Quality Industrial Corp 8-K/A, filed Jun 7, 2024
Quality Industrial Corp. (QIND)
About this 8-K/A
Quality Industrial Corp filed this 8-K/A on June 7, 2024, reporting on events of March 27, 2024.
Items reported
- Item 9.01: Financial statements and exhibits
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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As of March 27, 2024, we entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Al Shola Al Modea Gas Distribution LLC (“ASG” or “Al Shola Gas”) to acquire a 51% interest in ASG. The Closing of the transaction took place when both parties signed the definitive Share Purchase Agreement.
Al Shola Gas is an Engineering and Distribution Company in the LPG Industry in the United Arab Emirates and was established in 1980. The company is one of the region’s leading suppliers and contractors of LPG centralized pipeline systems and is approved by The General Directorate of Civil Defense, Government of Dubai, as a Central Gas Contractor and LPG Supplier.
Al Shola Gas is ISO 9001 certified and offers a wide range of services including Consultation, Design, Supply, Installation, Maintenance, Distribution and Commissioning of Central Gas Systems. ASG provides a wide range of bespoke solutions across all LPG related requirements.
The Parties agreed a “Purchase Price” of 51% shares for $10,000,000 (Ten Million USD), which is payable as follows:
| Tranche | Timeframe and Conditions | Amount | Paid By | Paid To | |||||||
| 1 | $9 million in National Exchange listed stock or cash to be paid to Seller. Payment in eight quarterly tranches over a period of 24 months, beginning from the first quarter following uplist to a National Exchange. Stock value to be protected by a make whole agreement/s and each tranche subject to a mutually agreed 12 months leak out agreement. | $ | 9,000,000 | QIND | ASG | ||||||
| 2 | Within 12 months of closing and at the soonest possible time, $1 million cash payment to the Seller. | $ | 1,000,000 | QIND | ASG | ||||||
Pursuant to the terms of the Purchase Agreement, the QIND will occupy two non-paid board seats including Chairman of the Board of Al Shola Gas and there shall be one other non-paid board seat for existing Al Shola Gas shareholders. QIND obtained immediate control with execution of the Agreement. Full operational control will be retained by existing shareholders and management unless the new Board of Directors determines otherwise due to a breach of the Agreement, ongoing poor performance, or if structural changes are recommended in line with the laws governed by the Agreement which will be decided and approved by the new Board of Directors of the Company.
The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the text of such documents, which are filed as Exhibits 2.1 hereto and which are incorporated herein by reference.
SECTION 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
| (a) | Financial Statements of business Acquired |
The Company will file the financial statements required by Item 9.01 (a) of Form 8-K in its annual report on Form 10-K for the year ended December 31, 2023, within the time period required by such filing.
| (b) | Pro Forma Financial Information |
The Company filed the pro forma financial statements required by Item 9.01 (a) with this Form 8-K.
| (c) | Exhibits |
| 2.1 | Stock Purchase Agreement, Al Shola Al Modea Gas Distribution LLC, dated March 27, 2024(1) | |
| 99.1 | Notes to the audited Pro Forma Condensed Combined Financial Statements | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| (1) | previously filed. |
The information set forth in Item 5.01 of this Current Report on Form 8-K is incorporated herein by reference
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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 hereunto duly authorized.
| Quality Industrial Corp. | |
| /s/ John-Paul Backwell | |
| John-Paul Backwell, CEO | |
| Date: June 7, 2024 |
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Exhibit 99.1
NOTE 1. BASIS OF PRO FORMA PRESENTATION
The audited pro forma condensed combined financial statements are based on the Company’s and Al Shola Al Modea Gas Distribution LLC’s historical consolidated financial statements as adjusted to give effect to the acquisition of Emergency Response Technologies and the shares issued as part of the acquisition. The audited pro forma combined statements of operations and balance sheet for the year ended December 31, 2023, give effect to the Al Shola Al Modea Gas Distribution LLC acquisition as if it had occurred on December 31, 2023.
Historical financial information has been adjusted in the pro forma balance sheet to pro forma events that are: (1) directly attributable to the Acquisition; and (2) factually supportable.
The pro forma adjustments presented in the pro forma combined balance sheet and statement of operations are described in Note 4 — Pro Forma Adjustments.
