Consolidated
Notes to Financial Statements
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Quad
M Solutions, Inc. (“the Company”), f/k/a Mineral Mountain Mining & Milling Company, was incorporated under the laws of
the State of Idaho on August 4, 1932 for the purpose of mining and exploring for non-ferrous and precious metals, primarily silver, lead
and copper. Until April 16, 2019, the Company had two wholly owned subsidiaries, Nomadic Gold Mines, Inc., an Alaska corporation, and
Lander Gold Mines, Inc., a Wyoming corporation (the “MMMM Mining Subsidiaries”).
On
March 22, 2019 the Company entered into two separate Share Exchange Agreements pursuant to which it agreed to acquire 100% of the capital
stock of two newly organized private entities, NuAxess 2, Inc., a Delaware corporation, and PR345, Inc., a Texas corporation n/k/a OpenAxess,
Inc., in consideration for the issuance of 400,000 shares of Series C Preferred Stock, issued to the control shareholders of each of
NuAxess and PR345, n/k/a OpenAxess and 400,000 shares of Series D Preferred Stock, issued to the minority, non-control shareholders of
the two entities.
The
closing of the two Share Exchange Agreements occurred on April 16, 2019, at which date NuAxess and PR345 became wholly-owned subsidiaries
of the Company. In addition, on April 16, 2019, the Company sold 75% of its equity interests in the MMMM Mining Subsidiaries for $10,
to Aurum, LLC, a newly organized Nevada corporation (“Aurum”) formed and controlled by Sheldon Karasik, the Company’s
former CEO, Chairman and a principal shareholder, for the purpose of entering into the MBO Agreement and operating the Company’s
formerly wholly-owned Mining Subsidiaries. In addition, Aurum assumed all of the liabilities of the MMMM Mining Subsidiaries. Reference
is made to Recent Developments-Former MMMM Mining Subsidiaries under Note 3 – Former Mining Operations, and Note 6 –
Share Exchange and Assignment Agreement, below.
On
May 13, 2019, the Company filed a Definitive Information Statement on Schedule 14C for the purpose of implementing the following corporate
actions: (i) the increase in the authorized shares of common stock from 100 million shares to 900 million shares (the “Authorized
Common Stock Share Increase”); and (ii) change the name of the Company from Mineral Mountain Mining & Milling Company to Quad
M Solutions, Inc. (the “Name Change”).
On
June 7, 2019, the Company filed Articles of Amendment to its Articles of Incorporation with the Secretary of State of the State of Idaho
effecting the Name Change. On June 14, 2019 the Company filed Articles of Amendment to its Articles of Incorporation with the Secretary
of State of the State of Idaho effecting the Authorized Common Stock Share Increase. In addition, effecting the Authorized Common Stock
Share Increase. In addition, on July 19, 2019, the Company obtained the requisite approval from FINRA for the Name Change.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of Quad M Solutions, Inc and its two wholly owned subsidiaries is presented to assist in understanding
the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which
is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in
the United States and have been consistently applied in the preparation of the financial statements.
Basis
of Presentation
The
consolidated financial statements incorporate the accounts of Quad M Solutions, Inc and its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated in consolidation. The accounts have been prepared in accordance with U.S.
generally accepted accounting principles (“U.S. GAAP”).
Accounting
Method
The
Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.
Earnings
(Losses) Per Share
Basic
earnings per share are computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the
year. Fully-diluted earnings per share is computed by dividing net income (loss) by the sum of the weighted-average number of common
shares outstanding and the additional common shares that would have been outstanding if potential common shares had been issued. Potential
common shares are not included in the computation of fully diluted earnings per share if their effect is anti-dilutive.
Cash
Equivalents
The
Company considers cash, certificates of deposit, and debt instruments with a maturity of three months or less when purchased to be cash
equivalents.
Estimates
The
preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires
the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during
the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s
financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could
have a material effect on the reported amounts of the Company’s financial position and results of operations.
The
Company had a set of convertible notes that had warrants with down round features and there have been events which have triggered recognition
of the down round features. The accounting recognition of these features involved significant estimates by the Company management.
The
accounting recognition of the triggered down round features, which have the same accounting effect as a “dividend”, cumulatively
reduced retained earnings by $1,575,068.
Fair
Value of Financial Instruments
The
Company’s financial instruments as defined by ASC 825-10-50, include cash, receivables, accounts payable and accrued expenses.
All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates
fair value at September 30, 2021 and 2020.
The
standards under ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting
principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value as follows:
Level
1. Observable inputs such as quoted prices in active markets;
Level
2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level
3. Unobservable inputs in which there is little of no market data, which require the reporting entity to develop its own assumptions.
At
December 31, 2021, September 30, 2021 and 2020 the Company did not have any assets measured at fair value other than cash and deposits.
