Item
1.01 Entry into a Material Definitive Agreement.
Quad
M Solutions, Inc., an Idaho corporation, (the “Company” or “Registrant”), is a public holding company that offers
staffing services and employee benefits, such as health plans, HR-human resources, and payroll services, to small and mid-sized group
employers. The Company is filing this Current Report on Form 8-K to disclose recent material events, including the Company’s receipt
of substantial credit facility financing, elimination of toxic convertible debt and the surrender of potentially dilutive preferred stock,
all for the benefit of the Company’s shareholders.
On
April 9, 2021, the Company entered into a Master Senior Loan Agreement (“MSLA”) with BeachStar Partners, LLC (“BeachStar”)
as Lender and Administrative Agent. Pursuant to the MSLA, the Company borrowed the initial sum of $4,200,000(the “BeachStar Loan”).
Together with the MSLA, the Company entered into a Security Agreement with BeachStar, while the Company’s wholly-owned subsidiary,
Nuaxess 2, Inc., entered into a Guaranty Agreement with BeachStar, in order to provide security and ensure recourse for BeachStar.
The
MSLA contains customary representations, warranties, and agreements of the Company and BeachStar, as wells as indemnification rights
and other obligations of the parties.
With
the initial proceeds of the BeachStar loan, the Company has been able to (i) pay existing loans in full, (ii) satisfy dilutive convertible
financings; (iii) expand operations and (iv) reserve capital for the Company growth and expansion, including acquisition of targeted
enterprises.
The
MSLA further provides for a credit facility in the form of additional incremental loans in tranches of $1,000,000 for every five hundred
(500) insured employee lives added by the Company, up to a maximum of sixty-five thousand (65,000) insured employee lives, or one hundred
thirty million dollars ($130,000,000) (the “Credit Facility”). As a result, the Company is positioned to realize revenue
from additional premium payments from its clients as more employees are insured through the Company’s health insurance plans and
larger employers use the Company’s benefit services, while drawing down on additional capital funding from the Credit Facility
made available by BeachStar as necessary to finance increased operational capacity and further expansion and growth through strategic
acquisitions.
The
BeachStar Loan is repayable as the greater of a set monthly sum or a percentage of monthly premiums received by the Company. Each month,
BeachStar will be entitled to receive either 4% of the Company’s net revenues or interest at a rate of 1.5% per month (18%/annum).
The Company’s initial loan repayment obligation amounts to $63,000 per month until the principal becomes due and payable, which,
in the case of the initial funding sum, is eighteen (18) months from execution of the BeachStar loan documents, or October 8, 2022. The
MSLA contains no prepayment penalty, which could allow the Company to avoid costly interest payments in the event expected revenues are
realized. Further, all payments made by the Company that exceed the monthly interest (1.5%) reduce the principal balance from which the
interest amount is calculated.
In
order to preserve existing shareholder value, the Company is intent on avoiding new funding involving convertible securities. The initial
funds received from the BeachStar loan were used to resolve the Company’s existing convertible debt, as set forth
hereafter. The Company further intends to avoid any funding opportunities that could serve to dilute the equity of the Company held by
management and current shareholders. Accordingly, and in keeping with this stated intent, the MSLA is not convertible to the Company’s
stock unless in the event of a material uncured default of the MSLA, and the MSLA contains no anti-dilution provisions favoring BeachStar.
The
foregoing description of the MSLA is not complete and is qualified in its entirety by reference to the full text of the Standby Equity
Distribution Agreement which will be filed as an exhibit to the Company’s next periodic filing.
On
June 8, 2021, the Company reached an agreement with the holders of the Company’s Series E and D Preferred Stock to surrender those
issuances in their entireties.
The
Series D Holders (Carriage House Capital, Inc. and Draper, Inc.) have agreed to accept the sum of two million dollars ($2,000,000.00)
from Quad M payable over nine (9) months in exchange for the immediate surrender of all outstanding shares of Series D Preferred Stock
and warrants to purchase One Million (1,000,000) shares of the Company’s common stock each at a price of $1.00 over the next three
(3) years. As security for the payout, Quad M has agreed to reserve 160,000 shares of Series D Preferred for each of the Series D Holders,
which amount will diminish as further payments are made, until satisfied in full.
The
Series E Holder (KinerjaPay, Inc.) holds 16,902 shares of Series E Preferred Stock. The Series E Holder and Quad M have agreed to allow
the Series E Holder to convert all remaining shares of Series E Preferred Stock into 2,000,000 registered and freely trading common shares.
The Company has also issued the Series E Holder warrants to purchase One Million (1,000,000) shares of the Company’s common stock
at a price of $1.00 over the next three (3) years.