UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 28, 2010
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number: 333-118138
Quantum Energy, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 98-0428608
------------------------ ------------------------
(State of incorporation) (I.R.S. Employer ID No.)
7250 N.W. Expressway, Oklahoma City, OK 73132
---------------------------------------------------------
(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (405) 728-3800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No
Indicate by checkmark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer," and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
[ ] Large accelerated filer [ ] Accelerated filer
[ ] Non-accelerated filer [X] Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently
completed second fiscal quarter:
As of June 9, 2010 (the last business day of the registrant's most recently
completed second quarter), the aggregate market value of the voting and
non-voting common stock of the registrant held by non-affiliates of the
registrant was $235,000 (based upon the closing price of the registrant's
common stock as reported by the OTC Bulletin Board on June 9, 2010).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
As of June 9, 2010, there were 47,000,000 shares of the registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
FORWARD-LOOKING STATEMENTS
This document contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are "forward-looking statements" for purposes
of federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or
belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may", "could", "estimate",
"intend", "continue", "believe", "expect" or "anticipate" or other similar
words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Accordingly, readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of
the dates on which they are made. We do not undertake to update forward-
looking statements to reflect the impact of circumstances or events that
arise after the dates they are made. You should, however, consult further
disclosures we make in future filings of our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking
statements. Our future financial condition and results of operations, as
well as any forward-looking statements, are subject to change and inherent
risks and uncertainties. The factors impacting these risks and uncertainties
include, but are not limited to:
o inability to raise additional financing for working capital and product
development;
o inability to fulfill and plan an event for an organization;
o deterioration in general or regional economic, market and political
conditions;
o the fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may
require management to make estimates about matters that are inherently
uncertain;
o adverse state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to existing
operations;
2
o changes in U.S. GAAP or in the legal, regulatory and legislative
environments in the markets in which we operate;
o inability to efficiently manage our operations;
o inability to achieve future operating results;
o our ability to recruit and hire key employees;
o the inability of management to effectively implement our strategies and
business plans; and
o the other risks and uncertainties detailed in this report.
In this form 10-K references to "Your Event", "the Company", "we", "us", and
"our" refer to Your Event, Inc.
AVAILABLE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You can read these SEC filings and reports over the Internet at the
SEC's website at www.sec.gov. You can also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 100
F Street, NE, Washington, DC 20549 on official business days between the
hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for
further information on the operations of the public reference facilities. We
will provide a copy of our annual report to security holders, including
audited financial statements, at no charge upon receipt to of a written
request to us at Quantum Energy, Inc., 7250 N.W. Expressway, Oklahoma City,
OK 73132.
3
PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, all references in this report to
"Quantum," "our," "us," "we" and the "Company") refer to Quantum Energy, Inc.
and its subsidiaries, as a combined entity.
Quantum Energy Inc. is engaged in the acquisition and exploration of gas and
oil properties. Quantum was incorporated on February 5, 2004, in the State of
Nevada. The Company's principal executive offices now are located at 7250 NW
Expressway, suite 260, Oklahoma City, OK. The Company's telephone number is
(405) 728-3800.
Starting in May of 2006, we decided to embark on a new business path in oil
and gas exploration and acquisitions. We acquired interests in numerous oil &
gas properties in the Barnett Shale area of West Texas. Our business strategy
is to acquire interest in the properties of, and working interests in the
production owned by, established oil and gas production companies, whether
public or private, in the United States oil producing areas. We believe such
opportunities exist in the United States. We also believe that these
opportunities have considerable future potential for the development of
additional oil reserves. Such new reserves might come from the development of
existing but as yet undeveloped reserves as well as from future success in
exploration.
When and if funding becomes available, we plan to acquire high-quality oil
and gas properties, primarily "proven producing and proven undeveloped
reserves." We will also explore low-risk development drilling and work-over
opportunities with experienced, well-established operators.
Competition
We operate in a highly competitive environment. We compete with major and
independent oil and natural gas companies, many of whom have financial and
other resources substantially in excess of those available to us. These
competitors may be better positioned to take advantage of industry
opportunities and to withstand changes affecting the industry, such as
fluctuations in oil and natural gas prices and production, the availability
of alternative energy sources and the application of government regulation.
4
Compliance with Government Regulation
The availability of a ready market for future oil and gas production from
possible U.S. assets will depend upon numerous factors beyond our control.