At December 31, 2021, September 30, 2021 and 2020 the Company had conversion features embedded in its convertible notes payable. The
fair value measurement of those derivatives, using a Binomial valuation model, was 4,421,956, $2,718,312 and $3,763,090 at December 31,
2021, September 30, 2021 and September 30, 2020, respectively and is reported as derivative liability on the balance sheet.
Going
Concern
As
shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of December
31, 2021, the Company has limited financial resources with which to achieve its objectives and attain profitability and positive cash
flows from operations. As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit
of $30,908,777. The Company’s working capital deficit is $12,217,850.
Achievement
of the Company’s objectives will depend on its ability to obtain additional financing, to generate revenue from current and planned
business operations, and to effectively operating and capital costs.
The
Company plans to fund its future operations by potential sales of its common stock or by issuing debt securities. However, there is no
assurance that the Company will be able to generate sufficient equity and/or debt capital at terms and conditions satisfactory of the
Company.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under
the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis
of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred
tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5
to allow recognition of such an asset. See Note 5.
New
Accounting Pronouncements
The
Company has evaluated the authoritative guidance issued subsequent to September 30, 2021 and does not expect the adoption of these standards
to have a material effect on its financial position or results of operations.
NOTE
3 – SHARE EXCHANGE AND ASSIGNMENT AGREEMENT
On
April 16, 2019, the Company entered into a Share Exchange and Assignment Agreement (the “MBO Agreement”) with Aurum, LLC
(“Aurum”), a newly formed Nevada corporation organized by Sheldon Karasik, the Company’s former CEO, Chairman and a
principal shareholder for the purpose of acquiring 75% of the capital stock of the MMMM Mining Subsidiaries from the Company for cash
consideration of $10 plus the assumption by Aurum of all of the liabilities of the Mining Subsidiaries. On the date of closing of the
MBO Agreement, the Company made a payment of $100,000 to Aurum, which proceeds were to be used by Aurum to fund the operations of the
MMMM Mining Subsidiaries. The MBO Agreement also required the Company to allocate a portion of the proceeds received by the Company under
the Crown Bridge Equity Line, if any, to pay Aurum for the operations of the MMMM Mining Subsidiaries, among other terms and conditions.
In connection with the MBO Agreement, Aurum assumed all of the liabilities of the MMMM Mining Subsidiaries, which were disclosed to the
Company as totaling approximately $96,673. As a result of this transaction, a loss of $403,327 was recorded.
NOTE
4 – CONVERTIBLE DEBT
Outstanding
Convertible Debt
On
or about November 4, 2021, the Company issued a convertible promissory note to an institutional investor for the principal sum of $25,000,
together with interest at the rate of 8%
per annum, with a maturity date of November
4, 2022. During
the period ended December 31, 2021, $312
of
regular interest and $3,904
of
debt discount was expensed. On or about November 4, 2021, the Company issued a convertible promissory note to an institutional
investor for the principal sum of $50,000,
together with interest at the rate of 8%
per annum, with a maturity date of November
4, 2022. During
the period ended December 31, 2021, $624
of
regular interest and $7,808
of
debt discount was expensed. On or about November 4, 2021, the Company issued a convertible promissory note to an institutional
investor for the principal sum of $25,000,
together with interest at the rate of 8%
per annum, with a maturity date of November
4, 2022. During the period ended December 31,
2021, $312
of regular interest and $4,318
of debt discount was expensed.
On
or about November 4, 2021, the Company issued a convertible promissory note to an institutional investor for the principal sum of
$50,000,
together with interest at the rate of 8%
per annum, with a maturity date of November
4, 2022. During
the period ended December 31, 2021, $624 of
regular interest and $8,636 of
debt discount was expensed. On or about November 9, 2021, the Company issued a convertible promissory note to an
institutional investor for the principal sum of $220,000,
together with interest at the rate of 8%
per annum, with a maturity date of November
9, 2022. During
the period ended December 31, 2021, $2,542 of
regular interest and $27,405 of
debt discount, and $3,937 in
derivative liability discount was expensed. On or about April 29, 2019, the Company issued a convertible promissory note to
another institutional investor for the principal sum of $66,000,
together with interest at the rate of 12%
per annum, with a maturity date of April
29, 2020. During the period ended September
30, 2021, $3,993 of
regular interest, was expensed. During the period ended December 31, 2021, $3,993 of
regular interest was expensed.
On or about May 7, 2019, the Company issued a convertible promissory note to another
institutional investor for the principal sum of $50,000,
together with interest at the rate of 12%
per annum, with a maturity date of May
7, 2020.
On
April 5, 2021, the investor converted the outstanding principal into 925,930 shares of common stock, $15,918 of accrued interest remains
outstanding.