NOTE 2. ACCOUNTING PERIODS PRESENTED
Certain pro forma adjustments were made to conform accounting policies to the Company’s accounting policies as noted below.
The audited pro forma condensed combined balance sheet as of December 31, 2023, is presented as if the acquisition had occurred on December 31, 2023, and combines the balance sheet of the Company on December 31, 2023, and the balance sheet of the Al Shola Al Modea Gas Distribution LLC on December 31, 2023.
The audited pro forma condensed combined statement of operations for the year ended December 31, 2023, has been prepared by combining the Company’s consolidated statement of operations for the year ended December 31, 2023, with the statement of operations of Al Shola Al Modea Gas Distribution LLC for the year ended December 31, 2023.
NOTE 3. PRELIMINARY PURCHASE PRICE ALLOCATION
As of March 27, 2024, we entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) with the shareholders of Al Shola Al Modea Gas Distribution LLC (“ASG” or “Al Shola Gas”) to acquire a 51% interest in ASG. The Closing of the transaction took place when both parties signed the definitive Share Purchase Agreement.
Al Shola Gas is an Engineering and Distribution Company in the LPG Industry in the United Arab Emirates and was established in 1980. The company is one of the region’s leading suppliers and contractors of LPG centralized pipeline systems and is approved by The General Directorate of Civil Defense, Government of Dubai, as a Central Gas Contractor and LPG Supplier.
Al Shola Gas is ISO 9001 certified and offers a wide range of services including Consultation, Design, Supply, Installation, Maintenance, Distribution and Commissioning of Central Gas Systems. ASG provides a wide range of bespoke solutions across all LPG related requirements.
The Parties agreed a “Purchase Price” of 51% shares for $10,000,000 (Ten Million USD), which is payable as follows:
| Tranche | Timeframe and Conditions | Amount | Paid By | Paid To | ||||||
| 1 | $9 million in National Exchange listed stock or cash to be paid to Seller. Payment in eight quarterly tranches over a period of 24 months, beginning from the first quarter following uplist to a National Exchange. Stock value to be protected by a make whole agreement/s and each tranche subject to a mutually agreed 12 months leak out agreement. | $ | 9,000,000 | QIND | ASG | |||||
| 2 | Within 12 months of closing and at the soonest possible time, $1 million cash payment to the Seller. | $ | 1,000,000 | QIND | ASG | |||||
The Company acquired 51% of Al Shola Gas LLC for $10,000,000 and now owns 51% of the Net Assets of Al Shola Gas. The Net Assets of Al Shola Gas were $4,410,174 as of December 31, 2023, of which $2,249,189 (51%) would have been owned by QIND. The remaining $2,160,985 (49%) of the Net Assets are held by minority interest. The purchase price of $10,000,000 minus the Net Assets held by the company in Al Shola Gas equating to $7,750,811 would be part of the Company’s Goodwill if the acquisition had occurred on December 31, 2023.
NOTE 4. PRO FORMA ADJUSTMENTS
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the audited pro forma condensed combined financial information:
| a) | To give effect of consolidation as per general accepted principles of consolidation, purchase consideration, goodwill and minority Interest has been recorded. |
QUALITY INDUSTRIAL CORP.
