarily decided to utilize
Bakken crude as its feed stock since it would be the most plentiful crude slate. Based on the assays available utilizing this
crude slate, the estimate of the output was based upon a 40,000 barrel per day refining process. The following is an estimate
of the output based on a 360 day year:
Product Yield in barrels per day, gallons
per day, and total gallons per year
|
·
|
Gasoline
18,400 barrels; 772,800 gallons; 278,208,000 gallons
|
|
·
|
#2
Diesel 13,200 barrels; 554,400 gallons; 200,000,000 gallons
|
|
·
|
#1
Diesel 5,600 barrels; 235,200 gallons; 84,672,000 gallons
|
|
·
|
AGO/bottoms
2,800 barrels; 117,600 gallons; 42,336,000 gallons
|
These yields are estimates only and do not
take into consideration that the yield per barrel increases about 2.6 gallons when refined. A 42 gallon barrel can yield 44.6
gallons of product due to molecular expansion and light gas off-take. Products yield of the C1 to C4s are not considered, but
can be produced for consumption. These products can include ethane, propane, isobutane, n-butane, isopentane, n-pentane, and hexanes,
with the largest volumes of these products being butane and propane. There will also be elemental sulfur that is a sellable product.
These projections do not include the additional gasoline produced by refining an additional 10,000 barrels per day of raw naphtha
into gasoline.
Although gasoline and diesel are the major
products derived from the refining process, there are at least, 6,000 or more products manufactured from refined byproducts. Such
items as plastics, building materials, clothing, cosmetics and numerous other products that are produced every day from refined
crude oil.
The DEPG refinery will have an estimated life
of 75 to 100 years. By placing a refinery in this area, gasoline and diesel will be less expensive due to the elimination of transportation
costs of shipping crude from this area and then having to pay for the “return” shipping of the refined products. There
is an estimated 200 to 500 years supply of crude that can be accessed in the Bakken field region.
Marketing and Sales
The DEPG refinery must have access to a rail
spur and must have truck loading and unloading facilities for the crude supply and the refined products. Most of the gasoline
and diesel can be sold at the site or “rack” and be transported by truck. Some of the product will be shipped by rail
tanker car to other refineries or processing plants for the particular product.
Part of the AGO (atmospheric gas and oil)
and bottoms will be sold locally to the drilling industry for their diesel based drilling fluids and the fluids that are utilized
when they turn horizontal should equal the price of about $.05 per gallon lower than #2 diesel at a service station. The balance
can be easily sold to Gulf Coast Refineries to utilize their heavy oil conversion units or for ultra-low sulfur ship fuel.
The price of the gasoline and diesel per gallon
will follow the “rack” prices in the nearby cities. These prices are posted on a daily basis at reporting groups such
as OPIS.
Capital Costs and Startup
The capital cost of the DEPG refinery and
associated storage tank farm facilities is planned in two phases. The total cost of phases I and II is approximately $500,000,000.
This includes pre-development costs, land acquisition, permitting, engineering, ISBL plant equipment, site work and storage tanks
and building. Working capital and the cost of initial crude will add approximately $75,000,000, for a total of $575,000,000. This
will include pre-development costs, financing fees, reserves, taxes, wages, insurance, and other contingency expenses.
Financial Projections
Projected income is based on operating 360
days per year although most refineries operate 365 days per year. The new DEPG refinery should not have a “turn around”
or stoppage for repair and/or maintenance for the first 2 to 5 years. The total projected revenue per year will be approximately
$796,994,402 with an EBIDTA in an amount of approximately $272,154,539. The capital commitment to build the facility is estimated
at $575,000,000. The estimated output of the primary products from the crude processing facility in barrels per day based on a
360-day operating year include 18,400 bpd of gasoline; 13,200 bpd of diesel #2; 5,600 bpd of diesel #1 and 2,800 bpd of AGO/bottoms.
What is the DEPG Stoughton refinery?
|
•
|
A
partial refinery to supply a local market
|
|
•
|
Small
quick-to-market refinery
|
|
•
|
Smaller
Land Area & Tank Farm
|
Technology
– 40,000 BBLPD =
|
•
|
18,400
BBLPD retail gasoline
|
|
•
|
18,800
BBLPD Jet & Diesel
|
Oil-based drilling mud/ultra low sulfur fuel
oil. Does not include the additional gasoline from refining raw Naphtha.
Primary Products
|
•
|
Ultra
low sulfur fuel oil
|
Berthold, North Dakota
Through a 50/50 joint venture with Native
Son Refining, LLC, Quantum has formed Quantum Native Processing Partners, LLC (QNPP), a Texas domiciled limited liability company,
for purposes of the pre-development, construction and operation of a complete oil refinery in Berthold, North Dakota. As a result
of a feasibility study and further due diligence, QNPP is proposing a refinery facility sized at 40,000 barrel per day utilizing
Bakken sweet crude produced from the Bakken and Three Forks’ formations to be developed and constructed within a master
planned “Industrial Complex” anchored by the QNPP refinery, storage tank farm and associated facilities.
The cost associated with the construction
and initial operation of the refinery is approximately $674,000,000.
QNPP has submitted an application for a construction
permit with the state of North Dakota on the land under Option in the Berthold area. There have been several locations identified
that have the land, rail, water, power, and the access to crude that are suitable for a refinery of this size. Each of the locations
would also accommodate expansion of the refinery facilities.
Horizontal drilling and new technologies for
“fracking” (fracturing the shale formation with high pressure injection of fluids and injecting sand (proppants) to
hold the fractures open) has created tremendous reserves of oil from the Bakken and Three Forks formations. A study of shale formations
in the Bakken estimates that the Bakken formation contains between 400 to 600 billion barrels of oil “in place”. Potential
recoverable oil from the Bakken formation has been estimated at about 4.5 to 8 billion barrels. Some of the producers have estimated
a potential of up to 24 billion barrels of recoverable oil from the Bakken.
The amount of oil being produced and the tremendous
recent increase in production has created many opportunities for the refining business throughout the Bakken field. Most of the
products from the proposed QNPP refinery can be sold in western North Dakota or eastern Montana. According to QNPP engineers,
minor source emissions standard can be accomplished by utilizing modern technologies:
|
·
|
Installing
ultra-low NOx heating elements in burners & boilers.
|
|
·
|
Utilizing
new technologies that are on the market for sulfur removal systems.
|
|
·
|
Procuring
hydrogen from a separate source provider or onsite with state of the art technology limiting
emissions.
|
|
·
|
Utilizing
the low sulfur “sweet” Bakken crude oil as a feed source. Installing vapor
recovery systems on all tanks in the tank farm.
|
|
·
|
Capturing
the CO2 emissions.
|
|
·
|
Installing
quality air monitoring sensors and controls.
|
|
·
|
Utilizing
SCR and oxidizing catalysts to reduce NOx, CO and VOC emissions from selected process
heaters.
|
Adopting these control standards will allow the QNPP refinery to
meet or exceed the minor source emission requirements and QNPP to expand to a larger system (enhanced “throughput”/capacity)
in the future.
Product Line Quantities
QNPP has preliminarily decided to utilize Bakken crude as its feed
stock since it would be the most plentiful crude slate. Based on the assays available utilizing this crude slate, the estimate
of the output was based upon a 40,000 barrel per day refining process. The following is an estimate of the output based on a 360-day
year:
Product Yield in barrels per day, gallons
per day, and total gallons per year
Gasoline - 18,400 barrels; 772,800 gallons;
278,208,000 gallons
#2 Diesel 13,200 barrels; 554,400 gallons;
200,000,000 gallons
#1 Diesel 5,600 barrels; 235,200 gallons;
84,672,000 gallons
AGO/bottoms 2,800 barrels; 117,600 gallons;
42,336,000 gallons
These yields are estimates only and do not
take into consideration that the yield per barrel increases about 2.6 gals when refined. A 42-gallon barrel can yield 44.6 gallons
of product due to molecular expansion and light gas off-take. Products yield of the C1 to C4s are not considered, but can be produced
for consumption. These products can include ethane, propane, iso-butane, n-butane, iso-pentane, n-pentane, hexanes with the largest
volumes of these products being Butane and Propane. There will also be elemental sulfur that is a saleable product. These projections
do not include the additional gasoline produced by refining an additional 10,000 barrels per day of raw naphtha into gasoline.
Although gasoline and diesel are the major
products derived from the refining process, there are at least, 6,000 or more products manufactured from refined byproducts. Such
items as plastics, building materials, clothing, cosmetics and numerous other products that are produced every day from refined
crude oil.
The QNPP refinery will have an estimated life
of 75 to 100 years. By placing a refinery in this area, gasoline and diesel will be less expensive due to the elimination of transportation
costs of shipping crude from this area and then having to pay for the “return” shipping of the refined products. There
is an estimated 200 to 500 years supply of crude that can be accessed in the Bakken field region.
Marketing and Sales
The site to be chosen for the QNPP refinery
must have access to a rail spur and must have truck loading and unloading facilities for the crude supply and the refined products.
Most of the gasoline and diesel can be sold at the site or “rack” and be transported by truck. Some of the product
will be shipped by rail tanker car to other refineries or processing plants for the particular product.
Part of the AGO (atmospheric gas and oil)
and bottoms will be sold locally to the drilling industry for their diesel based drilling fluids and the fluids that are utilized
when they turn horizontal should equal the price of about $.05 per gallon lower than #2 diesel at a service station. The balance
can be easily sold to Gulf Coast Refineries to utilize their heavy oil conversion units or for ultra-low sulfur ship fuel.
The price of the gasoline and diesel per gallon
will follow the “rack” prices in the nearby cities. These prices are posted on a daily basis at reporting groups such
as OPIS.
Capital Costs and Startup
The capital cost of the QNPP refinery and
associated storage tank farm facilities is planned in two phases. The total cost of phases I and II is approximately $599,000,000.
This includes the per-development costs, land acquisition, permitting, engineering, ISBL plant equipment, site work and storage
tanks and building. Working capital, cost of initial crude will add approximately $75,000,000, for a total of: $674,000,000. This
will include pre-development costs, financing fees, reserves, taxes, wages, insurance, and other contingency expenses.
Financial Projections
Projected income is based on operating 360
days per year although most refineries operate 365 days per year. The new QNPP refinery should not have a “turn around”
or stoppage for repair and/or maintenance for the first 2 to 5 years. The total projected revenue per year will be approximately
$1,123,000,000 with an EBIDTA in an amount of approximately $345,000,000. The capital commitment to build the facility is estimated
at $645,000,000. The estimated output of the primary products from the crude processing facility in barrels per day based on a
360-day operating year includes 18,400 bpd of gasoline, 13,200 bpd of diesel #2, 5,600 bpd of diesel #1, and 2,800 bpd of AGO/bottoms.
What is a QNPP Topping Plant?
|
•
|
A partial refinery to supply
a local market
|
|
•
|
Small quick-to-market refinery
|
|
•
|
Smaller Land Area &
Tank Farm
|
Technology – 40,000 BBLPD =
|
•
|
18,400 BBLPD retail gasoline
|
|
•
|
18,800 BBLPD Jet & Diesel
|
Oil based Drilling mud/ultra low sulfur fuel oil. Does not include
the additional gasoline from refining raw naphtha.
Primary Products
|
•
|
Ultra low sulfur fuel oil
|
Growth Strategy
We have implemented several initiatives
that we believe will further our business, the objective being to build our first refinery. Our goal is to increase stockholder
value by executing our strategic plan. The principal elements of this plan are:
Identify and Execute
Selected Site Acquisitions.
Our management team has demonstrated its ability to identify strong potential locations for
our refinery, consummate acquisitions on favorable terms, obtain acquisition financing and integrate acquired assets. We believe
that this offering will enhance our ability to execute this strategy.
Identify and Attract
Growth Capital.
We are dependent in large part upon the success of this offering for executing our growth strategy. We estimate
that our Stoughton refinery will cost approximately $575,000,000 to build. Should we complete this offering and raise sufficient
funds, we will commence with building operations immediately.
Increase Refinery
Throughput.
As we commence building operations for our Stoughton refinery and the refinery comes online, we will seek
to increase crude oil throughput. We expect that the Stoughton refinery will be able to process up to approximately 40,000 barrels
per day.
Products
We intend to sell a variety of refined products
to our customers, including gasoline, diesel fuel, jet fuel and feedstocks.
Competition
We operate in the Bakken region of North Dakota
and Canada. Refined products are supplied from the region’s refineries as well as from refineries located in other regions,
including the Midwest via interstate pipelines. The principal competitive factors affecting us are costs of crude oil and other
feedstocks, refinery efficiency, refinery product mix and costs of product distribution and transportation. As a new entrant to
the refining industry, we will face significant competition and barriers to entry from larger companies such as Valero Energy
Corp and BP, PLC. 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.
Intellectual Property
At present, we do not have any patents, trademarks,
licenses, franchises, concessions, and royalty agreements, labor contracts or other proprietary interests.
Research and Development
We are not currently conducting any research
and development activities.