These factors may include, amongst others, regulation of oil and natural gas
production, regulations governing environmental quality and pollution
control, and the effects of regulation on the amount of oil and natural gas
available for sale, the availability of adequate pipeline and other
transportation and processing facilities and the marketing of competitive
fuels. These regulations generally are intended to prevent waste of oil and
natural gas and control contamination of the environment.
We expect that our sales of crude oil and other hydrocarbon liquids from our
future U.S.-based production will not be regulated and will be made at market
prices. However, the price we would receive from the sale of these products
may be affected by the cost of transporting the products to market via
pipeline and marine transport.
Environmental Regulations
Our U.S. assets could be subject to numerous laws and regulations governing
the discharge of materials into the environment or otherwise relating to
environmental protection. These laws and regulations may require the
acquisition of a permit before drilling commences, restrict the types,
quantities and concentration of various substances that can be released into
the environment in connection with drilling and production activities, limit
or prohibit drilling activities on certain lands within wilderness, wetlands
and other protected areas, require remedial measures to mitigate pollution
from former operations, such as pit closure and plugging abandoned wells, and
impose substantial liabilities for pollution resulting from production and
drilling operations. Public interest in the protection of the environment has
increased dramatically in recent years. The worldwide trend of more expansive
and stricter environmental legislation and regulations applied to the oil and
natural gas industry could continue, resulting in increased costs of doing
business and consequently affecting profitability. To the extent laws are
enacted or other governmental action is taken that restricts drilling or
imposes more stringent and costly waste handling, disposal and cleanup
requirements, our business and prospects could be adversely affected.
Employees
At June 9, 2010, we had 2 part-time employees. We consider our relations with
our employees to be good.
ITEM 1A. RISK FACTORS
Not applicable.
5
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate office is currently located at 7250 N.W. Expressway,
Suite 260, Oklahoma City, OK 73132.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings and, to our knowledge,
no such proceedings are threatened or contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
Quantum Energy, Inc. is traded on the OTC Bulletin Board and is quoted under
the symbol: QEGY. There has been limited trading of our stock since it was
cleared for trading.
(b) Holders of Common Stock
At the date of this report, we had 24 stockholders of record holding a total
of 47,000,000 shares of common stock, par value $0.001.
(c) Dividends
Our dividend policy for holders of common stock is to retain earnings to
support the expansion of operations through organic growth or by strategic
acquisitions. We have not previously paid any cash dividends, and we do not
intend to pay cash dividends in the near future. Any future cash dividends
will depend on our future earnings, capital requirements, financial condition
and other factors deemed relevant by the Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Overview
--------
Unless the context otherwise requires, all preferences to "Quantum," "our,"
"us," "we" and the "Company" refer to Quantum Energy, Inc. and its
subsidiaries, as a combined entity.
We were incorporated on February 5, 2004, in the State of Nevada. Our
principal executive offices are located at 7250 NW Expressway, suite 260,
Oklahoma City, OK. Our telephone number is (405) 728-3800.
Starting in May of 2006, we decided to embark on a new business path in oil
and gas exploration and acquisitions. We acquired interests in numerous oil &
gas properties in the Barnett Shale area of West Texas. Our business
strategy is to acquire interest in the properties of, and working interests
in the production owned by, established oil and gas production companies,
whether public or private, in the United States oil producing areas. We
believe such opportunities exist in the United States. We also believe that
these opportunities have considerable future potential for the development of
additional oil reserves. Such new reserves might come from the development of
existing but as yet undeveloped reserves as well as from future success in
exploration.
Barnett Shale Developments; after the initial success of the Barnett Shale
leases, the production program in the Barnett Shale area encountered
substantial difficulties. Numerous wells throughout this extensive area
experienced production difficulties. In addition to the production problems
was the severe drop in natural gas prices. All of the wells in which the
Company had interests were suspended and all marginal wells have been capped,
resulting in the Company abandoning the Company's interest in the Barnett
Shale area.
When and if funding becomes available, we plan to acquire high-quality oil
and gas properties, primarily "proven producing and proven undeveloped
reserves." We will also explore low-risk development drilling and work-over
opportunities with experienced, well-established operators.
7
Liquidity and Capital Resources
At February 28, 2010 the Company had a working capital deficiency of
$2,619,267 as compared to $2,479,306 as at February 28, 2009, The total
assets of the Company were $784, consisting of cash compared to total assets
of $1,823 at February 28, 2009.