AUDITED PRO FORMA COMBINED BALANCE SHEET
| Quality Industrial Corp | Al Shola Gas | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
| 31-Dec-23 | 31-Dec-23 | 31-Dec-23 | 31-Dec-23 | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 2,492 | 141,564 | 144,056 | |||||||||||||
| Inventory | 1,358,399 | 1,358,399 | ||||||||||||||
| Accounts and Other Receivables | 3,712,711 | 3,712,711 | ||||||||||||||
| Deposits, prepayments and advances | 552,044 | 552,044 | ||||||||||||||
| Other current assets | 2,354,083 | 5,568,979 | 7,923,062 | |||||||||||||
| Total current assets | 2,356,575 | 5,764,718 | 8,121,293 | |||||||||||||
| Non- Current assets | ||||||||||||||||
| Goodwill | 7,750,811 | 7,750,811 | ||||||||||||||
| Property Plant & Equipment | 195,739 | 195,739 | ||||||||||||||
| Long term Investment | 6,500,000 | 2,249,189 | 6,500,000 | |||||||||||||
| Total other assets | 6,500,000 | 195,739 | 6,695,739 | |||||||||||||
| Total Assets | 8,856,575 | 5,960,457 | 10,000,000 | 34,817,032 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued liabilities | 166,577 | 799,151 | 965,728 | |||||||||||||
| Other Current Liabilities | 5,615,440 | 5,500,000 | 5,615,440 | |||||||||||||
| Bank Borrowings | 466,947 | 466,947 | ||||||||||||||
| Total current liabilities | 5,782,017 | 1,266,098 | 5,500,000 | 7,048,115 | ||||||||||||
| Long Term liabilities | ||||||||||||||||
| Long term payable Al Shola | 4,500,000 | 4,500,000 | ||||||||||||||
| Convertible Notes | 2,331,059 | - | 2,331,059 | |||||||||||||
| Bank Borrowings | 154,388 | 154,388 | ||||||||||||||
| Employee end of service benefit | 129,797 | 129,797 | ||||||||||||||
| Total Long-Term Liabilities | 2,331,059 | 284,185 | 4,500,000 | 2,615,244 | ||||||||||||
| Total Liabilities | 8,113,076 | 1,550,283 | 10,000,000 | 19,663,359 | ||||||||||||
| Stockholders’ Equity | ||||||||||||||||
| Preferred stock; $0.001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding as of as of December 31, 2023, | ||||||||||||||||
| Common stock; $0.001 par value; 200,000,000 shares authorized; 127,129,694 shares issued and outstanding as of December 31, 2023. | ||||||||||||||||
| Additional paid-in capital | 127,132 | 40,872 | (40,872 | ) | 127,132 | |||||||||||
| Additional paid in Capital | 17,248,964 | 17,248,964 | ||||||||||||||
| Retained Earnings/ accumulated Deficit | (16,632,597 | ) | 1,792,167 | (1,792,167 | ) | (16,632,597 | ) | |||||||||
| Shareholder Capital Account | 81,784 | (81,784 | ) | 0 | ||||||||||||
| Shareholder Current account | 2,495,392 | (2,495,392 | ) | 0 | ||||||||||||
| Total stockholders’ Equity | 743,499 | 4,410,175 | (2,618,008 | ) | 5,153,674 | |||||||||||
| Total liabilities and stockholders’ Equity | 8,856,575 | 5,960,457 | 7,382,992 | 34,817,032 | ||||||||||||
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QUALITY INDUSTRIAL CORP.
AUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
| Quality Industrial Corp.. | Al Shola Gas | Proforma Adjustments | Pro Forma Combined | |||||||||||||
| 31-Dec-23 | 31-Dec-23 | 31-Dec-23 | 31-Dec-23 | |||||||||||||
| Revenue | - | 10,839,209 | 10,839,209 | |||||||||||||
| Cost of revenues | - | 6,848,289 | 6,848,289 | |||||||||||||
| Gross profit | - | 3,990,920 | 3,990,920 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Professional fees | 315,011 | - | 315,011 | |||||||||||||
| Product Development | - | - | ||||||||||||||
| General and administrative | 2,389,309 | 2,198,830 | 4,588,139 | |||||||||||||
| Total operating expenses | (2,704,320 | ) | (2,198,830 | ) | (4,903,150 | ) | ||||||||||
| Profit/ Loss from Operations | (2,704,320 | ) | 1,792,090 | (912,230 | ) | |||||||||||
| Non-Operating expenses: | ||||||||||||||||
| Interest on Convertible Notes | 137,448 | - | 137,448 | |||||||||||||
| Shares issued for services | 1,320,029 | - | 1,320,029 | |||||||||||||
| Depreciation | 522 | 522 | ||||||||||||||
| Total non- operating expense | 1,457,477 | 1,457,999 | ||||||||||||||
| Non-Operating Income: | ||||||||||||||||
| Other Non-Operating Income | - | |||||||||||||||
| Gain on settlement & forgiveness of debt | 457,863 | 457,863 | ||||||||||||||
| Net loss/ profit | (4,161,797 | ) | 1,791,568 | (2,370,229 | ) | |||||||||||
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