Governmental Regulatio
n
All of our contemplated
operations and properties are subject to extensive federal, state and local environmental and health and safety regulations governing,
among other things, the generation, storage, handling, use and transportation of petroleum and hazardous substances; the emission
and discharge of materials into the environment; waste management; and characteristics and composition of gasoline and diesel
fuels. Our operations also require numerous permits and authorizations under various environmental and health and safety laws
and regulations. Failure to comply with these permits or environmental laws generally could result in fines, penalties or other
sanctions or a revocation of our permits. We will have to make significant capital and other expenditures related to environmental
and health and safety compliance, including with respect to our air permits and the low-sulfur gasoline and ultra low-sulfur diesel
regulations.
The EPA has adopted
regulations under the Clean Air Act that require significant reductions in the sulfur content in gasoline and diesel fuel. These
regulations required most refineries to begin reducing sulfur content in gasoline to 30 ppm in January 1, 2004,
with full compliance by January 1, 2006, and require reductions in sulfur content in diesel to 15 ppm beginning
in June 1, 2006, with full compliance by January 1, 2010. However, we may qualify for what is known as
“
small
refiner status
”
under the EPA low-sulfur gasoline and ultra low-sulfur diesel programs.
As a
“
small refiner
”
under
the EPA rules, we qualify for designation as a small refiner under tax legislation. This legislation allows us to immediately
deduct up to 75% of the ultra low-sulfur diesel compliance costs when incurred for tax purposes. Furthermore, the law allows the
remaining 25% of ultra low-sulfur diesel compliance costs to be recovered as tax credits with the commencement of ultra low-sulfur
diesel manufacturing.
Certain environmental
laws hold current or previous owners or operators of real property liable for the costs of cleaning up spills, releases and discharges
of petroleum or hazardous substances, even if these owners or operators did not know of and were not responsible for such spills,
releases and discharges. These environmental laws also assess liability on any person who arranges for the disposal or treatment
of hazardous substances, regardless of whether the affected site is owned or operated by such person.
In addition to clean-up costs,
we may face liability for personal injury or property damage due to exposure to chemicals or other hazardous substances that we
may have manufactured, used, handled or disposed of or that are located at or released from our refinery or otherwise related
to our current or former operations. We may also face liability for personal injury, property damage, natural resource damage
or for clean-up costs for the alleged migration of petroleum or hazardous substances from our refinery to adjacent and
other nearby properties.
There have recently
been various discussions of legislation, which, if passed, could affect our financial condition and operations. Following the
recent Gulf Coast hurricanes, there have been increasing legislative discussions about the need to increase U.S. refining
capacity and ease the regulatory restrictions that have limited the construction of new refineries and expansion of existing refineries
in the U.S. If such legislation is adopted, our costs of regulatory compliance could decrease and, as a result of new refinery
construction and existing refinery expansion, competition in our industry may increase. There has also been discussion about legislation
to increase taxes or impose price controls on refined products, which, if adopted, could have an adverse effect on our financial
condition
Employees
With the exception of Stanley Wilson we have
no employees. We have no employment agreements with any of our management. Mr. Wilson will devote their full efforts and as much
time as needed when operations and funding are available. We anticipate hiring additional employees in the next twelve months
on as business activity warrants.
Waste Handling
The Resource Conservation and Recovery Act,
as amended, ("RCRA") and comparable state statutes and regulations promulgated thereunder, affect oil and natural gas
exploration, development and production activities by imposing requirements regarding the generation, transportation, treatment,
storage, disposal and cleanup of hazardous and non-hazardous wastes. With federal approval, the individual states administer some
or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Although most wastes associated
with the exploration, development and production of crude oil and natural gas are exempt from regulation as hazardous wastes under
RCRA, such wastes may constitute "solid wastes" that are subject to the less stringent requirements of non-hazardous
waste provisions. However, we cannot assure you that the EPA or state or local governments will not adopt more stringent requirements
for the handling of non-hazardous wastes or categorize some non-hazardous wastes as hazardous for future regulation. Indeed, legislation
has been proposed from time to time in Congress to re-categorize certain oil and natural gas exploration, development and production
wastes as "hazardous wastes." Any such changes in the laws and regulations could have a material adverse effect on our
capital expenditures and operating expenses.
Other Regulation of the Oil and Natural
Gas Industry
The oil and natural gas industry is extensively
regulated by numerous federal, state and local authorities. Legislation affecting the oil and natural gas industry is under constant
review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both
federal and state, are authorized by statute to issue rules and regulations that are binding on the oil and natural gas industry
and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on
the oil and natural gas industry increases our cost of doing business and, consequently, affects our profitability, these burdens
generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry
with similar types, quantities and locations of production.
The availability, terms and cost of transportation
significantly affect sales of oil and natural gas. The interstate transportation and sale for resale of oil and natural gas is
subject to federal regulation, including regulation of the terms, conditions and rates for interstate transportation, storage
and various other matters, primarily by the Federal Energy Regulatory Commission ("FERC"). Federal and state regulations
govern the price and terms for access to oil and natural gas pipeline transportation. FERC's regulations for interstate oil and
natural gas transmission in some circumstances may also affect the intrastate transportation of oil and natural gas.
Although oil and natural gas prices are currently
unregulated, Congress historically has been active in the area of oil and natural gas regulation. We cannot predict whether new
legislation to regulate oil and natural gas might be proposed, what proposals, if any, might actually be enacted by Congress or
the various state legislatures, and what effect, if any, the proposals might have on our operations. Sales of condensate, oil
and NGLs are not currently regulated and are made at market prices.
Drilling and Production
Our operations may be subject to various types
of regulation at the federal, state and local level. These types of regulation include requiring permits for the drilling of wells,
drilling bonds and reports concerning operations. State laws regulate the size and shape of drilling and spacing units or proration
units governing the pooling of oil and natural gas properties. Some states allow forced pooling or integration of tracts to facilitate
exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization
may be implemented by third parties and may reduce our interest in the unitized properties. In addition, state conservation laws
establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas
and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of oil and natural
gas we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state generally
imposes a production or severance tax with respect to the production and sale of oil, natural gas and NGLs within its jurisdiction.
States do not regulate wellhead prices or engage in other similar direct regulation, but we cannot assure you that they will not
do so in the future. The effect of such future regulations may be to limit the amounts of oil and natural gas that may be produced
from our wells, negatively affect the economics of production from these wells or to limit the number of locations we can drill.
Legal Proceedings
In the ordinary conduct
of our business, we may be subject to periodic lawsuits, investigations and claims, including environmental claims and employee-related
matters. There are no material current legal proceedings pending against us.
Properties
Our current corporate offices are located
60 East Rio Salado Parkway Suite 900, Tempe, Arizona 85281, and are leased from Regus PLC at a rate of $230 per month.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial
condition and results of operations should be read in conjunction with our financial statements and the related notes, and other
financial information included in this Form S-1.
Our Management’s Discussion and Analysis
contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking
statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national,
and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully
make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers;
fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions;
the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange
rate; and other risks that might be detailed from time to time in our filing with the Securities and Exchange Commission.
Although the forward-looking statements in
this Registration Statement reflect the good faith judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks
and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking
statements. You are urged to carefully review and consider the various disclosures made by us in this report and in
our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial
condition, and results of operations and prospects.
Overview
We are engaged in the development, construction
and operation of energy processing facilities that will include crude oil refinery facilities. We were incorporated in the State
of Nevada on February 5, 2004 as “Boomers Cultural Development”. On May 18, 2006 the company changed its name to Quantum
Energy, Inc. We acquired interests in numerous oil & gas properties in the Barnett Shale area of West Texas which ceased operations
in 2008. In 2013 we shifted our focus to the Bakken field area of North Dakota and Canada and began to pursue the development,
construction and operation of crude oil refineries.
Plan of Operation
The Company is currently engaged in identifying
site locations for its planned refineries in or around Stoughton, Saskatchewan, Canada, Berthold, North Dakota, Stanley, North
Dakota, Baker, Montana, and Fairview, Montana, which includes, among other actions, obtaining required zoning and other permits
necessary for our planned refinery operations. To such end, the Company has entered into various agreements to purchase certain
properties as described herein:
Stoughton,
Saskatchewan
|
·
|
December
5, 2016 – 480 acres; contract for the purchase and sale of land
|
Berthold,
North Dakota
|
·
|
October
8, 2014 – 140 acres, option
|
|
·
|
November
12, 2014 – 125 acres, option
|
|
·
|
December
12, 2014 – 75 acres, option
|
Fairview,
Montana
|
·
|
August
26, 2014 – 80 acres, option
|
|
·
|
August
26, 2014 – 74 acres, option
|
Stanley,
North Dakota
|
·
|
October
24, 2014 – 260 acres, option
|
Baker,
Montana
|
·
|
August
22, 2014 – 400 acres, option
|
On September 15, 2014, the Company announced
a Joint Development Agreement with Bilfinger Westcon of Bismarck, ND forming a strategic alliance with Bilfinger Westcon for the
development of multiple energy centers throughout the Bakken. Bilfinger Westcon is the ECP Contractor and Project Manager of the
diesel refinery constructed in Dickinson, ND.
On July 21, 2015, the Company entered into
a 50/50 joint venture with Native Son Refinery, LLC with the formation of Quantum Native Processing Partners, LLC and the signing
of an Operating Agreement which was later amended on August 3, 2015. On July 29, 2015, the parties submitted an application for
a construction permit with the state of North Dakota to construct a complete refinery for 40,000 bpd to be constructed on land
under option by Company in the Berthold, North Dakota area.
On August 2, 2016, the Company formed a wholly
owned subsidiary corporation in Canada, Dominion Energy Processing Group, Inc.
Our plan with respect to identifying the site for our refinery,
securing control of such site and building the refinery is as follows:
Phase I: Obtain Necessary Zoning approval, Permits and Government
Approvals Mos. 1-3
Engage Engineer of Record, Hatch Engineering;
conduct permitting process.
Phase II:
We are highly dependent on the success of
this offering to execute upon this proposed plan of operations. If we are unable to raise sufficient funds through this offering
or obtain alternate financing in lieu of funds raised through this offering, we may never complete development and become profitable.
In order to become profitable we may still need to secure additional debt or equity funding above and beyond what we are seeking
to raise through this offering. To such end, we hope to be able to raise additional funds from an offering of our stock in the
future. However, this offering may not occur, or if it occurs, it may not raise the required funding. We do not have any plans
or specific agreements for new sources of funding at present.
Results of Operations
For the year ended February 29, 2016 February 28, 2015, respectively
|
For
the year ended February 29 and 28,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
Advertising
and marketing
|
$
|
8,128
|
|
$
|
73,844
|
|
$
|
(65,716)
|
|
(89.0%)
|
Management
fees
|
|
54,200
|
|
|
83,300
|
|
|
(29,100)
|
|
(34.9%)
|
Office
and administration
|
|
69,375
|
|
|
202,552
|
|
|
(133,177)
|
|
(65.7%)
|
Stock
option expense
|
|
83,461
|
|
|
933,368
|
|
|
(849,907)
|
|
(91.1%)
|
Land
option expense
|
|
946,075
|
|
|
521,040
|
|
|
425,035
|
|
81.6%
|
Impairment
of land option agreements
|
|
206,573
|
|
|
-
|
|
|
206,573
|
|
N/A
|
Professional
fees
|
|
78,250
|
|
|
182,522
|
|
|
(104,272)
|
|
(57.1%)
|
OPERATING
EXPENSES
|
|
1,446,062
|
|
|
1,996,626
|
|
|
(550,564)
|
|
(27.6%)
|
Loss
on conversion of debt
|
|
-
|
|
|
11,875
|
|
|
(11,875)
|
|
N/A
|
Other
expense (income)
|
|
1,510
|
|
|
156,564
|
|
|
(155,054)
|
|
(99.0%)
|
NET
LOSS
|
$
|
1,447,572
|
|
$
|
2,165,065
|
|
$
|
(717,493)
|
|
(33.1%)
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended February 29, 2016, operating
expenses decreased $550,564 to $1,446,062 from $1,996,626 for the year ended February 28, 2015.
Our cash balance was $81 as of February 28,
2016, with $18,953 in liabilities. Our cash balance is not sufficient to fund our limited levels of operations for any period
of time without further revenue or proceeds from this offering.
We incurred expenses of $1,446,062 for the
year ended February 29, 2016, which is comprised of advertising and marketing ($8,123), management fees ($54,200), office and
administrative ($69,375), land option expense ($946,075) and professional fees including: legal and accounting fees ($78,250).
This constitutes an aggregate loss of $1,446,062.
The maximum aggregate amount of this offering
will be required to fully implement our business plan. If we do not receive any proceeds from the offering, we may be compelled
to seek a loan from our Chief Executive Officer, who has informally agreed to advance us funds, however, he has no formal commitment,
arrangement or legal obligation to advance or loan funds to the Company.
