QUANTUM ENERGY INC. - Quarter Report: 2021 November (Form 10-Q)

PART I - FINANCIAL INFORMATION

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

The accompany notes are an integral part of these financial statements.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

The accompany notes are an integral part of these financial statements.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

The accompany notes are an integral part of these financial statements.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2021 AND 2020 - UNAUDITED

The accompany notes are an integral part of these financial statements.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

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, mining, and the refining and reprocessing of rare earth minerals and materials for the production of magnetic products and manufacturing of magnets and magnetic assemblies.

The Company is domiciled in the Unites States of America and trades on the OTC market under the symbol QEGY.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated balance sheet has been derived from the February 28, 2021 audited financial statements and the unaudited condensed consolidated financial statements as of November 30, 2021 and 2020, have been prepared in accordance with generally accepted accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited financial statements and related footnotes included in our Annual report on Form 10-K for the year ended February 28, 2021 (the “2019 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”).  It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for fair condensed consolidated financial statements presentation. Operating results for the three and nine months ended November 30, 2021, are not necessarily indicative of the results of operations expected for the year ending February 28, 2022.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries FTPM Resources Ltd. and Dominion Energy Processing Group, Inc. after elimination of the intercompany accounts and transactions.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and uncertainties

The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - continued

Fair value of financial instruments

The Company's financial instruments include cash and cash equivalents, promissory notes payable, and promissory notes payable - related parties. All instruments are accounted for on a cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2021 and February 28, 2021, respectively.

When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

At November 30,, 2021 and February 28, 2021, the Company had no assets or liabilities accounted for at fair value on a recurring basis.

Long-Lived Assets

The Company reviews long-lived assets which include a deposit on land purchase for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows and reports any impairment at the lower of the carrying amount or the fair value less costs to sell.

Stock-based Compensation

The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time stock options will be held before they are exercised (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting periods as determined by the Board of Directors. The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.

Related Parties

In accordance with ASC 850 “Related Party Disclosure”, a party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company; its directors, officers, and management; members of the immediate families of principal owners of the Company and its management; and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

New Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements, including the new lease standard. The Company does not have any leases and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 3 – GOING CONCERN

These condensed consolidated financial statements have been prepared in accordance with U.S. GAAP applicable to a company that is a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months.

As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of November 30, 2021 and February 28, 2021, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying condensed consolidated balance sheets and condensed consolidated statements of operations, the Company has an accumulated deficit and a working capital deficit at November 30, 2021 and February 28, 2021. Achievement of the Company's objectives will be dependent upon the ability to obtain additional financing, generate revenue from current and planned business operations, and control costs. The Company plans to fund its future operations by joint venturing, obtaining additional financing from investors, and/or lenders, and attaining additional commercial revenue. However, there is no assurance that the Company will be able to achieve these objectives, therefore substantial doubt about its ability to continue as a going concern exists.

NOTE 4 – EARNINGS PER SHARE

Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.

The dilutive effect of outstanding securities as of November 30, 2021, and February 28, 2021, respectively, would be as follows:

At November 30, 2021 and February 28, 2021, respectively, the effect of the Company's outstanding options and warrants would have been anti-dilutive.

NOTE 5 – OTHER ASSETS

Work in Progress

Work in progress consists of partially manufactured and raw rare earth metal products used in production in the amount of $118,358 at November 30, 2021.

Deposits – Related Party

Deposits – Related Party consist of deposits made to a related party that share board members of the Company. A letter of intent was signed on October 12,2021 that calls for the purchase of shares of common stock of the related party to obtain a majority stake at a purchase price per share of $2.10 with closing scheduled for December 15, 2022. The letter of intent is non-binding and if the majority shares are not obtained the deal is terminated and the money is refunded. Hence, the classification of deposits of $9,280,000 at November 30, 2021. The Company is expecting to acquire majority ownership by the closing date.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 6 – PROMISSORY and CONVERTIBLE NOTES PAYABLE

The Company’s outstanding notes payable are summarized as follows:

Interest expense for the three months ended November 30, 2021, and 2020 was $1,453 and $5,164 respectively. Interest expense for the nine months ended November 30, 2021, and 2020 was $4,363 and $15,497, respectively.