On
or about August 4, 2021, the Company issued a convertible promissory note to an institutional investor for the principal sum of
$660,000,
together with interest at the rate of 8%
per annum, with a maturity date of August
4, 2022. During the period ended December
31, 2021, $13,308 of
regular interest and $166,356 of
debt discount was expensed. On or about August 10, 2021, the Company issued a convertible promissory note to an institutional
investor for the principal sum of $150,000,
together with interest at the rate of 8%
per annum, with a maturity date of August
10, 2022. During the period ended December
31, 2021, $3,024.66 of
regular interest and $37,498.63 of
debt discount was expensed. On or about August 13, 2021, the Company issued a convertible promissory note to an institutional
investor for the principal sum of $137,500,
together with interest at the rate of 8%
per annum, with a maturity date of August
13, 2022. During the period ended December
31, 2021, $2,811 of
regular interest, $30,499 of
debt discount and $4,159 of
derivative liability discount was expensed. On or about August 20, 2021, the Company issued a convertible promissory note to an
institutional investor for the principal sum of $50,000,
together with interest at the rate of 8%
per annum, with a maturity date of August
20, 2022. During the period ended
December31, 2021, $1,008 of
regular interest, $8,241 of
debt discount and $4,362 of
derivative liability discount was expensed. On or about September 20, 2021, the Company issued a convertible promissory note to an
institutional investor for the principal sum of $110,000,
together with interest at the rate of 8%
per annum, with a maturity date of September
20, 2022. During the period ended December
31, 2021, $2,218 of
regular interest and $27,726 of
debt discount was expensed.
Retired
Convertible Debt
On
or about November 27, 2018, the Company issued a convertible promissory note to an institutional investor for the principal sum of $63,000.00,
together with interest at 12% per annum, with a maturity date of November 27, 2019 (the “Note”).
The
Company then issued a replacement convertible promissory note payable to the acquiring institutional investor for the principal sum
of $96,816 with
identical terms to the original note (interest at 12%
per annum, maturity date of November
27, 2019, conversion rights and conversion
price.)
On or about November 29, 2019, the Company and the institutional investor entered into a Note Extension Agreement
(“Extension Agreement”). Pursuant to the Extension Agreement the maturity date was extended to November
30, 2020.
On
or about October 1, 2019, the Company issued a convertible promissory note to the same institutional investor for the principal sum of
$94,000, together with interest at the rate of 10% per annum with a maturity date of September 30, 2020.
On
or about September 1, 2020, the Company entered into a Note Modification Agreement (“Modification”) in which the two above
notes in the amount of $94,000 of principal and $8,627 of accrued interest and $96,816 of principal and $20,403 of accrued interest (described
above) were superseded and consolidated into a single new long-term note in the principal amount of $250,000. The new note bears interest
at a rate of 8% per annum and has a maturity date of December 31, 2021. During the period ended December 31, 2021, there was no expense
for these notes. During the period ended December 31, 2020, $4,322 of regular interest and $91,993 of derivative liability discount was
expensed. This note was fully converted during the year ended September 30, 2021 into 5,750,000 shares of common stock.
On
or about May 17, 2019, the Company issued a convertible promissory note to another institutional investor for the principal sum of $50,000,
together with interest at the rate of 12% per annum, with a maturity date of February 17, 2020. On January 21, 2020, the note was assigned
to another investor with the original terms of the note remaining unchanged. During the period ended December 31, 2021, there was no
expense. During the period ended December 31, 2020, $3,025, of regular interest, was expensed. On April 16, 2021, the outstanding principal
of $50,000 and accrued interest of $17,951 was settled for $37,410, a gain on extinguishment of debt was recorded in the amount of $30,541.
On
or about January 17, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $50,000,
together with interest at the rate of 10%
per annum with a maturity date of October
11, 2020. On October 11, 2020 this note
fell into maturity date default and the interest rate increased to 22%.
During the period ended December 31, 2021, $2,773
of regular interest was expensed. During the
period ended December 31, 2020, $2,592
of regular interest and $2,052
of derivative liability discount was expensed.
On
or about March 3, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $112,750,
together with interest at the rate of 12% per annum, and a default interest amount of 24%, with a maturity date of January 11, 2021.
On September 15, 2020, the investor converted $55,193 of principal and $7,228 of accrued interest into 917,395 of post-split shares of
common stock. During the period ended December 31, 2020 the investor converted the remaining principal
of $57,557, $670 of accrued interest and $1,500 in financing fee into 1,203,822 shares of common stock. During the period ended
December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $18,971 of regular interest,
$28,600 of original issue discount and $122,148 of derivative liability discount was expensed.
On
or about June 4, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $75,000,
together with interest at the rate of 12% per annum, and a default interest amount of 18%, with a maturity date of June 4, 2021. During
the period ended December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $1,603
of regular interest, $1,353 of original issue discount and $49,400 of derivative liability discount was expensed.
On
December 11, 2020, the investor converted the outstanding principal of $75,000
and $4,512
of accrued interest
into 806,413
shares of common stock.