To meet our need for cash we are attempting
to raise money from this offering. If we are unable to successfully find customers we may quickly use up the proceeds from this
offering and will need to find alternative sources. At the present time, we have not made any arrangements to raise additional
cash, other than through this offering. If we need additional cash and cannot raise it, we will either have to suspend operations
until we do raise the cash, or cease operations entirely.
Income & Operation Taxes
We are subject to income taxes in the United
States of America.
Net Loss
We incurred net losses of ($1,447,572) for
the year ended February 28, 2016.
For the three and nine months ended November
30, 2016 and 2015, respectively
|
For
the three months ended November 30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
Advertising
and marketing
|
$
|
-
|
|
$
|
955
|
|
$
|
(955)
|
|
(100.0%)
|
Management
fees
|
|
15,000
|
|
|
7,200
|
|
|
7,800
|
|
108.3%
|
Office
and administration
|
|
4,093
|
|
|
12,750
|
|
|
(8,657)
|
|
(67.9%)
|
Land
option expense
|
|
60,016
|
|
|
-
|
|
|
60,016
|
|
N/A
|
Professional
fees
|
|
7,565
|
|
|
800
|
|
|
6,765
|
|
845.6%
|
Other
expense (income)
|
|
374
|
|
|
-
|
|
|
374
|
|
N/A
|
NET
LOSS
|
$
|
(87,048)
|
|
$
|
(21,525)
|
|
$
|
65,343
|
|
301.1%
|
Total expenses for the three months ended
November 30, 2016 of $87,048 increased $65,353 from total expenses of $21,525 for the comparable period ended January 31, 2016.
The increase in expenses was primarily related to non-cash land option expense of $60,016 incurred during the three months ended
November 30, 2016.
|
For
the nine months ended November 30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
Advertising
and marketing
|
$
|
5,736
|
|
$
|
8,128
|
|
$
|
(2,392)
|
|
(29.4%)
|
Management
fees
|
|
73,200
|
|
|
53,200
|
|
|
20,000
|
|
37.6%
|
Office
and administration
|
|
17,491
|
|
|
71,684
|
|
|
(54,193)
|
|
(75.6%)
|
Land
option expense
|
|
310,472
|
|
|
164,527
|
|
|
145,945
|
|
88.7%
|
Professional
fees
|
|
21,465
|
|
|
30,200
|
|
|
(8,735)
|
|
(28.9%)
|
Other
expense (income)
|
|
1,134
|
|
|
-
|
|
|
1,134
|
|
N/A
|
NET
LOSS
|
$
|
429,498
|
|
$
|
327,739
|
|
$
|
101,759
|
|
31.0%
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses for the nine months ended November
30, 2016 of $429,498 increased $101,749 from total expenses of $327,739 for the comparable period ended November 30, 2015. Non-cash
land option expense increased $145,945 for the nine months ended November 30, 2016 compared to the nine months ended November
30, 2015.
For the periods ending February 28, 2016 and 2015, respectively
Our cash balance was $81 as of February 28,
2016, with $18,953 in liabilities. Our cash balance is not sufficient to fund our limited levels of operations for any period
of time without further revenue or proceeds from this offering.
We incurred expenses of $1,446,062 for the
year ended February 29, 2016, which is comprised of advertising and marketing ($8,123), management fees ($54,200), office and
administrative ($69,375), land option expense ($946,075) and professional fees including: legal and accounting fees ($78,250).
This constitutes an aggregate loss of $1,446,062. The maximum aggregate amount of this offering will be required to fully implement
our business plan. If we do not receive any proceeds from the offering, we may be compelled to seek a loan from our Chief Executive
Officer, who has informally agreed to advance us funds, however, he has no formal commitment, arrangement or legal obligation
to advance or loan funds to the Company.
To meet our need for cash we are attempting
to raise money from this offering. If we are unable to successfully find customers we may quickly use up the proceeds from this
offering and will need to find alternative sources. At the present time, we have not made any arrangements to raise additional
cash, other than through this offering. If we need additional cash and cannot raise it, we will either have to suspend operations
until we do raise the cash, or cease operations entirely.
Controls and Procedures
We are subject to the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”). The Sarbanes-Oxley Act created a strong and independent accounting oversight board
to oversee the conduct of auditors of public companies and to strengthen auditor independence. It also requires steps to enhance
the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures
made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest
affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of
the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading
during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes
a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes-Oxley Act will substantially
increase our legal and accounting costs.
Because it will take time, management involvement
and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements
and market expectations for our operations, we may incur significant expense in meeting our public reporting responsibilities,
particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also
take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Once our management’s report on internal
controls is complete, we will retain our independent auditors to audit and render an opinion on such report when required under
Section 404 of the Sarbanes-Oxley Act. The independent auditors may identify additional issues concerning our operations while
performing their audit of internal control over financial reporting.
Off-Balance Sheet Arrangements; Commitments and Contractual
Obligations
As of February 29, 2016, we did not have any
off-balance sheet arrangements and did not have any commitments or contractual obligations.
Development Stage and Capital Resources
Since its inception, the Company has
devoted substantially all of its efforts to business planning, research and development, recruiting management and staff and raising
capital. Accordingly, the Company is considered to be in the development stage
.
The Company has generated minimal
revenues from operations and therefore lacks meaningful capital reserves.
We are attempting to raise funds to proceed
with our plan of operation. To proceed with our operations within 12 months, we need a minimum of $3,000,000. We cannot guarantee
that we will be able to sell all the shares required to satisfy our 12 months financial requirement. If we are successful, any
money raised will be applied to the items set forth in the Use of Proceeds section of this prospectus. We will attempt to raise
at least the minimum funds necessary to proceed with our plan of operation.
While we have minimal revenues as of this
date, no substantial revenues are anticipated until we have completed the financing from this offering and implemented our full
plan of operations. We must raise cash to implement our strategy to grow and expand per our business plan. The minimum amount
of the offering will likely allow us to operate for at least one year and have the capital resources required to cover the material
costs with becoming a publicly reporting. The company anticipates over the next 12 months the cost of being a reporting public
company will be approximately $30,000.
We are highly dependent upon the success of
this offering, as described herein. Therefore, the failure thereof would result in the need to seek capital from other resources
such as taking loans, which would likely not even be possible for the Company. However, if such financing were available, because
we are a development stage company with no operations to date, we would likely have to pay additional costs associated with high
risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the
terms of such debt financing. If the Company cannot raise additional proceeds via a private placement of its equity or debt securities,
or secure a loan, the Company would be required to cease business operations. As a result, investors would lose all of their investment.
Additionally, the Company will have to meet
all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company’s
management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory
requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required
of management could limit the amount of time management has to implement the business plan and may impede the speed of its operations.
Liquidity
|
As
of February 28, 2016
|
Current
Ratio*
|
.002
|
Total
Debt/Equity Ratio**
|
0.07
|
Total
Working Capital***
|
($33,621)
|
__________
*Current Ratio = Current Assets /Current Liabilities.
** Total Debt/Equity = Total Liabilities/Total Shareholder Equity.
*** Working Capital = Current Assets – Current Liabilities.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
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. Our directors and executive officers are as follows:
Name
|
|
Age
|
|
Position
|
Stanley
F. Wilson
|
|
68
|
|
Chairman,
Chief Executive Officer, Secretary, Treasurer & Director
|
Stanley F. Wilson, Chairman, CEO Secretary, Treasurer and
Director
Mr. Wilson is corporate executive as well
as an M&A securities attorney whose legal and business career has placed primary emphasis in business combinations involving
small cap publicly traded companies across a wide range of industries including oil and gas, fuel trading and marketing, telecommunications,
specialty finance, insurance and retail automotive. This specialization has taken many forms including numerous going-public transactions,
serving as President and General Counsel to multiple publicly traded holding companies. Mr. Wilson has been an active member of
the Nebraska State Bar Association since 1974, was appointed by the Governor as acting Lancaster County Court Judge and served
as The Staff Judge Advocate of the 67th Infantry Brigade of the Nebraska Army National Guard with the rank of Captain. Mr. Wilson
is Of Counsel with the Tempe, Arizona law firm of Davis, Miles, McGuire Gardner, PLLC.
Code of Ethics Policy
We have not yet 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
There have been no changes in any state law
or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating
committee, we currently have no specific audit committee and no audit committee financial expert. Based on the fact that our current
business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.
Family Relationships
None.
Involvement in Certain Legal Proceedings
No officer, director, or persons nominated
for such positions, promoter or significant employee has been involved in the last ten years in any of the following:
|
·
|
Any
bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years
prior to that time;
|
|
·
|
Any
conviction in a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses);
|
|
·
|
Subject
to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending
or otherwise limiting her involvement in any type of business, securities or banking
activities;
|
|
·
|
Found
by a court of competent jurisdiction (in a civil action), the Commission or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated;
|
|
·
|
Any
government agency, administrative agency, or administrative court impose an administrative
finding, order, decree, or sanction against them as a result of their involvement in
any type of business, securities, or banking activity;
|
|
·
|
Subject
of a pending administrative proceeding related to their involvement in any type of business,
securities, or banking activity;
|
|
·
|
Any
administrative proceeding threatened against them related to their involvement in any
type of business, securities, or banking activity.
|
Compliance with Section 16(a) of the
Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act
of 1934, as amended, requires our executive officer and director and persons who own more than 10% of a registered class of our
equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes
in ownership and annual reports concerning their ownership of our shares of common stock and other equity securities, on Forms
3, 4, and 5, respectively. Executive officers, directors, and greater than 10% shareholders are required by the Securities and
Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of
such forms received by our company, or written representations from certain reporting persons that no Form 5s were required for
those persons, we believe that, during the fiscal year ended September 30, 2013, all filing requirements applicable to our officers,
directors and greater than 10% beneficial owners as well as our officer, director and greater than 10% beneficial owners of our
subsidiaries were complied with.
Audit Committee and Audit Committee
Financial Expert
Our board of directors has determined that
it does not have a member of its audit committee that qualifies 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.
We believe that our board of directors is
capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial
reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert"
would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact
that we have not generated any significant profitability to date. In addition, we currently do not have nominating, compensation
or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee
charter. Our directors do not believe that it is necessary to have such committees because they believe the functions of such
committees can be adequately performed by our board of directors.
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, 2015 and February 29, 2016.
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 CEO
|
2016
|
0
|
0
|
0
|
0
|
0
|
0
|
27,100
|
$27,100
|
2015
|
0
|
0
|
0
|
0
|
0
|
0
|
41,650
|
$41,650
|
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth the ownership,
as of the date of this prospectus, of our common stock by each person known by us to be the beneficial owner of more than 5% of
our outstanding common stock, 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.
The information presented below regarding
beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission
and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a "beneficial
owner" of a security if that person has or shares the power to vote or direct the voting of the security or the power to
dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person
has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible
security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.
The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment
power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such
person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating
such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community
property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with
respect to the shares shown.
Security Ownership of Certain Beneficial
Owners
Name
and Address of Beneficial Owner
|
Title
of Class
|
|
Amount
and Nature of
Beneficial
Ownership (1)
|
|
|
Percent
of Class (2)
|
|
Kandy,
LP (3)
60
E. Rio Salado Parkway, Suite 900
Tempe,
Arizona 85281
|
Common
|
|
|
14,500,000
|
|
|
|
24.20%
|
|
Kandy,
LP (3)
60
E. Rio Salado Parkway, Suite 900
Tempe,
Arizona 85281
|
Series
A Preferred
|
|
|
500,000
|
|
|
|
50%
|
|
Security
Ownership of Management
Name
and Address of Beneficial Owner
|
Title
of Class
|
|
Amount
and Nature of
Beneficial
Ownership
(1)
|
|
|
Percent
of Class (2)
|
|
Stanley
Wilson (4)
60
E. Rio Salado Parkway, Suite 900
Tempe,
Arizona 85281
|
Common
|
|
|
15,100,000
|
|
|
|
25.20%
|
|
All
Officers and Directors as a Group (1 Person)
|
Common
|
|
|
15,100,000
|
|
|
|
25.20%
|
|
Stanley
Wilson (4)
60
E. Rio Salado Parkway, Suite 900
Tempe,
Arizona 85281
|
Series
A Preferred
|
|
|
500,000
|
|
|
|
50%
|
|
All
Officers and Directors as a Group (1 Person)
|
Series
A Preferred
|
|
|
500,000
|
|
|
|
50%
|
|
|
(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 59,911,683 shares of common stock and 1,000,000 shares of preferred stock issued and
outstanding as of February 23, 2017.
|
|
(3)
|
Andrew
Kacic beneficially controls the shares held by Kandy, LP. Mr. Kacic is a former officer
and director of the Company.
|
|
(4)
|
Stanley
Wilson is the Company's chief executive officer, secretary, treasurer, and director.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director Independence
We do not have any independent directors, as the term “independent”
is defined by the rules of the NASDAQ Stock Market.
Advances from related party
None.