Convertible note payable consists of one note payable in the amount of $-0- and $67,500 at November 30, 2021 and February 28, 2021, respectively. The note which was issued in April 2019 for $45,000 accrued interest at an annual rate of 12% and matured in April 2020. In the event of default, the note principal is increased by 150% times the outstanding principal and provides for default interest at 22%. The conversion option expired on October 7, 2020.

On June 18, 2019, the Company received a default notice from Power Up stating that the Company was in default under the Power Up Note because, among other reasons, the Company failed to comply with the reporting requirements of the Securities Exchange Act of 1934 as required by the Note, and therefore accelerating the terms of the Power Up Note and demanding that the Company pay the default sum of $67,500 together with accrued interest and accrued default interest with respect to the Power Up Note. The Company reached a settlement of this matter with Power Up as of April 2021 in the amount of $70,200. Included in gain on debt conversion of $140,395 for the nine months ended November 30, 2021, is $23,996 of accrued interest that was not paid and $116,399 of derivative liability.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 7 – PROMISSORY NOTES PAYABLE, RELATED PARTY AND OTHER RELATED PARTY TRANSACTIONS

The Company’s outstanding notes payable, related party are summarized as follows:

Interest expense for the three months ended November 30, 2021, and 2020 was $1,894 and $1,894, respectively. Interest expense for the nine months ended November 30, 2021, and 2020 was $5,720 and $5,720, respectively.

Starting January 1, 2019, the Company began accruing a monthly management fee of $15,000 due to an advisory company owned by Andrew J. Kacic, the Company’s former chief executive officer (“CEO”). During the year ended February 28, 2019, the Company recognized management fees of $30,000 under this agreement which amount is included in “Accounts payable and accrued liabilities, related parties” on the consolidated balance sheet at February 28, 2019. Since February 28, 2019, no additional management fees have been accrued since the parties are in dispute. There were no similar management fees due the CEO prior to December 31, 2018. Certain directors and officers of the Company dispute the management fee asserting that no consulting agreement has been executed. It is possible that the amount ultimately paid to the advisory company will be other than the accrued balance of $30,000 due to continuing negotiations between the board of directors and the former CEO. The disputed amount as of the date of these financials is $150,000, which is the remaining 10 (ten) months of the management fee for the calendar year ended 2019. Amounts due to Andrew Kacic at November 30, 2021 and February 28, 2021 were $107,868 and $17,868, respectively, but are contested by the Company.

Certain officers, directors and other related parties of the Company have paid various expenses on behalf of the Company. Balances due to the officers, directors and a related company for reimbursement of these expenses were $198,801 and $197,302 at November 30, 2021 and February 28, 2021, respectively, which amounts are included in “Accounts payable and accrued liabilities - related parties” on the consolidated balance sheets. These balances owed are contested by the Company.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 8 – COMMON STOCK PAYABLE

Common Stock Payable – for Contracts/Agreements

Common stock payable for contracts/agreements consist of 1 million shares owed to Raul Factor per the joint venture agreement (Note 11) and 1 million shares owed to landlord for rent at February 28, 2021. On June 7, 2021, 1,000,000 shares were issued to the landlord. These shares were adjusted to its fair value of $600,000 on June 7, 2021, and $100,000 was recognized as unrealized gain on that date. The Company also recognized a gain on the issuance of these shares in the amount of $360,000. At November 30, 2021, the fair value of the remaining shares owed to Raul Factor were adjusted to its fair value of $420,000 based on the closing price of the stock on that date. The Company recognized unrealized gain on common stock payable of $250,000 and $-0- during the three months ended November 30, 2021 and 2020, respectively. The Company recognized unrealized gain on common stock payable of $480,000 and $-0- during the nine months ended November 30, 2021 and 2020, respectively.