On
or about June 5, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $220,000,
together with interest at the rate of 8% per annum, and a default interest amount of 18%, with a maturity date of June 5, 2021. During
the period ended December 31, 2021, there was no expense association with this note. During the period ended December 31, 2020, $4,261
of regular interest, $7,562 of original issue discount and $47,890 of derivative liability discount was expensed. During the year ended
September 30, 2021, the investor converted the outstanding principal of $190,000 and accrued into 2,523,224 shares of common stock, additionally
the Company paid $30,000 in principle, 12,956 in accrued interest and $4,644 as a prepayment penalty
in the total amount of $47,600 to fully extinguish the note.
On
or about June 8, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $44,000,
together with interest at the rate of 8% per annum, and a default interest amount of 24%, with a maturity date of June 10, 2021. During
the period ended December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $900 of
regular interest, $1,512 of original issue discount and $9,578 of derivative liability discount was expensed. On
April 13,2021, the Company paid $44,000 in principle, $3,012 in accrued interest and $14,148 as a prepayment penalty in the total amount
of $61,160 to fully extinguish the note.
On
or about June 10, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $44,000,
together with interest at the rate of 8% per annum, and a default interest amount of 24%, with a maturity date of June 10, 2021. During
the period ended December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $660 of
regular interest, $4,136 of original issue discount and $26,196 of derivative liability discount was expensed. On
December 16, 2020 the investor converted the outstanding principal of $44,000 and $1,774 of accrued interest into 462,368 shares of common
stock.
On
or about July 1, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $173,500,
together with interest at the rate of 12% per annum, and a default interest amount of 24%, with a maturity date of June 15, 2021. During
the period ended December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $5,321
of regular interest and $45,736 of original issue discount was expensed. On April 13,2021, the
Company paid $94,180 in principle, $16,483 in accrued interest and $4,337 as a prepayment penalty in the total amount of $115,000 to
fully extinguish the note.
On
or about July 6, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of up to $150,000,
together with interest at the rate of 10% per annum, the first twelve months being guaranteed, and a default interest amount of 15%,
with a maturity date of twelve months from the effective date of each tranche. The first tranche was in the amount of $50,000. During
the period ended December 31, 2021, there was no expense associated with this note. During the period ended December 31, 2020, $1,260
of regular interest, $8,723 of original issue discount and $3,709 of original issue discount was expensed. On April 13,2021, the Company
paid $50,000 in principle, $3,904 in accrued interest and $28,596 as a prepayment penalty in the total amount of $82,500 to fully extinguish
the note.
On
or about August 28, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $110,000,
together with interest at the rate of 10% per annum, and a default interest amount of 24%, with a maturity date of August 27, 2021.During
the period ended December 31, 2021there was not expense associated with this note. During the period ended December 31, 2020, $2,811
of regular interest, $7,740 of original issue discount and $20,062 in derivative liability discount was expensed. On March 2, 2021, the
investor converted 80,000 in principle into 2,018,750 shares of common stock. On April 13,2021, the Company paid $30,000 in principle,
$6,025 in accrued interest and $11,983 as a prepayment penalty in the total amount of $48,008 to fully extinguish the note.
On
or about April 1, 2020, the Company issued a promissory note to an institutional investor for the principal sum of $150,000, together
with interest at the rate of 1.5% per month, subject to a fixed minimum of $2,250 per month. The lender was also granted 4% of collections
received by the Company, from which interest would be paid first and any remaining amount would be applied to the outstanding principal.
On or about June 1, 2020 the above promissory note was amended to increase the outstanding principal to $300,000, and the fixed minimum
was increased to $4,500. On or about September 21, 2020, the above promissory note was amended, restated and consolidated into a convertible
debt note in the amount of $600,000, with a maturity date of March 31, 2022. On the first day of each month a fixed minimum interest
payment of $9000 is due. The investor has the right at any time following the date of the Note to convert all or any part of the outstanding
and unpaid principal amount of the Note into fully paid and non-assessable shares of Common Stock at $0.30 per share.
During
the period ended December 31, 2021There was no expense associated with this note. During the period ended December 31, 2020, $4,500 of
regular interest was expensed.
On
or about April 9, 2021, this note was combined with other notes payable into a new non-convertible note payable. See Note 5.
On
or about October 21, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of
$55,000,
together with interest at the rate of 10%
per annum, with a maturity date of June
16, 2021. During
the period ended December 31, 2021, There was no expense associated with this note. During the period ended December 31, 2020,
$2,983 of
regular interest, $5,817 of
original issue discount and $10,605 in
derivative liability discount was expensed. On April 13,2021, the Company paid $55,000 in
principle, $7,269 in
accrued interest and $3,731 as
a prepayment penalty in the total amount of $66,000 to
fully extinguish the note.
