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.
Change in Control Transactions
Reference is made to the Form 8-K filed by the Company on March 27, 2019,
reporting that the Company entered into two separate Share Exchange Agreements
("SEAs") dated March 22, 2019: (i) one with PR345, Inc. ("PR345") n/k/a
OpenAxess, Inc., a newly organized Texas corporation; and (ii) one with NuAxess
2, Inc. ("NuAxess"), a newly organized Delaware corporation. Pursuant to the
SEAs, the Company agreed to acquire the all of the capital stock of these two
entities in exchange of the issuance of newly authorized shares of Series C and
D Preferred Stock, par value $0.10 per share, to the shareholders of
PR345/OpenAxess and NuAxess. The entry into the two SEAs was authorized and
approved by the Company's Board then in existence in furtherance of the
Company's plan, as disclosed in its registration statement declared effective by
the SEC on March 8, 2019, Registration No. 333-227839 (the "Registration
Statement"), to diversify its business beyond its historic mining operations of
its two subsidiaries, Nomadic Gold Mines, Inc. and Lander Gold Mines, Inc. (the
"MMMM Mining Subsidiaries"). The Company also granted Sheldon Karasik, the
Company's CEO and Chairman at the date of the SEAs (or an entity to be formed by
him) the right to acquire for nominal amount 75% of the capital stock of the
MMMM Mining Subsidiaries for nominal consideration of $10, with the Company
retaining 25% of capital stock of the MMMM Mining Subsidiaries.
Pursuant to the provisions of the closing of the SEAs, among other conditions:
(i) Sheldon Karasik agreed to resign as CEO and Chairman, but would continue to
serve as a director, together with Michael Miller, an independent director of
Mineral Mountain Mining & Milling Company; (ii) Felix Keller agreed to resign as
a director; and (iii) Pat Dileo, Carl Dorvil and Derrick Chambers would be
appointed to the newly constituted 5-person Board and Pat Dileo would be
appointed as CEO and Chairman of the Board.
As disclosed in the Company's Form 8-K filed on April 24, 2019, the Company
reported that: (i) on April 16, 2019, it entered into a Share Exchange and
Assignment Agreement, also referred to as the 'MBO Agreement" with Aurum, the
entity formed by Sheldon Karasik for the purpose of acquiring 75% of the capital
stock of the MMMM Mining Subsidiaries from the Company; (ii) effective April 16,
2019, Felix Keller resigned as a director; (iii) effective April 17, Sheldon
Karasik resigned as CEO and Board Chairman (but continued to serve on the
Board); (iii) effective April 17, 2019, Pat Dileo was appointed as CEO and
Chairman of the Board and Carl Dorvil and Derrick Chambers were appointed to as
members of the 5 person Board, joining Sheldon Karasik and Michael Miller; and
(v) effective April 16, 2019, Sheldon Karasik transferred and assigned the one
(1) share of Series B Super Voting Preferred Stock to Pat Dileo. In addition, as
a condition to closing the SEAs and the execution of the MBO Agreement, NuAxess
and/or PR345 agreed to make a payment of $100,000 into an account designated by
Aurum as working capital for the operations of the MMMM Mining Subsidiaries. The
$100,000 was funded by an institutional investor in consideration for the
issuance of 18,182 shares of Series E Convertible Preferred Stock.
As a result of the execution of the MBO Agreement and the closing of the March
22, 2019 Share Exchange Agreements, the Company determined that its resources
would be devoted to the business operations of NuAxess and PR345, as follows:
(i) NuAxess' business plan is to serve as a full service financial, employee
benefit and insurance consulting company offering, either directly or through
proven third parties, innovative ways to provide its clients' employees with
affordable and manageable health plans and comprehensive benefits, based upon a
new system being developed throughout the country for the rapidly expanding
market of small and medium-sized businesses (SMBs) which are experiencing
significant problems with their existing programs, to the extent that they even
provide programs because of their costs and complexities. NuAxess also intends
to create an international professional employer association (IPEA)
headquartered in San Juan, Puerto Rico, that will sponsor and provide
professional outreach programs offering health insurance, healthcare and
financial education to its PEO and financial services members globally; and
(iii) additionally, the IPEA will offer these and other services to leading
rural hospital providers via a proprietary program called 'Community Health
Exchanges', which will work directly with SMB employers in rural communities
providing access to private insured health plans with contracted medical
services through the rural hospitals.