Common Stock Payable – Deposits Received on Subscriptions Agreements

Common stock payable for deposits received on stock subscription agreements consist of 43,768,876 shares owed to various investors who have paid for these shares. At November 30, 2021, the fair value of these shares were adjusted to its fair value of $19,662,084 based on the closing price of the stock on that date. The Company recognized unrealized gain on common stock payable of $9,339,356 and $-0- during the three months ended November 30, 2021 and 2020, respectively. The Company recognized unrealized gain on common stock payable of $6,955,441 and $-0- during the nine months ended November 30, 2021 and 2020, respectively.

NOTE 9– COMMON STOCK

Common stock

The Company is authorized to issue 495,000,000 shares of its common stock with a par value of $0.001 per share. All shares of common stock are equal to each other with respect to voting, liquidation, dividend, and other rights. Owners of shares are entitled to one vote for each share owned at any Shareholders’ meeting.

Preferred stock

The Company is authorized to issue 5,000,000 shares of its preferred stock with a no-par value per share with no designation of rights and preferences.  

Treasury Stock

During the nine months ended November 30, 2021, the Company bought back 8,814,411 shares of its stock in the amount of $813,261 and placed it in treasury.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 10 - WARRANTS

The following is a summary of the Company’s warrants issued and outstanding:

The following table summarizes additional information about the warrants granted by the Company as of November 30, 2021 and February 28, 2021:

NOTE 11 – OTHER MATTERS- Joint Venture

Easy Energy Systems Inc. Memorandums of Understanding

On April 2, 2019, the Company and its subsidiary FTPM Resources, Inc. entered into a Non-Binding Memorandum of Understanding (“MOU-1”) with Easy Energy Systems, Inc. (“EESI Systems”). Pursuant to the MOU-1, if certain conditions are met, including the availability of financing: (i) EESI Systems and FTPM will enter into a joint venture, which would be owned 33% by FTPM and 67% by EESI Systems, for the purpose of developing and marketing of “clear glucose” FTPM will have a 90-day option beginning April 30, 2019, to merge with EESI Systems, whereby EESI Systems will be the surviving entity; EESI Systems will have the right to acquire shares of preferred stock of the Registrant, with such rights and preferences as the parties shall agree; and EESI Systems will have the right to appoint members to the board of directors of the Registrant. EESI Systems designs, manufacturers, operates and sells its patented 1M, 2M, and 5M gallon per year, small-scale, modular biorefineries for the production of alternative liquid biofuels from organic waste streams.

On April 16, 2016 the Company entered into a separate Non-Binding Memorandum of Understanding (“MOU-2”) to acquire EESI Infrastructure Series, LLC (“EESI Infrastructure”). The prospective EESI Infrastructure acquisition, if consummated as provided in the MOU-2, would provide a guarantee for the construction of an addition to the existing plant of EESI Systems in Emmetsburg, Iowa. This addition will add a 9.3 Mega Watt dual gas power plant to EESI Systems’ Emmetsburg facility at an anticipated cost of approximately $10 million. Upon signing the MOU-2, the Company paid $25,000 to the EESI Infrastructure. Due to the uncertainty of this agreement, the $25,000 deposit has been expensed in General and Administrative expenses for the year ended February 29, 2020.

As of November 30, 2021, no action has been performed under either MOU.

QUANTUM ENERGY, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - UNAUDITED

NOVEMBER 30, 2021

NOTE 10 – OTHER MATTERS- Joint Venture - continued

Pursuant to (2) two prior License and Operating Agreements, the principals of Raul Factor BV agreed to provide an aggregate of $200,000 (USD) to purchase an aggregate of 1,000,000 units of Quantum at a price of $0.20 per Unit, (for an aggregate of 1,000,000 shares of the Company’s common stock plus 18 month warrants to purchase an aggregate of 1,000,000 shares of the Company’s common stock at a price of $0.25 per share. Pursuant to these transactions, the Company agreed to use $150,000 of the proceeds from the sale of the Units to purchase the distribution rights of EES-E and EETC and in turn the Company would assign such distribution rights to EES-E and EETC respectively. Also, Raul Factor agreed to invest the required reasonable funding as determined by the board of directors of EETC for the startup, working capital, specific module development and required 6 months of economic demonstration of carpet and artificial turf into energy or value-added products for EETC. Also, EES agreed to contribute its module technologies developed by or available via license agreements from others to EES further on to EES-E via license agreements conforming to the terms set forth in these License and Operating Agreements. Raul Factor also agreed to fund additional capital requirements. As of the date of this report, the $200,000 was received by the Company from Raul Factor, but the stock has not yet been issued. As of November 30, 2021, the stock was valued at $420,000 utilizing the closing price of the shares on November 30, 2021.