Related party lease
None.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant as provided
in the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other than
the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding, is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is currently available for
trading on the OTC Link under the ticker symbol “QEGY.” Despite our common stock being listed public, there remains
little liquidity with respect to our common stock. The following table sets forth the high and low bid prices for our common stock
per quarter as reported by the OTC Markets based on our fiscal year end November 30, 2016 and 2015. These prices represent quotations
between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.
Fiscal Year 2016
|
|
High
|
|
|
Low
|
First Quarter (Mar. 1, 2015
– May 31, 2015)
|
|
|
0.3998
|
|
|
|
0.135
|
Second Quarter (Jun. 1, 2015- Aug. 31, 2015)
|
|
|
0.43
|
|
|
|
0.135
|
Third Quarter (Sept. 1, 2015 – Nov. 30,
2015)
|
|
|
0.25
|
|
|
|
0.13
|
Fourth Quarter (Dec. 1, 2015 – Feb. 29,
2016)
|
|
|
0.195
|
|
|
|
0.05
|
Fiscal Year 2015
|
|
High
|
|
|
Low
|
First Quarter (Mar. 1, 2014
– May 31, 2014)
|
|
|
1.43
|
|
|
|
0.031
|
Second Quarter (Jun. 1, 2014 – Aug. 31,
2014)
|
|
|
0.68
|
|
|
|
0.172
|
Third Quarter (Sept. 1, 2014 – Nov. 30,
2014)
|
|
|
0.54
|
|
|
|
0.301
|
Fourth Quarter (Dec. 1, 2014 – Feb. 28,
2015)
|
|
|
0.50
|
|
|
|
0.1811
|
Penny Stock Considerations
Our shares will be "penny stocks",
as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Thus,
our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain
transactions involving a penny stock.
Under the penny stock regulations, a broker-dealer
selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the
purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise
exempt.
In addition, under the penny stock regulations, the broker-dealer
is required to:
|
·
|
deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared by the
Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer
or the transaction is otherwise exempt;
|
|
·
|
disclose
commissions payable to the broker-dealer and our registered representatives and current
bid and offer quotations for the securities;
|
|
·
|
send
monthly statements disclosing recent price information pertaining to the penny stock
held in a customer’s account, the account’s value, and information regarding
the limited market in penny stocks; and
|
|
·
|
make
a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the transaction, prior
to conducting any penny stock transaction in the customer’s account.
|
Because of these regulations, broker-dealers
may encounter difficulties in their attempt to sell shares of our Common Stock, which may affect the ability of selling shareholders
or other holders to sell their shares in the secondary market, and have the effect of reducing the level of trading activity in
the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities,
if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding
decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and
our shareholders will, in all likelihood, find it difficult to sell their securities.
Sales of our common stock under Rule
144
There are 24,991,683 shares of our common
stock held by non-affiliates and 35,000,000 shares held by affiliates, which may constitute restricted securities, as those terms
are defined by Rule 144.
Non-affiliates hold 17,246,165 shares to be
registered in his offering, while management and their affiliates hold 30,000,000 shares to be registered in this offering. However
all of the remaining shares will still be subject to the resale restrictions of Rule 144. In general, persons holding
restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than
one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage
transaction at the market price. The availability for sale of substantial amounts of common stock under Rule 144 could
reduce prevailing market prices for our securities.
Holders
As of the date of this registration statement,
we have approximately 46 shareholders.
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.
Reports to Shareholders
After this offering, the Company will furnish
shareholders with audited annual financial reports certified by independent accountants, and unaudited quarterly financial reports
After this offering, the Company will file periodic and current reports with the Securities and Exchange Commission as required
to maintain fully reporting status. The public may read and copy any materials the Company files with the SEC at the SEC’s
Public Reference Room at 100 F. Street, N.E., Washington D.C. 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company’s SEC filings will also be available on the SEC's
Internet site found at http://www.sec.gov.
PART II – INFORMATION
NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemization of all
expenses, without consideration to future contingencies, incurred or expected to be incurred by our Corporation in connection
with the issuance and distribution of the common shares being offered by this Prospectus. Items marked with an asterisk (*) represent
estimated expenses. We have agreed to pay all the costs and expenses of this offering.
Item
|
|
Amount
|
|
SEC
Registration Fee
|
|
$
|
1,437
|
|
Legal Fees and
Expenses*
|
|
$
|
30,000
|
|
Accounting Fees
and Expenses*
|
|
$
|
10,000
|
|
Miscellaneous*
|
|
$
|
10,000
|
|
Total*
|
|
$
|
51,437
|
|
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Pursuant to Section 607.0850 of the Nevada
Revised Statutes, we have the power to indemnify any person made a party to any lawsuit by reason of being a director or officer
of the Company, or serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Our Bylaws provide
that the Company shall indemnify its directors and officers to the fullest extent permitted by Nevada law.
With regard to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer
or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the common shares being registered, we will, unless in the opinion of our counsel
the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by us is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed
by the final adjudication of such case.
RECENT SALES OF UNREGISTERED SECURITIES
Prior to this offering, we offered and sold
unregistered securities as described below. None of the issuances involved underwriters, underwriting discounts or commissions.
We relied upon Section 4(2) of the Securities Act of 1933, as amended, and Regulation S promulgated thereunder, for the offer
and sale of the securities. We believed these exemptions were available because:
|
·
|
We
are not a blank check company;
|
|
·
|
Sales
were made to non-United States persons; or
|
|
·
|
As
to sales to United States persons: (i) sales were not made by general solicitation or
advertising; (ii) all certificates had restrictive legends or an exemption; (iii) sales
were made to persons with a pre-existing relationship to our directors or executive officers;
and/or (iv) sales were made to investors who represented that they were accredited investors.
|
In connection with the above transactions,
although some of the investors may have also been accredited, we provided the following to all investors:
|
·
|
Access
to all our books and records.
|
|
·
|
Access
to all material contracts and documents relating to our operations.
|
The opportunity to obtain any additional information,
to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given
access. Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any
materials available to us concerning our business.
On March 4, 2014, the Company issued 750,000
common shares in conversion of a promissory note.
On March 10, 2014, the Company issued 625,000
common shares in conversion of a promissory note.
On March 19, 2014, the Company issued 250,000
common shares as resolution of a disputed vendor balance for professional services.
On March 25, 2014 the Company accepted a convertible
debenture which was converted by the holder to 3,773,125 common shares of the Company.
On June 10, 2014, the Company issued 120,000
shares of common stock in consideration of consulting services rendered.
On September 2, 2014, the Company issued 1,012,000
shares of common stock in consideration of two Land Purchase Option Agreements.
On November 11, 2014, the Company issued 820,000
shares of common stock in consideration of the execution of a Land Purchase Option Agreement.
On September 4, 2015, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On September 4, 2015, the Company issued 50,000
shares of common stock pursuant to a Stock Purchase Agreement.
On September 4, 2015, the Company issued 10,000
common shares pursuant to a Stock Purchase Agreement.
On November 18, 2015, the Company issued 125,000
common shares to two vendors pursuant to an agreement to resolve disputed professional fees.
On March 11, 2016, the Company issued 400,000
common shares pursuant to conversion of 200,000 preferred shares.
On March 18, 2016, the Company issued 2,500,000
shares of common stock pursuant to a Stock Purchase Agreement.
On April 22, 2016, the Company issued 1,000,000
shares of common stock pursuant to a Stock Purchase Agreements.
On May 19, 2016, the Company issued 200,840
shares of common stock pursuant to a Stock Purchase Agreement.
On July 25, 2016, the Company issued 500,000
shares of common stock pursuant to a Stock Purchase Agreement.
On July 25, 2016, the Company entered into
a contribution agreement whereby it issued 5,000,000 shares of the Company’s common stock.
On November 25, 2016, the Company issued 500,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 20, 2016, the Company issued 200,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 20, 2016, the Company issued 300,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 20, 2016, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 28, 2016, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 28, 2016, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 28, 2016, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 28, 2016, the Company issued 20,000
shares of common stock pursuant to a Stock Purchase Agreement.
On December 29, 2016, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
On January 9, 2017, the Company issued 100,000
shares of common stock pursuant to a Stock Purchase Agreement.
QUANTUM ENERGY, INC.
CONSOLIDATED BALANCE SHEET
|
|
November
30, 2016
|
|
February
29, 2016
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
20,380
|
|
|
$
|
81
|
|
Note
receivable
|
|
|
67,500
|
|
|
|
—
|
|
TOTAL
CURRENT ASSETS
|
|
|
87,880
|
|
|
|
81
|
|
OTHER
ASSETS
|
|
|
730,049
|
|
|
|
490,520
|
|
TOTAL
ASSETS
|
|
$
|
817,929
|
|
|
$
|
490,601
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
35,395
|
|
|
$
|
15,922
|
|
Promissory
notes payable
|
|
|
12,980
|
|
|
|
12,980
|
|
Due
to related party
|
|
|
—
|
|
|
|
4,800
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
48,375
|
|
|
|
33,702
|
|
LONG
TERM LIABILITIES:
|
|
|
—
|
|
|
|
—
|
|
TOTAL
LIABILITIES
|
|
|
48,375
|
|
|
|
33,702
|
|
COMMITMENTS
AND CONTINGENCIES (NOTE 7)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding
|
|
|
|
|
|
|
|
|
Series
A: 3,000,000 shares allocated, 1,000,000 shares issued and outstanding
|
|
|
1,000
|
|
|
|
1,000
|
|
Series
B: 2,000,000 shares allocated, 200,000 and 200,000 shares issued and outstanding
|
|
|
—
|
|
|
|
200
|
|
Common
Stock, $.001 par value; 290,000,000 shares authorized; 56,171,683 and 46,070,843 shares issued and outstanding, respectively
|
|
|
56,172
|
|
|
|
46,071
|
|
Additional
paid-in capital
|
|
|
10,189,923
|
|
|
|
9,454,781
|
|
Stock
subscribed
|
|
|
—
|
|
|
|
2,890
|
|
Accumulated
deficit
|
|
|
(9,477,541
|
)
|
|
|
(9,048,043
|
)
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
769,554
|
|
|
|
456,899
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
817,929
|
|
|
$
|
490,601
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY
|
|
For
the three months ended
November 30,
|
|
For
the nine months ended
November 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
OPERATING
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
and marketing
|
|
$
|
—
|
|
|
$
|
955
|
|
|
$
|
5,736
|
|
|
$
|
8,128
|
|
Management
fees
|
|
|
15,000
|
|
|
|
7,200
|
|
|
|
73,200
|
|
|
|
53,200
|
|
Office
and administration
|
|
|
4,093
|
|
|
|
12,570
|
|
|
|
17,491
|
|
|
|
71,684
|
|
Stock
option expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Land
option expense
|
|
|
60,016
|
|
|
|
—
|
|
|
|
310,472
|
|
|
|
164,527
|
|
Professional
fees
|
|
|
7,565
|
|
|
|
800
|
|
|
|
21,465
|
|
|
|
30,200
|
|
TOTAL
OPERATING EXPENSES
|
|
|
86,674
|
|
|
|
21,525
|
|
|
|
428,364
|
|
|
|
327,739
|
|
LOSS
FROM OPERATIONS
|
|
|
(86,674
|
)
|
|
|
21,525
|
|
|
|
(428,364
|
)
|
|
|
(327,739
|
)
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(374
|
)
|
|
|
—
|
|
|
|
(1,134
|
)
|
|
|
—
|
|
TOTAL
OTHER EXPENSE
|
|
|
(374
|
)
|
|
|
—
|
|
|
|
(1,134
|
)
|
|
|
—
|
|
NET
LOSS BEFORE INCOME TAXES
|
|
|
(87,048
|
)
|
|
|
(21,525
|
)
|
|
|
(429,498
|
)
|
|
|
(327,739
|
)
|
Provision
for income tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(87,048
|
)
|
|
$
|
(21,525
|
)
|
|
|
(429,498
|
)
|
|
|
(327,739
|
)
|
Basic
and diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Basic
and diluted weighted average number shares outstanding
|
|
|
52,383,640
|
|
|
|
45,316,725
|
|
|
|
50,620,720
|
|
|
|
45,316,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
to these financial statements.
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For
the nine months ended
|
|
|
November
30, 2016
|
|
November
30, 2015
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(429,498
|
)
|
|
$
|
(327,739
|
)
|
Adjustments
to reconcile net loss to cash used by operating activities
|
|
|
|
|
|
|
|
|
Amortization
expense, land purchase option agreements
|
|
|
310,472
|
|
|
|
164,527
|
|
Issuance
of common shares in lieu of cash for operating expense
|
|
|
2,162
|
|
|
|
—
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Promissory
notes receivable
|
|
|
(67,500
|
)
|
|
|
—
|
|
Accounts
payable and accrued liabilities
|
|
|
19,473
|
|
|
|
—
|
|
Net
cash used by operating activities
|
|
|
(164,891
|
)
|
|
|
(163,212
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
—
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds
from sales of common stock
|
|
|
189,990
|
|
|
|
—
|
|
Proceeds
from subscription of common stock
|
|
|
—
|
|
|
|
134,000
|
|
Proceeds
from loan payable
|
|
|
—
|
|
|
|
10,143
|
|
Repayment
of loan, related party
|
|
|
(4,800
|
)
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
185,190
|
|
|
|
144,143
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
20,299
|
|
|
|
(19,069
|
)
|
CASH
AT BEGINNING OF PERIOD
|
|
|
81
|
|
|
|
18,952
|
|
CASH
AT END OF PERIOD
|
|
$
|
20,380
|
|
|
$
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest
paid in cash
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these financial statements.