At February 28, 2010 the total current liabilities of the Company increased
to $2,620,051 from $2,480,342 at February 28, 2009. This increase in current
liabilities was due to loans from accounts payable and accrued interest.
The Company had a negative cash flow of $252 from operating activities for
the twelve months ended February 28, 2010 ($82,985 - 2009) a decrease of cash
outflow of $$82,733.
Cash inflow from financing activities was $nil for the twelve months ended
February 28, 2010 ($43,198 - 2009).
Results of Operations
---------------------
For the twelve (12) months ended February 28, 2010 operating expenses were
$42,058 compared to $104,218 for the twelve (12) months ended February 28,
2009. This decrease of was due to a decrease in professional fees, management
fees, marketing and office and administration.
The Company posted a net loss of $140,748 for the year ended
February 28, 2010, compared to a net loss of $592,245 for the year
ended February 28, 2009.
At February 28, 2010 there was no bank debt.
Off-Balance Sheet Arrangements
------------------------------
There are no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.
8
Going Concern
-------------
The Company has not attained profitable operations and is dependent upon
obtaining financing to pursue its business objectives. For these reasons, the
Company's auditors stated in their report on the Company's audited financial
statements that they have substantial doubt the Company will be able to
continue as a going concern without further financing.
The Company may continue to rely on equity sales of the common shares in
order to continue to fund the Company's business operations. Issuances of
additional shares will result in dilution to existing stockholders. There is
no assurance that the Company will achieve any additional sales of the equity
securities or arrange for debt or other financing to fund planned business
activities.
ITEM 7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Financial Statement Schedules - See Index to
Consolidated Financial Statements and Schedules immediately following the
signature page of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed by it in the reports that it files
or submits to the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized, and
reported within the time periods specified by the Securities and Exchange
Commission's rules and forms, and that information is accumulated and
communicated to its management, including its principal executive and
principal financial officers (whom we refer to in this periodic report as our
Certifying Officers), as appropriate to allow timely decisions regarding
required disclosure. Our management evaluated, with the participation of its
Certifying Officers, the effectiveness of its disclosure controls and
procedures as of February 28, 2010, pursuant to Rule 13a-15 under the
Securities Exchange Act. Based upon that evaluation, our Certifying Officers
concluded that, as of February 28, 2010, our disclosure controls and
procedures were effective.
9
Our management is responsible for establishing and maintaining effective
internal control over financial reporting as defined in Rules 13a-15(f) under
the Securities Exchange Act of 1934. Our internal control over financial
reporting is designed to provide reasonable assurance to our management and
Board of Directors regarding the preparation and fair presentation of
published financial statements. Our controls are designed to provide
reasonable assurance that our assets are protected from unauthorized use and
that transactions are executed in accordance with established authorizations
and properly recorded. Management used the framework set forth in the report
entitled "Internal Control-Integrated Framework" published by the Committee
of Sponsoring Organizations of the Treadway Commission (referred to as
"COSO") to evaluate the effectiveness of our internal control over financial
reporting as of February 28, 2009. Based on that evaluation, management
concluded that the design and operations of our internal controls over
financial reporting at February 28, 2010 were effective and provided
reasonable assurance that the books and records accurately reflected our
transactions.
There were no changes in our internal control over financial reporting that
occurred during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
This report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual
report.
ITEM 9B. OTHER INFORMATION.
None.
10
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our Board of Directors is currently composed of one person: Sharon Farris.
Ms. Farris, age 49, has been a director since 2007 and also serves as our
President, acting Chief Financial Officer and Secretary.
Sharon Farris
-------------
Sharon Farris was appointed as our Secretary and to our board of directors on
March 1, 2007. On January 14, 2009, Ms. Farris was appointed as our
President. Ms. Farris has worked in the oil and gas industry for the past
several years. She has worked for Buccaneer Energy Corporation and HoCo, Inc.
for the past two and a half years, working with the Oklahoma Corporation
Commission, Oklahoma Tax Commission, Petroleum Engineers, Geologist,
Landowners, and Attorneys, Crude Purchasers as well as various oil field
workers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent of our common stock, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of our common stock and other equity
securities. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish US with copies of all Section 16(a)
forms they file. A Form 3 for Ms. Farris has yet to be filed and are
delinquent as of the date of this report.
