Quarterly Report (10-q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2022

 

Commission file number: 1-03319

 

Quad M Solutions, Inc.

 

(Exact name of registrant as specified in its charter)

 

Idaho		82-0144710
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
1111 Belt Line Road, Suite 108E, Garland, TX		75040
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: [phone]

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class		Trading Symbols		Name of each exchange on which registered
N/A		N/A		N/A

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒

 

As of August 22, 2022, there were 166,643,802 shares of the issuer’s common stock outstanding.

 

 

 

 

 

Table of Contents

 

		Page
Part I. Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statement of Stockholder’s Equity (unaudited) Ended June 30, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18
Part II. Other Information
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
Signatures		21

 

2

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

		June 30, 2022				December 31, 2021
		(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,001,653			$	319,613
Accounts Receivable, net			5,256,451				2,101,512
Other Current Assets			183,750
Total Current Assets			6,441,854				2,421,125
OTHER ASSETS			4,768,521
TOTAL ASSETS		$	11,210,375			$	2,421,125
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	926,786			$	399,494
Accrued interest			225,926				166,916
Notes payable - related party			-				57,618
Convertible debt, net			328,920				601,900
Derivative liability			1,384,820				4,421,956
Accrued expense			16,500				700,625
Aurum payable			400,000				400,000
Note payable			5,932,106				4,234,799
Due to preferred shareholders			1,416,313				2,063,745
Other current liabilities			5,553,836				1,591,922
Total Current Liabilities			16,185,207				14,638,975
TOTAL LIABILITIES			16,185,207				14,638,975
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $.10 par value, 10,000,000 shares authorized, 2,421,300 and 2,717,638 issued and outstanding			242,907				261,460
Common stock, $0.001 par value, 900,000,000 shares authorized; 140,556,181 and 20,121,010 shares issued and outstanding			143,557				78,011
Additional paid-in capital			18,139,229				18,151,756
Shares to be issued			202,800				202,800
Subscription receivable			(3,000	)			(3,100	)
Accumulated deficit			(23,700,325	)			(30,908,777	)
Total Stockholders’ Equity			(4,974,832	)			(12,217,850	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	11,210,375			$	2,421,125

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

3

Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

		Three Months Ended June 30								Six Months Ended June 30
		2022				2021				2022				2021
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
REVENUES		$	18,144,568			$	10,630,064				36,268,362				28,719,911
COST OF SALES			15,852,288				9,547,713				31,095,960				27,221,784
GROSS PROFIT			2,292,280				1,082,351				5,172,403				1,498,127
OPERATING EXPENSES
Insurance expense			-				-				-				-
Professional fees			39,249				47,706				154,300				195,408
General and administrative			612,840				1,644,075				1,106,410				1,744,075
Payroll expense			590,263				247,058				1,063,833				578,488
Sales expense			-				117				117				351
Travel			22,478				25,566				45,185				64,383
Other expenses			-				500,034				-				1,007,599
TOTAL OPERATING EXPENSES			1,264,830				2,464,556				2,369,845				3,590,304
INCOME  FROM OPERATIONS			1,027,450				(1,382,205	)			2,802,558				(2,092,177	)
TOTAL OTHER INCOME (EXPENSES)			748,745				(3,425,149	)			2,744,307				(3,593,754	)
INCOME BEFORE TAXES			1,776,195				(4,807,354	)			5,546,865				(5,685,931	)
INCOME TAXES			-				-				-				-
NET INCOME (LOSS)		$	1,776,195				(937,908	)			5,546,865				(3,970,225	)
NET INCOME PER COMMON SHARE, BASIC AND DILUTED		$	0.01				(0.15	)			0.04				(1.52	)
WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED			140,556,181				7,125,207				140,556,181				2,867,684

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

4

Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

 