QUANTUM ENERGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
QUANTUM ENERGY INC. (“the Company”)
was incorporated under the name “Boomers Cultural Development Inc.” under the laws of the State of Nevada on February
5, 2004. On May 18, 2006 the company changed its name to Quantum Energy Inc.
The Company is a development stage diversified
holding company with an emphasis in land holdings, refinery and rail transload development, oil and gas exploration, drilling,
well completion and fuel distribution.
The Company is domiciled in the Unites States
of America, 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.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary FTPM Resources Ltd. after elimination of the intercompany accounts
and transactions.
Going Concern
As shown in the accompanying financial statements,
the Company has incurred operating losses since inception. As of November 30, 2016, the Company has limited financial resources
with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets
and statements of operations, the Company has an accumulated deficit of $9,477,541 at November 30, 2016. As of November 30, 2016,
the Company's working capital was $39,505. Achievement of the Company's objectives will be dependent upon the ability to obtain
additional financing, to locate profitable mining properties and 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 production. 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. The financial statements
do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs
should the Company be unable to continue as a going concern. In the event the Company is unable to fulfill the terms as specified
in the Property Option Agreements (Note 4), the Company could default on the agreement(s) and surrender its right to future claims
on the respective property.
Use of Estimates
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates
relate to asset impairments and stock option valuation. Actual results could differ from these estimates and assumptions and could
have a material effect on the Company’s reported financial position and results of operations.
Cash and cash equivalents
For the purposes of the statement of cash
flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be
cash equivalents.
Financial Instruments
The Company's financial instruments include
cash and cash equivalents, and short term notes payable, related party. All instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2016 and February
29, 2016, respectively.
Fair Value Measures
The Financial Accounting Standards Board Accounting
Standards Codification Topic 820 "Fair Value Measurements" ("ASC 820") requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value
hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial
instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1: Level 1 applies to assets
or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2:
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset
or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs
are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities.
At November 30, 2016 and February 29, 2016,
the Company had no assets or liabilities accounted for at fair value on a recurring basis.
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 employees will retain their vested stock options before exercising them (“expected
life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”),
employee 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.
Loss 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
for years ended November 30, 2016 and November 30, 2015, would be as follows:
|
November
30, 2016
|
|
November
30, 2015
|
Stock
options
|
|
3,841,666
|
|
|
5,161,666
|
Warrants
|
|
107,934
|
|
|
107,934
|
TOTAL
POSSIBLE DILUTION
|
|
3,949,600
|
|
|
5,269,600
|
|
|
|
|
|
|
At November 30, 2016 and November 30, 2015,
respectively, the effect of the Company's outstanding options and common stock equivalents would have been anti-dilutive.
Income Taxes
The Company recognizes provision for income
tax using the liability method. Deferred income tax liabilities or assets at the end of each period are determined using the tax
rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred
tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
New Accounting Pronouncement
In August
2014, the FASB issued ASU No. 2014-15—Presentation of Financial Statements—Going Concern. The guidance requires an
entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial
doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued (or within one year after the date that the financial statements are available to be issued when applicable). If conditions
or events exist that raise substantial doubt about an entity’s ability to continue as a going concern, the guidance requires
disclosure in the financial statements. The guidance will be effective for the annual period ending after December 15, 2016, and
for annual periods and interim periods thereafter. Early application is permitted. The Company has concluded that
adoption of the standard would have minimal impact on the Company’s financial statements as such disclosure is already included
the financial statements.
NOTE 3 – NOTE RECEIVABLE
On April 7, 2016, the Company entered into
a short-term promissory note and loaned $67,500 to an energy company. The note matures on April 7, 2017 and in interest-free.
For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter, the monthly installment
shall be $2,500 per month until paid in full.
NOTE 4 – LAND PURCHASE OPTION AGREEMENTS
The Company has executed a series of land
purchase option agreements with various landowners in and around the State of Montana. In aggregate the land purchase option agreements
encompass approximately 1,150 acres. For a period of two years from the respective execution date, the Company has the option
to purchase the property for the purpose of evaluating and developing a Clean Energy Center including a diesel refinery, crude
processing and natural gas liquid stripping facility and CO2 capture equipment for enhanced oil recovery.
The fair value of consideration given for
the exclusive option to purchase has been charged to “Other Assets” and amortized over the respective term of the
land purchase option agreement. For the three months and nine months ended November 30, 2016 and February 28, 2015, the Company
amortized “Land Option Expense” $946,075 and $521,040, respectively.
The Company recognized an impairment expense
of $206,573 relating to certain land purchase option agreements at February 29, 2016. There are no liabilities or future obligations
to the Company on any of the impaired land purchase option agreements. Absent notification to or from land owners, the Company
retains right to purchase related properties. To date, notification of cancellation has not been communicated by either party.
However, in lieu of executed extensions to the land purchase options, the Company accelerated amortization of remaining book value
on those properties to which significant cash payments have been delinquent and, therefore, are potentially in default of terms
of the purchase option agreement.
The following is a summary of the Company’s
Other Assets at November 30, 2016:
Option
Agreement Date
|
Consideration
|
Number
|
Fair
Value
|
Accumulated
Amortization
|
Allowance
for Impairment
|
Net
Book Value
|
August
22, 2014
|
Stock
options
|
1,120,000
|
$521,691
|
($521,691)
|
-
|
-
|
August
22, 2014
|
Stock
options
|
1,680,000
|
800,217
|
(400,120)
|
-
|
180,049
|
August
26, 2014
|
Common
shares
|
560,000
|
280,000
|
(210,000)
|
(70,000)
|
-
|
August
26, 2014
|
Common
shares
|
452,000
|
226,100
|
(169,575)
|
(56,525)
|
-
|
October
8, 2014
|
Cash
|
-
(1)
|
-
|
-
|
-
|
-
|
October
24, 2014
|
Common
shares
|
820,000
|
336,200
|
(256,152)
|
(80,048)
|
-
|
November
12, 2014
|
Cash
|
-
(1)
|
-
|
-
|
|
-
|
December
10, 2014
|
Cash
|
-
(1)
|
-
|
-
|
|
-
|
TOTAL
|
|
|
$2,164,208
|
($1,777,586)
|
($206,573)
|
$180,049
|
|
|
|
|
|
|
|
|
(1)
|
Consideration
to be paid upon exercise of property option agreement. No fair value of option agreement
made as of balance sheet date.
|
The balance of the land purchase option agreements
are included in “Other Assets”.
NOTE 5 – SHARE EXCHANGE AND CONTRIBUTION
AGREEMENT AND PARTIAL RESCISSION
Investment in Subsidiary
On or about July 25, 2016, the Company entered
into a share exchange and contribution agreement whereby it acquired 100% of the Partnership Interests of New Tex IV, LP, a Texas
limited partnership. The acquisition shall be effective September 1, 2016 and consists of approximately 3,000 acres of and 89
well bores in the Texas panhandle along with an approximate 5% working interest in a heavy oil project in Missouri. In consideration
of this acquisition, the Company issued 15,000,000 shares of the Company’s common stock with a fair market value of $1,650,000
on July 25, 2016.
On or about January 24, 2017, the Company
executed a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby all provisions of the share exchange and contribution
agreement dated July 25, 2016 (Note 4) were revoked. By mutual rescission, Mountain Top Properties, Inc. agreed to the immediate
cancellation and surrender of the common stock certificates representing 10,000,000 shares common stock of Quantum Energy, Inc.
The Company, therefore, rescinded its acquisition of 100% of the Partnership Interests of New Tex IV, LP, a Texas limited partnership.
The fair market value of the common stock rescinded was $1,100,000.
The Company has revised the November 30, 2016
financial statements to reflect the impact of the Mutual Rescission Agreement. The balance sheet as of November 30, 2016 presented
in these interim financial statements reflects the change in total assets, common stock and additional paid in capital subsequent
to the rescission of a portion of the July 2016 Share Exchange and Contribution Agreement.
The previously issued financial statements
have been revised as follows:
Balance
Sheet at November 30, 2016
|
|
As
Previously Reported
|
|
Revision
|
|
As
Revised
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,917,929
|
|
$
|
(1,100,000)
|
|
$
|
817,929
|
Total
liabilities
|
|
$
|
48,375
|
|
$
|
-
|
|
$
|
48,375
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
1,000
|
|
|
-
|
|
|
1,000
|
Common
stock
|
|
|
66,172
|
|
|
(10,000)
|
|
|
56,172
|
Additional
paid in capital
|
|
|
11,279,923
|
|
|
(1,090,000)
|
|
|
10,189,923
|
Accumulated
deficit
|
|
|
(9,477,541)
|
|
|
-
|
|
|
(9,477,541)
|
Total
stockholders' equity
|
|
|
1,869,554
|
|
|
(1,100,000)
|
|
|
769,554
|
Total
liabilities and stockholders' equity
|
|
$
|
1,917,929
|
|
$
|
(1,100,000)
|
|
$
|
817,929
|
NOTE 6 – PROMISSORY NOTES PAYABLE
The Company’s outstanding notes payable
and accrued interest payable are summarized as follows:
|
November
30, 2016
|
|
February
29, 2016
|
|
Note
payable
|
|
Accrued
interest
|
|
Note
payable
|
|
Accrued
interest
|
15% unsecured note payable
by the Company due on demand
|
$
|
10,000
|
|
$
|
4,894
|
|
$
|
10,000
|
|
$
|
3,760
|
TOTAL
|
$
|
10,000
|
|
$
|
4,894
|
|
$
|
10,000
|
|
$
|
3,760
|
NOTE 7– RELATED PARTY TRANSACTIONS
For the three months ended November 30, 2016
and 2015, respectively, the Company paid management fees including amounts accrued $15,000 and $7,200, respectively, to the Officers
of the Company. For the nine months ended November 30, 2016 and 2015, respectively, the Company paid management fees including
amounts accrued $73,200 and $53,200, respectively, to the Officers of the Company
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company engaged the services of a government
relations advisory group under an agreement in which the payment obligation is subject to the receipt of funding. That agreement
is now terminated and disputed as to its enforceability. If or when the subject funding is realized, and if or when the enforceability
issue is resolved, the Company may have a contingent liability in the approximate amount of $75,000.
NOTE 9 – COMMON STOCK
Authorized
295,000,000 voting common shares with a par value of
$0.001 per share
3,000,000 convertible preferred “A” shares
with a par value of $0.001 per share
2,000,000 convertible preferred 6% series “B”
shares with a par value of $0.001 per share
|
Restricted
|
Non-restricted
|
November
30, 2016
|
|
Restricted
|
Non-restricted
|
February
29, 2016
|
Common
Shares
|
|
|
|
|
|
|
|
Outstanding
at beginning of period
|
38,830,943
|
7,239,900
|
46,070,843
|
|
37,576,825
|
7,239,900
|
44,816,725
|
Issued
|
20,100,840
|
-
|
20,100,840
|
|
1,254,118
|
|
1,254,118
|
Rescinded
|
(10,000,000
|
-
|
(10,000,000)
|
|
-
|
-
|
-
|
Outstanding
at end of period
|
48,931,783
|
7,239,900
|
56,171,683
|
|
38,830,943
|
7,239,900
|
46,070,843
|
|
|
|
|
|
|
|
|
Preferred
Convertible Shares
|
|
|
|
|
|
|
|
Outstanding
at beginning of period
|
-
|
1,200,000
|
1,200,000
|
|
-
|
1,200,000
|
1,200,000
|
Issued
Series A
|
-
|
-
|
-
|
|
-
|
|
-
|
Issued
Series B
|
-
|
-
|
-
|
|
-
|
|
-
|
Converted
Series B
|
-
|
(200,000)
|
(200,000)
|
|
-
|
|
-
|
Outstanding
at end of period
|
-
|
1,000,000
|
1,000,000
|
|
-
|
1,200,000
|
1,200,000
|
Each of the Series A preferred stock is convertible into common
shares, at the option of the holder on a 1:100 basis. Each of the 6% series B preferred stock is convertible into common shares
on a 1:1.25 basis if converted within twelve months from the date of purchase and on a 1:1.15 basis if converted within the second
twelve months from the date of purchase and on a 1:1 basis if converted in month twenty-five or thereafter from the date of purchase.