On
or about October 22, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $55,000,
together with interest at the rate of 12% per annum, with a maturity date of October 21, 2021. During the period ended December 31, 2021,
there was no expense associated with this note. During the period ended December 31, 2020, $1,266 of regular interest, $1,635 of original
issue discount and $8,942 in derivative liability discount was expensed. On April 13,2021, the Company paid $55,000 in principle, $3,110
in accrued interest and $17,057 as a prepayment penalty in the total amount of $71,167 to fully extinguish the note.
On
or about November 10, 2020, the Company issued a convertible promissory note to an institutional investor for the principal sum of $116,600,
together with interest at the rate of 10% per annum, with a maturity date of August 10, 2021. During the period ended December 31, 2021,
there was no expense associated with this note. During the period ended December 31, 2020, $13,477 of regular interest, $7,153 of original
issue discount and $14,630 in derivative liability discount was expensed. On April 13,2021, the Company paid $128,260 in principle, $17,051
in accrued interest and $34,253 as a prepayment penalty in the total amount of $179,564 to fully extinguish the note.
NOTE
5 – NOTE PAYABLE
On
April 9, 2021, the Company entered into a Master Senior Loan Agreement (“MSLA”) with BeachStar Partners, LLC as Lender and
Administrative Agent. Pursuant to the MSLA, the Company borrowed the initial sum of $4,200,000, which sum has been received by the Company
in full. A Promissory was issued at closing, the Note bears interest at 18% per annum based on a 360-day year and is due eighteen months
from the funding day. The Company pays interest monthly in the amount greater of $63,000 or 4% of the collections received by the Company.
The Company has authorized the lender to apply the portion of each collections payment that exceeds the monthly interest amount to future
monthly interest amount scheduled through the maturity date, at which time such excess payments shall be applied to the principle of
the loan The MSLA is not convertible to the Company’s stock unless in the event of a material uncured default of the MSLA. The
MSLA further provides for additional incremental loans in tranches of $1,000,000 per every 500 insured lives added by the Company, up
to a maximum of 65,000 insured lives, or $130,000,000. During the period ended December 31, 2021, the Company paid $199,234 in interest.
NOTE
6 – COMMON STOCK AND PREFERRED STOCK
Upon
formation the authorized capital of the Company was 2,000,000 shares of common stock with a par value of $.05, in 1953 the Company increased
the authorized capital to 3,000,000 shares of common stock, in 1985 the authorized capital was again increased to 10,000,000 shares of
common stock, and in 2014 the Company increased the authorized capital to 100,000,000 shares of common stock with a par value of $.001
and 10,000,000 shares of preferred stock with a par value of $.10. On May 13, 2019, the Company filed a DEF 14C approving the increase
in authorized shares of common stock from 100,000,000 shares to 900,000,000 shares.
Preferred
Stock
Series
B Super Voting Preferred Stock
On
March 21, 2019, the Company, while under the control of former CEO, Chairman and principal shareholder, Sheldon Karasik, filed a Certificate
of Designation amending the Articles of Incorporation and designating the rights and restrictions of one (1) share of newly authorized
Series B Super Voting Preferred Stock, par value $0.10
per share (the “Series B Preferred Stock”),
pursuant to resolutions approved by the Board of Directors (the “Board”) on November 5, 2018. On March 21, 2019, the Company
issued to Sheldon Karasik, the Chief Executive Officer, President and Chairman of the Board, the one (1) share of Series B Preferred
Stock for $0.16,
which price was based on the closing price of the Company’s Common Stock of $0.16
as of November 5, 2018, the date of the issuance,
which was approved by the Company’s then Board. Sheldon Karasik, as the holder of the Series B Preferred Stock, was entitled to
vote together with the holders of the Company’s Common Stock upon all matters that may be submitted to holders of Common Stock
for a vote, and on all such matters, the share of Series
Voting Preferred Stock shall be entitled to that number of votes equal to 51% of the total number of votes that all issued and outstanding
shares of Common Stock and all other securities of the Company are entitled to, as of any such date of determination, on a fully diluted
basis. The Company filed the Certificate of Designation
with the Secretary of State of Idaho on March 21, 2019. In connection with the closing of the SEAs and the MBO Agreement, Mr. Karasik
transferred and assigned the Series B Preferred Stock to Pat Dileo, the Company’s CEO and Chairman. During the period ended December
31, 2021, Pat Dileo transferred and assigned the Series B Preferred Stock to the current CEO and Chairman, Joseph Frontiere.
Series
C and Series D Convertible Preferred Stock
On
April 2, 2019, the Company filed two Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 400,000
shares of Series C Convertible Preferred Stock
par value $0.10
and 400,000
shares of Series D Convertible Preferred Stock
par value $0.10,
which were originally issued pursuant to two separate Share Exchange Agreements, see Note 5.
During
the year-ended December 31, 2021, the holders of shares of Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock (collectively, the “Series C and Series D Shares”) converted a total of 28,038
Series C and Series D Shares into a total
of 16,039,110
shares of Common Stock.