Code of Ethics
Our code of ethics applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions. A copy of the Code of Ethics was filed as an
exhibit to the 2006 Annual Report and is incorporated by reference herein. We
will provide to any person, without charge, a copy of our Code of Ethics upon
receipt of a written request addressed Quantum Energy, Inc., Attn: Corporate
Secretary, 7250 N.W. Expressway, Suite 260, Oklahoma City, OK 73132.
Corporate Governance
We do not presently does not have an audit committee of the board of
directors due to the early stage of our operations and the fact that we have
only recently started to acquire leases and working interests in oil and gas
properties. Additionally, our size makes it impractical to implement board
committees at this point.
11
ITEM 11. EXECUTIVE COMPENSATION.
Our directors and executive officers received no compensation during the last
three fiscal years and no compensation has accrued. There are no securities
authorized for issuance under any equity compensation plan, or any options,
warrants, or rights to purchase our common stock.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
As of June 9, 2010, based upon ownership filings with the SEC, we have no
shareholders that beneficially own more than 5% of our outstanding shares of
common stock. As of June 12, 2009, none of our directors or named executive
officers owned any shares of our common stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Director Independence
No members of our Board of directors are independent.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth information regarding the amount billed to us
by our independent auditor, Killman, Murrell & Company, P.C., for the fiscal
years ended February 28, 2009 and February 29, 2008:
Years Ended February 29 or 28
2010 2009
-----------------------------
Audit Fees (1) $ 8,505 $ 38,644
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
(1) Audit Fees are the aggregate fees billed by the independent auditor for
the audit of the consolidated annual financial statements, reviews of interim
financial statements, and attestation services that are provided in
connection with statutory and regulatory filings or engagements.
Generally, the board of directors approves in advance audit and non-audit
services to be provided by our independent auditors. In other cases, in
accordance with Rule 2-01(c)(7) of Securities and Exchange Commission
Regulation S-X, the board of directors has delegated preapproval authority to
our President for matters that arise or otherwise require approval between
regularly scheduled meetings of the board of directors, provided that such
approvals are reported to the board of directors at its next regularly
scheduled meeting.
12
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
Number Description of Exhibit Location
------- ---------------------- --------
Item 3 Articles of Incorporation and Bylaws
3.1 Articles of Incorporation Incorporated by reference
from the Registration
Statement Amendment 2 on
Form SB-2 filed October 26,
2004, SEC File No. 333-118138
3.2 Bylaws, as amended Incorporated by reference
from the Registration
Statement Amendment 2 on
Form SB-2 filed October 26,
2004, SEC File No. 333-118138
3.3 Articles of Amendment Incorporated by reference
from 10-KSB annual report
filed on June 14, 2006,
SEC File No. 333-118138
Item 31 Rule 13a-14(a)/15d-14(a) Certifications
31.1 Certification of Chief Executive This filing
Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Item 32 Section 1350 Certifications
32.1 Certification of Chief Executive This filing
Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
13
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Quantum Energy, Inc.
By: /s/ Sharon Farris
-----------------------------------------
Sharon Farris
President and Chief Executive Officer
(acting principal financial officer)
Date: June 9, 2010
Pursuant to the requirements of the Securities Exchange Act, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
/s/ Sharon Farris
---------------------
Name: Sharon Farris
Title: Director
Date: June 9, 2010
14
Quantum Energy, Inc.
Audited Financial Statements
And
Report of Independent Registered Public Accounting Firm
Years Ended February 28, 2010 and 2009
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Quantum Energy Inc.
7250 N.W. Expressway
Oklahoma City, Oklahoma
We have audited the accompanying balance sheets of Nitro Petroleum Inc. as of
February 28, 2010 and 2009, and the related statements of operations,
stockholders' deficit, and cash flows for the years then ended. Quantum
Energy Inc.'s management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the
company's internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nitro Petroleum Inc. as of
February 28, 2010 and 2009, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has generated revenues from operations but has
substantial accumulated deficit and working capital deficiency and this
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The 2010 and 2009 financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Killman, Murrell & Company, P.C.
------------------------------------
Killman, Murrell & Company, P.C.
Odessa, Texas
June 9, 2010
F-2
QUANTUM ENERGY INC.