Private Placement – Raul Factor – continued

Also, as part of the transactions contemplated by these agreements: (i) the stock purchase warrant issued on November 20, 2016, to Kevin Holinaty to purchase 500,000 shares of the Company’s common stock (“Warrant No. 002”) was amended to extend the exercise period of the warrant through May 19, 2021 and to change the exercise price to $0.25 per share; (ii) the stock purchase warrant issued to Kevin Holinaty issued on June 9, 2017, and amended on March 15, 2018, to purchase 250,000 shares of the Company’s common stock (“Warrant No. 003”) was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25 per share; (iii) the stock purchase warrant issued to Haaye de Jong to purchase 250,000 shares of the Company’s common stock was amended to extend the exercise period to December 9, 2021, and to change the exercise price to $0.25 per share; (iv) the Company issued a warrant to Kevin Holinaty to purchase 500,000 shares of the common stock at a price of $0.25 per share, which warrant has an exercise period until December 20, 2020; (v) the Company issued a warrant to Haaye de Jong to purchase 500,000 shares of the common stock at a price of $0.25 per share, which warrant has an exercise period until December 20, 2020. (See Note 10).

The sale of the Units and the warrants to Kevin Holinaty and Haaye de Jong, the principals of Raul Factor, who have represented that they are “accredited investors” and non-U.S. citizens and in offshore transactions, was made in reliance on the provisions of Regulation D and on Regulation S.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

Any statement that expresses or involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections “Description of Business” and “Management’s Discussion and Analysis and Plan of Operation” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Quantum Energy, Inc. disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Quantum Energy, Inc. qualifies all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statement.

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect,” and similar expressions include the Company’s expectations and objectives regarding its future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis and Plan of Operation” and elsewhere in this Quarterly Report.

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Quantum Energy,”, “Quantum” and the “Company”, mean Quantum Energy, Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

The following statements may be forward-looking in nature and actual results may differ materially.

OFFICES

Our principal executive offices are located at 3805 Rockbottom, Henderson, Nevada. The Company’s telephone number is (877) 355-1277. Our website is www.qegy.energy and is not part of this Quarterly Report.

Historical Operations

The Company was originally incorporated as Boomers Cultural Development, Inc. (“Boomers”) on February 5, 2004, in the State of Nevada to be a service-oriented firm that would integrate the cultural interests of baby boomers with destination learning, by packaging onsite personal growth, education, and entertainment seminars with a variety of vacation destinations. On May 18, 2006, its name was changed to Quantum Energy, Inc. and business plans were changed to focus on the energy industry and in particular the oil and gas segments of the energy industry. 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. However, the anticipated funding opportunities did not materialize.

The business plan from 2008 to 2020 included our plan to develop, construct and operate a “state-of-the-art”, energy efficient, full slate oil refinery including a storage tank farm and associated facilities in Stoughton, Saskatchewan, Canada (the Stoughton Refinery”). In this regard, on August 2, 2016, the Company formed a Canadian subsidiary, Dominion Energy Processing Group, Inc. for purposes of the Pre-development work, construction and operation of the Stoughton Refinery.

The Company previously identified a 480-acre site in Stoughton Saskatchewan (the “Land”) on which it planned to construct the Stoughton Refinery. However, we never obtained the necessary funding to build the finery and so in 2020, it we gave up on that idea.