Series
E Convertible Preferred Stock
On
April 8, 2019, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 25,000
shares of Series E Convertible Preferred Stock
with par value $0.10
and stated value $10.
On
April 8, 2019, the Company issued 18,182 shares of Series E Convertible Preferred Stock (“Series E Preferred”) to an institutional
investor in consideration for funding the $100,000 payment made to Aurum pursuant to the MBO Agreement.
During
the quarter ended March 31, 2021, a total of 1,365 shares of Series E Convertible Preferred stock were converted into 2,150,000 shares
of common stock.
During
the quarter ended June 30, 2021, the Company issued 2,000,000 shares of common stock and 1,000,000 warrants valued at $139,346 for the
extinguishment of the Series E Preferred Stock. A loss on extinguishment was recorded in the amount of $417,655.
Series
F Convertible Preferred Stock
On
March 9, 2019, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of
Designation of the rights and restrictions of 20,750 shares
of Series F Convertible Preferred Stock with par value $0.10 and
stated value $10.
During
the period ended March 31, 2020, 50 shares
of Series F Preferred Stock were converted into 43,750 shares
of common stock. During the period ended June 30, 2020, 11,870 shares
of Series F Preferred Stock were converted into 3,217,500 shares
of common stock. During the period ended September 30, 2020, 5,430 of
the outstanding shares of Series F Preferred Stock were converted into 1,420,000 shares
of common stock.
On
October 2, 2020, the 3,400 remaining outstanding shares of Series F Preferred Stock was converted into 881,250 shares of common stock.
13%
Series G Cumulative Redeemable Perpetual Preferred Stock
On
April 27, 2020, the Company filed a Certificate of Designation amending the Articles of Incorporation and designation the rights and
restrictions of 2,000,000
shares of 13% Series G Cumulative Redeemable
Perpetual Preferred Stock, par value $0.10
and a stated value of $25
per share. The Series G Holders will not have
any voting rights. To date, no shares of the Series G Cumulative Redeemable Perpetual Preferred Stock have been issued or are outstanding
nor are there any plans to issue any shares of Series G Cumulative Redeemable Perpetual Preferred Stock.
Series
M Convertible Preferred Stock
On
April 27, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 50,000
shares of Series M Convertible Preferred Stock
with par value $0.10.
On
May 28, 2020, the Company’s Board of Directors approved the execution of consulting services agreements with six unrelated persons/entities,
none of whom were affiliates of the Company, pursuant to which the Company agreed to the issuance of 11,500 shares of a Series M Convertible
Preferred Stock.
During
the quarter ended September 30, 2020, the Company issued 11,500 shares of Series M Preferred Shares to consultants for services valued
at $691,214. One shareholder converted 1,500 shares into 75,000 shares of common stock.
During
the quarter ended December 31, 2020 the Company issued 4,500 shares of Series M Preferred Shares for 225,000 shares of common shares
that had previously been disclosed as “shares to be issued”.
During
the quarter ended March 31, 2021, a total of 6,000 shares of Series M Convertible Preferred stock were converted into 300,000 shares
of common stock.
During
the quarter ended June 30, 2021, there was no activity.
During
the quarter ended September 30, 2021, the 4,500
shares of Series M Preferred Shares that were
previously disclosed as being converted during the quarter ended December 31, 2020, was reversed as it did not happen.
Series
A Convertible Preferred Stock
On
July 2, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 2,851,318
shares of Series A Convertible Preferred Stock
with par value $0.10.
During
the quarter ended September 30, 2020, 950,000 shares of Series A Preferred Stock were converted into 950,000 shares of common stock.
Series
H Convertible Preferred Stock
On
August 28, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 5,000
shares of Series H Convertible Preferred Stock
with par value $0.10
and stated value $10.
The shares were issued for cash of $25,000.
During
the quarter ended March 31, 2021, a total of 1,259 shares of Series H Convertible Preferred stock were converted into 599,733 shares
of common stock.
7%
Series O Cumulative Redeemable Perpetual Preferred Stock
On
September 28, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and designation the rights
and restrictions of 1,000,000 shares of Series O 7% Redeemable Cumulative Preferred Stock, par value $0.10 and a stated value of $12.50.
9%
Series N Convertible Preferred Stock
On
November 20, 2020, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 100,000
shares of Series N Convertible Preferred Stock
with par value $0.10.
On
November 27, 2020 the Company issued 10,300 of Series N Preferred Stock for cash of $103,000 and paid $3,000 in fees related to the issuance.
During
the quarter ended June 30, 2021, the Company paid $136,933 to extinguish the Series N Convertible Preferred Stock. A loss on extinguishment
was recorded in the amount of $33,933.
Series
R Convertible Preferred Stock
On
November 19, 2021, the Company filed a Certificates of Designation amending the Articles of Incorporation and the Certificates of Designation
of the rights and restrictions of 100,000
shares of Series R Convertible Preferred Stock
with par value $0.10.