		Common Stock								Preferred Stock								Additional Paid-in				Accumulated				Stock to be Issued or Subscription				Total Stockholders’
		Shares				Amount				Shares				Amount				Capital				Deficit				Receivable				Equity
Balance, March 31, 2022			116,784,295			$	116,784				2,415,182			$	241,518			$	17,599,830			$	(29,247,190	)		$	199,800			$	(11,089,258	)
Common stock issued for convertible debt			5,985,122				5,985												532,676												538,661
Common stock issued for financing fees			963,213				3,964												(63	)											3,900
Conversion of preferred stock			11,656,345				11,656				6,118				1,389				(13,045	)											1
Warrants issued for convertible debt			5,167,206				5,167												19,831												24,999
Net income for period ending June 30, 2022																							5,546,865								5,546,865
Balance, June 30, 2022			140,556,181			$	143,557				2,421,300			$	242,907			$	18,139,229			$	(23,700,325	)		$	199,800			$	(4,974,832	)

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

5

Table of Contents

 

QUAD M SOLUTIONS, INC.

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

		Six Months Ended June 30,
		2022				2021
		(unaudited)				(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	5,546,865			$	(5,685,931	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Loss (gain) on revaluation of derivative liability			(3,037,136	)			(1,137,449	)
Changes in assets and liabilities:
Decrease (increase) in prepaids
Increase (decrease) in accounts payable			527,292				(2,970	)
Increase (decrease) in accrued interest			59,010				(9,601	)
Increase (decrease) in prepaid revenue			-				(5,315	)
Increase (decrease) in accrued expense			(684,125	)			39,838
Increase (decrease) in due to preferred shareholders			(175,609	)			(300,000	)
Increase (decrease) in due to other current assets/liabilities			(3,560,467	)			4,301,684
Net cash used by operating activities			(1,324,170	)			(2,799,744	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments			-				-
Net cash used by investing activities			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock			(18,553	)			103,000
Proceeds from convertible debt, net			(272,980	)			204,852
Proceeds from sale of common stock and warrants, net			65,546				(615,760	)
Proceeds from note payable			1,697,307				3,585,000
Net cash provided by financing activities			1,471,320				3,277,092
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS			147,149				381,630
Cash, beginning of period			854,504				463,874
Cash, end of period		$	1,001,653			$	845,504
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$
Income taxes paid		$
Common stock issued for convertible debt		$	5,985			$	735,764

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

 

6

Table of Contents

 

QUAD M SOLUTIONS, INC

(fka MINERAL MOUNTAIN MINING & MILLING COMPANY)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2022

 

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, NuAxess and Open Axess, 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.

 

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, 2020 and December 31, 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.

 

7

Table of Contents

 

Going Concern

 

As shown in the accompanying financial statements, the Company has incurred cumulative operating losses since inception. As of June 30, 2022, 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 $23,700,325.

 

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 the operations of its two wholly owned subsidiaries, NuAxess and PR345, by potential sales of its common stock and/or by issuing debt securities to institutional investors. 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.

 

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 8.

 

Revenue Recognition

 

Sales revenues are generally recognized in accordance with the SAB 104 Public Company Guidance, when an agreement exists and price is determinable, the services are rendered, net of discounts, returns and allowance and collectability is reasonably assured. We are often entitled to bill our customers and receive payment from our customers in advance of recognizing the revenue. In the instances in which we have received payment from our customers in advance of recognizing revenue, we include the amounts in deferred or unearned revenue on our consolidated balance sheet.

 

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.

 

8

Table of Contents

 

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.

 

9

Table of Contents

 

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.

 

NOTE 6 – COMMON 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 three-month period ended March 31, 2022, 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 193,101 Series C and Series D Shares into a total of 23,396,128 shares of Common Stock.

 

10

Table of Contents

 

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.

 

11

Table of Contents

 

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.

 

12

Table of Contents

 

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.

 

On February 28, 2022, the holders of shares of Series R Convertible Preferred Stock converted a total of 2,000 Series R Shares into a total of 2,000,000 shares of Common Stock.