The Company formed a strategic alliance with Inductance Energy Corporation in 2019, finding tactical advantages through solutions in mining, producing, trading, and manufacturing components and working instruments from rare earth metals and oxides. Within this alliance the two companies also found leadership and specialized talent advantages, thereby fulfilling the Company’s past due compliance obligations to the SEC. This raised investors interest and awareness to the opportunities associated with the production of rare earth materials, which can be used to produce and manufacture innovative technological devices over the next era of energy supply and demand.

Current Business Strategy

On September 22, 2020 the Company entered into a joint development agreement with MP Special Purpose Corporation to enter into the business of mining and refining rare earth materials.

The Company developed a straightforward strategic and tactical business plan that could be executed around 3 basic business segments: Mining, Minerals and Magnets. These 3 segments would become a highly focused center of work for the Company.

Various work at the Company by its technical committee had shown that the Company could enter the mining industry through a very unique path of recovering rare earth and ferrite magnet material from discarded appliances, computers, and other sources in the United States and Canada. Secondly, the Company would concentrate its efforts on the recovery of rare earth materials from other waste streams including fly ash and fly bottom waste streams from combusted coal burning power plants in the United States and Canada. It is estimated that over 1 billion tons of this material exists and dumpsites, and far greater than 4 billion pounds of this material is still generated from coal burning power plants and other sources in the United States alone each year.

Successful recovery from these waste streams are described as follows;

Governmental Regulation

All of our contemplated operations and properties are and will be subject to extensive Canadian and U.S. federal, provincial, state and local environmental and health and safety regulations governing, among other things, the generation, storage, handling, use and transportation of rare earth minerals; the emission and discharge of materials into the environment; waste management. 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.

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.

Results of Operations

Three Months Ended November 30, 2021 Compared to Three Months Ended November 30, 2020. 

Sales for the three months ended November 30, 2021 was $324,240 compared to $-0- for the three months ended November 30, 2020. Cost of goods sold for the three months ended November 30, 2021 was $109,253 compared to $-0- for the three months ended November 30, 2020. Operating expenses for the three months ended November 30, 2021, was $983,144 compared to $4,854 for the three months ended November 30, 2020. The increase in operating expenses was due to the fact that the Company had cash available and therefore were able to resume operations and their SEC filings. Other income and (expense) for the three months ended November 30, 2021 was $9,586,009 compared to $225,627 for the three months ended November 30, 2020. This increase in other income and (expense) of $9,360,382 was due to an increase in unrealized gain on common stock payable of $9,589,356, a decrease in gain on derivative of $232,685 and a decrease in interest expense of $(3,711).

Net Income

Net income for the three months ended November 30, 2021 and 2020 was $8,817,852 and $220,773, respectively. The increase in net income of $8,597,079 was due to the sales of $324,240, the cost of goods sold of $109,253, the increase in operating expenses of $978,290 and increase in other income and (expense) of $9,360,382.

Nine Months Ended November 30, 2021 Compared to Nine Months Ended November 30, 2020. 

Sales for the nine months ended November 30, 2021 was $324,240 compared to $-0- for the nine months ended November 30, 2020. Cost of goods sold for the nine months ended November 30, 2021 was $109,253 compared to $-0- for the nine months ended November 30, 2020. Operating expenses for the nine months ended November 30, 2021 was $2,398,064 compared to $4,854 for the nine months ended November 30, 2020. The increase in operating expenses was due to the fact that the Company had cash available and therefore were able to resume operations and their SEC filings. Other income and (expense) for the nine months ended November 30, 2021 was $7,925,753 compared to $(43,189) for the nine months ended November 30, 2020. During the nine months ended November 30, 2021, the Company had $140,395 in gain on debt settlement, $7,435,441 in unrealized gain on common stock payable, gain on issued common stock payable of $360,000 and $(10,083) in interest expense, compared to the nine months ended November 30, 2020 where the Company had only $(21,972) loss on derivative for a convertible note payable, and incurred ($21,217) in interest expense.