Balance Sheets
(Expressed in US Dollars)
February 28, February 28,
2010 2009
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 784 $ 1,036
------------ ------------
Total current assets 784 1,036
Other assets
Other equipment, net of accumulated depreciation - 787
------------ ------------
Total assets $ 784 $ 1,823
============ ============
Liabilities and Stockholders' (Deficit)
Current liabilities
Accounts payable and accrued liabilities $ 582,093 $ 442,384
Promissory notes payable 2,017,708 2,017,708
Due to related party 20,250 20,250
------------ ------------
Total current liabilities 2,620,051 2,480,342
Common stock issuance liability 762,500 762,500
------------ ------------
Total liabilities 3,382,551 3,242,842
Stockholders' (deficit)
Common stock, par value $0.001 per share:
75,000,000 shares authorized: 47,000,000
shares issued and outstanding, respectively 47,000 47,000
Additional paid-in capital 1,685,913 1,685,913
Accumulated (deficit) (5,114,680) (4,973,932)
------------ ------------
Total stockholders' (deficit) (3,381,767) (3,241,019)
------------ ------------
Total Liabilities and Stockholders' (deficit) $ 784 $ 1,823
============ ============
The accompanying notes are an integral part of these financial statements
F-3
QUANTUM ENERGY INC.
Statements of Operations
(Stated in US Dollars)
Years Ended
February 28,
2010 2009
------------- -------------
Net oil and gas revenue $ - $ -
------------- -------------
Operating expenses
Lease operating expenses 24,206 -
Amortization, depletion and depreciation 787 738
Management fees - 42,000
Marketing - 10,042
Office and administration 881 2,897
Professional fees 16,184 48,541
------------- -------------
Total operating expenses 42,058 104,218
------------- -------------
Net loss before other income (expenses) (42,058) (104,218)
Other items
Forgiveness of debt 19,100 -
Interest expense (106,080) (500,133)
Currency translation (11,710) 12,106
------------- -------------
Total other income (expenses) (98,690) (488,027)
------------- -------------
Net loss $ (140,748) $ (592,245)
============= =============
Basic and diluted loss per share $ (0.00) $ (0.01)
============= =============
Weighted average number of shares outstanding 47,000,000 47,000,000
============= =============
The accompanying notes are an integral part of these financial statements
F-4
QUANTUM ENERGY INC.
Statements of Stockholders' (Deficit)
For the Years Ended February 28, 2010 and 2009
(Stated in US Dollars)
Common Shares Paid-in Accumulated
Number Par Value Capital (Deficit) Total
---------- ------- ---------- ------------ ------------
Balance as of
February 28, 2008 47,000,000 $47,000 $1,685,913 $(4,381,687) $(2,648,774)
Net loss for the
year ended
February 28, 2009 (592,245) (592,245)
---------- ------- ---------- ------------ ------------
Balance as of
February 28, 2009 47,000,000 47,000 1,685,913 (4,973,932) (3,241,019)
Net loss for the
year ended
February 28, 2010 - - - (140,748) (140,748)
---------- ------- ---------- ------------ ------------
Balance as of
February 28, 2010 47,000,000 $47,000 $1,685,913 $(5,114,680) $(3,381,767)
========== ======= ========== ============ ============
The accompanying notes are an integral part of these financial statements
F-5
QUANTUM ENERGY INC.
Statements of Cash Flows
(Stated in US Dollars)
Years Ended
February 28,
2010 2009
------------- -------------
Operating Activities
Net loss $ (140,748) $ (592,245)
Adjustment to reconcile net loss to net
cash used by operating activities
Amortization, depreciation and depletion 787 738
Forgiveness of debt (19,100) -
Changes in operating assets and liabilities
Prepaid expenses - 2,500
Accounts payable and accrued liabilities 158,809 124,772
Interest expense - 381,250
------------- -------------
Cash (used in) operating activities (252) (82,985)
------------- -------------
Financing Activities
Due to related party - 20,250
Issuance of promissory notes payable - 22,948
------------- -------------
Cash provided by financing activities - 43,198
------------- -------------
Decrease in cash during the period (252) (39,787)
Cash, beginning of the period 1,036 40,823
------------- -------------
Cash, end of the period $ 784 $ 1,036
============= =============
Supplemental disclosure of cash flow information:
Cash paid for income tax purposes $ - $ -
============= =============
Cash paid for interest $ - $ -
============= =============
The accompanying notes are an integral part of these financial statements
F-6
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 1 Nature of Operations and Going Concern
QUANTUM ENERGY INC. ("the Company") was incorporated under the name "Boomers
Cultural Development Inc." under the laws of the State of Nevada on February
5, 2004. On May 18, 2006 the company changed its name to Quantum Energy Inc.