Effective July 30, 2010, the Board of Directors
authorized a 1,000 for 1 reverse stock split of the Company’s issued common stock. One thousand (1,000) old issued common
shares were reverse split into one (1) new issued common share. All references in the accompanying financial statements to the
number of common shares issued have been restated to reflect the reverse stock split.
Effective November 15, 2013 the Board of Directors
authorized a 150 for 1 forward stock split of the Company’s issued common stock. One (1) old issued common share was forward
split into one hundred and fifty (150) new issued common shares. All references in the accompanying financial statements to the
number of common shares issued have been restated to reflect the forward stock split.
On March 4, 2014, the Company issued 750,000
common shares in conversion of a promissory note, a transaction that was authorized prior to February 28, 2014 and included in
those year-end balances.
On March 10, 2014, the Company issued 625,000
common shares in conversion of a $20,000 promissory note.
On March 19 2014, the Company issued 250,000
common shares with a fair market value of $0.22 per share or $55,000 as resolution of a disputed vendor balance for professional
services.
On March 25, 2014 the Company accepted a $150,000
convertible debenture which was converted by the holder to 3,773,125 common shares of the Company.
On June 10, 2014, the Company issued 120,000
common shares with a fair market value of $0.54 per share or $64,680 in consideration of consulting services rendered.
On September 2, 2014, the Company issued 1,012,000
common shares in consideration of two Land Purchase Option Agreements, the fair value of which was $505,088 based on a closing
price of $0.50 per share.
On November 11, 2014, the Company issued 820,000
common shares in consideration of the execution of a Land Purchase Option Agreement, the fair value of which was $336,200 based
on a closing price of $0.41 per share.
The Company received $34,000 in proceeds from
stock purchase agreements; Trevor MacNeil $20,000 and Donald MacNeil $14,000 on August 10, 2015 and August 11, 2015 consecutively.
On September 4, 2015, Trevor MacNeil was issued
100,000 common shares - Special Purchase Agreement signed and funds wired on August 10, 2015.
On September 4, 2015, Donald MacNeil was issued
50,000 common shares – Special Purchase Agreement signed and funds wired on August 11, 2015.
On September 4, 2015, Donald MacNeil 10,000
common shares issued to daughter as nominee – Special Purchase Agreement signed and funds wired on August 11, 2015
On November 18, 2015, the Company issued 125,000
to two vendors pursuant to an agreement to resolve disputed professional fees. The fair value of the shares issued was $46,250
based on a closing price of $0.37 per share.
On March 11, 2016, the Company issued 400,000
common shares issued pursuant to conversion of 200,000 preferred shares.
On March 18, 2016, the Company issued 2,500,000
shares of common stock issued at $0.04 per share pursuant to a Special Purchase Agreement signed and funds of $100,000 wired on
March 2, 2016.
On April 7, 2016, the Company entered into
a short-term promissory note and loaned $60,000 to an energy company. The note matures on April 7, 2017 and in interest-free.
For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter, the monthly installment
shall be $2,500 per month until paid in full.
On April 22, 2016, the Company issued 1,000,000
shares issued at $0.035 per share pursuant to Special Purchase Agreement signed and funds of $15,000 an $20,000 wired on April
6 and April 7, 2016, respectively.
On May 19, 2016, the Company issued 200,840
shares issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds received February 24 and March 2, 2016
and company expense paid on February 5, 2016.
On July 25, 2016, the Company issued 500,000
shares of common stock issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds of $25,000 received
July 25, 2016.
On July 25, 2016, the Company entered into
a share exchange and contribution agreement whereby it acquired 100% of the Partnership Interests of New Tex IV, LP, a Texas limited
partnership. The acquisition shall be effective September 1, 2016 and consists of approximately 3,000 acres of and 89 well bores
in the Texas panhandle along with an approximate 5% working interest in a heavy oil project in Missouri. In consideration of this
acquisition, the Company issued 10,000,000 shares of the Company’s common stock with a fair market value of $1,650,000 on
July 25, 2016.
On November 25, 2016, the Company issued 500,000
shares of common stock issued at $0.05 per share pursuant to a Special Purchase Agreement signed and funds of $25,000 received
on November 25, 2016.
NOTE 9 –
STOCK OPTIONS
In consideration for the option to purchase
property (see Note 4) and various agreements in exchange for consulting services, the Company issued stock options to purchase
shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered
to be the closing price of the Company's common stock on the issue dates.
The following is a summary of the Company’s
options issued and outstanding:
|
For
the three months ended November 30, 2016
|
|
For
the three months ended November 30, 2015
|
|
|
Options
|
|
Price
(a)
|
|
Options
|
|
Price
(a)
|
Beginning
balance
|
|
3,841,666
|
|
$
|
0.50
|
|
|
5,161,666
|
|
$
|
0.75
|
Issued
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Ending
balance
|
|
3,841,666
|
|
$
|
0.50
|
|
|
5,161,666
|
|
$
|
0.75
|
|
For
the nine months ended November 30, 2016
|
|
For
the nine months ended November 30, 2015
|
|
|
Options
|
|
Price
(a)
|
|
Options
|
|
Price
(a)
|
Beginning
balance
|
|
5,161,666
|
|
$
|
0.75
|
|
|
5,161,666
|
|
$
|
0.75
|
Issued
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Expired
|
|
(1,300,000)
|
|
|
(0.25)
|
|
|
-
|
|
|
-
|
Ending
balance
|
|
3,841,666
|
|
$
|
0.50
|
|
|
5,161,666
|
|
$
|
0.75
|
The following table summarizes additional
information about the options granted by the Company as of November 30, 2016:
Date
of Grant
|
Options
outstanding
|
|
Options
exercisable
|
Price
(a)
|
|
Remaining
term (b)
|
|
|
|
|
|
|
|
|
|
May 30, 2014
|
375,000
|
|
375,000
|
0.40
|
|
0.50
|
|
June 12, 2014
|
875,000
|
|
875,000
|
0.40
|
|
0.53
|
|
July 21, 2014
|
166,666
|
|
166,666
|
0.75
|
|
0.64
|
|
August 22, 2014
|
1,680,000
|
|
1,680,000
|
1.00
|
|
0.73
|
|
February 24, 2015
|
745,000
|
|
248,333
|
0.40
|
|
1.24
|
|
Total options
|
3,841,666
|
|
3,344,999
|
$ 0.50
|
|
0.56
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Weighted
average exercise price per shares
|
|
(b)
|
Weighted
average remaining contractual term in years.
|
As of November 30, 2016, there remains $166,922
of unrecognized stock option expense.
NOTE 10 - WARRANTS
On June 1, 2014, in consideration for professional
and consulting services provided for raising capital for the Company, warrants were issued to purchase shares of the Company’s
common stock with an exercise price of $0.90 per share. The warrants expire on May 31, 2017. The Company charged $73,303 to professional
fees and consulting which approximated the fair value of the warrants at the grant date.
The Company has estimated the fair value of
the warrant grant using the Black-Scholes model with the following information and range of assumptions:
Warrants issued
|
|
107,934
|
|
|
|
Fair value of warrants granted
|
$
|
73,303
|
|
|
|
Exercise price
|
$
|
0.90
|
|
|
|
Volatility
|
|
376.9%
|
|
|
|
Expected term (years) at issuance
|
|
3.00
|
|
|
|
Risk free rate
|
|
0.79%
|
|
|
|
The following is a summary of the Company’s
warrants issued and outstanding:
|
For
the years ended February 29, 2016
|
|
For
the years ended February 28, 2015
|
|
|
Options
|
|
Price
(a)
|
|
Options
|
|
Price
(a)
|
Beginning
balance
|
|
107,934
|
|
$
|
0.90
|
|
|
-
|
|
$
|
-
|
Issued
|
|
-
|
|
|
-
|
|
|
107,934
|
|
|
0.90
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Ending
balance
|
|
107,934
|
|
$
|
0.90
|
|
|
107,934
|
|
$
|
0.90
|
The following
table summarizes additional information about the warrants granted by the Company as of February 29, 2016:
Date
of Grant
|
Warrants
outstanding
|
|
Warrants
exercisable
|
Price
|
|
Remaining
term
|
|
|
|
|
|
|
|
|
|
June 1, 2014
|
107,934
|
|
107,934
|
0.90
|
|
1.25
|
|
Total warrants
|
107,934
|
|
107,934
|
$ 0.90
|
|
1.25
|
|
NOTE 11 –
SUBSEQUENT EVENTS
On or about January 24, 2017, the Company
executed a Mutual Rescission Agreement with Mountain Top Properties, Inc. whereby all provisions of the share exchange and contribution
agreement dated July 25, 2016 (see Note 5) were revoked by mutual rescission, Mountain Top Properties Inc. agreed to the immediate
cancellation and surrender of the common stock certificates representing 10,000,000 shares common stock of Quantum Energy, Inc.
The Company, therefore, rescinded its acquisition of 100% of the Partnership Interests of New Tex Petroleum IV, LP, a Texas limited
partnership.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
of
Quantum Energy, Inc.
We have audited the accompanying balance sheets
of Quantum Energy, Inc. as of February 29, 2016 and the related statements of income, stockholders’ equity (deficit), and
cash flows for the year ended February 29, 2016. Quantum Energy, Inc.’s management is responsible for these financial statements.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, 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. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Quantum Energy, Inc. as of February 29, 2016 and
the related statements of income, stockholders’ equity (deficit), and cash flows for the year ended February 29, 2016 in
conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company has no revenues, has negative working capital at February 29, 2016, has incurred recurring losses and recurring negative
cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue
as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
/s/ AMC Auditing
AMC Auditing
Las Vegas, Nevada
November 3, 2016
QUANTUM ENERGY, INC.
CONSOLIDATED BALANCE SHEET
|
|
February 29, 2016
|
|
February 28, 2015
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
81
|
|
|
$
|
18,953
|
|
TOTAL
CURRENT ASSETS
|
|
|
81
|
|
|
|
18,953
|
|
OTHER
ASSETS
|
|
|
490,520
|
|
|
|
1,643,168
|
|
TOTAL
ASSETS
|
|
$
|
490,601
|
|
|
$
|
1,662,121
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
$
|
15,922
|
|
|
$
|
12,251
|
|
Promissory notes payable
|
|
|
12,980
|
|
|
|
12,000
|
|
Due
to related party
|
|
|
4,800
|
|
|
|
—
|
|
TOTAL
CURRENT LIABILITIES
|
|
|
33,702
|
|
|
|
24,251
|
|
LONG
TERM LIABILITIES:
|
|
|
—
|
|
|
|
—
|
|
TOTAL
LIABILITIES
|
|
|
33,702
|
|
|
|
24,251
|
|
COMMITMENTS AND CONTINGENCIES
(NOTE 4)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $.001
par value; 10,000,000 shares authorized, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Series A: 3,000,000 shares
allocated, 1,000,000 shares issued and outstanding
|
|
|
1,000
|
|
|
|
1,000
|
|
Series B: 2,000,000 shares
allocated, Nil and 2,000,000 shares issued and outstanding
|
|
|
200
|
|
|
|
200
|
|
Common Stock, $.001 par
value; 300,000,000 shares authorized; 46,070,843 and 44,816,725 shares issued and outstanding, respectively
|
|
|
46,071
|
|
|
|
44,817
|
|
Additional paid-in capital
|
|
|
9,454,781
|
|
|
|
8,853,206
|
|
Stock subscribed
|
|
|
2,890
|
|
|
|
339,118
|
|
Accumulated
deficit
|
|
|
(9,048,043
|
)
|
|
|
(7,600,471
|
)
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
456,899
|
|
|
|
1,637,870
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
490,601
|
|
|
$
|
1,662,121
|
|
|
|
|
|
|
|
|
|
|
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
For
the year ended
|
|
|
February
29, 2016
|
|
February
28, 2015
|
OPERATING
EXPENSE
|
|
|
|
|
|
|
|
|
Advertising
and marketing
|
|
$
|
8,128
|
|
|
$
|
73,844
|
|
Management
fees
|
|
|
54,200
|
|
|
|
83,300
|
|
Office
and administration
|
|
|
69,375
|
|
|
|
202,552
|
|
Stock
option expense
|
|
|
83,461
|
|
|
|
933,368
|
|
Land
option expense
|
|
|
946,075
|
|
|
|
521,040
|
|
Impairment
of land option agreements
|
|
|
206,573
|
|
|
|
—
|
|
Professional
fees
|
|
|
78,250
|
|
|
|
182,522
|
|
TOTAL
OPERATING EXPENSES
|
|
|
1,446,062
|
|
|
|
1,996,626
|
|
LOSS
FROM OPERATIONS
|
|
|
(1,446,062
|
)
|
|
|
(1,996,626
|
)
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Loss
on conversion of debt
|
|
|
—
|
|
|
|
(11,875
|
)
|
Interest
expense
|
|
|
(1,510
|
)
|
|
|
(156,564
|
)
|
TOTAL
OTHER INCOME (EXPENSE)
|
|
|
(1,510
|
)
|
|
|
(168,439
|
)
|
NET
LOSS BEFORE INCOME TAXES
|
|
|
(1,447,572
|
)
|
|
|
(2,165,065
|
)
|
Provision
for income tax
|
|
|
—
|
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(1,447,572
|
)
|
|
$
|
(2,165,065
|
)
|
Basic
and diluted loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.05
|
)
|
Basic
and diluted weighted average number shares outstanding
|
|
|
45,730,614
|
|
|
|
42,667,991
|
|
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY
|
Preferred
shares
|
|
Common
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Par
value
|
|
Number
|
|
Par
value
|
|
Additional
Paid-In Capital
|
|
Stock
subscribed
|
|
Accumulated
(Deficit)
|
|
Total
|
Balance
at February 28, 2013
|
-
|
|
-
|
|
7,466,400
|
|
$
|
7,466
|
|
$
|
2,893,649
|
|
$
|
-
|
|
$
|
(5,230,053)
|
|
$
|
(2,328,938)
|
Issuance
on acquisition of FTPM Resources, Inc.