(ii) PR345, n/k/a OpenAxess, a business enterprise consulting firm, plans to
provide: (a) specialized staffing services for a variety of professional
industries including, but not limited to, medical, education, financial
services, technology and hospitality, among others; (b) specific back office
services including accounting, payroll, and a full complement of Human Resource
(HR) benefits; and (iii) serve as a Professional Employer Organization (PEO).
At the date of the MBO, the Company understood that Aurum would continue to
operate the MMMM Mining Subsidiaries. Under the MBO Agreement, the Company
retained a 25% equity interest in the Mining Subsidiaries and effective on
September 15, 2019, the Company sold, transferred and assigned to an
unaffiliated third party 6% of its equity interest in the Mining Subsidiaries to
an unaffiliated third party for $1,000, evidenced by a promissory note due on
September 30, 2020, reducing the Company's equity interest in the former Mining
Subsidiaries from 25% to 19%.
Reference is made to the Company's Form 8-K and 8-K/A filed with the SEC on
October 22, 2019 and December 2, 2019 reporting the resignations of Sheldon
Karasik and Michael Miller as members of the Board of Directors.
As disclosed in the Company's Form 8-K filed on August 3, 2021, the Company
reported that: (i) effective July 31, 2021, Pat Dileo resigned as CEO, Interim
CFO and member of the Board; (ii) Joseph Frontiere was appointed as Interim CEO,
Interim CFO and Chairman of the Board and Douglas Cole was appointed to as a
member of the Board.
30
Results of Operations for the Three and Nine Months Ended June 30, 2021 compared
to the Three and Nine Months Ended June 30, 2020
Revenue
The Company generated no revenues from its former mining operations during the
two periods ended June 30, 2021 and 2020. Furthermore, because the Company only
retained 19% of the capital stock of the MMMM Mining Subsidiaries, the financial
results of the former mining subsidiaries are not including in this Form 10-Q
for the period ended June 30, 2021. In April 2019, the Company experienced a
change in control transaction, as reported in its Forms 8-K filed in March and
April 2019, referenced above, as a result of which it divested 75% of the MMMM
Mining Subsidiaries to an entity formed and controlled by the Company's former
CEO and Chairman, Sheldon Karasik. At the same time, the Company commenced
operations of its health insurance and employee benefits subsidiaries.
During the three month and nine months ended June 30, 2021 the Company received
$10,630,064 and $28,719,911, respectively in revenue principally from insurance
premiums and we incurred $9,547,713 and $27,221,784 in expense directly related
to this revenue. During the three month and nine months ended June 30, 2020 the
Company received $4,731,316 and $10,044,022, respectively in revenue principally
from insurance premiums and we incurred $4,542,031 and $9,676,191 in expense
directly related to this revenue
Expenses
Operating expenses for the three and nine-month periods ended June 30, 2021 was
$2,464,556 and $3,590,304 compared to $546,548 and $1,407,945 for the same
periods of the prior year, representing anincrease of 351% for the three-month
period and an increase of 155% for the six month period.
The main components of general and administrative expenses for the three and
nine-month period ended June 30, 2021 consisted of approximately $768,923 and of
consulting fees, $40,550 of marketing fees and $54,342 of office expense. During
the prior year for the three and nine-month-period, the main components of
general and administrative expenses were $363,527 and 755,647 in consulting fees
and $65,466 and $260,862 in insurance fees and $12,836 and $30,650 in
commissions.
Working Capital
The Company's net loss for the three and nine month-period ended June 30, 2021
was $4,807,354 and 5,685,931 a 412.6% and 43.2% increase over the net loss of
$97,908 and $3,970,255 at June 30, 2020. The change in net loss is due primarily
to an increase in non-cash gains of the revaluation of derivative liabilities,
interest expense and loss on extinguishment of debt related to convertible debt
financings offset by an increase in general and administrative expense and
payroll expense.