On
December 3, 2021, the Company issued 2,000 shares of Series R Preferred Stock for services in the amount of $100,000.
The
shares of Preferred Stock outstanding at December 31, 2021 and September 30, 2021
SCHEDULE OF PREFERRED STOCK OUTSTANDING
| | |
Period
Ended | |
| Preferred
Stock Series | |
December
31,
2021 | | |
September
30,
2021 | |
| A | |
| 1,901,318 | | |
| 1,901,318 | |
| B | |
| 1 | | |
| 1 | |
| C | |
| 383,256 | | |
| 385,070 | |
| D | |
| 311,284 | | |
| 315,287 | |
| E | |
| - | | |
| - | |
| F | |
| - | | |
| - | |
| H | |
| 3,741 | | |
| 3,741 | |
| M | |
| 13,000 | | |
| 13,000 | |
| N | |
| - | | |
| - | |
| R | |
| 2,000 | | |
| - | |
| Total | |
| 2,614,600 | | |
| 2,618,417 | |
Common
Stock
On
February 23, 2020, the Company implemented a 1 for 100 reverse split of its outstanding common stock (the “Reverse Split”).
All issuances for services are valued at market price on the approximate date of service unless otherwise noted.
During
the three-month period ended December 31, 2019, the Company authorized for issuance 66,666 shares of common stock valued at $2,158 for
investor relations, these are disclosed on the balance sheet as shares to be issued.
On
December 5, 2019, the Company issued 7,819 shares of common stock for the conversion of principal of $7,000 and accrued interest of $460
at a conversion price of $0.009541.
During
the three-month period ended March 31, 2020, the Company issued 5,000 shares of stock for services and recorded an additional 5,000 shares
as “to be issued” for a total value of $40,000; 130,094 shares of common stock for the conversion of principal of $68,287,
accrued interest of $13,342 and financing fees of $1,750; 43,750 shares of common stock for the conversion of 50 shares of Series F Preferred
Stock
During
the three-month period ended June 30, 2020, the Company issued 8,970,724 shares of common stock for the conversion of convertible debt;
1,074,302 shares of common stock for conversion of warrants; 3,217,500 shares of common stock for conversion of 11,870 shares of Series
F Preferred Stock and 200,000 shares for services valued at $77,500
During
the three-month period ended September 30, 2020, the Company issued 2,267,183 shares of common stock for the conversion of convertible
debt valued at $203,180; 3,395,000 shares of common stock for conversion of preferred stock (see above); and 10,000 shares of common
stock for services that had previously been recorded as “stock to be issued” Additionally, 750,000 shares were recorded as
stock to be issued for services in the amount of $255,000.
During
the three-month period ended December 31, 2020, the Company issued 5,276,643 shares of common stock for the conversion of convertible
debt valued at $321,015; 164,155 shares of common stock for the issuance of convertible debt valued at $32,688. The $32,688 was recorded
as debt discount and will be amortized over the life of the notes; 20,000 shares of common stock for financing fees valued at $4,340;
2,881,250 for the conversion of preferred stock (see above); and 2,199,073 for conversion of warrants. Additionally, 230,659 shares of
common stock were authorized for issuance valued at $45,050, the shares are disclosed in “to be issued”.
During
the three-month period ended March 31, 2021, the Company issued 2,004,361 shares of common stock for the conversion of convertible debt
valued at $105,000 and 50,318 for a commitment share adjustment related to convertible debt valued at $11,020
During
the three-month period ended June 30, 2021, the Company issued 6,409,503 shares of common stock for the conversion of convertible debt
valued at $309,750 and 2,000,000 shares of common stock and 1,000,000 warrants for the conversion of 16,902 shares of Series E Preferred
Stock. (See above)
During
the three-month period ended September 30, 2021, the Company issued 7,839,902 shares of common stock for conversion of preferred shares;
8,429,542 shares for conversion of warrants and 2,800,000 shares of common stock for conversion reserved preferred shares for debt due
to preferred shareholders. (See above.)
During
the three-month period ended December 31, 2021, the Company issued 3,100,000 shares of common stock for conversion of preferred shares;
2,962,500 shares for conversion of warrants and 3,200,000 shares of common stock for conversion reserved preferred shares for debt due
to preferred shareholders. (See above.) Additionally, the Company issued 2,000,000 shares of common stock for services valued at $200,000.