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which assumes
that the Company will be able to meet its obligations and continue its
operations for its next fiscal year. Realization values may be substantially
different from carrying values as shown and these financial statements do not
give effect to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be unable to
continue as a going concern. The continuation of the Company as a going
concern is dependent upon the continued financial support from its
shareholders, the ability of the Company to obtain necessary equity financing
to continue operations and to determine the existence, discovery and
successful exploitation of economically recoverable reserves in its resource
properties, confirmation of the Company's interests in the underlying
properties, and the attainment of profitable operations. At February 28,
2010, the Company had not yet achieved profitable operations, has a working
capital deficiency of $2,619,267 ($2,479,306 - 2008). These factors raise
substantial doubt regarding the Company's ability to continue as a going
concern.
Note 2 Summary of Significant Accounting Policies
The financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America.
Because a precise determination of many assets and liabilities is dependent
upon future events, the preparation of financial statements for a period
necessarily involves the use of estimates, which have been made using careful
judgment. Actual results may vary from these estimates.
The financial statements have, in management's opinion been properly prepared
within the framework of the significant accounting policies summarized below:
a) Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less. As at February 28, 2010, cash and cash
equivalents consist of cash only.
F-7
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 2 Summary of Significant Accounting Policies (Continued)
b) Other Equipment
Other equipment is recorded at cost. Depreciation of computer equipment is
at a rate of 30% per annum, on a straight-line basis. Depreciation of office
equipment is at a rate of 20% per annum, on a straight-line basis.
c) Foreign Currency Translation
The Company's functional currency is the United States dollar. The Company
uses the United States dollar as its reporting currency for consistency with
registrants of the Securities and Exchange Commission ("SEC") and in
accordance with the ASC 830-10.
Assets and liabilities were translated at the exchange rate in effect at the
period end and capital accounts are translated at historical rates. Income
statement accounts are translated at the average rates of exchange prevailing
during the period. Any exchange gains and losses are included in the
Statement of Operation
d) Use of Estimates
The preparation of financial statements in conformity with US generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company regularly evaluates estimates and assumptions
related to donated expenses, and deferred income tax valuations. The Company
bases its estimates and assumptions on current facts, historical experience
and various other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the
Company's estimates. To the extent there are material differences between the
estimates and the actual results, future results of operations will be
affected.
e) Stock-based Compensation
The Company records stock-based compensation in accordance with ASC subtopic
718-10 "Compensation - Stock Compensation" using the fair value method. The
Company has not issued any stock options since its inception.
F-8
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 2 Summary of Significant Accounting Policies (Continued)
f) Basic and Diluted Net (Loss) Per Share
Basic and diluted net loss per common share is computed based upon the
weighted average common shares outstanding as defined by ASC 260-10,
"Earnings Per Share." Basic EPS is computed by dividing net loss available
to common shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to all
potentially dilutive common shares outstanding during the period. In
computing diluted EPS, the average stock price for the period is used in
determining the number of shares assumed to be purchased from the exercise of
stock options or warrants. Diluted EPS excludes all potentially dilutive
shares if their effect is anti-dilutive. At February 28, 2010, there are
250,000 dilutive potential common shares.
g) Financial Instruments
In August 2009, the FASB issued ASU 2009-05 which includes amendments to
Subtopic 820-10, "Fair Value Measurements and Disclosures-Overall". The
update provides clarification that in circumstances, in which a quoted price
in an active market for the identical liability is not available, a reporting
entity is required to measure fair value using one or more of the techniques
provided for in this update. The amendments in this ASU clarify that a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability and also clarifies that both a quoted price in an
active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. The guidance provided in this ASU is
effective for the first reporting period, including interim periods,
beginning after issuance. The adoption of this standard did not have a
material impact on the Company's consolidated financial position and results
of operations
The Company's financial instruments consist principally of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
and notes payable. The Company believes that the recorded values of all of
the other financial instruments approximate their current fair values because
of their nature and respective maturity dates or durations.
F-9
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 2 Summary of Significant Accounting Policies (Continued)
g) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts
until realization is more likely than not. The Company has adopted SFAS No.