During the three and nine months ended June 30, 2021, our principal sources of
liquidity included cash received from revenue, convertible notes payable, short
term loans, the sale of preferred stock and notes payable. During the three and
nine months ended June 30, 2020 our principal source of liquidity included
proceeds from convertible debt, notes payable and assignment of future
receivables. 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
$2,799,744 and $535,304 for the nine months ending June 30, 2021 and 2020,
respectively. Net cash used by investing activities totaled $95,718 and $0 at
June 30, 2021 and 2020, respectively. Net cash provided by financing activities
totaled $3,277,092 and $914,241 for the nine-month periods ending June 30, 2021
and 2020, respectively. The change between 2021 and 2020 is primarily attributed
to an increase in notes payable in 2021 as compared to 2020. The cash increased
to $845,504 at June 30, 2021 from $463,874 at September 30, 2020.
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As reflected in our accompanying financial statements, we have negative working
capital, limited revenues and an accumulated deficit of $22,596,056 and
$16,910,125 for the nine-month period ending June 30, 2021 and year ended
September 30, 2020, 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 $200,000 per month, management's plans for
the next twelve months include approximately $2.5 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
Contractual Obligations
Other than lease obligations stated above, as of June 30, 2021, we have
contractual obligations relating to debt or anticipated debt, as follows:
The Company, while operating as Mineral Mountain Mining & Milling Company,
entered into an Equity Purchase Agreement, dated as of October 1, 2018 (the
"Equity Purchase Agreement"), with Crown Bridge Partners, LLC (the "Crown
Bridge") pursuant to which the Company agreed to issue to Crown Bridge shares of
the Company's Common Stock, $0.001 par value (the "Common Stock"), in an amount
up to Five Million ($5,000,000.00) Dollars (the "Equity Line"). In connection
with the transactions contemplated by the Equity Purchase Agreement, the Company
was required to register with the SEC shares of Common Stock underlying the
Crown Bridge Agreement, as follows: (1) 8,000,000 Put Shares to be issued to the
Investors upon purchase from the Company by the Investors from time to time
pursuant to the terms and conditions of the Equity Purchase Agreement; (2)
1,428,571 shares of Common Stock to be issued by the Company to the Investors as
a commitment fee pursuant to the Equity Purchase Agreement.
The Company filed a registration statement which was declared effective by the
SEC on March 8, 2019. However, the Company has determined not to pursue the
funding from Crown Bridge under the Equity Line and the registration statement
is no longer current. As a result, the Company never received any proceeds from
the Crown Bridge Equity Line.
The following is a listing of the convertible debt principal amounts outstanding
at June 30, 2021.
Jefferson Street Capital, LLC 66,000
KinerjaPay Corp. 50,000
Total $ 116,000
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The following is a listing of loan amounts (all of which are unsecured) due to
related parties (each of whom are either a shareholder or related to a
shareholder of Mineral Mountain Mining & Milling Company) and the dates that
these loans were made to the Company:
As of As of
June 30, 2021 September 30, 2020
Name Date Amount Amount
Premium Exploration 03/27/17 15,000 15,000
08/02/17 35,000 35,000
John J. Ryan, adult son of a former
officer and director 2/23/2016 7,000 7,000
Total notes payable - shareholders $ 57,000 $ 57,000
The loan from John J. Ryan bears interest at 10% per annum and is due upon
demand. $3,000 was converted to 300,000,000 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 and, in the event of demand for payment, a default interest rate of 15%
applies. the balance of principal and interest at June 30, 2021 was $11,565. The
loans from Premium Exploration bear interest at 5% and 10% per annum. Pursuant
to the terms of the loan agreements, interest on the unpaid balance increase
from 5% to 10% for the $35,000 note on August 2, 2018 and interest increased
from 5% to 10% for the $15,000 note on September 27, 2018. The outstanding
principal and interest are due, upon demand of payment of Premium Exploration,
on July 1, 2019. The outstanding principal will continue to earn 10% interest if
demand for payment is not made on July 1, 2019 or in the event of default
pursuant to the terms of the agreements the balance of principal and interest at
June 30, 2021 was $67,797.
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.
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