|
-
|
|
-
|
|
30,000,000
|
|
|
30,000
|
|
|
94,994
|
|
|
-
|
|
|
-
|
|
|
124,994
|
Issued
common shares
|
-
|
|
-
|
|
750,000
|
|
|
750
|
|
|
26,750
|
|
|
-
|
|
|
-
|
|
|
27,500
|
Stock
subscribed on debt conversion
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,016,135
|
|
|
-
|
|
|
2,016,135
|
Net
loss for the year ended February 28, 2014
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(205,353)
|
|
|
(205,353)
|
Balance at February
28, 2014
|
-
|
|
-
|
|
38,216,400
|
|
|
38,216
|
|
|
3,015,393
|
|
|
2,016,135
|
|
|
(5,435,406)
|
|
|
(365,662)
|
Issuance
of Series A preferred stock
|
1,000,000
|
|
1,000
|
|
-
|
|
|
-
|
|
|
2,016,135
|
|
|
(2,016,135)
|
|
|
-
|
|
|
1,000
|
Issuance
of Series B preferred stock
|
200,000
|
|
200
|
|
-
|
|
|
-
|
|
|
199,800
|
|
|
-
|
|
|
-
|
|
|
200,000
|
Stock
subscribed on conversion of debt
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
309,118
|
|
|
-
|
|
|
309,118
|
Stock
subscribed
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
30,000
|
|
|
-
|
|
|
30,000
|
Reversal
of stock purchase
|
-
|
|
-
|
|
250,000
|
|
|
250
|
|
|
54,750
|
|
|
-
|
|
|
-
|
|
|
55,000
|
Beneficial
conversion feature of convertible debenture
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
150,000
|
|
|
-
|
|
|
-
|
|
|
150,000
|
Conversion
of debt
|
-
|
|
-
|
|
4,398,125
|
|
|
4,399
|
|
|
183,402
|
|
|
-
|
|
|
-
|
|
|
187,801
|
Issuance
of warrants in lieu of cash for consulting and professional services
|
|
|
|
|
|
|
|
|
|
|
73,303
|
|
|
-
|
|
|
-
|
|
|
73,303
|
Issuance
of stock options in lieu of cash for consulting and professional services
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
933,367
|
|
|
-
|
|
|
-
|
|
|
933,367
|
Issuance
of stock options for land purchase option agreement
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
1,321,908
|
|
|
-
|
|
|
-
|
|
|
1,321,908
|
Issuance
of common shares in lieu of cash consulting and professional services
|
-
|
|
-
|
|
120,000
|
|
|
120
|
|
|
64,680
|
|
|
-
|
|
|
-
|
|
|
64,800
|
Common
stock issued at $0.50 per share for land option agreements
|
-
|
|
-
|
|
1,012,200
|
|
|
1,012
|
|
|
505,088
|
|
|
-
|
|
|
-
|
|
|
506,100
|
Common
stock issued at $0.41 per share for land option agreement
|
-
|
|
-
|
|
820,000
|
|
|
820
|
|
|
335,380
|
|
|
-
|
|
|
-
|
|
|
336,200
|
Net
income (loss)
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,165,065)
|
|
|
(2,165,065)
|
Balance at February
28, 2015
|
1,200,000
|
|
1,200
|
|
44,816,725
|
|
|
44,817
|
|
|
8,853,206
|
|
|
339,118
|
|
|
(7,600,471)
|
|
|
1,637,870
|
Isuance
of common stock for stock subscribed
|
|
|
|
|
309,118
|
|
|
309
|
|
|
308,809
|
|
|
(309,118)
|
|
|
-
|
|
|
-
|
Stock
subscribed
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,890
|
|
|
-
|
|
|
2,890
|
Purchase
of common shares at $0.20 per share
|
-
|
|
-
|
|
820,000
|
|
|
820
|
|
|
163,180
|
|
|
(30,000)
|
|
|
-
|
|
|
134,000
|
Issuance
of common shares in lieu of cash consulting and professional services
|
-
|
|
-
|
|
125,000
|
|
|
125
|
|
|
46,125
|
|
|
-
|
|
|
-
|
|
|
46,250
|
Stock
based compensation
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
83,461
|
|
|
-
|
|
|
-
|
|
|
83,461
|
Net
income (loss)
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,447,572)
|
|
|
(1,447,572)
|
Balance at February
29, 2016
|
1,200,000
|
|
1,200
|
|
46,070,843
|
|
$
|
46,071
|
|
$
|
9,454,781
|
|
$
|
2,890
|
|
$
|
(9,048,043)
|
|
$
|
456,899
|
QUANTUM ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
|
For
the year ended
|
|
February
29, 2016
|
|
February
28, 2015
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
$
|
(1,447,572)
|
|
$
|
(2,165,065)
|
Adjustments
to reconcile net loss to cash used by operating activities
|
|
|
|
|
|
Stock
based compensation
|
|
83,461
|
|
|
933,368
|
Amortization
expense, land purchase option agreements
|
|
946,075
|
|
|
521,040
|
Impairment
of land option agreements
|
|
206,573
|
|
|
|
Issuance
of common shares in lieu of cash for professional services
|
|
46,250
|
|
|
120,800
|
Issuance
of warrants in lieu of cash for professional services
|
|
-
|
|
|
73,303
|
Loss
on conversion of debt
|
|
-
|
|
|
317,801
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
3,671
|
|
|
(10,454)
|
Bank
indebtedness
|
|
-
|
|
|
(310)
|
Net
cash used by operating activities
|
|
(161,542)
|
|
|
(209,517)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Net
cash used in investing activities
|
|
-
|
|
|
-
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Proceeds
from sales of common stock
|
|
134,000
|
|
|
-
|
Proceeds
from sales of preferred stock
|
|
-
|
|
|
200,000
|
Proceeds
from subscription of common stock
|
|
2,890
|
|
|
30,000
|
Proceeds
from loan payable
|
|
980
|
|
|
-
|
Repayment
of loan, related party
|
|
-
|
|
|
(1,530)
|
Proceeds
from loan, related party
|
|
4,800
|
|
|
-
|
Net
cash provided by financing activities
|
|
142,670
|
|
|
228,470
|
Net
increase (decrease) in cash and cash equivalents
|
|
(18,872)
|
|
|
18,953
|
CASH
AT BEGINNING OF PERIOD
|
|
18,953
|
|
|
-
|
CASH
AT END OF PERIOD
|
$
|
81
|
|
$
|
18,953
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
|
|
|
Interest
paid in cash
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
NON-CASH
FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
|
Common
stock issued for land option agreements
|
$$11
|
-
|
|
|
842,300
|
Stock
options issued for land option agreements
|
|
-
|
|
|
1,321,908
|
QUANTUM ENERGY, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
Period from inception to February 29, 2016
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 rail transload development, oil and gas exploration, drilling,
well completion, and fuel distribution.
The Company is domiciled in the Unites States
of America, 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.
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary FTPM Resources Ltd. after elimination of the intercompany accounts
and transactions.
Going Concern
As shown in the accompanying financial statements,
the Company has incurred operating losses since inception. As of February 29, 2016, the Company has limited financial resources
with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying balance sheets
and statements of operations, the Company has an accumulated deficit of $9,048,043 at February 29, 2016. As of February 29, 2016
the Company's working capital was $33,621. Achievement of the Company's objectives will be dependent upon the ability to obtain
additional financing, to locate profitable mining properties and 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 production. 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. The financial statements
do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs
should the Company be unable to continue as a going concern. In the event the Company is unable to fulfill the terms as specified
in the Property Option Agreements (Note 3), the Company could default on the agreement(s) and surrender its right to future claims
on the respective property.
Use of Estimates
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts
of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates
relate to asset impairments and stock option valuation. Actual results could differ from these estimates and assumptions and could
have a material effect on the Company’s reported financial position and results of operations.
Cash and cash equivalents
For the purposes of the statement of cash
flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be
cash equivalents.
Financial Instruments
The Company's financial instruments include
cash and cash equivalents, and short term notes payable, related party. All instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments, approximates fair value at February 29, 2016 and February
28, 2015, respectively.
Fair Value Measures
The Financial Accounting Standards Board Accounting
Standards Codification Topic 820 "Fair Value Measurements" ("ASC 820") requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value
hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial
instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the
fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1: Level 1 applies to assets
or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2:
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset
or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs
are observable or can be derived principally from, or corroborated by, observable market data.
Level 3:
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant
to the measurement of the fair value of the assets or liabilities.
At February
29, 2016 and February 28, 2015, the Company had no assets or liabilities accounted for at fair value on a recurring basis.
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 employees will retain their vested stock options before exercising them (“expected
life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”),
employee 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.
Loss 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
for years ended February 29, 2016 and February 28, 2015, would be as follows:
|
February
29, 2016
|
|
February
28, 2015
|
Stock options
|
|
4,961,666
|
|
|
5,161,666
|
Warrants
|
|
107,934
|
|
|
107,934
|
TOTAL POSSIBLE DILUTION
|
|
5,069,600
|
|
|
5,269,600
|
|
|
|
|
|
|
At February 29, 2016 and February 28, 2015,
respectively, the effect of the Company's outstanding options and common stock equivalents would have been anti-dilutive.
Income Taxes
The Company recognizes provision for income
tax using the liability method. Deferred income tax liabilities or assets at the end of each period are determined using the tax
rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred
tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
New Accounting Pronouncement
In August
2014, the FASB issued ASU No. 2014-15—Presentation of Financial Statements—Going Concern. The guidance requires an
entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial
doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued (or within one year after the date that the financial statements are available to be issued when applicable). If conditions
or events exist that raise substantial doubt about an entity’s ability to continue as a going concern, the guidance requires
disclosure in the financial statements. The guidance will be effective for the annual period ending after December 15, 2016, and
for annual periods and interim periods thereafter. Early application is permitted. The Company has concluded that
adoption of the standard would have minimal impact on the Company’s financial statements as such disclosure is already included
the financial statements.
NOTE 3 – OTHER ASSETS
The Company has executed a series of land
purchase option agreements with various landowners in and around the State of Montana. In aggregate the land purchase option agreements
encompass approximately 1,150 acres. For a period of two years from the respective execution date, the Company has the option
to purchase the property for the purpose of evaluating and developing a Clean Energy Center including a diesel refinery, crude
processing and natural gas liquid stripping facility and CO2 capture equipment for enhanced oil recovery.
The fair value of consideration given for
the exclusive option to purchase has been charged to “Other Assets” and amortized over the respective term of the
land purchase option agreement. For the years ended February 29, 2016 and February 28, 2015, the Company amortized “Land
Option Expense” $946,075 and $521,040, respectively.
The Company recognized an impairment expense
of $206,573 relating to certain land purchase option agreements at February 29, 2016. There are no liabilities or future obligations
to the Company on any of the impaired land purchase option agreements. Absent notification to or from land owners, the Company
retains right to purchase related properties. To date, notification of cancellation has not been communicated by either party.
However, in lieu of executed extensions to the land purchase options, the Company accelerated amortization of remaining book value
on those properties to which significant cash payments have been delinquent and, therefore, are potentially in default of terms
of the purchase option agreement.