 

13

Table of Contents

 

The shares of Preferred Stock outstanding at June 30, 2022 and December 31, 2021

 

		Period Ended
Preferred Stock Series		June 30, 2022				December 31, 2021
A			1,901,318				1,901,318
B			1				1
C			200,000				383,256
D			297,122				311,284
E			-				-
F			-				-
H			3,741				3,741
M			13,000				13,000
N			-				-
R			-				2,000
Total			2,415,182				2,614,600

 

Common Stock

 

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.

 

During the three-month period ended March 31, 2022, the Company issued 10,772,364 shares of common stock for conversion of preferred shares; 3,210,326 shares for conversion of convertible debt; 14,623,764 shares of common stock for conversion reserved preferred shares for debt due to preferred shareholders (see above); 10,000 shares of common stock for an investment valued at $100,000 and 166,667 shares of common stock for financing fees.

 

During the three-month period ended June 30, 2022, the Company issued 11,656,345 shares of common stock for conversion of preferred shares; 5,985,122 shares for conversion of convertible debt and 963,213 shares of common stock for financing fees.

 

14

Table of Contents

 

The following warrants were outstanding at June 30, 2022:

 

Warrant Type		Warrants Issued and Unexercised				Exercise Price				Expiration Date
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, 2021:

 

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			16,666,667			$	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				00.09			August 2026
Warrants			1,252,526				.09-0.30			November 2026

 

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.

 

15

Table of Contents

 

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 December31, 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.

 

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 will compute 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.

 

16

Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations General

 

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our financial statements and the notes to those statements. In addition to historical financial information, this discussion contains forward-looking statements reflecting our management’s current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed under the heading “Risk Factors” in our Consolidated Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on January 15, 2019.

 

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company” or “our Company,” “Quad M” refer to Quad M Solutions, Inc., an Idaho corporation.

 

The Company, through its two wholly owned operating subsidiaries, NuAxess and PR345 n/k/a OpenAxess, Inc., business, is engaged in providing a full spectrum of benefit and insurance related staffing and business consulting services, principally to smaller and mid-sized employers, offering innovative means of providing their employees with multiple levels of employee benefits including major medical health insurance, as well as providing other financial and business consulting services. The Company has entered into third-party agreements with select strategic partners to provide comprehensive programs administered through its vendor relationship agreements. The Company offers programs that include innovative and affordable major medical health insurance plans and other employee benefit products and services. The NuAxess Smart Healthcare Plan is a proprietary health plan that is an ERISA-qualified, self-insured plan, that includes wellness and prevention programs, among other features. Our primary markets are small and mid-size group employers, sometimes referred to as the ‘gig’ economy.

 

Results of Operations for the Three Months Ended June 30, 2022 compared to the Three Months Ended June 30, 2021

 

Revenue

 

During the three months ended June 30, 2022 and June 30, 2021 the Company received $18,144,568 and $10,630,064, respectively in revenue principally from insurance premiums and we incurred $15,852,288 and $9,547,713 in expense directly related to this revenue.

 

Expenses

 

Operating expenses for the three-month period ended June 30, 2022 was $1,264,830 compared to $2,464,556 for the same period of the prior year.

 

Working Capital

 

The Company’s net profit for the three month-period ended June 30, 2022 was $1,776,195 compared to a net loss of $4,807,354 at June 30, 2021. This net profit is due primarily to an increase in revenue and rationalization of COGs and SG&A.

 

During the three months ended June 30, 2022, our principal sources of liquidity included cash received from notes payable. During the three months ended June 30, 2022 our principal source of liquidity included proceeds from short term loans. We intend to use new capital in the form of new equity or debt to further advance objectives. Net cash used by operating activities totaled $1,324,170 and $2,799,744 for the three months ending June 30, 2022 and 2021, respectively. Net cash provided by financing activities totaled $3,277,092 and $892,115 for the three-month periods ending June 30, 2022 and 2021, respectively. The change between 2022 and 2021 is primarily attributed to an increase revenue and proceeds from short term loans in 2022 as compared to 2021.