The
following warrants were outstanding at December 31, 2021:
SUMMARY OF WARRANTS OUTSTANDING
| Warrant
Type | |
Warrants Issued
and Unexercised | | |
Exercise Price | | |
Expiration Date |
| Warrants | |
| 10,000 | | |
$ | 5.00 | | |
December 2021 |
| Warrants | |
| 5,000 | | |
$ | 10.00 | | |
December 2021 |
| Warrants* | |
| 1,666,667 | | |
$ | 0.02 | | |
December 2024 |
| Warrants* | |
| 1,249,995 | | |
$ | 0.60 | | |
July 2023 |
| Warrants | |
| 3,000,000 | | |
$ | 1.00 | | |
June 2024 |
| Warrants | |
| 7,333,333 | | |
$ | 0.09 | | |
August 2026 |
| Warrants | |
| 1,666,667 | | |
$ | 0.09 | | |
August 2026 |
| Warrants | |
| 550,000 | | |
$ | 0.09 | | |
August 2026 |
| Warrants | |
| 555,555 | | |
$ | 0.09 | | |
August 2026 |
| Warrants | |
| 1,222,222 | | |
$ | 0.09 | | |
August 2026 |
| Warrants | |
| 1,252,526 | | |
$ | 0.09-0.30 | | |
November 2026 |
| * | | Each of these warrants
have a down round feature that have been triggered by certain events resulting in recognition of the down round. The accounting recognition
of the triggered down round features, which have the same accounting effect as a “dividend”, has a cumulatively reduced retained
earnings by $1,575,068 and increased the outstanding number of warrants. |
The
following warrants were outstanding at December 31, 2020:
| Warrant
Type | |
Warrants Issued
and Unexercised | | |
Exercise Price | | |
Expiration Date |
| Warrants | |
| 10,000 | | |
$ | 5.00 | | |
December 2021 |
| Warrants | |
| 5,000 | | |
$ | 10.00 | | |
December 2021 |
| Warrants* | |
| 1,666,667 | | |
$ | 0.02 | | |
December 2024 |
| Warrants* | |
| 2,918,750 | | |
$ | 7.00 | | |
March 2025 |
| Warrants* | |
| 2,918,750 | | |
$ | 0.40 | | |
June 2025 |
| Warrants* | |
| 1,249,995 | | |
$ | 0.60 | | |
July 2023 |
| Warrants* | |
| 625,000 | | |
$ | 0.40 | | |
June 2025 |
| * | | Each of these warrants
have a down round feature that have been triggered by certain events resulting in recognition of the down round. The accounting recognition
of the triggered down round features, which have the same accounting effect as a “dividend”, has a cumulatively reduced retained
earnings by $1,575,068 and increased the outstanding number of warrants. |
NOTE
7 – RELATED PARTY TRANSACTIONS
During
the year ended September 30, 2016 the Company issued a note payable to a family member of a former officer in the amount of $15,000.
$3,000 was converted to 300,000 shares of common stock and $5,000 was repaid in cash. The note bears interest at a rate of 10% beginning
on July 24, 2016, the balance of principal and interest at December 31, 2021 and 2020 was $12,095 and $11,045, respectively.
During
the year ended September 30, 2017 the Company issued two notes payable to Premium Exploration Mining in the amount of $35,000 and $15,000
each having an interest rate of 5%, the balance of principal and interest at December 31, 2021 and 2020 was $70,399 and $65,235, respectively,
the companies had directors in common at the time of the transaction.
NOTE
8 – INCOME TAXES
Topic
740 in the Accounting Standards Codification (ASC 740) prescribes recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2018 the Company had
taken no tax positions that would require disclosure under ASC 740.
The
Company files income tax returns in the U.S. federal jurisdiction and the State of Idaho. The Company is currently in arrears in filing
their federal and state tax returns, both jurisdictions statute of limitations of three years does not begin until the tax returns are
filed.
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for income tax purposes.
Significant
components of the deferred tax assets at an anticipated tax rate of 21% for the period ended September 30, 2021 and September
30, 2020 are as follows:
SUMMARY OF DEFERRED TAX ASSETS
| | |
December
31,
2021 | | |
September
30,
2021 | |
| | |
| | |
| |
| Net operating
loss carryforwards | |
| 30,908,777 | | |
| 27,753,783 | |
| Deferred tax asset | |
| 6,824,052 | | |
| 6,142,603 | |
| Valuation allowance
for deferred asset | |
| (6,824,052 | ) | |
| (6,142,603 | ) |
| Net deferred tax
asset | |
| - | | |
| - | |
At
December 31, 2021 and September 30, 2021, the Company has net operating loss carryforwards of approximately $30,908,800 and $27,753,800.
The change in the allowance account from September 30, 2021 to December 31, 2021 was $681,449.
On
December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act, (the “Tax Act”) was enacted. Among the significant
changes to the U.S. Internal Revenue Code, the Tax Act lowered the U.S. federal corporate income tax rate (“Federal Tax Rate”)
from 35% to 21% effective January 1, 2018. The Company computed its income tax expense for the December 31, 2017 fiscal year using a
Federal Tax Rate of 21%. The remeasurement of the deferred tax assets resulted in a $68,010 reduction in tax assets to $885,961 from
an estimate of $953,971 that the assets would have been using a 35% effective tax rate.
NOTE
9 – SUBSEQUENT EVENTS
Not Applicable.