The following is a summary of the Company’s
Other Assets at February 29, 2016:
Option
Agreement Date
|
Consideration
|
Number
|
Fair
Value
|
Accumulated
Amortization
|
Allowance
for Impairment
|
Net
Book Value
|
August 22, 2014
|
Stock options
|
1,120,000
|
$521,691
|
($391,268)
|
-
|
130,423
|
August 22, 2014
|
Stock options
|
1,680,000
|
800,217
|
(600,163)
|
-
|
200,054
|
August 26, 2014
|
Common shares
|
560,000
|
280,000
|
(210,000)
|
(70,000)
|
-
|
August 26, 2014
|
Common shares
|
452,000
|
226,100
|
(169,575)
|
(56,525)
|
-
|
October 8, 2014
|
Cash
|
-
(1)
|
-
|
-
|
-
|
-
|
October 24, 2014
|
Common shares
|
820,000
|
336,200
|
(256,152)
|
(80,048)
|
-
|
November 12, 2014
|
Cash
|
-
(1)
|
-
|
-
|
|
-
|
December 10, 2014
|
Cash
|
-
(1)
|
-
|
-
|
|
-
|
TOTAL
|
|
|
$2,164,208
|
($1,627,158)
|
($206,573)
|
$537,050
|
|
|
|
|
|
|
|
|
(2)
|
Consideration
to be paid upon exercise of property option agreement. No fair value of option agreement
made as of balance sheet date.
|
NOTE 4 – PROMISSORY NOTES PAYABLE
The Company’s outstanding notes payable
and accrued interest payable are summarized as follows:
|
February
29, 2016
|
|
February
28, 2015
|
|
Note
payable
|
|
Accrued
interest
|
|
Note
payable
|
|
Accrued
interest
|
15% unsecured note payable
by the Company due on demand
|
$
|
10,000
|
|
$
|
3,760
|
|
$
|
10,000
|
|
$
|
2,260
|
TOTAL
|
$
|
10,000
|
|
$
|
3,760
|
|
$
|
10,000
|
|
$
|
2,260
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 5– RELATED PARTY TRANSACTIONS
For the years ended February 29, 2016 and
February 28, 2015, respectively, the Company paid management fees including amounts accrued since inception of $52,700 and $26,000
to the Officers of the Company.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
The Company engaged the services of a government
relations advisory group under an agreement in which the payment obligation is subject to the receipt of funding. That agreement
is now terminated and disputed as to its enforceability. If or when the subject funding is realized, and if or when the enforceability
issue is resolved, the Company may have a contingent liability in the approximate amount of $75,000.
NOTE 7 – COMMON STOCK
Authorized
295,000,000 voting common shares with a par value of
$0.001 per share
3,000,000 convertible preferred “A” shares
with a par value of $0.001 per share
2,000,000 convertible preferred 6% series “B”
shares with a par value of $0.001 per share
|
Restricted
|
Non-restricted
|
February
29, 2016
|
|
Restricted
|
Non-restricted
|
February
29, 2015
|
Common
Shares
|
|
|
|
|
|
|
|
Outstanding
at beginning of period
|
37,576,825
|
7,239,900
|
44,816,725
|
|
30,976,500
|
7,239,900
|
38,216,400
|
Issued
|
1,254,118
|
-
|
1,254,118
|
|
6,600,325
|
-
|
6,600,325
|
Outstanding
at end of period
|
38,830,943
|
7,239,900
|
46,070,843
|
|
37,576,825
|
7,239,900
|
44,816,725
|
|
|
|
|
|
|
|
|
Preferred
Convertible Shares
|
|
|
|
|
|
|
|
Outstanding
at beginning of period
|
-
|
1,200,000
|
1,200,000
|
|
-
|
-
|
-
|
Issued
Series A
|
-
|
-
|
-
|
|
-
|
1,000,000
|
1,000,000
|
Issued
Series B
|
-
|
-
|
-
|
|
-
|
200,000
|
200,000
|
Converted
Series B
|
-
|
(200,000)
|
(200,000)
|
|
-
|
-
|
-
|
Outstanding
at end of period
|
-
|
1,000,000
|
1,000,000
|
|
-
|
1,200,000
|
1,200,000
|
|
|
|
|
|
|
|
|
Each of the Series A preferred stock is convertible into common
shares, at the option of the holder on a 1:100 basis. Each of the 6% series B preferred stock is convertible into common shares
on a 1:1.25 basis if converted within twelve months from the date of purchase and on a 1:1.15 basis if converted within the second
twelve months from the date of purchase and on a 1:1 basis if converted in month twenty-five or thereafter from the date of purchase.
Effective July 30, 2010, the Board of Directors
authorized a 1,000 for 1 reverse stock split of the Company’s issued common stock. One thousand (1,000) old issued common
shares were reverse split into one (1) new issued common share. All references in the accompanying financial statements to the
number of common shares issued have been restated to reflect the reverse stock split.
Effective November 15, 2013 the Board of Directors
authorized a 150 for 1 forward stock split of the Company’s issued common stock. One (1) old issued common share was forward
split into one hundred and fifty (150) new issued common shares. All references in the accompanying financial statements to the
number of common shares issued have been restated to reflect the forward stock split.
On March 4, 2014, the Company issued 750,000
common shares in conversion of a promissory note, a transaction that was authorized prior to 2/28/14 and included in the year-end
balance.
On March 10, 2014, the Company issued 625,000
common shares in conversion of a $20,000 promissory note.
On March 19 2014, the Company issued 250,000
common shares with a fair market value of $0.22 per share or $54,75 as resolution of a disputed vendor balance for professional
services.
On March 25, 2014 the Company accepted a $150,000
convertible debenture which was converted by the holder to 3,773,125 common shares of the Company.
On June 10, 2014, the Company issued 120,000
common shares with a fair market value of $0.54 per share or $64,680 in consideration of consulting services rendered.
On September 2, 2014, the Company issued 1,012,000
common shares in consideration of two Land Purchase Option Agreements, the fair value of which was $505,088 based on a closing
price of $0.50 per share.
On November 11, 2014, the Company issued 820,000
common shares in consideration of the execution of a Land Purchase Option Agreement, the fair value of which was $336,200 based
on a closing price of $0.41 per share.
The Company received $34,000 in proceeds from
stock purchase agreements; Trevor MacNeil $20,000 and Donald MacNeil $14,000 on August 10, 2015 and August 11, 2015 consecutively.
On September 4, 2015, Trevor MacNeil was issued
100,000 common shares - Special Purchase Agreement signed and funds wired on August 10, 2015.
On September 4, 2015, Donald MacNeil was issued
50,000 common shares – Special Purchase Agreement signed and funds wired on August 11, 2015.
On September 4, 2015, Donald MacNeil 10,000
common shares issued to daughter as nominee – Special Purchase Agreement signed and funds wired on August 11, 2015
On November 18, 2015, the Company issued 125,000
to two vendors pursuant to an agreement to resolve disputed professional fees. The fair value of the shares issued was $46,250
based on a closing price of $0.37 per share.
NOTE 8 - STOCK
OPTIONS
In consideration for the option to purchase
property (see Note 4) and various agreements in exchange for consulting services, the Company issued stock options to purchase
shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered
to be the closing price of the Company's common stock on the issue dates.
The Company has estimated the fair value of
these option grants using the Black-Scholes model with the following information and range of assumptions:
Options issued
|
|
5,161,666
|
Aggregate fair value of options issued
|
$
|
2,505,659
|
Weighted average exercise price
|
$
|
0.72
|
Weight average volatility
|
|
216.2%
|
Expected term (years) at issuance
|
|
2.24
|
Weighted average risk free rate
|
|
0.79%
|
The following is a summary of the Company’s
options issued and outstanding:
|
For
the years ended February 29, 2016
|
|
For
the years ended February 28, 2015
|
|
|
Options
|
|
Price
(a)
|
|
Options
|
|
Price
(a)
|
Beginning
balance
|
|
5,161,666
|
|
$
|
0.75
|
|
|
5,161,666
|
|
$
|
0.75
|
Issued
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Ending
balance
|
|
5,161,666
|
|
$
|
0.75
|
|
|
5,161,666
|
|
$
|
0.75
|
The following table summarizes additional
information about the options granted by the Company as of February 29, 2016:
Date
of Grant
|
Options
outstanding
|
|
Options
exercisable
|
Price
(a)
|
|
Remaining
term (b)
|
|
|
|
|
|
|
|
|
|
March 27, 2014
|
75,000
|
|
75,000
|
$ 0.85
|
|
0.07
|
|
May 30, 2014
|
375,000
|
|
375,000
|
0.40
|
|
1.25
|
|
May 30, 2014
|
125,000
|
|
125,000
|
0.60
|
|
0.25
|
|
June 12, 2014
|
875,000
|
|
875,000
|
0.40
|
|
1.28
|
|
July 21, 2014
|
166,666
|
|
166,666
|
0.75
|
|
1.39
|
|
August 22, 2014
|
1,120,000
|
|
1,120,000
|
1.00
|
|
0.48
|
|
August 22, 2014
|
1,680,000
|
|
1,680,000
|
1.00
|
|
1.48
|
|
February 24, 2015
|
745,000
|
|
248,333
|
0.40
|
|
1.99
|
|
Total options
|
5,161,666
|
|
4,664,999
|
$ 0.75
|
|
1.23
|
|
|
|
|
|
|
|
|
|
|
(c)
|
Weighted
average exercise price per shares
|
|
(d)
|
Weighted
average remaining contractual term in years.
|
As of February 29, 2016, there remains $166,922
of unrecognized stock option expense.
NOTE 9 - WARRANTS
On June 1, 2014, in consideration for professional
and consulting services provided for raising capital for the Company, warrants were issued to purchase shares of the Company’s
common stock with an exercise price of $0.90 per share. The warrants expire on May 31, 2017. The Company charged $73,303 to professional
fees and consulting which approximated the fair value of the warrants at the grant date.
The Company has estimated the fair value of
the warrant grant using the Black-Scholes model with the following information and range of assumptions:
Warrants issued
|
|
107,934
|
Fair value of warrants granted
|
$
|
73,303
|
Exercise price
|
$
|
0.90
|
Volatility
|
|
376.9%
|
Expected term (years) at issuance
|
|
3.00
|
Risk free rate
|
|
0.79%
|
|
|
|
The following is a summary of the Company’s
warrants issued and outstanding:
|
For
the years ended February 29, 2016
|
|
For
the years ended February 28, 2015
|
|
|
Options
|
|
Price
(a)
|
|
Options
|
|
Price
(a)
|
Beginning
balance
|
|
107,934
|
|
$
|
0.90
|
|
|
-
|
|
$
|
-
|
Issued
|
|
-
|
|
|
-
|
|
|
107,934
|
|
|
0.90
|
Exercised
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Expired
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Ending
balance
|
|
107,934
|
|
$
|
0.90
|
|
|
107,934
|
|
$
|
0.90
|
The following table summarizes additional
information about the warrants granted by the Company as of February 29, 2016:
Date of Grant
|
Warrants
outstanding
|
|
Warrants
exercisable
|
Price
|
|
Remaining
term
|
|
|
|
|
|
|
|
|
|
June 1, 2014
|
107,934
|
|
107,934
|
0.90
|
|
1.25
|
|
Total warrants
|
107,934
|
|
107,934
|
$ 0.90
|
|
1.25
|
|
NOTE 10 – SUBSEQUENT EVENTS
On April 7, 2016, the Company entered into
a short-term promissory note and loaned $60,000 to an energy company. The note matures on April 7, 2017 and in interest-free.
For the first twelve months, there are no monthly installment payments due to Quantum Energy, Inc. Thereafter, the monthly installment
shall be $2,500 per month until paid in full.
On March 11, 2016, the Company issued 400,000
common shares issued pursuant to conversion of 200,000 preferred shares.
On March 18, 2016, the Company issued 2,500,000
shares of common stock issued at $0.04 per share pursuant to a Special Purchase Agreement signed and funds of $100,000 wired on
March 2, 2016.
On April 22, 2016, the Company issued 1,000,000
shares issued at $0.035 per share pursuant to Special Purchase Agreement signed and funds of $15,000 an $20,000 wired on April
6 and April 7, 2016, respectively.
On May 19, 2016, the Company issued 200,840
shares issued at $0.05 per share pursuant to a Special Purchase Agreement signed on funds received February 24 and March 2, 2016
and company expense paid on February 5, 2016.
EXHIBITS
UNDERTAKINGS
The undersigned registrant hereby undertakes:
1.
|
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
i.
|
To
include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;
|
ii.
|
To
reflect in the Prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement.
|
iii.
|
To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
|
2.
|
That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
|
3.
|
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
|
4.
|
That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned
registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
i.
|
Any
Preliminary Prospectus or Prospectus of the undersigned registrant relating to the offering required
to be filed pursuant to Rule 424;
|
ii.
|
Any
free writing Prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
|
iii.
|
The
portion of any other free writing Prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant;
and
|
iv.
|
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
5.
|
|
That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser: Each Prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than Prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
statement or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or Prospectus that was part of the registration statement or made in any such document immediately prior to such
date of first use.
|
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised
that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the corporation in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public
policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such case.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized on March 3, 2017.
Quantum Energy, Inc.
|
|
|
By:
|
/s/
Stanley F. Wilson
|
|
|
Stanley F. Wilson
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
Quantum Energy, Inc.
|
|
|
By:
|
/s/
Stanley F. Wilson
|
|
|
Stanley F. Wilson
|
|
|
Principal Financial Officer
|
Pursuant to
the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities
and on the dates indicated.
Name
|
|
Title
|
|
Date
|
/s/
Stanley F. Wilson
|
|
CEO, Chairman,
Secretary, Treasurer
|
|
March
3, 2017
|
Stanley F. Wilson
|
|
|
|
|
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