ASC 740 "Accounting for Income Taxes" as of its inception. Pursuant to SFAS
No. 109 the Company is required to compute tax asset benefits for net
operating losses carried forward. Potential benefit of net operating losses
have not been recognized in these financial statements because the Company
cannot be assured it is more likely than not it will utilize the net
operating losses carried forward in future years.
h) Recent Accounting Pronouncements
In June 2009, the FASB issued guidance under ASC 105, "Generally Accepted
Accounting Principles." This guidance established a new hierarchy of GAAP
sources for non- governmental entities under the FASB Accounting Standards
Codification. The Codification is the sole source for authoritative U.S. GAAP
and supersedes all accounting standards in U.S. GAAP, except for those issued
by the SEC. The guidance was effective for financial statements issued for
reporting periods ending after September 15, 2009. The adoption had no impact
on the Company's financial position, cash flows or results of operations.
In June 2009, the FASB issued FASB ASC 855-10, "Subsequent Events." FASB
ASC855-10 establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. FASB ASC 855-10 applies
to both interim financial statements and annual financial statements. FASB
ASC 855-10 is effective for interim or annual financial periods ending after
June 15, 2009. The adoption of FASB ASC 855-10 during the period did not have
a material impact on the Company's financial position, cash flows or results
of operations.
F-10
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 2 Summary of Significant Accounting Policies (Continued)
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-03 (ASU 2010-03), Extractive Activities-Oil
and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This
amendment to Topic 932 has improved the reserve estimation and disclosure
requirements by (1) updating the reserve estimation requirements for changes
in practice and technology that have occurred over the last several decades
and (2) expanding the disclosure requirements for equity method investments.
This is effective for annual reporting periods ending on or after December
31, 2009. However, an entity that becomes subject to the disclosures because
of the change to the definition oil- and gas- producing activities may elect
to provide those disclosures in annual periods beginning after December 31,
2009. Early adoption is not permitted. The Company does not expect the
provisions of ASU 2010-03 to have a material effect on the financial
position, results of operations or cash flows of the Company
In January 2010, the FASB issued Accounting Standards Update 2010-02,
Consolidation (Topic 810): Accounting and Reporting for Decreases in
Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does
not change, the scope of current US GAAP. It clarifies the decrease in
ownership provisions of Subtopic 810-10 and removes the potential conflict
between guidance in that Subtopic and asset derecognition and gain or loss
recognition guidance that may exist in other US GAAP. An entity will be
required to follow the amended guidance beginning in the period that it first
adopts FAS 160 (now included in Subtopic 810-10). For those entities that
have already adopted FAS 160, the amendments are effective at the beginning
of the first interim or annual reporting period ending on or after December
15, 2009. The amendments should be applied retrospectively to the first
period that an entity adopted FAS 160. The Company does not expect the
provisions of ASU 2010-02 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity
(Topic 505): Accounting for Distributions to Shareholders with Components of
Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This
amendment to Topic 505 clarifies the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a limit
on the amount of cash that will be distributed is not a stock dividend for
purposes of applying Topics 505 and 260. Effective for interim and annual
periods ending on or after December 15, 2009, and would be applied on a
retrospective basis. The Company does not expect the provisions of ASU 2010-
01 to have a material effect on the financial position, results of operations
or cash flows of the Company.
F-11
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 2 Summary of Significant Accounting Policies (Continued)
In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair
Value Measurements and Disclosures (Topic 820): Investments in Certain
Entities That Calculate Net Asset Value per Share (or Its Equivalent). This
update provides amendments to Topic 820 for the fair value measurement of
investments in certain entities that calculate net asset value per share (or
its equivalent). It is effective for interim and annual periods ending after
December 15, 2009. Early application is permitted in financial statements
for earlier interim and annual periods that have not been issued. The Company
does not expect the provisions of ASU 2009-12 to have a material effect on
the financial position, results of operations or cash flows of the Company.
In December 2007, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, (revised 2007), "Business Combinations". SFAS 141 (R) applies
the acquisition method of accounting for business combinations established in
SFAS 141 to all acquisitions where the acquirer gains a controlling interest,
regardless of whether consideration was exchanged. Consistent with SFAS 141,
SFAS 141 (R) requires the acquirer to fair value the assets and liabilities
of the acquiree and record goodwill on bargain purchases, with main
difference the application to all acquisitions where control is achieved.
SFAS 141 (R) is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The adoption of this statement is not
expected to have a material effect on the Company's future financial position
or results of operations
In December 2007, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 160, "Non controlling Interests in Consolidated Financial Statements
- An amendment of ARB No. 51".SFAS 160 requires companies with non
controlling interests to disclose such interests clearly as a portion of
equity but separate from the parent's equity. The non controlling interest's
portion of net income must also be clearly presented on the Income Statement.