 

As reflected in our accompanying financial statements, we have limited cash negative working capital limited revenues and an accumulated deficit of $23,700,325 and $30,908,777 for the three-month period ending June 30, 2022 and year ended December 31, 2021, respectively. Notwithstanding our belief that we will be able to continue to raise capital through the issuance of convertible notes at terms and condition acceptable to the Company, of which there can be no assurance, these factors indicate that we may be unable to continue in existence in the absence of receiving additional funding. In addition to our operating expenses which average approximately $350,000 per month, management’s plans for the next twelve months include approximately $4 million of cash expenditures for development and expansion of our health insurance and employee benefits business operations. While there can be no assurance, the Company believes that it will be able to generate sufficient capital from operations, equity and/or debt financing to fully-implement its business plan of offering principally to smaller and mid-sized employers a full spectrum of employee benefit and insurance services enabling employers to offer a variety of plans providing their employees with multiple levels of benefits including major medical health insurance, as well as providing financial and business consulting services.

 

17

Table of Contents

 

Off-Balance Sheet Arrangements

 

The Company has not undertaken any off-balance sheet transactions or arrangements. We have no guarantees or obligations other than those which arise out of normal business operations.

 

Critical Accounting Policies and Estimates

 

Our significant accounting policies are more fully described in Note 2 to our Unaudited Condensed Consolidated Financial Statements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As of June 30, 2022, we conducted an evaluation, under the supervision and participation of management including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). Our 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.

 

The management of the Company assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in SEC guidance on conducting such assessments. Based on this assessment, management determined that, during the three-months ended June 30, 2022 our internal controls and procedures require additional improvement due to deficiencies in the design or operation of the Company’s internal controls. Management identified the following areas of improvement in internal controls over financial reporting:

 

1. The Company did not have a written internal control procedurals manual which outlines the duties and reporting requirements of the Directors and any staff to be hired in the future. This lack of a written internal control procedurals manual does not meet the requirements of the SEC or good internal controls.

 

2. The Company should further improve maintenance and access to a centralized location for current and historical business records.

 

Changes in Internal Control over Financial Reporting

 

We have evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls as of June 30, 2022.

 

18

Table of Contents

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

It is possible that from time to time in the ordinary course of business that the Company may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. However, in the opinion of our Board of Directors, current legal proceedings are not expected to have a material adverse effect on our financial position or results of operations

 

Item 1A. Risk Factors

 

Risk Factor: The Company relies substantially on small and mid-size business for its products and services. It is expected that small and mid-size businesses, many of which rely on continuing cash flow to fund day-to-day operations, may be particularly hard hit by the COVID-19 pandemic that has not shown any clear indications of abating. The pandemic has resulted and may continue to result in forced closures and other preventative measures taken by federal, state or local governments. Although government programs have sought, and may further seek, to provide relief to these types of entities, there can be no assurance that these programs will succeed or that the small and mid-size businesses will, in fact, receive funding from the governmental programs. Also, governments in affected areas have and may continue to adopt regulations or promulgate executive orders that restrict or limit financial institutions’ ability to take certain actions with these small and mid-size customers, upon which the Company relies, that they would otherwise take in the ordinary course. At the same time, it may be the case that more customers may seek to draw on existing lines of credit, if any, or seek additional loans to help finance their business operations including the self-insurance and employee benefit services offered by the Company. In addition, COVID-19, which only became a pandemic during the end of the first quarter of fiscal 2020 in the United States, may adversely affect the Company and its customers in unforeseen ways during the remainder of 2020 and perhaps thereafter.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the quarter ended June 30, 2022 5,985,122 shares of common stock for the conversion of convertible debt at an average conversion price of $.09; 11,656,345 for the conversion of 6,118 shares of multiple series of preferred stock.

 

19

Table of Contents

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
31.2		Certification of Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2		Certification of Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

20

Table of Contents

 

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.

 

	Quad M Solutions, Inc.
Dated: August 22, 2022	By:	/s/ Joseph Frontiere
		Joseph Frontiere
		Interim Chief Executive Officer (Principal Executive Officer
		and Principal Financial Officer and Accounting Officer)

 

21