Net Income (Loss)

Net income (loss) for the nine months ended November 30, 2021 and 2010 was $5,742,676 and $(48,043), respectively. The increase in income of $5,790,719 was due to the sales of $324,240, the cost of goods sold of $109,253, the increase in operating expenses of $2,393,210 and the changes to other income and (expenses) as mentioned above.

Liquidity and Capital Resources:

As of November 30, 2021, our assets totaled $17,559,412 which consisted of $8,161,054 in cash, $118,358 in work in progress and $9,280,000 in deposits - related party. The Company's total liabilities were $20,740,122 which consisted of accounts payable and accrued expenses, – related parties, common stock payable – for contracts/agreements, , common stock payable – deposits received on subscriptions agreements, promissory notes payable and promissory notes payable – related parties. As of November 30, 2021, the Company had an accumulated deficit of $14,105,621 and working capital deficit of $3,180,710.

Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended November 30, 2021 and 2020 was $2,337,114 and $-0-, respectively. The increase in the amount used was attributed to the resumption of operations.

Cash from Investing Activities

Net cash used in investing activities was $8,893,261 and $-0- for the nine months ended November 30, 2021 and 2020, respectively due to the purchase of treasury stock of $813,261 and deposits to a related party of $8,080,000.

Cash from Financing Activities

Net cash provided by financing activities was $17,421,921 and $-0- for the nine months ended November 30, 2021 and 2020, respectively, which was due to cash received from sale of common stock subscriptions of $17,489,421 and repayment of a convertible note payable of $67,500.

The Company does not hold any derivative instruments and does not engage in any hedging activities.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2021.

Our management, with the participation of our president (our principal executive officer, principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our president (our principal executive officer, principal accounting officer and principal financial officer) has concluded that, as of the end of such period, our disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our president (our principal executive officer and our principal accounting officer and principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.

The reason for this deficiency relates to the fact that our management is relying on external consultants for purposes of preparing our financial reporting package; however, the officers may not be able to identify errors and irregularities in the financial reporting package before its release as a continuous disclosure document.

Evaluation of Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our Company’s assets that could have a material affect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of our president, our principal executive officer and our principal accounting officer and principal financial officer, an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2021 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of November 30, 2021, our internal control over financial reporting was not effective. We are in the process of adopting specific internal control mechanisms. Future controls, among other things, will include more checks and balances and communication strategies between the management and the board to ensure efficient and effective oversight over Company activities as well as more stringent accounting policies to track and update our financial reporting.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal controls over financial reporting identified in connection with the evaluation described above during the quarter ended November 30, 2021 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

Quantum Energy, Inc. is not a party to any material legal proceedings and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of Quantum Energy, Inc. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to Quantum Energy, Inc. or has a material interest adverse to Quantum Energy, Inc. in reference to pending litigation.

Quantum Energy, Inc. initiated a lawsuit against PCS Advisors, LLC and its principal John Suprock (See 2:21-cv-02184-JAD-BNW Quantum Energy Inc. v. PCS Advisors LLC et al in regards to failure to perform on an agreement executed between Suprock and Quantum on March 30, 2017, which was agreed to and executed by previous Quantum management, all of whom have voluntarily resigned and are no longer associated with the Company. The Company as Plaintiff in this matter seeks the return of approximately 3.4 million shares that the Company intends to prove were gained through the defendants operating as unlicensed broker/dealers.

The Company is not a  party to any other material legal proceedings and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of Quantum Energy, Inc. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to Quantum Energy, Inc. or has a material interest adverse to Quantum Energy, Inc. in reference to pending litigation.

Not applicable.

On June 7, 2021 the Company issued 1,000,000 shares of its common stock in consideration for cancellation of a debt in the amount of $190,000.00. These shares were issued pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933. The issuance was not a public offering as defined in Section 4(2) due to the limited number of persons that received the shares, and the manner of the issuances.  In addition, the transferees of the common stock represented that they had the necessary investment intent as required by Section 4(2) and agreed to receive share certificates or book entry shares containing a legend that states the securities were restricted pursuant to Rule 144 of the Securities Act.

None

None

None

SIGNATURES

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