SFAS 160 is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The adoption of this statement is not
expected to have a material effect on the Company's future financial position
or results of operations.
The following various other pronouncement (ASU) as announced by FASB have no
material effect on the Company financial statements: ASU 2010-08 Technical
Correction to Various Topics issue February 2010, ASU 2010-07 Not for Profit
entities issued January 2010, ASU 2010-04 Accounting for Various Topics -
Technical Corrections issued January 2010, ASU 2009-16 Transfers and
Servicing issued December 2009, ASU 2009-15 Accounting for Own-Share Lending
Arrangements issued October 2009, ASU 2009-14 Software: Certain Revenue
Arrangements that include Software elements issued October 2009, ASU 2009-13,
Revenue Recognition: Multiple-Deliverable Revenue Arrangements, EITF No. 09-1
Accounting for Own-Share Lending Arrangements issued July 2009.
F-12
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 3 Other Assets
Accumulated Net Book Value Net Book Value
Cost Depreciation February 28, 2010 February 29, 2009
-------------------------------------------------------
Office equipment $3,629 $ 3,629 $ - $ 787
Computer equipment 1,433 1,433 - -
-------------------------------------------------------
$5,062 $ 5,062 $ - $ 787
=======================================================
Note 4 Common Stock
The authorized number of common shares remains at 75,000,000 common shares
with a par value of $0.001. At February 28, 2010 and 2009, 47,000,000 shares
of common stock were issued and outstanding. The Company has agreed to issue
an additional 250,000 shares of the Company's common stock to a debt holder.
Note 5 Promissory Notes Payable
The Company's outstanding notes payable and accrued interest are summarized
as follows:
February 28, 2010 and 2009 February 28, 2010
Note Payable Accrued Interest
-----------------------------------------------
Fourteen (14) 4% notes
payable to investors in oil
and gas investments by the
Company, unsecured and due
on demand $ 1,594,760 $ 293,797
10% note payable to an
investor in oil and gas
investments by the Company,
unsecured and due on demand 172,948 65,300
10% note payable to a company
that sold oil and gas properties
to the Company, secured by the
oil and gas properties and due
on demand 250,000 74,999
-----------------------------------------------
$ 2,017,708 $ 434,096
===============================================
F-13
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 5 Promissory Notes Payable (Continued)
In 2006 the Company agreed to issue 250,000 shares of it's common stock in
connection with the purchase of oil and gas properties. Due to non-payment of
the $250,000 note payable by the Company these shares were valued at $3.05
per share and interest expenses of $381,250 was recognized for the years
ended February 28, 2007 and 2009. The 250,000 shares have not been issued as
of February 28, 2010, therefore, the liability section of the accompanying
balance sheet reflects a "Common stock issuance liability" of $762,500.
Interest expense related to the notes payable was $106,080 and $118,883 for
the years ended February 28, 2010 and 2009 respectively.
Note 6 Income Taxes
At February 28, 2010, the Company had a net operating loss carry forward of
$5,114,680 which will begin to expire in 2025. A valuation allowance has been
provided for the deferred tax assets as it is uncertain whether the Company
will have future taxable income.
A reconciliation of the benefit for income taxes with amounts determined by
applying the statutory federal income tax rate (34%) to the loss before
income taxes is as follows:
----------------------
2010 2009
----------------------
Benefit for income taxes computed using the
statutory rate of 34% $ 47,854 $ 201,363
Non-deductible expense - -
Change in valuation allowance (47,854) (201,363)
----------------------
Provision for income taxes $ - $ -
======================
F-14
QUANTUM ENERGY INC.
Notes to the Financial Statements
February 28, 2010 and 2009
(Stated in US Dollars)
Note 6 Income Taxes (Continued)
Significant components of the Company's deferred tax assets were as follows
at February 28, 2010 and February 29, 2009.
--------------------------
2010 2009
--------------------------
Deferred tax assets and liabilities:
Stock to be issued for expenses $ 259,250 $ 259,250
Tax operating loss carry forward 1,457,275 1,409,421
--------------------------
1,716,525 1,668,671
Valuation allowance (1,716,525) (1,668,671)
--------------------------
Net deferred tax asset $ - $ -
==========================
Note 7 Subsequent Events
The Company has evaluated subsequent events through June 9, 2010, the date
which the financial statements were available to be issued.
F-15